Prudent Man CFA

VIX Encourages Bull Hubris

Coincidental indicator according to the Myron Scholes and Bob Mertons who received the Nobel (Socialists) Award for designing the formula that calculates the Volatility Indexes. They should not be used for forecasting, e.g., in 1999 when it was 60 and the market continued up for six months.

How Much Will We Blame the Fed?

Rescinding Glass-Steagall and allowing banks to expand across state lines is, in my mind, the core of the problem. When banks had to put together syndicates for lending with each member holding a piece of the action we had less problems for obvious reasons. When a loan officer is held by his Board to be personally responsible for the re-payment of the loan results improve dramatically.

Will the "Health Panels" be as effective as the bank and SEC/NASDR examiners?


On Sep 09 02:28 PM bob adamson wrote:

> I am eagerly awaiting the comments of the Libertarians and Austrian
> School proponents to this blog. They might even note that the triggering
> event leading to the banking crisis in October of last year began
> with the actions of the US Fed to reign in the hedge fund speculative
> bubble in derivatives in July of that year (if only the market had
> been allowed to function unfettered by a central bank, the bubble
> could have continued on and been ‘resolved’ at some later point in
> time).
>
> On a more serious note, while a case can be made for institutions
> like the Bank of England and the US Fed being governed primarily
> by private sector investment banking interests, government needs
> to set some ground rules and set limits as well. The ongoing debate
> and tension between such a central bank and ‘The Street’ on the one
> hand, and government, on the other, can be creative. Arguably, the
> Clinton and Bush 1 administrations dropped the ball, however, by
> abandoning its involvement to too great a degree.
>
> While the Australian, New Zeeland and Canadian banking systems are
> not major players in international investment banking as compared
> to New York and London and therefore do not provide exact models
> for the US and UK, I suggest that recent events illustrate that the
> government’s role in those systems maintained a better balance. Note,
> in particular, an article appearing in the latest edition of ‘The
> Economist” at the following web site:
>
> www.economist.com/busi...;source=hptextfeature
>

How Much Will We Blame the Fed?

Fannie and Freddie are babies of Frank and Dodd. Congress passes the laws. Powerful incumbent Congress-people become millionaires making less that $200K a year and live in mansions while the National Debt soars. Is anyone awake enough to catch on. How much do you want to be screwed without being kissed or do you just want to kick your responsibilities down to future generations.? That's not going to work because we depend upon other countries for our well being.

(As an aside: If housing and consumers pending (70% of GDP-much, to much - will not improve until employment improves then Employment is a Leading Indicator!)

Time for Congressional Term Limit!

Twitter's Revenue Plans

Does anyone produce anything in the U.S. today?

While China sells more cars worldwide than the U.S in August even with the "Cash for Trash Program", which must be paid for with taxes, we spend our time "communicating" nonsense with equipment produced abroad.

How long does anyone believe this can continue?

OECD Economies Recovering Earlier than Expected

When, if ever, have the economists at the OECD been correct?

China's is now investing in bonds issued by the IMF, monetized in SDRs, instead of U.S. Treasuries. How will that affect interest rates regardless of what the Fed says?

A slight increase in interest rates will blow out the black-box traders who are creating the momentum for equities. That is 1987 redux.

Will the Market 'Melt Up'?

"Extremely bullish news lately"? Where? Yes the talking heads who need advertising dollars are talking up economies world wide but we just had a revision of July's unemployment and original report of 240,000 was revised to 360,000 a 50% miss that was hardly mentioned. Quite a "lagging" indicator!

How much real estate owned (REO) does the banking system own while foreclosures are still rising? Where is support for the $25,000,000,000,000.00+ of toxic assets and worthless derivatives, carried on the books at cost, from an FDIC who is leveraged 50:1? When will policy makers decide to face our growing deficits that are already unmanageable, both private and public? Answer please, not simple cliches.

What would a slight increase in interest rates do to the black-box trader's, who monopolize equity markets, paradigm? 1987 redux!

Good News, Bad Market Action

Didn't see any of this as good news.

Purchasing managers can stop their orders in a minute. Home contracts are far from closings - ask any real estate broker. Buyouts for stock is just exchanging paper.

Is this the best we are going to get? Is this the stuff that analysts are estimating a 25% (same analysts who estimated 40% sales growth for Ford) earnings growth of 2010 over 2009 for the S & P 500? By the way, how does an analyst estimate 2010 earnings while clueless about 2009?

Indexes Could Test Support Levels Today

Some "support".

Two Great Bounces

How much debt did the Fed have on its balance sheet last year? Who is financing it and will they continue to get negative real returns?

The housing market collapsed because of over-leverage. Now we have an FDIC with 50:1 leverage and private and public debt still at unsustainable levels. Of course, this is macroeconomic and their are a few, very few, companies who have managements and balance sheets positioned to take advantage of the new realities of a smaller world economy.

This "black box" trading reminds me of 1987. Should that be a case, where it is the equivalent of on trying to sell one's home in a hurricane, the risks certainly out weigh the potential gains.

Does anyone think interest rates are going lower and trust China's numbers? Brazil is expropriating oil assets. Taxes will be raised and/or the dollar drastically devalued chasing bond buyers out.


What were the equity markets "discounting" in early 2000 and 2007 when the country was already in recession?

What's Plausible for the Fiscal Outlook?

A veiled support for increased taxes while clueless as to the effects on the most productive segments of our economy. Awfully silent about bailing out the elites but then Concord is elite.

Long-Term Economic Growth Prospects Remain Subpar

The "shadow inventory" is being ignored by the banks and regulators. It could be as high as double the number homes and businesses in foreclosure. Delinquent debt payments and long-term unemployment continue to increase. Any further increases in unemployment will be in core, the most productive, workers.

With the FDIC leveraged 50:1 and trillions in toxic assets and worthless derivatives unable to be liquidated but held as assets on the banks and Fed's balance sheet at cost, will result, at best, to overhanging supply and write-offs. What if the taxpayers didn't bailout the elitist financial institutions that should have been left to fail and that are insolvent now without bailouts? That debt for the taxpayers continues to rise.

The current equity markets are results of "Black Box" trading; 1987 redux.

Hope is always fine but realism is necessary to adapt to the fact that the world economy was over-leveraged to the point of breaking. How the "entitlement" generation accepts this reality will only result in greater market volatility bot socially and economically.

ETF Trends: Bulls Deserve a Rest

Great examples of "Black Box" trading. 1987 redux.

Weekly Market Recap: What Year Is This, Anyway?

1987 "Black Box Trading" redux.

Doug Kass Calls a 2009 Market Top on Overly Bullish Psychology

Kass has been an excellent contrarian.

The combination of fundamentals confirmed by technicals have been, in my experience, a great way to manage my risk/reward ratio, with more emphasis on fundamentals. The influence of computer index and ETF trading distorts the technicals of individual stocks and makes me more skeptical of technicals. Many institutional investors sector trade, something I avoid, and few have been consistently successful.

As we saw late last year on the downside we are seeing on the upside the same effects of computer trading. As interest rates are a major component in the programs and they are historical lows should be cause for pause. Does anyone expect interest rates to decline?

Peak Oil: A Reality or a Lie?

Astonishing: Wall Street and Washington lies! Take away the lies and they both would collapse. When collectivist economic effete at Brookings and Berkeley warn of too much debt it is already too late.

Agree that the "Black Swan" is ready to swoon as there are innumerable catalysts that are there and it is just that the momentum crowd don't want to believe it. Denial is a deadly sin.

Look for more fudged economic numbers until the bureaucrats and politicians can no longer paint over reality. Believe them at your own and your families risk.