If its Saturday nite, then its time for an Open Thread.
The questions before you: Is this the end of the Fed cycle — or is it a pause before the next raise?
Oil? Energy?
I said about 6 months ago its an election year, so we can expect more terror warnings and thwarted attacks — but this one looked real — was it?
Has the market gotten used to terror — like it was used to MAD/threat of global nuclear destruction?
Lastly, does anyone still believe there still a Summer rally out there to be had?
What say ye?
I believe this is policy pause rather then policy shift, whatever, this bears market looks like just at the starting point.
Not related in anyway, but figured some would enjoy this LATimes story (http://www.latimes.com/sports/la-sp-aba31jul31,0,917243.story):
also, wrt the summer rally. it starts monday on the cease fire and partial re-opening of pipeline news. lasts through, oh, maybe 1:30 – 2:00.
Barry, you said on the last thread: “Big uptick in plastic this week — no Housing ATM anymore, so they hit the credit cards!”
Do you have a link to the source of this data? I’m interested in reading more about this.
Cease Fire? Who cares, nobody has been paying attention to that fiasco for days. The Neo-cons were hoping Israel could drive the Hezzies out of Lebanon, it didn’t work. So now they are stopping it, simple as that.
yeah, surprised by Barry’s trolling for terrorism conspiracy or hyping for election concerns.
I hope that this wasn’t just a provactive statement to drive comments. I held this blog in higher esteem.
(yet, I’d be remiss if I didn’t note: Funny how partisans on one stripe claim that terrorism is hyped to bolster fear and thus, the repubican party – yet, what party is it that runs around creating fear about Global Warming for their own gain?).
Fear about Global Warming? The fact is that it is the EARTH itself propping up this warming with man just giving it a nice push should be worrisome enough, especially if it causes a re-balance into another little ice age like the Middle ages warmth caused between 1400-1800.
What are your views on the discussion of the yield curve inversion contained in the Burton Malkiel article in this week’s Barrons? Why is he right/wrong?
look out cherry’s off her meds again
As I see it, Barry lives in New York. According to a Zogby Poll over 80% of New Yorkers have doubts about the official story on 9/11.
So I am not that surprised that Barry being intelligent, has some doubts about official news stories.
Both the london bombings and Toronto Arrests seem to have a large number of unanswered questions.
I think it is safe to say that we are going to see a large number of terror warnings, and possibly one will be “allowed” to happen a. al 9/11. It is an election year after all.
Cheers
and I thought the london terror incident was
to get the price of gasoline down so that
bush’s approval ratings would go up ……
anyways, cheap gasoline, atleast this weekend.
Anon,
One doesn’t have to be a conspiracy thoery nut to believe that the Bush administration (Karl Rove) would exagerate a foiled terror plot in order for political gain. I think it is pretty obvious that the plot to blow up Sears tower was a total joke, for instance. However, I agree with Mr. Ritholtz and think that this one was legit. Obviously having British Intelligence involved gave it a little more credibility.
Back to my point, which is that it is another thing completely to suggest that reasonable people would believe that the same, incompotent, politics-before-policy jack-asses in the White House would allow the killing of Americans in order to retain power for the Republicans.
I truely hope that you were not being serious in your suggestion and that you just had your tongue pressed firmly up against your cheek. If not, I pity you and your bleak, cynical outlook on the world.
Also, I’m not sure I believe the Zogby poll results you quoted.
Are you planning on a mid-term election year stock market rally? It seems like a good story, but going into a recession, high oil prices, lower earnings, how can the market rally? Perhaps a September Fed rate cut will do it? But can the market really rally for a year or two, as it historically does in mid-term years?
Slog lower until October. Resistance 124 on the SPY. Good trading market. Don’t own anything, short term rent until October. No meltdown in view yet.
rick- I don’t know where you live, but I just paid $3.08 for medium grade gas and that ain’t cheap in my book for around here.
Barry- I really don’t understand why you would bait the Winger Werewolves unless you are amused by the mutterings of sad and confused people? They are pretty much the heirs of the Nixon Majority! which didn’t capitulate until we got out the Cluebat, then they all gave up at one time (which was kind of spectacular).
Anyway, regarding your question about whether the markets have started to shrug off terrorism as they did MAD, I’d say that you’ve got your history wrong. The markets and everybody else was periodically scared as hell during the 60-70’s and acted accordingly. The one episode that I remember was when the public found out that Dick had called a Defcon III (global nuclear) alert during October, 1973, about a week after he had already stood everybody down. Even the Cold Warriors were trying to figure that one out and it probably accounted for him being forced out of office as much as anything.
Basically, the second biggest collection of cowards in the entire country is on Wall Street as 9/11 proved, while the biggest collection is in DC, as 9/11 proved. They are feckless cousins, but at least the latter have the ability to do something about OBL. But he is their cousin as well, so they don’t and find him quite useful.
Where is Tailgunner Joe when you need him to clean out all of the treason? :}
“Back to my point, which is that it is another thing completely to suggest that reasonable people would believe that the same, incompotent, politics-before-policy jack-asses in the White House would allow the killing of Americans in order to retain power for the Republicans”
How far fetched does it need to be in light of lying to get American troops into a shooting war and killing thousands of Iraqis and a few thousand of our own, not ot mention the thousands of wounded who will never be the same. Then we have the known “the sky is falling”, “WOLF” false alarms.
NO, people of such high moral standards would never stoop to anything so low to stay in power, would they?
They would only kill Muslims and our kids.
To imagine wouldn’t really require tongue placement anywhere special, would it? I’m honestly not sure to what length these ass clowns would go to to stay in power, but something tells me we are about to find out. In light of that, I think Barry’s question is well placed as is citizens doubts of the trustworthiness of their government.
per slam:
“Slog lower until October. Resistance 124 on the SPY.”
Resistance there but that will be broken as will 122. I look for a Pause! at 120 before it heads on down to 114 and the helicopters come flying overhead.
Barry will eventually get his 80-90 prediction, but only after a lot of very ugly and obvious machination that fails. Might take up to a year, but we’ll get there sooner or later.
Barry, how am I supposed to take you seriously when you insinuate that the foiled terrorist attacks were all plotted by those in power/govt? This is very tacky commentary, you should be ashamed of yourself.
per Mike:
“Barry, how am I supposed to take you seriously when you insinuate that the foiled terrorist attacks were all plotted by those in power/govt? This is very tacky commentary, you should be ashamed of yourself.”
Barry can speak for himself, but Terror Alerts! are generally just an election tool that gets the sheep to look up from their grazing and move a little closer together. And they are seasonal, have a look at this abomination. So they were going to blow up the Mackinac bridge because it is in a strategic hunting/fishing location? And use prepaid cellphones that cost $100 a piece? Is there anyone here who couldn’t do that at $8 per from radio shack assuming the explosives were available to begin with?
(Is it any wonder why Decline to State is the fastest growing politcal non-party?)
I think the Fed pauses for now, and that we’re just in a normal correction within a bull market.
I specifically said this one looked real — but I have my doubts about all the terror alerts in 2004 — an election year.
Somehow, the terror alerts stopped after the election.
I do believe the Brits thwarted some bad guys — but I can almost guarantee you that we will see some politically motivated nonsense this year . . .
per muckdog:
“I think the Fed pauses for now, and that we’re just in a normal correction within a bull market.”
Excellent, then pump some money into this bull market so that I can take your ears for my collection. heheheh.
Question for the esteemed panel here:
Rather than being a sign of strength, is the relatively high level of consumer spending indicative of consumer weakness?
Wages have been stagnant and declining in real terms, and this would not normally be a condition for increased consumer activity. Almost all durable goods are leased – what else do you call a 40-year-old with a 30-year mortgage? It would be interesting – probably impossible to figure – to figure out what the present LTV of durable goods is. As we go forward, it would be interesting to know how much non-durable goods purchases are being funded through credit. The negative savings rate would seem to indicate that this is occuring. This would strike me as the last step before the consumer collapses. Analogous to this would be a decline in durable goods purchases. Auto and home sales seem to indicate a slowing here.
I think this terror case was for real.
Some good old fashioned detective work, with key parts done for us by Muslims (in Pakistan and presumably the police who infiltrated the group in the UK).
All the previous alerts I can remember felt ficticious or exaggerated.
I am not sure that any shenanigans the current regime in Washington might try would work. A lot of people seem to have responded this time not by saying “Thank God we have a strong president to protect us from terrorists”, but rather “you people knew about the dangers of liquid explosives since when and did nothing about it?”
The piece of the puzzle that is always hardest for me to figure is what the Fed will do if (when) forced to chose between severe recession even depression or inflation. I don’t think any chart can predict such an essentially political choice.
I don’t see how the Fed can stop the housing bust. They can drop money from helicopters and lower the Fed funds rate to 0 if they want, but that will drive up inflation and mortgage interest rates with it.
Is there a politically possible way for them around this? In theory, the government could just start writing everyone 30-year mortgages at 2% and create another housing bubble for a while, but politically that is out of the question. Or the government could issue credit cards with interest rates at the Fed Funds rate and let everyone transfer their balances. That would rescue many consumers. And will happen when pigs can fly.
BTW, I think that China handing out its huge foreign currency reserves to its own consumers so they can buy the goods our consumers won’t be able to buy would also work and is equally politically impossible.
There is no replacement for the US consumer unless and until the pain becomes so severe that what is politically impossible now becomes the only choice (as in 1929 and 1932).
per Kevin:
“A lot of people seem to have responded this time not by saying “Thank God we have a strong president to protect us from terrorists”, but rather “you people knew about the dangers of liquid explosives since when and did nothing about it?”
And that isn’t a fair question? I remember that a few months after 9/11, the DoD bozos asked hollywood writers to furnish any and every imagininary terrorist plot they could for evaluation. I don’t know what became of that effort, but would guess that it was purely for show.
What is clear is that Homeland Security is run by assholes and that the TSA has adopted the Microsoft approach of presenting inconvenience as security. In the interim, you can float a nuke into New York Harbor and set it off with no problem at all. Stay the course!
Whipsaw,
I agree that it is quite a fair question. And the fact that it is being asked is a healthy change from after 9/11.
I try to avoid explaining things in terms of people being assholes. It is a discipline that usually leads to me to a more useful explanation.
Having said that, I agree with you that our nation’s post-9/11 security approach has been long on posture and short on brains.
Before 911 — before W was even elected — there was the Project for a New American Century (PNAC). Signatories? Cheney, Rumsfeld, Perle, Wolfowitz, Jeb Bush, and others who became and remain W’s closest confidants. One of the PNAC members once commented that a new Pearl Harbor would provide the political will to spring the PNAC plan.
I do believe Muslim terrorists flew planes into the WTC. But, I also believe not enough was done to prevent it. Intentional failure to do enough, incompetence (e.g., Katrina), or “acceptance” (that not enough could be done anyway to protect all possible targets)?
Yes, Republicans think this is crazy talk. But, when you think about what Republicans believe is at stake (the prevention of Muslim theocracies that ignore or even support militants that threaten US lives/interests for decades), is it really that crazy? Remember that Bush justifies (or even brushes aside) the 30,000 “more or less” dead Iraqi civilians, the dead Lebanese civilians, and dead American GI’s. Are dead American civilians really a “stretch”? If you’re looking at the long-term, big picture through neocon eyes, I don’t think so. These are “birth pangs” for the new ME.
I think an acceptance of “the inevitable attack” made them say “well, when it comes, we’ll do what we think we have to do to prevent attacks in the future, which might eventually include attacks of the nuclear kind”.
Listening to NPR Sat a.m. on my way to secure victuals there were two stories: One about the foiled terrorist plot. I had to smile when Juan Williams noted that “some” scepticism around the story. Nevertheless, British intelligence had a lock on this group and felt that with their exploration into smuggling liquids on board needed to be thwarted. Conclusion for me: “evil doers” will remain fixated on doing evil. Isn’t that their role in human drama? The characters don’t change, only the time, venue and cause. It’s called the human race! And politicians (of any persuasion) will remain fixated in exploiting whichever angle that positions their interests best.
Second, more alarming, story had to do with Iran and the scenarios of dealing with Iran (to included Israel) by force or otherwise. Israel lacked the firepower (long range missiles as well as refueling jets)–so US intervention would be important. Iran had the ability through its missiles to take out several US military basis. The conclusion (by those involved to include current ex military, Newt G. and other influential advisors), then, was that the “otherwise” or diplomancy, no matter how difficult was preferred. I have to say, it was eery to hear. I think that there is a surprising complacency regarding the escalation of these ancient hatreds.
Cherry…I agree with you and think that there is also a complaceny regarding the potential devastation of climate change. A mini-ice age could reduce food production and increase the need for heat production in a way that we are wholly unprepared for. (And for those who scoff at the opinions of others to hurl medication invectives to those with whom they disagree–take a pill and get over it!).
Craig, there is a big difference between being stupid and being evil.
“The evil that is in the world almost always comes of ignorance, and good intentions may do as much harm as malevolence if they lack understanding.”
Albert Camus (1913-1960)
Michael C,
This link was given in the previous thread to my same question:
U.S. Consumer Credit Unexpectedly Accelerated in June (Update3)
I believe this is what Barry is referring to…
Whatever happened to the Brits well known tendency toward understatement. “… on an unimaginable scale”.
hi whipsaw…. the gasoline futures dropped
roughly 10% after the london incident, the local
gasoline here dropped 10-15% on the weekend.
I believe if you live in a rural area,,, the less the tendency for the competition, or the lack of to
sell to public at a loss.
The volatility, esp this past week has got to be hurting
some gas stations.
I wonder how much of the credit surge is from all those 0% APR offers out there right now? Why WOUDN’T it surge when they are offering free use of money for a year…no fees, 0% APR?!
Just Google up “0% APR credit card”, and you’ll be blown away…free money.
poor lost liberals
vitamins
patio furniture
cosmetic surgery
lasik texas
outdoor grill
Barry:
There seems to be a fluke in this blog. I’m noticing many duplicate postings over the course of several threads.
I would love to see some statistics published regarding the % of initial credit card offerings with a 0% interest rate that end up going to the maximum rate, and the period of time that it takes. I know that I’ve posted this here earlier, but I remind that some of those rates (in past offers that have come my way) can increase if your credit goes south, even though one has fouled the relationship with the issuer. Personally, I find that offering such terms to folks that are bound to falter is horrible business practices–like offering crack to an addict.
Rhetorical question: Is private equity “dumb money”?
If the PE guys truly believed equity prices were overvalued and/or going lower, why are they fevorishly closing on the biggest deals they’ve ever done? (HCA, assets of Phillips Semi, Aleris, etc. etc. etc.?)
And why would little SONC decide to wreck its balance sheet so it can buy back 30% of its stock? Maybe because it feels the market isn’t properly valuing its stock and is willing to take the risk of added leverage?
To borrow a witty phrase from Bill Miller who used it in a different context, “only scattered Stone Age tribes in the Amazon, the comatose, or newly arrived aliens from Alpha Centauri” don’t know about the housing problem. I don’t think the PE guys fit into any of those categories, so I’m pretty sure they are aware of the pending crisis, modeled the outcomes, and decided now is a good time to be a buyer of assets.
Can someone reconcile these dynamics (i.e., LBOs closing in size and volumes never seen before together with corporate buybacks occuring at record rates) with expectations for a decline in equity values?
Paul, I agree with you and Camus in principle.
However, how do we choose when it is obvious that ideology is chosen over reality? Isn’t it evil to purposely pick ignorance over “intelligence”?
It behooves our supposed leaders to make the distinction clear. Are they acting out of ignorance or evil? When things are purposely made obscure and information is hidden, then they force those responsible (the citizenry) to choose which it is, based on appearance and previous experience.
No matter your political stripe, you have to admit they aren’t leaving many options for us to choose in their favor. If it weren’t for British Intel and Pakistani arrests to verify, how many here would believe this story?
SHAME on our government for THAT. I think this is their primary failure to the people of America.
In these times there should NEVER be ANY doubt as to our resolve and this topic should be agreed to at the highest levels and transmitted to all Americans that we are united. REAL LEADERSHIP DEMANDS IT. Instead these jerks have used the most important struggle in our history to their own political use and instead of uniting the leadership and the people, these assholes used it to consolidate Presidential power for their own political uses. And lest anyone think this is one-sided, I abhor all the arm waving idocy on both sides. We need leadership not politics.
Of positive note would be the leadership/membership of the 9/11 commission who seemed to understand this point clearly, as an example.
It’s gotta change or we are in deep trouble.
Hey, what’s happened to VH1?!? Been a while since I’ve watched – used to be videos for the post-MTV folks and artist profiles like “Behind the Music”.
I stumbled upon “Flavor of Love” last night. Now VH1’s trying to find a dude in a viking helmet and extra large clock around his neck a gal from a stable full lost girls desperate for attention. Apparently it’s not VH1’s first attempt at trying to hook this guy up. Aye! I want the old VH1 back…
Barry, I think the ‘fluke in the blog’ resulting in double postings is caused because it takes so long after you click ‘Post’ in the verify screen for it to refresh. People get tired of waiting and so they post again. Is that a typepad feature?.. if so a note to their tech support might get some relief.
I think not a problem with the verify feature but a problem with slow updating of the new entry after it’s accepted. Overload on typepad… they should fix it.
Hey Chief Tomahawk- OMG, your post brings back memories- I haven’t watched MTV or VH1 in over a decade. I found this to help me reminisce. I was in love with Marta Quinn when I was like 10 years old.
To S,
I’m certainly no authority on private equity management (except my own “PE”), but the argument centers around two things: 1) time frame and 2) cost of credit.
I would guess that many of the LBO’s are looking at the long term and are seeing a sweetspot of relatively cheap credit with which to make purchases.
Perhaps they are not buying assets right at the bottom, but the bottom is getting into view. The trade off is that interests rates are relatively low, and likely to go higher in the short and long term.
Barry and others (I don’t dare to speak for them, I’m only surmising) are simply saying that prices for most asset classes are headed lower in the short term, so hang onto your cash and you’ll probably get a better deal over the next several months.
If you’re getting nervous about missing an upswing, then start to dollar-cost avg back into large dividend stocks now and over the next year. But don’t expect a smooth upward trajectory.
“Rhetorical question: Is private equity “dumb money”?”
Does Fortress taking Intrawest private for a 50% premium answer the question? All that debt won’t go away but all the asset valuation backed by resort area land holdings will. This isn’t a deal that has to happen unlike the Homebuilders who had their buyback programs to prop up the price while the insiders cashed out of Lyons who by going private can report awhole lot less. When Intrawest is carved up and sold off for debt repayment things will get interesting. There seems to be some weird bet that the Vancouver Olympics will enhance their BC holdings but I want the name of the bank that okayed this white elephant deal.
Jeez, it appears that political issues make people go crazy the most…rarely have I heard so many nutty theories. To insinuate that any government/leaders of the US would do harm to our fellow citizens on a mass scale for political gain is the lowest level of thinking I have ever seen. To even think this displays a distinct lack of morality and probably indicates one who lives a life dominated by negative values.
Luckily there is a solution and you will be amazed at how effective it is at helping people regain their common senses and moral compasses. The solution: TURN OFF AND THROW AWAY YOUR TV!!!
I repeat: TURN OFF AND THROW AWAY YOUR TV!!!
Folks, have you considered the power of the messaging that is coming thru that box? It is very powerful and has a tendency to shape viewpoints no matter how badly formed and ill-supported they are.
I haven’t had a TV for the last five years and it is amazing how I have changed in that period. I read more, have more balanced viewpoints, and I believe I see & live life in a much clearer and uncluttered manner.
In deference to this blog and topic my investment returns have also increased substantially.
Try it and see if you can get away from it. I’ll bet 95% of you can’t go one day without TV, yet that is where most of your negative views originate from. Think about it.
Now for my view on the market…Cash is king…5% money market is the place to be. The indices are going down and the transports are confirming the downturn. Based on the most recent earnings reports many think stocks are cheap…yet those who think that are linear thinkers in a non-linear world. The cheapness they see is based on assumptions that future quarters will be better. They won’t be which is why equities are more expensive than they appear and why the markets will go down further…a lot further.
Anyone studied the recession of 1937? The indices lost 50% in the blink of an eye. A wise man would do well to examine this further…it could definitely happen again.
See, I told you having no TV improves your thinking. Now go get’em tiger!
There’s very little correlation b/w record stock buybacks and record private equity deals and the direction of equity prices.
You can find plenty of examples when huge private equity deals corresponded to tops (or near-tops) in equity prices. And no shortage of examples where significant stock buybacks led to major stock declines.
MSFT has been buying tons of stock. But the stock itself goes nowhere.
And who can forget IBM’s famous 50-million-share buybacks from 1985-1990? When the buybacks ended in 1990, the stock price fell 70% from 1990-1993.
There are a lot of reasons why a corp would buy back its own stock, and very few of them are due to mgmt believing its shares are cheap. Quite often, just the opposite.
On the subject of consumer credit expansion, I think the article and a lot of commentary on it gets it backwards. Yes, it is due to the housing slowdown, but it is not because people have switched from buying with their equity to buying with plastic.
People pretty much use their credit cards instead of their checkbooks to buy most things, from groceries to home improvements to gasoline to vacations. And this isn’t a phenomenon that just took hold in June. What HAS happened is that paydowns of credit card balances are decreasing, and thus the amount of outstanding consumer credit is up.
People can’t/aren’t taking cash out of their house like they used to, and thus can’t pay off credit card balances.
That’s why consumer spending is going to take a lot longer to drop than many are expecting.
I was just thingking about this last night…
I think that the threat was a tempest in a tea cup… No big deal…! The terrorist may be crazy but they are not stupid, unless these were just amature players like the Miami gang…
Due to the ME sittuation, all indication point to Saudi assistance in support of the dollar. Quid pro quo, leash in your Israeli friends and we help… It’s going to be expensive but it beats getting your head chopped off and having the stock market and the whole economy going to hell in a hand basket as you watch a republican blood bath in November. It’s a short term solution, but the odds are that they can pull it off… Or better said, it’s better than nothing….
As a whole, things have gone from bad to worse and I intend to be a sensitive and defensive short. When the moment arrives, I will be all over the short side like white on rice, to be polite.
I tried to write here earlier and lost the whole thing
!
First there is the bashing on republican/democratic issues. What the hell is wrong with you people? I am a liberal but I go by results. If a republican came through with greater prosperity for all in America, and a forward thinking energy plan that acknowledged that due to shrinking world oil resources (or at least available ones) there was a problem. That sending vast sums of our wealth to countries whose citizenry would just as well see us dead or living in the 14th century is unwise on both a political and financial basis. Why were we not able to go into an oil producing country (right or wrong) and secure the oil for our use and thus reduce our cost (which would be nice)? That recognized that loosing our oil supplies could be a really bad thing and made sure that we had the means to produce needed fuels and that the oil companies who are rewarded with greater profits for doing nothing newly productive, just by having the price go up, should maintain their infrastructure or go to prison. This is a national security issue.
We are a country that has great capabilities when we focus. Last I recalled we put a man on the moon, we created the atomic bomb, slogged our way through two world wars. Invented the Internet, and powerful computers that I can go to the mall to buy.
So why don’t we have an energy policy that seeks a transition from the use of big oil. It is getting more and more expensive and it is damm dirty at least in the way we currently use it.
I think it is due to the fact that those who profit from the status quo and quarterly reports have nothing in it to change things.
If we made an electric car, the profits from servicing cars would drop like a rock. I think it will happen but not due to those who like things the way they are. Twenty first century luddites! There is no vision for America.
No imagination either. I knew how to make explosive from household materials when I was 11. But I had enough sense to stick with fireworks. So if a kid 42 years ago could figure it out then our government could figure it out.
As far as people who think our government or any government will not act against its people for the sake of the ambitions of those in power really should read history. IT happens. We had our red scare; people’s lives were destroyed. Look at Stalin, Hitler, Mao tse Tung, Pol Pot. The genocides that were perpetrated on the American Indians. . do not underestimate our capacity to rationalize any action.
Back to energy. Go to http://www.wegoted.com and check out the conversation with the governor of Montana. He discusses how we have vast resources of coal and now have the technologies to utilize it cleanly. Yeah Ed Shultz is a liberal, but look at the argument. There is a company called changing world technologies, which has a working process for converting garbage to oil efficiently. Why isn’t our country pouring money into these areas instead of thousands of trailers sitting in Arkansas? Disconnected short-term thinking.
Anybody notice that the Latin American markets are moving up? And that the peso against the dollar is going up (short term) ?
Global warming. Since it is a reality, perhaps we should be concerned about it, since it will likely lead to great disruptions in our lives and our children’s lives.
More scientists are alive today then have ever existed and they talk to each other. But I am afraid that no more capable leaders exist at least in our republic and they really do not talk to each other.
Kill your tv sounds ok although I still watch it.
There is much talk of recession due to an inverted yield curve — Fed studies show that the question to ask is “how much spread and at what Fed funds rate.” For instance, a 0 spread at 6% Fed funds rate has been well-correlated with impending recessions, while at 5.25% you are in bigger trouble at (inverted) spreads closer to 0.5% with respect to the 3-month bill and 10-yr bond. The Fed is not stupid and when the Fed says that yield curve inversions do not mean the same thing when the yield curve is as flat as it is, they appear to be basing their argument on studies such as these. Nouriel Roubini’s recession call or Jim Stack’s 88% recession probability are not something I am planning to bet on currently, although a slowdown affecting financial markets appears to be on the cards.
Cherry: The neos were trying to provoke Syria and Iran and failed miserably as neither budged not blinked. A great deal of US and Israeli assets and prestige were expended in this fiasco. I would think that in both Russia and China there are two men sleeping with smiles on their faces. I think that we’ve got’em just where they want us… Next round, defence of the dollar…. If it wasn’t for Paulson, I’d be hiding under my covers.
Journey into the mind of Private Equity and you see guys borrowing at 7-8% to make 15%+ ROE. It’s not arbitrage, but they kinda think it is in a broad sense. Of course, if equity is so cheap why wouldn’t they just buy the stock? Well, who wants to be another faceless shareholder subject to the whims of managment? Look at old Kerkorian, for example. But the bottom line is that they want to make gobs of money. Lever up, take XYZ private, sell marginal assets to pay down debt, reposition business strategy, establish earnings visibility, then take the fuc%er public again and have the world pay 15 times earnings for new stock.
Of course, the risk out there for PE guys is the economy. It it tanks (and I totally think it is in the process of really rolling over), all that debt on XYZ’s balance sheet is gonna sting. And it’s going to be hard to establish any sort of earnings growth in the near term. So my point is that I think the PE guys might be too early. Seems like the time to really get jiggy with PE is when the world hates stocks. At that point the weak companies will have probably been identified by the market and the strong companies will probably be taken down with them in terms of price. That’s the time to buy, when the world hates ’em. And it seems to me that we just had 20 years of equity returns that were nearly 2x average.
I like the smackdown of the conspiracy-minded weirdos in the recent post.
One thing I note on global warning – many of the people who complain to me that “we must do something” drive big gas hoggin’ SUV’s. When I point out something obvious that they can do…they get pissed.
I’m a libertarian that drives a CIVIC.
The piece of the puzzle that is always hardest for me to figure is what the Fed will do if (when) forced to chose between severe recession even depression or inflation. I don’t think any chart can predict such an essentially political choice.
Keep in mind that it is the fed’s job to protect the banking system. That’s who they work for. When the problem starts affecting the bankers and it starts cutting into their margins and profits then the fed will act. It’s not a ‘crisis’ until the banksters are suffering
“Instead these jerks have used –the most important struggle in our history– to their own political use and instead of uniting the leadership and the people, these assholes used it to consolidate Presidential power for their own political uses. And lest anyone think this is one-sided, I abhor all the arm waving idiocy on both sides.”
911 was a sucker punch…
The WAR on terror ™
is simply, & transparently, Orwellian neo-con marketing…..
What other “war” in american history has been marked by Tax Cuts (for the GOP’s donor base) and calls to conspicuous consumption?
911 was not “staged” imo, but this “war” has been incessantly stage managed ever since!
Think about it….
ONE attack… and we’ve been at “war” for 5 years.
The neo-con propagandists would have the American sheeple believe we’ve had no further attacks owing to the GOP’s “toughness” and diligence vs. those Freedom Fry eating Defeatocrats…..
ONE word….
Katrina.
These incompetant clowns (especially Bush)couldn’t find their ass in the dark using both hands.
The ONLY thing these gutless, greedy, incompetant, mendacious, Un-American cynical bastards know is marketing-bullshit and propaganda. period.
Al Quaida? Boogyman.
Beef up intelligence. special forces. ALLIANCES. screening…and deal with the fact that
Al Quaida is an ongoing nuisance with a membership in the few thousands.
Two other thoughts….
NO WAR CAN BE WON WITH A DIVIDED ELECTORATE.
Only incompetant bullshitters would attempt to demonize HALF of their citizenry as traitors while waging a war.
at this point…DEMOCRATS CANNOT CONTINUE TO ATTEMPT COMPROMISE WITH REPUBLICANS.
you cannot compromise with people who are incapable of compromise…
you can only “capitulate.
Republican cries of “partisanship” are LUDICROUS on their face.
Instead these jerks have used the most important struggle in our history to their own political use and instead of uniting the leadership and the people, these assholes used it to consolidate Presidential power for their own political uses.
Surely you don’t believe this. The most important struggle IN OUR HISTORY? Get a grip on yourself.
The biggest problem we face today is having a whole nation convinced that terrorism is THE BIGGEST PROBLEM WE HAVE EVER FACED. Only a bunch of pantspissers could believe this.
Our forefathers would be so ashamed.
I agree on your point about our vile leaders. But they succeed only because so many people buy into the other part of your statement.
Yeah, but thank god they’ve stopped us from taking travel-sized toothpaste and chapstick on airplanes.
i was quoting Craig in the 1st part….
The natives are restless and appear to be revolting against your cynicism. Anyone who doesn’t believe the propaganda machine is capable of distorting a few terrorist stories around campaign season is mighty naive. Dreaming something up which is totally fabricated is quite absurd but stretching a story for political favor is done constantly.
Are we going to get a rally? Whatchoutalkinboutwillis? We just had a rally. Banking stocks, staples and utilities just had a great three weeks. Next week is down. How hard is another story with it being witching week.
Vega:
You are making my point. The GPs of a PE deal have rich incentives to maximize IRRs.
One way to maximize IRR is to buy cheap. If the economy is going to hell in a handbasket, then the “E” they’re paying for today will presumably be smaller later, so why not wait to do a deal then at a lower transaction value?
And as you point out, if the economy slows severely or goes into recession, there’s always the risk that the equity contributed by the PE firm to do the deal could get wiped out, or impaired, if XYZ can’t service the debt. So much for maximizing IRR in that scenario.
To me, the fact the PE guys are falling all over themselves to do deals NOW doesn’t seem consistent with an economy flirting with recession. And treasurys rallying to below 5% yields doesn’t seem consistent with runaway inflation. Why can’t this investing/trading crap be easier? It’s too confusing!
“”I specifically said this one looked real — but I have my doubts about all the terror alerts in 2004 — an election year.
Somehow, the terror alerts stopped after the election.
I do believe the Brits thwarted some bad guys — but I can almost guarantee you that we will see some politically motivated nonsense this year . . .
“”
i guess we will see on aug 22nd. psycho iran and these thrawted terroist plans where there is one there are 100 more baking. god speed.
Here’s a question for the board. How many here would like to see the U.S. spilt up into several different countries, provided it could be done without bloodshed?
HERE’S AN UNBELIEVABLE LINK:
http://www.thepeoplescube.com/red/viewtopic.php?t=797
“Here’s a question for the board. How many here would like to see the U.S. spilt up into several different countries, provided it could be done without bloodshed?”
That depends on how many of them would actually revert to being democratic republics with capitalist economies and libertarian outlooks.
Sorry, couldn’t resist after a swim and an aquarium here in bubble San Diego. I take along view by modern standards but SD has gone over the cliff. No new aircraft carriers, no new Pacific wealth transfers, no native successes reinvesting. Thee freeways are -all- under construction. The Downtown is in no way ready to accomodate growth. Classic prefect storm. A microcosm of Kalifornia which will follow. Question; who in the “other” 49 are ready to help their neighbors in the Golden State? Ouch, got it. Thanks.
“…How many here would like to see the U.S. spilt up into several different countries, provided it could be done without bloodshed?”
OK..
But it’ll be tough to find folks willing to live next door to Kansas…PRAISE JAAAYSUS!
“Here’s a question for the board. How many here would like to see the U.S. spilt up into several different countries, provided it could be done without bloodshed?”
WELL, WE SORT OF STARTED THAT WAY BACK. YOU HAVE TWO SEPERATE AND DISTINCT NATIONS IN THE YANKEES AND THE RED SOX. THE REST CAN GO TO HELL.
Sherman M: “Stuffin Martha’s Muffin”?!? Got a link for that song? Thanks for the “Video Killed the Radio Star” link. I’m guessing A Flock of Seagulls is somewhere about? It’s too bad VH1 has disintegrated – an era lost accept for random clips on the web…
here ya go chief…
http://www.youtube.com/watch?v=cmjuGIVyP4Q
oops. Flock of Seagulls was it?
http://www.youtube.com/results?search_type=search_videos&search_sort=relevance&search_query=flock+of+seagulls&search=Search
youtube has blossomed
Thanks, Brion. Any word on the “Stuffin Martha’s Muffin” song?
Private equity is rising because it’s been a successful strategy recently vs. a lot of other strategies – so that’s people chasing performance. Bottom line is that PE guys have to get their money out of their hands to make any returns, so they are incentivized to make deals – even if they overpay. Add to this that they have more money than they can really handle, and you get a lot purchases that may be expensive to very expensive (aka HCA).
The fact that they can borrow money so cheaply makes it work, and once they have control they quickly force the companies to take on more debt to pay special dividends to the PE company that takes the majority of their risk off the table. From there, the IPO is just upside. That said, there is an interesting trend in the PE space to not actually bring companies public, but rather just sell them among themselves. So another PE company thinks they can get value out of the company. Bottom line, the old approach of break-up the company and create a sustainable business doesn’t seem as important to these guys – it seems like it is more about the quick-hit/quick return. Witness Warner Music.
wow. very cogently put Damian.