60 minutes continues to point out that the mortgage unwinding is about 50% through. They are saying more pain is going to occur in the economy for sometime.
This story was broadcast on Sunday, December 14th, 2008.
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Dan Ross
Showing posts with label great depression. Show all posts
Showing posts with label great depression. Show all posts
Friday, December 19, 2008
Thursday, December 18, 2008
Are Hedge Funds Dead?
Interesting article on SeekingAlpha.com
http://seekingalpha.com/article/110563-the-hedge-fund-business-is-finished-and-bernie-madoff-is-sealing-the-deal?source=email
"I have a feeling that the hedge fund offices around the world are being inundated with phone calls from people with a need to get up and close with their money. The ramifications of this could mean we are in for that trade we all hoped would never come...........'the capitulation trade'. Would you be able to sleep at night knowing some shill in the Hamptons on a computer may be using some white out to manipulate your investment statement.
The hedge fund business is finished, and Bernie Madoff is sealing the deal. There's nothing like fraud and corruption to put the cherry on the sundae. I know techincally, Madoff didn't run a hedge fund. But is this going to help the unregulated hedge funds, when Madoff, who was regulated, can't be stopped."
My Take: We'll find out in January when the next redemption period occurs for hedge funds. That is what I have heard anyway. I still think the market heads lower in 2009 & the S&P, which is around 850 in recent weeks, heads to 700 with no problem at all.
Dan Ross
http://seekingalpha.com/article/110563-the-hedge-fund-business-is-finished-and-bernie-madoff-is-sealing-the-deal?source=email
"I have a feeling that the hedge fund offices around the world are being inundated with phone calls from people with a need to get up and close with their money. The ramifications of this could mean we are in for that trade we all hoped would never come...........'the capitulation trade'. Would you be able to sleep at night knowing some shill in the Hamptons on a computer may be using some white out to manipulate your investment statement.
The hedge fund business is finished, and Bernie Madoff is sealing the deal. There's nothing like fraud and corruption to put the cherry on the sundae. I know techincally, Madoff didn't run a hedge fund. But is this going to help the unregulated hedge funds, when Madoff, who was regulated, can't be stopped."
My Take: We'll find out in January when the next redemption period occurs for hedge funds. That is what I have heard anyway. I still think the market heads lower in 2009 & the S&P, which is around 850 in recent weeks, heads to 700 with no problem at all.
Dan Ross
Monday, December 15, 2008
The U.S. Dollar has biggest One Week Decline in 25 years - Did you know that?
Here is an interesting article I read on SeekingAlpha.com this weekend
"The U.S. Dollar ....its largest one week drop in percentage terms in at least 25 years."
"Historically, a falling dollar has generally not been positive for stocks. It will, however, provide some support for exporters and enhance demand for commodities that are quoted in dollars across the globe."
"Now with the mushrooming U.S. debt on top of an already severe economic crisis, the prospects for the U.S. economy relative to that of some of other global economies is being reevaluated from one of the strongest to perhaps only slightly better than average.
The dollar appreciated approximately 23% from July to November. This week the dollar moved below its 50 day moving average for the first time since the July bullish move again. "
My take: I've been commenting on this blog that we, as a country, can't print our way out of this problem without inflationary concerns creeping back into the economy. I didn't expect the U.S. dollar to begin collapsing this quickly. Then again, this is only a pullback, not a collapse :) But it does get me worried how quickly the dollar has fallen. I look for commodity prices to begin rebounding as most are denominated in U.S. dollars. Oil should start to creep back into the $50 price per barrel area and maybe even hit $60 if the trend continues. I expect cuts from OPEC to actually start happening at some point although, from what I have read, so far only 800k of the 2 million barrel cuts have actually started to happen. Countries continue to overproduce to pay for their committed government spending this year.....and likely next :) As a result, I think that market volatility for commodities and equity prices will be around for awhile :)
Oh, by the way, you see the 60 minutes show that had the head of Saudi Arabia's oil industry talking about the price of oil? Saudi Arabia is INCREASING their production capacity, giving them more control over the oil industry and volatility of prices (in theory.) Production will go from 10 million barrels per day to 12 million barrels per day once the project is done. By early 2009 their capacity will be up and oil prices will remain down. Talk about taking hybrid autos on. With oil in the sub 50s do hybrids ever get market acceptance? Will consumers, in an economic downturn, pay the premium price for a hybrid vs. a gas guzzling SUV? I think we are ADDICTED to oil and these guys are going to enable us to be that way for quite awhile. O, by the way, the Saudis publicly say that they would like oil to be at around $75 per barrel and their break-even price is $55 (where the country actually spends more $$$ than they make from oil sales, 75% of their economy.)
Watch CBS Videos Online
Here is Part 2 of that interview.
Watch CBS Videos Online
Dan Ross
"The U.S. Dollar ....its largest one week drop in percentage terms in at least 25 years."
"Historically, a falling dollar has generally not been positive for stocks. It will, however, provide some support for exporters and enhance demand for commodities that are quoted in dollars across the globe."
"Now with the mushrooming U.S. debt on top of an already severe economic crisis, the prospects for the U.S. economy relative to that of some of other global economies is being reevaluated from one of the strongest to perhaps only slightly better than average.
The dollar appreciated approximately 23% from July to November. This week the dollar moved below its 50 day moving average for the first time since the July bullish move again. "
My take: I've been commenting on this blog that we, as a country, can't print our way out of this problem without inflationary concerns creeping back into the economy. I didn't expect the U.S. dollar to begin collapsing this quickly. Then again, this is only a pullback, not a collapse :) But it does get me worried how quickly the dollar has fallen. I look for commodity prices to begin rebounding as most are denominated in U.S. dollars. Oil should start to creep back into the $50 price per barrel area and maybe even hit $60 if the trend continues. I expect cuts from OPEC to actually start happening at some point although, from what I have read, so far only 800k of the 2 million barrel cuts have actually started to happen. Countries continue to overproduce to pay for their committed government spending this year.....and likely next :) As a result, I think that market volatility for commodities and equity prices will be around for awhile :)
Oh, by the way, you see the 60 minutes show that had the head of Saudi Arabia's oil industry talking about the price of oil? Saudi Arabia is INCREASING their production capacity, giving them more control over the oil industry and volatility of prices (in theory.) Production will go from 10 million barrels per day to 12 million barrels per day once the project is done. By early 2009 their capacity will be up and oil prices will remain down. Talk about taking hybrid autos on. With oil in the sub 50s do hybrids ever get market acceptance? Will consumers, in an economic downturn, pay the premium price for a hybrid vs. a gas guzzling SUV? I think we are ADDICTED to oil and these guys are going to enable us to be that way for quite awhile. O, by the way, the Saudis publicly say that they would like oil to be at around $75 per barrel and their break-even price is $55 (where the country actually spends more $$$ than they make from oil sales, 75% of their economy.)
Watch CBS Videos Online
Here is Part 2 of that interview.
Watch CBS Videos Online
Dan Ross
Great Follow Up Interview on Commercial Real Estate
KB Toys bit the dust this week, filing for bankruptcy. Big Box tenants (anchor tenants) that have declared bankruptcy as well include Circuit City & Linens N Things, which causes problems for commercial real estate developers. Then, lets not forget Starbucks and their recent problems. While Starbucks isn't an "anchor tenant" from a space perspective they do drive traffic to market centers. I've seen them pull out or close 3 different projects within 3-4 miles of my house. At some point, other coffee retailers are going to go on the offense as I think Starbucks is finally getting TOO defensive and missing out on some great opportunities/traffic. Developers won't forget what they have done....
Dan Ross
Dan Ross
Sunday, December 14, 2008
Merrill Lynch's Outlook for 2009 (Pessimistic)
I think this guy is ABSOLUTELY correct.
This recession IS different and there are only two comparable declines to measure against (japan in the 90s and the U.S. in the 30s).
11 months of new house supply vs. 9 months in the early 90s (big recession). As a result, he sees another 15% decline in housing in 2009.
Consumer staple stocks is the way to go, in their opinion, for those that like big cap stocks with dividends. I think that is sound but tobacco, while not socially responsible, pays HIGH dividends and seems to be HIGHLY recommended by them.
I'll update later today/tomorrow in the comment section with some other thoughts from Merrill Lynch....
Another thought....I wonder if he still has a job after the research layoffs as Bank of America merges research with Merrill Lynch. I think he has been VERY right the year!
Dan Ross
This recession IS different and there are only two comparable declines to measure against (japan in the 90s and the U.S. in the 30s).
11 months of new house supply vs. 9 months in the early 90s (big recession). As a result, he sees another 15% decline in housing in 2009.
Consumer staple stocks is the way to go, in their opinion, for those that like big cap stocks with dividends. I think that is sound but tobacco, while not socially responsible, pays HIGH dividends and seems to be HIGHLY recommended by them.
I'll update later today/tomorrow in the comment section with some other thoughts from Merrill Lynch....
Another thought....I wonder if he still has a job after the research layoffs as Bank of America merges research with Merrill Lynch. I think he has been VERY right the year!
Dan Ross
Thursday, December 11, 2008
A few CEOs and their thoughts on the recession
Interesting article posted at:
http://finance.yahoo.com/career-work/article/106252/The-Recession:-What-Top-CEOs-Are-Thinking
A few comments that really rang a bell with me.
1) Robert Nardelli, CEO of Chrysler, said he could see unemployment at 10% +. Based on his record as a CEO I don't really know how valuable his information/thoughts are. The guy had a VERY unsuccessful tenure at Home Depot after leaving GE and now ran into one of the worst economic climates in modern day history. Chrysler is toast in my opinion, whether or not they get some bailout or not.....
2) Lewis Hay, FPL Group (utility business) said " Probably 25% of our customers are past due. Normally, it's more like 15%. Another issue is access to capital. We had plans to invest more than $7 billion this year, and we've already cut back to about $5 billion. With such a shortage of access to capital, how are we going to get all these alternative energy projects going?" <--bold for emphasis as it is rather intriguing....I think pure play businesses have a chance at getting financing more than diversified companies. It depends on whether it is debt or equity financing though. Debt financing would be more likely with diversified energy companies since there would be more collateral and equity investments would be more likely with "pure play" alternative energy companies because they would provide more upside in the long-term (higher risk/reward).
3) When asked "How long or severe do you think the recession will be?" most said mid 2010 and one CEO commented that, "The key is inflation. If inflation stays under control and confidence returns, we'll come back early. If inflation starts to roar in mid-2009 and thereafter, we have a problem. It might start to look like the mid-1970s."
I think that is one smart CEO re: concern about inflation. While we are experiencing deflation right now there is increasingly a higher probability that the U.S. dollar will fall vs. other currencies and spike inflation since the U.S. government is printing ALOT of them. If this happens we see higher commodity prices again.
Dan Ross
http://finance.yahoo.com/career-work/article/106252/The-Recession:-What-Top-CEOs-Are-Thinking
A few comments that really rang a bell with me.
1) Robert Nardelli, CEO of Chrysler, said he could see unemployment at 10% +. Based on his record as a CEO I don't really know how valuable his information/thoughts are. The guy had a VERY unsuccessful tenure at Home Depot after leaving GE and now ran into one of the worst economic climates in modern day history. Chrysler is toast in my opinion, whether or not they get some bailout or not.....
2) Lewis Hay, FPL Group (utility business) said " Probably 25% of our customers are past due. Normally, it's more like 15%. Another issue is access to capital. We had plans to invest more than $7 billion this year, and we've already cut back to about $5 billion. With such a shortage of access to capital, how are we going to get all these alternative energy projects going?" <--bold for emphasis as it is rather intriguing....I think pure play businesses have a chance at getting financing more than diversified companies. It depends on whether it is debt or equity financing though. Debt financing would be more likely with diversified energy companies since there would be more collateral and equity investments would be more likely with "pure play" alternative energy companies because they would provide more upside in the long-term (higher risk/reward).
3) When asked "How long or severe do you think the recession will be?" most said mid 2010 and one CEO commented that, "The key is inflation. If inflation stays under control and confidence returns, we'll come back early. If inflation starts to roar in mid-2009 and thereafter, we have a problem. It might start to look like the mid-1970s."
I think that is one smart CEO re: concern about inflation. While we are experiencing deflation right now there is increasingly a higher probability that the U.S. dollar will fall vs. other currencies and spike inflation since the U.S. government is printing ALOT of them. If this happens we see higher commodity prices again.
Dan Ross
Sunday, December 7, 2008
Severe Market Recession in 2009?
Folks, this guy has been right EVERY step of the way. He screamed "WOLF" 2 years ago and has been right all the way down.
I agree with Roubini re: too much global supply. Demand will fall, which should cause deflationary risks. That is how oil goes from $140 to $44 in 6 months :) Having said that, I think, at some point, that certain commodities will become INFLATIONARY again as supplies get cut off and the U.S. dollar falls. Oil is the most likely to experience a notable REBOUND. It might take until 2010 or 2011 for oil prices to increase at hockey stick prices again (back to $100 +) because all of the oil producing countries need the revenue to finance projects through 2010 at a minimum. Most countries won't cut their spending quick enough so they will need to continue pumping oil at low prices to finance their spending deficits.
Given Middle East deficits, who buys U.S. assets? The asian economies is the answer....which is why I think U.S. stock prices continue to languish for awhile.
"Worst recession in 50 years" per the video below.
Dan Ross
Friday, November 14, 2008
This is NOT another Great Depression
So I spend too much time each night looking at datapoints/articles, etc. I am always looking for interesting facts/figures that I find intriguing that might give me an edge in investing. Additionally, I like to be KNOWLEDGEABLE about a wide array of topics. Kind of MichaelAngelo type except without ANY artistic capabilities :)
I am not an economic forecaster but here is why, despite NO comparable datapoints since 1929, this will NOT be another great depression.
* The level of government intervention in the current financial crisis is completely unprecedented. Last time this happened the government INCREASED taxes, the Federal Reserve did nothing and banks were ALREADY belly up. Oversight of the stock market was NON-EXISTENT.
* There is a coordinated multinational approach to this economic history like none in modern or prior history that I can find. At least not on this scale, in value terms or percentage terms. Please let me know if you find anything comparable.
So, there you have it folks. I don't have solutions but I do have some observations. I'll post some interesting, "pick me upper" quotes for everyone this weekend. How about that? Hopefully by then everyone hasn't put a shotgun to their head due to depression about reading this blog ;)
Dan Ross
http://www.BetterBizBooks.com
I am not an economic forecaster but here is why, despite NO comparable datapoints since 1929, this will NOT be another great depression.
* The level of government intervention in the current financial crisis is completely unprecedented. Last time this happened the government INCREASED taxes, the Federal Reserve did nothing and banks were ALREADY belly up. Oversight of the stock market was NON-EXISTENT.
* There is a coordinated multinational approach to this economic history like none in modern or prior history that I can find. At least not on this scale, in value terms or percentage terms. Please let me know if you find anything comparable.
So, there you have it folks. I don't have solutions but I do have some observations. I'll post some interesting, "pick me upper" quotes for everyone this weekend. How about that? Hopefully by then everyone hasn't put a shotgun to their head due to depression about reading this blog ;)
Dan Ross
http://www.BetterBizBooks.com
Saturday, November 8, 2008
Unemployment zoomed past 10 million....6.5%
http://biz.yahoo.com/ap/081108/financial_meltdown.html
The unemployment rate soared to a 14-year high of 6.5 percent, the government said Friday, up from 6.1 percent just a month earlier. The nation's jobless ranks zoomed past 10 million last month, the most in a quarter-century, as piles of pink slips shut factory gates and office doors to 240,000 more Americans with the holidays nearing. Politicians and economists agreed on a painful bottom line: It's only going to get worse.
With the three U.S. auto companies seeking financial assistance to avoid bankruptcy (at least GM & Chrysler) my thoughts of 9% + unemployment are becoming more probable. My thoughts were that this recession would be notably worse than the prior one and, if one auto company fails, it would get us to 9% unemployment very quickly as the ripple effects would go through the economy over a few months.
Banks have exposure, which they would then have to book losses
Auto suppliers would go belly up as many aren't just SOLELY GM, Chrysler or Ford dependent. They lose 35% of their production and potential receivables (uncollected bills) then they' ll have to cut their production, let people go, etc.
Oh yeah, and the communities are dependent on them. So that would ripple through the local economies where the manufacturer is located.....
It could get UGLY quickly is my point here.
FYI, I think the guy with Task is DEAD WRONG for one reason. This economic cycle and downturn is being caused by something NOT SEEN IN 80 years! This is a CREDIT CRUNCH / devaluation cycle and it will take quite a bit of time to work through the system. It can happen quickly or slowly. That is the choice of politicians and policy makers. Either way, I think it will be painful.
Dan Ross
http://www.betterbizideas.com/
The unemployment rate soared to a 14-year high of 6.5 percent, the government said Friday, up from 6.1 percent just a month earlier. The nation's jobless ranks zoomed past 10 million last month, the most in a quarter-century, as piles of pink slips shut factory gates and office doors to 240,000 more Americans with the holidays nearing. Politicians and economists agreed on a painful bottom line: It's only going to get worse.
With the three U.S. auto companies seeking financial assistance to avoid bankruptcy (at least GM & Chrysler) my thoughts of 9% + unemployment are becoming more probable. My thoughts were that this recession would be notably worse than the prior one and, if one auto company fails, it would get us to 9% unemployment very quickly as the ripple effects would go through the economy over a few months.
Banks have exposure, which they would then have to book losses
Auto suppliers would go belly up as many aren't just SOLELY GM, Chrysler or Ford dependent. They lose 35% of their production and potential receivables (uncollected bills) then they' ll have to cut their production, let people go, etc.
Oh yeah, and the communities are dependent on them. So that would ripple through the local economies where the manufacturer is located.....
It could get UGLY quickly is my point here.
FYI, I think the guy with Task is DEAD WRONG for one reason. This economic cycle and downturn is being caused by something NOT SEEN IN 80 years! This is a CREDIT CRUNCH / devaluation cycle and it will take quite a bit of time to work through the system. It can happen quickly or slowly. That is the choice of politicians and policy makers. Either way, I think it will be painful.
Dan Ross
http://www.betterbizideas.com/
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