Matt Blackman

America: A Bona Fide Plutonomy

Interesting point but Michael Moore has yet again done his best to suck the public into his truth-distorted sensationalist mockumentary world. Those who take him seriously do so at their financial and intellectual peril.

But the Citigroup findings do bring up an interesting point. Although the top10% income group earned 43% of the total income, in the same year (2006) the top 10% paid 70.22% of total taxes in the US and this proportion has been steadily rising according to the National Taxpayers Union.

Translation? While the percentage income earned by the top brackets has been rising, the amount the government claws back through higher taxes is rising even faster.

But if the conclusion that the wealthy have done better through this meltdown versus the Great Depression is true, it means that all the stimulus money has had a proportionately greater benefit to the wealthy - most certainly an unintended consequence of the Obama plan that is designed to take more from the rich. But it would seem that the rich are better at catching the money being thrown out of Fed Reserve and government helicopters....

Rant Anniversary - Cramer's Mad Money (8/1/08)

He is also the guy who would rather the Fed try inflate its way out of the breaking of the multitude of asset bubbles now popping. Can you imagine what commodity (and oil) prices would be doing now if the Fed had cut rates to 2% when Cramer wanted them to?

So the best way to prevent bubbles from breaking is to create more of them? Thought he would have learned his lesson from the Fed dropping rates to 1% and keeping them there for too long from 2001 - 2004 but I guess not.

Earnings Season: Fundamentally Flawed

Mike;
Very good article! I too gave up on following S&P500 earnings, surprises and disappointments etc as I was unable to garner any way to accurately interpret them to make money. I instead follow earning changes reported weekly for the 4000+ companies tracked by WSJ and have found it a little more reliable.

As you can see from the chart as Q1-08 reporting season was ending, earnings broke down hard in Q3-07 (which we began to see a few weeks into Q4-07 - tradesystemguru.com/co... ).

As of the latest data as I write this (July 20/08) Q2-08 earnings dropped again falling 30% from Q2-07 after the second week of reporting season with 631 companies having reported so far. Earnings have shown a bearish tendency to continue to worsen as reporting season progresses...

It is harder to fudge results for the majority of companies reporting as a group than it is the cherry picked companies of an index like the SPX or DJIA... but I didn't realize just how bad it was till I read your article.

Cheers,
Matt Blackman
Host TradeSystemGuru.com

Options Trader: Thursday Outlook

I enjoy your options input but come on, "[w]e still need something to be done on the Federal level to put a floor under the housing/mortgage market and something needs to be done to stop the dollar from breaking below 70, which will put us at $1.60 to the Euro and under 100 yen to the dollar - things that will make this month’s CPI and PPI look very mild by comparison," ? Give me a break. If doing both isn't mission impossible, I don't know what is.

To put a floor under "an inflated" housing market implies lowering rates, while supporting the dollar implies raising them. You can't have both sides of the coin show at once. The reason the dollar is falling is because the Fed is trying to prevent the housing bubble from breaking. Given that this is an election year when governments and the agencies they control do everything they can to inflate the economy so as not to upset voters, we can expect more of the same if history is any guide.

Besides, the Fed has used more than 60% of its asset trove of $700 billion and the Fed funds rate is now below the real rate of inflation (forget CPI or PCE, they are useless). The Fed is in the early stages of a gun fight and has used most of its ammunition. Guess they could drop interest rates to zero but then the dollar would be worth less than $0.50 on the US Dollar Index in short order and real inflation (not that measured by CPI or PCE) would explode...

Analysts See Dow Rising Sharply in 2008

I wonder what the analysts' track record is? They rarely mention that in such forecasts. Correct me if I'm wrong but wasn't Abbey Cohen bullishly optimistic in January 2000 as the market was peaking and didn't Glassman predict a Dow of 36,000 in 1999? And who can forget Henry Blodget?

I would bet that fundamental analysts have a similar accuracy to economists and here is a report on their accuracy at predicting economic slowdowns...

"In 1929, days after the stock market crash, the Harvard Economic Society reassured its subscribers: “A severe depression is outside the range of probability” In a survey in March 2001, 95% of American economists said there would not be a recession, even though one had already started. Today, most economists do not forecast a recession in America, but the profession's pitiful forecasting record offers little comfort." – Economist November 15.