George Enone

Third Quarter Growth Revised Down 2.8%, Much Lower than Original Estimate

double-dip coming up by June 2010

Where the Dubai Fallout Will Land

The global debt implosion has begun...expect many more governments and corporations to default on their obligations. We have a global financial system built on excessive leverage, from China to Brazil. As economies leverage down, this will spur global deflation lasting a few years to a decade. Asset prices will continue to fall as consumers cut back and default on loans increase. The risk of inflation will come only after deflation has ran its course. The best scenario is to immediately raise rates to 4% to accelerate the deleveraging and minimize the risk of inflation down the road, but we all know Bernanke will do the opposite and keep increasing money supply in a deleveraging economy. This is like pouring gasoline on a burning house.
He will soon find out you cannot force a business to take a loan if the prospects of making money is not there. Or a factory cannot risk to make products when consumer don't need or can't buy them. This is insanity. I hope Bernanke does not get confirmed by the Senate.

Another Crisis Looms Right Around the Corner

The Fed was created in 1913 to protect the dollar and create market price stability...but now has totally failed all its statutes. The US dollar devalued by 93% since then. There was no Fed before 1913 and capitalism worked just fine. Inflation is theft...thats the cold truth. Governments steal money from citizens savings by creating inflation and keeping the illusion that they are fighting it. This is the END my friends. Nothing the Fed does is working anymore. Deflation has struck the US and will in the end show the ordinary American that we do not need the Fed. The Fed will be abolished within 5 years. We have a broken financial system and a lack of trust infected by a dangerous virus that is now spreading to Asia. The problem is not lack of liquidity. There is no need to own equities anymore. The DOW will crash not because of economic fundamentals but because of lack of trust. Trust is the sacred ingredient for equity markets to function. Non-equity investing will become the norm until the trust is restored to the financial system. Sell all your equities now. Deflation will ravish equity values.

Bill Gross: Sell Equities, Buy Treasuries

Bill Gross is right. The bond market will be superior to the equity markets in the next 5-10 years, even so will be long-term treasuries. Most clients tell me they want to pay down their debt AND more than likely will avoid borrowing moving forward. This sounds like a secular trend. Consumer and business deleveraging will take some serious time as people continue to reduce or totally avoid risk associated with equities.

It's Time to Sell Equities and Look to These 3 Areas

The most difficult thing an investor will face is when to sell their investment. Why? Because waiting for signs to materialize before selling means you"ll have missed the top. Greed is the culprit...as hitting that sell button leaves an awful feeling of missing out on more gains. A feeling that paralyzes seemingly smart men and women year after year and decade after decade from acquiring real wealth. What is your "net realized gain" from investing in the last 10 years? The answer to this question will give you the idea.
The enigmatic term "unrealized" refers to gains as well as loses for anyone who owns an investment portfolio. A "realized" 60% gain is better than an "unrealized" 70% gain any day of the year. A fact that separates real money from phantom money. This rally is based on "hope" and "rosy economic sentiment" that may never materialize and at this point has entered the dangerous blow-off phase in which investors buy if the market is up and wait if it is down. This is my indication of a major market top, probably near DOW 10K. It smells like October 87. This rally could perhaps prove to be the biggest waste of capital allocation in recent memory. Coupled that with all the unprecedented government stimulus, the capital waste could be epic.

Is a Crash Impending?

Commodities crash coming....

China Enters a Bear Market - Preview for U.S. Stocks?

China in bear market means no global recovery. Epic commodity selloff coming and US in double dip recession.

Stephen Roach's Case Against Bernanke

Roach speaks up, it makes me happy. Assuming the President is not counting on the Senate confirmation to fire Bernanke, this is Obama's first BIG mistake and could derail any kind of credibility in restoring US economy. Its very curious why Obama rushed (during his vacation) to re-appoint Bernanke when he could have waited a few more months. This tells me the Fed has a lot of dark skeletons on its balance sheet. The senate confirmation hearings could not confirm Bernanke and take the hit off the young president for dissing "Helicopter" Bernanke. Bernanke's experimentation with monetary looseness has put the US economic credibility in question and his re-appointment could put the last 12-inch nail in the dollar coffin and unleash a deadly downward spiral deflation then followed by mega inflation. This guy is completely reckless. Bernanke took the the reins 2 years before the banking crash started and missed it. All the signs were there. He then became a mad scientist in its aftermath distributing unlimited cash to yet un-named institutions and taking rates in blazing speed to near zero. A smart central banker would have let rotten banks fail and create new banks with fresh capital from the Fed and private investors. This would have crashed the banking system allowing good banks to survive but give birth to the NEW banking system with a healthy architecture for the 21th century and have derivatives trade on a separate exchange. Yes, there would have been blood on the streets and the DOW could have fallen to 4500, but we would have had a true market rally based on fundamentals and a stronger system. Indeed, C and BAC went to under $3, DOW went to 6500 but...the problem is not resolved. Just the biggest wasted opportunity in American financial history. Today, banks simply are still not lending and will not until a gun is put to their heads. There's now talk about negative interest rate in Sweden. The same zombie banks that should have been allowed to fail are still in business with the same system and the problem just became more complex. AIG is now a hot stock. BAC is trying to expand in China when the Chinese government is begining to aggresively curb excess bank lending. This is not a problem that needs half-measures to resolve. This re-appointment is a huge dissapointment unless Obama is counting on the Senate to do the firing. The current banking system is half-dead and just "hoping" for a miracle. Doesn't sound good. Prepare for the next banking crisis of unparallel proportions soon. I am shorting the financials here.

William Black: Bailouts Transfer Wealth from Middle Class to Monied Class

For many years Wall St has laughed at the Chinese for intervening in markets and propping up zombie and failed companies. What the Fed and the Treasury has done with bailouts actually outdid the Chinese. The middle-class is the engine of prosperity and the foundation of democratic and stable nations. This lesson has been forgotten in America. You can't cheat your way to prosperity. Reality always trumps illussion.
Bailing out AIG was a cover to bail out Goldman Sachs in the tune of +200B...and counting. Many banks are rotten. Lets see what happens when Chinese banks begin their epic collapse. The biggest run on banks is coming. FDIC will have to guarantee 100% of deposits. This indeed will bring risk/reward ratio back in balance.

More Evidence of Deflation

We are in uncharted territory. Evidence point toward a long period of deflation (housing prices, energy, stock values, consumer spending, GDP, wages, employment...all down and will take years to rise). This recent Wall St created "recovery hope" will be seen for what it is by the end of Fall: "an illusion". Fed rates are already at zero and can only go up from here or stay at zero. Fed at this point has no teeth left. Capitalism is broken and it will take a real global shakedown to re-boot it. The real global crash is on its way that will leave everyone speechless starting in China. Buy dollar and stay in cash. Rates are going up in January when Bernanke is replaced.

Leveraged ETF Ban Spreading Like the Flu

Leveraged ETFs have their uses. Politicians should stay out of this business of handpicking what's good or bad. What's next? ban the stock market?

Forget the 1930s; We're Reliving 1975 (Part II)

We are in the early stages of what will be known as "the great deflation" lasting to about 2015. Deleveraging takes time. Americans basically have 4 "money buckets" to keep our consumer economy going: wages, credit cards, home equity and 401Ks/IRAs. Wages are down for those who are employed and nada for the unemployed, credit lines has been cut and rates risen on existing card balances, home equity already maxed-out or severely reduced by falling home prices and difficult to use today, 401Ks lost about half of their values and with the recent rise in the stock market I expect people to try and lock in their 45% gains from 3/20 stock lows. Of the 4 money buckets only 401Ks/IRAs is now available and believe it or not is the "last gasp". Many are making hardship and early withdrawals to meet monthly obligations. An additional burden is the massive debt accumulated in recent years. How does this compare to the 70s or the 30s? Probably doesn't...I think this is a unique animal never seen before. Prices of everything will continue to drop as many people pay down debt, spend less and companies continue to cut costs and not invest in new projects. Any true recovery will come when the "money buckets" are somewhat restored...perhaps around 2013-2014 IF a new 500B infrastructure-only stimulus bill is enacted and government refinances all existing consumer debt at a fixed 2 or 3%. Otherwise you're looking at somewhere near 2020.

Obama's Wasted Political Capital

Banks have already destroyed capitalism and the concept of market-economy that will ultimately end up crashing the banks themselves soon. Its a noose around America's neck. This is what we have to deal with in the next few years as we grasp with a painful deflation and consumer deleveraging. Who has the courage the face the problem and fix the problem? There is no easy solution than to let things playout. A consumer revolt may be the answer.The financial meltdown that started with bank speculation is actually getting worse for the broken system we now have preserved (sickening). This will not be able to create any kind of meaningful economic recovery. Every president wastes political capital and congress is there to make sure this happens. Perhaps you have to view US congress as an institutional trader to be able to make sense of anything going on. Congress is used as a "killer meaningful of initiatives" with its ability to vote down anything that big business doesn't like. This is a major letdown in the biggest economy in the world, soon to become smaller and smaller as capitalism slowly dies out turning back the clock to oligopoly and mercantilism in the process. This is not a pretty scenario. This is the real threat we face, not what Obama does or doesn't or for that matter any past of future president. We have a corporate culture that's cancerous and manipulates politicians. Congress only cares about their paycheck and pet projects that gives them all kinds of kick-backs. HP and GOOG were created by regular Americans in homes of regular American neighborhoods...thats true capitalism, one in which great ideas coming from ordinary citizens becomes monetized and creates jobs and value in the process. Banks are supposed make money by lending to small businesses to unlock the next HP and GOOG. Not today though as they've become traders and speculators betting with other people's money and when they loose, take other people's money to bailout themselves and jump around saying they're profitable. Are we kidding ourselves? American banks need to be broken up starting with Goldman, Bank of America and JP Morgan. How can you lend to yourself to trade? Then count on the FDIC to cover your mishaps?
Obama is stuck just like Bush was. Don't blame him.

The Age of Turbulence: Preparing for the Crash

Predicting crashes by having targets ends up hurting you. Its like a sheriff investigating a crime he committed by looking for other suspects...We are currently in the middle of a crash and you're looking elsewhere by "waiting" for the S&P to hit some number. Crashes are like "black swans"... they seem to appear out of nowhere....but in hindsight all the clues always seem so evident, however hugely overlooked. We"ve just been through the first leg of the crash with DOW falling to approx 6500 from 14000...now back to 9000. What's changed? Not much only that people are crazy and have bought stocks raising their paper values and hoping for a "quick economic recovery"...without asking themselves how? Things have actually gotten worse in reality and look to be this way for a while...The second leg of the crash will do more psychological damage that will prompt a "real recovery" by forcing the nation to look at the real porblems we face and make the right investments for the future and prosperity of the nation. The risk associated with stocks does not justify owning them at the present time. However, gurus are telling you to buy stocks. And the allure of creating quick wealth is irresistable. Now is the time for asset preservation and debt reduction. You have the last chance to protect your money before the crash kicks into its second and most devastating leg. This second leg will leave many people numb and broken with large numbers of people moving-in with relatives as unemployment rises and firms continue to cut cost and withhold making new investments. Strong companies will exit the stock markets by de-listing and going private. Many bondholders will be forced to take equity stakes (a la GM) in the underlying companies through "controlled bankruptcy", further diluting stock values overall. When enough companies de-list from exchanges and go private, perhaps then a new wave a reason will return and re-institute the right market regulations necessary for market-economy to thrive again. Capitalism has been severely damaged by banks and now exists only as a shadow of oligopoly and mercantilism. This is the arc of events we'll have to go through in the upcoming months and it will be painful. We have come to the end of bubble-mania economics.

The Age of Turbulence: Preparing for the Crash

Jimmy,
you seem to have the right pulse of our economic and social situation. First people were pushed into using their credit cards, then pulling equity from their homes. These 2 buckets are now exhausted. The "last bucket" left is 401Ks and IRAs.The stock market crash will be triggered by people liquidating their 401Ks and consequently the underlying Mutual Funds forcing fund managers to sell stocks to meet redemptions.


On Jul 27 09:35 AM jimmy Turano wrote:

> Your analogy in general makes sense to a degree, but I believe your
> 1017.64 SP500 is a little to
> optimistic. Your oil price of high 80's is way off,
> since there will be less demand because of people losing their jobs
> and less use of car travel. The trust of the Market by many after
> lsoing their 401ks, or majority of savings, leaves only the fund
> managers, and wealthy to participate in the market. And with all
> the uncertainty, this is not a game to play with so many unknown
> factors at this time. Rather,
> a test of new lows for the Dow, and S & P would be more appropriate,
> before a new foundation of optimism is formed across the Nation.
>
> WITH A BURN RATE OF DEBT THIS COUNTRY IS ACCUMULATING, AND PROPOSED
> NEW STIMULUS PACKAGES, AND NATIONAL HEALTH CARE IN THE WINGS, YOUR
> PREPARATION FOR A CRASH WILL BECOME FRUITION FOR SURE. THE INEVITABLE
> FIRST SIGNS WILL BE MASSAIVE DEMONSTARTIONS ACROSS THE COUNTRY,<br/>FOL...
> BY THE BEGINNINGS OF VIOLENCE, AND LOOTING, AND LAST BUT NOT LEAST,
> THE ORGANIZED MARCHES TO THE WHITE HOUSE WILL BE THE BIGGEST RED
> FLAG OF ALL. OBAMA'S PLATFORM WAS CHANGE. BUT IT APPEARS TO BE TURBULENT
> CHANGE TO A DEGREE NOT SEEN IN HISTORY AS OF YET. BUT IT IS COMING!