Kevin Walmsley

Why Merrill Lynch Is Bullish on 2010: Foreseeing a Burst of the Pessimism Bubble

Sounds like a great analysis. In fact, I think I'll buy Merrill Lynch stock.

What's the ticker again? Wasn't it ML?

Recession Ends for Summers: Anyone Else?

A sobering review. In my 4Q calls to clients, almost all of whom are business owners, I learned that not a single one of them made more money this year than last. Almost all were down by double-digit percentages; a handful were hoping to be right where they finished 2008, but would need to have strong holiday sales. As you might expect, none of them expect to do any hiring anytime soon, and none of us have any idea what the tax regime is going to look like moving forward.
Larry Summers' certainty and confidence is refreshing. I hope it's based on actual data, and that it turns out that he was prescient. The cynic in me, though, wonders if he knows anyone outside of Wall Street and Washington. There, I understand, things are pretty good.

Is Another October Surprise in the Works?

October tends to be a violent month--going back centuries--because it's harvest time. Crops are brought to market, resulting in wildly fluctuating commodities prices. Loans are paid off, monies reinvested, and huge sums of money change hands. What's more, the entire agrarian economy would shut down pending Spring.

Monday Options Recap

We took down a small covered call position in DRYS this afternoon, selling the June 7.5 calls.

New Jersey's Pension Crisis: A Canary in the Coal Mine?

Two choices: use money kited from the Chinese to pump into these public pension carcasses, resulting in severe inflation years down the road, or reduce benefit payments.

Either way, people are going to be working longer than they had planned. In the first case because their benefits in inflation-adjusted dollars don't go nearly as far, in the second because their benefits are slashed. And considering that Social Security and pension indexing haven't come anywhere close to increases in longevity, that's a good thing. You shouldn't be able to retire at 55 on my nickel anyhow.

Options Trader Monday Outlook: Global Pandemic Edition

Great point on General Motors.

The market has rallied strongly over past weeks on news that the banks are now able to lie about their financial position, with the blessing of regulators and the accounting community. Now GM surges on news that the common shareholder will experience massive dilution, courtesy of secret meetings between General Motors' management, union representatives, and the Treasury Department.

It's time to start using the term "irrational exuberance" again. Or, "certifiably insane exuberance". Maybe.

Put-Writing: Too Often Overlooked

Smarty, why not buy to close?
If you're finicky about commissions, that would be understandable. But I trade my clients' accounts in managed (fee-based) accounts, with no ticket charges. So I would just close the position out and lock in a gain. Just me.
Good job on EXM.

A Bull Is Born, 2009

More like stillborn. Every single economic datum is deteriorating. EVERY SINGLE ONE.

Yes, you're right--the stock market typically leads upward before the economy does. But for that to happen, the market has to become cheap. It isn't. Even with the most optimistic crack-dream-induced forward earnings forecast, the market is trading at 14 times. That's not even slightly inexpensive, let alone cheap.

Sorry, but this is a sucker's rally. It might last another couple of weeks. After all, we can expect Barack Obama and his miracle workers to get nothing less than fawning media coverage, through the first week or so after the inauguration. Then the blinders come off again.

Credit Started This Recession; It Will Also Help End It

Shoot. My apologies to Smarty Pants, who already used the junkie analogy. And did a better job besides, I may add.
Sorry.

Credit Started This Recession; It Will Also Help End It

It's a good thing this crew of geniuses wasn't around to combat the dot-com collapse. We would have thrown hundreds of billions of taxpayer dollars at Global Crossing, Enron, and Dr. Koop.com. The end would have been the same, but the tab would be paid over the course of the next hundred years, rather than in 2002 and 2003.

Credit Started This Recession; It Will Also Help End It

You can't borrow your way out of debt, and instead of asking the question, "what should the government be doing to loosen up an economy that simply refuses to lend or borrow any more", perhaps they should ask something else. "What do hundreds of millions of individuals, tens of millions of households, millions of firms, and tens of thousands of banks know, that the government doesn't?"

The credit cycle is ending, that's what. And sometimes it's better to let a junkie go through a period of withdrawal, painful but (hopefully) brief, rather than keep up the addiction another day.

Dennis Gartman: Go Long Infrastructure, Short Everything Else

Yup. Great post, game over. Even a profligate government run by liberal Democrats can't borrow and spend fast enough to make up for the annihilation of private sector investment.

Gartman is half right: go to the headline and excise the words "go long infrastructure" and "else", and you've got the only winning strategy for 2009.


On Dec 28 09:13 AM prudentinvestor wrote:

> I doubt that the steel demand for all the new bridges and tunnels
> will make up for the decline in demand due to fewer new petrochemical
> facilities, power plants, mining projects, industrual buildings,
> office buildings, malls, casinos, cruise ships, cars, trucks, etc.
> There is a capacity overhang in all these areas that has to work
> itself off, and many projects around the world that consume steel
> are being put on hold.
>
> Ditto for other infrasturucture commodities.
>
> Thus, I believe the infrastructure bandwagon (like all bandwagons)
> has been over-rated.

Random Thoughts About a Potential Rally

Good article. A client of mine phoned me last Friday and wanted to know why the market was rallying in the face of such dismal news. He knows I've been bearish for most of this year, and wanted to know if it was time to go long again.
Sure, I said. Nothing like the worst employment report since I was 7 years old to make me feel all bullish all over. And it's just beginning, I reminded him. The posters above are right, as we cynics usually are. With climbing unemployment and falling incomes, good luck convincing folks that expensive gadgets are a good gift ideas for this year. Or next.