How Much Downside Could Still Exist? 86 comments
-
Font Size:
-
Print
- TweetThis
From the prism of facts pertaining to previous recessions, the risks, including systemic risks, within the broad American financial framework are now fully priced. The problem is that, unlike in the case of previous downturns, the American economy today is heavily integrated with the rest of the world and, as a consequence, “extraneous” factors which could drive the major market indices significantly lower from yesterday’s closing levels need to be comprehensively recognized.
Those analysts who are looking for value (buy-and-hold) this week are failing to grasp the potential impact of four compelling developments (briefly outlined only in this article) which are going to shape America’s financial and economic future, specifically the value of American assets, stimulus packages regardless: (a) the crisis in Eastern Europe, (b) the structural collapse, including the meltdown in manufacturing, of the economic fabric in countries like India, China, Brazil, Russia and Turkey, (c) the increasingly unfriendly environment for foreign private capital in South America and (d) the rise of political Islam, beyond Iran, to Pakistan, Bangladesh, Somalia and Central Asia.
Properly considered and fully contextualized, all four factors point to further downside in the S&P 500 (SPY), the Dow (DIA), the Nasdaq (QQQQ), the emerging markets (EEM) and the financials (XLF). This writer has exited all short positions on the stated indices and in financials as of today simply to close out a strategy predicated on (a) the S&P 500 reaching 700 and (b) the inherent flaws in bank balance sheets. But the hard facts still make a persuasive case for reinstating shorts on rallies, triggered either by technical considerations or by an abundance of spin (penchant for rosy scenarios) in relation to the succession of rescue and bailout plans.
Any number of fund managers appearing on CNBC, FOX and Bloomberg since last week have been calling a market bottom, without being able to explain, with any acceptable degree of precision, the basis upon which they are forecasting corporate earnings. In fact, most analysts are proving to be hopelessly inadequate in translating today’s multi-faceted investment climate into credible and sustainable trading recommendations.
All former Soviet satellites, without exception, are finally confronting a reality which was more than apparent to this writer shortly after the fall of the Berlin Wall: that the transition from communism to a free market, in economic terms, was never cogently presented, documented, debated or scrutinized. In brief, democracy and freedom were no substitutes for economic imperatives. “The crisis in Eastern Europe is already shaking the foundations of the European Union,” a senior Hungarian cabinet minister told the BBC yesterday. “It is also challenging Washington’s view of post-Cold War Europe, though no politician dare acknowledge this in public.”
The structural collapse in leading emerging markets has its own dimensions. Real unemployment is breaking all historical records, middle-class household balance sheets are in tatters and infrastructure spending is so haphazard that it will do little to boost consumer demand in the foreseeable future. Poverty levels vary from region to region; but, as a rule, the failure to adequately tackle impoverishment, despite all the promises and programmes since the Second World War, is creating a series of well-grounded protest movements which will inevitably result in the legislation of higher subsidies and greater protectionism.
Impoverishment in South America has already led to anti-capitalist governments, usually through electoral mechanisms. As the many protagonists of Bolivarian-style social justice continue to implement their political agenda, it is not too difficult to predict a spate of nationalizations in the food, agricultural, mining and energy sectors.
Finally, there is the issue of failed states, and the scope for substantive instability, and a heightened risk of terrorism, following the growth of Political Islam. While American and NATO forces in the Afghanistan-Pakistan theatre are targeting Al Qaeda and Taliban militants, populous nations like Pakistan and Bangladesh are being torn apart by modern-day fascism. This is not the forum to engage in a detailed analysis of the economic ideology of Political Islam; for trading purposes, it is enough to conclude that religious extremism of the Islamic variety is essentially unfriendly to western capital (e.g. Iran).
So when comparing today to earlier recessions, or even the Great Depression, it is important to understand that the globalization process of the last 60 years has brought with it a unique, and as yet unquantified, risk-reward profile for the American economy. By all accounts, Wall Street has been unable to comprehend the sheer complexity of today’s financial and economic environment. The less said about Washington lawmakers and regulators, the better. And, as far as systemic risk is concerned, Ben Bernanke’s definition is proving to be entirely academic, restricted by numerous, self-serving scholarly texts of the 1929-1939 era.
Stock position: None.
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most active
Instabloggers.-
1
TraderMark
-
2
Don Dion
-
3
Cliff Wachtel
-
4
Mike Havrilla
-
5
James Quinn
Top Instabloggers » -
1
-
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
This article has 86 comments:
The paragraph about emerging markets is wide sweeping and isn't supported by a single number.
I suppose the argument is that the world is a messy place today and so.... S&P will go down. But world's been a messy place for the last.... oh... twenty thousand years. Was the world more stable back during the Cold War? Around the two World Wars? In 1800s Europe? When?
Much more of the real value will be established outside the USA than previously assumed.
Ultimately, if the US does have the right conditions to attract more investment than other economies, then it wages will have to fall below those of its major competitors. This of course can only happen through currency realignment in an inflationary environment.
In addition you ask, 'How much more downside is there?' and claim there is lots based on a list of vague assumptions and generalizations. Yet, in spite of this you have exited your short positions because, based on your peerless research, the S&P reached the magical number of 700, coupled with those flaws in the banks' balance sheets that you oh so cleverly spotted!
And after predicting more downside, you suggest that you will once again enter short positions if your once again vague set of conditions are met!
You have the unmitigated gall to end this rambling river of drivel by slamming 1929-1939 authors as 'self-serving'! What hypocrisy! Your entire article is self-serving
Communism is primarily a critique and rejection of capitalism, so a decision to reject communism is effectively a decision to end the ongoing debate (which lasted decades). Hence, there was more deliberation than you might guess underlying the decisions...
"Wall Street has been unable to comprehend the sheer complexity of today’s financial and economic environment."
Wall Street grasped the complexity perfectly. As soon as you realize that you can pay yourself a bonus even when you destroy the company, you know that the game is not "capitalism" but "kleptocrism" - a game that the Russians mastered post-Communism. The problem of high compensation on Wall Street or among senior corporate executives is one symptom of a bigger problem; the investors are too busy looking for the magic algorithm to hold management accountable (and Wall Street figured out they had carte blanche to do as they pleased while offering various magic algorithms).
If I understand you correctly then I respectfully disagree.
Yesterday's market action was driven, in part, by AIG who incurred massive quarterly losses as a result of restructuring charges and continuing losses on CDS's and securites backed by commercial real estate.
And if the value of troubled assets were fully priced, then we would not be going through the stress test exercise. Toxic assets are still very much front and center.
AIG is a metaphor in other ways inasmuch as it returned the government well, repeatedly, and is still in trouble; and it was unable to sell good assets to generate cash. Restricted access to capital still haunts this market as does doubts about government policy response.
Its important that we set up large transmitters and try to contact our creators so they get off their coffee break and get back on the job, because we are going to helll in a hand basket and need their attention now! It is past the point of no return and we are sliding into a financial black hole, and my dividends, I just know, are going to be soon cut!
HHHHHHHEEEEEELLLLLLPPP...
Many chartists are looking at sp500 at 600 or 550. Some say sp500 may hit 300 to 400. Extreme opinion has it that sp500 at 150 is possible representing a 90% correction as in 1929 to 1933.
On Mar 03 09:55 AM know nothing wrote:
> "You cannot legislate the poor into freedom by legislating the wealthy
> out of freedom. What one person receives without working for, another
> person must work for without receiving. The government cannot give
> to anybody anything that the government does not first take from
> somebody else. When half of the people get the idea that they do
> not have to work because the other half is going to take care of
> them, and when the other half gets the idea that it does no good
> to work because somebody else is going to get what they work for,
> that my dear friend, is about the end of any nation. You cannot multiply
> wealth by dividing it."
Seems a risk pricing specialist could come to that conclusion in seconds.
Most downside collapses overshoot just like the Bubbles that produce them.
The larger the Bubble....the larger the Downside Collapse.
We'll take out the entire Real Estate Sham Bubble gains (already there) and the ENTIRE Tech Bubble Gains (have some of that already but will take the early 90's out as well).
We could test some of the late 80's but I'll reserve some of my DOOM and GLOOM and call it a day at the DOW 4000-5000 level.
Then we will finally see the total destruction of most of the leveraged debt buildup that began in the Reagan Revolution Era of the early 80's. As we should.
(Just to be fair....I'm at fault here as well. I voted for Reagan and exclusively Republican all my life. I am part of this problem. However, I will not compound it by voting or supporting Obama and the Democrat Socilaist Party. I am now an Expatriot in my own land)
On Mar 03 10:13 AM Sentinel wrote:
> However, if the Cornucopians (American Utopians) don't see significant
> gains in early 2010 (think 1st quarter/March/April 2010) then they
> will finally capitulate and we could see DOW 1000-2000.
>
> Then we will finally see the total destruction of most of the leveraged
> debt buildup that began in the Reagan Revolution Era of the early
> 80's. As we should.
>
> (Just to be fair....I'm at fault here as well. I voted for Reagan
> and exclusively Republican all my life. I am part of this problem.
> However, I will not compound it by voting or supporting Obama and
> the Democrat Socilaist Party. I am now an Expatriot in my own land)
As for the comments above relating to your closing out your shorts, that is pretty standard after a series of down days like we have had and, given this markets propensity to meander after a major move down, probably advisable. Nothing goes straight up or down.
On Mar 03 10:26 AM morph366 wrote:
> Intrigued by the title to this piece I read through it but unfortunately
> I am none the wiser as to how much downside still exists.
Already thinking about it.....
When America is nothing more or quickly becoming nothing more than a patchwork, politically correct, quasi-Tribalist version of Canada.....
Well...why not move to a country that has been Socialist for longer and does a much better job at it like Canada?
Instead of calling me disgusting, why don't you allow yourself to assess this situation we are in and compare it to our Founding Fathers' vision of what America should be and more importantly.....how we got here and why we continue to decline in that vision of freedom.
Perhaps you will then be a little less Jingoistic. (That's mindless Patriotism fueled by some misplaced Romantic Notion of what patriotism means....in case you didn't know)
We commend you for providing a cogent and thoughtful assessment of the current state of the economy and major equity indices. We especially appreciate the observations concerning "professional" fund managers and their appearances on the useless and inane television programs that broadcast "stock advice" to the public.
Other than a WSJ op-ed which attempted to discredit the actual methodology behind the calculation of the Major Indices themselves, we have heard no substantive corroboration of the "experts" claim that stocks are cheap.
In our humble opinion, any optimism at this point is based upon nothing more than worn out adages and blind hopes, summed up entirely by the mantra we have heard so often in the past 18 month:
"The economy/market/house prices/jobs/prosperity will return...it always does."
Honest alias? I don't insult people on here, I would appreciate the same respect in return! Thank you.
On Mar 03 10:12 AM Anandakos wrote:
>
> @know nothing
>
> "What one person receives without working for, another person must
> work for without receiving".
>
> Like for instance the income during retirement from the non-recipient's
> Individual Retirement Account eviscerated by the mendacious actions
> of the receiver? Was that what you were meaning? Because if not,
> you're probably one of the thieves.
>
> P.S. You have an honest alias! Congratulations.
>
> On Mar 03 09:55 AM know nothing wrote:
LOL, I got out of that extremist-capitalist cesspool (America) 16 years ago! A quick check of my profile and website would have saved you some misdirected indignation.
Canada is much too like the cesspool FWIW. Denmark is a great place and still relatively safe for Yanks as long as they keep their mouth shut about how they used to do things back in the land of the formerly free.
For my money Asia is the only place to be.
I did not call you disgusting. I said you are disgusted. You know, as in you are disgusted with how bad its gotten....!
On Mar 03 10:41 AM Sentinel wrote:
> boats....
>
> Already thinking about it.....
>
> When America is nothing more or quickly becoming nothing more than
> a patchwork, politically correct, quasi-Tribalist version of Canada.....
>
>
> Well...why not move to a country that has been Socialist for longer
> and does a much better job at it like Canada?
>
> Instead of calling me disgusting, why don't you allow yourself to
> assess this situation we are in and compare it to our Founding Fathers'
> vision of what America should be and more importantly.....how we
> got here and why we continue to decline in that vision of freedom.
>
>
> Perhaps you will then be a little less Jingoistic. (That's mindless
> Patriotism fueled by some misplaced Romantic Notion of what patriotism
> means....in case you didn't know)
Markets are only meaningful when they can valuate stuff in a meaningful way based on real demand and supply for example and not when they are fraudulently being played by traders who use rants as dip sticks to valuate the markets.
We have already taken out most of the tech bubble gains if you factor in inflation.
So....the Dow is not at April 1997 levels....we are actually now on an inflation adjusted basis somewhere in 1995 levels.
Remember....your money isn't worth what it used to be whether it is cash in your hand or stocks bought with cash.
And with Bernanke and Gang printing money like there is no tomorrow your cash and stocks will soon be worth even less.
Which means that in reality my prediction of taking out the gains since the early 90's and even back to the eighties will come about much sooner that you think.
But here's the key.....you have to "THINK" first.
"Sentinel,
LOL, I got out of that extremist-capitalist cesspool (America) 16 years ago! A quick check of my profile and website would have saved you some misdirected indignation.
Canada is much too like the cesspool FWIW. Denmark is a great place and still relatively safe for Yanks as long as they keep their mouth shut about how they used to do things back in the land of the formerly free.
For my money Asia is the only place to be.
I did not call you disgusting. I said you are disgusted. You know, as in you are disgusted with how bad its gotten....! "
On Mar 03 10:56 AM Sentinel wrote:
> Oh yeah...forgot to mention this because of 'boats" misguided rant
> against me.....
>
> We have already taken out most of the tech bubble gains if you factor
> in inflation.
>
> So....the Dow is not at April 1997 levels....we are actually now
> on an inflation adjusted basis somewhere in 1995 levels.
>
> Remember....your money isn't worth what it used to be whether it
> is cash in your hand or stocks bought with cash.
>
> And with Bernanke and Gang printing money like there is no tomorrow
> your cash and stocks will soon be worth even less.
>
> Which means that in reality my prediction of taking out the gains
> since the early 90's and even back to the eighties will come about
> much sooner that you think.
>
> But here's the key.....you have to "THINK" first.
Yes, I am indeed disgusted.
No it is not really that easy to leave. Wife, 5 kids, laid off, lost most of my 401K, lost my house (not because I took a a loan I couldn't afford...I took a loan I could not afford if I wasn't working....at all). Lost faith and hope in most of my political and religious institutions who have all said they're here to help, when in fact when I begrudgenly called upon them (I've always been fiercely independent) for just such help, they could not or would not.
Just trying to stabilize things so I can make a rational decision moving forward.....which indeed could be the option of leaving the country altogether.
Before you become an expatriot in the physical you have to make that decision in the mind. That's why I said I am an expatriot in my own land.
Or perhaps I should have more accurately stated....
America has expatriated from me.
On Mar 03 11:09 AM Sentinel wrote:
> My apologies then "boats" for misinterpeting what you typed. <br/>
>
> Yes, I am indeed disgusted.
>
> No it is not really that easy to leave. Wife, 5 kids, laid off,
> lost most of my 401K, lost my house (not because I took a a loan
> I couldn't afford...I took a loan I could not afford if I wasn't
> working....at all). Lost faith and hope in most of my political
> and religious institutions who have all said they're here to help,
> when in fact when I begrudgenly called upon them (I've always been
> fiercely independent) for just such help, they could not or would
> not.
>
> Just trying to stabilize things so I can make a rational decision
> moving forward.....which indeed could be the option of leaving the
> country altogether.
>
> Before you become an expatriot in the physical you have to make that
> decision in the mind. That's why I said I am an expatriot in my
> own land.
>
> Or perhaps I should have more accurately stated....
>
> America has expatriated from me.
You have written some good articles, but this is not one of them. There are too many unelaborated generalities. One example: "And, as far as systemic risk is concerned, Ben Bernanke’s definition is proving to be entirely academic, restricted by numerous, self-serving scholarly texts of the 1929-1939 era." What value does that statement have without an explaination of "self-serving"?
You have enumerated a number of the important issues for the current time and coming years. But the value of the article stops there. It's like you started to make a sandwich and stopped when all that was done was to put out two slices of bread. Where's the beef?
boats:
You wrote: "There you go confusing freedom and capitalism. Capitalism makes slaves of 99% of the population."
If I accept your statement, then I would add to it. Communism makes slaves of 99.9% of the population. But hunter-gatherers are 100% free.
On Mar 03 11:16 AM kruser53 wrote:
>
>
> If I accept your statement, then I would add to it. Communism makes
> slaves of 99.9% of the population. But hunter-gatherers are 100%
> free.
On Mar 03 10:49 AM boats wrote:
> Sentinel,
>
> LOL, I got out of that extremist-capitalist cesspool (America) 16
> years ago! A quick check of my profile and website would have saved
> you some misdirected indignation.
>
> Canada is much too like the cesspool FWIW. Denmark is a great place
> and still relatively safe for Yanks as long as they keep their mouth
> shut about how they used to do things back in the land of the formerly
> free.
>
> For my money Asia is the only place to be.
>
> I did not call you disgusting. I said you are disgusted. You know,
> as in you are disgusted with how bad its gotten....!
>
> On Mar 03 10:41 AM Sentinel wrote:
If markets bottom approximately 6 months before the end of a recession on average, then the question is not so much a matter of a bottom number as it is a matter of timing.
How long will this recession (depression) last? Are we 6 months from recovery as Bernacke hinted? I don't think so. Exactly when will the economy bottom and start its climb back upward?
Housing prices, which started this roller coaster ride still have at least 9 more months of falling to do to get in line with personal income. Because personal income is falling, that could stretch out to 15 to 18 months.
Financial deleveraging is still happening and unwinding and you still have several challenges ahead including ARM resets which peak in 2011, alt-a, commercial, credit card, etc. Add to that the spectacle of an Eastern Europe meltdown and we are looking at another 9 to 24 months of adjustment and correction.
So the initial question "How much more downside could still exist?" is a timing issue. Our real economy will not turn around for at least 12 to 24 months meaning we are 6 to 18 months from a bottom.
We could test the market losses suffered in the Great Depression. That would be 90%. So look for the market to continue downward to the 3000 level over the next 6 months and possibly hit 1500 in 12 to 18 months.
On Mar 03 11:24 AM raytayzmd wrote:
> ...oh, yeah, right, you live in Bangkok -- that oasis of urban sprawl,
> air pollution, and child prostitution...is the military "junta" still
> in power?...no?...well, just wait a couple of weeks...pardon me if
> I ignore your opinion.
Longer term; the direction has already been laid out with more than 90% probability of lower lows from current levels for the next few months until late Q4 2009 to early Q1 2010 as the projected timetable for the final bottom to be reached.
Dow Jones is defining an Expanding Flat on the 100 year chart. This is a very common pattern most chartists encounter in intraday, daily, weekly, or monthly charts and has better predictability than most other patterns such as Common Flats, Zigzags, Triangles, Double Combinations, Triple Combinations, etc. An example of expanding flat on the monthly chart is MER. MER was able to finalize the pattern; unfortunately, the C wave of the ABC pattern was able to "kill" MER.
Since Oct, 2008 (see my comments last Oct-Nov 2008 regarding potential downside targets for Dow Jones), the expanding flat probability have taken a definitive pattern with more than 90% probability that the iii-rd wave of the 3rd wave of the C wave will be completed in a very short period of time - and it was basically but not definitively completed last Nov 2008.
We are now either starting to form the iv-th wave of the 3rd wave of the C wave or forming another pattern that has a low probability of the iii-rd wave not being complete yet but with increasing probability at this stage that it is going to produce an extended run to the downside. At this stage, as previously mentioned, nobody can possibly know with high degree of certainty. We will know in the next several weeks depending on what the next patterns will develop whether the probability of the Expanded Flat that the Dow Jones is still in the process of finalyzing will develope higher probability of being just a common variety type or an extended type. An extended type is going to have dire consequences for America and the global economy.
For now, the current actions of the government regarding proposed law amendments on trading fees and proposed tax hikes in the future are being looked upon by both traders and investors as anti-capitalistic thus resulting in the sudden asceleration of the downside momentum in the last 2 weeks that has a potential to end in the Dow Jones 6,000 area before the next relief rally can follow. Meanwhile, the plan or no-plan Banks Recovery Program if it gets announced and received warm reception from both banks and investors will immediately result in a relief rally from these levels to the 9,000 to 10,000 levels.
The $787B stimulus package is not yet priced into the markets. It is going to take 4 to 8 months this year once the fund starts releasing cash to the public that traders and investors will be able to get a handle on how effective or ineffective the stimulus will be.
On Mar 03 05:26 AM Nikola wrote:
> I liked the first two paragraphs. The rest is incoherent and non
> sequitur.
>
> The paragraph about emerging markets is wide sweeping and isn't supported
> by a single number.
>
> I suppose the argument is that the world is a messy place today and
> so.... S&P will go down. But world's been a messy place for the
> last.... oh... twenty thousand years. Was the world more stable back
> during the Cold War? Around the two World Wars? In 1800s Europe?
> When?
>
>
This occured to me the other day. We are so so focused on our financial problems that we have forgotten about this. Obama is just a great big target for the terrorists, who have a history of testing new presidents.
Seeing how you live and breath your business because that business is your life it really shouldn't be that hard for you to stop taking anything out of the business for those luxuries you earned. Hey, its your business that's most important, right? Just get rid of the mansion, cars, planes, boats, $2000 hookers, club memberships, $2000 suits, alligator shoes...you know, all that stuff that isn't as important as your business.
Hey boss, where do you want this cot for your office?
On Mar 03 11:45 AM know nothing wrote:
> On Mar 03 09:55 AM ATLBob wrote:
On Mar 03 10:26 AM morph366 wrote:
> Intrigued by the title to this piece I read through it but unfortunately
> I am none the wiser as to how much downside still exists.
On Mar 03 11:16 AM kruser53 wrote:
> Rakesh Saxena:
>
> You have written some good articles, but this is not one of them.
> There are too many unelaborated generalities. One example: "And,
> as far as systemic risk is concerned, Ben Bernanke’s definition is
> proving to be entirely academic, restricted by numerous, self-serving
> scholarly texts of the 1929-1939 era." What value does that statement
> have without an explaination of "self-serving"?
>
> You have enumerated a number of the important issues for the current
> time and coming years. But the value of the article stops there.
> It's like you started to make a sandwich and stopped when all that
> was done was to put out two slices of bread. Where's the beef?<br/>
>
> boats:
>
> You wrote: "There you go confusing freedom and capitalism. Capitalism
> makes slaves of 99% of the population."
>
> If I accept your statement, then I would add to it. Communism makes
> slaves of 99.9% of the population. But hunter-gatherers are 100%
> free.
On Mar 03 09:44 AM raytayzmd wrote:
> .....hmmm, he is a "risk pricing specialist" at Quote Platform Syndicate
> Group which "is part of an international network of risk buying pools
> engaged in the pricing of credit default swaps, synthetic collateral
> debt obligations, political risk insurance contracts, index put options,
> far-forward FX contracts and asset securitizations."...in other words,
> he helped create this mess to begin with...I vote we all get together
> for a good old fashioned lynching -- anybody know his address?
> may hit 300 to 400. Extreme opinion has it that sp500 at 150 is
> possible representing a 90% correction as in 1929 to 1933.
On what basis? Throwing out numbers without an analysis backing it is shamanism and fear mongering at best. As the index rises / falls, you will hear new targets from these experts "reflecting new realities" - which will again be, um, not worth looking into.
Using elliot-speak, i think we are currently completing the 5th of A wave; and based on that I believe a short term bottom is in sight. This should be followed by a B-wave, or a nice bear market rally.
-KaranZ
AprioriTrader.blogspot...
On Mar 03 08:23 AM investor88 wrote:
> Agree there is further downside to the markets.
>
> Many chartists are looking at sp500 at 600 or 550. Some say sp500
> may hit 300 to 400. Extreme opinion has it that sp500 at 150 is
> possible representing a 90% correction as in 1929 to 1933.
On Mar 03 05:51 AM Jim Hawthorne wrote:
> I agree with Nikola;
>
> In addition you ask, 'How much more downside is there?' and claim
> there is lots based on a list of vague assumptions and generalizations.
> Yet, in spite of this you have exited your short positions because,
> based on your peerless research, the S&P reached the magical
> number of 700, coupled with those flaws in the banks' balance sheets
> that you oh so cleverly spotted!
>
> And after predicting more downside, you suggest that you will once
> again enter short positions if your once again vague set of conditions
> are met!
>
> You have the unmitigated gall to end this rambling river of drivel
> by slamming 1929-1939 authors as 'self-serving'! What hypocrisy!
> Your entire article is as self-serving as the proclamations of the
> lowest CNBC shill; or a Time's Square pimp, for that matter!
Thank god im an Australian.
On Mar 03 11:56 AM plumstupid wrote:
> Hey boss! HEY!
>
> Seeing how you live and breath your business because that business
> is your life it really shouldn't be that hard for you to stop taking
> anything out of the business for those luxuries you earned. Hey,
> its your business that's most important, right? Just get rid of the
> mansion, cars, planes, boats, $2000 hookers, club memberships, $2000
> suits, alligator shoes...you know, all that stuff that isn't as important
> as your business.
>
> Hey boss, where do you want this cot for your office?
>
>
>
>
On Mar 03 06:47 AM CautiousInvestor wrote:
> "From the prism of facts pertaining to previous recessions, the risks,
> including systemic risks, within the broad American financial framework
> are now fully priced."
>
> If I understand you correctly then I respectfully disagree.
>
> Yesterday's market action was driven, in part, by AIG who incurred
> massive quarterly losses as a result of restructuring charges and
> continuing losses on CDS's and securites backed by commercial real
> estate.
>
> And if the value of troubled assets were fully priced, then we would
> not be going through the stress test exercise. Toxic assets are still
> very much front and center.
>
> AIG is a metaphor in other ways inasmuch as it returned the government
> well, repeatedly, and is still in trouble; and it was unable to sell
> good assets to generate cash. Restricted access to capital still
> haunts this market as does doubts about government policy response.
Those who were perfectly honest would agree that with the words of the BOSS being so emphatically focused on building the business he would only be dedicated enough to that business that when the business climate changed he would again roll up his sleeves and rededicate himself to the success of his business. If having to dump the silly accouterments of "wealth" is what it takes then why wouuldn't such a dedicated man do that?
Perhaps you haven't been a BOSS?
On Mar 03 12:31 PM know nothing wrote:
> SPOKEN LIKE A TRUE EMPLOYEE, YOU ARE EXACTLY THE TYPE OF PERSON THAT
> LETTER WAS INTENDED TO ADDRESS! IT SOUNDS AS THOUGH YOU ARE OFFENDED
> BY OTHER PEOPLES SUCCESS. THERE ARE PEOPLE WHO WILL NEVER SHARE IN
> THAT TYPE OF SUCCESS, BUT DON'T BLAME YOUR LACK OF SUCCESS ON ANOTHER
> PERSON'S ACHIEVEMENTS!
On Mar 03 12:31 PM know nothing wrote:
> SPOKEN LIKE A TRUE EMPLOYEE, YOU ARE EXACTLY THE TYPE OF PERSON THAT
> LETTER WAS INTENDED TO ADDRESS! IT SOUNDS AS THOUGH YOU ARE OFFENDED
> BY OTHER PEOPLES SUCCESS. THERE ARE PEOPLE WHO WILL NEVER SHARE IN
> THAT TYPE OF SUCCESS, BUT DON'T BLAME YOUR LACK OF SUCCESS ON ANOTHER
> PERSON'S ACHIEVEMENTS!
On Mar 03 12:29 PM PROXIMO wrote:
> Rakesh--I enjoy all of your articles .Please keep posting. An observation.
> If a portion of the energy expended today attacking you and this
> article had instead been used to study virtually any of the 115 articles
> you have previously posted in the past 8 months(and your recommendations),
> there would be far less vitriol and far more gratitude. Thanks for
> what you write. Prox.
On Mar 03 12:55 PM plumstupid wrote:
> Actually, I am even ore offended by those that have attained a modicum
> of success and suddenly think they are better than where the came
> from. Just me, I could be wrong.
E. M. Jones & E. A Radice; An American Experiment, 1936
J. M. Keynes; A Treatise on Money, 1930 (before fame)
Caught Short! A Saga of Wailing Wall Street, 1929
Only Yesterday; Harper, 1931
Stock Exchange Practices, Washington Report, 1934
The Liberty Digest, June1, 1929
Bernard J. Reis; False security, 1937
Federal Reserve Bulletins; monthly, beginning in 1929
The list is long; but I can't wait to read your curious definition of ' Self Serving'! Let's see if it applies to yourself as well, shall we?
On Mar 03 12:06 PM Rakesh Saxena wrote:
> Dear Jim: Can you cite me one text of the 1929-1939 period which
> you have read and which in your opinion is not self-serving? If we
> are to use this forum for a constructive discussion, then let's all
> do our homework. Otherwise, don't be ashamed to ask questions. Many
> thanks - Rakesh
You don't know me. Your fantasy about me is inaccurate.
I retired at 41 after reaching the pinnacle of my profession. I haven't worked for more than 12 years.
I live comfortably but not lavishly in the Condo I paid cash for 10 years ago. I have a housekeeper who cleans and does laundry. My automobile is of good quality, better than a Benz but less than a Bentley, and twice as expensive as it would be in America due to engine size and vehicle origin. It looks and runs as good as it did the day I bought it new for cash 10 years ago through the efforts of my excellent driver. It has only 43,000 miles on it. I pay both of them 20% more than scale and pay their medical insurance and deductibles from my pocket.
I am married to a beautiful petite non-western woman who is almost two decades younger than I am. We have a great marriage and are best friends.
Sorry to disappoint your fantasy of me. Have a great life!
On Mar 03 01:37 PM know nothing wrote:
> It seems as though you are disturbed by someone who is just stating
> the facts, rather than be envious, resentful, or hateful, wouldn't
> it be better to be thankful for people who are willing to make such
> a large commitment, and in doing so , we allow people like you to
> make your trailer payments, monster truck payments, and buy more
> guns! The facts,please, only the facts.
Here are some forces that often minimize purely economic and financial explanations of human interactions, including the vicissitudes of the economy and the production of goods and services:
Historical forces, e.g. grievances from past wars, revolutions, injustices, new wars, etc.
Psychological forces, e.g. envy, greed, desire for power, lack of concern for one's own health, the health of others and the planet, etc.
Sociological forces, e.g. racism, sexism, class consciousness, caste differences, language and cultural differences, mass hysteria, etc.
Political forces, e.g. revolutions, newly elected governments, imperialistic wars, genocide, etc.
Technological forces, or the invention of new devices which make the old way of life obsolete, e.g. railroads made rivers and river barges much less important for moving goods. Milking machines and other motorized and electrified farm machines lowered the demand for unskilled farm workers. Today, the internet makes brick and mortar stores much less important, etc.
The Great Depression was caused by many things including the historical, psychological, sociological, political, and technological events mentioned above.
Think of the rise of Hitler, the Russian Revolution, the German attack on European Jewry, the mass hysteria produced by fascism and communism and the dislocation produced by the electrification and motorization of Europe and America. And I've only mentioned the most obvious.
Economics and finance are only part of the picture.
Aside from above All Govt intervention has done lately is to delay the inevitable in the short term and create bigger mess in the long term.
I agree with Author from long term perspective where major indices are headed but I have big concern on timeline. Will the change happen in 3-6 month or 12-18 month?
The more Govt intervenes the longer the period for the change and more casuality it will cause in the economy.
Also so far the Govt has been offering soap to the greedy. It must switch to carrot and stick, if It really wish to succeed.
- PBS
On Mar 03 04:19 PM Socialism cannot compete! wrote:
> How much? How about ALL of it. Any stock can go to zero...and therefore,
> though improbable...all could go to zero. Is it as unlikely as we
> once thought? That is a question to ponder seriously at the moment!!
Please justify that statement.
Under socialism, it's the reverse.
On Mar 03 09:59 AM boats wrote:
> There you go confusing freedom and capitalism. Capitalism makes slaves
> of 99% of the population.
On Mar 03 01:56 PM Jim Hawthorne wrote:
> Sure!
> E. M. Jones & E. A Radice; An American Experiment, 1936
> J. M. Keynes; A Treatise on Money, 1930 (before fame)
> Caught Short! A Saga of Wailing Wall Street, 1929
> Only Yesterday; Harper, 1931
> Stock Exchange Practices, Washington Report, 1934
> The Liberty Digest, June1, 1929
> Bernard J. Reis; False security, 1937
> Federal Reserve Bulletins; monthly, beginning in 1929
>
> The list is long; but I can't wait to read your curious definition
> of ' Self Serving'! Let's see if it applies to yourself as well,
> shall we?
On Mar 03 09:11 PM The AntiCramer wrote:
> "From the prism of facts pertaining to previous recessions, the risks,
> including systemic risks, within the broad American financial framework
> are now fully priced."
>
> Please justify that statement.
On Mar 03 02:11 PM carey_jim wrote:
> Rakesh:
>
> Here are some forces that often minimize purely economic and financial
> explanations of human interactions, including the vicissitudes of
> the economy and the production of goods and services:
>
> Historical forces, e.g. grievances from past wars, revolutions, injustices,
> new wars, etc.
>
> Psychological forces, e.g. envy, greed, desire for power, lack of
> concern for one's own health, the health of others and the planet,
> etc.
>
> Sociological forces, e.g. racism, sexism, class consciousness, caste
> differences, language and cultural differences, mass hysteria, etc.
>
>
> Political forces, e.g. revolutions, newly elected governments, imperialistic
> wars, genocide, etc.
>
> Technological forces, or the invention of new devices which make
> the old way of life obsolete, e.g. railroads made rivers and river
> barges much less important for moving goods. Milking machines and
> other motorized and electrified farm machines lowered the demand
> for unskilled farm workers. Today, the internet makes brick and mortar
> stores much less important, etc.
>
> The Great Depression was caused by many things including the historical,
> psychological, sociological, political, and technological events
> mentioned above.
>
> Think of the rise of Hitler, the Russian Revolution, the German attack
> on European Jewry, the mass hysteria produced by fascism and communism
> and the dislocation produced by the electrification and motorization
> of Europe and America. And I've only mentioned the most obvious.
>
>
> Economics and finance are only part of the picture.
Both of these are depressing current earnings. However, time and policy will tend to ameliorate both factors. That in turn will stimulate future earnings to levels which, while lower than the "silly season" of 03-06, will be substantially higher than today's hyper-depressed levels.
Anticipation of those earnings will cause stock prices to move up. When that will happen remains 2B seen, but history would indicate we may not be too far.
However, I do share the original author's concerns. If some of the regions that (rightly, in my opinion) hitched their futures to the concept of free market capitalism come to regret and reverse their decisions, and if radical islam creates additional friction to the workings of the western world, both will serve to hamper economic recovery and growth and in turn make market recovery much more protracted and less robust than otherwise.
On Mar 03 10:00 AM doubleguns wrote:
> No earnings = no stock appreciation. Since earnings continue to drop
> off so will the stock prices.
>
> Seems a risk pricing specialist could come to that conclusion in
> seconds.
>
>
socialism? works great, huh. that's why the soviet union and easter europe were so wealthy after their experiment with it.
how does capitalism have anything to do with poverty in africa and other places? most of it is the fault of strong armed dictators who seize the wealth of the people. the capitalistic system did nothing to impoverish anyone in africa or anywhere else.
capitalism is certainly a better system for allocating resources than socialism and that is what really matters.
i
On Mar 04 10:42 AM Johnny Biznatch wrote:
> you can attack capitalism all you want however, what is your alternative?
>
> socialism? works great, huh. that's why the soviet union and easter
> europe were so wealthy after their experiment with it.
>
> how does capitalism have anything to do with poverty in africa and
> other places? most of it is the fault of strong armed dictators who
> seize the wealth of the people. the capitalistic system did nothing
> to impoverish anyone in africa or anywhere else.
>
> capitalism is certainly a better system for allocating resources
> than socialism and that is what really matters.
>
> i
On Mar 03 11:50 AM freddyv wrote:
> "and a heightened risk of terrorism"
>
> This occured to me the other day. We are so so focused on our financial
> problems that we have forgotten about this. Obama is just a great
> big target for the terrorists, who have a history of testing new
> presidents.
My guess is that the fundamentals have to kick in before the downside is reached, investing in equities will have to be eniticing again from an inco me perspective rather than speculative price appreciation one. Namely dividend yields will have to go up again to not pre-crash 2-3 percent but more like 6-8 percent. Companies will have to first have earnings to yield, therefore layoffs will have to stabalize before we can entertain thoughts of recovery. Second there will have to be a "theme" like the internet, steam engine, whatever, which will have to be a direction that the economy is going which looks viable, profitable and innovative to spur interest in equities.
I see none of the above happening in a time span even worth considering. We're in a secular bear market which depending on how bad the govenrment screws up price signals in the economy will last a long time so invest accordingly until things change DRAMATICALLY on a fundamental basis.
On Mar 04 11:56 AM Professorsnape wrote:
> Random, self-indulgent tripe! Of course the markets are going lower.
> However, to say the world is more interconnected today than in generations
> past is erroneous. World trade as a percentage of GDP was higher
> in the 1920s and 30s.
If capitalism is allowed to work, without the bastardization or the tipping of the scales by government, It outperforms all other systems for ingenuity and wealth. Special case and punitive legislation destroy its power.
Without incentive there is no gain. If you are not allowed the benefits of your mind and your labor there is no incentive for advancement, stagnation is the only outcome. Why work if the outcome is the same.
We have not had Capitalism in America for quite some time; yet its spirit has been able to overcome.
The last straws are being added; Liberty Is Fading In The Land Of The "Free".
On Mar 03 09:59 AM boats wrote:
> There you go confusing freedom and capitalism. Capitalism makes slaves
> of 99% of the population.
On Mar 04 10:44 AM plumstupid wrote:
> Soviet Union and E. Europe were Communist. Communism and Socialism
> are not the same thing.
The DOW peaked above the 14,000 level, on October 9, 2007.
During the last depression, it lost 90% of it's value.
That would be around 1400.
Today, the DOW is 6855.
We still have a ways to go in the next couple of years....
On Mar 04 01:43 PM Just Say Whoa! wrote:
> How much downside?
>
> The DOW peaked above the 14,000 level, on October 9, 2007.
>
> During the last depression, it lost 90% of it's value.
>
> That would be around 1400.
>
> Today, the DOW is 6855.
>
> We still have a ways to go in the next couple of years....
>
You made a compelling case for a continued decline in the stock market and didn't even include the fact that the housing market appears to have a long ways to go before bottoming.
Huge loan for dirt cheap? Are you inferring that America is going to default, or "merely" hyper-inflate in order to "pay" its bond holders?
Sounds like allot of flag waving and wishful thinking. Just me, I could be wrong.
On Mar 04 02:57 PM Victor84 wrote:
> Downside is not the Great Depression. I don't think 25% unemployment
> or even upper teens is in the cards. In addition, America was more
> breadwinner-centric back then, meaning that losing a job affected/hurt
> a greater percentage of the population. There was a financial implosion
> of epic proportions where at least a quarter of banks failed. Even
> in today's sh*tstorm, we won't see that. As for the housing crisis,
> it is the timing that matters. Indications are that there buyers
> waiting on the sidelines, but the prices still need to come down.
> The housing inventory backlog could start going down in a few months
> if prices depreciate at a faster rate. I think the global factors
> do pose uncalculated risks, but there are also rewards, namely a
> huge, barely tapped market for goods, innovation, and services. This
> job displacement is necessary to reallocate Americans to more productive
> jobs that will help us be competitive in the future. And remember,
> we're getting a huge loan from the rest of the world for dirt cheap.
> It is up to us to take this gift and get a big return on their investment
> for ourselves.
I am no prescient being either, but let's look at reality. The U.S. cannot really default on these loans, since THEY ARE THE RESERVE CURRENCY OF THE WORLD. That means they can print an unlimited amount of money to redeem these Treasury bonds, at any time. It's exceedingly unlikely that we lose reserve status in the near future, because guess what, we're still by far the most productive and innovative country in the world and what other currency will take its place? Excuse me while I go unfurl my American flag.
This really is all about you, isn't it! It is very clear that you have not done much research into the writers of time period you so hastily condemn!
What you have written in this past can stand or fail on it's own merits. We were discussing this, my friend; not your past record.
We are all only as good as our last effort; yours was weak.
On Mar 04 12:09 AM Rakesh Saxena wrote:
> Dear Jim: Have you actually read the texts you are citing? These
> are either ideological documents driven by a particular world view
> or simply attempts to analyze the 1929-1939 period without any clear
> and fundamental knowledge of systemic risks in a capitalist economy.
> In any event, I will address the definition of self-serving in a
> forthcoming article and will await your comments---but, in brief,
> a self-serving document for our purposes is one which is planned
> and executed within the prism of a pre-determined vision of the where
> we are today and where we are (or should be) headed. As far as my
> article is concerned, it is indeed self-serving. Take it or leave
> it, but I stand by it and I invite cogent challenges. And do read
> the various previous articles before you rush to comment--you may
> not have the courage to admit it, but I have been right all along,
> on the mark. Many thanks - R
In recent history (Black Monday, Asian Crisis, 9/11) when the stock market goes into free fall, meaning near vertical charts, the duration of the fall (in time) is relatively short.
Someone with access to a Bloomberg said that if the DOW was to return 6% a year from here for the next 10 years we would eclipse (in a negative way) the great depression. So it appears things are plenty bad already.
The bank stocks, AIG, GE, all old news. The cumulative market cap of those is what? 10% of October 2007? There is no significant downside left in these stories.
The PPI, most sentiment indexes, unemployment, inflation, oil prices, and other commonly accepted measures of economic conditions are either flat or curving towards flat since November. September-November was when things went vertical.
None of this proves a darn thing, but the fact that this thread and another similar one are both lacking any posts actually calling a bottom, is interesting to me. This is a game of psychology at the end of the day. Instead it's doomsday scenarios, personal politics, a little name calling, and bemoaning of losses. I feel confident of at least a bear market rally.
Though, I miss your bearish articles. Best of luck to you,
-Dave