Via Doug Kass, comes this list of bad dope by the punditocracy, including analysts, strategists, and T-heads. These are a cautionary warnings not to blindly follow the cliches and heuristics so popular on Wall Street:
• Home prices will never fall (said repeatedly two years ago). Look out above, home prices are falling.
• Don’t fight the Fed (said repeatedly over the last several decades). Sometimes, like in the last nine months, it does pay to fight the Fed.
• The cash on the sidelines will provide fuel to a new bull market leg (always said). There is always tons of cash on the sidelines.
• Citigroup, at $53/share, is inexpensive at only 12x earnings (said last year repeatedly). Last sale? $26. Res ipsa loquitur.
• Bank stocks and government-sponsored agency stocks have strong dividend support (said last year repeatedly). Bank dividends have been slashed throughout the year. (Fannie Mae just cut its dividend.)
• The housing and credit crises are over (said frequently recently). The housing depression and the seized up credit markets remain problematic.
• As night follows day, the financial writedowns will become financial writeups over the course of time (said will regularity recently).
• Buy stocks in the long run (always said). Stock markets have historically gone through decade-long periods with no price appreciation.
What have you been hearing lately that sounds good, but is not quite right?
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Source:
The Media’s Muddled Message
Doug Kass
TheStreet.com, 05/06/08 – 11:59 AM EDT http://www.thestreet.com/_rms/s/kass-the-medias-muddled-message/newsanalysis/investing/10415304.html
The administration is sure trying to stay out front on this one…..
AP
US Treasury chief: no ‘quick fix’ on oil
Sunday June 1, 10:21 am ET
By Barbara Surk, Associated Press Writer
US Treasury Secretary Henry Paulson says he sees ‘no quick fix’ to high oil prices
DOHA, Qatar (AP) — U.S. Treasury Secretary Henry Paulson said Sunday that there was no quick fix to high oil prices, which he called an issue of supply and demand.
AP
OPEC president says oil prices not tied to market
Sunday June 1, 7:00 am ET
Algerian OPEC president blames weak US dollar, other factors for oil prices
ALGIERS, Algeria (AP) — The weak U.S. dollar, market speculation and the subprime crisis are the causes for the spiraling price of oil, OPEC’s current president said Saturday.
Huge pools of foreign capital are on the sideline, just waiting for interest rates to bottom to come back into the US market.
Over the past several decades data that had been always a good predictor suddenly became erratic, inaccurate, and sometimes irrelevant. Then new data sets arrived and off we go. I think we are in one of those times where the data is dirty and we are all lost. I don’t know, maybe the new market God will be the wheat-Dow Jones ratio. Don’t laugh, at one time the iron clad indicator was the soybean and silver ratio.
Most of us look at the carnage of the credit markets, the massive unemployment caused by the collapse of the housing market, the rampant foreclosures and wonder why the unemployment stays flat, the economy shows modest growth, and productivity rises. Gasoline prices and food costs should mean ruinous inflation. So the stock markets go up. I know this gypsy……
How about: Oil prices will never go down, because supply will never be increased, brought to you by the same pundits who brought you the rest of your list.
How fitting that this comes from the self-proclaimed anti-Cramer, as the list is practically a verbatim quote of Jim Cramer’s commentary over the past 18 months: (1) Cramer wrote at the October peak: “The Fed has got your back” (which he later tried to ignore and RevShark threw in his face — embarrassing), (2) Cramer actually bought Citigroup in the $50s in mid 2007, and then blamed everything on Chuck Prince (he almost always blames the CEO when his stocks don’t do what he wants) (3) On many, many occasions in past few months he has told people to buy bank stocks because of the dividend protection, (4) In March 2007 he wrote, “I now believe the worst of subprime is past us.”, (5) He has said at various times that cash on the sidelines and more specifically from European buyers of U.S. assets will propel us higher, (6) And of course he is a well-known Jeremy Siegel-style “stocks forever!” type of guy. The worst part about all this is that he has switched back and forth enough times from Cassandra to Pollyanna that he can point back and claim that he saw the credit crisis before anyone (seriously, he actually claimed this in response to a WSJ article). It’s too bad Cramer has so much media leverage or I suspect more people would speak frankly about his lack of accountability, luck and shenanigans.
1) oil’s going back to $80
2) the consumer is in GREAT shape
3) the global economy will rescue us
4) inverted yield curves don’t matter
Not sure if it sounds good and am pretty sure it is not quite right, at least in the real world, but I do believe I’ve finally seen an explanation of inflation ex-inflation that makes sense: http://tinyurl.com/63tngn
Well, not sense necessarily, but it does explain quite a bit.
Damn you. I don’t have time right now to deal with a soft ball like this one. I’ll make up for it next week somehow.
What about the ones that sound good, but could be quite false?
– Decoupling BRICs will save the credit market.
– OPEC is responsible for the current rise in oil prices.
– Friedman is the only way way, Keynes was a crypto-communist looser.
– Supporting Yeltsin and enforce privatisation instead of supporting Gorbachov and was a riskless bonanza.
– The government of the poor should not have the right to force their farmers to feed their own people first.
– The Bear’s bail out and the discount window will prevent credit crash and bank runs.
1. That it is a “credit crisis”……..
2. Recovery “in the second half”…….
3. Over 500K jobs will be created (see #2)
4. Banks are done with “write-downs”
(nevermind that NONE of them have taken
write-offs)
5. ANYTHING that comes from Henry Paulson
(he’s on his 11th or 12th bottom call)
6. Shorts cause ALL the problems (see #4)
7. The Fed’s numerous auctions to “ease the
credit crisis” (see #1)
Everyone knows where the auction money is
going….not to lendee’s but to pad their
hopelessly impaired balance sheets at the
qtr. end. (wonder why it’s for 28 days?)
8. The Fed is concerned about inflation
9. Any inflation data released by any
“official” agency.
Those are just the ones I can think of in a few short minutes……
please feel free to add to them…
Ciao
MS
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Those who show 100+ year charts of Dow and show how markets go up in the long-run need to be reminded that most of us do not know a single person who invested in the market in 1900 and lived till 2008 to tell the story.
What matters for most investors are period of 25-30 years of investing and then using the money for the retirement.
In fact, Mr. Kass is understating the risk when he says decade-long periods.
Consider this – an investment in the market (DOW) in 1929 would have had to wait 25 years (until 1954) just to break even. In real terms (using CPI to measure inflation) that investor would not have broken even till 1958 – almost 30 years later.
Another bear market in equities that started in 1968, the DOW was highly volatile but ended at a level of 985 in 1982 – almost the same level it had reached in 1968!
Consider Nikkei which reached just over 40,000 in late 1980s only to drop below 8,000 in late 1990s and even now (20 years later), it is about 13,500.
Stocks for the long-run may be a good theory, but not in practice.
Buy stocks in the long run (always said).
This one doesn’t belong on the list. Dollar cost average into an index fund and you will, over time, outperform everything else. Yes stocks didn’t do well in the inflationary 70’s (bonds performed even worse), but who was prescient enough to time their way in and out of commodities or gold? No one.
“The US has a strong dollar policy.”
What’s interesting to me is that on Thursday, Kass wrote an article on TheStreet called “I’m Putting My Money in the Banks.”
He thinks their stocks have bottomed, and he is making a “large (and growing) commitment on the long side” to bank stocks.
Some of his reasons, from the article:
1. The curative process of substituting lost (or written off) capital for fresh capital continues apace and is now almost complete.
2. The industry’s historic financial (balance sheet) opaqueness is being replaced by renewed disclosure.
3. The core banking franchises of deposit gathering and loan originating, which are producing solid growth in net interest income, remain intact.
4. The banking industry’s competitive position has been enhanced as the non-regulated shadow banking industry labors under high funding costs, funding availability, capital constraints and poorly diversified books of business.
5. The banking industry’s ne’er-do-well executives have been replaced by competent, pragmatic and more realistic management teams.
So, is Kass right?
Could please one summarize the bullsh bullsht ?
Yep! Here comes Portfolio.com brilliantly home-running the contradictions.
IMHO, considering the spread of discrepancies between officials themselves, you should become a conspiration theorist (given, of course, you are not already a conspiration practicioner.)
I cannot beleive a nation of Economy Nobels could behave so oddly without being on purpose…
Home prices have dropped so now is the time to buy because housing prices always go up.
I really love the pretzel logic.
Mr shanker:Are you making an argument that investing in the stock market is a bad investment because one can invest his fortune at a bubble peak and then get terrible results? Unlike say a house, where you have to buy ‘all at once’, you don’t have to invest all your money in the stock market all at once.
You can carry your argument about the stock market into almost every other investment; for example gold is a terrible investment because it lost almost 90% of its value between 1980-2000.
Your point about investing in 1929 stock market bubble assumes that dividend were not reinvested. With dividends reinvested, you would have broken even in 16 years, not 30.
What according to you is a good long term investment, and what would you invest in now?
Jaime Dimon got a deal
Ken Lewis got a deal
Mark Hurd got a deal
The UAE SWF got a deal
I just got a great deal on a condo
How about one many of us used to believe:
The USA is the greatest nation in the world.
isn’t cass buying Citi (some financials) now..hope he doesn’t become one of the knife catchers
“Jaime Dimon got a deal
Ken Lewis got a deal
Mark Hurd got a deal
The UAE SWF got a deal
I just got a great deal on a condo”
You mean you made a deal. It’ll take at least five years for you to know if you ‘got’ a deal.
Goodluck
‘Via Doug Kass, comes this list of bad dope by the punditocracy, including analysts, strategists, and T-heads. These are a cautionary warnings not to blindly follow the cliches and heuristics so popular on Wall Street:………• Don’t fight the Fed (said repeatedly over the last several decades). Sometimes, like in the last nine months, it does pay to fight the Fed.’
I love it!!!!!!!!! yes fight the fed by buying GOLD and OIL and dumping USD !!!!
WOW, NO BS here like on CNBC and CNN.
Kudlow calling the dollar ”King Dollar” (!?!?!!!), and saying all McClain or Obama have to do is talk about wanting a strong dollar and it will magically go up somehow without any mention of what policy changes will be necessitated to bring about a strong dollar, and if that’s politically possible.
Republicans saying that the budget deficit as a % of GDP is historically low and the budget deficit will be cut in half by 2009 (not hearing that so much anymore). Never a mention of the massive accumulation of debt during the 8 years of the Bush Administration. And, if it does get mentioned the blame goes to inheriting a recession from Clinton and 9/11.
Dennis Kneale saying constantly “what recession?”
George W. Bush saying “we’re making good progress in Iraq.”
Steve Forbes saying crude oil is in a bubble. You called it a bubble at $60 saying it was going back to $40, Steve. You can’t come on CNBC last week and call it a bubble at $130. Why do you insult my intelligence like that? And why doesn’t CNBC mention that you were calling it a bubble on Fox on Forbes at $60???
Anything coming out of Don Luskin’s mouth.
Bob Dole, Sean Hannity, Anne Coulter and many other Republicans/Republican mouthpieces smearing Scott McClelland. I’m supposed to believe George W. Bush has done a heckuva job, huh?
Oh yes and how could I have forgotten the granddaddy of them all:
The Federal Reserve Open Market Committee expects inflationary pressures to moderate in coming months.
With a hat tip to the Cunning Realist, I excerpt:
http://cunningrealist.blogspot.com/
Thursday, May 01, 2008
Your Lying Wallet
From the Federal Reserve’s statement on Wednesday, when it cut interest rates yet again:
Although readings on core inflation have improved somewhat, energy and other commodity prices have increased, and some indicators of inflation expectations have risen in recent months. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization.
Keeping in mind that individuals and businesses use these forecasts for planning purposes, let’s revisit the Fed’s previous predictions about inflation:
* March 18, 2008: “The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization.”
* January 30, 2008: “The Committee expects inflation to moderate in coming quarters”…
* January 22, 2008: “The Committee expects inflation to moderate in coming quarters”…
* December 11, 2007: “Readings on core inflation have improved modestly this year”…
* October 31, 2007: “Readings on core inflation have improved modestly this year”…
* September 18, 2007: “Readings on core inflation have improved modestly this year”…
* August 7, 2007: “Readings on core inflation have improved modestly in recent months.”
* June 28, 2007: “Readings on core inflation have improved modestly in recent months.”
* May 9, 2007: “Inflation pressures seem likely to moderate over time”…
* March 21, 2007: “Inflation pressures seem likely to moderate over time”…
* January 31, 2007: “Readings on core inflation have improved modestly in recent months, and inflation pressures seem likely to moderate over time.”
* December 12, 2006: “Inflation pressures seem likely to moderate over time, reflecting reduced impetus from energy prices, contained inflation expectations, and the cumulative effects of monetary policy actions and other factors restraining aggregate demand.”
And excerpts from some of Bernanke’s past speeches and testimony:
* 7/19/06: “FOMC participants project that the growth in economic activity should moderate to a pace close to that of the growth of potential both this year and next. Should that moderation occur as anticipated, it should help to limit inflation pressures over time…the economy should continue to expand at a solid and sustainable pace and core inflation should decline from its recent level over the medium term…our baseline forecast is for moderating inflation.”
* 11/28/06: “Core inflation is expected to slow gradually from its recent level”…
* 3/28/07: “Core inflation, which is a better measure of the underlying inflation trend than overall inflation, seems likely to moderate gradually over time.”
* 7/18/07: “With long-term inflation expectations contained, futures prices suggesting that investors expect energy and other commodity prices to flatten out, and pressures in both labor and product markets likely to ease modestly, core inflation should edge a bit lower, on net, over the remainder of this year and next year.”
Bravo, Todd!
And how about putting your great quotes in a beautiful chart like this one :
http://www.google.com/trends?q=inflation&ctab=0&geo=all&date=all&sort=0
“Vista is a major improvement over other operating systems.”
Don’t worry, I’m on the pill.
My dad was in corporate finance in Calif. and Texas from 1933, the bottom of the Depression, to his death in 1996. His advice was to always keep half your money in cash, bonds, cd’s, etc. and never to consider your home as some sort of financial asset, as you have to live somewhere. And yes, one should live below one’s income, save, and avoid debt. Those are ‘cliches’ whose time has come again- probably the time never really left but was merely disguised by consumerism. Our family’s effort to become producers instead of the consumers whose health the media has such angst about is a garden, home canning, and a woodburning stove to combat propane prices.
What sounds good but is not quite right?
This, mostly:
“I do solemnly swear that I will faithfully execute the office of President of the United States, and will to the best of my ability, preserve, protect and defend the Constitution of the United States.”
There is enough oil in the oil shales of Colorado and the oil sands of Canada to power the world for generations.
Sex Panther, by Odeon. They’ve done studies, you know. 60% of the time it works every time.
Quite right Bluzer. Sorry if my sarcasm didn’t come through, I was attempting to follow the jist of the “Quotes you’ve heard that are wrong” thread.
It would take being beaten around the head and neck by a couple of former Assistant Attorney General John Yoo’s memos to get me to buy a condo where I live (downtown Chicago) or anywhere else in the good ole U. S. of A for that matter.
And for the record, I think Dimon, Hurd, Lewis all got conned.
Cheers.
…any church, any faith, any day…
Bodz:
I am merely making an argument, that although stocks may do fine over 100 year period (long-term), staying invested in it all the time is a strategy firmly rooted in fantasy land.
There are extended periods in which equities don’t do well and other asset classes do extremely well. So, during these periods, stay out of equities.
I always like to remember Cinefoz in january of this year saying he was just going to “keep doing what I’ve been doing” as an investment strategy. I believe his strategy was ‘buying the dips’.
Seems he’s changed his tune these days. Unless he is investing in financials which i guess could be considered buying the dipshits.
From Barbara Surk’s AP story:
“What we found is that Iranian banks have been aggressive and disruptive in moving money through financial systems,” he (Paulson) said.
He warned Iran that it is isolating itself from financial sectors and investment banks that they would like to do business with.
There is “plenty of evidence to indicate that many banks are not willing to do business with Iran,” Paulson said.
“That sends a message to Iran. If you want to be a rogue state, carry on the way you are. If you want to be part of (the) legitimate financial system and global community, then don’t isolate yourself with your actions.”
…Oh, the hypocricy…
Has Hammerin’ Hank ordered all the mirrors in the Treasury Building to be removed?
The United States Dollar’s Quantum Valuation Pattern
Relative to other leading economic nations, America’s governments, corporations, and citizens have borrowed proportionally more. Under this primary GNP growth through debt pushing on the proverbial string parameter and to a correlative and accompanying measure – under the conditions of inappropriately low interest rates and imprudent lending terms which fueled that borrowing – the US dollar has fallen – in a relatively precise fractal manner – against a basket summation of other leading currencies. While the dollar has fallen nearly 50 percent against basket currencies in the last 12/30/24/18 :: x/2.5x/2x/1.5x months, it has fallen to less than 15 percent below its lows from 1987 to 1994. The world requires inflation of all currencies for growth in order to service debt and population growth. in spite of the 2 percent US interbank lending rates and US treasury rates which directly foster malinvestment speculation in stocks and commodities, the latter of which is killing the pay check to pay check surviving middle class, a necessary saturation curve mathematical fractal correction of the US dollar to the summation basket fiats is now and will occur.
“Higher oil prices won’t affect the economy because it’s a smaller percentage of personal spending.”
Wrong.
-AT
“Never bet against the U.S consumer.”
Is the U.S consumer the most entitled? We sure act like we have a monopoly on materialistic selfishness (entitled to entitlement?).
It seems to me that consumers in India and China are becoming middle class consumers now. In other words, the cycle is just beginning. They are just now, as they see the growth around them, starting to learn that they should be entitled to things.
The U.S. consumer, on the other hand, seems toppish to me. The housing boom may have marked a U.S consumer exhaustion move.
Of course, “never bet against the U.S consumer.”
Hate to expose my bias so completely here…but….
“China’s emerging middle class is going to: buy cars and use more gas;
eat more beef which of course means–
more grains because you need 7X more corn to feed cattle than to just eat corn;
buy gold jewelry because now they’re rich;
buy computers and software;
buy designer clothes and handbags in malls; dine out at KFC relentlessly because they like chicken;
eat more soybeans just because they like the new source of protein;
hoard rice because they still like to eat a lot of rice;
buy a lot of potash and fertilizer to make all this food they’re going to eat because much richer now;
surf the internet all day long and buy things online;
buy a bunch of steel to build all the new malls and farm equipment to go shopping in and till the new farms;
buy a bunch of crude oil at subsidized prices to keep the whole scheme moving along;
buy a bunch of solar panels because they have to go green to avoid killing themselves under the mountain of smog they’ve created to maintain high levels of production and exports.
And all this is occuring because the median income of chinese people has moved to $4,000 bucks or whatever….up from $2,000 several years ago…just think how much more they’re going to be buying several years from now.
-AT
Here’s one for Tom Joad:
“Rain follows the plow.”
“The rate cuts should trickle down to the consumer any day now, and they should see lower mortgage rates”
“One or more of these will lift the stock market: lower dollar, lower oil, lower commodities, lower rates, etc.”
“Crime rates are at historic lows, we are not in depression” (this is for 6 months from now)
“We will get through these tough times, and we will come out stronger as a nation” (New president in Feb 2009)
Come on – just the tip
The BOTTOM is IN!
OT – David Lereah says we haven’t hit bottom yet!
http://www.newsweek.com/id/135724/page/1
The “Fed Model” for evaluating equities. Specifically, the U.S. treasury is the “risk free” rate.
Coolest use of “res ipsa” ever :-)
“We are in a goldilocks economy.”
(Conveniently forgetting that goldilocks was breaking and entering and that the porridge that was neither too hot nor too cold actually belonged to… a bear.)
12th Percentile remembered:
I always like to remember Cinefoz in january of this year saying he was just going to “keep doing what I’ve been doing” as an investment strategy. I believe his strategy was ‘buying the dips’.
reply: Damn right, and it’s been successful. I’m up ytd and am in position to buy into another bottom whenever one appears … or into this market if it changes structurally and starts rising with conviction. Why don’t you quietly continue standing in the background with your hands in your pockets, secretly scratching yourself. BTW, you have a great name. It’s inspirational when your kind expresses ambition so boldly, especially when it’s so unlikely you will ever come close to matching the potential of your name.
What I do is called ‘making money’ and I’m pretty good at it. If oil was not working as a parasitic counterbalance, housing and related industries would be improving instead of resembling a disgusting case of endless dry heaves. Being the eternal optimist, I’m still hoping Goldilocks sobers up and goes out for another romp soon.
and the Number One goes to…..
Change you can believe in (me).
I’ve been persistently hearing the folks on CNBC’s Fast Money pumping MSFT, saying it is a buy.
As an Elliott Wave analyst (and a Vista user), I’m wondering, “What are these guys thinking?”
I suspect MSFT will fall into the teens before it sees any kind of serious advance.
There’s no credit crunch. Click on my name to see an article about how inBev’s financing probably won’t go through. and if it does it will be somewhere in the range of 250 to 400 bps over LIBOR.
no credit crunch? yeah right.
Message from CNBC on investing:
Stocks only go up, they never go down.
. . .
Message from CNN on the subject of oil prices:
It’s not about easy monetary policy, or the weak dollar or the restrictions on drilling. It’s all about the evil speculators “manipulating” prices.
What about the “bad dope” from Mr. Kass, whose performance as per his recent interview in Barron’s has been less than spectacular? Is his BS and his sucking up to “El Capitan” Jim Cramer any more idiotic than the pronouncements that he now criticizes from other pundits? I think not!