4 Bears Growl

4 Bears - Nouriel Roubini (Cliff Küle M-AA*), Eric Sprott (Cliff Küle M-AA*), Meredith Whitney, and Ian Gordon discuss their views and forecasts...

Roubini - will be the first to call a bottom... earnings to surprise on the downside... believes this is a bear market rally... many emerging markets are in trouble... risk of depression has been reduced due to massive government stimulus in the last few months...spike on gold due to risk aversion and fear of depression, near term bearish on gold... emphasizes integrated approach to recovery - monetary and fiscal stimulus, address toxic assets, assist emerging markets, etc... investing in cash at the margin in the last few years...

Sprott - is long gold and short US stocks..."staying bearish is the route to go"...does not believe the commodity boom will resume due to massive leverage that must be reduced... de-leveraging means "no loans for 10 years"... governments are now the only buyer of toxic assets... sees "utter financial collapse"... bullish on gold...

Whitney - banks have reaped recently on their mortgage-backed security holdings and likely to reap balance sheet earnings from the recent mark-to-market accounting changes... says the greatest export from the US in recent years has been financial services but going forth the US needs to export something other than leverage... sees housing prices in the US falling another 30%... predicts we will see another leg down on the subprime mortgage sector... says Americans use credit cards as cash flow management-over 45% of Americans revolve every month on their cards -but credit card lines are being cut by $2.7 Trillion, meaning massive "pay cuts" and drastic cuts in spending... predicts banks likely to sell assets and the sooner they sell, the better prices they will get... foresees going back to a 1980s style banking system -local banks serving local customers on basic banking needs...

Gordon - takes a cycle perspective based on the Kondratieff long wave... says we are now in the deflationary depression cycle, characterized by a washing of all debt... favors gold as the investment of choice... says stocks will drop at least 90% from the peak, target of Dow 1000... depression does not end until 2020...

1. Roubini and Sprott: http://watch.bnn.ca/#clip158793 (about 23 minutes in length)
2. Whitney and Gordon: http://watch.bnn.ca/#clip158804 (about 30 minutes in length)

Gold & Interest Rates

George Soros does not confirm he is trading gold but he implies it is a good bet...says US treasury bonds are in a bubble and likely to burst sooner rather than later... "The moment this fear of deflation turns into a fear of inflation, you'll find interest rates rise in the long end which is going to choke off the recovery... If we are successful [in reviving the economy] we are heading from the prospect of deflation to stagflation"... http://finance.yahoo.com/tech-ticker/article/226767/Soros-Says-Fed-in-a-Bind-Beware-Stagflation-Bursting-of-Bond-Bubble?tickers=dia,spy,GDX,GLD,TLT,TLB,TIP (includes 4 minute video)

Helicopter Money For All

The European Central Bank has ruthlessly attacked G20 plans to use the IMF to pump liquidity into the global economy, calling it "pure cash creation"... "helicopter money for the globe"...

http://www.telegraph.co.uk/finance/financetopics/recession/5119671/ECB-attacks-G20-plans-to-use-IMF-to-pump-cash-into-global-economy.html

Bear Market Investing

Sprott fund manager Jean-Francois Tardif, a Cliff Küle M-AA*, says the"bear"is not over, de-leveraging ongoing for years, debt moving from banking system to government (but still there)... is heavy in cash, invests in depression-resistant stocks, sees $100/barrel oil within 6 - 18 months, predicts $1200 gold by yearend...bullish on agriculture..

1. http://watch.bnn.ca/clip158693#
2. http://watch.bnn.ca/clip158694#
3. http://watch.bnn.ca/clip158695#

Print Your Own Money

Some cash-strapped communities across America are printing their own money... a Depression-era idea, they are trying to help consumers make ends meet while supporting struggling local businesses... the idea is the money stays in the community...

http://www.usatoday.com/money/economy/2009-04-05-scrip_N.htm

Roadmap to $200 Oil

James Quinn details the steps toward an energy crisis, likely to propel oil to $200 a barrel or higher... chart above - click to enlarge - is a map of what has happened and what is likely to happen...

http://www.financialsense.com/editorials/quinn/2009/0407.html

Who Might Go Under?

Slideshow: http://www.cnbc.com/id/29640663/?slide=1

Journey to New Normal

The markets are on a volatile journey to a "new normal," says Mohamed El-Erian, Pimco CEO, a Cliff Küle M-AA* ...

Long Term Opportunity

Sol Palha says copper appears to have built a bottom & is on its way to test the 225 range... "Taking a long term perspective,it is still a bargain; a day will come when its current all time high will look cheap"...

http://www.safehaven.ca/article-13025.htm

cartoon - click to enlarge - courtesy of Nate Beeler

Down Then Up

Marc Faber, a Cliff Küle M-AA*, does not think there will be new lows on stocks, may get 5%-10% correction, then go higher...Asian stocks better value than S&P... thinks US government bond market will go into bear market for 15 to 20 years, as the longer we don't have a recovery, governments will print more money... projects gold neutral for next few months..good time to accumulate... declares G20 agreed to policies that weaken currencies relative to commodities... blames government intervention and regulation as causes of the crisis...now more regulation will solve the problems? http://tinyurl.com/cc93lg (about 19 minutes)

Toxic Effects of a Recovery?

Nouriel Roubini (a Cliff Küle M-AA*) and Goldman Sachs Jim O'Neill discuss exit strategies from the global crisis, but are concerned with the after-effects of massive liquidity injections and inflationary pressures in a recovery...John Thornhill then explores these concerns further...

1. Roubini and O'Neill interview: http://www.ft.com/cms/1644d08e-f450-11dc-aaad-0000779fd2ac.html?_i_referralObject=1084529301&fromSearch=n
2. John Thornhill article: http://www.ft.com/cms/s/0/95f7e972-22c3-11de-9c99-00144feabdc0.html

Falling Faster Than 1930s

Eichengreen and O'Rourke show that the global economy is plummeting worse than Great-Depression-like manner;.. world industrial production, trade and stock markets are diving faster than during 1929-30... the difference is the policy response to date is much better...

http://voxeu.org/index.php?q=node/3421 (chart above courtesy of Eichengreen and O’Rourke)

Debt vs Income

Chart - click to enlarge - courtesy of Michael Hodges

http://mwhodges.home.att.net/nat-debt/debt-nat.htm

Who Understands Risk Models ?

Nobel laureate Robert Merton shows how risk propagated across the financial system to evolve into the economic crisis...blames the crisis on incomplete understanding of the models of risk ... he says it’s not “bad and incompetent people” who have brought this about but “a structural issue between financial innovation and crisis.” We’ve essentially built a high speed train for which there’s not yet an appropriate track...

Liquidity Drained

Meredith Whitney updates on the crisis… liquidity continues to be drained from the system… more consumers unable to service debt burdens… says banks made considerable profit on the mortgage-backed securities being bought by the government… says housing prices still likely to fall further – another 30% expected… banks may post a profit due to change in mark-to-market accounting…

History Rhymes Again?

In 1931, the Austrian bank Creditanstalt went under, sparking a run on other Austrian banks that spread globally to trigger the Great Depression... today-Austrian banks have lent 70 percent of the country's total economy (GDP) to Eastern Europe, and Eastern Europe is now in trouble - could Austrian banks trigger another depression?... http://moneynews.newsmax.com/headlines/Creditanstalt/2009/04/06/200200.html

Fighting Recklessness Recklessly

John Hussman says the American public will likely suffer huge losses instead of bank bondholders from the Geithner Plan... "This is a recipe for the insolvency of the FDIC [Federal Deposit Insurance Corporation] & an attempt to bail out bank bondholders using funds that have not even been allocated by Congress"... John questions how long investors will remain happy over trillion dollar band-aids and accounting gimmicks... on the markets: "if I were to make a guess, it would be that the potential downside in the S&P 500 from these levels could approach 30-40%. That is not a typo, and it is not a possibility that should be ruled out"... http://hussmanfunds.com/wmc/wmc090406.htm (cartoon courtesy of Mike Lane)

$40 Oil This Year?

US Unemployment 19.8% ?

Chart - click to enlarge - courtesy of shadowstats

http://www.shadowstats.com/

Shadowstats says this rate is more accurate than official US government figures, as it takes into account people who have fallen off the radar & have been collecting unemployment benefits for longer than 6 months or 1 year, but have still not found employment...

Lasting Slowdown

George Soros says the US economy is in for a "lasting slowdown" and will not recover this year, especially as US banks are "basically insolvent"...discusses the potential for an international currency replacing the US$ as the world's reserve currency... says the system that has allowed the US to spend more than it earns has to be reformed... http://www.cnbc.com/id/30069223

Inflation-Indexed Bonds

Bond investors are beginning to pile into Treasury Inflation Protected Securities (TIPS) as global central bankers print money to combat the crisis... this massive printing could set the stage for a rise in inflation... http://www.bloomberg.com/apps/news?pid=newsarchive&sid=atbwl_TVWTI0

Buy Food

Slow Painful Recovery Ahead

Roger Altman of the Financial Times maintains the nature of this crisis precludes a normal recovery... instead it is to be a "slow, painful climb-out... The implications for US policy include a likely second round of stimulus, much more federal capital for the banking system and stunning budget deficits that will slow key initiatives for Obama, such as healthcare and energy reform"... http://www.ft.com/cms/s/0/3d89a930-220d-11de-8380-00144feabdc0.html?nclick_check=1 (may need to register to see full article)... cartoon courtesy of Pat Bagley

Europe's Founding Fathers

Over one hour video discussion between the European Founding Fathers including the former President of the France and the former Chancellor of Germany... moderated by the head of the European central bank Jean-Claude Trichet...
http://www.thomson-webcast.net/de/dispatching/?ecb_090402_misc

Bulls vs Bears: Tug of War

Lakshman Achuthan, managing director at the Economic Cycle Research Institute, says lagging indicators like jobs still confirming we are in a deep recession, but forward looking indicators looking hopeful... these indicators include home sales, factor orders, commodity prices... long-term leading indicators bottomed in November... stock market picking up on this... says G20 is not more powerful than the business cycle... http://tinyurl.com/cvetk7

Hyperinflation Coming?

Thorsten Polleit (Frankfurt School of Finance) says the stimulus and recovery policies being pursued globally are increasingly inflationary... "the forces and instruments that can pave the way towards hyperinflation are already in place and gaining strength by the day"... proposes the solution is the return to sound money — free-market money — as outlined by Mises and further developed by Murray Rothbard, and would presumably, at least in the initial stage, result in gold-backed money... http://mises.org/story/3390

If The Fed Fails ?

Simon Johnson (former chief economist of the IMF) and James Kwak (Yale Law School) have a question.. what if it doesn't work? "Bernanke's willingness to pump money into the economy risks unleashing the most serious bout of U.S. inflation since the early 1980s"... Bernanke's approach is based on the belief that the Fed can simply print more dollars - for example, by buying long-term bonds on the market - which reduces the value of money and raises the dollar price of goods and services...

1. article: http://www.washingtonpost.com/wp-dyn/content/article/2009/04/02/AR2009040202573.html
2. famous Bernanke speech of 2002 in which he discusses the "printing press": http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/default.htm#fn18

S&P 500 Determines Politics?

As the market crashed at the beginning of Obama's Presidency, his probability of winning the 2012 election went lower. But now that the market has rallied in recent weeks, his probability to win has spiked to 65%... chart (click to enlarge) courtesy of Bespoke Investment

"Backed by Government"

Eric Sprott's monthly "Markets At A Glance" deserves affirmation by Cliff Küle almost without exception. It is both insightful and entertaining...eg:Government these days is backing everything, from bank deposits, to money market funds, to commercial paper, to insurance companies like AIG, to mortgage agencies like Fannie and Freddie, to auto industry companies like GM and Chrysler - even nonbanks can now issue debt "backed" by the government (GE Capital can issue FDIC debt)... but says Eric "the emperor has no clothes. Government guarantees are merely guarantees to print more money. Ironically, the more the government guarantees, the more worthless that guarantee becomes" http://www.sprott.com/pdf/marketsataglance/03_2009.pdf

Business Confidence Remains Low

“Business pessimism remains deep and widespread across all industries and regions of the globe. Survey responses regarding hiring and equipment and software investment fell to record lows last week,” said the latest Survey of Business Confidence of the World conducted by Moody’s Economy.com.

When Will the Rally End?

Andrew Mickey says mutual fund investors usually put money in the markets and pull it back out at the worst possible time... this happened at the beginning of the dot.com bubble & in 2002/2003 just before the last bull market- could it be happening again?... chart above and recent data from TrimTabs indicate most investors have not jumped back into stocks this year... few mutual fund investors are believers in this rally so far, so as a contrary indicator could there be panic buying soon?... http://news.goldseek.com/GoldSeek/1238947680.php

Investments in Energy

Andrew Teufel of Fisher Investments discusses investments, technology and recent developments in the energy industry... covers upstream, midstream, and downstream operations in oil and gas, differences in heavy oil and light sweet oil, peak oil...

1. Windows version: http://www.netcastdaily.com/broadcast/fsn2009-0404-2.asx (about 33 minutes in length)
2. MP3 version: http://www.netcastdaily.com/broadcast/fsn2009-0404-2.mp3 (about 33 minutes in length)

The Crisis of Our Life

Paul Krugman, a Cliff Küle M-AA*(Most-Admired Adviser) observes that once we are in a world with not enough demand and interest rates going to zero then we are "in a world where the rules of economics go into reverse - much like Alice in Wonderland"...

http://www.mydesert.com/article/20090404/NEWS01/904040323/1139

Sector View of Debt

Chart - click to enlarge - courtesy of

http://www.businessinsider.com/henry-blodget-our-de-2009-4

(check link for charts and insightful comments on US debt problem)

G20: New Commitments?

Chart - click to enlarge - courtesy of the Financial Times:
http://www.ft.com/cms/ec2c8682-1fbb-11de-a1df-00144feabdc0.gif

Soros Speaks

George Soros discusses the IMF plan to make available up to $750 billion in SDRs (Special Drawing Rights) to aid developing countries... still thinks the dollar is the dominant currency, and discusses the subject of alternative world reserve currencies...

Wall Street Oligarchy

New Bull ? Are You Crazy?

David Rosenberg, a Cliff Küle M-AA*, says this bull market rally is all just a sucker's rally.He thinks the market is headed to startling new lows... especially because the housing market still has not stabilized..."..the risk of earnings disappointments will take the S&P 500 to new lows before the bear market runs its course. Based on the outlook for corporate profits and the typical ..P/E multiple that characterized recession bear markets, it would not surprise us to see the S&P 500 gravitate in a 475-650 range for an extended period of time... http://finance.yahoo.com/techticker/article/224593/Merrill

Beware Protectionism

Former Deputy Secretary of the US Treasury says the rise of protectionism remains the greatest concern...

Financial Crisis: Inside View

White paper prepared for the Brookings Panel on Economic Activity...Professor Phillip Swagel of the University of Chicago discusses the events, decisions, and initiatives of addressing the credit and economic crisis since the beginning back in 2007... http://www.brookings.edu/economics/bpea/~/media/Files/Programs/ES/BPEA/2009_spring_bpea_papers/2009_spring_bpea_swagel.pdf

Technicals: Looking Bullish

7 Indicators of No Bull

Eric Roseman lists 7 indicators why he does not think this is a bull market:

1. The VIX Index or the CBOE Volatility Index, which acts as a fear gauge, remains above 40
2. Investment grade corporate credit spreads are still way too high. High quality spreads remain above four hundred basis points (4%); historically, investment grade spreads have averaged 130 basis points or 1.3% above Treasury yields, according to PIMCO.
3. REITs are not rallying along with the stock market.
4. The Baltic Dry Index, which measures bulk cargo rates for shipping commodities, skyrocketed off its lows last fall and then peaked a few weeks ago. This index is now down 32% since peaking in March – indicating that trade flows are deteriorating sharply
5. Gold. If the reflation theme is back or the re-emergence of higher inflation accompanied by the acceleration of bank credit and money printing, then why hasn’t gold rallied along with stocks?
6. Small-cap stocks are lagging since mid-March – an anomaly in the context of bull market rallies. If stocks were truly putting in a bottom then smaller stocks would generally lead the market;
7. The U.S. dollar should be declining much faster as stocks rally. If the bear market was truly over then more dollars would be sold to increase risk and leverage bets in global markets.

http://rosemanblog.sovereignsociety.com/2009/04/seven-indicators-that-question-a-prolonged-rally.html

Return of Commodity Bull?

Gary Dorsch of Global Money Trends shows through a set of charts how investors and speculators are returning to the commodity markets...metal which has performed best this year is copper, and it’s attracted the strongest investor portfolio flows in the mining sector of global equity markets... says that "G-20 central bankers are monetizing trillions of dollars worth of government debt, engaging in full-scale currency devaluations, and working feverishly to re-inflate commodity and asset markets"...

http://news.goldseek.com/GoldSeek/1238698674.php

Fair Value?- Just Wing It

The Financial Accounting Standards Board (FASB) has voted to relax the fair-value accounting rules, allowing banks to mark securities to a model rather than to market prices. This is being done in response to a threat by Congress...if FASB did not relax the rules, Congress would do so ... Cliff Note: could this allow too much leeway in valuing toxic assets? how can risk be assessed?hasn't the horse already left the barn?

1. http://www.cnbc.com/id/30009618
2. http://www.bloomberg.com/apps/news?pid=20601087&sid=agfrKseJ94jc&refer=home

Stein & Beck

Cannot Spend Out Of Depression

Venerable Richard Russell weighs in... says government is trying to do the impossible - spend its way out of depression...aware of recent developments by China downplaying the US$ as the world's reserve currency - the currency swap with Argentina and the $95 billion in deals signed with China's trading partners since December... says US debt is now compounding at a terrifying rate...Note:look at Cliff's"DebtClock"& know it does not include all liabilities!

http://www.321gold.com/editorials/russell/russell040209.html

Bear Market Rally Won't Last

Globalization Unstoppable

Spiegel interviews Nobel Prize laureate Economist Joseph Stiglitz... Stiglitz says government stimulus plans are not enough, even given the trillions already spent & loosening monetary policies... suggests the German social model of capitalism may be a good system for today's world... advises the bank bailout money should be directed to small-to-medium sized banks that actually do lending... emphasizes global growth needs to be fostered since the old model of Americans borrowing and consuming no longer works as Americans are "over-indebted"... concludes that if we learned one thing from this economic crisis it is this: "Globalization can't be stopped. It has to be managed or else the global economy won't work"...

http://www.spiegel.de/international/world/0,1518,616743,00.html

Loosening Monetary Policy

Chart - click to enlarge - courtesy of Casey Research

Chart emphasizes interest rates globally heading to virtually 0%

and money supply growth increasing at double digit rates!

http://www.safehaven.com/article-12982.htm

VIX Will Indicate Direction

Chris Puplava of Financial Sense explores the relationships and effects of the Volatility Index (VIX) technical indicator on the financial markets...it is at a critical juncture now- see chart showing a triangular formation... which way this indicator breaks out..-upside or downside-..will have a big effect on the financial markets... Chris says "Looking at these relationships appears to be sending a collective message that the worst may indeed be over, with a complex bottoming process likely to ensue in the months ahead"... http://www.financialsense.com/Market/cpuplava/2009/0401.html

Fed's Fisher Speaks Out

Kerr on Commodities

Commodities guru Kevin Kerr on agricultural commodities, new developments affecting American farmers... outlook on grains, cotton, coffee, and sugar...relationship of sugar to crude oil?... http://www.howestreet.com/audio/kevinkerr01042009.mp3

Gartman's Top 3 Picks

CNBC Fast Money crew discusses the top three plays for the spring with Dennis Gartman, The Gartman Letter...Long Copper, Long Alcoa, Short Yen

"Song" by Black Swan

Nassim Taleb, the"Black Swan",says the financial system has too much hidden risk... the government does not understand the core of the problem...much more complex than 1930s. The Geithner Plan is an attempt to patch the problem, and is just another subsidy to Wall Street...like "trying to feed a dead horse"...says we need an environment with very low leverage, no complex derivatives, no "too big to fail"banks - this would be more compatible with capitalism... suggests making banks become like utilities, taking much less risk... http://tinyurl.com/dxwfar

Past is Prologue ?

An eerie omen - in 1933 amidst the Great Depression, more than a thousand of the world's top finance and government officials squeezed into London's stuffy Geological Museum to set about trying to save the world from the economic crisis. Six weeks later, the World Economic Conference gave up. Now in 2009, a similar gathering in the same city with the same purpose...

http://www.msnbc.msn.com/id/29973077/

Shake Hands With Government

Pimco's Bill Gross is investing in what governments are buying...

America - An Emerging Market

Echoing Simon Johnson (see below), Desmond Lachman, previous chief emerging market strategist at Salomon Smith Barney and deputy director of the IMF's Policy and Review, says the US is resembling more and more an evolving emerging market crisis country run by a financial oligarchy "spouting nationalistic rhetoric" at at time it needs to address its growing debt and list of problems... http://www.washingtonpost.com/wp-dyn/content/article/2009/03/25/AR2009032502226.html?referrer=emailarticle