Pretzel Logic

This Recession Will Be Anything but Deep

There are a few things missing here in the inflation/deflation argument:

1) We are destroying credit, which is deflationary. Much of the money supply is credit and/or leverage. It is imaginary, not "real" money supply. As a result, money is being destroyed faster than it is being created.

2) We already HAD the rabid inflation people were predicting years ago. In case you missed it: oil was trading around $150 bbl, gold was north of $1000/oz., etc., ad infinitum.

3) We have never had inflation during a falling housing market.

4) We have passed a psychological threshold where banks, people, and businesses no longer view "easy credit" as desirable. Gov't can't reinflate that balloon right now, there are too many holes in it.

My personal opinion is that we get strong deflation for a while as the deleveraging and credit destruction continues. Once that unwinds fully, we will finally see inflation again.

Chasing Unicorns: The Cycle Gods Are Still Playing with Us Mere Mortals

Monday was also a bank holiday. No Treasury auctions or settlements.

Has the Energy 'Tsunami' Been Aborted?

"My sister the real estate maven tells me there are a lot of home buyers “on the sidelines” waiting for the deals to get better and prices to stabilize. She thinks we could be six months or so away from a bottom in housing prices."

I know I'm not a family member, but I hear from a great many homeowners who are waiting for the market to go up so they can SELL. There is a huge overhead supply in housing, so I think the "technical damage" in the housing market will make it hard for prices to rise in the near future.

And we are still completely overbuilt. For years, the realtors told us, "They aren't making any more land!" Well, according to demographics, the problem is: they aren't making any more people, either. And the days of average Joe Speculators owning 27 houses are gone. There are tons of new developments that have huge vacancies. So demand will have to rise again to meet supply before houses can stabilize.

What a Look Back at the Japanese Market Tells Us

I keep hearing that "the American consumer is tapped out." I have to say that this may be true for many, there are also many savers in this country. I sell large ticket remodeling (35K-100K typical) and you would be surprised how many middle-class Americans pay cash for these purchases. My experience in the real world tells me the statistics may seem more dire than the reality.

Reaching for the Bottom in the Markets

If this is a "generational crash" as some are saying, you might do better to compare what happenned after 1929.

Friday Outlook: Commodities, Emerging Markets

"Technical analysis at these levels is not as helpful as one would like as markets are blowing through support levels quicker than we can identify them."

Lee Adler, who runs Captialstool.com, has a saying: "There's no such thing as support in a bear market."

Global Coordinated Rate Cut: Nice Try, but the Party Is Over

quote: "Everyone knows the stock market does better under democrats. And that these insane right-wing ideologues caused this disaster."

I'm no fan of Bush, but if we don't know how we got here, we don't know how to avoid repeating our mistakes.

Apparently, few seem to know about Robert Rubin (Clinton's Secretary of Treasury) and the *hugely* instrumental role he played in getting us here. Here's a quick education on the matter:

Rubin discovered a great accounting trick. He discovered that you could take the Social Security "surplus" and add it to the Treasury's balance sheet, and in its place you could write IOU's to Social Security. (Remember Al Gore's SS "lockbox"? This is what he was referring to.) So Rubin, through this accounting trick, created tons of extra liquidity out of thin air. (Rubin himself has written about this) This huge liquidity in turn led to the NASDAQ bubble.

When that bubble crashed, we should have paid the piper.

But instead of paying our dues, Greenspan dropped interest rates to artificially low levels and we traded the stock bubble for the housing bubble. Now that's collapsing, and it seems our due can be delayed no longer. But make no mistake about where this all started: it started in the 90's, long before Bush took office.

Bank of America's Acquisitions: What Was Ken Lewis Thinking?

What was Ken Lewis thinking? My personal opinion is that these acquisitions are being done as a defensive measure. Making your bank bigger increases your chances of becoming "too big to fail." The acquistions (obviously) aren't to improve the balance sheet; they are desperate acts of self-preservation.

Love your blog, btw. Great work.

Our Coming Depression

I have this vague glimmer of hope that the coming collapse will make people so disgusted by the ruling parties that we may finally trend back towards a Constitutional government, and leaders like Ron Paul. It's a slim hope, but I'm trying to look for the positives.

36 Opportunities for the Beginning of the Bull

There are problems with trying to catch falling knives at this point.

1) The markets are overly unstable, as the 300-700 daily point swings illustrate. We run the real risk of a crash.

2) The fundemental conditions are not anything most of us have seen in our lifetimes. Maybe everyone is RIGHT to be fearful. Contrarian indicators generally only work to confirm other indicators. They are virtually useless on their own, because the levels of bullish/bearishness are all relative. As an example: It may seem high when 50% of the people are bearish, relative to the 20% who were 2 months ago... but it will turn out that 98% will be bearish at the REAL bottom -- which makes the 50% seem low. There's just no way to know where you are in that cycle, except by hindsight.

3) There is a risk of systemic meltdown. This would obviously be exceedingly bearish.

4) The hedge funds are facing extremely high redemptions, and may be forced to continue selling.

5) The market anticipates the future. The future 6-9 months ahead looks worse, not better.

All in all, I have considered trying to bottom pick, but decided against it. Bottom picking implies a bottom -- and I'm not convinced we're there yet. Stocks are still not cheap by historical standards.

I would rather miss the exact bottom by a few percent than be way too early and lose dozens of percent.

Why Are Homebuilders Up On Lousy Earnings? [Housing Tracker]

Hey! As a 30-something investor, I resent these implications! Short attention span, my ass! Wait... what was I talking about again?

Anyway, you'd be surprised how many of us 30-somethings know our history. I've been bearish since 2001 (I actually missed the cyclical bull we completed last year because I stayed bearish the entire time). This market looks a lot like the market of the late 60's to me, and I don't expect an end to the bear for years.

Why all the bashing of 30-40-somethings, when it's the Baby Boomers who took the strongest economy in history and basically destroyed it over the course of about 20 years? They mortgaged our economic future to China, Japan, et al and buried us in debts we cannot repay (except possibly by massive inflation). As far as I'm concerned, the Boomers sold this country down the river, but my generation will be the one left holding the bag.

So which generation has the short attention span, exactly?

Generation X: The suckers who are still buying into their 401Ks and paying their FICA because they don't know their history?

Or the Baby Boomer ME generation who just had to have their entitlements and a bigger home and a plasma TV and timeshare in Venice -- and didn't care how they got them, as long as they got what they wanted?

And, for the record, Cramer is a complete idiot.

Eurozone Divided By Banking Crisis

I'm of the opinion that the EU collapses before this is all over. There are too many divergent interests for this not to happen. The Euro was a great currency for beautiful days when the sun was shining, but now that the floods have come, I think the foundation will be washed away.

The Source of the Dollar's Recent Strength

My theory too. Nice simple explanation.

As U.S. Financial Markets Circle the Drain, What Happens to Clean Energy?

WTF seeking alpha. Go to www.climatescienceinte.../
and click on U OF ALASKA'S AKASOFU CONTESTS IPCC'S MOST IMPORTANT CONCLUSION.

As U.S. Financial Markets Circle the Drain, What Happens to Clean Energy?

I give up. The last part is: "/recovery_little_ice_...