Jeremy Grantham(Cliff Küle M-AA*):more bullish in the medium term,but says markets may go to a new low first..long-term bull "most unlikely"..foresees "less indulgent world.Life to be lived "more frugally"...confident stimulus programs will work but.."we seem to be making a desperate attempt to make the setback shallower..at the expense of longer recovery.Concludes we should not be led to "believing that all of the failing financial companies -or very nearly all-had to be defended at all costs"..bank bailout money should have been spent on infrastructure and energy projects(Cliff concurs) http://www.gmo.com/websitecontent/JGLetter_1Q09.pdf (may need to register for free first)
Thursday, May 7, 2009
Jeremy Grantham(Cliff Küle M-AA*):more bullish in the medium term,but says markets may go to a new low first..long-term bull "most unlikely"..foresees "less indulgent world.Life to be lived "more frugally"...confident stimulus programs will work but.."we seem to be making a desperate attempt to make the setback shallower..at the expense of longer recovery.Concludes we should not be led to "believing that all of the failing financial companies -or very nearly all-had to be defended at all costs"..bank bailout money should have been spent on infrastructure and energy projects(Cliff concurs) http://www.gmo.com/websitecontent/JGLetter_1Q09.pdf (may need to register for free first)
Inflation Warning... China's Central Bank gives warning that the massive monetary stimulation by Western governments risks setting off worldwide inflation and undermining global bond markets... http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/5286832/China-fears-bond-crisis-as-it-slams-quantitative-easing.html
Stress Test Results - Capital Needs of Big U.S. Banks (in alphabetical order)
American Express — None
Bank of America — $33.9 Billion
Bank of New York — None
BB&T — None
Capital One Financial — None
Citigroup — $5.5 Billion
Fifth Third — $1.1 billion
GMAC — $11.5 Billion
Goldman Sachs — None
JPMorgan Chase — None
KeyCorp — $1.8 billion
MetLife — None
Morgan Stanley — $1.8 Billion
PNC Financial — $0.6 Billion
Regions Financial — $2.5 billion
State Street — None
SunTrust Banks — $2.2 billion
U.S. Bancorp — None
Wells Fargo — $13.7 Billion
http://www.cnbc.com/id/30626465
American Express — None
Bank of America — $33.9 Billion
Bank of New York — None
BB&T — None
Capital One Financial — None
Citigroup — $5.5 Billion
Fifth Third — $1.1 billion
GMAC — $11.5 Billion
Goldman Sachs — None
JPMorgan Chase — None
KeyCorp — $1.8 billion
MetLife — None
Morgan Stanley — $1.8 Billion
PNC Financial — $0.6 Billion
Regions Financial — $2.5 billion
State Street — None
SunTrust Banks — $2.2 billion
U.S. Bancorp — None
Wells Fargo — $13.7 Billion
http://www.cnbc.com/id/30626465
When, at a hearing before the Senate Budget Committee, Fed Chairman Ben Bernanke was asked, “Will you tell the American people to whom you lent $2.2 trillion of their dollars?” He answered, “No.”... http://www.lewrockwell.com/orig10/celente4.html
Obama's Budget Cuts - cut $17 but spend $3500, even though you only make $2100 and have to borrow $1400... CNN says "The $17 billion in savings amounts to roughly 0.5% of the more than $3.5 trillion in spending approved for next year, or 1.2% of the projected $1.4 trillion deficit next year if the president's overall budget is adopted"... http://money.cnn.com/2009/05/07/news/economy/obama_budget_details/index.htm?postversion=2009050710 (click on chart above to enlarge)
Central Banks Gold Holdings
chart - click to enlarge - courtesy of FT(may have to "zoom" in after enlarging for greater clarity)
Greenspan Legacy Tarnished?
Former Fed Chairman Alan Greenspan was hailed three years ago as "the greatest central banker who ever lived"... but is now is being criticized and blamed for his management of the economy and for sowing the seeds of today's financial crisis..."I was praised for things I didn't do...I am now being blamed for things that I didn't do"... http://online.wsj.com/article/SB120760341392296107.html
"Black Swan" Nassim Taleb says the global crisis is "vastly worse" than the 1930s because economies worldwide are more connected... governments have no control over economies...thinks the world is facing “big deflation,” though the risks of inflation are increasing as governments print more money...gold and copper may “rally massively” as a result...- article: http://www.bloomberg.com/apps/news?pid=20601087&sid=aaw1G6d30PO8&refer=home
- video: http://tinyurl.com/cw5plw (may have to adjust volume settings due to faint quality)
Wednesday, May 6, 2009
Former IMF Chief Economist Ken Rogoff...discusses stress tests, bank bailouts & more...says we will need More Stimulus for recovery,but the recovery will likely be longer than expected, at least 3 or 4 years........http://tinyurl.com/cabf69
Higher Quality Assets is what Richard Bernstein favors for investing... says the economy is likely to get a more muted recovery going into 2010... still believes the government bailout efforts will not work in the long run... thinks most of the market risk aversion of a few months ago is now lost... about 17 minutes in length, includes discussion with Dick Bove... http://tinyurl.com/d3ncby
Markets and Retirement Investing
Control Its Own Destiny?
Asia has setup a $120 Billion fund through the Asian Development Bank (ADB) as the go-to organization in this crisis..Cliff Note:could this be a step in Asian de-coupling? could the ADB be the new "Asian IMF"? could Asia be resentful?(the IMF demanded belt-tightening in Asia's 1990s crisis).The West has done the opposite when the "shoe is on the other foot" http://www.reuters.com/article/businessNews/idUSTRE5420L220090504
Green Shoots Rally..Gary Dorsch uses charts with notes at key points to show how the recovery is happening,especially in Asia...shows that massive monetary and fiscal stimulus worldwide,along with accounting gimmickery,has economies recovering...cites Warren Buffett: "While short-term stock-market movements can’t be foretold,the likelihood is the market will recover before the economy or investor sentiment,& if you wait for the robins, Spring will be over"... http://news.goldseek.com/GoldSeek/1241590380.php
Insider selling at highest level since the beginning of the bear market in 2007... http://www.bloomberg.com/apps/news?pid=newsarchive&sid=arl3VgxA0FAA
Tuesday, May 5, 2009
Income Down , Debt Up
Charts - click to enlarge - showing long-term falling disposable personal income (below) but rising debt service payments as a percent of disposable personal income (lower) - very bearish for Americans in the long-term and for the prospect of a recovery...
Charts courtesy of St Louis Fed and Mish Shedlock http://globaleconomicanalysis.blogspot.com/2009/05/wages-contract-in-us-uk-japan.html
Deflation Will Win
David Rosenberg, a Cliff Küle M-AA*(Most-Admired Adviser), says we are in year 9 of an 18-year secular bear market... thinks we are past the half-way point in the recession... foresees we could be on the precipice of a cyclical upturn but still considers the secular long-term bear market in play... and ultimately deflation will win out over inflation... http://zerohedge.blogspot.com/2009/05/parting-thoughts-from-rosenberg-ver-10.html
De-leveraging Still On-Going
Jean Francois Tardif, a Cliff Küle M-AA*(Most-Admired Adviser), updates on his positions and views of the economic and investment environment... still thinks this is just a bear market rally, says people are likely to get hurt... says don't "buy and hold" in this environment... still focusing on the de-leveraging in the economy... http://watch.bnn.ca/#clip168279
Monday, May 4, 2009
China Cancels US Credit Card?
Congressman Mark Kirk says "It would appear,quietly and with deference and politeness,China has canceled America's credit card"... http://www.google.com/hostednews/afp/article/ALeqM5i4estRSYeFBIII9kezxnP4jgoGZQ
Satyajit Das ponders the lessons of the crisis... says "consumption rather than investment drove growth,... debt-fuelled consumption became the norm"... instead of real engineering, financial engineering became the driver of the economy... the disease is "excessive debt and leverage in the financial system, especially in the US, Great Britain, Spain and Australia. The "cure" is the reduction...of debt that is now underway (the great "de-leveraging"). The initial phase of the cure is the reduction in debt within the financial system... the second phase of the cure is the effect on the real economy... within the financial sector,de-leveraging is well advanced... in the real economy it is in the early stages"... http://www.eurointelligence.com/article.581+M553774d2c37.0.html
2+2=4
Bernard Baruch (above) cautioned investors in the late 1920s of a speculative stock market blowoff with the saying that "2+2=4"... today Pimco CEO Bill Gross looks at Bernard's photo almost every day and hears a whisper of "2+2"... inspired by Bernard, Bill today warns "Do not be deceived by the euphoric sightings of “green shoots” and the claims for new bull markets in a multitude of asset classes. Stable and secure income is still the order of the day. Shaking hands with the new government is still the prescribed strategy, although it should be done at a senior level of the balance sheet"... http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2009/IO+May+09+Gross+2+2+4.htm
What is Money?
John Lee explores what money is...Aristotle defined the characteristics of good money:- It must be durable. Money must stand the test of time and the elements. It must not fade, corrode, or change through time.
- It must be portable. Must hold a high amount of 'worth' relative to its weight and size.
- It must be divisible. Money should be relatively easy to separate and re-combine without affecting its fundamental characteristics...the item should be 'fungible'. Dictionary.com describes fungible as:
"(esp. of goods) being of such nature or kind as to be freely exchangeable or replaceable, in whole or in part, for another of like nature or kind." - It must have intrinsic value. This value of money should be independent of any other object and contained in the money itself.
Characteristics of potential choices for money,a thousand years ago, left gold as the only choice... today, the choices are different but both gold and the Oil ETF have the right characteristics...http://www.financialsense.com/editorials/lee/2009/0501.html
Use viruses to power batteries, MIT Researchers claim that its virus-powered batteries have as much power and energy capacity as rechargeable batteries currently being considered for hybrid cars... they say that the viruses are harmless to humans, the batteries are cheap to manufacture, don't require harmful solvents, and contain non-toxic materials... http://www.fastcompany.com/blog/ariel-schwartz/sustainability/mit-scientists-build-virus-powered-batteries-your-next-electric-c
Tension over the economic crisis fuels protests and riots across Europe in Germany, Greece, Austria, Turkey & France... http://www.telegraph.co.uk/news/worldnews/europe/5258634/Riots-across-Europe-fuelled-by-economic-crisis.html
US Banks Insolvent?... James Quinn relates that McKinsey calculates there are still $2 Trillion of toxic assets on the books of US banks...says the IMF estimates total credit write-downs of $4.1 Trillion, with $2.7 Trillion in US financials alone...relates a similar perspective from Economist Nouriel Roubini - the total losses on loans made by US financials will reach $1.6 Trillion, with an additional $2 Trillion in losses on securities, but these losses don't include commercial real estate losses, nor credit card losses, nor upcoming mortgage reset losses ...yet Treasury Secretary Geithner says: “Currently, the vast majority of banks have more capital than they need to be considered well capitalized by their regulators" http://www.minyanville.com/articles/index/a/22494
Which Way to the Markets?... John Hussman quotes F. Scott Fitzgerald – “The test of a first rate intelligence is the ability to hold two opposed ideas in the mind at the same time and still retain the ability to function"... this captures John's thoughts on the current markets - not sure if they will go up or down... http://www.hussmanfunds.com/wmc/wmc090504.htm
Gillian Tett writes about the Genesis of the Debt Disaster that has brought on this economic crisis... focuses on credit derivatives and follows their historical development and use... http://www.ft.com/cms/s/2/51f425ac-351e-11de-940a-00144feabdc0.html (may need to register first)
Chart of the Day
click to enlarge - courtesy of Bureau of Economic Analysis;
National Bureau of Economic Research
Sunday, May 3, 2009
Robert Shiller explores fears of economic depression, as measured by the University of Michigan Survey of Consumers... finds that depression scares come and go,& numbers for this recession are not as bad as in previous recessions...as Franklin Roosevelt said during the Great Depression, “the only thing we have to fear is fear itself"...Robert concludes: "Let’s hope that [quote from Roosevelt] is true,& that the relative complacency in the general population is good news for the economy"...
John Mauldin says:..Dangerous Game played by Obama & the Fed...printing trillions of dollars to avoid deflation...but "for a variety of reasons...real,sustainable recovery may be a few years away"...what happens when the markets "balk..at high & unsustainable national deficits" when inflation returns and recovery is only "tepid"? can the Fed remain independent & take back the money it is printing?... http://www.frontlinethoughts.com/pdf/mwo050109.pdf (cartoon courtesy of Chad Crowe)
MSN Money's Jim Jubak looks at what to invest in ... expresses concern...burdens of this crisis "will linger for a generation"...lower living standards, higher interest rates, higher inflation & lower growth...concludes to invest in companies with strategies for escaping this slow-growth trap... http://articles.moneycentral.msn.com/Investing/JubaksJournal/only-1-way-out-of-big-economic-hole.aspx?page=all
Saturday, May 2, 2009
Commodities...US Global Investors webcast dispelling the "irrational pessimism"on commodities...“While there are a number of headwinds... there are also several reasons to remain bullish"...what's driving gold & what's driving energy?...insights,statistics& trends...webcast: http://events.vcall.com/VCall/ReplayLogin.aspx?room=2146003413 (about 1 hour)
52 slides: http://www.usfunds.com/webcast/Commodities_04-2009/USGlobal_Commodities04-2009.pdf
Gold - Supply & Demand
CPM Group discusses gold..demand & supply, central bank reserves, investment trends & prices...CPM puts out the Gold Yearbook 2009... gold is the one investment that has gone up 9 years in a row...(about 35 minutes) Windows:http://www.netcastdaily.com/broadcast/fsn2009-0502-2.asx MP3version:http://www.netcastdaily.com/broadcast/fsn2009-0502-2.mp3
Friday, May 1, 2009
Zombie Oligarchs... Simon Johnson writes that most crises lead to "a greater concentration of economic power and political influence"... in this crisis, the survivors from Wall Street have become the financial oligarchy... because of this power and influence, it will be hard to bring needed change... Simon says "you won’t see a great deal of innovation, investment, and growth coming from these survivors"... and these survivors "are made invincible by campaign contributions, political connections, and everyone’s reasonable fear of a great depression"... http://www.rgemonitor.com/financemarkets-monitor/256593/zombie_oligarchs
When Does Gold Do Well?... Mish Shedlock clarifies: "The idea that gold does well in periods of inflation and deflation is easily disproved. Gold fell from over $800 to $250 over the course of 20 years with inflation.... The reality is gold does well in periods of high economic stress (deflation, stagflation, hyperinflation,& credit stress)...we are in a period of extreme credit stress. Moreover, nearly every country on the planet is attempting to debase their currency simultaneously(Cliffspeak:"monetary debauchery").... http://globaleconomicanalysis.blogspot.com/2009/04/gold-continues-to-act-well.html
Banks Own Washington?... Senator Dick Durbin of Illinois this week said: "And the banks -- hard to believe in a time when we're facing a banking crisis that many of the banks created -- are still the most powerful lobby on Capitol Hill. And they frankly own the place"... http://www.businessinsider.com/senator-admits-that-bankers-own-capitol-hill-2009-5
An interview of President Obama on the future of finance, health care, education, and US global competitiveness... Obama says "if you look at who our long-term competition will be in the global economy — China, India, the E.U., Brazil, Korea — the countries that are producing the best-educated work force, whose education system emphasizes the sciences and mathematics, who can translate those technology backgrounds or those science backgrounds into technological applications, they are going to have a significant advantage...... And I think that we’ve got to have enough of that in order to maintain our economic strength"... http://www.nytimes.com/2009/05/03/magazine/03Obama-t.html?_r=2&pagewanted=all
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