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Mark Bern, CFA

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  • A Deeper Look at the Housing Data [View article]
    And thank you, too! This article puts the trend in housing into a better perspective. When the banks crank up foreclosure again and start putting those properties back onto the market, inventory may rise, prices may fall, and some truth can finally be made out of bank balance sheets. They are holding onto defaulted mortgages and foreclosed properties in hopes that prices will rise. But they can't hold out forever. At some point, external auditors will have to take a stand and require appropriate application of accounting standards. I would expect to see those results surfacing next spring, if not earlier.
    Oct 23, 2009. 02:42 PM | 5 Likes Like |Link to Comment
  • American Austerity Is About to Begin [View article]
    I also agree with the theme of the article. We are headed down the wrong path; a path that will culminate in a long and painful economic stagnation for the masses.

    Isn't it funny, though, that the party now in power has always positioned itself as the protectors of the poor and middle class? The evidence that we are witnessing currently would indicate that they are really the party of helping the rich get richer and the expansion of the number of poor people in this country.

    The poor are being assisted by government. They don't pay any taxes. So they look to the government to bail them out. What it's going to take to get to the necessary pain is for the poor and middle class to realize that things just keep getting worse regardless of the promises that keep emanating from their leaders in Washington. They don't have a clue about who's making the money on Wall Street or how, so it doesn't matter. They listen to MSM for all their "input.."

    I am sorry to say that I suspect it will take a prolonged period of failed attempts by government to right the ship, with the average wage earner getting hammered by rising prices (due to a decline dollar increasing imports of oil and consumer goods), increased costs for health care in spite of "reform," a cap and trade system that also increases the cost of energy for every family, and the addition of a VAT that will increase the cost of everything before reality will sink into their heads. We may have to endure several more years of things getting worse before enough voters will actually understand that it is "their representative" that needs to be voted out of office, not just the other guy.

    I am not trying to be pessimistic. I don't like the answer I am offering. It's just human nature, and the track record of this nation supports the assumption, that we won't do anything about the real problem until it is completely out of control. Today, we are merely in the denial stage. As a nation, too many people still believe that all the problems we are living through were brought about by the past administration. We blame Bush for everything! It isn't just Bush, it's the system of career politicians on both sides of the aisle! They won't make the necessary, difficult decisions because it would mean political suicide for them personally. And their own career comes before country, before constituents, before everything. That is the foundation of our problem.

    Until we get back to the basics of the Constitution and reinvent our government to one that creates an environment conducive to productive growth. creativity, and the entrepreneurial spirit we will continue to flounder.

    While Peter Schiff is on the right track, it will take far more than one elected official to change the course of this great nation.
    Oct 18, 2009. 11:21 AM | 30 Likes Like |Link to Comment
  • Strategists' Year-End Price Targets Right Where They Started [View article]
    But I have one question. What were the earnings estimates at the beginning of the year compared to current earnings estimates for the year?

    Why is this important? Because the index price is a projection of stock values based upon future earnings. The answer is that the earnings estimates are significantly lower for 2009 than they were at the beginning of the year. Also, and perhaps more important, revenue estimates are far lower than they were at the beginning of the year. The economy is not performing as well as expected. Yet, here we are with index levels where expected, even without the fundamental support that was expected.

    I suspect that, at some point, we will have to adjust the indexes to reality.
    Oct 15, 2009. 02:38 PM | 6 Likes Like |Link to Comment
  • It's the Direction of Stock Price Movement that Counts [View article]
    "but then the equity markets are not operated for our benefit."

    Bummer, Dude!
    Oct 13, 2009. 05:21 PM | Likes Like |Link to Comment
  • Mid-Cycle Meltdown: Jobless Claims for October 08, 2009 [View article]
    The third chart from the top of the article is interesting from a certain perspective. If you look closely you will notice that in past recessions the Continued Claims did not rise as much relative to increases in Initial Claims, while in the current recession the lag (or gap) is relatively narrow. All this means is that people are remaining unemployed longer this time than in any of the previous recession since 1967. But why might that be significant?

    Well, I'm glad I asked. It is apparent that the economy is not creating new jobs as quickly or in the numbers sufficient this time to reabsorb people who have lost work. The big question in my mind is with amounts of stimulus spending by our government why is the economy not creating jobs faster than it's shedding them?

    Obviously some of the stimulus programs have created jobs or saved jobs for some period of time. Take Cash for Clunkers (CARS, everybody's favorite), it may have created jobs temporarily or it may have save jobs temporarily, but now that the program is over where are those workers? They are in the unemployment offices looking for jobs that do not exist.

    Unemployment doesn't require people to accept jobs that are significantly different from their past experience or that pay significantly less. In many cases, the unemployment benefits are pay better than what is available in the job market so people would rather continue receiving the benefits than work for even less.

    Many of the jobs that pay a "living wage," or an income upon which people can raise a family, are being exported overseas in cost-cutting efforts by American corporations. That's what you get when you favor big unionized employers over local, small businesses. And that is what our current Administration seems to be doing. We are starving the small businesses into bankruptcy while regulating and taxing the big employers out of the country.

    Without some major changes in policies from Washington, DC, I don't expect significant job growth for the foreseeable future. Sure, unemployment will flatten out, but not down around five percent or less. It may very well flatten out above eight percent for several years.
    Oct 8, 2009. 07:16 PM | 2 Likes Like |Link to Comment
  • China Wants a Global Currency? Here's How [View article]
    Since the problems seem to emanate from policies of governments around the globe, not just China and not just the US, unilateral solutions will not cure the disease. I do not see or expect a real unified strategy coalescing either. After all, why would a nation like China, which is experiencing the growth and wealth creation they desire, change course to accommodate the US? It may make sense from a big picture and long-term perspective, but we do not live strategically anymore. The world is a "what have you done for me lately" kind of place now and it will probably take a lot of pain for us all to get back to making any real sense in what we do or how we do it, especially on a sovereign nation platform.

    In other words, you can all propose any solutions you want, but I seriously doubt that our leaders will do what needs to be done; at least, not until they are forced to do it. And their followers don't want any pain either, so we are just going to keep digging this hole deeper and deeper until it all blows up in our faces and can't go on anymore.

    Then all the wealthy will move to a more tax-friendly nation and leave us to default on all that debt.
    Oct 8, 2009. 12:23 PM | 2 Likes Like |Link to Comment
  • The Currency Cabal [View article]
    If China is denying it, then it's probably true!
    Oct 8, 2009. 11:38 AM | 2 Likes Like |Link to Comment
  • Airlines Say, "Take A Dump." [View instapost]
    Good comment User 283977. If I were a terrorist I would have to thank you for reminding me of the opportunity in the cargo jet arena. BTW, are there any major American cities lying below a major dam?
    Oct 8, 2009. 11:16 AM | 2 Likes Like |Link to Comment
  • Airline Revenue Datapoint of the Day [View article]
    There are, of course, other factors contributing to the drop in airline travel. Businesses have cut back travel budgets and are relying more on teleconferencing. Businesses have reduced employee head count, and have fewer people traveling due to their own loss of customers who have gone out of business. Oh, and businesses that used to have employees travel a lot have closed down, gone bankrupt. Vacation travel is getting a lot less extravagant also, with more families staying closer to home and driving.

    As for the difference in revenue drops comparing airlines that charge for baggage to those that do not charge, there may be other factors affecting customer loyalty. Did those same airlines (that do not charge for baggage) experience as big of a revenue drop as did those that do charge before baggage charges were adopted? If not, there could be other reasons. Some airlines have open seating, which is something some customers like (others do not, but presumably those who do are their more loyal customers). Some airline change rates from day to day, others don't (strangely enough some people don't like to always book their flights on Tuesday between 8 a.m. and 11 a.m. to get the best rate). Some airlines have superior customer service (I don't think I need to explain that one). Some airlines won't lose your checked bags every fourth trip (also obvious). Obviously, this list could go on (I haven't brought up food, blankets, on-line systems, frequent flier programson, on-time arrivals, waiting time on tarmacs before takeoff, etc.).

    The point is that it may be very difficult to determine the impact of one change in service or additional charge (such as baggage) on the revenues of any one airline. The only certain way to do that is to add the charge for at least one year and, while holding all other factors stable, remove the charge with a lot of hype and publicity. Of course, that won't work either, because competitors will react and affect the change. In other words, to assign one factor all the blame within such a hostile environment for airlines is not very scientific, nor does it make much sense.

    Having said that, I think airlines are getting away from being service oriented and personally hate the baggage charges. They could at least experiment with specials, dropping the baggage charges on certain city pairs for a limited duration to see if it affected traveler volume and overall revenue. Just charging extra for everything during a recession could end up killing customer loyalties for the recovery.
    Oct 8, 2009. 11:09 AM | Likes Like |Link to Comment
  • Volcker Should Advocate VAT and Drop the Carbon Tax Recommendation [View article]
    The problem I see coming is that, because of the huge deficits and mountains of debt piling up our benevolent leaders will not play the shell game of making us choose just one tax. They will probably add a VAT on top of the payroll/income tax system. But to make it palatable they will announce a huge cut in income tax rates so we will all think we're getting a great deal. The VAT will add more revenue than the income tax cut will lose initially. Then, with both tax systems running simultaneously, our wonderful leaders can make small increases here and small increases there to balance the budget. And, once all that is in place, and if they can get us all traumatized about the environment again, they could add a small carbon tax to boot. Of course, to do any good, it would have to be increased over time. And government can be the growth engine of our economy! (Sarcasm intended)
    Oct 8, 2009. 10:03 AM | 5 Likes Like |Link to Comment
  • Political Will for Reform and the Concept of Corporate Communism [View article]
    John - Very interesting concepts. I really enjoyed the way you made it visual. That helps those of us who are visual by nature. The point that we are continually approaching the point at which capitalism fails because of too much concentration of wealth and power in too few individuals is well made. But wasn't that what anti-trust laws were designed to avoid. It seems that the problems we have are not from lack of regulations, but rather the indifference in application by our government leaders. I guess you can't fully apply all the laws on the books and expect to get reelected.
    Oct 8, 2009. 12:52 AM | 2 Likes Like |Link to Comment
  • Airlines Say, "Take A Dump." [View instapost]
    For right now they are saving money. But in the not so distant future it will be a part of federal regulations. They'll start setting up porta-johns next to the gates for last minute dumps. But cutting down on carbon emissions will get serious by the end of 2010 if BO has any say. You think they charge for stuff now?
    Oct 8, 2009. 12:40 AM | 2 Likes Like |Link to Comment
  • Bank Recovery Vulnerable to Weaker Economic Environment [View article]
    I, for one, would like a full audit of the Fed activities over at least the last three years (starting with the most recent year first being reported, and then moving back as far as necessary to get to the bottom of how bad things really are) and it's balance sheet. Without that, and the requirement to report all assets on the balance sheet by banks (no more hiding assets off balance sheet) we will never gain the transparency needed to truly assess the situation and how to resolve it going forward. Making up regulations for the future without a full understanding of the problem seems to be more of a political exercise to appease the masses and garner votes than a practical step in the right direction.

    Well, what can we expect from career politicians? Most of them couldn't manage their way out of a paper bag, let alone manage our nation in an efficient manner. It's all about power and self preservation. That's about the only thing at which our leader excel.
    Oct 7, 2009. 06:54 PM | 1 Like Like |Link to Comment
  • Faber, Rogers, Dent and Celente: Collapse Dead Ahead [View article]
    ConceptWizard - Excellent comment! My sentiments exactly! I've read recently that the official reason that the PPIP is not happening is that those toxic assets that had been priced by the market at a mere 20 cents on the dollar are now valued at 70 cents. Of course, the operative word there is "valued." It seems to indicate that they are trading at that value but I suspect what they mean is than banks are now using their own proprietary pricing models to "value" their assets and have come up with 70 cents. If they all tried to sell those same assets in the market, I also suspect that the true market value would something far less than that at which the assets are being carried on their books.

    In other words, the problem isn't solved, it's just been swept temporarily under the rug.
    Oct 7, 2009. 06:39 PM | 5 Likes Like |Link to Comment
    Maya - You really should read the rest of the insta. The history lesson isn't that bad. I lived through the 1979-82 double dip recession (now called two recessions as we will probably experience again in the current period) and it really does feel very similar. I was too young to understand much back then so I just muddled through. The only exceptional thing I found, investment-wise, were zero coupon, long-term Treasuries. That worked out extremely well. So I've expanded on by strategy a bit now: gold and mining stocks now, adding some TBT whenever long Treasury yields get below 3.25% for the ride up with inflation. Then, legging out as we start to peak and the Fed raises interest rates to tame inflation and staying in cash until we inflation starts to subside and interest rates appear to have topped. Then I'll buy long sovereign debt, probably a mixture depending on return and risk. Then I'll just sit back and collect those juicy yields (likely at least 15% or more) into retirement.
    Oct 7, 2009. 05:24 PM | 2 Likes Like |Link to Comment