Drew Horn

The Twenty Year Stock Bubble Is Still Inflated

Interesting discussion that attempts to find correlations between past market data and prospects for the future.

Two key points haven't had much emphasis:

1) Globalization has been creeping along and, over the time frame of the analysis, added to both sales and profit, and accounts for some of the bubble effect. This has had a major, yet unexplained, effect on market caps and makes time comparisons less meaningful.
2) Changes in profits have been, and will continue to be "increasingly" impacted by more efficiency (marketing, technology & infrastructure) and that makes historical comparisons less useful.

It would be interesting to have someone write an algorithm that adds these and perhaps other variables to learn how they might influence the future.

Wall Street Breakfast: Must-Know News

You are right, but those you complain about all belong to the same club, hire and help each other, play golf and tennis in Greenwich, CT., and they own the only game in town. Like Major league baseball and the NFL, finance is an oligopoly legalized by congress, and licensed by various federal and state political appointees. In short, complaining will do nothing to change the "system". What we need is a good constitutional lawyer to find a way to break up the game so it is no longer "too big to fail". Without a game changer like that, --- play the game, its the only one in town.


On Sep 17 10:25 AM notsosmart wrote:

> i have said it for years & luckily figured it out for myself..wall
> st is a ponzi/casino.it will continue to be that as the crooks &
> scoundrels pay off congress to make sure no strong regs are passed.
> the pres is busy with health.something he should have left alone
> for now.the rating agencies should be ignored by all in hope they
> will go away.made-off is a piker compared to those who should be
> in jail with him.unless you are an insider the best you can hope
> for is a few crumbs from investing(does this word still apply?) or
> gambling.lying ceos,self serving boards,crooked accounting,lack of
> ethics,no transparency insure that all the homework you do could
> be wrong.buy good cos that pay a fair div & join their drip plan.its
> the only way to win a few crumbs.wall st greed is killing capitalism.sad.

Wall Street Breakfast: Must-Know News

Yeah, "culture of corruption" my left foot! Judges who make sentencing decision's based on "culture" probably got their jobs as a result of a "culture of political corruption". This precedent probably means that Representative Jefferson who was caught with $90 K in cash in his freezer (you cant call that hot money :-) should be sentenced to two weeks in Disney Land.

Financial flim flam artists will continue to ply their trade until some are sentenced to their rightful occupations -- cleaning our sewers or redesigning / reform of bank regulations, both subject they are very familiar with.

Wall Street Breakfast: Must-Know News

I agree, the Swiss approach is useful but it will never be imposed on the US financial industry for two reasons: 1) the banks and insurance industry "own" congress and 2) Geithner, Sommers, ET AL know they have temporary jobs and may already be maneuvering for a financial CEO job even before Obama' leaves office.

The real "systemic risk" is that the political system is responsive only to money which has proven to be fully capable of buying almost any election result. Eisenhower warned about the military / industrial complex. There should be a new warning about the Madison Ave / Washington Lobbyists complex. So long as the first amendment is held to mean that money = free speech, government and our economy will be in the hands of the banks.

Wall Street Breakfast: Must-Know News

The Obama crowd have adroitly skipped over the "too big to fail" issue. As long as capital reserve accounting standards remain the same and it is up to the banks to determine asset value, they will overvalue them to increase their real return on investment.

The old trick of moving auditors around till they are too confused to think straight has morphed into creating organizations that are so complex auditors/ regulators have no chance of truly understanding the firms they examine. The proposed changes in regulation are half measures designed to look like they are tough but allow the firms that are "too big to fail" to get bigger. If anything, the proposed change sets up the business cycle for greater peaks and valleys and eventual collapse.

Too bad, this is a missed opportunity to bring honesty and discipline to financial markets. But on the plus side, people like Paulson & Geithner, et al, have made a lot of Wall St friends and have the prospect of great jobs when they leave us with the mess they created.

Wall Street Breakfast: Must-Know News

You must admit, the whole thing gets to be more complex and interesting daily. It reminds me of the fellow on a street corner with a pea and walnut shells. He shows you exactly what he is doing, you understand it because what you see reinforces his claims, but ----- do you really see? Do you think you know? Do his actions move faster than your mind can comprehend?

Banks "too big to fail" take billions one day and give them back the next. Insurance companies (too big to fail) sell policies but have little or no reserves to pay claims but continue to sell "insurance". Mortgage borrowers & lenders commit fraud and tip the worlds economy into panic, and are then encouraged to use a future unearned tax credit for a down payment on the next house and mortgage.

The most interesting thing about this street corner game is that the fellow with the shells and pea is the president of the United States. And the people continue to watch and play his game!

Wall Street Breakfast: Must-Know News

You must admit, the whole thing gets to be more complex and interesting daily. It reminds me of the fellow on a street corner with a pea and walnut shells. He shows you exactly what he is doing, you understand it because what you see reinforces his claims, but ----- do you really see? Do you think you know? Do his actions move faster than your mind can comprehend?

Banks "too big to fail" take billions one day and give them back the next. Insurance companies (too big to fail) sell policies but have little or no reserves to pay claims but continue to sell "insurance". Mortgage borrowers & lenders commit fraud and tip the worlds economy into panic, and are then encouraged to use a future unearned tax credit for a down payment on the next house and mortgage.

The most interesting thing about this street corner game is that the fellow with the shells and pea is the president of the United States. And the people continue to watch and play his game!

Wall Street Breakfast: Must-Know News

You must admit, the whole thing gets to be more complex and interesting daily. It reminds me of the fellow on a street corner with a pea and walnut shells. He shows you exactly what he is doing, you understand it because what you see reinforces his claims, but ----- do you really see? Do you think you know? Do his actions move faster than your mind can comprehend?

Banks "too big to fail" take billions one day and give them back the next. Insurance companies (too big to fail) sell policies but have little or no reserves to pay claims but continue to sell "insurance". Mortgage borrowers & lenders commit fraud and tip the worlds economy into panic, and are then encouraged to use a future unearned tax credit for a down payment on the next house and mortgage.

The most interesting thing about this street corner game is that the fellow with the shells and pea is the president of the United States. And the people continue to watch and play his game!

Wall Street Breakfast: Must-Know News

The most troubling part of today's Must Know News is the description of how government continues to enable Americans to borrow money many of them will not be able to repay. This isn't new. Its a continuation of US government policies that have, and will again, result in taxpayers paying mortgages of others who don't earn enough to own a home. Its being done at the same time we are paying for the mortgage abuses that contributed to the current recession. It seems that the United States Government is out of control and each branch simply reacts to the lobby with a special interest agenda and the biggest political contribution. This is one more example of why our country is in trouble.

Wall Street Breakfast: Must-Know News

The Taylor rule seems to be that we have to bribe people to borrow and spend money they don't have and are unlikely to be able to repay. This seems to have a familiar ring to it, a bit like the hedonistic attitude that brought us this "crisis".

I wonder if the Fed will be getting legislative powers. If so, they may try to repeal the "business cycle" and institute a new policy --- eliminate capitalism.

Wall Street Breakfast: Must-Know News

Longing for clarity and focus, hoping for common sense, it seems there is no consensus and a leadership vacuum . Obama wants to dump the next two generations of Americas resources into the stew-pot, the EU only wants to stir the stew, the World Bank and IMF seem irrelevant, Japan seems impotent, China may be holding on to assets to tide it over until the next up cycle.

All eyes will be on the G20 meeting and most will assume that the USA will continue to bail out the world. "After you Alfonse"!

Wall Street Breakfast: Must-Know News

Shaggieman, thanks for the positive comment.

Looking at the history of the US, we started exploiting natural resources followed by efficient manufacturing + building the potential of average people ( free libraries, land grant colleges, etc.) to contribute. In the last 70 years we developed computers that give us the potential to solve problems previously insoluble. Its time to move beyond the concepts that started in the 19Th century (automobiles) by using our technical skills and our ability to manage risks (government seed money + venture capital).

If we believe our own rhetoric, there is no other useful option!


On Mar 26 12:43 PM Shaggieman wrote:

> Drew you hit on something there. I think if the government fibers-up
> every house in America (where it makes sense to do) then a lot of
> trips become unnecessary. I believe the new Obama package has some
> money in there for that purpose.

Wall Street Breakfast: Must-Know News

Trying to "fix" car companies isn't likely to solve the basic problems of the transportation industry and will only put a temporary prop under companies that have long lost the sense of imagination and creativity that was their foundation. We would be better served if tax resources were given to a consortium of creative thinkers (Stanford, MIT, RPI and the like) with the assignment of fundamentally changing the basic approach to moving from place to place. Helping GM without addressing the failings of our current transportation paradigm is like putting money into newspapers. We all know they will and must change but the direction isn't clear. GM & Chrysler operate the equivalent of obsolete printing presses. We need to focus on the "Internet" of transportation!

Wall Street Breakfast: Must-Know News

Surgeon, your idea for a Greenspan dart board is fantastic! Add others for Geithner, Bernanke, etc. and you have a new way to vent frustration.

However, you didn't mention the point scoring system. Perhaps it should be that the outer ring gets us nationalized banks, the inner ring, a rethink and a bulls eye gets a replacement. We can play our own games.With such a great game, who needs a shrink?

Wall Street Breakfast: Must-Know News

It will be interesting to watch congress as it reacts to Obama's house bail out proposal. There are few details at this time but the standards for honesty in applications will be minimal, and the speculators who gamed the system in the past will do so again. It is a gift to the scam artists from conservative US savers.

The house bail-out will serve to continue the price bubble thus making owners feel a little better about their own balance sheets. But the down direction of world economics will continue for at least two years and low future consumer confidence and spending (per capita)may not rebound any time soon.

The hard to predict variable is the influence of "technology". If a confluence of a drive to more efficiency in our lives, environmental pollution control, and longer term investment amortization happens, a new renaissance might be in the foreseeable future.