Financial topics

[aedens]

Like posited before we will see who makes "survives" the October grade. Many will be making adjustsments then.
All I would like to forward as history conveys is who posted earnings during the great shake then as today is conveying
again. P/E is a tool which to be frank I set aside for the time being myself since EBIT will sort them out.
I feel to many are prone to tools "angle" rather than hard work. As stated nuetral until the pretty boys
in the suits find out the hard way what value does mean. Of course my anemic 3.2% is something I live with this
YTD. Be carefull and will be seeking this fall for a few EBIT based investments only. Overall i see a massive amount
of wasted time in the Capital Markets which is a sign of the apathy Mr Market will have to cure in the current uncoupling
to persist from gross Global malinvestments which have really not played out in to many supply side markets.
Until dollar to crude is broken so we will be also to effective course change. Energy will smother out whatever
process we consider but no one cared in the 70's either since look who is holding the beast at the Consumers expense.
Maybe this time more will degrid which will idicate the consumer is growing up. All we can do is point the obvious out.
The piggyback globalist have screwed in bright spots they consider correct. Find them, "supply side" and you find the problem
or adjustments you need to pursue.

Good indications to macro issue linked below.

http://suddendebt.blogspot.com/

[Higgenbotham]

The US has overborrowed, default risk has risen to unacceptable levels and the long bond rate has just begun to spike higher. The US economy will start to shut down and we will then see the big deflationary collapse. The Fed has run out of options and Bernanke is getting weak. Congress is likely to turn on him like a pack of wolves. Rising long term bond rates generate all kinds of problems as we've only started to see see lately. Since mortgage rates key off of those rates, the housing market has already begun to shut down.

The Fed can't guarantee any of this mess. Once investors get nervous about what the Fed can and can't do, at some point the credit and stock markets will panic. I'm guessing August on that, but who knows. Problem here is that the panic is likely to be caused by loss of confidence in what the Fed can guarantee (junk dollars such as those that are probably in your money market - read your prospectus). So investors will flee out of all the junk paper, payment systems will probably lock up, commercial paper will crash, municipals will crash, FDIC rumored to be broke, etc. Total pandemonium. The BRIC countries will be absolutely crushed. Putin and Hu are looking for a whipping boy and all they can come up with is the US dollar. Don't let them fool you. These incompetent commies put all their assets in US dollars for a reason. They have never been able to run an economy on their own and the only successes they've had in 50 years have been in copying US methods and US technologies. The rise of the rest of the world outside the US is total hogwash! That will only happen if they can defeat the US militarily. The war hasn't happened yet but it is coming. After the junk dollars lock up and implode, the only thing left standing will be what US dollars remain. All assets and all other currencies will be decimated. Bernanke has been trying to drive the dollar down and inflate this mess again, but don't let him fool you. He can't do it and neither can Russia or China. The game is over!

[John]

Dear Higgie,

> The US has overborrowed, default risk has risen to unacceptable
> levels and the long bond rate has just begun to spike higher. The
> US economy will start to shut down and we will then see the big
> deflationary collapse. The Fed has run out of options and
> Bernanke is getting weak. Congress is likely to turn on him like
> a pack of wolves. Rising long term bond rates generate all kinds
> of problems as we've only started to see see lately. Since
> mortgage rates key off of those rates, the housing market has
> already begun to shut down. ... The game is over!

Do you have a broad enough view of the situation to be able to assess
how close we are? I've heard some pundits say that things are as bad
now as they were just before Lehman collapsed. Do you have a sense
of that?

Sincerely,

John

[Higgenbotham]

Do you have a broad enough view of the situation to be able to assess
how close we are? I've heard some pundits say that things are as bad
now as they were just before Lehman collapsed. Do you have a sense
of that?

Sincerely,

John

That feels about right.

It feels about like it did when you opened up the forum and one of the early posters (CatfishnCod) was saying the derivatives are no problem because they can just zero each other out and go "poof". Remember how he was quoting all those Bloomberg articles to that effect?

Now we have another poster (Malleni) saying the dollar will just go "poof" and he is quoting Bloomberg articles too. I'm beginning to wonder if CatfishnCod got upset and he is really Malleni in disguise.

[aedens]

http://zerohedge.blogspot.com/2009/06/m ... ng-to.html
Find a number that fits, or search for relavent EBIT "Monthly" cash management directives that
will ensue "are" to solvent GeoCorporates who do get it at this juncture. The on the other hand
people where already removed this spring. We will see how Long the EU can blow smoke.

Do you have a broad enough view of the situation to be able to assess
how close we are? I've heard some pundits say that things are as bad
now as they were just before Lehman collapsed. Do you have a sense
of that?

Sincerely,

John

That feels about right.

It feels about like it did when you opened up the forum and one of the early posters (CatfishnCod) was saying the derivatives are no problem because they can just zero each other out and go "poof". Remember how he was quoting all those Bloomberg articles to that effect?

Now we have another poster (Malleni) saying the dollar will just go "poof" and he is quoting Bloomberg articles too. I'm beginning to wonder if CatfishnCod got upset and he is really Malleni in disguise.

[aedens]

Damn straight on that conveyance. EU is asserting as always 6 months behind in most internal posting since when has a socialist made a straight decision. Putin's crew I suspect is just straight out playing the currency markets to the usual pandomoniun IMO.

What I have gleaned is the east has been patient enough "long term" to dollar cost average materials and to function as a market.

Meanwhile India wants to market a diesel truck in the States in a systemic mismoner of a democracy with a bent of mind to permagrouth debt fueled governant brats. Cooler heads can prevail but we have to see whats left to consider when these drunken sailors wake up. In conyenace with my govenment official they are unable to cope with per capita caps spending concepts. There clueless to reason and acountability to date. The iron curtain is being suplanted by the firewall but innovation works around that also.

The US has overborrowed, default risk has risen to unacceptable levels and the long bond rate has just begun to spike higher. The US economy will start to shut down and we will then see the big deflationary collapse. The Fed has run out of options and Bernanke is getting weak. Congress is likely to turn on him like a pack of wolves. Rising long term bond rates generate all kinds of problems as we've only started to see see lately. Since mortgage rates key off of those rates, the housing market has already begun to shut down.

The Fed can't guarantee any of this mess. Once investors get nervous about what the Fed can and can't do, at some point the credit and stock markets will panic. I'm guessing August on that, but who knows. Problem here is that the panic is likely to be caused by loss of confidence in what the Fed can guarantee (junk dollars such as those that are probably in your money market - read your prospectus). So investors will flee out of all the junk paper, payment systems will probably lock up, commercial paper will crash, municipals will crash, FDIC rumored to be broke, etc. Total pandemonium. The BRIC countries will be absolutely crushed. Putin and Hu are looking for a whipping boy and all they can come up with is the US dollar. Don't let them fool you. These incompetent commies put all their assets in US dollars for a reason. They have never been able to run an economy on their own and the only successes they've had in 50 years have been in copying US methods and US technologies. The rise of the rest of the world outside the US is total hogwash! That will only happen if they can defeat the US militarily. The war hasn't happened yet but it is coming. After the junk dollars lock up and implode, the only thing left standing will be what US dollars remain. All assets and all other currencies will be decimated. Bernanke has been trying to drive the dollar down and inflate this mess again, but don't let him fool you. He can't do it and neither can Russia or China. The game is over!

[aedens]

In any case, the Chinese are further out on the limb than I believe they can remain and I am sure they are madly seeking another finance game in order that something turn before their supply of dollars runs out. The US trade deficit is a mere 2.5% of GDP now and falling. Once the Chinese realize they have moved to corner an endless market and that their gold has turned to water, the gig of the BRIC countries will be up and the price of everything will collapse. In the meantime, our price for pretending everything is going to be okay is another $1 per gallon at the pump.

Normalcy will ensue when the sun comes up tommorow as we see it every day. Sorry to say they have already made decisions above our pay grade.
Why does less than three percent of the planet who can produce at the wars end around 50 percent of GNP <---- as in Planet then really care about
our 25 percent role as such today? If gas is 5 bucks a gallon it will not matter since they know it will sieze the markets to spending? For me i will fish more and read some more classics. Even they understand that on all levels. I do enjoy John's Framework of GD since it only conveys coherance to events we have seen in context of its unfolding. Maybe, enough will spill out seen or unseen to change some thinking if you will admit it or not?

Wed Apr 22, 2009 6:24 am <-------- old post not about us.
Remember true fungible attributes of pragmatic geocorporates
to vanilla level investors.
http://www.nytimes.com/2009/04/13/busin ... ml?_r=2&hp

"Asked about the balance of financial power between China and the United States, one of the Chinese government’s top monetary economists, Yu Yongding, replied that “I think it’s mainly in favor of the United States.” He cited a saying attributed to John Maynard Keynes: “If you owe your bank manager a thousand pounds, you are at his mercy. If you owe him a million pounds, he is at your mercy.” "The abrupt slowdown in China’s accumulation of foreign reserves instead seems to suggest that investors were sending large sums of money out of mainland China early this year in response to worries about the country’s economic future and possibly its social stability in the face of rising unemployment."
Does the Party believes it can outrun pressures for democracy through reform and performance? I should be interesting with Putin's pipeline and Peking regard that it does not matter is the cat is black or white but if it catches the mouse.

[aedens]

To be or
http://www.bloomberg.com/apps/news?pid= ... A59hCyoDV4
http://www.bloomberg.com/apps/news?pid= ... KnXn3puSjY
http://www.bloomberg.com/apps/news?pid= ... zpsQgJ68dA
not to be.
Meanwhile back at the ranch.
“It’s not up to politicians to determine which currency will be the world reserve currency,” said Lutz Karpowitz, a currency strategist at Commerzbank AG in Frankfurt. “In the end the market decides it.”
http://www.bloomberg.com/apps/news?pid= ... ypYCRB22fM
Along with providing more than $82 billion in war-related funding, the bill includes $5 billion to secure $108 billion
http://www.bloomberg.com/apps/news?pid= ... cbY1QQeBNY
China and India are “highly restrictive on the local debt side” and Russia has “quite an illiquid market” for foreign investors, said Cristina Panait, an emerging-market strategist at Los Angeles-based Payden & Rygel, which manages more than $50 billion. “Currency performance is a big portion of returns.”
Inclosing,
o Parkinson's law
o Peter principle
o The Dilbert Principle
Pick a day or paper and even the powers that be are stuck to the 3 options provided.

That is funny about the bonds. Anyone with a brain knows that is a hoax because there wasn't $134 billion in US government debt ever issued in 1934, much less $500 million bonds. This is almost like a joke, as who would be stupid enough to buy them, even if they were perfect fakes. In any case this is just the lead in.
...

I do not agree.

We discussed on this topic quite a bit "the confidence" in the US dollar.
Do you really believe that this event (even it those bonds are "perfect fakes") - can help increasing it?

Even if these bonds are a "perfect counterfeit", they still present a major problem for the US.

High-quality fraudulent treasury bonds measured in the hundreds of billions is the last thing the US needs to deal with right now.
http://www.marketwatch.com/story/treasu ... 0961091100
http://online.wsj.com/article/BT-CO-200 ... 07644.html
http://www.bloomberg.com/apps/news?pid= ... gZ7EeTvFbk
more of the same:
http://www.foxnews.com/story/0,2933,526541,00.html
http://business.smh.com.au/business/mar ... -ccoy.html
http://www.ft.com/cms/s/0/de0d19e6-5a02 ... ck_check=1

Obviously, US is already struggling to find lenders to finance the government’s record deficit spending.
These fake (or real) bonds also do nothing to inspire famous "the confidence" in the US dollar at a time when investors around the world are worried about its worth.

"Deflation" of US dollar:

...There is the other problem with potential deflation....

Regarding this issue - in my point of view it is really painful to talk about "deflation" any more (at least when we considering US dollar) - after all happened in the last couple months and happening now...

[greghaught]

since the dollar is no longer hard (it's paper not metal) the value is completely relative. relative to what? other currencies.

if you check the exchange rates, we're more valuable against the european and canadian currencies than we we're in late 2007 - early 2008. we've lost some ground since then to the yen.

in that context, the dollar doesn't really look unstable to me. we're certainly not going to be the only country trying to print and borrow our way out of this mess.

as far as the trade deficit, if we intentionally tightened up credit a little instead of trying to loosen it (trying to resurrect the bubble), we would reduce excessive internal consumption and reduce that deficit. that would go a long way toward getting the country back on firm fiscal ground.

that's just my take. btw, who says a little deflation is bad? that was just greenspan and bernanke justifying their targeted 'prosperity' which we now know was an unsustainable distortion.

[Gordo]

Nice commentary from Dr. Hussman this week related to valuations (one of John's favorite topics):
http://hussmanfunds.com/wmc/wmc090615.htm

Valuation Update: We estimate that the S&P 500 is currently priced to deliver total returns over the next decade in the range of 6.5-9.0%, centered at an expected total return of about 7.8% annually. Stocks are modestly overvalued here, except on metrics that assume a permanent recovery to 2007's record profit margins (which were about 50% above the historical norm).

On normalized profit margins, sustainable S&P 500 earnings are slightly above $60 on the index. That's certainly higher than the 7 bucks of net earnings that companies in the index have reported over the past 52 weeks, but unfortunately, even at current prices, the S&P 500 is near 16 times normalized earnings.

You can get that basic figure a lot of ways. Currently, book value on the S&P 500 is slightly above $500. Outside of the past 15 years, when the economy was building up to a debt crisis, the typical return on equity for the S&P 500 has historically ranged between about 10-12%. While a higher debt load raises return on equity in good times, it also leads more quickly to bankruptcy in bad times, as we've observed, and will continue to observe. The deleveraging pressure on the U.S. and global economy here is likely to be associated with a normalization in return-on-equity just as we're observing a normalization in profit margins (return on revenue, so to speak). Applying the higher end of historical return on equity to current book value, and assuming that we don't see major further writedowns in book value for the index, we again get a normalized earnings figure close to about $60. The higher earnings figures (over $80) that we observed in 2007 were based on profit margins and returns on equity far above the historical norm, and were also bolstered by unusual contributions from financials and commodity-driven companies.

Presently, the price-to-book ratio on the S&P 500 is about 1.9. If you think about the 1974 and 1982 lows, we observed price/book ratios at about 0.8, while price-to-normalized earnings multiples were at about 7. So the S&P 500 would have to drop by about 60% to match the best valuations that we've seen during the past 40 years. Investors shouldn't kid themselves that stocks are cheap – in the sense of being priced to deliver outstanding long-term returns – just because we've observed a wicked decline. We're not even close.


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