Gyoza Mimi

Consumer Confidence Index Encourages an Economic Rebound

Consumer confidence index is nothing more than an aggregate of individual opinions. It has improved due to the 2-months-long rally. The reasons behind the rally is another subject altogether. So in this case it is simply a virtuous circle: a rally raises consumer confidence, which in turn leads to a rally, which boosts confidence even further, fueling another rally that bolsters consumer confidence. The question is whether it is sustainable without any real improvements in the economy.

Is Obama Selling Military Secrets to China for Debt Forgiveness?

$50 billion is a pocket change on the scale of today's spending. Other reasons aside, it will be a silly decision for political reasons alone, and the price will not cover the political damage caused by "exposing country to danger". A couple workers running print operations overtime for a week will do a better job adding those $50B, and with far less strategic and political risk. I have great doubts regarding the article's credibility.

On another subject, B2 is a great idea for post-WWII times. In modern days it is no more than a odd-looking and expensive aircraft, with no significant advantage over its peers. It is expensive to make, even costlier to maintain, horribly inefficient and detectable by any defense system newer than bows and arrows. For a long time it has not enjoyed benefits of invisibility - Russians, Chinese, Indians, Israeli and Europeans can see it on their radars. With a payload that is half of B52 it is really ineffective against modern armies. And for warfare against not so modern armies (like Taliban), you don't really need more than the proven B52 and A10s, as "war" in Iraq showed. B52 can carry double the payload and doesn't have to undergo the same preparations before each flight, being capable to clock far more round-trips within the same timeframe. At the price of less than 1/5th of that of B2, B52 is over 20 times more effective in delivering bombs than B2 is. Did I mention that B2 requires special maintenance to preserve the "stealth" properties of its surface so it cannot be deployed anywhere, but has to fly 1,000s of extra miles just to get to its home base?

Is the News Manipulated? Are the Numbers Managed? Are Hedge Funds Out of the Woods?

It is, perhaps, not a conspiracy, but rather a policy.

The news releases over the last two month come out in pairs: bad always followed by good, just minutes later. Good doesn't need to be significant - it can be dwarfed by the magnitude of the "bad" - but it has to exist. Just an example: more job lost than were expected. In an hour: Consumer confidence increased, which signals we are out of the woods!
Housing data is really bad. In an hour: But X is now expecting less-than-expected loss.

When there is absolutely nothing positive to report, bad news are typically followed by Tim, Ben, Obama or someone else doing a press-release, indicating that "the economy shows signs of improvement".

For the last month the market has shot up at the end of the day on bad news, good news, no news. Perhaps, there is no conspiracy, but certainly there is a lot of market manipulation.

Buy and Hold Is Alive and Well

Were Microsoft and Oracle part of S&P500 in 1989? What about other random companies, like GM, Chrysler?

Spiraling Federal Debt: It's Likely to Get Worse

Good article, but the math is off. 10% inflation for 10 years will raise prices 160%, not 100%.

Why Buy and Hold Is a Dreadful Mistake

Joseph,

Good read, as always.

Just a question about the capabilities of people to do proper researching and rebalancing. If you address the above article to the investors, I cannot agree more with it. However, if you are talking to the regular moms and paps who are saving for their retirement, is it reasonable to expect them to have a level of knowledge to perform this task? Sure they get cheated out of their money by "Investment Advisers" (a very peculiar group of people half of which don't seem to have a clue about anything beyond the field manual provided at the Canadian Securities Course). At the same time, what information do they have on hands to make an educated investment decision? By their trade or lifestyle, many have no interest nor time to read 10s of articles a day. Many simply have no abilities or sufficient knowledge to put all the pieces together even if they had access to the crystal-clear information. Hence the advisers and mutual funds. So I am reluctant to call them "lazy" - for many investment in a mediocre mutual fund promoted on the cover page of a free newspaper is still a better bet than investing on their own.

Chrysler's Response to Indiana Pension Funds

Chrysler places way too many bets on everyone having a very short memory.
It screwed up its creditors (surely investors will line up in 30 days to flood Chrysler with money)
It badly screwed up its distribution network by asking the dealers to take on excessive inventory to help saving the company, and then sending them separation letters without reimbursing or taking back the inventory it asked dealers to beefed up
It decided not to pay suppliers, while requesting them to "share the risk" by providing parts on a credit
And finally, it screwed up everyone who bought Chrysler by terminating warranty, bouncing lemon cheques (yeah, we know that Chryslers never break, right) and basically treating customers just as well as the dealers (just buy a Chrysler, then we will surprise you)

Those who sat on the sidelines are clearly not motivated to pick up a spanking-new Chrysler, even after it emerges from the bankruptcy. Losing potential customers, alienating existing clients, destroying distribution network, cheating investors, suppliers and dealers - that's not the best way to start a prosperous business anew. At this point, I am starting to believe that it could be better if it just died. Having had 5 generations of Chrysler minivans, I have no intentions of buying another vehicle from Chrysler

Canada's Financial System: How Is It Still Stable in This Crisis?

A very good summary of the key points. Thanks.

The true strength of any system is best shown when it is under stress. During the bubble times of 2003-2007 there were a lot of talk about the Canadian banks being hindered by stricter rules and regulations. In late 2007 everyone started to agree that it wasn't such a bad thing after all. I hear a lot less talk about de-regulating the Canadian banking system now.

The Next Bull Market Is 4-8 Months Away

Two comments on your observations:
1. 300-day velocity would take 4-8 months before it crosses zero if it doesn't encounter the double-deep as it did in 2002-2003. If it shoots straight up, it might cross the zero-line in 4-8 months. However, if it will follow by another deep or a flat, it can stay under water for another year-year and a half.
2. Same thing for the 500-day RSX. If the current slower rate of descend is indeed the bottom, then yes, it is a good buying opportunity. If the pattern repeats that of Dot.com, then we are approaching early 2002 levels, and 2003 is way ahead of us.

Such charts work way better in hindsight.

Current Rally: Are We in May 2003 or May 2008?

Thanks for refreshing my memory on the "Anchoring phenomenon". While it is trivial, it is often forgotten by many.

Earnings Revisions Turning Positive

It appears that the revision started heading solidly north from November 2008 onwards. Yet, Q1 turned out to be much worse than most analyst would have anticipated in November. How reliable the revision data is? Seems like a toss of a coin...

Goldman Expects Large Drop in Rents; REITS Will Be Affected

I think the worst case scenario has been factored in many REIT prices already. Back in March, it wasn't uncommon for REIT to trade with P/B ratios of .3-.5 and dividend yields of 15-25%. Now the situation recovered a little, but many REITs are still undervalued.

The situation with REIT is amplified by the fear spawned by the lack of information (or desire to dig deeper): no one knows which REIT is going to fold. Yet, some of them have enough liquidity to survive past 2011 (that is if the economy doesn't improve), and for some of them the management prepaid interest charges for a couple of years ahead. Given the recent run up, BDN from below $3 to $7 now and AIV from under $4 to $9, a healthy pull-back is expected. However, I doubt we will touch the March lows again.

The Mysterious Case of the Vanishing Bull Volume

Well, the capital for The Ten have to be raised somehow.

What Were the People of California Thinking?

Makes me remember Alexander Tyler (written in 1787):

"A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship."

A Non-Chartist Charts the Coming Summer Decline

Joseph,

Just a speculation on my side, but recovery has to start with the weakest, preferably those who caused the mess to begin with. To prop the weakest, all needs to happen is for the Wall Street to raise some money, not through issuing debt, of course. How you can raise money, if everyone scared to buy, especially shares of those who are clearly insolvent? Who in a right mind would buy a load of diluted crap called new GS issue? Only if you know that you are in the middle of the new bull market and these worthless $127 shares will appreciate no matter what. So the government and the Wall street and all other interested parties trumpet recovery while selling loads of crap they valued in billions to the general public. The question is whether the pump scheme will follow by a dump or things will really get better because thing will enter the virtuous circle.