Manifestor

One Chart, Two Stories

This graph is too narrowly focused and doesn't give an idea how far it could fall or how significant the overall fall this week was. It is important to see this graph in a broader context of the March lows and last year highs.

Are We Due for Another Surge of Bad News in Labor Market?

GM, Chrysler bankruptcy doesn't necessarily have to result in big job losses, certainly not in millions as some earlier 'commentor' wrote. Bankruptcy proceeding will be more oriented towards financial dealings with bond holders, creditors, reduction in retirement benefits etc.

The Politics of Personality: Getting Geithner

I think Paulson was one of the key facilitators of this financial crisis. He was always on the defensive, rarely had any original idea to deal with the crisis and appeared overly obsessed with China.

Ken Lewis Continues to Claim that BofA Will Not Need Additional Capital

Thanks for publishing the interview details as well. That provides an adequate counter to the initial diatribe by the author and made the blog worth reading!

Buy Before Earnings Season

I think what MHFT is saying is that the extreme pessimism (S&P down to 666 and then to 400) is a contrarian indicator.

Accounting Rule Changes Creating False Rally in Financials

It is the unintended consequences of M2M that hurt the market. The second order effect that caused an adverse feedback loop (in a down market) made the market go awry. The suspension of the uptick rule that came into effect at the same time just added salt to the injury. The problem happened so quickly that it did not give any time for the banks to deal with the downward spiral in asset price markdown.

Having said that, if market is poised to move up, the second order effect of the M2M can provide a positive feedback loop this time:-) Perhaps they should leave it alone or fake tuning it to give market the kick.

Don't Watch CNBC

All I can say is they did it again. I still remember the hypes during the NASDAQ bubble days when the CNBC brought in all those analysts who started pricing companies on the basis of Price/Sales multiples even if the companies were incurring huge losses and projected 12 month target ranges of well over 1000$. At that time some of their most ardent viewers were the day-trading home moms!

The thing I hate most in CNBC are the big noises created when new charts are brought on to the screen. Very annoying.

Bloomberg TV is less entertaining but a bit more factual and less pushy about investment ideas. That is were I stay parked.

In Defense of CNBC (Sort Of)

All I can say is they did it again. I still remember the hypes during the NASDAQ bubble days when the CNBC brought in all those analysts who started pricing companies on the basis of Price/Sales multiples even if the companies were incurring huge losses and projected 12 month target ranges of well over 1000$. At that time some of their most ardent viewers were the day-trading home moms!

The thing I hate most in CNBC are the big noises created when new charts are brought on to the screen. Very annoying.
Bloomberg TV is less entertaining but a bit more factual and less pushy about investment ideas. That is were I stay parked.

It's a Winter Warming Spell - But More Snow Ahead for Markets

While your 13 reasons are compelling, the argument is not complete until you also discuss the potential reasons for a pull out of the bear market and argue why they may not succeed. Here are a few potential reasons for a bigger upside potential:
1. Stimulus package and unemployment benefits might just create enough oomph to enhance consumer confidence and in return spending.
2. Attempts to bring and keep mortgage rates down to <5% that can stimulate significant refinance activity.
3. Stimulus packages and welfare spending in other countries starting to create a more robust domestic economy there. China plans to spend big time (in the near future) on their local rural/migratory populations on health care, education, retraining and retirement benefits. This is over and above their $587B stimulus package. Indian market is starting to look up due to the election and because the market is way oversold. Australia, Japan, Saudi Arabia and others have their own stimulus and welfare spending plans already in action.
4. M&A activities could start to perk up as strong companies decide not to wait much longer lest they loose good buying opportunities. I wont be surprised if many companies don't already have a list to work off of when the time is right.
5. Bad asset mop-up might just become successful thanks to market upswing, mark-to-market discussion and private bank interest in grabbing a good deal with treasury backing.
6. TALF program
7. Census program (additional employment)
8. Unlikely as it may be, there may be no more news big enough to wake up the shorts. Especially if the uptick rule is reinstated.
9. Retirees, contrary to conventional wisdom, may decide to take risks and jump into stock market to revive and save their retirement. That is their only chance.
10. Last but not least, weather and consumer confidence. Even the small four-day rally has made people to sit up and even splurge on small low cost luxuries. Even I decided to buy one out of the umpteen items I had so far put off buying. I even sent a small amount to a charity! They could provide just the needed push to move the indices beyond various resistance levels. They are such key motivators :-)

My 2 cents.

How the Crash Will Reshape America

The common thread in all these is the propensity for bubbles to form due to greed, mass adoption and irrational exuberance. Recent bubbles have been in Internet stock valuations (burst in year 2000), housing valuations (2006-7), oil (burst in mid 2008), material and commodities (mid 2008), financial services (late 2008), even inflation bubble (burst in early to mid 1980s), terrorism and outsourcing bubbles (still not burst! ).

The problem with these bubbles is that over time they make one group significantly more powerful than the other and depletes the strength, defenses and vitality of the victim group so much that the victim eventually revolts and the bubble has to be burst, causing serious damage to the structure of the society.

For continued prosperity, we need a way to detect these bubbles when they are still small and keep them from becoming a problem for the society. Call it more regulation or socialism or a Big Brother watching, either way, it is needed to keep a check on the greed.

But then as a natural extension, who will burst the bubble in Regulation or Socialism that is sure to form over time:-) In short, looks like bubbles can be slowed or delayed but cannot be avoided.

Three Reasons the Stimulus Will Fail

Contrarian View:

1. China, Japan and Europe need America's revival as much as, if not more than America does and so will support the debt without batting an eyelid.

2. Just the fact that in the next year to 18 months, there will be over $2T of stimulus money from various nations of the world to be spent on a variety of projects and tax cuts will raise business confidence. This in turn will over time improve consumer confidence.

3. Thirdly, the world knows that without stimulus intervention the world economy engine will just not start. So appetite for accepting debt however unpalatable it may be has to happen.

It is now well understood that tax cuts and trickle down are a poor and inefficient mechanism for stimulating an economy. They are a help (may be) when the economy is stagnating or sputtering, but not when an economy is really moribund as it is now or when the business and consumer confidence are this abysmally low.

Don't Expect Immediate Gratification from Markets

The opposing view: Pretty impressive double bottom forming on the SPX!

Why a Spending Bill Just Won't Cut It

The logic in this article is naivety at its best. Perhaps exemplifies the tax cut /trickle down camps' thinking at its core. Their teachings,
- Tax cuts with fractional/marginal trickle down benefits,
- Total dependence on private businesses to support the social fabric of the country (what an oxymoron!),
- myopic planning (exemplified by quarterly earnings)
- expecting everything to be done by states (why our water grids, electricity grids, scientific research are lagging so far behind),
- utter disregard for non-business/non-finan... rewards that result in treating people with liberal and fine arts backgrounds as second rate citizens

has what has brought us to this pathetic state of affairs. Time to try something new.

Is the Obama Plan Creating Unfounded Market Optimism?

>Since that will not happen any time soon, .....

Depends on what's your time frame for a 'soon'? Note, employment is a lagging indicator and may take more time, but the stock market, IMO, could settle at a 10-15% higher level from here (ie. S&P > 1000) in the next three months.

Is the Obama Plan Creating Unfounded Market Optimism?

The family balance sheet will look up when the stock market goes up and the house price stabilizes. True the country's debt situation is dire but that could change very quickly if the employment and stock market improves. Even the various bailout dollars lent out will return with interest! One should also consider the following:
1. Mortgage rates are on a down trend. Refinance will help the balance sheet.
2. Housing prices have come down significantly but there is hope that it is bottoming (except may be in some specific neighborhoods).
3. Credit crunch seems to be easing (small businesses can look up).
4. Inflation has come down.
5. Many world economies are implementing big spending plans
6. Season retail sales looking up
7. Finance sector stocks are starting to look up. It is a proxy for the stock market.
8. Don't hear of any more major bank/finance company failures - at least for the time being.
9. The current payroll statistics might be the result of response to stock market downward spiral. The labor market statistics are a lagging indicator.
10. Layoffs increase need for more productivity tools (computers and other automation stuff).
11. Many big and essential companies and banks are now awash with cash
12. Country is saving a bunch due to fallen oil prices
13. The stimulus plan money is only needed in phases over a two year period
14. Will be interesting to see how the labor market behaves if the S&P goes up another 10 -15% from here.

The two areas that bother me still are health care (especially for those who are laid-off) and acquiring new skills for a new job. Hopefully the stimulus plan will address these in some form.

Above all, most in the country (except for you shorts and ideologists ) want the country and the stock market to look up!