Ricard

What's the Fair Value for the Dow Jones Industrial Average?

Please change the title of this article. Not only is it misleading, it is somewhat offensive as well.

Consumer Deleveraging Datapoint of the Day

Something doesn't connect here:

"That might well be a function of the sharp drop in auto purchases, and will spike back up when people start buying cars again."

We just had an auto-giveaway. Wasn't there a sharp RISE in auto purchases this July and August?

Do You Believe Borrowing Leads to Prosperity? (Part 2)

The road to hell is paved with good intentions.


On May 11 05:01 PM James Quinn wrote:

> You are right. The masses will always vote for more free stuff. Ultimately,
> this will collapse the whole system. An unsustainable trend can't
> be sustained.

Banks Negotiate Watered Down Stress Results

John,

Thanks again for highlighting another point of interest in studying the aggregate 'U.S. corporation'. Admittedly I've found your last two articles difficult to read, but this latest summation proves that perhaps I need to bite the bullet and suck it up a bit.



"We are currently at an historic low of marginal return on new debt."

I find that this statement succinctly explains why 'this time it's different' regarding recessions. IMHO, it would take a sea-change in how we do business (say, mass adoption of non-fossil fuel energy sources, or another technological breakthrough rivaling the computer) to prevent a prolonged Japanese style 'balance sheet recession' as explained by Richard Koo.

Either that, or the powers-that-be wave their magic wand again, and delay (not eliminate) and magnify the painful effects of a recession out to a later date, much like how they did in 2002. 'What asset class is left to exploit?' would be the only question I'd ask. Given your point about business ventures utilizing leverage becoming less and less productive, maybe people will just start digging holes in the ground and buying gold to put in them. Maybe this is the final stage of the bubble before it blows up in our faces.

Do You Believe Borrowing Leads to Prosperity? (Part 2)

I'd like to make what I hope is an astute observation.

I'd like any readers of this specific article, and the ratings following it, to take note that there has been a significant change in how the comments here are being rated. This significant change is not due to the message delivered by Mr. Quinn, nor any of the commentators to his articles (including Cetin). What has changed, is the direction of the movement of the Dow and S&P.

Notice how authors that, say 4-5 months ago, were heralded as the voice of reason, as the light out of this tunnel of darkness, are now regarded as doom-and-gloomers, patients suffering from manic depression, and the like.

Although the sampling is small, and at best only somewhat reliable and subject to manipulation, it is interesting nonetheless. Another 100-200 points upward on the S&P, and I believe Mr. Quinn will be officially regarded as irrelevant by the 'masses'. That is, until the next crisis humbles them yet again.

I for one hopes he continues to write :)

Do You Believe Borrowing Leads to Prosperity? (Part 2)

Cetin,

You seem to be a math expert, so perhaps this will be more understandable to you:

a=b
b=c
c=a

But, not
a=b
b=c
d=a

The latter leads to bridges collapsing and software measuring your heart rate in the millions per second. That's dangerous.


On May 07 02:32 PM Cetin Hakimoglu wrote:

> A little knowledge is a dangerous thing...
>
> On May 07 02:17 PM Ricard wrote:

Do You Believe Borrowing Leads to Prosperity? (Part 2)

Bravo, a real masterpiece! I always wondered what that REM song was referring to - I have like zero cultural capital from the 70s.

What I find interesting is the tragicomedy of how, like you said, Americans are their cars, and yet the American auto industry is going bankrupt. Furthermore, Americans long ago identified superiority and quality with German and Japanese brands...another telling statement. GM? POS. Ford? Gas Guzzler. Chrysler? Wait, wasn't that a German brand?

Government's New Credit Approach: Does the End Justify the Means?

Because it's realistic. In order for MSFT or CSCO to obtain the (by some standards) egregious margins requires a mythos of sorts. Why? Because if the buyer had a choice of a similar product at a lower price, they'd more than likely take that product over CSCO's. Thus, the mythos, or 'brand', allows for CSCO to charge prices that may or may not have anything to do with their cost of production. Some may call this price gouging, but MBA types would call this profit-maximization, and the pinnacle of a good business.

Think of the dot-com boom. This was essentially the same case, where the sellers of a product (those that IPO'ed) made a fortune, even though their ideas (webvan, for instance) failed miserably. But, the Silicon Valley 'brand' was so strong that they buyers were willing to overlook anything, *anything* to buy a piece of tech. Did many of these companies produce a product that benefited mankind? Absolutely not - most were trash. Yet, they walked away with a fortune.

I think this is the point dcb is trying to make. Private vs public good...


On Apr 25 09:27 PM Cetin Hakimoglu wrote:

> Why are all your posts always so negative?

Government's New Credit Approach: Does the End Justify the Means?

Attempting to protect credit-card users from themselves is like attempting to protect viewers of Cramer's Mad Money from taking his advice. Futile, and fraught with failure. The consumers made their choice, and now they must sleep in the bed they made.

The only thing I see as useful is Obama's pledge to make what is in the fine print more readable and prominent in advertising material. However, remember what rolls in front of the screen before every episode of Mad Money? How many avid viewers actually bother to read that message, much less understand it? So goes this proposal...

Bravo Mr. Schiff again, for providing the voice of reason.

This Rally May Have Legs - Bespoke

People on Wall Street don't need front-running. They have the capital to move markets - once moved, they then use "technical analysis" to justify further a similar position by the investing public. Same result, minus the illegality. It's predicated on how much people believe in charting.


On Mar 29 03:02 PM EMT reality wrote:

> Your blanket statements of wall street is a bit overstated. To point
> out a few facts about "money managers" 1) your point of front running
> is off base as it is illegal for a licensed rep to "front run". 2)
> I would agree that SOME of the advice from wall street could be self
> serving however if your using a fee only advisor and perhaps independent
> then his income is directly correlated to your growth. why would
> he want to advise anything other then that which is in his clients
> best interest?
> I will grant you that there are issues! This is one of the challenges
> of a capitalistic society. What would really protect one from Ponzi
> schemes?……… I would suggest as investors…… trusted advisors are
> critical to our ability to due diligence in understanding our own
> investing as it relates to life, goals and the markets. Would you
> do your own surgery? I don’t know about you but I would seek out
> a professionals help. You know what they say about a lawyer that
> represents himself as a client! One of the biggest challenges with
> investing is emotions. What do you do to keep them checked at the
> door? If you truly know the facts about investing then you might
> understand the value of advice in efficient markets.

This Rally May Have Legs - Bespoke

Well said...couldn't have stated it better.


On Mar 29 01:24 PM wdhalgren wrote:

> Imagine that, a money manager (Bespoke) who thinks the market is
> going up. To what address should I mail my check?
>
> Seriously, when the American people finally re-learn that advice
> from the investment community is ALWAYS self serving, then we will
> have made progress in returning to a more efficient form of capitalism.
> Namely, one in which people are diligent in deploying their capital,
> instead of blindly "investing" their hard earned savings in trading
> vehicles that they don't understand, under the tutelage of money
> managers whose incentives aren't necessarily aligned with the investor.
>
>
> Wall Street marketing language has been force fed to the public for
> so long that it has become accepted as fact. The true fact at this
> point is that the investment establishment has learned how to leverage
> the savings of average Americans into a payoff system that enriches
> money managers through boom and bust. Even worse, our financial
> system augments these cycles because the upside of leverage pays
> to the financiers and corporate insiders, while the downside accrues
> to bottom rung investors. Meanwhile, they front run their clients
> at every opportunity and generally shear the sheep who floke to them
> in droves.
>
> I am a fiscal conservative, but that doesn't mean I blindly accept
> the system of stock options, bonuses, insider trading that predominate
> the investing landscape. This is not a new realization, as the bubble
> of the late 90's erased any doubts I had about how the game was being
> played. Unfortunately, more government control is not the solution,
> in fact it played a large part in creating the problem. Letting
> investors pay the price for their lack of due diligence is the best
> course, but that seems unlikely until the whole thing is irreparably
> broken.

Credit Card Cancer

ED K,

I believe you've completely missed the point. Mr. Schiff's argument is that this line of reasoning is EXACTLY THE WRONG FOCUS required to solve this problem:

"...while such actions would certainly keep our phony economy propped up a while longer, it would further weaken the very foundation upon which a real economy will eventually have to be rebuilt."

Mr. Schiff's argument is that an ounce of prevention is worth a pound of cure. And right now, we need about a ton of cure.


On Mar 14 03:20 PM ED K wrote:

> A very timely and informative post.Ms. whitney's thoughts hit the
> nail right on the head,especially the "RAINY DAY THEORY",great stuff!!!!!