TheEconomyKilledKenny

Jeremy Grantham: Collapse is Over, But Monumental Challenges Remain

I have been reading Mr. Grantham's quarterly letters since I graduated from undergrad back in '07. Him and his letters played a huge part in why I became interested in finance and economics and how I chose the career path that I did.

That aside (please excuse the background talk) - everyone's comments on this page are extremely insightful, well-written, and in some ways reflect my own thoughts. I remember being chewed out back in 2007 by a fund manager at a gym in Boston for a comment that I had made alluding to the markets as a magic carpet ride that was about to have the air pulled out from underneath it.

I still feel the same way about this current "bear market rally." However, as some have pointed out, the rally is ignoring market fundamentals, particularly short-term - we see the same in the energy markets on a consistent week in week out basis. Irrational exuberance does come to mind. I also wholeheartedly agree with Ricard's post.

One major auto company declare bankruptcy and a second one inevitably on the way. The commercial real-estate shoe is starting to drop - seeing more companies simply hand over their assets to the banks. Jobs are still being cut left and right, but hey it's not as bad as the market guestimated! The banks are not increasing lending - if anything they continue to tighten their terms (I speak from recent personal experience). Some other quick points: an overwhelming amount of my former classmates and friends that graduated in the years following have not been able to find professional work. I also recently went down to my town hall and found out that tax liens have grown exponentially and since they take precedence to mortgages, banks have been trying to buy out the liens so they can foreclose on the properties.

My final point and question - and I posed this to a coworker the other day. What if it is in the country and the economy's best interest to ignore the obviously deteriorating fundamental picture? Almost similar to a red pill vs. blue pill situation. Do people really want to see how deep the rabbit hole goes and live in the "real world" of a potentially high double digit unemployment, the attainability of the American Dream ending, and potentially hazardous social chaos and unrest?

Or do we take the other pill and continue to live in an air-inflated dream and tell ourselves everything is alright? Ignore the fundamentals and let the market move sideways for the next 10 years in a tight range becoming our own lost decade.

Excuse the questions if thought naive.

Why Gencor Industries Hit the Asphalt

I just found this article when I did a search for asphalt... Should have set a target price to $5? ;)

Good call either way - you were on to something.

CDS: The Less You Know, the Worse They Look

Jadziasman and Levner hit the nail right on the hammer. Zero sum is thrown right out the window once the defaults get rolling.

While Felix may not be writing accurate articles as of late, the discussions following tend to shed some more light on the issues.

Did Buffett Kill the (First) Wells Fargo-Wachovia Deal?

errr deal finalized today?

Just sayin'

The Deal's Getting Done, But Will It Work?

So much for the deal getting done?

Banks on the Verge of a Nervous Breakdown

Forgive me, but I can't stop laughing - highly entertaining.

America Buys AIG

@gabe borenstein - I actually (surprisingly) agree with a lot of your sentiment and am hopeful that what you are proposing would happen yet am still doubtful. However, what you are saying is purely dependent on an economic turnaround more specifically in regards to the ongoing credit crisis and the bursting of the housing bubble. Ergo the likelihood of a sudden reversal of this is highly unlikely and all the credit default swaps will continue to unwind in value.

Just a few personal observations and thoughts (bash away):

I'm really disappointed at how blindly focused our concept of maximizing shareholders wealth has become increasingly focused on the short term and completely thrown out the possibility of long term or the lack of thought put into long term consequences.

This AIG rescue is two fold move by the Fed. 1) To patch up a leak in a massive dam (as they did with Bear Sterns, FNM, FRE). 2) They're getting what they've always wanted - more and more control over the financial system. They're gambling heavily though and again only time will tell what will happen.

Miles To Go Before a Bottom

Why are you sorry? For being a realist and refusing to continue to feed lies and deception into the system? People should have paid more heed to people like Jeremy Grantham of GMO, yourself, and others. Rather than accepting an idea such as self-accountability or in the case of these executives - corporate accountability people would rather stick their heads in the sand and then only peek out to externalize and rationalize their problems by pinning on people such as yourself as you say with profanity laced threats.

Welcome to the 1984 ladies and gentlemen.

Is Wachovia the Worst Run Bank in America?

Wachovia Bank - Next weekend's news?

BofA, Lehman, AIG: The New Financial Realities

Fellas, this is supposed to be a somewhat professional site where we can discuss various topics without yahoo-ite like comments. Keep it civil please.

@Lookingin: Depends which unemployment data reading you're referring to. The government always takes the lowest (U3 I think?) which is at about 6% right now... if you take the U6 say hypothetically today (hopefully I'm not getting my U's mixed up) I'd say after the coming weeks we'll be pretty darn close to your 20%.

Debating the Lehman Collapse

great post gramps2 - btw Barclay's has pulled out of the talks is what I'm reading on the wire... narrows it down to Bank of America and a far few others.

Let Lehman Fail

We are unbelievably screwed. In so many ways. This goes beyond the normal perma-bearish gloom and doom sentiment being spread. I'm a diehard republican and I nearly fell out of my chair when I heard Sarah Palin's take on Fannie and Freddie. God help us if the worst happens and that woman becomes the head of this country - it took her 4+ years and 5 different colleges to get a BA in Journalism.

2009 is when things turn around? Swallow some red pills - the rabbit hole's going to get a whole lot deeper before you find the bottom.

I agree with syndicat on his/her take. AIG will be broken up, WAMU will be taken over, Lehman should fail - it needs to. And Merrill appears to be next. It might not be over after that - Citi is still struggling and cutting costs faster than a boiler room firm burning its books; JPMorgan is shaky and has acquired Bear Stern's problems. Wachovia - who knows. It goes beyond the mortgage/credit catalyst - there are so many compounding problems... the short-sellers are definitely helping drive this over-packed clown car of investment banks et. al. straight into the ravine as well.

Look - Everyone here has their own opinion and I am nowhere nearly educated as many of you are being fresh out of school & working in entry level finance. Regardless, my ex-classmates and I are alarmed at the predicament we find ourselves in having just graduated.

Potash One Will Be Top Performer in Agriculture Bull Market

Great article - I've been reading through the 70 page report from CIBC this morning on the commute in. Missed on some key potential opportunities/threats in the analysis - but great information nonetheless.

Alpine - you bring up an interesing point. A light should have gone off as soon as you wrote that (well it did for me anyways). Cheers.

Looming Financial Catastrophe: A Real Inconvenient Truth

Wonder how many people have read Jeremy Grantham's Quarterly Letters on a regular basis - guy has been dead on and his bearish logic has some striking similarities with what Jim has written here.

U.K. Mortgage Delinquencies at Record High

Jeremy Grantham of GMO did mention in his 2008 1Q letter that he was short on UK Housing/Financials... thanks for sharing this information.