tsinvest

Richard Russell: Downturn Will Be 'Vicious'

Richard has been around a long time and seen and experienced a lot more than many of us. As unbelievable as it may seem, retesting the lows is a very real possibility that we may not agree with until it happens. How many times in the past ten years has the market made a spectacular move (up or down) for us to say only afterwards that we would have never guessed that would have happened until it actually happened. I know for now it seems like we are coming out of a very bad recession. I am one that still feels this is much more than a very bad recession that will surprise us yet again and again. For now things seem calm, but a lot has happened and hundreds of billions of dollars have been thrown at this problem, which in and of itself creates more problems. Plus, the demographics this time around are very different than 10 years ago. The boomers entering their retirement years will create a drag on spending, which is what helped fuel the 90's. In summation I would say we have an even chance of experiencing what Russell is suggesting or perhaps close to what he is suggesting. I guess we won't know it (or believe it) until it actually happens.

Past the Economy's Inflection Point?

I would love to believe Scott is correct in his analysis, however chances are we have much more pain to come. Two huge distressed areas that are just starting to make the headlines are the state and municipal governments. It is pretty sad when the states are setting $ quotas for the state troopers on total tickets they write. Take a look at the amount of cars pulled over and flashing lights behind them. On an hour ride the other day I must have seen 6 such incidents.

Remember, the underlying assets in all of our 401ks are down and we have to adjust to this new reality. On the other hand even though the underlying assets in federal, state, and local pension funds are down the public officials don't have to adjust. Why? - because even though most of our retirements have been decimated we are going to take from the less money we have to give to these public officials so that their retirements remain in tack.

Something is wrong with this picture - we have less than before but we are going to be taxed more so that those with pensions don't have to feel the pain. This is especially troublesome in states, as New Jersey, where the pension funds are so underfunded to begin with. I really think pension payments need to be adjusted down or tied to the performance of their underlying assets.

In summary, I think this is an area that is going to quickly come into play and will further perpetuate our failing economy.

The Selloff in Preferred Stocks May Be Overdone

My brain tells me you are absolutely correct and that I should be backing up the truck and loading up on PFF. My gut tells me PFF, as most other securities, is trading on emotions at the moment - more fear, less greed. Nevertheless, I think buying and holding PFF will prove a wise decision a year or two out. If you bought it and fell asleep for two years then awakened, you would probably be very happy with the results.

Does Geithner Know What He's Going to Do?

Good observations. I don't have a good feeling about his ability myself. As one of the senators mentioned, Geithner was in on many of the bailouts and look how they are going - not too well. As for his taxes, it almost appears he was letting the statute of limitations run out instead of paying. Then when he got the nomination he paid right away - nothing fishy here?

One thing for certain though, the committee's general willingness to overlook most of this and rush to confirm him is another sign of how bad things really are out there.

Bank Investors Beware, Shareholder Interests Are Secondary

You make some very good points Alan. The Government and many of those in high positions could be sued for non disclosure of material facts were they private individuals. It is next to impossible to intelligently invest in this type of environment. Someone wrote recently that the common equity in many banks is actually worthless - I am beginning to believe that is the case in many instances. I know the economy needs some government assistance, but it also needs to back off in some instances and let some institutions and large companies fail so that the better run and more honest (relatively speaking) firms can grow stronger. This would ultimately strengthen the economy and help to get things back on track. Good article!

A New Bull Market Is Born

Somehow I don't think so. No, no bull market here. Forget the 20% up - as someone else said, "this is not your father's recession". We have got a ways to go.

Last Thursday Was the Bottom - It's Time to Get Back in

Your response, in my opinion, is right on. This is a very different recession/situation than we have had in the past. When did we ever see the U.S. Treasury throwing money at so many businesses (and the public) all at the same time. And, for that matter, when have we ever seen practically the entire world doing the same thing. We have a financial system that is teetering on the brink of collapse. Indeed these are very different times.

I find it quite unbelievable that anyone could say (at this point during this mess) that we have seen the bottom and it's time to buy. Good luck!

Personally I think we will be in a trading market for some time to come. There has been too much damage done in this economy to think it's "up, up and away" for a few years from this point in time.
On Nov 28 09:48 AM You're Kidding wrote:

> I think you are dreaming. The worldwide macro economic situation
> is absolutely horrible and getting worse all the time. Have housing
> prices stabilized? Hardly. Has the derivatives market leverage unwound
> yet? Its hardly gotten started. Are the unemployment, bankruptcy,
> and bank failure rates going down now? They've just started going
> up. Do the people in charge of fixing things know what they are doing?
> Ya think?
>
> And you are saying that all these things are probably going to turn
> around in the next 6 mo?
>
> Just because the world's governments are throwing money around and
> the market bounces up a little, doesn't mean anything except that
> there are a lot of impatient investors who really, really, really
> want to make some money right now. So what else is new?
>
> This isn't a normal recession we're heading into, and it cannot be
> realistically compared to any of the recent recessions. This one
> is very different and the bottom is nowhere in sight.

This Market Is One of Opportunity

11 P/E could rise if earnings drop over the next few months. As a result, stock prices would have to drop to give us an 11 P/E Market Opportunity again. I guess my point is P/E's move - they are not static.