Moon Kil Woong

Global Markets in Review: Risky Assets Disconnect from Fundamentals

The reason risky assets have a market right now is because they seem to be the only assets that pay a decent (but not fair) value for their risk. Certainly safe assets like US Treasuries don't even cover for dollar devaluation, let along current inflation and future inflation. Likewise, with the government using taxpayers money to lure more people into the housing fiasco with low interest rates (yes you still can buy an ARM with low down despite all the banter about regulating the financial system).

Banks now sell mortgages at 5.xx % which can hardly cover the default risk let alone infation etc. The only reason they do is because they can dump them on Fannie Mae, Fredie Mac, Treasury, Federal Reserve, or FHA. Thus the taxpayer is taking all the risk. No bank in their right mind would sell one without being able to sell it to a government or quasi-government entity. Thus, traditional bonds have also becoming low interest paying garbage manipulated by the government so they won't reflect real risk either.

Thus we have what's left, stock and equity speculation, commodities to reflect real inflation and curb real dollar depreciation, and high yielding junk that at least pays enough to cover the 15% currency devaluation we are looking at this year and perhaps next year. At this rate, if you think the Peso was garbage 20 years ago get ready to feel like you're living in the real New Mexico. I wonder what they will think when Americans start accepting pesos as the preferable curency for payment over greenbacks. The Federal Reserve is shameful.

Expect Another Misguided Stimulus Plan

The only stimulus new stimulus will stimulate is inflation. If you feel sick seeing the word stimulus then I've made my point.

A Dow Double in 10 years? Easy

Much of the expectation in earnings growth is already valued into this market. If we get anemic earnings growth stocks will go down not up. The only major reason why I would agree with his premise is if he assumes that the dollar will depreciate 5-10% a year like it is this year, then the Dow only has to hold its own relative to the depreciation to double. With a lot of Dow firms deriving some component of their revenues from overseas that shouldn't be hard to accomplish.

With Bernake at the helm, persistent dollar depreciation is a very high probability.

Gone Nowhere in 8 Years

The index is not the only thing that hasn't changed much. The Trade Center hole in the ground is still sitting there. What a shame and embarassment.

There has been very little progress and a lot of harm done in the last 8 years financially and socially.

The only reason we are clamoring for government support these days is because government has completely failed at insuring economic security, regulatory honesty, and fiscal restraint. That which is destroying us is that which we have asked to save us.

I think we need to take a good long hard look at ourselves and what we are doing or not doing to insure domestic teanquilty. Certainly, being beholden to the rest of the world for oil, commodities, cheap labor, etc. is not a good way at protecting our safety erconomically or otherwise. Needlessly running up our debt to levels where we must beg China and others to buy our bonds also weakens the US. Economic strength more often proves more valuable than military strength. Without a strong economy it doesn't matter what you spend in defense, as proven by the fall of the USSR. We should wise up now and stop thinking government can solve everything by printing more money. This only leads to crippling our free market economy which is the source for our past economic resliency.

Has the Dollar Hit a Major Bottom?

The Fed must do something about it's increasingly alarming rise in yields in mid term dated Treasuries and fast. That means less or no QE dole for a while letting them and the US government know they must curb spending. Thank goodness for some market rationality. It seems like the only way to keep the Fed from ruining the entire US economy and destroying the dollar is to refuse to buy US Treasury bonds.

After all, a Federal Reserve that can't even operate Treasury Auctions has no rights or credibility whatsoever. Thus, their abolishment seems all to rational a response to make them feel comfortable.

Cramer's Mad Money - Paul Krugman Is Wrong (8/10/09)

The money the coverment dumps all over people permeates the entire market. Give a rich guy a million and he might just buy an iPhone lol. Give Chona billions and they'll buy loads of iron, copper, and oil. Give Goldman billions and they'll trade Trillions in program trading. Arguing government spending doesn't contribute to the revenue of corporate America is competely ignorant. Cramer is a good clown but not an economist. He should talk about what he barely knows, punting, and leave what he doesn't know alone.

Yet Another Huge Economic Number Coming out of China. Hard to Believe

As the US figured out property speculation that makes the biggest component of Chinese growth right now is not real growth. Ryu Mei Co and other posters are correct that the dislocation the market is also bringing to bear on migrant Chinese workers are creating a hotbead of discontent.

To say that China is ramping up its engine of economic growth is not to recognize the serious concern running through that country right now. To see it you may take note of its second failed long term treasury note failure. Even there people are predicting bubbles and inflation with government stimulus, not real growth.

Real growth comes from the private sector, not the public sector. If the economy was a chemical experiment government would be a catalyst, the main reaction comes from the active chemicals which would be the private sector (and I don't mean pseudo private sector companies like GM, AIG, BAC, the Federal Reserve, and Fannie Mae and Freddie Mac. I think you call them inactive waste that blocks all chemical reactions). More catalyst simply crowds out the amount of active substances you can fit in a contained space.

Monday's Closing Update

It is funny how rising oil is now seen as a positive market indicator. It just shows how discombobulated this market is. Usually it would be a negative indicator (higher gas prices take away consumer purchasing power, widen the trade deficit, and adds to inflationary pressures).

While it is true that it shows people are willing to put money into most any commodities rather than treasuries (meaning people are also likely to roatate to the stock market as well) such logic certainly isn't any green shoots indicator.

Where Have All the Buybacks Gone?

A company must have real positive cash flow, and that doesn't mean by accruing it through underfunding pension. We are coming to see how few large companies actually have this precious commodity. By and large stock buybacks for the last 20 years was a ploy to get share prices up and were often offset by employee options and executive stock bonuses.

Thanks for highlighting the oddity companies often only buy back shares when they are high because there are so few drivers to add appreciation to their stock at such heights.

Preview from Europe: Stocks In Retreat Ahead of U.S. Earnings Season

If I hear one more mention of Citibank I think I'll puke. Please close it and let it die the most horrible death possible. It has $3 trillion in CDS and derivatives contracts still. Do they learn nothing. They are not selling them either because they are bankrupt if they do, or because they think they can keep gambling forever with government funds, or both.

While you are at it add AIG too. As for the market. Yes, earnings will be very bad. The market should expect it but, you know. Heck, why not just keep jumping on the dead cow to make sure it's dead.

Personally I have 1 great reason the market should be down, Bernie is still walking around free. He is the poster child of how no one responsible for sinking the US economy is being held accountable let alone having anything done about it.

Where is the transparency laws, bank restrictions on gambling, derivatives regulation, Glass Stegal for the new century, Bank CEO and board of Executive criminal negligence laws. Oh I forgot, Paulson the leader of the old boys club (aka. great looters of the taxpayer, violator of trust, and filthy rich) reigns supreme. Thank goodness he hasn't commanded us to shave our heads if we want to keep the precious few dollars we still have.

Dow Dogs Were Dogs in 2008, What About 2009?

I would think the market would have factored in this strategy. If it wasn't adjusted for everyone would be doing it eroding the deal to the point were it would be parity with the rest of the market or worse. Personally, I would lean towards worse. Citibank and GE should be about 0. Thanks to government support they live. JP Morgan may be no better in 2009 if things get much worse. BofA is buying crap only because they got free money from TARP and got government support.

At least if you use this strategy you won't be saddles with Home Depot this year. What a sigh of relief. I suggest people actually screen what they invest in rather than playing silly strategies like buy all the products you buy for your home etc. It's tedious but it's oooh so worth it.

Anyway, thanks for the chart and strategy information. Even though I won't trade it, I like a good snicker once and a while.

Here's a strategy, find all the stocks Bernie Madoff bought last year and short them. Then go equally long the rest of the S&P 500. I'm sure once they track everything down and start liquidating it won't be a positive relative to this index.

The question now is what did he own and where's the money. I suggest you start asking his family members who happen to trade in the same building but strangely said they had nothing to do with them. Rigggghhhtttt....

And why should we believe Madoff who says that's absolutely true. Dude... you're wearing a tracking sensor. I would tend to believe the opposite of everything you say... What a con (use any term of that word you want).