My morning reads:

• Capitulation Everywhere (Hussman Funds) see also Assume Bull Secular — How Do You Justify It? (csen)
• When Economists Agree, Start Worrying (WSJ)
• The Fed Is More Out of It Than You Thought It Was (Bloomberg) see also At Fed, Nascent Debate on When to Slow Asset Buying (NYT)
• From $100-e-mails to $300,000 for photocopies and meals, how Nortel racked up a $755-million tab (The Globe and Mail)
• Why Deleveraging Still Rules Markets in 2013 (Bloomberg)
• How Newegg crushed the “shopping cart” patent and saved online retail (arstechnica)
• The Biggest Housing Bubble in the World Is in … Canada? (The Atlantic)
• Apple’s stock and earnings don’t go hand in hand (The Tech Block) see also Apple reports one of the largest corporate earnings in the history of the earth, stock down 10% (updated) (9TO5Mac)
• Airport Altruism (enRoute)
• Pictorial: Chicago’s Freezing Fire (The Atlantic)

What are you reading?


Overbought and Oversold Markets

Source: MacroMan

Category: Financial Press

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

22 Responses to “10 Monday AM Reads”

  1. VennData says:

    Senate group reaches immigration deal

    Say goodbye to the Reagan Coaltion’s nativists. Reagan Racism about “Welfare Queens” “Job-stealing” “Drug dealers and criminals” etc heads to the dustbin of history

    Call it Obama’s Northern Strategy.

  2. DeDude says:

    That Bloomberg piece is great, and a little scary. They really live in such a bubble that they fail to understand that the consumer IS the economy, and that consumers respond to their experiences – basically changing the formulas and models for how things are connected and respond to policy changes. It’s like with weathermen; sometimes they just need to stick their head out the window before they make any big proclamations about “bright and sunny”.

  3. funkright says:

    FYI formatting via mobileRSS reader on iPad nor your own tablet based interface are showing up correctly. Can only get clickable links if opening full web version. It all worked a few days go.

  4. James Cameron says:

    “. . . only one in 10 analysts is informed enough (and honest enough) to be helpful. The rest are marking time, waiting to punch their tickets for the buy side of the investment-banking and asset-management business, where the big money is made. . . . Their collective uselessness to retail investors is due not to some flaw in their characters, but to a fundamental truth of the financial industry designed to take money from investors, not make money for them.”

    Apple analysts are of no value to investors

  5. mad97123 says:

    John Hussman makes some great points in his piece this week. The notions of ‘cash on sidelines’ and ‘stocks are underowned’ are standard fair for the MSM reporters who don’t question these Wall Street myths. But who is going to listern to a loser like Hussman when there is a bull market to pump-up and unwashed muppets waiting to be washed?

    “The newest iteration of the bullish case is the idea of a “great rotation” from bonds and cash to stocks, as if the outstanding quantity of each is not held by someone at every point in time. The head of a “too big to fail” investment firm argued last week that stocks are “underowned” – as if every share of stock presently in existence is not actually owned by someone. To assert that stocks can be “underowned” seems to reflect either a misunderstanding of how markets work, or a desire to distribute overvalued institutional holdings onto the unwashed muppets. Likewise, the idea of a “rotation” out of bonds and into stocks begs the question of who will buy the bonds and sell the stocks, as someone must be on the other side of that trade. Similarly, to “move cash into the market” requires a seller of stock who becomes the new holder of said cash.

    Quite simply, the reason that pension funds and other investors hold more bonds relative to stocks than they have historically is that there are more bonds outstanding, relative to stocks, than there have been historically. What is viewed as “underinvestment” in stocks is actually a symptom of a rise in the gross indebtedness of the global economy, enabled and encouraged by quantitative easing of central banks, which have been successful in suppressing all apparent costs of that releveraging.”

  6. eliz says:

    Glad to see the Hussman piece posted. As I was reading it last night, I was again thinking I wish more people would read his work. He routinely sets the record straight in regard to what the MSM and not-as-sharp minds are feeding the public. Thank you.

  7. eliz says:

    p.s. Following up to the Hussman article – anyone who isn’t open to the possibility of another new low in the stock market in front of us, should look at the DJIA 1966-1974 for a pattern that could repeat (eerily similar) — look here

  8. CharlesII says:

    I think Hussman’s most telling line is this: “The bears are gone, extinct, vanished. Among the ones remaining, many are people whom even I would consider to be either permabears or nut-cases.”

    And then he goes on to make a bear case.

    The question is not whether it’s time to be cautious. It’s always time to be cautious, and the recession in Europe, the question of whether China is facing a financial retrenchment, the likelihood of an end to QE, and the risks of Austerianism in the US are significant. The question is what the risks are relative to other years. It’s very hard to look at the present, in which a lot of consumer debt has been paid down or written down and regard the rise in government debt as equally dangerous, but that’s what Hussman does.

    Are returns in the US market likely to be limited in the near term? Yes. The market looks to be approximately fairly valued (+/- 20%), meaning that downside risks and upside risks are balanced. Short-term investors can look at other markets, or scour the US market for bargains and momentum plays. Long-term investors can invest understanding that they’ll make only 3.9% nominal, according to Hussman. 3.9% nominal sounds pretty good compared to most bonds. Of course, that means being willing to accept the risks, and keeping enough in liquid assets to be able to weather a correction… or pick up some more exposure.

  9. RW says:

    Nicholas Stern: ‘I got it wrong on climate change – it’s far, far worse’

    My investing bias WRT US agricultural commodities and related goods is based on the expectation the drought will continue to worsen but will likely ‘move around’ regionally as the wider and deeper trend establishes itself.

    NB: I’ve read Hussman with great appreciation for many years and still do but his blind side (so to speak) IMO is a supply-side bias and finance/accounting academic background. The notion that there cannot be any money on the ‘sidelines’ relies on an accounting identity that is indeed immutable but in a fiat system that identity does not necessarily represent either an equilibrium condition or a real-world behavior; e.g., newly created money can be removed or injected into the system at any time and ditto for assets. At any given moment the books balance but, even assuming completely honest books, that probably has less influence on market dynamics than Hussman appears willing to acknowledge.

  10. DHM says:

    Like others, love reading Hussman. He certainly knows how to twist a phrase (“washed up muppets”!) I just wouldn’t want to be an investor in one of his funds.

  11. Orange14 says:

    @DHM – LOL Big Time. Maybe he really doesn’t read his own columns. Why anyone would invest a penny with him is beyond me. Best example yet of why should put money in an S&P 500 ETF.

  12. mad97123 says:

    @CharlesII, what makes you think a lot of consumer debt has been paid down or written down?

    U.S. Consumer Debt Hits All-Time High: Borrowing Rises To $2.7 Trillion

    Total Credit Market Debt is also up.

    There is nothing bullish about the debt picture unless you are betting it will continue rising.

  13. mad97123 says:

    @Orange14, the reason for investing in Hussman’s funds vs buy & hold the S&P is to double your money.

  14. DeDude says:

    If Paul Ryan declare it a “proven fact that Keynesian economics has failed”

    then we can saferly declare it a proven fact that Paul Ryan is batshit crazy.

  15. willid3 says:

    and now for some thing entirely different

    watch out for those…radioactive bugs which then try to emulate the move “them”.

  16. RW says:

    Sometimes it pays to review history if only to avoid repeating it or, in the case of us relative small fry, avoid loss and/or profit from the folly of those who neglected their review (or didn’t believe it: Seems to be more of those these days for some reason). The folly (and cruelty) of austerianism during an economic contraction goes back a long way and so also does the knowledge of a cure …for those who remember.

    John Stuart Mill vs. the European Central Bank

    In 1829, John Stuart Mill made the key intellectual leap in figuring out how to fight what he called “general gluts.” Mill saw that excess demand for some particular set of assets in financial markets was mirrored by excess supply of goods and services in product markets, which in turn generated excess supply of workers in labor markets.

    The implication of this was clear. If you relieved the excess demand for financial assets, you also cured the excess supply of goods and services (the shortfall of aggregate demand) and the excess supply of labor (mass unemployment).

  17. rd says:

    John Hussman’s blunder has been his assumption that the markets are largely rational with respect to valuations – 1999-2000 should have cured him of that.

    As a result, he has forgotten the fundamental mantra of “Don’t Fight the Fed.” Every central banker in the world and especially the US Fed has had a single-minded focus on increasing the price of equities, bonds, and commodities. Therefore, he has been years early to the bear case.

  18. Orange14 says:

    @mad97123 – yes, but his chart goes back to the start of the fund. If one only looks at the last 10 years of data as per Morningstar, he doesn’t beat the S&P. He may be a rocket scientist but I don’t want him managing my money.

  19. James Cameron says:

    > yes, but his chart goes back to the start of the fund. If one only looks at the last 10 years of data as per Morningstar, he doesn’t beat the S&P. He may be a rocket scientist but I don’t want him managing my money.

    His approach, at least for this fund, has actually been costly since the financial crisis, reflecting I suppose his bearish outlook. A primary goal of this fund is capital preservation during “unfavorable market conditions,” but it has come nowhere near to achieving this since mid 2008:

  20. jmcbp12 says:

    Regarding the Hussman article, while I understand that stocks cannot be “underbought,” the point of the rotation argument is that the relative demand between bonds and stocks will shift towards stocks, bidding up their price and hurting bond valuations. While the outstanding quantity of bonds or stocks may be static, their market value can change. All else equal, an expectation of increased demand for stocks at the expense of bonds is obviously bullish for stocks.

    What am I missing here?