Cinco De Mayo Afternoon Reading
Here’s what caught my eye today:
• Chairman Bernanke JEC: The economic outlook (Federal Reserve)
• The bear is dead, long live the bear (Marketwatch)
• Dick Bove: The Bureaucrat & The Academic (Rochdale Securities)
• Inflation Nation (Allan Meltzer, NYT Op/Ed)
• The Goldman Conspiracy (Marketwatch)
• Chrysler’s bondholders are whining about Obama’s deal. Don’t listen to them. (Slate)
• 3 part series: Chrysler Bankruptcy Analysis (BankruptcyLitigation Blog)
• Fed Stress Tests to Show About 10 Banks Need Capital (Bloomberg)
• Richardson/Roubini: We Can’t Subsidize the Banks Forever (WSJ)
• Bankers’ (Loan Officers ) Worry: Worst Is Yet To Come (Real Time Economics )
• Senior Loan Officer Opinion Survey: Banks Tighten Lending Standards Further (Federal Reserve)
• Scalia Scoffs at Calls for More Data Privacy Protection, Students Surprise Him With Dossier of His Own Data (boingboing)
• Rumors surface of Apple showing interest in acquiring Twitter (Apple Insider)
• And today’s head-scratching WTF headline: Wall Street Is Seen Emerging From Collapse Much Like Pre-Crisis Industry (Bloomberg)
• Leave ‘em laughing: Nation Ready To Be Lied To About Economy Again (The Onion)
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May 5th, 2009 at 3:54 pm
Quick “off the top of my dome” responses (because I have to take my HUSKY out for his 2nd walk – er – RUN of the day)…
• Chairman Bernanke JEC: The economic outlook (Federal Reserve)
RE: He studied the “Great Depression”…How versed is he on the “Weimar Republic”?
• The bear is dead, long live the bear (Marketwatch)
RE: Didn’t get a chance to read yet…Sounds like a CNBC sound byte…
• Dick Bove: The Bureaucrat & The Academic (Rochdale Securities)
RE: Hey…For a two months now BOVE ‘seems’ to be finally right…A broken clock…yada yada…
• Inflation Nation (Allan Meltzer, NYT Op/Ed)
• The Goldman Conspiracy (Marketwatch)
• Chrysler’s bondholders are whining about Obama’s deal. Don’t listen to them. (Slate)
RE: I can’t wait to see how a 55% UAW owned Chrysler (married to FIAT) lasts before revisiting BK…Stay tuned because this is going to turn into a classic Italian soap opera (I lived there for 12 years, believe me this will become comical)…
• 3 part series: Chrysler Bankruptcy Analysis (BankruptcyLitigation Blog)
• Fed Stress Tests to Show About 10 Banks Need Capital (Bloomberg)
RE: At what point are we going to be having to do a “stress test” on the Fed?
• Richardson/Roubini: We Can’t Subsidize the Banks Forever (WSJ)
RE: Roubini’s still right…but obviously the markets don’t trade on fundamentals, they trade on “Cramerica, CNBC, & Obamanomic fueled spin”…
• Bankers’ (Loan Officers ) Worry: Worst Is Yet To Come (Real Time Economics )
• Senior Loan Officer Opinion Survey: Banks Tighten Lending Standards Further (Federal Reserve)
RE: So why is SPG trading at a 6.0 PEG?…Don’t answer…I already know the answer…It was “rhetorical”…
• Scalia Scoffs at Calls for More Data Privacy Protection, Students Surprise Him With Dossier of His Own Data (boingboing)
• Rumors surface of Apple showing interest in acquiring Twitter (Apple Insider)
RE: BR…You or anyone got any stats on the ‘ascendency – demise’ rates on MYSPACE, FACEBOOK, and now this TITTER?…I’d be interested in seeing those numbers (assuming they’re not falsified – which they probably are)…My point: The NEED for Apple to reach out to the “next in line” of one of these social network forums, & understanding the “shelf life” of the previous endeavors makes me scratch my head…If Apple are the “innovating” KINGS OF THE UNIVERSE, why aren’t they simply creating the “next in line” forum instead of showing interest in acquiring this one?
• And today’s head-scratching WTF headline: Wall Street Is Seen Emerging From Collapse Much Like Pre-Crisis Industry (Bloomberg)
• Leave ‘em laughing: Nation Ready To Be Lied To About Economy Again (The Onion)
May 5th, 2009 at 3:55 pm
Gotta walk, er RUN, my dog now…BYE
May 5th, 2009 at 4:10 pm
Here is one more for you, Barry, from Mark Thoma on turning Japanese:
http://voices.washingtonpost.com/hearing/2009/05/staying_the_course_toward_1990.html
May 5th, 2009 at 4:11 pm
Is this the peak? Can i short now? JK. All major financials went down except C 3.5%, BAC 4.5% and AIG 18.5%.
Who thinks stress test will be positive re-inforcement? Negative? Flat? Just curious.
May 5th, 2009 at 4:15 pm
OK. Here it comes. Yet again. http://www.dailyfinance.com/2009/05/05/small-banks-face-commercial-lending-crisis/
“A loss rate that high means that U.S. banks and thrifts, which hold $1.8 trillion of commercial real estate on their books, could incur $216 billion in losses by the end of 2010. With that loss rate, “you’re talking about a depression in the U.S. economy and a major crisis in the banking system,” Richard Bove of Rochdale Securities told The Wall Street Journal.”
May 5th, 2009 at 4:16 pm
If “We Can’t Subsidize the Banks Forever” then is FDIC insurance out the window?
May 5th, 2009 at 4:25 pm
usphoenix:
How many bullets has Bernanke fired? Does he have any ammo left, seeing as there’s more than one hungry bear that has us up a tree? CRE defaults will be the mother of all tipping points, CC defaults will be the grandmother.
May 5th, 2009 at 4:28 pm
Marcus: US Treasury default is THE tipping point. Let’s hope they are not stupid enough to take us there.
US phoenix: Seems like we are going to get another round of “price discovery” in the BKX at some point.
May 5th, 2009 at 4:38 pm
Oh yeah…
And HAPPY CINCO DE MAYO everyone! :-)
At the end of all this, let’s all just kick back and have a margarita or two and listen to some music!
God knows, I have GALLONS of tequila still sitting in stockpile since the ETHANOL “ramp up” occurred about 18 months ago (remember that?)…
There was such a profitable “cash crop” of corn, that Mexican farmers were plowing over their algave fields and I was worried about a spike in Tequila prices so I stocked up…No catastrophe ensued, but I “still” purchased Tequila at a cheaper “inflation adjusted” price than today…
At least THAT investment is doing better than the “shorts” I’m still holding onto before (and since) the market reversed at the MIND NUMBINGLY inconsequential level of 666 on the S&P (despite what D. Kass has to say)…
That leads me to ANOTHER idea…
I respect Doug Kass, but his reasoning for a “generational low” seems to be purely TECHNICAL…Gee Doug, I thought you were a FUNDAMENTAL guy all along…
I mean, think about it…Kass’s TOTAL reasoning (of a LOW of 666) was loosely based on a .618 fibonacci retracement of the 1982 low to the October 2007 high in the S&P…If you extrapolate that further, you could go ALL THE WAY to say that the 1932 low (4)…and a fibonacci retracement from 1576 to THAT would be around 604 on the S&P…
Now I’m not arguing either way…But if you use what seems to be the KASS thesis…The S&P could NEVER…EVER…EVER…EVER… trade below 604…
What kind of crap is that?
I’ll give you a couple points to ponder on that…
1. Well, the NASDAQ collapse of 2000 ended up NOT adhering to “fibonacci” parameters.
2. According to “Schiller”, the P/E multiple on the S&P (as we speak is forecasting $57 earnings).
3. The “trough” in this recent downturn had the S&P trading at 12.7 earnings (off that same earnings forecast).
4. In past BEAR MARKETS, the ‘multiple’ has traded FAR down into single digits.
So I’m not saying ANYTHING either way…if the market wants to trade down to pessimism and fundamentals combined…I’d price the S&P at say $30 (aggressive vs. the past 3 quarters) times a 6 multiple = 180…OR you could say that it stays over 12x (still pessimistic) and “projects” earnings at $40 = 480…OR…BECAUSE THE TRUTH SEEMS TO BE TOO HARD TO BEAR by Bernanke and Obama…You could “cook the books”, and talk the market up…That way, you go back to a year 2000 style 35x (dot.com) type multiple at whatever integer you wanted to combine that with…$30 earnings gets the S&P to 1050…$50 earnings gets you to 1,750…
I think at some point, the WEIGHT of the reality of earnings is going to force LIMITED CAPITAL to move into less risky assets (until anyone REALLY saw light at the end of the tunnel, OR until a new INTERNET TYPE revolution sucked in a lot of cash – which is hard to see at present unless it is potentially GREEN in nature)…But you never know!
Best I can do is the following:
-$57 earnings projections ’10 seems AWFULLY optimistic to me (given the past 3 quarters)…
- a 15.75 multiple on that ALSO seems aggressive…
Let’s take it down to a “scare free” $50 earnings on a classic 14x earnings and you get 700 on the S&P…At this point (after this – Doug Kass fueled – “generational LOW” rally)…It seems appropriate that the market could drift there…I even think DK himself would agree…
If it goes LOWER (and establishes NEW lows below 666)…Fine, simply change the earnings and multiple numbers and come up with whatever you want…God knows the “administration” will probably be wanting to get into the SEC “bidnez” at that point and re-configure the S&P to reflect BETTER earnings (a time honored tradition)…Yeah baby, let’s all just ASSUME that every company in the world is GOOGLE and that we all get GOOGLE paychecks and FORGET that the vast majority of us are Wal Mart GREETERS (or EARN that way anyway)…
I think you all get my point by now…
The BOTTOM LINE is …Happy Cinco de Mayo! I’ll have another MARGARITA (that I mixed with 2004 tequila)…
May 5th, 2009 at 4:49 pm
cvienne, you are getting late for that Margarita.
May 5th, 2009 at 5:01 pm
here’s another worthwhile -graph:
“The precarious state of our financial system was echoed some time before August 2007, when none other than Dallas Fed President, Richard Fisher, espoused [in a rare moment of clarity and candor] back on April 16, 2007,
“I have spoken in previous speeches of our “faith-based currency,” a term I use only slightly tongue in cheek. The dollar—like the euro, the yen, the British pound and other currencies—is what economists call a fiat currency. It is backed only by the federal government’s power to raise the revenues needed to meet its obligations and by the rectitude of the U.S. central bank. If the market were to lose faith in either assumption, the dollar would be debased.”
Fisher’s [then] words elicit connotations of “a sales job” – to make believers out of skeptics. After all, instilling faith in skeptics “IS” fundamentally what any religion is all about anyway, ehhh?
Why We Should All Be Skeptical
Generally speaking, Central Bankers are paid to lie. We know this because former Federal Reserve Vice Chairman, Alan Blinder, “slipped” back in the 1990’s when, on national television, he uttered the words,
“The last duty of a central banker is to tell the public the truth.”…
http://www.financialsense.com/Market/wrapup.htm
~~
and, this http://www.bullnotbull.com/bull/ I find to be a useful site w/many good links..
May 5th, 2009 at 5:13 pm
This is something that has rarely been talked about here. Pension funds run by jackasses performed dreadfully last year, making a series of bad debts, sometimes with leverage. As a consequence, they will need to liquidate some positions this year in order to meet their obligations. Now let me see, what is it that can be liquidated easily??
http://www.nakedcapitalism.com/2009/05/guest-post-global-pension-tension.html
Add to this the summer Hedge Trimming™ season in leafy Greenwich as the “top people’s pension funds” also begin liquidating to meet redemptions, and you can see that sooner or later, there will be supply.
Sell in May.
May 5th, 2009 at 5:14 pm
“bad bets”.
An LB typo, rarer than a black swan.
May 5th, 2009 at 5:43 pm
lb,
the pension-fund scene–”Pension funds run by jackasses”–is a great point.
definitely one that could use a little of the Diogenes treatment..
see, as ex. http://globalpensions.com/showPage.html?page=gp_display_feature_cat&sub=21
their Trade Mags, not unsurprisingly, act like it’s ‘just another day in the neighborhood’.
the payoffs that many of these ‘Mgr.s’ have received to stuff garbage into their port.s would be, in a land of Freedom, front-page news..
though, we get “All the News that’s Fit to Print”, instead..
~~
as an aside, I have noticed your complimentary missives in my direction..
as you say: Respect ‘bro ~
May 5th, 2009 at 5:59 pm
Add this one to the list:
The Chrysler Fallout: Obama Takes Sides
http://newledger.com/2009/05/the-chrysler-fallout-obama-takes-sides/
And we’re supposed to believe this administration is “transparent”?
GM and Chrysler will be on taxpayer life support for as long as Obama is in office. And the politicians now think they know how to run companies.
May 5th, 2009 at 6:10 pm
If LB is creating black swans, this must be a top. Sell in May, indeed. Unless it’s gold, silver or oil. The Treasury will default, by destroying the currency. My kid (twelve) did a report on the fall of the Roman Eastern Empire in 476. She (w/out prompting by me) listed “debasement of the currency” as one of the causes. I told her all empires eventually do it and die by it. Question is: Is it a cause or an effect of a declining empire?
@MEH, I assume you mean Diogenes the Cynic? There’s so many of ‘em, and all…
May 5th, 2009 at 6:18 pm
@ zot23
You’re RIGHT!…And think…I had to run my DOG even b4that!…I’m WAY behind dude…Might have to make it a DOUBLE!
May 5th, 2009 at 6:28 pm
@ Curmudgeon…Kudos to your KID, smart girl!…Probable answer: THE COMBINATION OF THE TWO MOST LIKELY CREATED A NEGATIVE FEEDBACK LOOP…Also, curiously…If you took the year 2009 and subtracted the year 476, then did a FIBONACCI retracement on that timeframe, where would you arrive (around 1060-1066)…wasn’t that, like, “Battle of Hastings” era…Any significance…I’m on my FIRST “Cinco de Mayo” margarita now so nevermind my hallucinations…
@leftback…In a way, what you’re describing sounds like what Larry Summers did to the Harvard endowment so why shouldn’t, or couldn’t it happen again?
May 5th, 2009 at 6:49 pm
one more for the list …
http://nihoncassandra.blogspot.com/2009/05/financial-gitmo.html
I dunno how you do it, BR — it’s all I can do to keep up with TBP.
May 5th, 2009 at 7:09 pm
Curmudgeon,
like this: Diogenes of Sinope
Diogenes was a Cynic philosopher and a disciple of Antisthenes. He is noted for his contempt of luxury, riches, and honors; he fully renounced comfort and instead advocated a life of simple dedication to philosophical principles. Practicing self-control and a most rigid abstinence, he wore a coarse cloak, ate a simple diet, and relied upon handouts from others to survive. He is credited with a scandalous attack of convention entitled “Republic” that influenced Zeno of Citium. Diogenes is said to have gone about with a lantern in the daytime, looking in vain for an honest man, and is famous for living in a large tub in the Metroum in Athens at one point in his life. Due to the resemblance between his self-sufficient ideal and Henry David Thoreau’s sojourn at Walden Pond, Thoreau was called by some of his contemporaries the “American Diogenes.”
http://www.alcott.net/alcott/home/champions/Diogenes.html
and: The life and teachings of Diogenes of Sinope, the Greek philosopher who gave rise to classical Cynicism, deserve careful consideration because of their relevance to contemporary ethical issues. The task of reconstructing the philosopher’s life, however, is exceedingly difficult, because in his case, more than in those of other ancient philosophers, we must deal not only with the scarcity of reliable sources and testimonies, but also with the mountains of anecdotal and fictional accounts that are responsible for the creation of a veritable literary legend around the Cynic who once lived in a tub. This comprehensive study reconstructs his biography on the basis of classical and Arabic sources, identifies the main ideas and principles of his philosophy, and shows the application of his philosophical message for our contemporary world.
http://www.greenwood.com/catalog/GM0672.aspx
but, yes, aka “Diogenes the Cynic”
and, as an aside, good going w/ the young one~ just remember, there isn’t much that she won’t be able to figure out if given a good Glossary–much of the ‘different disciplines’ are the same ideas repackaged in different Jargon..keep up the Good Work.
May 5th, 2009 at 7:11 pm
cvienne,
here’s another one to go with those beverages:
“…As to the question at hand, we have had two periods of hyperinflation in America. The first period was during the Revolutionary War (not worth a Continental). The second was during the Civil War (greenbacks and graybacks). With 1776 as an obvious starting point, I leapt forward to 2009 and got a Fibonacci 233 years. The Civil War ended in 1865. Leap forward to 2009 from 1865 and you get a Fibonacci 144 years. If you’ve got your thinking cap on you’re already wondering about the length of time between 1776 and 1865, and yes, it is a Fibonacci 89 years.
But wait, it gets worse! Hyperinflation in 2009, would only be a side dish, the main course is war. Note well, these were not simply wars, but wars with ourselves. The Civil War was sometimes literally brother against brother until it ended in 1865. King George was our King, we were his subjects, until we declared independence on the fourth of July, 1776.
Are we really headed for war with ourselves and hyperinflation once again in 2009? This cluster of Fibonacci numbers linking up and landing on the year 2009 is striking and elegant. Is this the year where the old world ends and the new world begins? Leonardo Fibonacci says yes. ..”
http://www.financialsense.com/fsu/editorials/2009/0430.html
May 5th, 2009 at 7:12 pm
re pensions: great read if you are a faber subscriber in this months updates on pensions.
For people holding DRYS, DSX, etc.
http://4.bp.blogspot.com/_FM71j6-VkNE/SgBnHgh7CcI/AAAAAAAACWM/asx1nsFCiDw/s1600-h/Cass+5.5.09.gif
http://3.bp.blogspot.com/_FM71j6-VkNE/SgBnPXD_vNI/AAAAAAAACWU/F18TMc5RfRg/s1600-h/cass+2+5.5.09.gif
May 5th, 2009 at 7:15 pm
@mark,
nice link on financial sense, really interesting.
May 5th, 2009 at 7:18 pm
This is what caught my eye…
Fox’s Willard we are now in a Facist State
http://bluelori.blogspot.com/2009/05/foxs-willard-we-are-now-in-facist-state.html
May 5th, 2009 at 7:30 pm
@LB: “pension-tension” Indeed. That’s the monster that could eat Wall Street and K street.
May 5th, 2009 at 7:57 pm
@fromlori-
liked the guest’s advice- fascist is a bit heavy handed- you must remember that the banks and the auto manufacturers went to Washington for help- there was no forced partnership- having said that- I do hope the USG knows when to exit- stage left
@ hoffer-
pretty wild- thanks for the link
May 5th, 2009 at 8:32 pm
Mark,
A lot of people deserve the “Diogenes treatment” these days, don’t they.
May 5th, 2009 at 9:15 pm
Thanks MEH…as Diogenes might say–you just can’t be too cynical these days. Just when you think you’re cynical enough, the Larry, Ben and Timmy show comes on and you realize you should start living in a tub or something:)
May 5th, 2009 at 10:36 pm
Curm,
that Tub domicile is pretty hard-core, no? (:
and, yes, Transor, though I fear we may run out of Lanterns..
~~
here’s another one: “…Aristotle (384 BC – 322 BC) was a Greek philosopher, a student of Plato and teacher of Alexander the Great. Aristotle discovered, formulated, and analyzed the problem of commensurability. He wondered how ratios for a fair exchange of heterogeneous things could be set. He searched for a principle that makes it possible to equate what is apparently unequal and non-comparable.
Aristotle says that money, as a common measure of everything, makes things commensurable and makes it possible to equalize them. He states that it is in the form of money, a substance that has a telos (purpose), that individuals have devised a unit that supplies a measure on the basis of which just exchange can take place. Aristotle thus maintains that everything can be expressed in the universal equivalent of money. He explains that money was introduced to satisfy the requirement that all items exchanged must be comparable in some way.
Within such frame work, Aristotle defined the characteristics of a good form of money:…”
http://www.financialsense.com/editorials/lee/2009/0501.html
sometimes, we need to begin at the beginning, or, at least, a lot closer to it..
May 5th, 2009 at 11:21 pm
Are any of those articles somehow related, ethnically to the Holiday? No? BR you must do better. I swear ever since that book was published you’ve been slanken’. LOL Speaking about the book, how are sales doing?