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- Pacific Sunwear F3Q08 (Qtr End 11/1/08) Earnings Call Transcript
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NoFate
150 Comments
S&P 500 Technicals Show a Mixed Picture
BIG - The 18+ PE indicates an expected 5.5% return ...and the earnings expectations are probably hugely inflated like Q3 and Q4 both were.
Peter Schiff on the Housing Market and the Rescue Plan
NO TAX CUTS - Have you seen the deficit lately? Have you seen the value of the US dollar? Do you want some tiny bit of social security someday? Do you care at all that we are adding more and more debt that our grand children will have to pay back to the CHINESE someday!
NO FREE LUNCH - People got a free lunch for 5 years pulling equity out of their homes and not actually EARNING the money. It is time to STOP SHOPPING and go back to work!
We need a recession.
- It washes away the crooked and unprofitable businesses.
- It teaches investors to respect risk.
- It teaches employees to stop living paycheck to paycheck.
Foreclosures Have Peaked and It's Time To Buy? Not So Fast
But lets get real guys! I guess it depends on the size of the bubble in your market, but in a bubble area you are at least complicit in seeing some questionable stuff going on!
- Appraisals a teensy bit inflated?
- No doc loans? - 2% teaser ARMs being sold to illegal immigrant share croppers?
- Any of this ring a bell?
Maybe not ...but I am guessing many looked the other way because the money was rolling in ...lots of money.
So maybe YOU are a fine upstanding ethical professional business person ...but that hardly means all your fellow agents are.
And as a final note ...hire a REAL economist for a change at NAR! The last two bozos couldn't extrapolate their way out of a wet paper bag. I mean really ...my 6 year old daughter gives more accurate predictions!
Triumph of Bearish Pundits
What about the rest of us who have been fully invested in the bull market until fairly recently, but are asking the following questions:
1) The S&P PE is > 18 and I expect earnings to drop next year way below expectations...histori... this is an excellent time to sell. I'll start buying again when PEs are around 8 or 10 ...and I'll short some on the way down.
2) Housing price inflation, purchases, decor and MEW have been a primary reason we had a bull market. What will replace this now that no one is building or buying houses? Now that equity extractions are turning into ARM resets what will replace this consumption?
Lets face it ...the bull market is based on 2 things ...globalization and housing. Housing is now dead and globalization will slow down big time.
These may be problems ...and there may be great solutions to resolve these problems we don't know about yet. Or maybe these are problems ...and they will be resolved by a recession.
Recessions are just legend though right? It will be different this time...
A Top Secret Investment Opportunity: Don't Fight the Fed!
Earth to Jeff ...the Fed is stuck between a recession and stagflation at the moment ...and whatever cuts they make will help us in 2009.
Further, their auction will not help. It is a drop in the ocean of bank debt and the banks still don't trust each other due to a lack of transparency.
The Fed is trying to look like they are doing something so they don't get blamed for the mess.
And get with the program ...recessions happen. If the Fed shortens the one that is nearly upon us they will have done their job.
Finally, don't fight the Fed means don't leave yourself exposed in the market when the Fed announces rate changes ...it is common sense. It does not mean take some Pollyanna position that the Fed is going to drop out of the sky like Superman and save the world.
8 Predictions for 2008
1. Markets will produce results ahead of their historic average as liquidity provided by the Fed works into the system.
Response: There is plenty of liquidity in the system. The problem is that Banks don't trust each other, so they won't lend to each other. They are afraid other banks will run into problems because many are keeping their CDOs/SIVs mark to model (i.e. mark to make believe) and off balance sheet. Banks need trust and transparency, not lower interest rates.
Markets ultimately reflect earnings ...and earnings are going into the toilet.
2. Financials will stage a comeback and be one of the best performing sectors during the year.
One or more major financial will go bankrupt. See #1.
3. Valuations will matter.
Future earnings estimates are still WAY too high, so current PE ratios appear lower than they should. Both prices and earnings will drop next year for most companies, so who knows where the PEs will eventually end up. Cash will matter. See #1.
4. The Fed will continue to cut rates to be within 25 basis points of 3.5% by the end of the year...
The Fed will cut rates to at least 3.0% ...possibly lower. They will be trying to avoid a severe Japan-like recession caused by DEFLATION of assets (i.e. houses, etc.).
5. U.S. stocks will outperform international stocks on a dollar basis.
Emerging markets will easily out perform US stocks, though our recession will cause a global slowdown. We will export more and they will import less from us, but it won't be enough to save us. Much of Europe will also be in a recession. The $ could actually rise if other economies slow down ...but the GDP growth rates in places like China, India, S. America, etc. pretty much ensure stronger markets. See #1 and #3.
6. Consumer stocks will start off rocky but end up with sizable gains for the year as consumers become more confident.
Which consumer stocks ...staples or discretionary? If staples, then I agree with you... if discretionary then I think you are crazy. See #1, 4 and 5.
7. Housing will reach a bottom near mid-year.
Huh? The CME has Case-Shiller Housing futures ...most of them indicate a bottom in 2010 or 2011. Plus, have you seen the ARM reset schedule?? The next 6 months make the last 6 months look like a walk in the park.
8. Commodity prices will continue to be volatile throughout the year...
Ummmm, yeah. So what? Are they going up or down? You didn't make a prediction on the US$, which is the key to this one. I'm not sure where the $ is going, so I am staying away from commodities at the moment (currencies also).
Anyway, I am going to print this and we will see who is closer at the end of next year.
Is a Pattern of Lower Highs Developing?
If correct, this points to an ultimate drop in the market of (at least) a distance twice the peak from the peak ...ummmm that would be 1250.
I haven't bought the shorts yet, but I am watching and waiting.
Keep an Eye on REITs' Correlation With Equities
And I realize IYR has a high % of commercial property, but I think investors bid it up mainly because it was a real estate play and more liquid than buying actual property. In fact, IYR got a big lift right after Paulson's mortgage plan was announced ...which won't directly affect commercial property at all!
Finally, I agree foreign REITs might be the way to go though ...as long as you avoid other bubble countries! The Economist had a great article on which countries have inflated housing prices a few issues back.
8 Predictions for 2008
Why would the Fed continue to cut rates aggressively when the market is going to set new records ...and housing will apparently bottom next year?
This is utter nonsense. Jeeeezus ...be a bear ...or be a bull ...but don't claim the best parts of both sides and try to keep a straight face.
'Buy and Hold': As True Now as Ever
I will add also, that Dr. Hussman has very simplistic model he outlines that does FAR better than buy and hold over the long run:
www.hussman.net/wmc/wm...
Finally, buy and hold is not what hedge funds or mutual funds do ...so do as I say, but not as I do! It's true that most investors don't have the skill to do better than the major indices, but buy and hold has been the mantra mainly so that the big players have some level of support and everyone doesn't just go to cash when a bear market shows up. It's a con people. If you really believe this then stop reading immediately and just dollar cost average into the major indexes from now on.
Has Anything Really Changed in the Last Two Days?
peternavarro.com/bigpi...
If you are still bullish after reading these 5 articles then more power to ya. If you don't have at least a few bearish doubts though, it just means you are not getting it.
Has Anything Really Changed in the Last Two Days?
I do think many people are going to walk away from loans though. Most of the ARM resets are in the next 6 months ...and alot of loans were LTV over 100%! Nationwide houses have dropped in value now 4.5% (Case-Shiller Index) ...and the slope looks like about 80 degrees! This could get very ugly!
Finally, and admittedly, timing is the hardest part of trading stocks. And admittedly I do not have perfect knowledge. Much of what I read or hear (including most of CNBC) I dismiss, but there are certain people that regularly seem to know what they are talking about ...and if you are at all interested in hearing a more then below are some links to people I respect. If not, then it's really not my problem.
www.safehaven.com/arti...
www.hussmanfunds.com/w...
www.financialsense.com...
www.rgemonitor.com/blo.../
Has Anything Really Changed in the Last Two Days?
Besides, many many people are going to start walking away from their homes when they are worth less than their loan ...and most of the resets are still ahead of us. This could cause a death spiral ...prices drop ...people abandon underwater loans ...prices drop more ...more people walk away ...and so forth. There is allready a 10.8 month supply to prime this type of action.
Finally, credit could dry up quickly. Banks have to maintain certain margin and these losses could to cut into this leverage significantly. Am I ready to call the end of the world ...no way ...but many bulls are walking around with blinders on. There are huge dangers out there at the moment.
Has Anything Really Changed in the Last Two Days?
Has Anything Really Changed in the Last Two Days?
Do you disagree? Great ...then tell me what changed!
I'm mostly short or cash ...my big question is do I take this opportunity to add more shorts. I'm on the sidelines for the moment, since I think it could still go higher before it ultimately collapses. But that's just one bear's view...