It would have been nice if they had given this warning to investors BEFORE the stock market correction.
https://www.cnbc.com/2018/03/26/goldman-sachs-expects-gold-to-outperform-amid-growing-fears-of-a-stock-market-correction.html
Showing posts with label stock market. Show all posts
Showing posts with label stock market. Show all posts
Sunday, April 1, 2018
Friday, September 22, 2017
Saturday, July 16, 2016
Wednesday, October 28, 2015
Monday, August 31, 2015
Friday, February 27, 2015
Greenspan: "The Stock Market Is Great", But The Economy Feels Like In "The Late Stages Of The Great Depression"
I'm taking the over/under wager proposition on when former Fed Chairman Alan Greenspan-turned-truthsayer is demonized by the mainstream financial press. Another side bet could be made on when current Fed Chairperson Janet Yellen will accuse Greenspan of being a turncoat.
http://www.zerohedge.com/news/2015-02-26/stock-market-great-economy-not-alan-greenspan-warns-great-depression-global-demand
http://www.zerohedge.com/news/2015-02-26/stock-market-great-economy-not-alan-greenspan-warns-great-depression-global-demand
Monday, November 17, 2014
Friday, October 31, 2014
Thursday, August 22, 2013
Monday, June 3, 2013
Tuesday, April 2, 2013
Wednesday, July 11, 2012
Wednesday, October 6, 2010
Zimbabwe bull market
Click on chart to enlarge.
The bull market in the Zimbabwe stock market was the biggest of its kind--in nominal terms. In real terms (adjusted for inflation), due to hyperinflation and the collapse of its currency, investors eventually lost everything.
Tuesday, August 24, 2010
US Treasury bond bubble?
http://www.zerohedge.com/article/marc-faber-and-peter-schiff-take-bond-bulls-rosenberg-faber-gentlemens-bet
As for the Faber-Schiff view, no surprise: Peter encapsulates it best: "the bond market is the mother of all bubbles right now, and when it bursts the losses will dwarf the combined losses of the stock market bubble and the real estate bubble. There is no way for the government to pay this money back."
Schiff notes: "I am afraid is that when people realize we can't pay this money back, we aren't going to be able to roll over all this short-term debt. And so it's not just paying the interest, we are going to have to retire the principal." Peter Schiff is correct that inflating our way out of this debt bubble is a lose-lose proposition. Schiff also notes the stupidity of crowds, by highlighting that 10 years ago everyone was chasing risk, by piling into stock market funds, followed by everyone knows what. The outcome for bond investors is clear: "this decade is going to be the worst decade for bonds in US history. Bond holders are going to get wiped out. Either the government is going to default, or it is going to inflate, but either way the people holding the bonds, are holding the bag."
Faber then joins in: "there isn't much upside in treasuries unless it is for the short term. When I look ten years ahead I don't want to have my money in USTs." His main concern is that due to high budget deficits, there is a good chance that these will go even higher, and as a result the interest payments on government debt will become unbearable. As for the foreign bid, Faber also points out their prior folly: "In 1999/2000 foreigners also wanted to buy the NASDAQ and what happened afterwards is a major collapse. I would not look at foreign buying as a very intelligent leading indicator." In other words Faber just called the Chinese, UK and Japanese permabid in UST moronic. Faber is also not a big fan of a 30 year bond market (since 1981). "I would rather buy an asset class that has been in a bear market." Faber would buy farm land, agricultural commodities, and that gold belongs in a portfolio.
Probably the best argument of the debate is Schiff's observation that the government is not expanding the economy with the newly printed money: no money is being invested in productive capacity, it is not expanding the tax base, and as a result the economy is getting weaker.
Faber, is laconic, in saying that the UST market bottomed out in 1981 when yields went over 15% on the 10 Y, and topped in December 2008, at 2.1%, which was "the peak of the bubble."
Tuesday, May 4, 2010
Government wants to nationalize your 401K/IRA
If this passes, watch the stock markets collapse. Wow, the government is really eager to raise revenue. Whether you are a Democrat, Republican, Independent, Libertarian, or from Mars, passage of this proposal should concern you.
http://republicanleader.house.gov/News/DocumentSingle.aspx?DocumentID=183859
http://republicanleader.house.gov/News/DocumentSingle.aspx?DocumentID=183859
Dear Secretaries Solis and Geithner:
As members of the Republican Savings Solutions Group, we write today to express our strong opposition to any proposal to eliminate or federalize private-sector defined contribution pension plans, such as 401(k)s, or impose burdensome new requirements upon the businesses, large and small, who choose to offer these plans to their employees.
In the Annual Report of the White House Task Force on the Middle Class, Vice President Biden discussed at length the creation of so-called “Guaranteed Retirement Accounts, (GRAs)” which would provide for protection from “inflation and market risk” and potentially “guarantee a specified real return above the rate of inflation” – presumably at taxpayer expense. In the Report, the Vice President recommended “further study of these issues.”
The Vice President’s comments are troubling, insofar as they come on the heels of testimony before Congress from supporters of GRAs proposing to eliminate the favorable tax treatment currently afforded to 401(k) plans, and instead use those dollars to fund government-invested GRAs into which all employees would be required to contribute a portion of their salary – again, with a government subsidy. These advocates would, essentially, dismantle the present private-sector 401(k) system, replacing it instead with a government-run investment plan, the size and scope of which remain to be seen. This despite data showing that 90 percent of households have a favorable opinion of the existing 401(k)/IRA system.
In light of these facts, we write today to express our opposition in the strongest terms to any effort to “nationalize” the private 401(k) system, or any proposal that would dismantle or disfavor the private 401(k) system in favor of a government-run retirement security regime.
Sincerely,
House Republican Leader John Boehner (R-OH)
Rep. John Kline (R-MN)
Rep. Dave Camp (R-MI)
Rep. Sam Johnson (R-TX)
Rep. Dean Heller (R-NV)
Rep. Brett Guthrie (R-KY)
Rep. Michele Bachmann (R-MN)
Rep. Pat Tiberi (R-OH)
Rep. Bob Latta (R-OH)
Rep. Erik Paulsen (R-MN)
Rep. Lynn Jenkins (R-KS)
Rep. Ed Royce (R-CA)
Rep. Buck McKeon (R-CA)
Wednesday, August 5, 2009
More misleading government statistics
The Department of Commerce released Gross Domestic Product (GDP) growth statistics last week for the 2nd quarter ending June, and the numbers came in at "only" a 1% contraction, in contrast to the 1st quarter number which came in at a disastrous 6.4% decline. The contraction was smaller than what the Street expected, so markets rallied and the "green shoots" optimists came out celebrating that the recession had ended. The "getting less bad" argument was gaining traction. A couple thoughts gave me pause:
1) this GDP growth number is still negative. Sure, it's not AS negative but it still is negative. And since unemployment is a lagging indicator for economic growth, even if we are on our way to recovery, employment growth won't occur until 2010--at the earliest.
2) this aggregate number doesn't tell the full story. While overall GDP growth was only slightly negative, the private sector has experienced a much bigger decline. Why? Because all of the growth came from federal, state, and local government spending. The public sector is crowding out the private sector--the true engine of economic growth. More federal government employees were hired, while private industry was still laying off employees. That is not a long-term plan for success.
So while the GDP numbers were slightly encouraging (if still negative), I wouldn't start celebrating just yet. Meanwhile, I'm still long the market, but as soon as Congress returns from their summer recess later this month, I have a feeling Mr. Market will take away the punch bowl. Markets like it when Congress is not in session--they can't muck it up when they are idle.
1) this GDP growth number is still negative. Sure, it's not AS negative but it still is negative. And since unemployment is a lagging indicator for economic growth, even if we are on our way to recovery, employment growth won't occur until 2010--at the earliest.
2) this aggregate number doesn't tell the full story. While overall GDP growth was only slightly negative, the private sector has experienced a much bigger decline. Why? Because all of the growth came from federal, state, and local government spending. The public sector is crowding out the private sector--the true engine of economic growth. More federal government employees were hired, while private industry was still laying off employees. That is not a long-term plan for success.
So while the GDP numbers were slightly encouraging (if still negative), I wouldn't start celebrating just yet. Meanwhile, I'm still long the market, but as soon as Congress returns from their summer recess later this month, I have a feeling Mr. Market will take away the punch bowl. Markets like it when Congress is not in session--they can't muck it up when they are idle.
Monday, September 15, 2008
Lehman and Merill Lynch this morning....
I wrote this in response to a concerned client:
XXXXX, on the contrary. These firms (investment banks, commercial banks, and insurance companies) invested in mortgage-backed securities, thinking they were safe. Little did they know it was just another asset bubble bursting.
Life insurance companies are more conservative by nature, investing premium payments in short- and long-term bonds, and in the case of indexed products, are linked to stock indexes like the S & P 500. With your contracts, if the S & P tanks, you are still guaranteed a 1% floor--which isn't much, but it's better than losing 15% or more, which is what your current stock portfolio is doing. They are able to guarantee the 1% due to options trading, much like they cap you at 15%.
Expect a big loss in the stock market this morning, as this is really, really bad news, but not something I didn't warn you all about several months and years ago. I predicted the real estate bubble, and it's coming to fruition as well. While the more expensive neighborhoods of the bay area are holding up, expect high-end prices to start declining. Manhattanites continue to brag their real estate market has held up, but do you really think that will continue, now that hundreds of billions of dollars are vanishing? Not only are Wall Street bonuses going to disappear at the end of this year, but many investment bankers will be lucky to have jobs. Having a consortium of banks to band together to raise money to prevent the next disaster is akin to gathering 10 cancer victims into a leaky boat--a few will get tossed over the side. First Bear Stearns, Countrywide, now Lehman and Merrill Lynch. Don't forget insolvent Freddie Mac and Fannie Mae, who only hold trillions of dollars of mortgages (70% of all US mortgages). Check out their share prices--they've lost over 90% of their market cap, which makes the tech bubble look like Disneyland.
Expect more big losses and layoffs--it is going to be a bloodbath--the biggest since the Great Depression. Insurance companies were the only ones standing in the aftermath of the Depression, as thousands of banks failed. They set premiums based on actuarial data, not based on speculative lending practices. Banks use 10:1 leverage, which works great in a growing economy, but is terrible in a downturn, as bad loans mount. Expect Washington Mutual to fold, too--unless they get bailed out. It amazes me that people still think banks are safe, despite pervasive evidence to the contrary. How many more banks have to fail before people get it? In any case, insurance companies are forbidden by law to implement that type of leverage.
The VC market has dried up as well--last quarter was the first time ever that there were no IPOs. The liquidity crisis is spreading up and down the food chain--couples with high FICO scores and sizeable assets are having trouble getting financing. Cash is more important than ever, so curb your spending and hoard it. Don't mess around this time, this ride is going to be hell.
In summary, this is EXACTLY what should be doing in a severe downturn, where every asset you turn to is dropping like a Thai thunderstorm downpour. The next 2 (or more years) will be very difficult, and when the last bulls finally turn bearish, basically giving up all hope and expecting the world to end. hopefully we will reach a bottom. Real estate agents and stock brokers have been preaching to me their respective markets will turn around for the last two years, and given their polyannish outlook, I know this hellstorm is going to last longer. They're like Colonel Klink in Hogan's Heroes--whatever they say will happen, do the exact opposite.
If you had to pin me down, the meltdown recovers in 2010, which means you can expect a climactic abyss in stock markets late 2009. THAT will be the time to nibble at good companies who got thrown out with the baby wash--the companies themselves are solid, but the financial hurricane took them down unfairly Pick the winners of each struggling group: Goldman Sachs will be a screaming buy in a couple years, but don't try to catch a falling knife--it'lll cut you. Wait till they bottom and bounce off the bottom a couple times. It's better to be late when bottom-fishing (buying), and it's better to be early when selling.
Of course, I could be wrong and too optimistic on the recovery time, at which point, all bets are off. Just to give you an idea of how bad it is, Warren Buffett of Berkshire Hathaway just sent a directive to one of his portfolio companies, a reinsurer who guarantees funds above the FDIC limit of $100,000 for banks. They lost a mint in guaranteeing losses when IndyMac went under recently, so the reinsurer just notified thousands of banks they are no longer guaranteeing accounts above $100,000! Do you think wealthy depositors are going to react to that?
As an aside, the formerly venerable Lehman firm was the preemiment fixed-income (bond) banker who got themselves in trouble with junk offerings years ago. Buffett actually stepped in and helped bail them out at the time. Obviously, he's not bailing them out this time. These subprime mortgages are the latest cyanide, only this time the Kool-Aid is a lot more toxic. You thought I was a doom and gloomer earlier, and it turns out I understated the magnitude. And unfortunately, it's going to get even worse.
XXXXX, on the contrary. These firms (investment banks, commercial banks, and insurance companies) invested in mortgage-backed securities, thinking they were safe. Little did they know it was just another asset bubble bursting.
Life insurance companies are more conservative by nature, investing premium payments in short- and long-term bonds, and in the case of indexed products, are linked to stock indexes like the S & P 500. With your contracts, if the S & P tanks, you are still guaranteed a 1% floor--which isn't much, but it's better than losing 15% or more, which is what your current stock portfolio is doing. They are able to guarantee the 1% due to options trading, much like they cap you at 15%.
Expect a big loss in the stock market this morning, as this is really, really bad news, but not something I didn't warn you all about several months and years ago. I predicted the real estate bubble, and it's coming to fruition as well. While the more expensive neighborhoods of the bay area are holding up, expect high-end prices to start declining. Manhattanites continue to brag their real estate market has held up, but do you really think that will continue, now that hundreds of billions of dollars are vanishing? Not only are Wall Street bonuses going to disappear at the end of this year, but many investment bankers will be lucky to have jobs. Having a consortium of banks to band together to raise money to prevent the next disaster is akin to gathering 10 cancer victims into a leaky boat--a few will get tossed over the side. First Bear Stearns, Countrywide, now Lehman and Merrill Lynch. Don't forget insolvent Freddie Mac and Fannie Mae, who only hold trillions of dollars of mortgages (70% of all US mortgages). Check out their share prices--they've lost over 90% of their market cap, which makes the tech bubble look like Disneyland.
Expect more big losses and layoffs--it is going to be a bloodbath--the biggest since the Great Depression. Insurance companies were the only ones standing in the aftermath of the Depression, as thousands of banks failed. They set premiums based on actuarial data, not based on speculative lending practices. Banks use 10:1 leverage, which works great in a growing economy, but is terrible in a downturn, as bad loans mount. Expect Washington Mutual to fold, too--unless they get bailed out. It amazes me that people still think banks are safe, despite pervasive evidence to the contrary. How many more banks have to fail before people get it? In any case, insurance companies are forbidden by law to implement that type of leverage.
The VC market has dried up as well--last quarter was the first time ever that there were no IPOs. The liquidity crisis is spreading up and down the food chain--couples with high FICO scores and sizeable assets are having trouble getting financing. Cash is more important than ever, so curb your spending and hoard it. Don't mess around this time, this ride is going to be hell.
In summary, this is EXACTLY what should be doing in a severe downturn, where every asset you turn to is dropping like a Thai thunderstorm downpour. The next 2 (or more years) will be very difficult, and when the last bulls finally turn bearish, basically giving up all hope and expecting the world to end. hopefully we will reach a bottom. Real estate agents and stock brokers have been preaching to me their respective markets will turn around for the last two years, and given their polyannish outlook, I know this hellstorm is going to last longer. They're like Colonel Klink in Hogan's Heroes--whatever they say will happen, do the exact opposite.
If you had to pin me down, the meltdown recovers in 2010, which means you can expect a climactic abyss in stock markets late 2009. THAT will be the time to nibble at good companies who got thrown out with the baby wash--the companies themselves are solid, but the financial hurricane took them down unfairly Pick the winners of each struggling group: Goldman Sachs will be a screaming buy in a couple years, but don't try to catch a falling knife--it'lll cut you. Wait till they bottom and bounce off the bottom a couple times. It's better to be late when bottom-fishing (buying), and it's better to be early when selling.
Of course, I could be wrong and too optimistic on the recovery time, at which point, all bets are off. Just to give you an idea of how bad it is, Warren Buffett of Berkshire Hathaway just sent a directive to one of his portfolio companies, a reinsurer who guarantees funds above the FDIC limit of $100,000 for banks. They lost a mint in guaranteeing losses when IndyMac went under recently, so the reinsurer just notified thousands of banks they are no longer guaranteeing accounts above $100,000! Do you think wealthy depositors are going to react to that?
As an aside, the formerly venerable Lehman firm was the preemiment fixed-income (bond) banker who got themselves in trouble with junk offerings years ago. Buffett actually stepped in and helped bail them out at the time. Obviously, he's not bailing them out this time. These subprime mortgages are the latest cyanide, only this time the Kool-Aid is a lot more toxic. You thought I was a doom and gloomer earlier, and it turns out I understated the magnitude. And unfortunately, it's going to get even worse.
Tuesday, August 12, 2008
Good news, bad news...
The good news is that oil and fuel prices have backed down, as I predicted recently. Further good news indicates Americans are driving less, reducing our carbon emissions. The bad news is that the reduced tax revenue from fuel sales has left the federal and state governments even more cash-strapped.
Another gem I saw on the news is that our superhero Governor has mandated all non-emergency response state employees will now earn the minimum Federal wage of $6.55 an hour. That paycheck should really help pay the variable mortgage about to reset--not.
The US is a mess, and a recent trip by a friend to Australia illuminates the growing gap, as the land Down Under is experiencing a bull market in natural resources, fueled by booming economies in China and India. Australia is clean, modern, and their citizens are in good spirits, buoyed by a tourism boom as well. Kinda reminds me of us in the late 90's.
Meanwhile, China and India are aggressively securing energy and natural resources, acquiring equity stakes in suppliers, setting the stage for the US to be forced to buy at spot prices.
The Fed has to continue printing dollars in order to sustain an unsustainable balance of economic growth and fiscal responsibility. A money manager quipped that he senses the public believes we're in the late innings of this recovery, which is true--but not when you consider it's a 7-game World Series, not a one-game wonder. In other words, we should continue to have record foreclosures and bankruptcies for a couple more years before we turn this tanker around. The good news is that equity prices should rebound a year before the actual bottom, as the stock market is a forward discounting mechanism.
Another gem I saw on the news is that our superhero Governor has mandated all non-emergency response state employees will now earn the minimum Federal wage of $6.55 an hour. That paycheck should really help pay the variable mortgage about to reset--not.
The US is a mess, and a recent trip by a friend to Australia illuminates the growing gap, as the land Down Under is experiencing a bull market in natural resources, fueled by booming economies in China and India. Australia is clean, modern, and their citizens are in good spirits, buoyed by a tourism boom as well. Kinda reminds me of us in the late 90's.
Meanwhile, China and India are aggressively securing energy and natural resources, acquiring equity stakes in suppliers, setting the stage for the US to be forced to buy at spot prices.
The Fed has to continue printing dollars in order to sustain an unsustainable balance of economic growth and fiscal responsibility. A money manager quipped that he senses the public believes we're in the late innings of this recovery, which is true--but not when you consider it's a 7-game World Series, not a one-game wonder. In other words, we should continue to have record foreclosures and bankruptcies for a couple more years before we turn this tanker around. The good news is that equity prices should rebound a year before the actual bottom, as the stock market is a forward discounting mechanism.
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