Wisdom-Seeker

34 Comments

    • Dow Theory Revisited [view article]
      So, what you're saying is, you think the market will go higher - unless it goes lower. Unless you'd care to put probabilities on those two outcomes, such as by posting the historical rate of occurrences of false Dow buy signals early on in a recessionary/bearish environment, you haven't said a damn thing. But still, nice window dressing on that tautology!
       Apr 22 01:44 AM
    • Better Off Now Than 5 Years Ago? [view article]
      Real Median Income has fallen (slowly) since 2001 and is now taking a swan dive. Apr 22 01:36 AM
    • What Credit Crunch? [view article]
      You're missing a few crucial quantitative details. First, the growth of credit should be adjusted for inflation and also per-capita, to get a sense of whether it's really growing or not in terms of an individual's actual purchasing power. Second, if you look at the Fed's G.19 source data you can see that the trend has keeled over dramatically. After increasing at an 8.0 percent rate (annualized, seasonally adjusted) in Q3 of 2007, consumer credit growth dropped to 4.0 percent in Q4, and over the last three months (Dec/Jan/Feb data), it is now down to just 2.8 percent AT A TIME WHEN INFLATION IS SPIKING.

      My take on this is that consumers, reaching the end of their rope in the mortgage, HELOC and refi arenas (not part of this data set), grasped at as much credit as they could in the 3rd quarter and then ran out of room to borrow in the 4th quarter (remember, Christmas retail sales were awful).

      My prediction is that you'll see the credit crunch show up in your data in the next 2 quarters.       Apr 15 12:22 AM
    • The Great Television Price Inflation Scam [view article]
      Great article. Hedonic adjustments to the CPI are absolute BS. The comment by ferdy is also dead on.

      "We now present the Consumer Price Index for all items, excluding food, clothing, shelter and transportation..."...

      BUT - 10 seconds on Google shows me 32" CRT TVs for $350. Prices for same-tech items HAVE come down, somewhat.

      I'm waiting for the hedonic CPI adjustment to cable TV: higher prices, and since there's nothing much worth watching on TV that you can't get by other means, there should be *LESS HEDONIC VALUE*. So, this should drive the CPI through the roof!       Apr 14 02:06 AM
    • GE's Earnings Miss: What Ever Happened to Warning Investors First? [view article]
      The obvious conclusions are that (a) they didn't know sooner than 3/31 themselves that they couldn't get the sales done in Q1, and (b) there were other, more systemic problems with the earnings and the "blame Bear" tactic is just window dressing.

      Why is it that everyone is focusing on the "lack of advance warning", and then on the "Bear Stearns connection"? Sure, maybe they could have met their guidance if they'd gotten the magic pixie dust on some key asset sales in March, but that's not why the earnings sucked.

      The ACTUAL EARNINGS REPORT shows BROAD-BASED WEAKNESS across many of GE's lines of business! This is a recession-induced earnings miss, spread systemically across the company - not just a subprime / financial crisis-induced miss.       Apr 14 01:55 AM
    • 7 Reasons March Was Not the Bottom [view article]
      For DooDah, a clue brick: learn to read a bar or candle chart, and then look at any chart other than the Dow. Don't forget to try China and Europe. Unless and until we start to see higher highs and higher lows on the real indexes, the smart money bet is that March was just a minor rally and bull trap. Apr 11 07:30 PM
    • Value Traps and Market Bottoms [view article]
      Bullshit. You can't figure out a company's value without estimating the forward earnings (for multiple years). You can't do that without making assumptions and forecasts about the future of the economy in general.

      Your prediction about the earnings of XYZ will look a lot different if your macro forecast anticipates a recession with 5% less GDP than if you anticipate a growth period of 5% more GDP. Remember, net earnings are a derivative quantity - revenue minus expenses - and we can have a lot of GDP with zero net corporate earnings.

      And don't forget the black swans that you can't anticipate at all!

      That forward earnings analysis is the same analysis, with the same sorts of assumptions/forecasts, currently being used by those trying to call a bottom in the market. The only difference is the size of the business being analyzed. There are some things that get more complex at the macro level but also many that get simpler.

      But either way, picking "good stocks at a cheap price" or picking "the index at a cheap price", you are bottom-picking. The only difference I see is that with individual companies you might get some benefits from simplicity (especially if you're Warren Buffett, but not if you're Bill Miller right now) and you also get the benefit of averaging over a lot of picks.

      You might counter that you don't have to be exactly right, you just have to make some money over the long term. To which I'll counter that the bottom-pickers don't need to be right either, they just have to be in for the eventual recovery, to make moeny over the long term.       Apr 11 07:07 PM
    • A Tale of Two Coasts [view article]
      Not only is Florida on the East Coast, but last time I checked, Seattle on the West Coast was doing at least as well as New York.

      Article should be retitled "tale of two cities", but oops, that was already taken 150 years ago.

      Bigger question is, will New York really come out okay, or are they just going to be a late bloomer?       Apr 11 06:50 PM
    • Brace Yourself For the Payrolls Number [view article]
      Excellent article. But this time around, the linkage between payrolls and USD could be weakened, because the Fed has already cut interest rates further and faster than in the past. The employment data therefore has less leverage over the future path of interest rates. The Fed cannot ease much further, and Bernanke's testimony yesterday pointed to lower growth, higher unemployment, and more firmness on interest rates due to the inflation / dollar collapse concerns... Apr 03 05:42 PM
    • My Way or the Highway? [view article]
      The best part is that Merton's theory doesn't adequately account for the long-tail outliers in the distribution of probable events -- which are caused by both the "dynamic, regime-centric, transient and savage" behavior of the market participants and the realities of life in the chaotic system we call Earth. So we're effectively all driving around in a car with "Black-Scholes-Me... seatbelts, airbags, ABS and 4WD", except that it turns out none of those work when the 100-year storm comes (every 10 years or so in fact). So the whole market gets caught in an enormous pileoup out there on the road of life. And while the bankers suck enormous profits out of the system during the good times, when that storm comes, the taxpayers, unless they fight back, get stuck with the bill.

      Private gain, socialized pain is grossly unfair and threatens both capitalism and democracy by encouraging moral hazard. The handout to save Bear Stearns may be only the beginning of a long slippery slope to higher taxes for all, fascism, or worse. Fight against it! www.financialpetition....       Apr 02 11:43 PM
    • The "Ben is My Friend" Trade [view article]
      Apropos of Cramer, how about 9 lives gone, and the crazy cat's reputation is now dead? Apr 02 11:30 PM
    • Chart of the Day: Credit-Equity Divergence [view article]
      You meant to write, "we're about as far away from normal as we've been in the past 5-6 years". We haven't been in a credit crunch in that time period, and since there's widespread data showing that the current financial-sector problems are much worse than in 2002 (as far back as your data go), there's no reason that chart can't go even farther from normal.

      Plots of yield spreads from the 1929-1938 period show much wider divergences, with Treasury yields below 3% and investment-grade corporate yields above 6% for extended stretches.


       Apr 02 04:08 PM
    • Apple's iPhone Shortage Is Probably Just That [view article]
      My immediate bet would be that there was a component supplier issue in China during their huge winter storms (which shut down large chunks of the country for a while), and we're seeing the effects of that now. Apr 02 03:59 PM
    • News That Moved Tuesday's Market [view article]
      Roy, I generally appreciate the market analysis and commentary here, but I think this time you completely missed the most important news that moved the markets, which was the Treasury's input to the Senate hearings on Thursday. Treasury said it's backstopping the Fed's losses on the $30B "loan" made to JP Morgan to goose the Bear Stearns thing.

      In other words, the U.S. Taxpayer is paying for any losses the Federal Reserve takes on the Bear Stearns "loan". Which is a no-recourse loan. So there's no reason for anyone to pay it back. That means the financial markets have just picked the taxpayer's pocket for a bailout of $100 for every man woman and child in the United States. And, this sets a whale of a precedent!

      THE MARKET IS HAPPY BECAUSE THE TAXPAYERS ARE NOW ON THE HOOK FOR BAILING OUT THE BIG BAD BANKS. WOULDN'T YOU BE HAPPY IF YOU COULD KEEP ALL YOUR PROFITS, AND DUMP ALL YOUR HUGE LOSSES OFF ONTO THE TAXPAYERS?

      By the way, this is blatantly unconstitutional - only the House of Representatives is allowed to decide Federal spending. Somehow Paulson and Bernanke and Bush have decided that they can spend taxpayer money "on the sly" as long as they make it look like a "loan".
      This is IMPEACHABLE. But Congress needs a "spine transplant" from unhappy voters.

      The citizens of this country should be ashamed of themselves if they don't protest this one. Or, if you'd like, just open up your wallet and send in your $100 checks. Per person. And be prepared to do it again and again as the dominos continue to fall...

      Protest here: www.financialpetition....
      Learn more here: market-ticker.denninge...       Apr 01 07:43 PM
    • ISM Manufacturing Index Rebounds [view article]
      Yet another negative news item mis-spun into bull-s***. This one is almost as good as the Realtor's "the bottom is in for housing" a short while ago.

      The graph shows a convincing trend of lower highs and lower lows: it's still going down.

       Apr 01 07:30 PM
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