The Bulls, The Bears, & the Media

Today’s "What’s Online" column in the New York Times is about an ongoing debate between Paul Kedrosky, Herb Greenberg and I, titled Taking the Bears to Task.

That was kind of a WTF headline. Taking the Bears to Task? For what — being right? Coming up next week: People carrying Umbrellas in the rain — Whats wrong with them?!

A few corrections are in order:

The article links to the wrong blog post, pointing to our emergency Fed cut discussion (Whiff of Panic), rather than the post quoted, So Much for the Decoupling . . .   

What’s worse, the author apparently misunderstand our criticism. Had he contacted me (!), I would have told him that its not that some strategists got it wrong, or that "people remained positive about the markets and the economy." Understand this: Markets are all about differences of opinion, and there are always credible arguments on both sides.

Merely being wrong is no sin . . . It’s the process, not the outcome, that matters. (See our 2005 column, Expect to Be Wrong

No, our criticism was about the Its-Different-This-Time crowd. The post’s (obvious) main point was a list of well established economic and investment rules that some people decided to (once again) ignore. Was the year 2,000 so far in the past that these lessons have been already forgotten? These Its-Different-This-Time clowns are the ones that cost investors their money — the sanguine cheerleaders, the pollyannas, the political hacks.

But back to our debate: The Times references Paul’s post, "Why are Financial Blogs so Bearish?" That post reminds me of this The Daily Show exchange:   

Rob Corddry: How does one report the facts in an unbiased way when the facts themselves are biased?

Jon Stewart: I’m sorry, Rob, did you say the facts are biased?

Rob Corddry: That’s right Jon. From the names of our fallen soldiers to the gradual withdrawal of our allies to the growing insurgency, it’s become all too clear that facts in Iraq have an anti-Bush agenda.

That was about Iraq the war — but its not too hard too see that the economic facts maintained a similar "bias."


Name calling: I’ve always chafed at the Bear label. It’s a an intellectually lazy, ad hominem criticism — much easier than addressing the actual arguments about economic concerns. It also ignores our longstanding advice that investors maintain "ideological flexibility." (See: Bull or Bear? Neither)

Some of those disinclined to mental exertion (no, I am not referring to Paul) like to point to the Bearishness of the past few years — but somehow, they never, ever, mention the Bullishness. We take this as proof their argument’s disenginuousness.

Perfect example: In 2002/03, we wrote a detailed explanation as to why the markets had gotten too bearish, titled Contrary Indicators 2000 – 2003 Bear Market. That originally ran in the Stock Trader’s Almanac as a 3 part piece in June, July and August of 2003, and eventually was posted on the blog. The irony is that much of the critical email accused me of being a perma-bull — despite turning aggressively bearish in January 2,000.

Investing: As money managers, no one pays you to sit in cash. We flip bullish
and bearish as conditions, risks and opportunities warrant. For example, this past
Wednesday, on CNBC, we flipped Bullish, calling for an 8-12% rally. But we also noted this was a trading rally. The 2008/09 recession bottom likely has not been made yet. The usual name callers would never credit us for a good bullish trading call, but again, that is merely more evidence of their hackery.

Some people have criticized our defensive posture, but it has well served our clients for the past few years — they made
money in overseas investing, in energy, metals, gold, agriculture, etc. 
For "Bears," we’ve done pretty well on the long side. Our "favorite stock pick for 2007" in BusinessWeek December 2006 was
Mosaic, which was up 330%
.  And, our forecast was the best out of all of the WSJ/BusinessWeek predictions for 2007. (For the record, we think predictions are silly, and we do them just for fun).


Of course, one’s perspective is a function of what you do during the day.

Paul Kedrosky, for example, is a venture capitalist. We’ve worked on several projects together, and both scribe for TSCM.

Paul’s job is to purposefully put money at risk. He is looking at early venture companies, start ups, new ideas. That requires not only technological and finance skills, but a specific kind of optimism. He knows despite the long odds — most start ups fail — that the next Apple or Google is out there.

Herb Greenberg is an investigative reporter. His job is to identify the seemy underside of business, the frauds, the crooks, the liars — even the occasional errant Sith Lord.

I have a different perspective. I manage money for a living. That creates very different obligations — its to preserve capital and manage risk. Since inflation is always eroding our clients assets, we must find ways to offset that by generating returns in excess of inflation. Part of our calculus is when to go into risk-free treasuries.

And because of our long experience on Wall Street, we have become rather skeptical of what we read in the papers and hear on TV. We have not forgotten all of the television cheerleading in 2000, nor the analysts who lost investors trillions. We well remember the investment banking scams, the corporate accounting fraud, the lax regulatory oversight, the general theivery that took trillions our of the pockets of individual investors. 

As Raymond Jame’s insightful strategist Jeff Saut likes to say, where you stand is determined by where you sit. And where I sit requires a healthy dose of not letting the bullshit artists lose our client’s money

I suggest readers and investors do the same . . .

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  1. Marcus Aurelius commented on Jan 26

    Unbiased observation is essential, but it’s also nearly impossible (especially when what you are observing is deservedly questionable in its authenticity).

    Question everything. Believe half of what you see and none of what you hear. Doubt is essential to good decision-making. Always err on the side of caution.

  2. bsneath commented on Jan 26

    I suggest “Its-Different-This-Time” works both ways. Yes, the global economy can never completely decouple from its largest consumer. But yes also, aggressive monetary and fiscal policy will re-stimulate economic growth – including housing.

    If we do stave of a severe recession, and with an additional 50 bp cut next week, I believe we now have a chance, we might all want to thank Jerome Kerviel in a perverse way for making it so.

    Why we have a chance:

    While many homeowners are in a world of hurt, many others are waiting in the wings. With 30 year mortgage rates at historic lows (5.00 – 5.50 30yr), refinancings and home purchases will pick up dramatically.

    A house is more than an investment. Prospective homeowners will be willing to risk some further depreciation in home prices as a trade off for today’s extremely low mortgage rates. There will not be a recovery in the over speculative regions (California, Nevada, Florida), but housing in other regions will do quite fine and will help to mitigate these losses at the national level.

    Refinancings will not generate nearly as much new cash to pull out, but they will generate some and contribute to discretionary income. Refinancings will also lower monthly debt service payments and increase homeowner cash flow.

    Lower libor and treasury rates will benefit ARM resets by 200 bps. More homeowners who would have “walked away” will now be able to muddle through.

    The fiscal package will be coming in at just the right time to provide discretionary income as home equity balances are depleting.

    My conclusion is that aggressive monetary and fiscal actions can stave off the upcoming headwinds (one of which will be the loss of up to 1 million construction jobs in 2008 as commercial, condo and new home construction drop dramatically), and will buy time for the necessary structural changes to take place (less consumption, more exports, fewer imports).

    We have been building these excesses for 20 years and we simply cannot correct them overnight without triggering massive job losses, deflation and the permanent destruction (beyond creative destruction) of valuable economic institutions.

    Even with aggressive monetary and fiscal stimulus, this economic restructuring will be painful to the consumer. But it is absurd to think that the best course of action is to let the market rapidly adjust for the imbalances that have taken 20 years to build.

    As flexible as our real economy is, it simply could not adjust quickly enough to absorb the economic destruction of institutions, the loss of wealth and the massive dislocation and retraining of workers that would accompany such an approach. We tried this once already and concluded that Hooverian Economics do not work.

  3. Justin commented on Jan 26

    bsneath, is there really a lot of buyers of homes, waiting in the wings? I frankly doubt it, but that doesn’t mean that it isn’t true.

  4. JasRas commented on Jan 26

    Being realistic about the market is truly difficult because no one has come up with an adequate discriptive word for it. Because that outlook switches from positive to negative from time to time, some around me think I am a trader, or a market timer, but I am not. Some think I am a pure technician because I do use point and figure, but I am not.

    Our most negative person in the office commented to me Friday that I was even more negative than he. I am not. He is always negative. I have high conviction in both negative and positive directions.

    Tuesday we were pleading with clients to wait for the overdue oversold rally to reposition some assets. Thursday, as the internals of the rally were less than stellar, we were encouraging the repositioning. Flip flop? No. Absolutely not.

    The problem in this business (asset managing, retail advisors) is that it is so easy (in this business) to make a living with limited knowledge or effort at great expense to those who failed to look past the veneer. The vast majority of those helping retail clients spend very little time being a student of the markets, economy. They, by and large, read the company line (why re-invent the wheel, right?), and regurgitate it. If things fall out the the parameter discussed by those talking points, they start avoidance tactics.

    According to some, I “waste” an inordinate amount of time reading a wide variety of information from a diverse group of authors. But I have an opinion, a short term outlook, a long term outlook, and I can back it all up in depth because it is mine and I have conviction about it. Is it right? Heck, no one truly knows that until it has long blown over.

    The reality is that most of the major strategists are hedging by “looking for a stronger second half”. Just like they were hedging when they said housing effects were “contained”, Just like they were hedging when they said “the economy will slow, but we should avoid recession”. It gives them an out as “facts come to light”. It keeps client’s of their firm from panicking or moving too much to cash which isn’t fee’d in most cases. It leads people down the path of “well it’s too late to do anything now”.

    How many people do you know that are banking on a recovers or “better” second half of ’08? Which stat will be right, the presidential election year stats, or the first 5 days of January, or the breaking of December lows, or the lack of a Santa Claus rally, or the AFC winning again, or “don’t fight the Fed”?

    Please. Bulls, Bears all get slaughtered at some point. Realists make it…

  5. Marcus Aurelius commented on Jan 26

    Posted by: bsneath | Jan 26, 2008 9:04:52 AM

    In keeping with my earlier post, I doubt “Fiscal Stimulus” will work. The bottom is a long way down, and there will be many casualties along the way – regardless of how quickly or slowly we descend. Any attempt at “Fiscal Stimulus”, by our feckless government will be ill-conceived, poorly executed, and rife with holes and loopholes that will be exploited and abused to the point that the original intent of said measures will look like lunacy in hindsight.

    Decline is usually efficient when left alone. Trying to break our fall will do more harm than good.

  6. Lars commented on Jan 26

    There probably are a lot of buyers waiting and willing to buy at lower mortgage rates, but if they must sell their existing home first, the process may take longer than we would like to see. Those with the cash (not so many of these) are golden.

  7. Danielle Park commented on Jan 26

    Only money managers are the pilots.

    Everyone else gets to spout off and flip flop. They will not be held accountable. Money managers are required to be the parents in a room of teenagers. It is up to us to protect our clients and their capital. It will be considered our fault if we do not. Clients will often fire you for losing money. Sometime they will also fire you if you appear to be “missing out” on some gains. We must accept that in order for us to do our job well we must “miss out” and “look wrong” at certain points in each market cycle. That is what having a discipline means.

    When you have a discipline that works you have to stick to it and do the right thing no matter what your clients may think from time to time. If this means holding cash, so be it.

    Without a discipline that we stick we are literally useless as money managers. The world is already full of the useless spread it around and hope for the best crowd.

    Recently people have been asking me why there seem to be so few “financial experts” who ever talk about trying to avoid down markets? Why do most insist losses are unavoidable and holding and hoping is all one can do?

    The best explanation that I can come up with is the fact that the vast majority of financial advisors out there are not actually portfolio managers with a skilled and proven management discipline. This is another way of saying they have no buy or sell rules to manage risk. Most are financial planners, or financial journalists or investment sales people. They have no skill or training as actual money managers, so they know no alternative but to tell people to hold through market downturns. Sadly, the blind lead the blind right over the cliff each market cycle. Personally I find it very sad to watch.

    People that have not invested the time and commitment to develop a definable risk management discipline around investing, really have no business giving people investment timing advice. Telling people to never sell equities and insisting that no one can time markets is giving investment timing advice–advice that most are just not qualified to give. (Spreading money around in equities does not count as a valuable investment management technique as world stock markets have shown once again in recent weeks).

    Those with a financial planning and sales background should stick to general financial planning advice and leave investment management to those few who have devoted our life work to doing it well. I know of no other profession where the unqualified are given such freedom to run amuck.

  8. Greg0658 commented on Jan 26

    shaping the landscape on MSNBC right now

    Obama race in SC ie: its not the economy or the war, its race and gender

    shaping an establishment win in November

    lucky for cable I’ve got a trucker housemate – cause digital tv is bringing back the antenna

  9. bob commented on Jan 26

    A bit off topic, but yesterday I tried calling around to a few of the bigger banks (BoA, Wells, Citi) to get some info on refinancing and I couldn’t even get through. At most of them, I waited on hold for so long I finally hung up. At Wells, there was an actual message that said the call volume was so high, that I should call back later.

    I am not saying that we are entering a new housing boom or even close, but I think people are underestimating (for better or worse) the impact of the lower rates. 30 yr fixed are now in the low 5’s, which haven’t been seen in years.

  10. lurker commented on Jan 26

    “said measures will look like lunacy in hindsight”

    to me, they look like lunacy NOW. Tax rebates to get consumers to spend when banks around the world are losing billions, real estate prices are falling, and the layoffs are beginning??? This is really nuts and not going to work. IMHO.
    The chickens are coming home and it ain’t gonna be pretty. Of course, if I am good and scared, the market just may rally hard for another week or so but Monday should reveal a lot and no one has to decide what to do right now. thanks BArry. and that long airplane story really freaked me out. Please don’t do that again Eclectic.

  11. Cameron Dean commented on Jan 26


    First, good morning… I see you are up and at it early this Saturday morning. :-)

    I have four comments:

    1. Your right, Dan Mitchell tosses you into the perma-bear crowd, and then he links to one post – out of hundreds (thousands?) – to prove his point. And, it wasn’t even the correct post. Hmm… the press getting it wrong. No surprise here; the older I get, the more critical I become regarding everything I read, see, or hear.

    2. Wouldn’t it have been much better if Mr. Mitchell had linked to a source which would provide a wider gauge of investor blogger sentiment? Such as:

    Not that the above poll is perfectly scientific, by any stretch of the imagination, but at least it is better thank linking to one blog post. Of course, linking to such a poll would NOT support the claim that a majority of financial bloggers are bulls or bears; in fact, the most recent Tickersense poll indicates an almost even split between the two camps.

    3. Are you a perma-bear or perma-bull? I wouldn’t put you in either category. Pragmatist? Yes. Realist? Yes. Beyond that, I must be missing something Mr. Mitchell is seeing.

    4. Wouldn’t it be nice to have a “leave a comment” feature on the NY Times web site? You can e-mail, print, or request a re-print, but you can’t comment. Interesting that this functionality is not present.

    Everyone, have a good day.

  12. Jim commented on Jan 26

    Hmmmm? “rouge banker/trader” my ass. . . think about it – – how convenient it is whenever a bank is robbed, if the insurance settlement winds up paying more than he bandits actually stole because how much is missing can often become a case of he said/she said, thus giving the bankers “a little cushion,” for some of the prior bad deals they made. What if Jerome was merely making trades that his boss had approved, but alas, things went awry, so to speak? Given the alternative – Societe General SA looks incredibly incompetent to the point of criminal negligence or let the kid take the fall to save everyone else’s’ venerable old asses . . . Wherever you are — Be careful, Jerome Kerviel, be very careful.

  13. Cameron Dean commented on Jan 26

    JasRas: Just now reading the comments, and see the last line of your comment… agree with everything you say in your post… in regards to the last line of your post, glad to see I am not the only one that see’s Barry (and this blog) as realist.

    Take care.

  14. Greg0658 commented on Jan 26

    Marcus – good points

    I emailed on the spot (tho maybe never seen) and certainly not asked as of yet

    ask Paulson at the announcement “is paying down credit cards a good idea?”

    Chairman Ben said at his last hearing – it would be best to buy American – I would add buy Local with the money

    for me and my maybe 300 dollars maybe I can compound that with my small business loophole if there is one

  15. Don commented on Jan 26


    Yes….it’s back on! The new real estate boom has already begun.

    I’m in the business (closing attorney) and just had my busiest day (Friday) in months, w/ people refinancing. Watch out next week if Uncle Ben delivers again.

    While it is good for me personally, I despair that it appears nothing was learnt. You can’t borrow your way to prosperity. Houses don’t appreciate $20,000 (about 10% in this case) in four months, as an appraisal claimed in one of the refi’s I did yesterday.

    Cheap money is an addiction that distorts the addict’s view. Asset inflation creates the illusion of wealth, but nothing more.

    But like the movie Groundhog Day, it appears we have re-awakened and its 2003 all over again, and again, and again.

    Oh well. A couple more years of mortgage market insanity, and I’ll be set to retire–as long as I can turn all the slips of US paper into something real before the paper’s best use becomes kindling–off the grid and on enough land to grow my own. Then hopefully when the real decline comes that can no longer be forestalled because there are no more illusionist tricks left to the Wizards of Oz, it won’t matter to me.

  16. BenBittrolff commented on Jan 26

    Bottom Line: The average Joe six pack is a baby boomer quickly running out of time. His single largest asset, his primary residence, is deflating rapidly. This single largest asset is also the primary collateral for his single largest liability. His balance sheet is rapidly deflating as all his assets, from his home to his equity portfolio, all simultaneously deflate while his debt outstanding may actually still be increasing. His debt servicing costs not dropping, despite aggressive rate cuts, and may actually be rising. It has also become damn near impossible to refinance certain mortgages as easy credit evaporates. On top of that, Joe six pack should now be seriously concerned about his job security. So when a cheque for $300 to $1500 arrives in the mail, Joe six pack is not going to spend it on a $200 steak dinner or a new computer or on a vacation. Got it?

    More on the stimulous package: (

  17. jm commented on Jan 26

    On the magazine cover front, we see today, “Americans expect a recession but also survival — Most aren’t worried about their own situations yet, a Times/Bloomberg poll has found.”

    So on which is this indicator wrong? Recession? Or survival?

  18. Winston Munn commented on Jan 26

    Because debt is the instrument of expansion under our economic system, the only variable that can be affected is time.

    All are aware that the housing boom was spurred by aggressive rate cutting – but what is the result of ultra low rates on time?

    It changes time preference to an attitude of immediacy of spending. The real question is how does that forced percpetion change affect future economic activity?

    The net affect is a compression of economic time. Housing explains this well.

    Twenty or thiry years of normal economic housing activity was compressed into a few short years. But once the artificial expansion culminates, a void is left that must either be filled with a new type of buyer or the expansion cannot sustain. In the case of housing, future demand was borrowed to show as an asset on today’s balance sheet – but having stripped future demand, what is left?

    All that was accomplished was illusionary, as future productivity was brought forward to show on today’s balance sheet. And now having borrowed from that future, there is little left to fill the void.

    It is not unlike the shennanigans you often see in corporate accounting, shipping goods out the door to distributors who are not selling the product in order to keep the balance sheet intact – counting the shipped goods as revenue this quarter while in effect only boosting accounts receivables – and counting future sales as current revenues.

    It can work for a quarter or two, but then the shennanigan unwinds when stripped of illusion by the reality of slowing sales and a growing days-to-receivable ratio.

    The problem of compression of economic time through the utilization of ultra low interest rates is that it caps expansion when the market saturates – at that point, having borrowed the great percentage of qualified buyers from the future, there is no one left to fill the void.

    This is the point reached in housing in late 2005 and into 2006. Having borrowed from the future to count as expansion today, the only way left to continue to create an illusion of expansion was to marginalize uncreditworthy borrowers.

    The mania was so great duting this period that it was not enough simply to borrow future economic activity but future foreclosures and bankruptcies were borrowed, as well, and these future claims of insolvency were tossed as logs onto the pyre to fan the flame of false expansion.

    We are now paying the price for having borrowed against future economic activity.

    However, none of this should come as a surprise, for over the last 30 years or so this is the accounting standards we, as a nation, have adopted – borrowing from the future to credit as a benefit today.

    But all it is, really, is a shennanigan. There is no “quality” to these earnings. They are unsustainable.

  19. ken h commented on Jan 26

    I always understood Bull and Bear to describe MARKETS and not Traders. There are distinct definitions, right. SMART traders have the knowledge and experience to negotiate ANY market.

    I think it laughable that networks like CNBC try to TAG traders as Bulls and Bears? “Aw, the bears have taken over the market today” WTF does that mean? No, the underpinnings of the market or that drive the market up, are not present.

    Cramer is always portrayed as a stud. What a BULL that Cramer is! No, more like a risk taking trader who relies on conjecture instead of facts.

    Man, your life is like a beer commercial if your a Bull. Ya, Baby, hot chicks(dudes) and fun.

    I think this market is pretty obvious and I’m sorry that some of you traders/financial planners are headed for hard times. But many looked the other way while stuffing their pockets including many running this country. Some claim that the self-centered nature of the human will lead to the demise of Democracy. We just can’t help helping ourselves. Even when we do things for others it’s because it makes US feel better.

    This we’ll be okay, we’ll not be okay debate will go on for months until this unwinding runs it’s course. You can’t make day come faster in the middle of the night by talking about it.

    The variables in play are enormous and I will wait until clear signs of a BULL MARKET are present to make my plays as I am a amateur. I still can’t help being pissed about the fact that in the end my children and I will paying for this in the end.

    I also worry about the variable we are missing. What could we miss in this fiasco that could make this much worse?

  20. Steve Barry commented on Jan 26

    The media for the average Joe is 100% bullish 100% of the time. What I mean by that is if you turn on any nightly news show, local, network or cable, if the Dow is up 200 they will always say “great day for Wall Street” or words to that effect. I will run naked down 5th Avenue if anybody ever heard it said “great day for Wall Street” if the Dow was down 200. That brings me to CNBC…clearly they cheerlead the market and would greatly prefer up markets for many reasons…ratings, advertisers, GE’s stock price, etc. They will ask guests to put bullish slants at times and will break out in laughter if market is up 300. As a bear, it is sometimes sickening, but they do have guests from time to time that will be non-bullish and they make it bearable to watch at all.

    Society in general like optimists…you cannot advance in any corporate setting being pessimistic. People don’t want to hear me say bearish things about housing, the economy or markets…it scares them because their future is at risk. They will shoot the messenger, so be careful what you say bears…and be ready and willing to turn bullish again sometime in the future.

  21. Don commented on Jan 26

    Eclectic…well-written story–you should be making a living at writing, if you aren’t already.

    If I were the pilot, I’d say WTF, I’m not aborting. As long as the engines don’t quit, you’ve got a better than 50% chance to fly through almost any type of weather, but trying to stop a lumbering whale of a jumbo jet at almost take-off speed on a wet runway would be insane. Besides, if your gamble on takeoff fails, likely neither you nor anyone else on board is alive to complain. But the wet runway leaves lots of dead, a few that escape unharmed, and lots of injured–in short, a much bigger mess from which your life, if intact, would likely never recover.

    So, I guess the metaphor is to money managers. I see why they rarely stray from their chosen path.

  22. bob commented on Jan 26

    Don – great insight from someone in the business. I agree, long term this is not going to help the underlying issue in that this country has way too much debt. Short term though, I think people are really underestimating this impact.

    BenBittrolff – you just posted this same garbage over at Random Rogers blog. STOP SPAMMING. Barry – please block this idiot

  23. Greg0658 commented on Jan 26

    and you cables and fiber networks – looking for help on HDTV piping in the NetNeutrality debate – additionally getting rid of folks like me

    we will push for www access thru wifi networks we can access at public librarys, truck stops and coffee shops

  24. donna commented on Jan 26

    I can’t believe they would quote bloggers for a newspaper without discussing it with them. What irresponsible journalism. ;^)

  25. getting older commented on Jan 26

    Barry-Isn’t there an issue of perspective in all this? If I inherit $ 200,000 from my dear old Aunt Millie and decide to plunk it all in the market then where we are in the cycle makes a hell of a difference. If instead I decide to pay you to manage it for me, then you damn well better get it right or I’m going to be pretty pissed off. So to professional money managers where the market is going in the next 6 months or 1 year or 2 years is of critical importance, no question.

    But that isn’t the way most investors invest. Most folks put some small set amount into their 401k every month, hopefully in wise choices like SPY or DIA, rather than chasing last year’s hot mutual fund. In that case, it doesn’t matter so much, because they will buy some shares at market tops, some shares at market bottoms and most shares somewhere in-between. In the end, they will benefit from the long-term upward trend, including, most importantly, dividends. I would submit to you that even if you took 1929 as your starting point, someone who invested a set amount every month over the next 25 or 30 years would have done fine. And that would be the worst case scenario. Take 1950 or 1970 or 1990 as your starting point and the numbers would look even better.

    Could you do better if you got out and stayed in cash during bear markets? Sure, if you could call them accurately. The problem is no one has been proven to be able to do so over a lifetime, even you Barry. Anyone who could do so with unfailing accuracy would be richer than Buffett.

  26. donna commented on Jan 26

    And Don –

    That is the attitude that is destroying the country – I’ll get mine and screw the rest. If we can’t all become responsible for each other, instead of not caring that the system is broken and needs to be fixed, there isn’t much hope for us as a nation. I hope you will try to actually help the people you are dealing with and not put them into deals they can’t really afford.

  27. bob commented on Jan 26

    donna – people should be responsible for their actions and that is the bottom line. Don’t blame real estate agents, lawyers, etc for getting people into mortgages they cannot afford. It is up to the person to do their due diligence themselves. If someone who is making $40K a year goes and gets a $1M mortgage and thinks they can pay for it, then they deserve to be bankrupt.

  28. Eclectic commented on Jan 26

    Wonderful quote in that Times piece and very insightful by Kedrosky:

    “[about financial bloggers/commentaries] a relentless and somewhat bizarre mixture of Calvinist moralizing and noisy negative triumphalism.”

    That’s precious, and it’s true, but it’s true for both blindly optimistic bloggers and blindly pessimistic bloggers. I don’t think either Kedrosky or Barringo necessarily fit the niches they’re assigned to by common opinion, but let’s play it that way for a moment.

    At first I thought Kedrosky was losing his objectivity in that quote, since I could only assume both ends of the quote to represent his own unrecognized bias against those with a bent for always being either outright pessimists or at worst cautioning pessimists. Why?

    It’s not the “noisy negative triumphalism” part, which is unequivocally directed to Barringo and Herb Greenberg certainly (witness Barringo’s occasional grotch-grabbing of his Triumphant Tunic Tuna and wagging it in Wall Street’s face). No that wasn’t why I questioned Kedrosky’s quote. Rather, it was because at first I considered that his reference to Calvinism was a reference to some possible notion that Calvinists would enjoy the misery of a market decline and see it as God’s wrath against the undeserved wealth of sinners. Well, there’s that expressed in some financial blogs and by their following for sure, but let’s turn the table on Kedrosky. I can’t envisage a Calvinist grabbing his BVD Bonita and wagging it… I just can’t.


    True practitioners of the faith would likely just ignore it and keep working. And I mean by that the true moral sentiments of faith, for which I’m sure Calvinists would include compassion as an element.

    No, it’s because I think Kedrosky stumbled into picking the wrong religion for his quote, because to my mind Calvinists represented the first establishment of supply-side economic theory, at least the origins of it. You see, it’s an easy couple of steps from Calvinism (pigeon-holed for relentless work ethic, work for its own sake as a component of religious faith), to Say’s Law advocacy (Jean-Baptiste Say, also a French Protestant, liberal minded extension of work ethic into capacity build-out also for its own sake)… and then, after losing all faith, moral sentiment and compassion, finally the last step to roaring, blindly optimistic, unrestrained free-market supply-side capitalism, in which the objective of too many of our corporations and entrepreneurs seems to be one of beating their customers to the doors.

    Look at the current financial fiasco, and say it ain’t so! From Calvinists… to Sayists…

    …and on to supply-siders and the Monetarism that fuels them… and then to hocus-pocus pro-forma EBITDA worshipful willfulness for its own sake. And then what do you get?… Just what we have now, a special kind of failed religion.

    However, to be fair to Kedrosky, I discovered he wasn’t biased after all in his comments. I went to his blog on the subject…

    … and he’d addressed that very element in this quote taken in proper context with the one Barringo posted:

    “And to be clear, I am equally critical of the always-be-buying up-with-the-economy crowd. Their indefatigable and illogical boosterism in the face of contrary economic evidence is merely wealth-deflating.”

    “Indefatigable and illogical boosterism in the face of contrary economic evidence is merely wealth-deflating.”

    My, my… that’s a statement I’m sure Barringo or Herb would be mouth-wateringly envious of. I certainly am. I am Eclectic. It would also have been nice if the article’s author had put it in for better context and to give a better interpretation of what Kedrosky was saying. I’m not attacking Calvinism, but maybe Kedrosky had something like that in mind to balance out the equation in his quote. We’d have to axe him to find out?…On second thought…Naawww!, I kinda doubt it.

    But anyway, Paul, your observations were reasonable all the way around. No bias detected.

    To Don: Thank you, glad you enjoy it. I do make my living communicating but not as a professional writer.

  29. Winston Munn commented on Jan 26


    I, too, find your writing interesting. Considering the pilot piece, this reminds me greatly of ex-CEO of Citi, Charles O. Prince who stated last summer, “As long as the music is playing, you’ve got to get up and dance. We’re still dancing.”

    I guess as Citi’s pilot, he now can join James Taylor in a chorus of “Fire and Rain”.

    “Sweet dreams and flyin’ machines in peices on the ground.”

  30. JudgeJudy commented on Jan 26

    Markets can stay irrational longer than a patient renter can find a decent house for 3X their income.

  31. stormrunner commented on Jan 26

    Eclectic, Winston, Estragon, …

    I have noticed you pay very close attention to the machinations of the 10Y,
    I’ve been closely following the analysis of Karl Denninger recently and it was his opinion that on the public release of info regarding the stimulous package that the immediate 30 basis point upward yeild swing of nearly 6% was a significant tell as to the attitude of the bond market. It is his opinion that the bond market is telegraphing, further cuts next week with this stimulous package will likely create a rising yeild which will negatively impact the mortgage market, we could actually get a downside (hold)surprise next week rather than another cut. As the slosh is indicating that the FED is needing to much injection to prtect the new rate as it is.

    I am obviously new to the mechanics of FOMC operation, would appreciate your opinions of this analysis.

    Thanks just trying to anticipate, the learning curve is steep.

  32. Winston Munn commented on Jan 26


    Eclectic is the Van Cliburn of economic theory, so gifted that he can bring tears to the eyes of Russians by his mastery of Tchiakovsky.

    I play in the piano bar – part time.

    Lately, I’ve been sounding like Little Johnny One Note while playing the same song over and over – I expect more cuts next week, and more again later.

    But it is not the bond market that influences my view but rather Bernanke’s and Mishkin’s own past writings.

    Unlike many others, my conclusion from the data is that a deflationary recession is a high probability – Japan, to me, is the example, and not the Weimer Rebpublic.

    In a speech, Bernanke stated that the error of the Bank of Japan was in not lowering rates early enough and low enough.

    Thus, I conclude that the continuing downward pressure on assets prices will lead to deeper and deeper preemptive rate cuts.

    Not that rate cuts will accomplish their aims, as the turmoil is outside Fed direct action. They are more like a skulling crew trying to use their tiny craft as a tugboat to nudge an aricraft carrier out of harm’s way.

  33. Francois commented on Jan 26

    I went and read the article in question in the NYT. This experience thought me something really troubling: my capacity to endure bullshit has not declined significantly enough.

    To my amazement, I was able to read the whole thing without inflicting terminal damage to my mouse or keyboard. Broad ad hominem statements without proper context, qualifiers with a below minimal quantity of facts, and an economy with the truth that would make a English boarding school comptroller green with envy.

    I guess it is very difficult for some people to grasp the concept of a perma-realist, which Barry is a great example. After all, these people accept that a unruly gang of thugs called facts, shall barge into the castle of theories, tear down the alcove of belief systems and bluntly traumatize anything that moves inside.

    Tough titties!

  34. stormrunner commented on Jan 26

    The premise here is that the FED is not operating in a vaccuum, and as also indicated by Estragon in a previous thread that the bond market retaliation could get punitive in a too far, too fast senario. I really don’t know how significant a 6% percent swing is but it was implied to be huge, the emergency cut was purported to be more of a reaction to the lack of credit demand late last week as indicated by the slosh also, more so than any rogue trader activity. I find the concepts to be quite plausible. Long term Winston, as you indicated reflation in a credit satuarated market will be nearly impossable. I am however intrigued by the analytic components and their predictive power in the short term. They will obviously have a hugh impact on next weeks action and the sanity of positioning oneself for a short term relief rally. A no cut should reverse this action.

  35. stormrunner commented on Jan 26

    In a previous thread I asked about the predictive power of the following also without any input from the brain trust the analysis in retrospect would seem to have been spot on.

    Along with the Denninger site I also check out Tim Wood for cyclic analysis. I found a statement by his quest Tony very intriquing. He stated that normally on options expiry there has been, for as far back as 20 or more years, a level at which the brokerages covering the options broke even (his no-pain zone) for this cycle that was S&P @ 1425. At the time of the interview Wednesday S&P sat @ 1375. He stated at 50 handles that this implied massive losses for the house and the last occurance of this magnitude was the ’87 crash. At Fridays close the S&P was > 100 handles double this acceptable pain zone!!!

    any opinions.

    Posted by: stormrunner | Jan 19, 2008 9:40:37 PM

  36. Eclectic commented on Jan 26

    I’m going to have pull a quote from Panzner and toss it at Kedrosky:

    “Another problem with this synthesized latticework is that it enables toxic fallout to flow unimpeded and puddle in places with widely varying rules, regulatory standards, political regimes, and moral codes. This all but ensures that when defensive measures have to be taken, solutions are not only hard to find, but impossible to implement.” end quote – Mike Panzner

    Now, back to Kedrosky’s:

    “Indefatigable and illogical boosterism in the face of contrary economic evidence is merely wealth-deflating.”

    Well, they’re saying slightly different things, but I’m gonna give the nod to… hmmm?… well, hell, my heart’s with Panzner and so…

    No, I just can’t do it. “Indefatigable illogical boosterism” beats “synthesized latticework” by a hair, so I’ll give the nod to Kedrosky.

    Now, Mike Panzner, I’m going to take some liberties and punch yours up a tad… sokay with you?

    Let’s do it this way and make it sing:

    “The problem b-l-e-e-d-s into a toxic synthesized latticework flowing unimpeded to puddle where there is n-o regulation or moral compass for purging it.” (should be spoken in the style of the movie preview voice-overs of the 1960s – Think ‘On The Waterfront’)

    Howzat?… You know what they say… If it bleeds, it leads.

    So, let’s hear it for K-e-d-r-o-s-k-y:

    …..Now, for P-a-n-z-n-e-r.

    Who wins?

    Hold that thought, cause I’m tossing in too. I’ve updated one of my own prior quotes, which I might add will hold its own with the aforementioned, if I say so myself:

    “[about willfully optimistic supply-siders’ disdain for the public] Let it believe it can l-e-v-i-t-a-t-e as though by bootstraps unrestrained to that n-e-v-e-r–n-e-v-e-r land where fools suck w-e-a-l-t-h from the mist of common delusion.” (also with voiceover done in movie preview style)

    Now, which one gets the nod. Applause?… Can I hear some for old Eclectic?

    You know… This bloggy-bloggy hatespeak can actually be fun, huh?


    Right now we’re sort of in the Fog Of War with the Fed. I have no idea what they’ll do. I could argue a good case for nothing and I could argue a case for a full 100 basis points lower, FF and Discount Rate.

    When I take either position, I whip my other-self’s ass, and so I guess I’m just lost like a ball in high weeds.

  37. Winston Munn commented on Jan 26


    Good qutstion, but I am ignorant on the subject of the internal workings of options houses.

  38. Winston Munn commented on Jan 26


    I believe the more apt term should be:
    supply s-l-i-d-e economics, and present this phrase to the assembled masses for thumbs up approval or thumbs down distain.

  39. Eclectic commented on Jan 26

    Supply-sLide!… I like that.

    BTW, Storm, I was only referring to the here and now, just about the Fed next week.

    I think it’s much of a matter of whether they’ll feel bullied or not. If they take it personally what’s been said in the press, they may balk. Too, events beyond anyone’s capacity to predict (if you’ve noticed, we’re getting hit almost semi-weekly with blow-ups, any of which could be the one to finally turn the lights off) might overpower the Fed’s fear of being co-opted by Wall Street.

    Later, however, Bondie is going lower in my opinion, regardless of what the Fed does next week.

  40. stormrunner commented on Jan 26


    I fully appreciate that prognostication is an inexact science, the question is to the accuracy of the causal relationships.

    In the expiry example short of a 25 year unprecedented inter-meeting cut we may well have experienced a serious decline (tradable??)

    If the FED is in this game to save the structured investment market, housing needs to be re-targeted, more so than equities, the bond market if the analysis I am referring to is plausible, (this is my query), has largely stated the direction of 10Y yield if another cut plus stimulus is implemented, and the slosh escalation to defend the new target seems to support a hold also. My question is to the historical validity of the premise not a guarantee. I am looking forward to a debunking of the idea regardless of what your leaning is as to the outcome. In other words I have no basis for the opposing side of the argument (reasons this could be wrong), and though I may be very well mistaken it would appear to be relevant moving forward. We’ve already experienced a significant decline given the recent norm ~10% declines followed by rebounds. Further cuts should spike equities, but what’s the game, save equities or save the bond market and likewise the banks. I realize the banks borrow short to lend long and therefore spikes in the 10y could be irrelevent to the mortgage market. Its more about the mechanics is the 6% spike a significant tell when coupled with the slosh. It would seem to be a question of balance and for this round the balance is already off kilter.

  41. Winston Munn commented on Jan 26

    To Wall Street, the bullish aroma of Miracle-Gro ultra-low rate interventionism sprinkled on the economy may smell sweet, but for those of us at grass roots level the aromatic effect is of something entirely different and vaguely familiar – but still having to do with bulls.

  42. Eclectic commented on Jan 26

    Storm, I don’t give advice or investment council of any type on this blog.

    My observations are only about the very broadly defined macroeconomic environment and about philosophical concepts and Barringo-initiated trivia and ironic humor.

  43. Eclectic commented on Jan 26

    Here’s some more to heap on your pile:

    Seems like a good place for a review of a former topic along with my comments from then that I’ll edit now in the review. I’ll link the Bic Pic topic from August 30, 2007, but at the end instead so as to prevent confusion.

    My comments then (with minor editing now) were:

    Carl Quintanilla asked a very good question today on the CNBC segment. I’ll paraphrase it: “Wouldn’t it seem reasonable to just assume that maybe Grantham, a value investor, is looking around at a market at 13,000 that’s just continuing to go up, and needs to come up with something to say* to justify the fact that things aren’t going his way?”

    *Grantham wrote to his customers a letter on about that date widely viewed and attacked then as being pessimistic for the sake of Grantham’s supposed need for absolution in some way for being wrong. I wasn’t attacking Quintanilla then, or now, because a good journalist should take the devil’s advocacy position. The problem in media is that we don’t have enough journalists who understand how important it is to question the intentions and motivations of those whose opinions they often willingly and unquestioningly assist in feeding to the public.

    Let’s examine the logic of that observation by Carl.

    Grantham has written his opinions in a quarterly letter to his clients… to his customers that pay him for his intellectual services.

    Carl’s question, while reasonable to ask, implies at least the potential that Grantham might choose to be disingenuous with his customers rather than face a reality already known to him. In other words, it implies that Grantham might knowingly deprive his customers of opportunity merely for the purpose of being right by his own definition. It would be as though an angry parent, who after understanding he was punishing a child for illogical reasons, decided to continue to punish the child because of a further and more illogical w-i-l-l-f-u-l-n-e-s-s.

    Readers of this blog who believe Barringo is a willful pessimist just don’t understand him… and they haven’t read him in context. My readers here may remember that I have described willfulness as being a quite different but related emotion to the abstract expression of optimism. By that I mean that optimism has a sign, in the sense of a mathematical valence; it can be positive (+) or negative (-), as can pessimism have the same opposite signs.

    When either optimism or pessimism are drawn from o-b-j-e-c-t-i-v-i-t-y, they are capable of changing signs according to changing interpretations of the facts.

    However, willfulness can never change its sign. With willfulness, the human psychological attitude is one of making a foregone conclusion… as in: I am on the train and the journey is predestined to be completed by my willfulness, and thus there is no need to evaluate any facts during the journey.

    Such persons can never get off the train, and they’ll interpret any attempt to influence them to do so as being pessimism for its own sake, when in fact they are demonstrating optimism merely for its own sake, as expressed in illogical willfulness instead when faced with even overwhelming facts related to risks.

    In my opinion it’s the human psychological basis that supports Grantham’s observation, quoted here from Mr. Mauldin’s recent entire reproduction of Grantham’s letter in Mr. Mauldin’s “Outside The Box” piece dated 30 April 2007 (found here):

    It’s Everywhere, In Everything: The First Truly Global Bubble (Observations following a 6-week Round-the-World Trip) by Jeremy Grantham

    “In the real world, unfortunately, even if you believed it [‘it,’ meaning: supposing that you are a money manager and believe customers would be better off in cash] with every fiber in your body, you could only have a little cash on the margin because the career risk or business risk of moving more would be unsupportable.” End quote – [bracketed text my addition for clarity]

    So, Carl, here Grantham seems to be giving us a better description of possibly what a disingenuous act could be, one that is done even with the possession of the intellectual skill and knowledge required to understand that it is the more disingenuous.

    No, Carl… I think Grantham, Russell and Buffett are all cut from the same cloth. None of them would recommend a person play Russian Roulette for a million bucks, even though the odds for one successful play favor the player… and when a successful player came back to them and waved the mil in their faces, they’d not spend a lot of time looking for a reason to justify their ‘failed’ recommendations.

    On to you, MAS* (San Diego)

    *[a comment poster on that date/topic]:

    You’ve already linked the article about comments from Grantham from approximately May, 2005, so I won’t reproduce the link… *[although I must now for continuity, so here it is]:

    …but here are three entire paragraphs reproduced from it, from which you selected your partial quote. I have double-bracketed the entire passage, although the single brackets are not mine:

    [[‘The key point in the U.S.,’ Grantham emphasizes, ‘is that in the recent three-year stock market decline, all the stock market wealth lost by the median family holding stocks was more than offset by a 21% advance in house prices. This favorable circumstance seems extremely unlikely to recur [next] time. The inevitable 30% to 40% decline in U.S. stock prices necessary to get to fair value, accompanied by flat to down housing prices, will pose substantially greater risks for consumer spending than last time.

    ‘The ‘best’ reasonably likely outcome in the U.S.,’ the bubble-tracker concludes, ‘is that a moderate stock market decline in the next two years… could be accompanied by up to one more year of average house prices rising, for the U.S. housing market has lagged the other countries and has some good potential for catch-up in certain regional markets…

    ‘But by this time next year,’ Grantham warns, ‘time would really seem to be running out for our U.S. housing semi-bubble. It also seems likely that by then the housing markets in England and Australia will have completely run out of steam.’]] end quoting. I must observe that the punctuation regarding quotations in this passage is a bit confusing.

    I have several observations to make:

    -Grantham was in good company expressing concern about the housing industry in 2005. Alan Greenspan had more-or-less begun the first serious Fed criticism of the excesses of the derivatives-based mortgage industry by that time, albeit Greenspan was less critical then than Bernanke has become recently… and for good reason if you’ll read his recent public speeches and testimony (see the Fed’s site). You can also read evidence that the Fed has lost the ability to control risk leverage in the article: “OUTER LIMITS – ‘As Funds Leverage Up, Fears of Reckoning Rise – Fed and SEC Question Wall Street on Policies: ‘A Mockery’ of Margin” by Randall Smith and Susan Pulliam, WSJ – April 30, 2007, page one.

    -Grantham wrote that it was unlikely for the next downturn in equity market wealth to correspond with what he himself termed, the “favorable circumstances” of it being offset by a corresponding increase in real estate equity wealth in the same magnitude that had been experienced over the previous 3 years until that present time. He further indicated a downturn in the stock market was likely within 2 years (that period is about now lapsing). Well, he was quite wrong, since the stock market has rocketed up, and, too, cracks in housing did not get the full attention of investors, regulators and Congress until after a slightly longer period of time than, as he expressed it, “by this time next year,” meaning by approximately mid-2006.

    -Okay, so he underestimated the stock market – my guess is he’s well aware of it, but his observations about housing are just off by a few months, and it is in my opinion quite true that were the stock market to decline, the already boosted real estate market wouldn’t have the same capacity to offset it again in the same way, if at all. The real wildcard in this dilemma would occur should housing worsen considerably, because it has a much greater capacity to reduce aggregate wealth effects in the economy… as well as a greater capacity to hinder consumer and investor sentiment.

    End of Grantham letter comments from prior topic here:

    New subject:

    Another I think worthy opportunity for reproducing my best metaphorical picture of Willfulness for Its Own Sake:

    Part I

    You’re an experienced jumbo jet captain with 25 years of experience. You’ve never had an accident of any sort although there have been a few tight spots.

    This afternoon your plane is loaded with 306 passengers and crew, including yourself, and you’re sitting at the gate a few minutes behind schedule; should have been pushed back 10 minutes ago. Your flight is supposed to connect to Atlanta in about 4 hours.

    There are still some unavoidable delays and 10 minutes later you finally get pushed back and taxi out into a very long line of other aircraft waiting to take off. If you’d not been delayed, it would’ve been 3 or 4 ahead at most and by now you’d be near cruising altitude. If you miss your gate time by too much in Atlanta, the company will be hosting a very expensive list of hotel guests tonight, and things are beginning to look like you might miss it.

    As it is, you’re basically in a linear parking lot of heavy iron, and as you taxi at wheelchair speed you notice a large thunderstorm darkening the sky in the distance, even as there’s only sun and cloudless blue sky above you now. Boy, you wish you were getting the okay for takeoff now, but what will it be like in another 20 or 30 minutes?

    There are still 10 ahead but you’re down near the end of the taxiway now, and you can see cleared flights ahead of you take the 180 degree turn, sit a moment, and thunder by you in the opposite direction. But now incoming flights are reporting wind shear on their approach legs to landing, and part of the thunderstorm is wrapping around and beginning to threaten the departure space. Each time a flight turns and departs you get closer to takeoff, but the thunderstorm gets closer as well.

    Now, finally, you’re up next and you are cleared to turn and hold the runway for takeoff clearance. As you turn, you get a really good look at that thunderstorm. Damn!… that’s close, far closer than you’d hoped. You call the tower and ask about windshear at the airport. “None reported,” the controller says, but incoming flights are beginning to get put into holding patterns now because of pilot reports of severe turbulence on approach.

    From your perspective now, sitting on the end of the runway, it can’t help but be worsening at least a little in the departure zone, but the flight ahead of you was cleared just a minute ago and he’s airborne. You’re next. While you wait, you look back down the line of aircraft now facing you and you can taste the tension they have as they wait for your wheels to roll them closer to a takeoff for themselves.

    Another look at that thunderstorm… it’s still closer it seems… don’t know if this is a good idea. There are winds in that thunderstorm that will steal the lift from over your wings and put you and your fellow 305 souls in a big pile of fire, smoke and twisted metal just off the airport grounds. But the tower still reports no windshear from electronic detectors near the runway. The next turning flight behind you for takeoff is so close you can see the eyes of the captain and copilot watching you.

    At that instant, the tower says your flight is ‘cleared for takeoff.’ Now the moment is all yours.
    What are you going to do?

    After waiting in that line so long… and while watching flight after flight take off… and after being told 2 or 3 times that there’s no windshear, there you sit with your hand on the 2 throttle controls connected to giant air-sucking monsters that will give you what you’ve been waiting for.

    Your copilot is watching you and waiting for your instructions like your pet dog waits for table scraps.

    The thunderstorm is even closer now, and you’d pray for the relief that would come if the tower canceled your clearance. But, no… all you hear is the tower repeat your clearance for takeoff. You’re sitting there like a dummy, cleared for takeoff but the sweat is beading on your forehead.

    All the captains in all the flights behind you also heard the first and repeat clearances for takeoff… so “why are you still sitting there, fool?” All this is flooding your brain in just seconds or fractions of seconds, and you now only have one last tiny fraction left to make up your mind.

    What’s it going to be?

    You can refuse the clearance if you want to, but then you’ll have to taxi at wheelchair speed again down the active runway to the nearest turnoff, and there you‘ll have to wait until ground control moves some of the departing aircraft behind you out of the way just so you can go lamely back to the gate. And when you’d turn off the active runway, you’ll have to hear the flight that was behind you thunder into the air… and know that its captain and copilot are whispering about you to themselves, “fools.”

    If you refuse the takeoff clearance, you won’t be able to get back in line again even if you wanted to, because your copilot worked an extra flight this morning and he’s due to be off the clock before you could get to the arrival gate in Atlanta with another huge delay. Not only would a number of connecting flights at Atlanta now be without their passengers who are on your flight, but you’ll have to put them in hotels tonight in the big city where you are, and it’s possible they might miss connections again tomorrow and stay another night in Atlanta.

    What are you going to do?

    You’ve been flying most of your adult life and every instinct inside your body and soul says, “Don’t go!” But everything in your chain of momentum; your company, the passengers, your copilot’s eyes, the flights behind you and the controllers are all telling you, “Go… go… go now, fool, what are you waiting for?”

    So, what are you going to do?… You’ve now had an extra thin second to think, but you’ve got to do something and do it now. What’s the decision? We don’t have all day.

    Pause a moment and think of what you’d do, and then read:

    Part II

    Okay, so you’re the captain of this jumbo and you’ve made the decision. It’s a go.
    You and the copilot join your hands on the throttles and push them firmly over to maximum power. The engines whine up and that massive sense of thrust begins to press you back into the seat. We’re on our way!… You’ve finally done this and it’s a “Go!”

    The tension immediately passes from your body and soul and routine takes over.

    One fraction of a second after the throttles are pushed, your copilot hears a garbled sound, a tiny clicking sound, over his headset. He knows from experience someone may be having their microphone transmissions “stepped on” (when two simultaneous communications can’t both be received), and if it’s the tower’s mike getting stepped on by another aircraft’s transmission to the tower at that exact same instant, then “What might the tower have been trying to tell us?” he thinks.

    Another fraction of a second later, your copilot tells you, softly at first, “We’re not… I don’t think, uh.. I don’t think we’re cleared,” but he begins to say it much louder as you continue down the runway, gaining more and more speed.

    You’d not heard the tiny clicked hint of a stepped mike and tell him “We’re cleared for takeoff! They cleared us!”

    Finally, the copilot almost yells the warning that he thinks the clearance has been “deleted,” and that you should “abort!”

    Now you’re almost moving too fast to abort, but in 1 or at most 2 more seconds you will be beyond aborting.

    The thunderstorm has now actually entered the immediate area at the other end of your runway, and it’s raining now so hard there that you can’t even see the end, and you couldn’t see another aircraft either if it were waiting there for you to slam into it as it crossed the runway with the clearance you thought you still had.

    Even yet the powerful urge you’d just had to refuse the takeoff clearance in the face of this dangerous thunderstorm is weighing heavily inside your head.

    What are you going to do now?…

    You wanna be twice the fool?… once for sitting like a chicken on the end of the runway with half the flying public lined up behind you?… and now again as you abort and possibly end up, brakes locked, tires screaming and smoking, sliding to a disturbing grinding halt beyond the runway’s end marker?

    That’ll get the blow-out emergency escapes inflated and you’ll see broken hips of old ladies when you finally get to the bottom with them. It’ll close the airport for hours. They’ll investigate what happened.
    You’ll get to tell ’em your dumbass copilot talked you out of an unambiguous takeoff clearance. Of course the tower will agree with that, so you’ll be the bigger fool still.

    What are you going to do now?… Think about it hard and fast… you’ve got another 1/2 second… that should be enough for a professional with your training, background and expertise.

    So, what’s the word?… What are we going to see happen now?

  44. Ed Miller commented on Jan 26

    In spite of all the other comments I will stick with my initial reaction…….

    Is this post really an implicit open letter to someone at CNBC with the initials LK?

  45. stormrunner commented on Jan 26

    Based on recent things I’ve read from Tim Wood, Frank Barberra, Denninger etc. the FED follows rathers than leads the bond markets and Tuesdays premarket action was more likely a response to a lack of demand for credit than a move to save the markets, though a preception of the prior is a win win for Bernanke. They however seem to have temporarily fixed the lack of demand issue, evidenced by the slosh and any further cuts could present some rather serious issues possibly not worth risking to save another resumption of equity decline from this rally attempt.

    Do you agree with the follows as opposed to leads assumption.

    I’m not looking for investment advice per se but a critrique on whether my understanding of the mechanic leaves something to be desired.

    Again thanks for the responses its tuff for a novice to find a place to toss these ideas around.

  46. Winston Munn commented on Jan 26


    The relative amounts of money involved to me is key – the bond markets are immense when compared to possible Fed intervention.
    The tail does not wag the dog.

    Charts seem to indicate that the Fed history is one of chasing the 6-month T-bill rate; hence, it would appear more cuts are to come.

    If not, this would be a departure from the Greenspan Fed and place a Bernanke stamp on this Fed with a line in the sand reluctance to instigate bubble formation.

    My take is 2.5% by year end. You can take the academic out of the ivory tower, but…

  47. Al Czervik commented on Jan 26

    “Herb Greenberg is an investigative reporter. His job is to identify the seemy underside of business, the frauds, the crooks, the liars…”

    Now there’s a man with lifetime job security.

  48. Al Czervik commented on Jan 26

    “And where I sit requires a healthy dose of not letting the bullshit artists lose our client’s money.

    I suggest readers and investors do the same . . . “

    Oh, and thanks for trying to help the rest of us (non-clients) do so – for free.

  49. stormrunner commented on Jan 26


    Your post indicates an agreement of the follows rather than leads theory, the question now is one of relative speed, at what rate of speed will they attempt to bridge the gap, and is that rate more dependant on the demand for credit and their ability to effect the FFR by reasonable daily FOMC operations or will they flood the market with easy money. Even in the emergency cut it was suggested, this was a response to a lack of demand for credit, would it not be in the character of the FED to now wait for another lack of demand before chasing the rate down much further to avoid the appearance of pandering to the equity markets.

    I’m likely jumping the gun here as Barry will likely host a thread next week or sooner regarding the expections from the FED for next week.

    It looks to me as if this topic more aptly fits the new thread. Sorry

  50. Eclectic commented on Jan 26



  51. ColonnadeBoston commented on Mar 8

    No Need to Consult Your Stockbroker to Recognize the Value of this Transaction

    BOSTON, Mass. – March 1, 2008 – With the stock market’s volatility impacting our portfolios daily The Colonnade Hotel, located in the heart of Boston’s fashionable Back Bay, felt it was time to give guests a welcome reprieve upon check-in. Instead of cringing at the closing bell guests will be rewarded whether the market closes up or down.

    Now through June 30, guests reserving The Bulls & Bears Package Monday through Friday will receive a percentage off their room rate based on the 4:30 p.m. Dow Jones Industrial Average’s closing bell regardless of which way the market closed. If the market finishes down, guests receive 20 percent off their stay; if the market is up the hotel will take 10 percent off making it a win-win for Bulls & Bears.

    “Everyone waits for the closing bell to hear how severely their wallet was affected that day,” says Director of Sales and Marketing Christopher Lynn. “We thought it was about time our guests received some good news at that hour.” Designed with the business traveler in mind, The Bulls & Bears Package includes a double occupancy room, in-room breakfast, high speed Internet access, an overnight shoeshine and parking.

    This package is subject to applicable taxes and availability. Business and leisure guests will appreciate The Colonnade’s full range of executive services such as a fully equipped business center offering secretarial, copying, mail and packing services as well as facsimile and multilingual translation service. Having a problem with your laptop? The hotel’s dedicated Director of Information Technology will be able to assist. Need to print a last minute document for your meeting? Wireless printing from a guest’s room to the business center enables you to print documents effortlessly.

    Of course the hotel also offers same-day laundry service, 24-hour pressing and overnight shoe shines. Nestled in the heart of Boston’s fashionable Back Bay, the newly renovated Colonnade Hotel is just steps away from many of Boston’s finest cultural venues, upscale shopping, restaurants, colleges and universities, as well as the Hynes Convention Center, making it an ideal location for both the leisure and business traveler.

    After undergoing an $18 million redesign, the hotels new look is one of sophistication and comfort placing a high priority on environmental sustainability. The transformation encompasses renovation of all guestrooms, suites and public spaces, and introduces 21st century comforts and high-tech amenities that can be customized to the needs of discerning business and leisure travelers.

    The Colonnade Hotel has provided genuine Bostonian hospitality to residents and visitors for more than 36 years. A beloved Back Bay landmark whose opening launched the neighborhood’s renaissance in the early Seventies, The Colonnade is home to the city’s only roof top pool, to the award-winning Brasserie JO, and to a host of recently remodeled function rooms and the hotel’s grand ballroom, providing the setting for many of the city’s memorable business and social events.

    The Colonnade is within walking distance of Newbury Street and many of Boston’s finest shops, museums, galleries, and landmarks including Hynes Convention Center, Symphony Hall and Fenway Park and is located just minutes from Logan International Airport. It is a member of Summit Hotels & Resorts and Concorde Hotels. For more information or to make reservations please call 1 (800) 962.3030 or visit or

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