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Ross Snyder
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Ross Snyder is a career professional musician.
  • No Longer the Last Bear Standing: When Fools Rush In 0 comments
    Feb 21, 2010 11:54 PM | about stocks: SRS, SPG, BX
    I know I’m not the last bear standing anymore. Recent business and political events solidify the economic recovery, and I stand squarely in the bull camp now.
    How are the PIIGS doing? We all know Greece has found some breathing room. Now, this has all been meaningless theater delaying the inevitable. Of course Germany was going to say some mumbo jumbo to placate investors. Of course Greece was going to find buyers for its latest $6 billion debt offering (
    These positive developments are all fluff. The Euro zone can’t commit sufficient hard cash to any kind of bailout; Greece will be unable to cut back on its public sector overemployment and surfeit of job benefits. That’s simple domestic politics, and voters are generally short-sighted, self-interested, under-informed and stupid.
    But good money in small amounts will always chase bad money in large amounts. That’s why Greece continues to find buyers for its debt. LOTS of money stands to be lost when the Greece problem turns for the worse; that is why a few governments or hedge funds can swing a few billion dollars now to float the problem a few more months down the road.
    U.S. pension funds serve another example of good money chasing bad. My musician pension ( will officially join the ranks of the underfunded on April 1 if its assets do not magically rocket in valuation before then.  My pension fund has even frozen some good money earned in the future by my colleagues to stay in the broken fund (
    Congress had already granted pension funds an extra year to sufficiently capitalize themselves. That year is over. We’ve had a HUGE market rally since March 2009. If my American Federation of Musicians pension is STILL underwater, isn’t it logically a pig beyond repair?
    Hell, no! Bring on the magic accounting! And by March 31, maybe a few more senseless commercial real estate transactions will overinflate asset values. Maybe a few pension funds will add to their distressed debt holdings, simply to give that debt a better price in their quarterly reports. We all know this is WINDOW DRESSING.
    Another instance of good money chasing bad? Look at Blackstone’s magic disappearing debt last Friday ( Whoever’s holding commercial paper like the $4 billion in forgiven Hilton debt thought that price was cheaper than what they would lose in a default scenario.
    Large investors are spending small amounts of cash to prop up their bad investments. As lending continues to open up, this pattern will continue for several quarters.
    I am incredibly bearish on commercial real estate long-term. Decades-long consumer trends are making secular shifts. Unemployment will not improve as quickly as in other recoveries. We spent all of our recession resources on stimulus and not on clearing out inefficiencies. We’re shopping and working online now and not at strip malls. Long-term predictions of weaker dollar and stronger commodities should produce inflation and encourage people not to travel or run errands as much.
    But as long as idiot investors, my own musician pension fund included, are protecting their poor investments, debt will continue to be bought, restructured or forgiven in distressed sectors. The blockbuster Simon offer for General Growth Properties last week is one such example. Lots more will be coming.
    I’ll say it again: drips of good money are chasing lakes of bad money. Where debts are forgiven or restructured, equity investors find new life. Fools are rushing in.
    But the fools will continue to rush in for weeks, quarters, maybe even years. Government stimulus is still a huge unknown. I had thought this year would be a big bear correction, with a second round of deflation. I now stand corrected.
    The money supply is exploding. Sure, the underlying economy is as weak as ever, but standing on the sidelines now means missing out on the continuing technical rally.
    No large investors out there have the courage to let debtors fail again. We will see a Lehman-sized default this year only if politics trump money. Would China ever dump its foreign reserves? Could the Tea Party swing Congress sufficiently away from ongoing stimulus?
    Default scenarios are rife for the coming five years. But for the next six months, they’re inconceivable.

    Disclosure: Still long SRS (double-short commercial real estate ETF). Vested in the AFM-EP.
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