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Mark Bern, CFA  

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  • Keeping Our Depression Real [View article]
    I authored two articles recently focused on housing. I believe that housing is going to lead the economy to fizzle again. The first article is an explanation of how I see a downward spiraling of prices and how this next decline may lead to further declines.

    The second is a review of an article I found in the Financial Analysts Journal put out by the CFA Institute. The author's analysis is excellent, however I believe that her recommended solutions are flawed.

    Finally, if you're still interested in the future of housing prices I recommend John Lounsbury's articles on the subject and one other article by another author which can be found at:

    Jul 4, 2010. 08:07 PM | 2 Likes Like |Link to Comment
  • Unemployment and Skills [View instapost]
    John - You already know some of my views on the educational system's failure, so I won't readdress those points. At some point, if the federal, state and local governments want to make a positive difference in young peoples' lives and help prepare the economy for further future expansion, they might consider offering more adult education programs for those who really need basic literacy and math skills. I think a second chance may be the only path to a productive life for many of our high school graduates (not to mention those who dropped out) of all ages. At least it might get some of them off the streets and reduce the looting and damage to the thousands upon thousands of vacant houses. And maybe, just maybe, it could provide some with a little more self respect and hope for their futures.
    Jul 4, 2010. 04:43 PM | 1 Like Like |Link to Comment
  • What Decline? [View article]
    An opinion: I believe, and have for several years, that India will be one of the globe's best places to invest over the long term. Having said that, I would not enter any markets long at this juncture. I believe that there will be better entry opportunities by 2011. I also think that even India and China will get sucked down a good bit by the whirlpool that has been created by developing nations, including the US, and that the storm is growing beyond our leaders' ability to control or manipulate.

    They've printing money by the trainload. They've kept interest rates at historic lows and have pledged to continue to do so as long as it is needed. They've provided us with stimulus programs to juice consumption. And they've bailed out whole industries with taxpayer money. And the results: a weakening economy. How can they overcome the forces of economic reality? They can't. Eventually we will have to pay the piper. Just as a rising tide raises all boats, it is also so that when the tides goes out all the boats drop with it. Caution is the proper course for the present, IMHO.
    Jul 4, 2010. 04:26 PM | 5 Likes Like |Link to Comment
  • Jobless Rate at 9.5%, Payrolls Fall [View article]
    robros - You are very correct in all that you say. There are many differences. I may think things are going to get worse in the near term but I do believe that our system will right itself just as it always has in the past.

    But as I look at the differences it does make me wonder a bit how all of those things give us such advantages today.

    We don't have the gold standard that, as you say, affected things negatively. That means we should be doing better as this gives us an advantage.

    And, yes, our Fed is printing money and pumping into the economy which did not happen during the Depression. That also should mean that we should be better off now as it gives us huge advantage.

    Today we have growth engines in China and India. That also gives us a huge advantage today that we didn't have back in the Depression.

    And banks do have huge piles of cash, but don't stop there, because many large corporations are flush with cash as well. Another huge advantage over the earlier period.

    Mellon was fighting deflation and Bernanke is bent on keeping the economy on the inflation path. That should also translate into a huge advantage.

    But it seems to me that with all these great advantages we shouldn't have so many similarities. It seems to me that our leaders have all the tools as you have described but continue to squander the opportunity. If everything is so much better this time, why does it not feel any better to those who have been unemployed for over two years? Why does it not feel better to the employment growth machine of small businesses in America?

    I'm sorry for jumping as hard on your premise as you did to mine. But you haven't convinced me that the differences are making things so much better this time around. It isn't over yet. Honestly, I hope it gets over soon and we can all get on with our lives just like things were before December 2007. In reality, neither of us really knows how things will turn out. I'll end by saying that I do respect your opinions and applaud your optimism. I just don't share either.

    I wish you and yours prosperity and all the happiness it entails. Enjoy your freedom and have a great (rest of the) 4th of July!
    Jul 4, 2010. 04:05 PM | Likes Like |Link to Comment
  • The Employment Depression [View article]
    Moon - You are right that employers, especially smalls who can't use scale to spread implementation costs over larger populations of employees, are already saddle with regulatory costs that are too high. Hiring just doesn't make sense from their perspective. They are more likely to work harder to meet demand (if demand rises any time soon) and offer their current employees a better wage to either be more efficient or work longer hours.

    The current Administration hasn't got a clue in terms of how to create lasting permanent jobs in the private sector. Instead they just keep layering on more costly regulations that make US-based businesses less competitive in a global economy.
    Jul 4, 2010. 03:47 PM | 13 Likes Like |Link to Comment
  • Keeping Our Depression Real [View article]
    I've seen just about all of this form of change that I can stand. Unfortunately, I expect even more to come. Once the Senate replacement for Byrd is named and on board, it may be back to the same agenda of change. I expect Congress to try very hard to pass a value added tax (VAT) and a Cap & Trade bill before the elections in November because the "ruling party" realizes that this may be their last chance to push through their pet projects of disguised new layers of taxation. The federal government will continue to expand both in size and power while state and local governments continue to contract and cut services to meet budgetary restraints.

    November just can't come soon enough for me.
    Jul 4, 2010. 01:29 PM | 11 Likes Like |Link to Comment
  • Likely Start of New Cyclical Downtrend Confirmed [View article]
    I hate to admit it Erik, but I'm even more pessimistic than you are these days. I don't know if we will test the March 09 lows on this leg, but I do believe that test is yet in our not so distant future. And I also think that we will break through to new lows. But that is just my gut feeling from a lot of assessment of potential global events that seem almost ready to begin to cascade like a row of dominoes. One event sets off the next and so on. I'm not hoping for that outcome. I'd rather be wrong. But I don't feel like the leaders are taking the necessary steps to avoid it. I do believe that it may be put off for a few more years, but I also think that the worst will still be ahead of us somewhere. The debt is reaching unmanageable levels everywhere and were are not systematically purging the toxic assets from the economy through bankruptcy. They are still there and they are continuing to rot right through the heart of our society. Sorry to seem such a doomster, but I've just been seeing too many parallels to the Great Depression to feel good about our future for the next decade. But this is a great country filled with great people and innovators. The system can work again in the future but we just have to get through this very rough storm and change economic and political paths.
    Jul 4, 2010. 12:41 AM | 2 Likes Like |Link to Comment
  • Jobless Rate at 9.5%, Payrolls Fall [View article]
    I home schooled my daughter in Social Studies for the 7th grade in the 2007-08 school year. I remember reviewing with her some of the major benchmarks from the Depression and, even at that early stage, there were already several stark similarities. I told her then that we could very well be entering another time like that and that we should feel very lucky to live as well as we do even in such hard times.

    Now, over two years later, the similarities continue and I am becoming more convinced that we are headed for far worse times ahead than what we have already experienced. If we hit the major bottom in stocks during 2011, it would be one more parallel. I only hope that it doesn't get as bad as it did in the 1930s and that it doesn't last as long. That said, it seems our government is bent on breaking those records and making even worse, IMHO.
    Jul 4, 2010. 12:28 AM | Likes Like |Link to Comment
  • Likely Start of New Cyclical Downtrend Confirmed [View article]
    I'm not Erik, so I'll let him answer your questions from his own perspective. But from my point of view, I believe that the HFTs have been propping the market all the way up with those late session stick saves, making a pretty heft profit all the way up. When GS reports that they made money with their proprietary HFT algos for over 95% of the trading days in the quarter, quarter after quarter, it smell of manipulation to me.

    But now that the market weakness is laid out bare boned to the world to see because of a nasty string of disappointing economic indicators and several potential market killers such as the European debt crisis, tensions rising in Korea and the Middle East, and the continued worsening of the gulf oil spill to record setting levels, there is a preponderance of downward pressure on equities. And the same folks that made the money on the way up certainly know how to do the same all the way down. They are just trying to play the side of the market that offers the best odds and, with their ability to rig the odds through massive manipulation, they can almost guarantee themselves profits as long as they move "with" the trend. They will provide the same action as they did during the rally, except in the inverse direction, IMHO.
    Jul 3, 2010. 03:01 PM | 3 Likes Like |Link to Comment
  • June Employment Report: Where Are the Graduating Students? [View article]
    I don't think it's the model that has failed our economy. I believe the evidence shows us that almost total disregard for the model and the constitution are what brought us to the brink. If we were to give capitalism a better chance, it would perform extremely better than this obomanation that has been created by power-hungry career politicians and greedy banksters.
    Jul 3, 2010. 02:43 PM | 6 Likes Like |Link to Comment
  • Further Signs of the Recession's Return [View article]
    I find it very amusing when I consider the facts that manufacturing jobs are, at the same time, both high-paying union jobs and also at risk of extinction because they are "dirty." The Administration really wants a Cap & Trade bill to pass, probably not for the good of the environment but for increased political control, which will effectively push most dirty manufacturing industries to close down and the jobs move overseas. We can't remain competitive in manufacturing if we keep layering on costly regulations and taxes. In this global environment higher costs equate to being less competitive. Best value wins every time. High cost for steel will make our companies less competitive both here and in foreign markets. Our auto companies will lose more market share to lower cost/lower priced foreign imports.

    If you'd like to consider a good argument on why some on the left wants a Cap & Trade bill click the link below and go to the April 26th show:
    Jul 3, 2010. 02:38 PM | 2 Likes Like |Link to Comment
  • Further Signs of the Recession's Return [View article]
    Good article that uses the facts without trying to distort them. A couple of comments:

    "Looks pretty positive from that vantage point, but so does the beach before the hurricane strikes."

    It feels more like we're in a massive hurricane and are currently in the eye. The back portion of a hurricane usually lasts longer than the front half. I experienced that in a huge typhoon during my delightful stay in Vietnam way back when. I remember pulling people out of the debris during the eye. It was perfectly calm and sunny. One would never know what was coming next. The good news in this story is that we had plenty of parts available for the helicopters that didn't get destroyed. The bad news is that there weren't nearly enough helicopter left intact.

    I also think that the Euro's weakness, if it persists, and the austerity measures being implemented in Europe will likely reduce demand for US manufactured goods. That's probably just an amplification of what you mentioned in the article.
    Jul 2, 2010. 04:27 PM | 14 Likes Like |Link to Comment
  • Part 3: We all know the Gulf blow out is a disaster….  [View instapost]
    User - I agree completely! This is an emergency of monumental proportions and should be treated as such. Instead it appears that the Administration is trying run this thing by committee. And the committee members have absolutely no experience with the problems or their rather obvious solutions. They really needed to get ahead of this thing even before the scope was fully understood. If they had the magnitude would have been recognized much sooner and additional resources could have been deployed when needed. We're now so far behind in the clean up effort, never mind containment, that the impact will undoubtedly be far greater than anyone inside the beltway has yet to imagine. Their only defense from here on out will be to put out lies and propaganda and when anyone calls them on it, to just call those people liars over and over again until the public starts to believe them. It's just another political campaign to the politicians. Nothing is real to them because none of them are ever directly affective negatively. If they lose their next election they start drawing a hefty retirement (on us) or hire on with a law practice or consultancy for far more than they were making in their elected position. It's a win-win situation for them. They can't lose.

    We need term limits now!
    Jul 2, 2010. 03:39 PM | 4 Likes Like |Link to Comment
  • Jobless Rate at 9.5%, Payrolls Fall [View article]
    It is the beginning of summer vacation season, so it makes sense that nearly all regions that benefit from tourism would show increases. But most of these jobs are temporary (2-3 months) and will disappear again when kids go back to school and families stay closer to home. The tolls to be taken on the gulf states are yet to show up in full force. A tsunami is building and it is likely to undermine the economic recovery plans, IMHO. I expect job growth much harder to come by during the remainder of the year.

    My reasoning is basically three-fold.

    1) Temporary Census workers will be laid off over the next few months (nearly 1 million more to go).
    2) Businesses began to turn more pessimistic about the prospect for growth over the remainder of the year and will be less likely to hire if they expect demand to shrink. Problems in housing and retail are beginning to appear and business leaders are taking note. I have noticed that guidance releases over the past month have contained far more negative guidance than during the previous several months. This trend is just beginning.
    3) Temporary help and part-timers will likely to trimmed at the end of summer vacation season at least until the economy begins to hire again for the holiday season. Much of the manufacturing and importing has already seen it up turn, while overland transportation usually gets a boost beginning around October, and retail start hiring in earnest in November. But those moves may only offset the losses at summer's end of tourism season and may also pale in comparison to the downdrafts caused by 1 & 2 above.

    Number 3 isn't much, but I threw it in there to counter the expectations about holiday hiring. Again, these are all temporary jobs and will go away when not needed. Permanency in jobs created is still the biggest problem I see undermining this recovery.
    Jul 2, 2010. 03:29 PM | 4 Likes Like |Link to Comment
  • Heads, Shoulders, Knees and Toes: A Warning Sign for Investors? [View article]
    Thank you for answering. I was just in a discussion on another thread about the 100 crossing below the 200 sma being even more ominous. Looking at the daily charts it doesn't appear likely for the 100-day sma to turn down (unless the market really tumbles) for at least 30-40 days when the oldest day used crosses past the April high. Not a question, just an observation.
    Jul 2, 2010. 03:07 PM | Likes Like |Link to Comment