Mr. Saut, the fed lowering rates to 0 is a signal that they have run out of bullets and now only have 1/2 a TARP to cover them up during the cold rainy season. The good news, as you pointed out is the dollar weakened. Every government wants to weaken their currency so they can export their way out of this downturn on the backs of the unwary foreign consumer.
Does this sound like a recipe for success? In fact, it's a recipe for disaster and protectionism. If it gets too bad it can plummet a global downturn into a depression.
Well anyway, let's not dwell on it too much and enjoy our roasted marshmallows and holiday festivities now.
A Trillion Dollars Ain't What it Used to Be [View article]
Shhh Robert Nabloid, don't let them know about the big numbers. It's too tempting for them to handle.
Good graph and posting Paul Kedrosky. It is true, I expect government spending projects by most countries early 2009. I say spending not stimulus because the governments that do them tend not to spend the money efficiently and often end up sucking money out of the real economy to pay for them. So they appear to be spending but if people believe they 1) won't produce tangible goods and services, 2) won't produce long term employment, 3) will be offset by taxes and/or inflation in the long run 4) will be slow to implement and inefficiently run then the public's sentiment towards them will more than offset any apparent benefit.
Sadly, politicians need tokenism. For them it makes the world go round and the votes come in. It's the modern day rain dance. I make big money fall from the sky as Bernake said was the solution to any economic slowdown. Really... can't we get a better Fed today rather than waiting until the end of January? We need a Christmas present.
Sorry for being grim. I mean to wish everyone a happy holiday.
Oil is low, why not buy it for the long term, bonds are low they are bound to go up. Stocks may go up, keep an eye on it. I sense a distinct lack of analysis and lots of snake oil.
The 12-14 month period for recession is an often cited statistic. So let me revisit the history of this market tidbit.
First, pundits derided anyone saying there was a recession until November. Then they said the recession has been going on for 3 quarters and that most recessions only last 1-1.5 years. So hmmm, naturally the market is a buy huh? Just like they said it was a buy in June, July, and August. Then September and October it was a once in a lifetime opportunity. Now it's a great stocking stuffer.
Because I wish a happy holiday to everyone I suggest that you be prudent this year and make sure you save cash to get through this down period. Have a safe Christmas/Hanukkah/Win... Solstice/New Year and drive carefully.
T-Bills: Bubble, Bubble, Toil and Trouble [View article]
I suppose the safest way quasi-short bonds is by not owning them. If you park your money in bonds I suggest short term bonds just in case. I would agree that the extra 1 or 2% for longer term maturities are not really worth the risk.
If you are a big bank, I'm sure they are making up the difference charging huge spreads on the few loans they do actually make. Which is part of the problem.
Also may I point out that the Fed is begging for $ by paying interest on bank deposits (encouraging them to take money out of the system and put it in the valut where no one can reach it) to fuel it's debt buying binge and balance sheet inflation. This is itself deflationary. So in actuality they are deflating at the same time they are inflating.
If you are a fund manager, if you haven't been making money on volatility plays you are probably under water. The tough part in 2009 will be that just about everyone is now making them and the premiums are getting bubbly (fit's nicely with the theme of the article lol).
Governments Tested as Global Economies Enter Dangerous Part of the Crisis [View article]
I agree that the longer this downturn lasts the more ugly it will get. Luckily the US doesn't have a history of revolution.
China is much more worrisome. If their economy hasn't even had a year of negative growth and they are already coming unhinged I hate to see what happens when they experience a real downturn.
As for protectionism. I think every player and every government is eying that option. Unfortunately that hurts everyone. But no politician is paid to think about the world.
The US is also set to engage in protectionism though. Bailouts are mild forms of protectionism. And the US is liable to start imposing more import restrictions (fines, levys, tariffs, or other trade barriers) although too many may actually ignite inflation. So, I think the US protectionism will be more constrained than Europe, Russia, etc.
Anyway, it doesn't look good going into 2009 even if some people are saying we should get a technical rally in January. That may be so but I think we need more than a technical rally to turn the economic tides.
James Grant Wants to Know: Who Will Buy Our Greenbacks? [View article]
Right now Asia is buying as they have been. This is a double edged sword. While we reap the rewards of cheap goods we slowly loose our financial independence. We are already tied very close to them right now in a somewhat symbiotic relationship. The question remains as the US keeps running roughshod over it's own finances will this relationship become parasitic.
This can occur either by the US essentially getting everything for nothing (debasing their currency so much their dollars become worthless), or by foreign debt holders forcing the US into a Wold Bank type austerity program with payments to foreign countries higher than Germany paid as a percent of GDP to the Allies after WWI? Of course if the US debases like this it will be a cold day in hell before anyone else starts accumulating US treasuries again. And if the second case occurs, it will be the end of Asia's export fueled expansion.
In order to keep our balance we need some level of fiscal restraint and de-leveraging. How much is healthy and if we can control it is the question. I think James Grant is right in the fact Bernake and the current administration have no real control which bodes very ill. However, that is not to say Volker or another person is unable to right the ship with some amount of pain. I'm sure they can. All is not lost.
LOL how do you invest in the precession of the earth events? Can I buy stock in lava demons and winged men? Oh, and 7 scrolls that taste bitter and sweet and pour pestilence upon man turning 1/3 of the seas to blood?
Actually never mind. I don't exactly want to bet on these things after all.
Giving Even Odds on a Holiday Rally [View article]
Wow... I'd comment except for the fact I'm puking in the toilet about now. And you say the auto workers are overpaid? I think I'd start with Wall Street analysts like Ms. Bartels.
Did (or Didn't) Japan Just Reintroduce Quantitative Easing? [View article]
Short response, yes they are but it's best to deny the facts since Japanese people are not in the mood to retest a failed initiative that has punished their people for over 15 years.
The long response is, they can defend it as a reaction to try to weaken their currency which is too strong to help them export their way out of their economic morass. The only problem is, every other country is also struggling to make their currencies worthless which ends up negating everyone's efforts to weaken their currency relative to one another.
This is the beginning of economic infighting similar to what happened in the great depression. If things get worse we get protectionism and some 3rd world countries (possibly even China) start revolting.
We can all hope this doesn't happen. But it is a clear and present danger. Gee, now I sound like Tom Clancy.
Deconstructing the Fed's Balance Sheet [View article]
An interesting note to this is what I have mentioned a few times before. Whereas the Fed and Treasury are publicly stating they are supporting quantitative easing and inflating the money supply, they are actually contracting the money supply. By paying interest on Fed deposits they are encouraging banks to deposit more than the necessary amount with them choking off the money supply and money multiplier.
It is true if the Fed can issue more money on Treasury debt and issue money by buying public debt they essentially can issue an infinite amounts of money since the first increases the public debt and the buying the public debt can increase even more public debt. However, the ugly part about sanitizing the loss and paying interest still rears it's ugly head. So the Fed and the Treasury have been squeezing all the markets to get as much cash it can to pay for the bad debt (presumably in the future). So in effect, without a mechanism for purging the system of all the bad debt, and with a general intolerance for the public to shoulder bank bad debt losses no real inflationary or stimulus is being done. Quite the opposite, asides from TARP which also has the same problem. No one wants it to take the loss either although the public surely is.
So the government's actions stagger on deflating the market and putting off recognizing and allocating the losses until later. There will be no good time when the public will happily accept the losses. So just like Japan, except this cycle to continue on and on and on. Just like what happened in Japan.
You will know when the downturn is over because there will be financial blood in the street. Someone someday will have to atone for the loss (bankruptcy, public write offs, prison time, and the like). That would be the good result.
The bad one is where we choose to let banks spend decades of long slow write offs using interest on your debt to pay off the excesses of the last few years as slowly as a you pay off a 20-30 year mortgage. All while an entire generation languishes in a prolonged recession.
Newspapers: Any Options Beyond Cutting, Selling or Closing? [View article]
It is funny, if you pick out 3 random newspapers and then read 3 online news sites you will know why they are going out of business. For one thing 90% of the articles are ripped from the same source, usually the associated press. In this case, you get the news much faster online and the quality is 0% different.
For another thing the newspaper these days is about 20-40% trash advertisements and another 20-40% are articles only about 5% of the people would ever read and only when they are bored out of their gourd. Simply stated, they are not able to target users interest or needs the way we expect this day and age.
If you want to start being eco-friendly, cancel your newspaper service and print out any news item on your printer that you want as a hard copy. You'll lower the paper content from 110 large pages of trash to about 7 pages. Plus you'll also save those little green papers you stick in your wallet to buy stuff.
Just because 99.5% of the time something isn't expected to happen doesn't mean it won't. I suggest people think about probability before they decry statistics dead. In general, I think people have a very hard time considering big numbers or small odds. Even .001% occurrences happens all the time. Just ask a nuclear physicist or chemist. Just because they happen doesn't mean the statistics are wrong or the half life of uranium is off.
The author does a good job pointing out the fact the VIX number people are used to only covers 1 standard deviation. However, the ending saying VIX underestimated volatility is probably not an accurate statement. People might have not estimated the probability correctly but it's very easy that this event just happened to end up as a .3% probability event. That's the fact.
If you roll dice you sometimes roll 4 sixes. That's life.
Palm Deal: Lifeline, But Oh That Dilution [View article]
I'm with Peter Lynch on this. Clearly the investor sees some positive value in their client base. I doubt if the analyst has shorted the stock or bought puts. It's easy to be a nay sayer. I remember such analysts decrying the doom of Apple in the 90's. Boy were they wrong.
A zero valuation always sounds to me like an analyst that doesn't want to do his homework. It is very hard to say the probablilty of a company's success is 0 in all cases. Especially when it still has millions in cash and fresh infusions without some government mumbo jumbo supporting role with taxpayers money.
I commend Elevation Partners for taking a calculated risk in this market. If only other money managers tried building something rather than just trying to figure out what company will pop up 20% because the government will bail them out tomorrow.
The Few, The Proud, The Winners in 2008 [View article]
It's nice to see that there are at least a few winners in this market. Innovation, technology, improved efficiency, and good management is the way out of any downturn. I look to these types of companies to lead us out of the dark not government bailouts and financial manipulation. That is what leads us deeper into the depths of this recession.
Give billions to promising companies not Lehman, Citibank, and Goldman Sacs. Give billions to research, education, roads, bridges, building out a more efficient better Internet and wireless system, not to GM, AIG, and a bunch of bellicose CEOs who mismanage every aspect of their business and gamble or fritter away decade long multi billion dollar companies.
Can 2009 be worse than 2008? It purely depends on the choices we make compared to those made in 2008. All is not set in stone, we still have choice. Americans are still in command of their future prosperity. And that is about as positive as it ever gets.
Happy holidays. Please be frugal even if people say overspending is a positive thing. It is not.
Four Dying Silicon Valley Companies [View article]
You have mentioned the proverbial problemed tech companies. All of these company's problems are well known. Mainly Yahoo which was trying to play the hard sell. Interesting enough, despite doom-sayers, many companies are about as tenacious as government bureaucracies. That means they will not turn the lights out until the last penny is spent.
That gives all of these companies many more years to de-zombify themselves. Of the four I'd place my money with AMD. #1) tech companies want an alternative to Intel if nothing more, to keep them in check so they don't bilk the entire computer market the way Miscrosoft is. #2) they have been rising from the ashes multiple times #3) you have to commend them in the early 2000s for taking the leadership with dual core processing even if it was a short time period before Intel got on the ball.
As for Palm, it has a base of loyal users but needs to work on the OS. They are becoming like Motorola was before Nokia and everyone ate their lunch in the cell phone market except they aren't the market leader. Look Motorola still survives. They are liable to roll over their debt several times before any death knell.
If you want to look for zombies and dying companies with more debt than assets I'd advise you8 to look at the banking section. The only catch is, they get to hide their losses by booking them in off balance sheet accounting due to Base 1 accounting rules. This was dreamt up to protect the public after the dot com bubble so they could keep lending without adequate capital and having to recognize those nasty losses. What a laugh.
Regulators, Fed, and Treasury, please stop helping us by gouging out our eyeballs and handicapping the entire market and economy. So far we can't get accurate inflation numbers because you fudge them, can't see the solvency of banks because of base 1 rules, can't see TARP allocations because with the Bush Jr. administration you can't see anything, and can't see a recovery because none is being organized.
And when I speak of handicapping the economy, I'm referring to all the zombie companies we are being forced to fund as they pay their inept executives and hemorrhage employees in the thousands every month. If this is not a prolonged drag on the economy I don't know what is. I dare to say, the free market is no longer free nor can you call it a market. Maybe we should call it a captured government torture chamber.
Sensing a Market Turning Point [View article]
Does this sound like a recipe for success? In fact, it's a recipe for disaster and protectionism. If it gets too bad it can plummet a global downturn into a depression.
Well anyway, let's not dwell on it too much and enjoy our roasted marshmallows and holiday festivities now.
A Trillion Dollars Ain't What it Used to Be [View article]
Good graph and posting Paul Kedrosky. It is true, I expect government spending projects by most countries early 2009. I say spending not stimulus because the governments that do them tend not to spend the money efficiently and often end up sucking money out of the real economy to pay for them. So they appear to be spending but if people believe they 1) won't produce tangible goods and services, 2) won't produce long term employment, 3) will be offset by taxes and/or inflation in the long run 4) will be slow to implement and inefficiently run then the public's sentiment towards them will more than offset any apparent benefit.
Sadly, politicians need tokenism. For them it makes the world go round and the votes come in. It's the modern day rain dance. I make big money fall from the sky as Bernake said was the solution to any economic slowdown. Really... can't we get a better Fed today rather than waiting until the end of January? We need a Christmas present.
Sorry for being grim. I mean to wish everyone a happy holiday.
Three Ideas for the Year's End [View article]
The 12-14 month period for recession is an often cited statistic. So let me revisit the history of this market tidbit.
First, pundits derided anyone saying there was a recession until November. Then they said the recession has been going on for 3 quarters and that most recessions only last 1-1.5 years. So hmmm, naturally the market is a buy huh? Just like they said it was a buy in June, July, and August. Then September and October it was a once in a lifetime opportunity. Now it's a great stocking stuffer.
Because I wish a happy holiday to everyone I suggest that you be prudent this year and make sure you save cash to get through this down period. Have a safe Christmas/Hanukkah/Win... Solstice/New Year and drive carefully.
T-Bills: Bubble, Bubble, Toil and Trouble [View article]
If you are a big bank, I'm sure they are making up the difference charging huge spreads on the few loans they do actually make. Which is part of the problem.
Also may I point out that the Fed is begging for $ by paying interest on bank deposits (encouraging them to take money out of the system and put it in the valut where no one can reach it) to fuel it's debt buying binge and balance sheet inflation. This is itself deflationary. So in actuality they are deflating at the same time they are inflating.
If you are a fund manager, if you haven't been making money on volatility plays you are probably under water. The tough part in 2009 will be that just about everyone is now making them and the premiums are getting bubbly (fit's nicely with the theme of the article lol).
Governments Tested as Global Economies Enter Dangerous Part of the Crisis [View article]
China is much more worrisome. If their economy hasn't even had a year of negative growth and they are already coming unhinged I hate to see what happens when they experience a real downturn.
As for protectionism. I think every player and every government is eying that option. Unfortunately that hurts everyone. But no politician is paid to think about the world.
The US is also set to engage in protectionism though. Bailouts are mild forms of protectionism. And the US is liable to start imposing more import restrictions (fines, levys, tariffs, or other trade barriers) although too many may actually ignite inflation. So, I think the US protectionism will be more constrained than Europe, Russia, etc.
Anyway, it doesn't look good going into 2009 even if some people are saying we should get a technical rally in January. That may be so but I think we need more than a technical rally to turn the economic tides.
James Grant Wants to Know: Who Will Buy Our Greenbacks? [View article]
This can occur either by the US essentially getting everything for nothing (debasing their currency so much their dollars become worthless), or by foreign debt holders forcing the US into a Wold Bank type austerity program with payments to foreign countries higher than Germany paid as a percent of GDP to the Allies after WWI? Of course if the US debases like this it will be a cold day in hell before anyone else starts accumulating US treasuries again. And if the second case occurs, it will be the end of Asia's export fueled expansion.
In order to keep our balance we need some level of fiscal restraint and de-leveraging. How much is healthy and if we can control it is the question. I think James Grant is right in the fact Bernake and the current administration have no real control which bodes very ill. However, that is not to say Volker or another person is unable to right the ship with some amount of pain. I'm sure they can. All is not lost.
Ten Economic Predictions for 2009 [View article]
Actually never mind. I don't exactly want to bet on these things after all.
Giving Even Odds on a Holiday Rally [View article]
Did (or Didn't) Japan Just Reintroduce Quantitative Easing? [View article]
The long response is, they can defend it as a reaction to try to weaken their currency which is too strong to help them export their way out of their economic morass. The only problem is, every other country is also struggling to make their currencies worthless which ends up negating everyone's efforts to weaken their currency relative to one another.
This is the beginning of economic infighting similar to what happened in the great depression. If things get worse we get protectionism and some 3rd world countries (possibly even China) start revolting.
We can all hope this doesn't happen. But it is a clear and present danger. Gee, now I sound like Tom Clancy.
Deconstructing the Fed's Balance Sheet [View article]
It is true if the Fed can issue more money on Treasury debt and issue money by buying public debt they essentially can issue an infinite amounts of money since the first increases the public debt and the buying the public debt can increase even more public debt. However, the ugly part about sanitizing the loss and paying interest still rears it's ugly head. So the Fed and the Treasury have been squeezing all the markets to get as much cash it can to pay for the bad debt (presumably in the future). So in effect, without a mechanism for purging the system of all the bad debt, and with a general intolerance for the public to shoulder bank bad debt losses no real inflationary or stimulus is being done. Quite the opposite, asides from TARP which also has the same problem. No one wants it to take the loss either although the public surely is.
So the government's actions stagger on deflating the market and putting off recognizing and allocating the losses until later. There will be no good time when the public will happily accept the losses. So just like Japan, except this cycle to continue on and on and on. Just like what happened in Japan.
You will know when the downturn is over because there will be financial blood in the street. Someone someday will have to atone for the loss (bankruptcy, public write offs, prison time, and the like). That would be the good result.
The bad one is where we choose to let banks spend decades of long slow write offs using interest on your debt to pay off the excesses of the last few years as slowly as a you pay off a 20-30 year mortgage. All while an entire generation languishes in a prolonged recession.
Newspapers: Any Options Beyond Cutting, Selling or Closing? [View article]
For another thing the newspaper these days is about 20-40% trash advertisements and another 20-40% are articles only about 5% of the people would ever read and only when they are bored out of their gourd. Simply stated, they are not able to target users interest or needs the way we expect this day and age.
If you want to start being eco-friendly, cancel your newspaper service and print out any news item on your printer that you want as a hard copy. You'll lower the paper content from 110 large pages of trash to about 7 pages. Plus you'll also save those little green papers you stick in your wallet to buy stuff.
Lehman, Forecasting, and the Vix [View article]
The author does a good job pointing out the fact the VIX number people are used to only covers 1 standard deviation. However, the ending saying VIX underestimated volatility is probably not an accurate statement. People might have not estimated the probability correctly but it's very easy that this event just happened to end up as a .3% probability event. That's the fact.
If you roll dice you sometimes roll 4 sixes. That's life.
Palm Deal: Lifeline, But Oh That Dilution [View article]
A zero valuation always sounds to me like an analyst that doesn't want to do his homework. It is very hard to say the probablilty of a company's success is 0 in all cases. Especially when it still has millions in cash and fresh infusions without some government mumbo jumbo supporting role with taxpayers money.
I commend Elevation Partners for taking a calculated risk in this market. If only other money managers tried building something rather than just trying to figure out what company will pop up 20% because the government will bail them out tomorrow.
The Few, The Proud, The Winners in 2008 [View article]
Give billions to promising companies not Lehman, Citibank, and Goldman Sacs. Give billions to research, education, roads, bridges, building out a more efficient better Internet and wireless system, not to GM, AIG, and a bunch of bellicose CEOs who mismanage every aspect of their business and gamble or fritter away decade long multi billion dollar companies.
Can 2009 be worse than 2008? It purely depends on the choices we make compared to those made in 2008. All is not set in stone, we still have choice. Americans are still in command of their future prosperity. And that is about as positive as it ever gets.
Happy holidays. Please be frugal even if people say overspending is a positive thing. It is not.
Four Dying Silicon Valley Companies [View article]
That gives all of these companies many more years to de-zombify themselves. Of the four I'd place my money with AMD. #1) tech companies want an alternative to Intel if nothing more, to keep them in check so they don't bilk the entire computer market the way Miscrosoft is. #2) they have been rising from the ashes multiple times #3) you have to commend them in the early 2000s for taking the leadership with dual core processing even if it was a short time period before Intel got on the ball.
As for Palm, it has a base of loyal users but needs to work on the OS. They are becoming like Motorola was before Nokia and everyone ate their lunch in the cell phone market except they aren't the market leader. Look Motorola still survives. They are liable to roll over their debt several times before any death knell.
If you want to look for zombies and dying companies with more debt than assets I'd advise you8 to look at the banking section. The only catch is, they get to hide their losses by booking them in off balance sheet accounting due to Base 1 accounting rules. This was dreamt up to protect the public after the dot com bubble so they could keep lending without adequate capital and having to recognize those nasty losses. What a laugh.
Regulators, Fed, and Treasury, please stop helping us by gouging out our eyeballs and handicapping the entire market and economy. So far we can't get accurate inflation numbers because you fudge them, can't see the solvency of banks because of base 1 rules, can't see TARP allocations because with the Bush Jr. administration you can't see anything, and can't see a recovery because none is being organized.
And when I speak of handicapping the economy, I'm referring to all the zombie companies we are being forced to fund as they pay their inept executives and hemorrhage employees in the thousands every month. If this is not a prolonged drag on the economy I don't know what is. I dare to say, the free market is no longer free nor can you call it a market. Maybe we should call it a captured government torture chamber.