Financial topics

[freddyv]

Take a look at the latest S&P earnings:
http://www2.standardandpoors.com/spf/xl ... EPSEST.XLS

They have a predicted P/E ratio of 181 on 9/30/09 and then it magically falls to the low 20's based on estimates. Funny how the estimates always seems to be better than reality. Until this changes I see no reason to expect a turn-around in stocks.

Notice also how the as-reported earnings P/E is 40 right now while the operating earnings P/E ratio is 14; I wish I could just ignore certain losses in my business...but I can't.

--Fred

[John]

Dear Fred,

> Take a look at the latest S&P earnings:

> http://www2.standardandpoors.com/spf/xl ... EPSEST.XLS

> They have a predicted P/E ratio of 181 on 9/30/09 and then it
> magically falls to the low 20's based on estimates. Funny how the
> estimates always seems to be better than reality. Until this
> changes I see no reason to expect a turn-around in stocks.

> Notice also how the as-reported earnings P/E is 40 right now while
> the operating earnings P/E ratio is 14; I wish I could just ignore
> certain losses in my business...but I can't.

I feel your exasperation and share it. Whenever I talk about
something like this, I often say, "It's incredible that anyone would
believe this." But what do I say now, after I've said that so many
times?

There are people earning 6 and 7 figure salaries, advising their
clients to buy stocks based on the "operating earnings" in this
spreadsheet. This is what our society has come to. We've had every
kind of fraud from "liar loan" mortgage applications to Moody's and
S&P giving AAA ratings to worthless securities in return for a fat
commission.

So here we have S&P reporting these "operating earnings" which cannot
be described in any other way but as a total fraud. The same people
at S&P who have been defrauding the public for years are continuing to
do so, and they know it. I continue to get infuriated and sickened
by what's been going on for years, and continues to go on with full
force.

Today President Obama lectured us on the value of his universal
health care initiative, implying that if we spend a few trillion more
dollars on it, then we'll save money. Obama is beginning to turn
into a used car salesman: The more he spends, the more money he's
saving you. I never felt that President Bush knew what was really
going on, but Obama appears to be much worse.

On a scale of 0 to 10, where 10 means full understanding of the
financial crisis and 0 means no understanding, Bush was a 0 and Obama
is a -10.

But it's really much darker than that. Just as the people at S&P are
committing fraud, there's no reason to assume that the Administration
isn't committing fraud. Maybe Obama himself is just honest but
clueless, but the people around him wouldn't hesitate for a minute to
screw people for their own benefit. Does anyone doubt that Rahm
Emanuel and Nancy Pelosi would slit your throat for a buck (or a
vote)?

Sincerely,

John

[John]

-- Market Summary, Thursday afternoon, March 5, 2009

This morning, guru Art Cashin said:

> Yesterday's stimulating stimulus was not mentioned by the
> Chinese. I think that's undercut world markets, and we're back to
> worrying about what we worried about before.

> I think we'll head lower, but I think, as I said yesterday,
> between here and Saint Patrick's day, there's going to be one
> whopper of a rally coming. At least that's the feeling. We
> revisited the 12-year lows, we've only done that 3 times in 109
> years, and the other two times we did it, we were either at the
> lows of the move, or within 3 months of the lows of the move.

Cashin has been predicting a rally almost every day for the last
year.

Well, there wasn't a rally today, as the markets fell to a new low
for the current century. The market is now back to the levels it was
at the time when Alan Greenspan warned about "irrational exuberance."

The New York Times said, "Stocks Drop Sharply on Retail Data and G.M.
Audit. Wall Street fell to new lows on Thursday as investors reacted
to more concerns about the fate of General Motors, dreary retail sales
and the financial sector. The Dow Jones industrial average and the
Standard & Poor's 500-stock index closed down more than 4 percent."

They might have added that Hu Jintao didn't announce a new stimulus
package for China after all, as had been expected.

One person said woefully, "This is not the big carthartic puke we
were hoping for." This is still the hare-brained "capitulation"
fantasy -- when the big "cathartic puke" finally occurs, they expect
the market to pop back up.

Today's award for idiot of the day was Robert Brusca, President of
Fact and Opinion Economics, and former chief of the NY Fed's
international Market division:

> We've got a signal from something that I look at from the
> manufacturing ISM that suggests that we're getting into rebound
> territory, and so I'm getting encouraged by that.

> And we saw claims today fall from their peak and it's a very
> highpeak for claims, that's true, but jobless claims tend to peak
> very close to the end of the recession, so once you've gotten a
> peak, and once it's authenticated -- and it's not authenticated
> yet , it's a volatile series, we could still see a higher number
> -- but if it's an authenticated peak, you'd expect to see the end
> of this recession coming around in a month, or maybe even two
> months, before not too long.

> What happens is that the low point in non-farm jobs tends to
> occur really right at the end of a recession, except for the last
> two recessions.

> The last two recessions were the exceptions. And the reason is
> that we lost jobs at a very slow pace.

> I tend to say that recessions are a little bit like billiards.
> The ball tends to come off the the cushion the way it goes into
> the cushion.

> So if you're losing jobs at a very painfully slow pace, you're
> going to gain them back at a very painfully slow pace.

> We're losing jobs at a horrific pace. And in fact if you look at
> it, compared to most recessions since about 1960, we're really on
> track to have a V-shaped drop and a V-shaped rebound, which means
> a nice strong rebound in jobs when it's over.

Once again, we have a guy who earns a 6 or 7 -digit salary, and the
above stuff is total crap. A recovery within two months. And why?
Because we're losing jobs at a "horrific" rate, and because we've
reached bottom, and because we're going to gain jobs at the same rate
we lost them, which is what we saw in the past, as long as we skip
the last two recessions, when it didn't happen.

I can't believe this. How is it that one total idiot (or crook)
after another comes on to Bloomberg or CNBC and spouts stuff like
this?

Sincerely,

John

[abs]

Hi John -

I think what is happening here is a social dynamic in which people are having a very difficult time accepting what we can clearly identify and see as a new reality. I've observed this many times before and in many contexts. Humans in general seem to have a very difficult time understanding the realities of the world around them. Ultimately, we all color our view of the world based on our perspectives, experiences and knowledge, however some do this to a far greater degree than others. The people who do this BELIEVE they are seeing reality, but they aren't and time proves that they aren't. However, these folks just never seem to learn and continue seeing the world with major distortions. In my experience it is the rare few who can actually recognize the distortions and see things for what they really are. To be honest, this is a really interesting topic - I don't know if it has been studied or tested - although I'm sure its true as it is so blatent and prevalent to me.

There is another possibility which is that some of these "talking heads" are financially motivated. If they are money managers and investors are pulling money out and selling positions, then they will lose business and income. If this is what is happening then it is deception of the worst kind.

My guess is it is probably a combination of both of these things and if I had to guess I would think the comments being made publicly are more of the first point than the second. Interesting to note that we saw similar behavior and comments in the 1930's as well.

Andrew

[MisterB]

John:

I agree that are dealing with generational forces that can not be stopped. However, people in power do have an impact. At least Paulson (Bush) were trying to stop the collapse. Maybe they were putting bubblegum in the dam but at least they were trying. Obama and Geithner are either incompetent or do not care. Here’s another thought: maybe for Mr. O. national health care and his other social programs are a higher priority than trying to save the economy.

[MisterB]

Andrew:

I agree that many people have a very poor understanding of our world. Many people believe utterly ridiculous things. Please also admit that you and I don’t truly understand the world either. It’s too complex and unpredictable for anyone to understand.

Actually, I think that a bigger problem is for people to change their view of reality ON A TIMELY BASIS when reality changes. Boomers have lived in a reality where the stock market and real estate were the best investments and the stock market always recovered from declines that were temporary. It’s very hard to accept that we are in a new reality – a new depression where stocks and real estate will not come back for decades. (Of course, the bears could still be wrong and the majority Boomers could still be correct.)

As far as pundits etc. are concerned. The CNBC audience is almost all long side investors and almost all investment fees are from long investments. That’s where the advertising money and the fees are. I have a very cynical view that investment advisors and their paid spokespeople are really nothing but salespeople.

[MarshAviator]

John:

I agree that are dealing with generational forces that can not be stopped. However, people in power do have an impact. At least Paulson (Bush) were trying to stop the collapse. Maybe they were putting bubblegum in the dam but at least they were trying. Obama and Geithner are either incompetent or do not care. Here’s another thought: maybe for Mr. O. national health care and his other social programs are a higher priority than trying to save the economy.

You are on to something here. The Bush people were attempting to keep the economy going, but were maybe incompetent.
I am arguing that Obama's people are not incompetent, but either consciously or unconsciously trying to bring it (the economy) down.
They may think the only way to get virtually socialistic policy in place is to make things so bad that resistance will be futile.

It really fits the Gen-X archetype, high risk approach to problem solving.

[MisterB]

It's possible that they do want a depression. More likely, IMO, is that they think that this is a once-in-a-lifetime chance to push through Socialized Medicine, Global Warming taxes etc., and their other socail programs. They are not going to let the depression stop their plans and/or they will use the depression to their advantage to implement their plans. It does have a certain Jr. High thinking about it: "tax the rich, feed the poor, til there is no rich no more."

In retrospect, I think that we should give Paulson and Bush SOME credit in that they did muddle through the crisis and keep things going somewhat. They look much better than Obama and Geithner so far.

[scared_sh+tless]

John » Thu Mar 05, 2009 8:48 pm wrote:

Today President Obama lectured us on the value of his universal
health care initiative, implying that if we spend a few trillion more
dollars on it, then we'll save money. Obama is beginning to turn
into a used car salesman: The more he spends, the more money he's
saving you. I never felt that President Bush knew what was really
going on, but Obama appears to be much worse.

There is a theory that Obama does know exactly what is 'going on':

http://www.discoverthenetworks.org/grou ... grpid=6967

The Cloward-Priven strategy seeks to hasten the fall of capitalism by overloading the government beaueaucracy with a flood of demands, THUS PUSHING SOCIETY INTO CRISIS AND ECONOMIC COLLAPSE.

To many this might sound like total nonense but given that Obama did have some leftist influence in his past I don't think this can be entirely dismissed.

Also take note of some recent statements by his chief of staff:

http://online.wsj.com/article/SB1227212 ... lenews_wsj

This opportunity isn't lost on the new president and his team. "You never want a serious crisis to go to waste," Rahm Emanuel, Mr. Obama's new chief of staff, told a Wall Street Journal conference of top corporate chief executives this week. He elaborated: "Things that we had postponed for too long, that were long-term, are now immediate and must be dealt with. This crisis provides the opportunity for us to do things that you could not do before."

The choices are not good, either Obama doesn't have a clue about the crisis or he is just implementing his agenda of socialist reform.

[Matt1989]

This is all nonsense. If Obama fixes the economy by the end of 2009 (quite a feat!), he'll be more popular than FDR ever was, and would be in a far better position to push through his programs.

Also, he's a progressive capitalist, not a socialist. Huge difference.