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Doug Poretz  

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  • Mid-East Turmoil Weighs on Forex Markets [View article]
    I also posted this as an InstaBlog -- I think it is relevant to the points you make:

    The political instability and unrest seen for the past few weeks in the Mid-East is not simply a Mid-East but a global phenomenon that is at least two years old. But we are still at the beginning stages of political, cultural and social tumult that will change the world and many of its institutions. The consequences will be enormous. If I am correct, investors should be extremely cautious about where they have put their money and they may want to reconsider the wisdom of putting money under their mattress instead of the equity markets.

    Just shy of two years ago, on March 9, 2009, I wrote a blog entitled “There Is About To Be A Very Significant Change In Headlines Around The World.” At the time, the focus of the world – what dominated the headlines of the time – was the financial and economic situation. The world was just emerging from the shock of the near total meltdown of the capital markets in the Fall of 2008, Obama had been inaugurated President just two months earlier. I began that article with the following:

    "For the past several months, it seems as if there should be a singular version for the word “news” because there has been really only one story: the economy, and what it means to people, how it happened, what’s happening now, who’s to blame, what should be done about it. But there’s about to be a much more significant story taking over the headlines worldwide: social, cultural and political upheaval. There is a growing number of protests events in virtually every area of the world, where primarily middle class anger is being vented at ruling governments for not doing enough (or for doing too much), and also aimed at what can only be identified as the non-government upper class."

    My thesis then was that the economic crisis had repercussions that went far beyond stock prices and interest rates and other economic trends. I suggested that the impact of the economic situation would be felt by the middle and working classes whose quality of life would decline even further, more visibly and at a faster pace than the gradual erosion evidenced over the decades when wealth became increasingly concentrated among the rich. At the time, I focused my attention on what was happening in Europe, where protests by the middle and working classes were proliferating, but I also saw the same thing happening in other parts of the world.
    I now believe that the argument I made about the European protests was appropriate for the Mid-East as well. The middle and working classes saw themselves becoming poorer and the prospects for recovery became increasingly dim. Who was to blame? The immediate answer: those in power – the people who possessed the economic and/or political clout whom the population at large considered to be guilty of mismanagement, greed, and incompetency. And, to make matters worse, as the economy began to improve, the rich and powerful participated in its recovery and the working and middle classes fell even further behind.
    The fruits of this situation could be seen in the US, where the Tea Party arose with no real “ism” but a unifying and very deep and real distrust and dislike for those who have held power. It could also be seen in London, where college students protested passionately about an increase in their tuition. It could be seen in Egypt where the revolution was not a religious but a sectarian movement by diverse elements of the population complaining not about religious freedoms or adherence to certain religious tenets, but about jobs and prices and taxes. Those same concerns are today being echoed in protests in Greece, where two major labor unions are leading a rally against government austerity measures.

    The likelihood of more social unrest is strong and getting stronger. In January 2011, food prices spiked to their highest prices in two decades, and according to World Bank President Robert Zoellick, the increase in food prices has pushed 44 million people into “extreme poverty.” That is on top of the 925 million people already considered undernourished by the UN. Oil prices have soared as a result of the Mid-East turmoil, certain to slow down or possibly reverse the global economic recovery that has begun to emerge, albeit very anemically.

    Jobs are going to be harder to find and prices are going higher. And we are about to see the real impact of the government austerity measures adopted to contend with the debt crises challenging governments around the world.

    Who is responsible for all this dire news? Future historians will sort out the reasons and the blame, but right now the issue is not so much how things really came to be but how broad populations perceive this situation arose. I think – whether justified or not – the middle and working classes will focus more and more on the rich and politically powerful as the culprits. They will be the ones pointed to as the people who forced governments to take away the entitlements of the middle and working classes for the sake of economic factors that allow them to (very publicly) prosper even as life becomes more difficult for those without power and wealth. As that happens, more people will get angrier. More people will take to their streets. More political instability will spread. More volatility will roil the capital markets.

    Two years ago when I predicted a change in the headlines throughout the world, I thought it was less a brilliant insight than it was a keen sense of the obvious. I fear that the continuation and escalation of the intensity of protests around the world is also a keen sense of the obvious. What is less obvious at this point is the prospect of where this may end, but it isn’t too early in the process to conclude that the process will be turbulent.
    Feb 23, 2011. 12:33 PM | 1 Like Like |Link to Comment
  • Can the Market Strength Continue? [View article]
    Consider this:

    -- The author gives a "warning" based on current market conditions and trends, which I believe was rationally presented with supporting data. I also think the signs aren't clear enough yet to determine whether or when the market would prove the warning to be prescient or not.

    -- But what if tomorrow or next month is very different that today -- if something(s) really good or bad happen? ? Clearly, if conditions improve, say an increase in jobs or other signs of an economic improvement, investors will use that as an excuse to push the market higher. Hell, they take BAD news, twist it, and use that as an excuse to send the market higher.

    -- But what happens if there is bad news? I don't mean bad news that can be twisted somehow into good news or neutral news, but really bad news. The market would go south -- and the slope of the decline would be directly related to the drama of the bad news. I do not think anyone would disagree with that.

    -- Then that raises the question: What are the chances of a steady stream of good-neutral news versus the chances of one really major blow of bad news? When I look around the world, the possibilities of "really bad news" are incredibly high. All sorts of possibilities for things taking a sharp turn to the negative with China. Terrorists. The entire Mid-East situation, each nation seemingly incubating their own versions of very serious negative potential. The Euro. Portugal, Ireland, Greece, and Spain (plus, of course, Eastern European nations that are given no attention but are in dire situations). Fallout from governmental actions that seem to be absolutely necessary from a market perspective and seem to be reason for protests if you are college students in London or farm workers in Greece. Political gridlock and ongoing inanity in the US. A disastrous snow storm. Korea. Pakistan.

    -- I am not predicting that ANY of those negative possibilities are going to happen. My point is: when you take a look at the odds and the consequences, you have to conclude that the odds are pretty low for good-neutral news that can be used as an excuse to keep pumping equity premiums to record highs, and the odds are pretty high for something really bad happening all of a sudden that could wallop the market with strong and long consequences.

    -- And then how do you weigh those odds when considering the author's "warning" without factoring any of those negative possibilities into the mix? Maybe you'd say it is a "warning squared."
    Dec 4, 2010. 11:01 AM | 1 Like Like |Link to Comment
  • Is Housing in Trouble, Again? [View article]
    I thought this post was very good. I'd like to add a few comments:

    -- "Recovery" and "return" are not synonyms. Somewhere along the line, there will be an overall bottom, although segments will hit their individual bottoms and start their recoveries at different times and with different degrees of strength.

    -- It is likely that the eventual recovery will bring with it a "new normal," not simply because of the scope and depth of this recession (or whatever it should be called) but also because the new normal will emerge in a newly and increasingly global economy that has been changed by a true revolution in how we communicate (which is no small thing).

    -- The question then arises: What will this new normal look like? It may be much easier to ask: What will this new normal NOT look like? Well, the current normal has been shaped, in my opinion, largely by the messaging that has hit people since the Post WWII Period -- the entire lives of the Baby Boomers (fair disclosure: until my most recent venture, NuuKo.com, I spent four decades in the communications business). The key messaging that has shaped their lives (and the generations since) has been simple: Buy. Buy new. Buy bigger. Buy more tech. Buy more impressive. Buy a second one. Buy. In response to this messaging, we have become buyers and the nation's economy has become a consumer economy. What if that message changed? What if that message morphed from "it's important what you show off" to something that people can do without money: "it's important what you think and how you live and how active you are in support of that." If that happened we'd change from a consumer society to a "supporter" economy. Of course, if that happened, dire predictions about home prices might very well come true.

    -- So then ask: Could that be happening? Could there be a change in the basic messaging that is shaping our culture? What would we look for? Maybe we'd look for strange new political organizations that coalesce quickly, grow virally, and exert significant influence. Maybe we'd look for the emergence of more advertising that pushes "support this movement or this legislation" rather than asks you to actually go buy something. Maybe we'd see a great deal of erratic shifts in what people prefer politically, so that within a two-year span they can both support and then detest the same political principles. We'd see passionate conflict between those who do not want the cultural (and economic) change and those who are anxious for it. That conflict might look like class war. Some people The people might take to the streets, maybe protesting increases in college tuition by rallies in public spaces or protesting the loss of social benefits by getting on tractors and blocking roads. Others may become more avaricious than ever, reaping their rewards while they can, as they envision a shift away from capitalism to socialism.

    -- Could those things actually be happening? Could we be in the midst of a cultural change that could be so massive as to move the economy in very new and unpredictable ways? And, if so, where do values go for homes then?
    Dec 1, 2010. 08:52 AM | 4 Likes Like |Link to Comment
  • A grope too far: Fliers' anger at TSA boils over [View article]
    The TSA is giving businesses a great lesson in how to conduct awful PR -- some more comments here: www.nuuko.com/2010/11/.../
    Nov 22, 2010. 11:37 AM | Likes Like |Link to Comment
  • Growing anxiety over airport pat-downs and scanners [View article]
    The way the TSA has handled this situation is a case history in bad PR for two primary reasons: 1) the quality of their execution of their strategy is naive at best, and 2) the entire premise of defending pat-downs isn't necessary because pat-downs aren't necessary -- look at Israel: no breaches of security in 8 years; less than a 30-minute wait from getting out of the car to arriving at the airplane's gate; no pat-downs. See details: www.nuuko.com/2010/11/.../
    Nov 22, 2010. 11:32 AM | Likes Like |Link to Comment
  • What Is the Roubini Sentiment Index Saying Lately? [View article]
    Whatever else, it is an interesting correlation -- how one uses it o the conclusions drawn will be subjective. But actually, it's an insightful observation. One thing: I'm not certain this relates so much to Roubini's "popularity" as it does to his newsworthiness. If you make that distinction, then you could conclude that when everyone is thinking that we are in a period of doom and gloom, then it isn't newsworthy to have an interview with a guru of gloom or doom. If you opt to take that conclusion, as I do, then you'd also conclude that doom and gloom isn't news and, instead, is part and parcel of the "new normal." Then you can make some additional conclusions about what the consumer is going to do, etc.
    Oct 22, 2010. 10:15 AM | Likes Like |Link to Comment
  • Is a New Economic Crisis Approaching? [View article]
    I posted similar comments at another Seeking Alpha article -- but add this to the list of the "snow ball of bad news" that could crush the market:

    Consider Pakistan. It is a crisis that is about to become chaos, if it isn't already. Some estimates put the number of people impacted at as high as 20 million. Wealth has been lost. Possessions have been lost. The cotton crop, which is vitally important to the nation's economy has basically been wiped out. The infrastructure, which has been built and improved over recent years, has been set back years -- more like decades. The government is incompetent, and the best tent cities for those who have been displaced are abysmal and the number of them is hardly worth mentioning -- in most cases, there aren't even tent cities.

    In the meantime, the Taliban is on the march asserting their messages and power in the most vulnerable parts of the nation. They are killing other aid workers. Food is soaring in price. Riots are starting, and will undoubtedly increase. Disease is early in just the initial stages, but will spread.

    What is at risk? Unlike Iran, Pakistan actually HAS a nuclear bomb. Its relationship with India (also a nuclear power) has become more fragile. It had become the de facto headquarters of Al Qaeda. Just look at a map!

    The US cannot possibly allow this nation to collapse. But how will it prevent it? Does Obama have the political capital to take preemptive action? Probably not. So, what is likely to happen? The situation will get worse -- probably much worse. In a month or two, video and pictures of what is happening there in refugee camps and with kids dying and the actions of our terrorist enemies will increase significantly. At that point, the pressure will increase for the US to get involved. How? Certainly with aid (probably in the billions) and possibly with military support (add in some more billions -- perhaps tens and hundreds of billions). What will happen to our deficit then? Where will we go to get the money to support the effort we will probably be forced to undertake?

    How will investors react? At that point, the reality of another major conflict/issue/call-it... in Pakistan will exert an influence on the market, and it won't be good. It may actually be very very bad.

    Watch the news. See how Pakistan starts to usurp headlines. And watch how the market reacts.
    Aug 30, 2010. 12:09 PM | 8 Likes Like |Link to Comment
  • Does a Change in Control of Congress Affect the Market? [View article]
    Whereas past patterns may be accurate predictors of what is to come, major events render past patterns useless except to the degree that they prove that major events do indeed render past patterns useless. For example ....

    Consider Pakistan. It is a crisis that is about to become chaos, if it isn't already. Some estimates put the number of people impacted at as high as 20 million. Wealth has been lost. Possessions have been lost. The cotton crop, which is vitally important to the nation's economy has basically been wiped out. The infrastructure, which has been built and improved over recent years, has been set back years -- more like decades. The government is incompetent, and the best tent cities for those who have been displaced are abysmal and the number of them is hardly worth mentioning -- in most cases, there aren't even tent cities.

    In the meantime, the Taliban is on the march asserting their messages and power in the most vulnerable parts of the nation. They are killing other aid workers. Food is soaring in price. Riots are starting, and will undoubtedly increase. Disease is early in just the initial stages, but will spread.

    What is at risk? Unlike Iran, Pakistan actually HAS a nuclear bomb. Its relationship with India (also a nuclear power) has become more fragile. It had become the de facto headquarters of Al Qaeda. Just look at a map!

    The US cannot possibly allow this nation to collapse. But how will it prevent it? Does Obama have the political capital to take preemptive action? Probably not. So, what is likely to happen? The situation will get worse -- probably much worse. In a month or two, video and pictures of what is happening there in refugee camps and with kids dying and the actions of our terrorist enemies will increase significantly. At that point, the pressure will increase for the US to get involved. How? Certainly with aid (probably in the billions) and possibly with military support (add in some more billions -- perhaps tens and hundreds of billions). What will happen to our deficit then? Where will we go to get the money to support the effort we will probably be forced to undertake?

    How will investors react? At that point, statistics about a President's third (or any other) term will become insignificant. The reality of another major conflict/issue/call-it... in Pakistan will exert an influence on the market, and it won't be good. It may actually be very very bad.

    Watch the news. See how Pakistan starts to usurp headlines. And watch how the market reacts.
    Aug 30, 2010. 12:04 PM | Likes Like |Link to Comment
  • What Will Be the Global Impact of European Fiscal Austerity? [View article]
    Here is an a priori case that our political leaders are stupid: There has never been a time in modern history when the populace has been so disappointed in incumbent politicians. Those in the best position to know this are the incumbents themselves -- say what you want about them, but in the final analysis they ARE professional politicians with professional advisers and access to high quality polls. Nevertheless, not one of them has stood up and said to other politicians or the public at large: "Hey ... this is the perfect time to start an independent political party." Rather, they have forfeited that position to unorganized, unsophisticated political neophytes who have a "movement" but no common platform -- no party. And nevertheless, the chaos and amateurism of the Tea Party has made progress. Some incumbents have embraced them. None have gotten the message from them that what they really represent is a deep and wide desire to turn away from politics as usual. And so, not a single "professional" politician has seized on the opportunity. And I call that stupid and, by extension, I consider ALL incumbent politicians stupid QED.
    Jun 12, 2010. 11:48 AM | Likes Like |Link to Comment
  • Market Overview: Treasury Yields, Housing, State of the Recession [View article]
    My point exactly -- the recession is most definitely not over, but check the way the news media covers it: the news media interprets bad economic news as raising the prospect that we may "slip BACK into recession" (which is impossible when you haven't gotten OUT of it) -- there are similar stories and headlines all the time -- this is irresponsible and misleading journalism and it is widespread.
    Jun 12, 2010. 11:37 AM | Likes Like |Link to Comment
  • Market Overview: Treasury Yields, Housing, State of the Recession [View article]
    When you note that "The NBER said that the recession began in December 2007" you can also note that it has not yet declared the end of the recession. I've heard some people including high-pitched CNBC anchors (there are a number of them) declare an end to the recession, but it isn't over. Nevertheless, the news media consistently runs stories about how the country is "slipping back into recession" -- which assumes that we have gotten out of the recession in the first place, and that just isn't the case. Watch the news: there is an assumption being asserted that we are no longer in a recession. It is a wide phenomenon and it is misleading the American public.
    Jun 10, 2010. 10:43 AM | Likes Like |Link to Comment
  • What Will Be the Global Impact of European Fiscal Austerity? [View article]
    Political instability must be factored-into all predictions. Economists, investors, politicians, etc., believe that nations such as Greece must "take their medicine" or lose financial support of other nations -- and of course if that happens, there would be dire consequences for the Greek government and all the creditors of Greece. On the other hand, when Greece "takes its medicine" that will mean such significant cuts to the income and lifestyle of so many Greeks that there will be a dire consequences for the Greek government and that will translate into dire circumstances for Greek creditors .... Political instability will result in either case as well, of course, as financial instability.

    If Greece were alone with this political dilemma perhaps we could dismiss it. But it isn't. The political instability situation is replicated in varying degrees throughout many Eastern European states (whose debt is held by Western European banks), Asia, even western Europe. And, perhaps not as dramatically yet, there are early stages in the US (what else is the Tea Party about but populace dissatisfaction?).
    Jun 10, 2010. 10:32 AM | Likes Like |Link to Comment
  • What's Next for U.S. Housing? [View article]
    The prediction that: “The negative wealth effect would shave between 0.2 and 0.8 percentage points off private consumption growth” underestimates the consequences because it looks at the decline of housing as an event unto itself. But it isn't. It is an event happening within a context of a dramatic number of other very fundamental problems, most of which will be pushed in the wrong direction by what is happening with home prices. It will make it that much longer and more difficult to dig out of problems. And when there is a recovery at last, I think we will discover the brutal truth that "recovery" and "return" are not synonymous.
    Jun 10, 2010. 10:09 AM | 2 Likes Like |Link to Comment
  • YouTube Much More Important Than Gmail for Google [View article]
    By over-weighting video content for search engine listings, Google is encouraging the faster move of the "video-ization" of the web -- thus, if you look over the horizon, google's search services and their video services will be integrated .....
    Apr 5, 2010. 03:28 PM | 1 Like Like |Link to Comment
  • Does Wall Street Love Obama? [View article]
    I largely agree with that -- it raises the question: if Wall Street moves because of Wall Street reasons rather (in many instances) than fundamental, economic, social, political or cultural reasons, what weight or consideration should we give to Wall Street pundits when they discuss fundamental, economic, social, political or cultural matters? I think Wall Street pundits can be extremely smart about Wall Street matters, and at the same time (but not necessarily) extremely stupid or uncaring or even biased against non-Wall Street matters.
    Mar 24, 2010. 12:46 PM | Likes Like |Link to Comment
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