On Wednesday morn, Doug Kass opined:
problems with the market run deep.
We live in a world in which the consumer is spent-up, not pent-up. If you
don’t believe me, the Federal
Reserve expanded on this subject last week. It is inevitable that the
American consumer will cease its consumption binge of the last decade and begin
to retrench and save as the one-time benefit of refinancing cash-outs slows to a
A parabolic boom in housing prices in certain "hot" regions of the U.S. –
and abroad — has stretched the relationship between household incomes to
housing prices to levels never, ever seen in the last century.
Spring 2006 will mark a substantive resetting of rates on adjustable-rate
and teaser mortgage loans, pressing the consumer ever more.
Our economy’s foundation is based on an asset-appreciation dependency,
compared to past cycles which relied on income and wage growth.
I continue to reject the government’s notion that inflation is in retreat.
Inflation statistics delivered by the BLS are works of fiction, as stubbornly
high energy prices, tuition, food, housing, commodities, insurance and other
costs are serving to pressure the consumers’ real disposable incomes.
The 28-year high in corporate profit margins is unsustainable
and likely to revert closer to the mean as (1) the benefits of four years of
cost cutting subside, and (2) cost pressures overcome pricing power.
A more hawkish Federal Reserve will raise federal funds to higher levels
than the consensus expected.
(Notwithstanding the results from various investor surveys) the body of
investors to be overly complacent (with a high measure of bullish conceit) as
fear and doubt had been driven from Wall Street.
A Second Shot Across the Bow?
Street Insight,3/1/2006 8:39 AM EST
If you haven’t already, I strongly admonish you to go read Jesse Eisinger’s column today:
Here’s the money quote:
"The shorting life is nasty and brutish. It’s a wonder anyone does
it at all.
Shorts make a bet that a stock will sink, and nobody else wants
that: Not company executives, employees, investment banks nor most investors.
That’s why most manipulation is on the other side; fewer people object when
share prices are being pumped up. For most on Wall Street, the debate is whether
shorts are anti-American or merely un-American.
Yet in all the paranoia about evil short-sellers badmouthing
companies, what is lost is how agonizingly difficult their business is. They
borrow stock and sell it, hoping to replace the borrowed shares with cheaper
ones bought later so they can pocket the price difference as profit. It’s a
chronologically backward version of the typical long trade: sell high and then
Go forth and read . . .
It’s a Tough Job, So Why Do They Do It?
The Backward Business of Short
WSJ, March 1, 2006; Page C1
UPDATE March 2, 2006 10:32am:
See below for more text