Wednesday, January 21, 2009

Everything I Wrote Last Night Was Wrong

The comments section last night was a great place to learn about knives and tolls you may need if the end of the world ever comes. As for myself I favor swords, nothing quite like a real folded steel clay treated samurai katana to use for personal protection.

The Government Should (and will) Be in the Telling You What to Buy Business
I have to hand it to homebuilders. They constructed millions of homes that were not needed all over the country and helped to cause the biggest mortgage bust in history and yet they still have the balls to scream for help. I am sure they will get it. I mean, the government should be able to MAKE YOU BUY THINGS THAT ARE NEEDED TO HELP THE ECONOMY, right? What could make more sense? From Housing Wire:
Builder Confidence Hits New Low; NAHB Urges Buyer Stimulus
January 21, 2009
Home builder confidence across the U.S. slumped to a new record low of 8, according to a monthly survey released Wednesday by the National Association of Home Builders. The housing market index, measuring builder perceptions of current single-family home sales and sales expectations for the next six months, is based on a scale of 100 where any number over 50 indicates more home builders perceive sales conditions as good than poor. An all-time low of 8 — a downward slip of a single point from December’s survey — indicates sales conditions are worse than they have been in more than 20 years, since the NAHB began the survey.
“Clearly, conditions in the nation’s housing market aren’t getting any better, and they aren’t going to get any better until the federal government takes substantial action to encourage qualified buyers to get back in the market,” said NAHB chairman Sandy Dunn, a W. Va.-based home builder. “The Obama Administration and the new Congress have a tremendous opportunity and responsibility to enact legislation that can spur home buyer demand and jump-start the national economy.”

The government should force people into the housing market. It is so American I cannot think there will be much opposition. Now if Washington could just force banks to buy up all those mortgage backed securities that are marked for the taxpayers instead, we might get someplace.

TARP Funds Used for Bonuses Now Buy Bank Stocks
All the hot news was that the bankiing CEO's of BAc and JPM were buying the company stock with their own money. In an era when the incoming treasury secretary cannot even pay his own taxes due to funny games of paperwork, how sure a thing is it that Dimon and Lewis are using their own money? Why not commit some of the TARP bonus money from 2008 to the cause? We may never know.

If the banks are such great buys, why do Dimon and Lewis not commit 100% of their net worth to the stocks? Whatever. This was a flashy confidence boosting trick and wall street went nuts over it. One word of caution for those two gentlemen. From a chronological recounting of the Great Depression:
March 1931Over 50% of the industrial companies on the NYSE were using excess cash to buy their own stock at low 1930 and 1931 prices. Some retired it and some kept it as treasury stock for future use in mergers or for other purposes. This reduction in the number of floating shares, similar in an opposite direction to the flood of new issues floated during the 1929 boom, makes the decline in share prices even more glaring. It also demonstrates that even many business insiders still did not understand the nature of this Great Depression.

What is Old is New Again
My favorite economist Paul Krugman had a strange departure from his normal Keynesian clowning and lefty bias writing to make a great comparison of the three major presidential keynote speeches. It seems the same old lines make the rounds no matter who is president. From Krugman's blog:
January 21, 2009, 8:58 am
Shared responsibility
Barack Obama, 2009:
What is required of us now is a new era of responsibility - a recognition, on the part of every American, that we have duties to ourselves, our nation, and the world, duties that we do not grudgingly accept but rather seize gladly, firm in the knowledge that there is nothing so satisfying to the spirit, so defining of our character, than giving our all to a difficult task.

George W. Bush, 2000:
A hundred years from now, this must not be remembered as an age rich in possessions and poor in ideals.
Instead, we must usher in an era of responsibility.

Bill Clinton, 1993:
We must do what America does best: offer more opportunity to all and demand responsibility from all.
It is time to break the bad habit of expecting something for nothing, from our government or from each other. Let us all take more responsibility, not only for ourselves and our families but for our communities and our country.


Everything I Wrote Last Night Was Wrong
What a difference one 12 hour span can make. I now take back everything I wrote last night. The banks are just fine, even better than fine. They will not need any more dilutive help nor will require nationalization. The bulk of the losses are now over and things are looking up.

The dollar is a rocket ship built on solid fundamentals and should recapture its old highs withing 2 weeks. The British pound is unfairly targeted and will stage a rebound the likes of which the world has never seen.

Russia and the Arab states have fully planned for oil at $20 a barrel, so this $35 a barrel price is all gravy. There should be no problems with those economies. At all.

The consumer spending numbers were obviously wrong, and business spending will take up the slack anyways, just look at the IBM and Apple earnings. Retail should be strong going forward.

I guess I was wrong about everything. If you get caught up in the daily silly moves of the markets you would feel that way anyway. As long as these stupid "everything is over" rallies happen we push out the real process of bottoming out even further. What a sick waste of time to trade the same 8% of the indexes over and over again with no direction.

As I have written that fundamentally sound markets that have good underpinnings do not pinwheel to the tune of 4% on a daily basis. Banking stocks themselves have moved over 20% for two days in a row. Nobody knows anything (myself included) and everything you see from the government interventions to the wild swings in the indices is proof positive a guessing game is going on. And I thought the markets hated "uncertainty"?

Have a good night.


Anonymous said...

The market does hate uncertainty that is why it's jumping around like a bungee cord. It's trying to figure out what those goofy clowns in DC are going to do next.


Anonymous said...

I find it interesting how the metals although down from their highs feel really safe right about now.

Not saying they can't drop further but it's nice to know they wont just turn into door stops.

Might be a good time to see what the rest of the world is doing while the new admins take office.


You will see what's unfolding right under the masses noses.