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I had a feeling it was either yesterday or today.
Given this week’s whackage, it was the all but inevitable. Kudlow & Company market discussion will be the full hour on CNBC. We’re scheduled to be on from 5:00 to 6:00 pm.
Also on is Cody Willard, David Malpass, Chief Economist for Bear Stearns, Keith Wirtz of Fifth Third Asset Management and Lincoln Anderson of LPL Financial Services
More damage discussion I am sure today . . .
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Remember, Bounce, Test, Bounce, Crash
what happened at 3:30??
market bounced. you didn’t think it would be that easy shorting this market did you?
Make Cody hear it, BR.
i thought maybe they discovered a cure for bird flu
GIVE THEM HELL, BARRY. You were right, they were wrong. Kudlow needs a kick in the pants with his “greatest thing never heard” talk. The US economy was NOT fine. He was just in denial.
Bout time you wore a cool tie
Complacency, in a word. These guys can only be right til their dead wrong.
Did Cody actually say that MSFT is the best place to put money? Is he kidding?
Cody Willard = Eddie Haskell
Perhaps Cody will team up with Barclays for the iShares Cody Willard ETF. A great short selling opportunity.
Somebody oughta bring this up with Cody sometime on that show.
Ipod/itunes and ‘piracy’
Seriously…. do you REALLY think the typical 40gb Ipod was loaded up with tunes somebody paid $1 a piece for? _________________________________ Many or most of the people I know that have Ipods, grownups, college students alike, have them loaded with tunes they did not pay for, that is from a friends computer. So… Ipod is in very likely most probably the biggest vehicle for illegal music sharing of all time________________________________ And there’s no record.. so they can’t come after you. Unless they start auditing all those Ipods, and that’s not gonna happen.
Cody is right about legal downloading, but for the wrong reasons. It’s too much of a pain in the ass to get a clean copy of a song on the pirate networks. The record companies have done an excellent job of posting up bogus and/or low quality tracks. It’s worth 99 cents to get a quick clean copy of a single.
BTW- I think there may not be a finer time to buy than today… we all fall into the the very human trap of looking for patterns, but some of these patterns are a reflection of human nature. This sell-off reminds me very much of the trouble in October 2005.
http://stockcharts.com/h-sc/ui?s=
$SPX&p=D&yr=0&mn=9&dy=0&id=p20613869174
Today was the second test of the bottom… all three of which have been steadily higher in price. Maybe we’ll see one more test, but I think the storm is over for now.
I do share Barry’s long-term outlook, but I’m a trader not an investor.
I know of very few iPods with music somebody didn’t pay for at som point. The problem is “fair use” in the law doesn’t jive with fair use in the market. Yard sales of CDs are sometimes illegal under the strictest interpretations. And make no mistake, RIAA pricing models encourage noncompliance.
Lets be honest. People fill their iPods with songs they or someone else ripped from a CD. Mostly other people. One person rips the CD and puts it on an iPod and then people share their songs by transferring from iPod to iPod.
Those of you with kids can confirm this. How many songs are on their iPod ? How much money did they spend downloading or buying CDs ? It is no mystery !
Cody’s interviews were bogus because nobody is going to admit to stealing music in public and he was referring to the Internet as the mechanism. He didn’t ask anyone if they ripped their friends CDs or shared tunes iPod to iPod.
This is just another example of where ‘net info is much more accurate than what you’ll see on a TV show. TV shows you what they want you to see, not the truth.
One more thing… if Apple wanted to stop piracy they could build a key into each iPod and have a downloaded song work with only one iPod. But that doesn’t happen.
Barry I think your tie is very cool, also nice jacket, your looking good but why sit next to that punk, still needs a haircut, and a few slapppps!!!
Cody Willard being a hedge fund manager just goes to show how out of whack this market is. I wouldn’t trust him to watch my dog.
Unbelievable what comes out of his mouth.
Hedge fund guys who say outrageous things get all the media coverage, and, sometimes, their own shows…
Much more whackage and you’ll either go blind or grow hair on your palms.
There is much, much more whackage to come !
Just wait until the market figures out where all the copper goes. Hint: HOUSES. And now we are experiencing a slowdown in… HOUSING. So sooner or later that will mean copper demand will…. DECLINE.
Seriously, the bottom will fall out of the copper market one of these days and then the market leaders that have been kind of whacked are REALLY going to get whacked, ala dot com meltdown type whackage.
Another thing the market hasn’t figured out is that not only is consumer spending going to decline, the consumer is going to be out BROKE. AKA delinquent on his mortgage. AKA foreclosures. What will happen then ?
And then there will be the issue of massive layoffs in the housing industry. Framers, drywallers, stuccoers, mortgage people, all no longer needed. Home Depot staff. Electricians, landscapers, plumbers, all previously employed by the great housing bubble and now no longer needed.
Seriously, I think by the time this is all done that we’ve got over a full year’s supply of excess housing inventory and NOBODY with a dime in their pocket to buy another house or even need another house. So now what happens ?
Stay tuned, this is going to get very interesting.
Is Kudlow grooming Cody to be the next Cramer? Actually, the one grooming Cody is Cody. He couldn’t stop playing with his hair the entire show.
Where I live (Reno / Tahoe), housing prices would have to drop by 50% to peak my interest. But if they do drop that much–and it’s a possibility–I’ll probably buy. If stocks go to 1974 valuation levels, there will be plenty of folks chomping at the bit.
With all the financial carnage coming, it’s important to remember that all the ‘stuff’ will still be there, no matter how ugly the global balance sheet gets. The technology, the know-how, the neighborhoods… barring thermonuclear war, none of that is going to just disappear.
trader75: Thank you for the reality check. Sometimes reading this blog I get the Chicken Little Blues. But the sky isn’t really falling.
The global financial engine churns on apace. These daily, and even yearly, gyrations of the markets are mere blips on the EKG of the vast body of the global economy.
That’s the Big Picture.
chicken little says: the last time we had both 1) profits as highest % of national income (= greatest share to top 1% w lowest marginal propensity to consume) and 2) negative US savings rate, was just before the Greatest Depression. it was just about that time that the “global financial engine” failed to churn…
1. Those rich guys have to do something with all that money. At some point it gets cycled back into the economy, I would imagine.
2. We better hope US consumers don’t suddenly become obsessive savers. It didn’t help the Japanese much in the early ’90s.
Also, doesn’t the “negative savings rate” fail to account for money saved in the form of a)home equity and b)pension plans?
Forbes says the sky is falling, or at least we are heading for a recession.
http://www.forbes.com/home/investmentnewsletters/2006/06/06/stack-recession-in_js_0606soapbox_inl.html
“1. Those rich guys have to do something with all that money. At some point it gets cycled back into the economy, I would imagine.”
Those rich guys have their money tied up in stocks or real estate. Some will get it out, but most won’t. They might not be as rich as you think. They might have a pretty big mortgage.
“2. We better hope US consumers don’t suddenly become obsessive savers. It didn’t help the Japanese much in the early ’90s.”
First they are going to have to pay off the negative equity of their house. Somewhere in this whole mess is a disconnect between what the market sees and understands and reality. All the market sees and understands is that that the consumer spends and keeps the economy healthy. What it misses is that the consumer has been racking up huge debt. It was masked by their housing assets, but now that is going to be written down. The consumer is going to be BROKE. Understand ?
“Also, doesn’t the “negative savings rate” fail to account for money saved in the form of a)home equity and b)pension plans?”
The government calculates the savings rate as the income after taxes less the spending. So… if Joe Sixpack makes $60K and he spends $60,600, he has a negative savings rate of $600. Joe probably got extra money from refi’ing his home, but that doesn’t count as income because it isn’t earned until the house is sold and he has capital gains.
In effect the consumer has been borrowing the future capital gains of his house. Now those gains are gone and the bank wants the money back. It should be real interesting to see how this plays out.
There is some really good reading here:
http://thehousingbubbleblog.com/
The housing bubble bursting and the recession forecasting was nothing new to the people on the blog. We’ve been talking about it for about a year now. We could see it coming.
Cody definentely is one of the least intuitive thinkers i have ever seen get to express his opinion. But that is what you get on cnbc. Yesterday, kudlow had a lady on the show whose answer to where she stood on the market was “always bullish”. Now, come on, who takes advice from someone who readily admits she is always bullish. Furthermore, how can the best invesmtent that 3 people on kudlow in 2 days could come up with be microsoft. Maybe 10 years ago…..but now….and nobody even rips them. What analysis did they do….hmm stock is down…gone nowhere in five years….lots of cash…..i guess its a buy. While i think msft is in good shape, it is being assailed on all sides in an increasingly vicious environment. It sure as hell is not the best investment in the entire market. A 15 year old could come up with a better pick. Its sad to see so few people doing any real work on wall street.
I am also amazed to see every single talking head explain away this sell off with strong earnings and cash flow. Did they ever consdier that maybe this sell off is predicting that earnings and cashflows will grow at a slower rate going forward then they have lately..or even decline. I guess the market as a forecasting tool only applies when earnings look bad, and will be getting better. I for one am extremely concerned that it will take a lot more work to contain inflation because the global bankers printed way too much money the last time around. If rates stop rising….we will eventually have a dollar crash and global deflationary depression. Just my thoughts.
The market has been really focused on Bernanke and inflation. Really, though, what does a quarter or a half point difference make, one way or another. BB is going to get a bad rap for killing the economy, but truthfully, a strong economy should be able to survive a couple extra rate hikes.
The problem is that the economy isn’t strong.
The market is still under estimating the whole housing situation. Truthfully, it is only recently that some tangible data made its way to the limelight, ie slowing sales, etc. But you could see the build up of it for a long time now. Everyone knew it was unsustainable, but nobody wanted to call end to it.
The real shocker to the market is yet to come. One day we will get a truly bad housing or employment number. Like 10,000 jobs lost in residential construstion. Or a bad foreclosure number or a big drop off in same store sales.
THEN the market will realize what is going on. BB and an extra 25 basis points ISN’T the problem. The problem is an economy that is doomed to fail. It is built on cheap imports, cheap money, housing appreciation, high debt loads and cheap gas. All that is going to change.
BTW: sooner or later I expect the lower US dollar to creep into the inflation numbers. The cost of imports will rise and feed through. That will warrant another rate hike.
Under a US slowdown and bear market scenerio,
in the context of a secular commodity bull market,
what is the strategy with the oil stocks…..
do you hold them through the bear market or
do you bail until the bear is over ??
I’d like to know the answer to that as well. I was just looking at the price of puts on some of the loftier stocks.
CPI next week … will it be hotter than the last CPI number ?
Has anything changed that will make the CPI less inflationary ?
US dollar has been falling. Oil at highest prices. Energy component of CPI should be increasing.
Some rumblings about rent rising.
GM is saying that they can’t reach their price cutting targets because of increase in commodity prices. I wonder if that will feed through.
I’d vote for higher, but its only a guess.
Yeah, I’m puzzling over what to do with energy stocks too. I guess they crater with everything else? I buy the secular commodity bull market story, BRIC and all that.
So what happens when we are in recession so obvious that even Bernanke and Co are sure of it, and their “core” inflation is 1% because housing bust is sending everything from copper to plywood down in price and consumer spending in the toilet?
Does Bernanke:
1. Raise rates
2. Hold rates steady
3. Lower rates
4. Lowers rates and prints money as quickly as he can buy more ink (in the electronic world that is PDQ).
That’s my real concern. Dollar will tank but printing money will be pushing on a string so economy won’t come back? I think the Big Picture I want to see is what is past the obvious recession we are going to have 3Q or 4Q. And the Fed move I want to understand is not whether 50bps in June 06, but what is Ben doing in June ’07 and its result.
When will the Chinese ever spend their goddamn reserves?? Why don’t they just go on a spending binge for education/healthcare? With so many poor and the export model destroying their country with pollution, what the hell are they waiting for? They can afford a little deficit spending.
I think they’re trying to do just that, and with their economic track record they may be successful in the next few years.
This would be the perfect cure for the deflationary depression risk.
And it would boost those long bond rates too
bhpt-
I think oil takes a dive with the general slowdown but reemerges intact on the other side. It has been a real nice easy trade on the $WTIC charts so far but the chart is morphing to my eye. I exited the sector 3 days ago.
I will watch the relative strength of my favorite stocks vis a vis the SP500, trendlines, Fibs, etc but I think it’s gonna be a REAL hard call on when to re-enter this sector this time.
Barry-
I see we have two “Mark”‘s posting again. How are we to distinguish my snide and cynical remarks from the snide and cynical remarks of the other “Mark”? I am having my own personal identity crisis here.
Its up to the poster to identify themselves — if you only want to distinguish yourselves, come up with a funky name unlikely to be duplicated (i.ie, trader75, Alaska Pete, Bynosaurus) —
Typepad wont assign specific names to individuals . . .
Oh, so I could do it like this and be SURE to generate lots of responses. :)
Isn’t it amazing that as Cody “Wyoming’s” picks go increasingly south, his on air attire becomes increasingly “adult-like”?
Barry, please pass on to Larry that those of us who manage our own [often substantial] assets, prefer to vet opinions from those that actually need to shave.
nice show barry. you were fantastic as always and no, you didn’t look stoned.
cody on the other hand looked a little fidgety and tired. kinda like a fellow who’s been on the wrong side of the market recently. (wonder how AAPL and MSFT have been treating him the past 2 months). he kept playing with his hair like my 11yo neighbor girl.
by the way…. for a “tech guy” cody should know that iTunes = the dumb guy download site.
Hey Barry – its BynoCERUS, pronounced just like Rhinocerus. Now, granted, Bynosaurus is one of the many other now archaic nicknames I’ve had in life, but no longer (unless you are a friend of mine from college). It is an interesting coincidence that you would think of that one, thought.
Is it too much to ask Cody to shampoo a couple of days before appearing on TV?
OK, so we mostly agree we are in for a big slowdown.
Next question: how long will it be ? Are we talking a 1929 type meltdown or a 2000 type meltdown ? Are the central bankers going to clear out all the excess liquidity and then leave the market to clear itself up or will they jump back in with a bit of stimulus ?
And… looking forward… what is the next hot area going to be ? It won’t be real estate and it probably won’t be tech. So what will it be ? Or are the boom days over for the next 10 years due to liquidity restraints ?
Thanks.
More questions: are the central banks going to allow the US to continue running deficits ? Will there be a dollar collapse ?
I can see that the economy is going to really slow down because of the housing bubble, but I can’t quite figure out how it will go from there.
Does anyone know of a better website/blog to discuss this on ?
Thanks.
me2200,
There is no better blog!
Also your choice between 1929 and 2000 is way too limiting. I think it is going to be a decade like the 70’s again.
Weak Dollar, High Inflation, High Interest Rates, Flat GDP on average.
“There is no better blog!”
I agree. I wish people would post more here. I enjoy reading this stuff. I like Barry. Pretty down to earth guy.
“Also your choice between 1929 and 2000 is way too limiting. I think it is going to be a decade like the 70’s again. Weak Dollar, High Inflation, High Interest Rates, Flat GDP on average.”
It will take a whole decade to shake out ? But inflation isn’t going run this time, not that I can see. I think that is going to be the difference. Volke inherited an out of control situation. They tried to prevent a crash by pumping. That ain’t going to happen this time. They will try to get things under control by tightening until demand for oil and commodities comes down, I think.
A whole decade ?
I think it will take a decade more/less to work through imbalances that exist. The last period lasted from about 1966 to1982. If 2001 were the start and it were to last as long that would be 2016! No one can see the future but I think things are alot more serious than a “quick correction” can solve. Alot of liquidity was pumped from every where for the last 10 years and they just now are starting to mop it up. It will be a long and painful process. And if they decide to start pumping liquidity again either the market will lose confidence which will cause major havoc or it will just delay the inevitable and make it worse.
>>And… looking forward… what is the next hot area going to be ? It won’t be real estate and it probably won’t be tech. So what will it be ? Or are the boom days over for the next 10 years due to liquidity restraints ? >>
me2200 – Jim Rogers says the next big thing is going to be…things. In other words, commodities.
Jim Rogers… I think he is wrong. Seriously, if the US economy goes into recession, isn’t the demand for “things” going to decrease ? And before anyone can say the C word (China), aren’t they really dependent on us buying their exports ?
Jim Rogers has made a lot of money in commodities. Especially lately. But we’ve also been on a spending spree since 1980 and when people spend, they generally buy… things, which are made of commodities.
I think the commodity boom is over. I’ve been thinking about now being like the 1970s and I see a few differences, namely I think we have a Fed that isn’t afraid to tighten.
You can have a recession and inflation (1970’s again – beating that horse I know) – hence commodity prices can rise in a recesssion.
I also do not think the Fed will tighten much at all. Raising rates does not by itself mean they are tight if they are still printing money – check out the M3 – oh yeah they discontinued publishing that statistic.
If I am reading Bernanke right, he is going to tighten like crazy. What he is doing right now is merely prepping the market for what is to come. He will battle inflation at all costs. And he hinted in his remarks that he had studied inflationary situations that took 18 months to develop, meaning to me that we might be in the very early stages of rate hikes.
Really, what stops the Fed from going to 7 or 8%. I do not understand what the big deal is about going to 6%. I think the media is blaming BB, but the sell off doesn’t have anything to do with him. He is just the messenger that a) we’ve got an inflation issue developing and b) the economy is getting soft.
I agree that BB should not get the blame for the market sell off – at most that is just the easy excuse when looking for a reason. The sell off IMO is because a slowdown is coming and globally the cost of capital is rising.
However I just think BB is blowing alot of hot air. He is trying to talk loud but IMO will carry a small stick.
I think he should go to 7-8% because real inflation is about 5.5% if you use the formula that was used during the Volker era. But I think BB wants to stop raising rates and will do so at 5.25% or 5.50%. He is the same guy that talked about dropping money out of helicopters.
If I am right then he will stop this summer – the market will give a failed rally – the dollar will slide – inflation will rise by any measurement – long rates will rise – the market will then sell off.
What happens then? 1) Does BB tighten to try to get control of the situation that he let get away from him and risk an even deeper recession? or 2) Does BB print even more money to try to jump start the economy and say to heck with the dollar and inflation. Political pressure will be on #2 – The only good Fed Chair (Volker) choose #1.
I dunno if he is going to stop. I hope he doesn’t. I think BB is going to really reign in inflation. When Volker did it back then, it was an experiment. We now know that we can get pretty decent growth and stability if one keeps inflation low. I think BB knows this and will use whatever means he needs to to attain low inflation. I didn’t think that before his speeches, but I do know.
Elsewhere people are grumbling because BB is talking. I much prefer him to AG. BB is much more communicative. Maybe it is roiling the markets, but at least we aren’t living in denial.
BB looks to be taking things in a different direction. AG would have stopped. Not paused, he would have stopped. BB is going to fight inflation head on.
We just disagree (I hope you are right but I doubt it) – We will see soon enough. I think 5.5% is the max he goes.