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U.S. Markets In For Another Lashing

The Fed wasn't directly bailing out the lenders. What it was doing was making loans available to credit worthy investors who were buying the portfolios of the mortgage lenders at firesale prices. The mortgage lenders staved off bankruptcy by giving away equity and the providers of new capital were offered funds so that they could make these investments without having to sell other assets to enjoy the feast. W. Buffett is reputed to be one of the fat cats vulchers who are feeding on their corpses. Vic

Investor’s Intelligence Survey Shows Highest Bearish Sentiment Since March 2003

All sentiment surveys are uselesss even given their accuracy (which is questionable given the diversity of the population). The typical person is easily intimidated by the media when it is hyping a problem constantly such as the current one of the mortgage lenders. The average man the street who is unable to give it a reasonable context is traumatized. That can provide the wall of worry which can be a positive for the equity market. Buyers are always availble if prices appear attractive and willing sellers are necessary. Vic

There's Just No Need For A Fed Cut

Reducing the Funds rate and injecting reserves into the system allows the Warren Buffett types who have the good credit to buy up the troubled mortgage lenders portfolios at 50 cents on the dollar without having to sell assets of their own to raise the money. That's what is going on now. The otherwise bankrupt lenders are getting their pockets picked by the vulchers who prey on the sick. I'm not saying I feel sorry for them. Some of the lenders are weathering this storm because they weren't leveraged to the hilt. By September the new money will have bolstered the lenders and the Fed will cut rates to prevent triggering more ARM failures because now they will be protecting the new W. Buffett type investors. People who are buying the stocks of these mortgage companies are going to find out that the fundamentals have changed. Vic

The View From Friday's GDP Report

I think the thinking public takes government bureaucrat generated numbers with a grain of salt. The media presents them to us as credible, but even if you believed they are trying to present honest data the practical problem is beyond their capacity. Government doesn't do anything very well is the simple fact. Why isn't there any independent organizations generating data, a cost of living index for example? Vic

More Volatility Likely Following Last Week's Selloff

I'm not sure the work required to gather the information for this table was presented in a very helpful way. I would be interested to see a picture of how the market was performing as it entered the period of consecutive down days and then what would have been the result of an investment made the Friday after three down days 6 months to a year after the consecutive down days. The period shortly after a market trauma is not a good gauge of the wisdom or folly of buying into these events since the sentiment right or wrong is likely to hang on for a period of time. Your data does show that which could be expected. Vic

Feeling Bearish? Don't Short This Market Yet

The market bears have predicated their negativism on three pilars, the subprime mortgage failures, the slowdown in home sales, higher gasoline prices, and failure of the Fed. to reduce interest rates. Everyone of these is a false justification for assuming stock market weakness. A summer slow down after a good rise is probable and malise going further is unlikey unless more important negative signs appear. The devaluation of the dollar we have eperienced is a powerful counter force. The result is that we can have strong markets because the products of America are cheap and foreign reserves generated overseas will flow into this countries bargain basement. It isn't good for us in the long run because we are just puting a higher price on our stock market with a cheaper dollar debauched by our government irresponsible spending. The rise then is actually phantom. Vic

ISM Index: Good and Improving

O K, but just remember all this is looking in the rear view mirror. It probably portends a slowdown in the stock market's advance for the Summer and early Fall, but I think the people who will take that as a buying opportunity may be the ones who will take it to the bank. Vic

Week in Review: Financials in Downtrend

What constitutes the finacial sector, Wall St. Inv. Banks, Commercial Banks, Brokers, Insurance Companies? All of the above? Are the risk in the economy common to all of these in the same way? Does the Fed Res work primarily to protect the banking system as it was created to do, or does it work to protect the dollar in opposition to irresponsible government spending? I don't think these are entirely compatable. If it's the latter, then can we assume that the current government reckless spending in a low tax environment is inevitably bad for the banking system, but I don't see the relationship to the other participants who it seems to me are better able to cope with narrower credit spreads. Perhaps other people will comment, giving me some enlightenment. Vic

Rising Yield Curve Generally Bad For Stock Performance

Post the trade deficit on this chart also. The recycled trade dollars are the most significant factor in my opinion. I'm quite sure there is an understanding that the trade door will remain open only as long as the dollars come back to finance our goverments adventures. Vic

The Fed's Cautious Optimism Isn't Believable

Interesting to see someone telling it like it is. We are headed for stagflation thanks to GWB's following the lead of LBJ in mismanaging the economy by pursuing a fabricated war on credit. The chickens didn't come home until the Jimmy Carter days then, by passing R. Nixon, but it looks like the time table will be advanced giving the next president the coup de gras. (or however you spell it) The Fed has it's hands tied. It should be raising rates but is unable. Eventually we will need to find another Paul Volker and the pain will be far worse than it would be if Bernake would sacrifice himself for the good of the country now. (but he isn't likely to do it) Vic

Are Share Buybacks Actually Good For Investors?

I don't think there is any correlation of stock buy backs to stock price increase in a short term perspective. Perhaps there are exceptions but my observations would point to just the opposite, why I don't know. Longer term the shares should go up because the EPS will go up everything else being equal. Those of you who don't like buy backs should avoid companies that are doing it because they tend to continue the practice. I, for one, think that in many cases it's a very good strategy. Vic

Largecap Share Buybacks Continue To Boom

I like buy backs in the case of IBM which I own a position in. IBM stock can be considered a company whose shares are priced reasonably by historical standards. The company generates sufficient cash flow so that it's operations are not squeezed. If they were to raise the dividend and the next incoming congress kills the 15% dividend rate any increase in dividend would be worth much less for many stockholders. As you are aware it just isn't done, that a sound company reduces it's dividend because many people live on these payments. Later, after the capitalization is reduced, the dividend can be increased at a cheaper cost to the company. I expect to see IBM paying a $5 dividend in 2011 and based on the projections they have announced it is not an unreasonable expectation. The current buy back program is part of the strategy that will make it possible. Vic.

Wall Street Still Doesn't Get It

I think the opinion of individuals taken from pols, whether they are the man on the street or CFOs are not worth much. The view of business insiders tends to be cautious. They tend to focus on problems just like the runners who, even if winning the race, are fearful and looking over the shoulder. To my mind the consumer sentiment pols are especially questionable since the ordinary person forms his vision from the salient stories in the media like the sub prime mortgage defaults and rising gasoline prices. It's typical of the media to hype these pols because they are consistent with their message. The stock market's action very often runs contrary to the drum beat and it seems to be doing that except for the past week which you could interpret as a normal retracement in an upward trend. Vic

What Do Bloggers Know About the Market's Direction?

I'd put more currency in the opinions of bloggers than in security analyst. The reason simple, one they are honest, and two the record of the professionals is poor if you look into it. Vic