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- Financials: How - And When - We Reached the Bottom [view article]
- Financials Have Bottomed? Readers Say We're Nuts [view article]
- Financials Future Still Uncertain [view article]
- The Calm Before the Next Bank Storm [view article]
- Scarlett O'Hara, Doris Day and Financial Market Tumult [view article]
- Apple: Dead Last In Exploited Horse Race? [view article]
- Speed with Which Financials Have Fallen Is Disconcerting [view article]
- Writedowns and Capital Raised by Financial Firms [view article]
- Speculation, Swaps and the Price of Oil [view article]
- Time to Exempt Mortgage Securities from Mark-to-Market Rules [view article]
- Financials Down 6.1% - Like the Days of the Tech Bust? [view article]
- NAR's Lawrence Yun Continues to Mislead on Housing [view article]
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- Financials Have Bottomed? Readers Say We're Nuts
- Financials Future Still Uncertain
- Financials: How - And When - We Reached the Bottom
- The Calm Before the Next Bank Storm
- Scarlett O'Hara, Doris Day and Financial Market Tumult
- Financial Recovery? Time to Wait and See
- Citigroup Posts Large Loss, but Outlook for Financials Improving
- Apple: Dead Last In Exploited Horse Race?
- All Is Well , Madame la Marquise
- Speed with Which Financials Have Fallen Is Disconcerting
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Financials: How - And When - We Reached the Bottom [view article]
Wonderful pipedream! Here's the reality: Housing loans over long periods have been 2.5-2.8 times household incomes. They have recently been as high as 4.5 times. As they revert to the norm (and may even overshoot on the downside) we'll be in what you'd call a Depression. Sadly, this is like calling the bottom in the summer of '29, I expect. Time will tell, but 7,500 on the Dow by Christmas seems a decent bet, although almost certainly before 2010. ReplyFinancials: How - And When - We Reached the Bottom [view article]
Tom, are you around to defend your thesis? ReplyStromeyer Jr
Financials: How - And When - We Reached the Bottom [view article]
You make some good points, DSB. I myself don't trust the ratings agencies which is why I try to follow credit default swap spreads as a sign of potential trouble.Also, according to the Bank for International Settlements (BIS), at the end of 2007 just in the OTC derivatives markets there was $596 trillion in outstanding contracts which was 8x the total value of all exchange traded financial contracts.
Until Tom Brown can convincingly explain why there won't be more blowups with derivatives then we should be skeptical that a bottom for the financials has finally occurred. Reply
Financials: How - And When - We Reached the Bottom [view article]
Debtacid:Let me add one more up-to-date quote to your wonderful list.
"This is far and away the strongest golbal economy I've seen in my business lifetime".
-Our esteemed Treasury Secretary Paulson, Fortune Magazine, July 12, 2007
(This couldn't have been much closer to the top and he neglected to mention the mountain of unservicable debt the "global economy" had been built on over the past decade)
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Financials: How - And When - We Reached the Bottom [view article]
Tom, I suppose this is just more proof that we already hit bottom?"Wachovia Posts $8.66 Billion Loss, Slashes Dividend, Will Sell Assets"
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Financials: How - And When - We Reached the Bottom [view article]
edit: until the end of the first week in March. I'm trying to work in between writing, and I'm rushing. ;-P ReplyFinancials: How - And When - We Reached the Bottom [view article]
Sorry, I was off on the 60c. It is 42c. Maybe it was higher when I heard the statistic, my apologies.Either way, this means that if you are in the highest tax bracket, let's say 45% of your income goes to taxes. That means that for the first 5.4 months of the year, 100% of your labor goes to the government. Of that 5.4 months, 2.26 months are spent on the military. So, 2.26 months out of the year, 100% of your work goes towards military spending and military debt obligations. For high wage earners, every hour of every day you work until the end of March goes towards war. HOOAH!
www.nationalpriorities...
en.wikipedia.org/wiki/...
www.truthandpolitics.o...
www.salem-news.com/art...
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Financials: How - And When - We Reached the Bottom [view article]
Also, does anyone notice a little cognitive dissonance here?"trying to pick precise tops and bottoms always turns out to be a pointless, unprofitable game. So don’t even try."
"July 15, 2008 Will Be Remembered As the Bottom"
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demand
Financials: How - And When - We Reached the Bottom [view article]
Under what sort of accounting do we spend 60% of the government budget on the military?As for the article, I would point out there was a similarly sized rally in financials from August to October last year, which has of course turned out to be a sucker's rally.
I think the scenario an investor needs to think very hard about is a situation where businesses start cutting jobs in a bigger way. What happens if official unemployment rises from these historically low levels? Then the other shoe would drop on the HELOC and credit card areas. Not a prediction; but in that scenario even the healthier banks will suffer badly. Reply
Financials: How - And When - We Reached the Bottom [view article]
Ok, I will add this to the list...July 15, 2008 Will Be Remembered As the Bottom
- Tom Brown.
"We will not have any more crashes in our time."
- John Maynard Keynes in 1927
"I cannot help but raise a dissenting voice to statements that we are living in a fool's paradise, and that prosperity in this country must necessarily diminish and recede in the near future."
- E. H. H. Simmons, President, New York Stock Exchange, January 12, 1928
"There will be no interruption of our permanent prosperity."
- Myron E. Forbes, President, Pierce Arrow Motor Car Co., January 12, 1928
"No Congress of the United States ever assembled, on surveying the state of the Union, has met with a more pleasing prospect than that which appears at the present time. In the domestic field there is tranquility and contentment...and the highest record of years of prosperity. In the foreign field there is peace, the goodwill which comes from mutual understanding."
- Calvin Coolidge December 4, 1928
"There may be a recession in stock prices, but not anything in the nature of a crash."
- Irving Fisher, leading U.S. economist , New York Times, Sept. 5, 1929
"Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months."
- Irving Fisher, Ph.D. in economics, Oct. 17, 1929
"This crash is not going to have much effect on business."
- Arthur Reynolds, Chairman of Continental Illinois Bank of Chicago, October 24, 1929
"There will be no repetition of the break of yesterday... I have no fear of another comparable decline."
- Arthur W. Loasby (President of the Equitable Trust Company), quoted in NYT, Friday, October 25, 1929
"We feel that fundamentally Wall Street is sound, and that for people who can afford to pay for them outright, good stocks are cheap at these prices."
- Goodbody and Company market-letter quoted in The New York Times, Friday, October 25, 1929
"This is the time to buy stocks. This is the time to recall the words of the late J. P. Morgan... that any man who is bearish on America will go broke. Within a few days there is likely to be a bear panic rather than a bull panic. Many of the low prices as a result of this hysterical selling are not likely to be reached again in many years."
- R. W. McNeel, market analyst, as quoted in the New York Herald Tribune, October 30, 1929
"Buying of sound, seasoned issues now will not be regretted"
- E. A. Pearce market letter quoted in the New York Herald Tribune, October 30, 1929
"Some pretty intelligent people are now buying stocks... Unless we are to have a panic -- which no one seriously believes, stocks have hit bottom."
- R. W. McNeal, financial analyst in October 1929
"The decline is in paper values, not in tangible goods and services...America is now in the eighth year of prosperity as commercially defined. The former great periods of prosperity in America averaged eleven years. On this basis we now have three more years to go before the tailspin."
- Stuart Chase (American economist and author), NY Herald Tribune, November 1, 1929
"Hysteria has now disappeared from Wall Street."
- The Times of London, November 2, 1929
"The Wall Street crash doesn't mean that there will be any general or serious business depression... For six years American business has been diverting a substantial part of its attention, its energies and its resources on the speculative game... Now that irrelevant, alien and hazardous adventure is over. Business has come home again, back to its job, providentially unscathed, sound in wind and limb, financially stronger than ever before."
- Business Week, November 2, 1929
"...despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression such as would entail prolonged further liquidation..."
- Harvard Economic Society (HES), November 2, 1929
"... a serious depression seems improbable; [we expect] recovery of business next spring, with further improvement in the fall."
- HES, November 10, 1929
"The end of the decline of the Stock Market will probably not be long, only a few more days at most."
- Irving Fisher, Professor of Economics at Yale University, November 14, 1929
"In most of the cities and towns of this country, this Wall Street panic will have no effect."
- Paul Block (President of the Block newspaper chain), editorial, November 15, 1929
"Financial storm definitely passed."
- Bernard Baruch, cablegram to Winston Churchill, November 15, 1929
"I see nothing in the present situation that is either menacing or warrants pessimism... I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress."
- Andrew W. Mellon, U.S. Secretary of the Treasury December 31, 1929
"I am convinced that through these measures we have reestablished confidence."
- Herbert Hoover, December 1929
"[1930 will be] a splendid employment year."
- U.S. Dept. of Labor, New Year's Forecast, December 1929
"For the immediate future, at least, the outlook (stocks) is bright."
- Irving Fisher, Ph.D. in Economics, in early 1930
"...there are indications that the severest phase of the recession is over..."
- Harvard Economic Society (HES) Jan 18, 1930
"There is nothing in the situation to be disturbed about."
- Secretary of the Treasury Andrew Mellon, Feb 1930
"The spring of 1930 marks the end of a period of grave concern...American business is steadily coming back to a normal level of prosperity."
- Julius Barnes, head of Hoover's National Business Survey Conference, Mar 16, 1930
"... the outlook continues favorable..."
- HES Mar 29, 1930
"... the outlook is favorable..."
- HES Apr 19, 1930
"While the crash only took place six months ago, I am convinced we have now passed through the worst -- and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us."
- Herbert Hoover, President of the United States, May 1, 1930
"...by May or June the spring recovery forecast in our letters of last December and November should clearly be apparent..."
- HES May 17, 1930
"Gentleman, you have come sixty days too late. The depression is over."
- Herbert Hoover, responding to a delegation requesting a public works program to help speed the recovery, June 1930
"... irregular and conflicting movements of business should soon give way to a sustained recovery..."
- HES June 28, 1930
"... the present depression has about spent its force..."
- HES, Aug 30, 1930
"We are now near the end of the declining phase of the depression."
- HES Nov 15, 1930
"Stabilization at [present] levels is clearly possible."
- HES Oct 31, 1931
"All safe deposit boxes in banks or financial institutions have been sealed... and may only be opened in the presence of an agent of the I.R.S."
- President F.D. Roosevelt, 1933
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Financials: How - And When - We Reached the Bottom [view article]
Let's see. On July 15 Meredith of Opco fame issued a sell recommendation on WB @7.75 and within three days it almost doubled. Wow! How can I get a job at Openheimer? ReplyFinancials: How - And When - We Reached the Bottom [view article]
Every quarter, with these 'better than expected' earnings, bulls crawl out of the bushes and start screaming victory. Give them a couple of weeks till reality sets in. ReplyFinancials: How - And When - We Reached the Bottom [view article]
DSB,I think you are right,there is not much correlation ,looking back,with what our financial fundamentals are now.Derivatives are the big question.Paulson has acknowledged that hedge funds will have to be rescued to prevent a slaughter.. ReplyFinancials: How - And When - We Reached the Bottom [view article]
Charlie, how much history can you rely on when the inputs to the market are vastly different than with previous credit related events?To rattle off a few:
- We have never before had such a major crisis of confidence in the ratings agencies. Their job is to accurately asses the risk of loss, and assign a rating to that probability. They rated securities that were so complex that they didn't have any history on which to base their assumptions. The loss of credibility is crippling the market. Trust/Credibility is the glue that holds the world together. When someone don't know for sure whether to trust a propsective purchase, they rely on a 3rd party to recommend (a friend, an agency, references, etc). This is what the ratings agencies have done for decades, this is what makes the Ebay feedback system crucial to their business model. It is also why the world hasn't questioned the Dollar for 60 years. When trust is broken, the system will remain broken until trust is restored.
- The government hasn't had to back a major financial institution in crisis during ANY of our lifetimes, to my knowledge. This is egregious, possibly illegal, and in theory it dilutes the dollar. It takes credibility away from the fed and our currency - however if it was/is not done, we might be in a much worse situation today. Going forward, the fed will be limited in their ability to bail out institutions.
- Our economic strength is tied to our military strength insofar as .60c of every tax dollar goes towards the military. As the dollar weakens, and the tax base shrinks due to economic contraction, how are we going to maintain our global military campaigns. If we aren't the toughest kid on the block (aside from nukes), it becomes a lot harder to throw our weight around.
- The derivatives market has never been this big. A 70+ Trillion system of complex IOUs between financial institutions rests on a foundation of rapidly defaulting debt. During the credit crisis of the early 90's, it was around 9 Trillion. Think of an inverted pyramid. This is why BSC failure would have been catastrophic, as they held up around 8% of this system of IOUs (from what I recall).
- The savings rate in America is flat. This is going to get worse as prices inflate, and people (with all that 'money sloshing around on the sidelines') are going to hoard $ in anticipation of worse times ahead. When the velocity of money slows down, demand falls, companies go out of business, and people baton down the hatches. What will increase the velocity of money? Growth. How do you grow? There must be demand, prices must not choke people out of markets, and there *MUST* be liquidity in the system.
$120/bbl oil has already done damage. Companies have already laid people off in anticipation of hard times ahead, with two quarters of high energy prices putting a thumbscrew on margins.
Nothing goes up or down in a straight line. The fact that the Financials staged a rally 2 business days after the 3rd largest bank failure in US history tells me that people aren't educated as to the real risk in the system right now. It tells me that hopeless optimism persists, justified by "valuations,"... history, and a blind eye to the storm that the world is in right now.
Don't get me started on Europe, which suffers from a housing crisis very similar to ours.
Fix the defaults, fix the world. Save the cheerleader. Reply
Financials: How - And When - We Reached the Bottom [view article]
Good article and good points by DSB. I do however agree more with Tom. DSB, by the time your 5 points have occurred we'll be past the bottom of the economy but we'll be LONG past the bottom of the market. Of course the level of risk is high right now, but the return potential is pretty high too. My vote is that the market is way ahead of the economy right now and the long term values are just too good to pass up. Reply