Sharp45

0% Financing Doesn't Mean It's Free

"Deficit spending is obviously not free but completely necessary to hopefully avoid a prolonged recession/depression."

Is a debt-funded spending-spree sustainable indefinitely? FYI, that's a rhetorical question. Of course it's not. At some point we have to stop spending at current levels, and it's going to crush our consumer-funded economy for a while. Like a college student graduating with 100k in credit card debt, we're about to get smacked in the face.

If we're smart (unlikely) the markets/economy will be reborn in a more efficient and risk-averse form, and we'll grow from there. But we have a nasty crash headed our way some time in the near future, and we're just delaying the pain.

Advice for the Fed: "Don't just do something, stand there".

Excluding Five Worst States, November 2008 Foreclosures Down by 1.10%

Bans on foreclosures can't last forever. Artificially low mortgage rates can't last forever, neither can this proposed FDIC plan to bailout underwater borrowers. It blows my mind that people think we can just postpone this pain eternally.

We will never completely stop propping up home prices artificially, but doing so at current levels is insane. Mortgage interest tax write-offs and artificially low rates have done more than enough. There is absolutely no need to further fan the flames with principal reductions, mega-low-rates, and other morally hazardous reward structures.

Gold Bugs Beware

Smart gold investors aren't expecting a straight ramp-up in price. As others have said, it's best to average-in. And not to bet everything on gold. But it's an important part of a portfolio, for many. As is silver.

If the economy recovers, precious metals rebound too. But gold and silver also serve as protection against nightmare scenarios like the dollar collapsing. Unlikely, but it is possible.

REITs Are Gold Mines on the Short Side

Nice article. SRS is possibly the most gut-wrenching ETN around. But the theory is sound - REITs should have much farther to fall. Consumer spending will never be the same without loose credit and insane home-equity loans. Dividends are unsustainable.

Today was especially gut-wrenching, though. I've been trading SRS for a few months, sold a bunch(for me) at $176 from $105 last month, was pretty happy.

Bought more on the way down, some at $140, then more at $110. I had a limit-sell order in at $185 this afternoon when I left for the dentist, and it was trading around $182. I figured it would hit $185 again, and still think it will in the near future. But it closed today at $134? Wow.

Forecasters See A Bear Market Till Mid-2009

A 2009 bull market? Growth will never be the same without insanely-loose credit. Where will the spending for a recovery come from? People are tightening their belts, and it's not a temporary thing. Our lifestyles have to change, and it's gonna be ugly combined with all the other factors (like $51 trillion in unfunded government liabilities).

If recovery means getting back to 2007 highs, that seems unlikely in the next 5 years, maybe 15. Stimulus packages and bailouts may allow the pipe-dream to continue a little longer. But confidence is broken, corporate responsibility is out the window.

Google: 3Q Results Reveal Chinks in the Armor

"The new talk of Microsoft acquiring Yahoo won’t help matters either. If these two finally get together, they could present formidable competition to GOOG, eventually chipping away at market share."

If you really think a combined Microsoft and Yahoo will preset a formidable challenge to Google, I would guess you have a poor understanding of the search-advertising market. No offense. Most people don't.

I work with the 3 major search engines every day, spent about $1.5 million on search advertising so far this year.

#1 - Search advertising is an auction/bidding based system. You bid on keywords, and whoever has the highest bid and the best ad gets their ad placed higher (more traffic/leads). Read up on Google's quality score if you're not familiar with this process. If people are getting great sales/leads from Google at x price, will they decrease their spending if microsoft and yahoo merge? No.

#2 - Microsoft and Yahoo's search technology isn't even close to Google's. Their results just aren't as good, period. Their advertising platforms lag far, far behind as well.

If Microsoft does buy Yahoo, they'll probably insist that Microsoft's search remains the main platform, and Yahoo features be integrated. What a disaster that would be, ugh. Bickering engineers, red-tape hell, etc.

If you think a Yahoo/Microsoft merger will solve these problems.... Good luck to you sir.

Google is suffering from the downturn, just like everyone else. But I'm holding my shares and waiting to buy more.

The Recession Is Already Priced Into Stocks

Bearfund - well said. You a mutual fund guy? I've owned Prudent Bear Fund (BEARX) for a while, and added some Grizzly bear fund GRZZX last month.

Basehitz - keep in mind that SeekingAlpha and other sites do NOT reflect your average investor.

Every non-financial-junkie I talk to keeps repeating the mantra of "just hold on through times like these, my financial advisor told me this is actually the best time to buy!"

The vast, vast majority of America and the world still have no idea about the true scale of the crisis. Most of them stocks are cheap now, but it's just everyone getting scared and selling in a panic. Scared is right, but scared about earnings that are likely to nosedive.

I'm not covering or buying anything until I see some convincing signs that things are actually improving. "Stocks are cheap" doesn't do it for me. Bear markets (or depressions) usually overshoot to the downside. I don't think we're even at fair value yet, let alone have we overshot to the downside.

Happy-Sad News: Foreclosure Sales Climb

I don't really trust these Realtor association press releases. Their bias is inherently obvious. It's always a great time to buy real estate according to their research.

They never include the % of sales that are foreclosures. His statement about 80% of purchases being primary residences doesn't mean much. Obviously there's less speculation with tanking prices. I'm curious what the overall % of these sales were in foreclosure.

A few saavy buyers waited for prices to drop before buying, but I think it'll be a brief boost. There are only so many people who can actually afford a home in the U.S., and we're still way overbought.

The Recession Is Already Priced Into Stocks

I'll play devil's advocate. I think stocks are still overpriced, and that earnings are likely to crash worldwide:

2/3rds of U.S. economy is consumer spending. And that's just starting to nosedive, will get a lot worse. Consumer debt is at record levels (not to mention gov and corporate).

Layoffs just picking up speed now, don't see unemployment improving in the foreseeable future.

Non-saavy investors are just now realizing something is wrong. Many will be pulling their money out soon. Yes, there is a lot of $ on the sidelines, but I think most of that is very skeptical and has lost it's risk-appetite.

1/6 homeowners underwater on their mortgages. And his may be only the first wave of foreclosures. Alt-A loans and commercial are starting to look ugly.

Unfathomably large derivatives market adds to the chaos. Honestly, I don't understand this one completely. But what I do understand ain't pretty.

Add to this unfunded medicare and social security costs of around $35 trillion, with baby-boomers retiring.

Call me a pessimist, but I'm holding my short positions (while it's still legal) and not buying much yet. Looking to buy gold bullion once it gets cheap enough. Seems like deflation will eventually give way to inflation with the inevitable $ printing presses running.

Roubini Was Right

Your writing is entertaining Felix. I'm a fan of Portfolio, and enjoy your pieces regularly.

But this qualifier attached to your quasi-apology makes it completely worthless:

"At some point, Nouriel will be too bearish."

What does that mean, exactly? If the S&P dives another 40% over the next 12 months, will he have been too bearish? So far it looks like he foretold this crisis pretty damn well, and took a lot of heat from journalists like yourself in the process.

At this point I'm in favor of handing over the reigns of the bailout to Roubini and a hand-picked group of economists he trusts. Better him than the all-Goldman team currently in charge. No conflict of interest with investment bankers in charge of bailing out the investment bankers, no sir....

Why Buffett Would Not Buy Google

Interesting piece, but this is incorrect:

"the way the company makes 99% of its money is by putting publishers and advertisers together"

Google makes the vast majority of its profits from Adwords (ads that are on search results). There are no publishers involved in this aspect of their business, at any point. If you search for "car insurance" and click on a Geico ad, $5 (estimate) goes directly to Google.

The smaller part of their business is Adsense, which are text-ads on publisher sites. Lots of revenue here, but not nearly as much profit as Adwords. With Adsense, they pay publishers about 60-90% of the revenue generated per-click from advertisers. They keep 100% with Adwords.

So as long as Google dominates search (which should be a very long time, I think) their main source of profits will be intact and growing healthily.

Is Google Scared?

Not true that Adsense has no incentive for publishing good content. If you have a high quality site, advertisers will specifically target it for CPM (cost-per-thousand) ads. This drives up the amount of money you're paid for both types of ads - CPM and PPC.

Google Longs: Consider Yourselves Lucky

Microsoft shareholders seem to disagree with you. Maybe some have looked into how well MSFT manages their web properties (not well). This deal has the potential to make Time Warner & AOL look like a marriage made in heaven.

Google has pulled back, it's a great value here. They will continue to dominate and extend their lead while Microhoo stumbles around, dazed and confused.

Despite 4Q Miss, Google's Still a Good Investment

Nice, I hadn't seen that Goldman commentary yet. The one thing I don't think enough people are commenting on is that a lot of the earnings shortfall was probably due to Google having to make payments to Myspace & other partners because of minimum payment clauses in their agreements. They shouldn't make that mistake again when negotiating with big content-partners.

Check out the earnings call, they go into this topic a few times. Reyes even refers to it one point as something that will probably be a one time "Q4 event".

Google: A Buy On MSFT/YHOO News?

Oops, that was a comment by anon, not Thomas.