gabe borenstein

Thursday Outlook: Commodities, Emerging Markets

To JJC
Your concerns do deserve a response .
The issue of foreclosures is a serious problem.Looking at the data it appears to me that forclosures have peaked.The housing sector is consolidating and very well may be the recipient of foreign investment(as the stock market is and will be).
Consumer credit is of concern ,but the relief is on the way.
Speculative forces(hedge funds and others) have pushed the price of crude oil into the stratosphere.The result was higher gasoline (and with a lag) food prices.Thus consumers disposable income had been decimated.As the crude continues imploding ,the lower gasoline/food prices will increase dramatically the net disposable income allowing greater consumer spending latitude(please allow for some lag).
Unemployment is an issue but it is a lagging economic indicator it reflects the past trends but not the future.WE have seen worse unemployment data in the past.
The stronger dollar will attract foreign capital especially as Europe and Emerging market economies are heading for a contraction.
This foreign investment will enhance our economic rebound and will contribute to the unprecedented stock market rally.
Stronger dollar will initially increase exports as the importers of our goods try to beat the price increases (in real terms).Our exports will not suffer for quite a while.There is something called a J -curve .This curve reflects an impact of a shift of a relative value of a currency(ie dollar) on trade (Exports ).The Curve implies that a lag of up to 18 months exist.Meanig that a major shift favoring dollar will not affect exports for up to 18 months.
One more time,I am very optimistc on the U.S economy.
The economy /market are on the verge of a major rebound.
The problerms in the financial sector have existed for years and are being addressed while their magnitude is distorted by the media and the market bears .
Why? take a look at the record short open interest in the equity market -that is why.
In the period ahead you will see Dow at 20,000 and the NASDAQ over 5000.
Hard to believe? So were my warnings about the current turmoil,issued over the period of more than two years.

Thursday Outlook: Commodities, Emerging Markets

To ROwns
I think that instead of panicking ,the investment community must sit back and evaluate objectively the current status quo.Please remember that untill recently experts have stated that we are in recession but have alluded to hyper inflation as well (stagflation),while the real estate prices were imploding(70% of Americans were/are home owners ).
The reality is that the U.S is not in recession but is experiencing the sub average growth.In fact the reported GDP growth for the second qtr,was 3.2% .Many try to negate that number but it is real.Exports do create jobs,revenue ,growth and disposable income.
In addition the foreign investments in the U.S are and will continue to grow almost geometrically.
Clearly ,the U.S economy/markets are in the process of consolidation.
The negative distortions and gloomy dissemination of analysis, you need to take within the context of record short open interest-mega shorts continue to distort issues and the problems which we were identified and are being addressed.
Which brings me to the question pertaining to my time span on the market/economic recovery.
The data shows consolidation.Major market /economic rebound will be indisputable by October mid November.
At the risk of being repetitive ,I have been warning the investment community about the current problemsfor more than two years .
I have issued a very explicit warning about the suprime related issues which may derail economy on Sepember18,2007 (Bloomberg TV -Brian Sullivan -FED Time).
Now that the problems have been identified and are being addressed in unprecedented effort by the FED ,Treasury ,Congressand the Administration,I am very bullish if sometimes surprised by the volatility caused by the negative rumors and discussions which have no bearing to reality.
Unbelievable ,but market/and economy are in the process of the trend reversal( going up).
Two things would neutralize the negativity
a) The FED should contemplate additional easing.
b) CNBC should stop practicing "Yellow Journalism"
ROwns ,better days are ahead shortly.

Thursday Outlook: Commodities, Emerging Markets

The U.S economy is the process of consolidation on the way to a major rebound.
Some additional easing (FED) may be necessary to allieviate market/investors fears.
It is amazing how consensus had changed from blindly bullish to bearish.
The problems we are facing today were more than two years in making I have warned investors about pending" turmoil" more than two years ago, reiterated the issuesas late as September18,2007.
If only the issues were addressed then.
In the meantime the problems have been identified an are being addressed.Little more time may bee needed to see the economic response to fiscal and the monetary measures(Lag).
We did see a 3.2% GDP growth in the previous quarter ,quickly dismissed by the economic "charlatans".
Economy looks always best on top of the cycle and the worst on the bottom of the cycle.
Yes ,there are some problems that are being addressed but we are on the way to a major market/economic rebound.
Hard to believe.

Tuesday Outlook: Commodities, Emerging Markets

Let's set the record straight.The Primary beneficiary of the Treasury's "rescue " plan was and is the "little guy".
It is because of the existance of the FRE and the FNM ,the little guy was able to obtain competitive mortgage rates.
In the current turmoil both agencies are responsible for up to 80% of the mortgage market acitivity.
The direct take over of the agencies has neutralized self serving and distorted rumors about the financial viability of both agencies clearly disseminated by the record shorts (including hedge funds).
The distortions had a turbulent effect on the rest of the financial sector as well.
With the Treasury's action both agencies have gained an implicit AAA rating .Th e speculators were put on notice that the U.S will not allow a sequential systemic failure which could result in the global economic implosion.All of this becausesome mega shorts had an ability to ferment market disturbances based on the myths and distortions.
With this action ,"bears" will have to move on and will likely try to victimize another sector.
In the period ahead the existance of the "new" agencies will inject stability into financial sector and broader economy as well.
We are in the process of consolidation on the way to a major rebound.
The Treasury's message is loud and clear- it will accomodate the necessary "tranquility".
Some will claim that the share holders are the real victims -at this price level not so.
The share holders have a one dollar call option on the success of the restructured agencies(without expiration date).
It had taken years to create this upheaval(I have warned against it as early as June of 2005).To allow another month or so to resolve the issues is not a crime .
Rebounding econmy will take care of the housing and the market issues.
I think we had enough of the paranoia.
The Treasury is wrong when it intervenes and is wrong when it does not-enough of this nonsense.

Friday Outlook: Commodities, Emerging Markets

Yesterday's sell off is just a reflection of a psychological inestment"dissarray".T... great and unexpected GDP data was ignored some weaker data was utilized as an excuse for a sell off .Untill month ago we have heard that the U.S was in recession and the market had adjusted accordingly.The reality isthat the U.S is in the moderate expansion mode on the way to a major rebound.The volatility will continue as a part of a bottoming process as the both weaker and stronger data is digested by the diversity of investors.One thing for sure ,the market bears are always looking for the excuse..
If it is not the crude then it is the agencies or......?
Let's just relax,the August is the universal vacation month .
It is curious that for all of the negative hysteria the FED appears relatively comfortable with the current status quo.
The market had discounted the worst economic scenario
and the major rebound lies ahead.

Wednesday Outlook: Commodities, Emerging Markets

The market volatility is not driven by the investors but rather prop desks and hedge funds.The problems ? -they have been identified and are being addressed.
For all of the nonsense ,FRE was able to raise (yesterday)1 billion dollars via reference note ,without any problemsw.In fact it had raised 43 billion dollars in 2008 via this vehicle. The FNM is doing fine .Both agencies have reserves abouve the requirement level, but the "bears " continue to distort the issues .MBIA had managed to write some relevant business and the AMBAC had "restructured" to be in a position to write new business.
The oil speculators have managed to spike the price of crude by spreading fear in the market by comparing every hurricane to Katrina.
Hurricane came and went ,the damage is insignificant and the oil prices have tumbled.
Now I suppose we will have to listen to the "experts" ,telling us about the upcoming OPEC meeting implying that the OPEC will cut the output.In the meantime Libya had already stated that it will not reduce its crude production.
The housing sector is showing signs of consolidation/stabilit... and the mega dollar inflows in the period ahead ,will cause a major price rebound.As it is ,we have seen foreign interests buying some "interesting" commercial properties in the U.S.The economic/political risks outside U.S will enhance dramatically demand for the dollar assets specifically the equities and the real estate (relative value assets).
What we need is more time(lag) to allow the fiscal and the monetary implemented measures to add to the economic jolt.
The time for concern was at least two years ago when the "financial" and the economic risks were becoming evident.
One more time .In June of 2005 ,in an interview with Mark Gilbert (Bloomberg- London) I have expressed my concerns about the issues we have faced to date.On September 18 ,2007 I have reiterated concerns during an interview with Brian Sulliovan (Bloomberg -TV) .
Now that all of the problems have been identified and are being addressed ,I am quite confident that the worst is behind us.
Europe and the Emerging markets are the areas of concern.
In fact I believe that we are in the process of market /economic consolidation which will lead to unprecedented economic rebound and the stock market rally.

Friday Outlook: Commodities, Global Markets

Yesterday was not a pocket picking day. It was a rude awakening by the market bears that the reality is more optimistic than their doom self serving prognosis. The recession frequently discussed ,had been avoided but is priced in to the market prices. The stock market in the process of consolidation is ready for a major rebound,perhaps enhanced by the major short covering.There should be no doubt amongst objective investors that the key issueshave been and are being addressed. Major banking insitutions had written off the "questionable assets and exposure "although some marginal adjustments may be necessary. Some of these "write offs "will come back as the profits in the period ahead. Bond insurers denegrated by one particular short ,have shown substantial profits but were ignored by the market.Hopefully today'saction by the rating agencies reiterating the AA rating for MBIA and Ambac will bring the sense of investment reality into the pricing structure .Eventually the other segmernts of the financial sector will strenghten.
Housing sector while unnerving ,is consolidating as well with some pick up n sales.
Basically the U.S economy/market are in a maqjor phase of consolidation.
Europe and Emerging market economies are heading for a major decompression ,leading to record capital flows into dollar assets(flight to quality).These capital flows will cement the U.S economic/market record rebound.

When Central Bankers Clash, Stock Markets Can Crash

The ECB and the FED as well as other Central Banks have a different mission.Let's accept the notion that the higher rates will lower the inflation rate (and expectations of)by declerating economic growth .If the Central Bank underestimates the impact of the higher rates on the economy ,a major economic debacle may follow,ie Great Depression.
Oil.untill now has been priced in dollars.By raising the rates and implying more hikes in the future,the ECB had managed to weaken the dollar by about 50% vs the Euro. As the oil priced had spiked ,the shift in the currency relationship in favor of Euro ,had lowered inflationary pressures in Europe.At the same time this policy will create a European Armageddon in the period ahead.The U.S American economic deceleration will decelerate European growth.Simultaneously,... higher rates imposed on Europe will only intensify severe slowdown.If the ECB decides to ease they will face stagflation.Anyhow ,because of the monetary lag ,any attempt to deflect potential European implosion to follow ,will not be effective.
The FED had chosen the right monetary course .Most of the post subprime debacles have been addressed .The record open short interest in the equity markets reflect a massive speculation (including hedge funds),not a investors liquidation(although some of it transpires as well).
Objectively speaking ,the risks that the U.S had faced ,will be the risks that the global economies are about to face.We have addressed most of our issues ,the others have not.The sequential economic implosion outside the U.S will cause an unprecedented fight to U.S assets.
Unprecedented stock market rally will follow and the yield curve underdog (10 yr treasuries)will rally even if for the wrong reasons.