This is a copy of something I wrote on Calculated Risks page. I thought it at least covered an area that was too important to lose in a comment post, so I have put it here for save keeping. Those who don't go to Calculated Risks page, you are missing some of the most important information about the economy and the housing bubble. I am going to add a little more to the bottom of the page because I didn't finish my thought.
Risk, you have a great page and I have used it for at least 2 years for reference of data you have accumulated. I have been around housing in some capacity most of my working life, having been both a Realtor and a mortgage broker. I have also been though a housing bust, the 1980's Texas bust being one of the worst seen in the USA for a long time prior to the current mess. In any case, your data doesn't support what the recent data is showing.
The big deal is that home sales really never exceeded 4 million prior to this bubble on an existing basis. I do know from your data and other data I have mined from the government that new home sales were at a record of 819K until somewhere around 1997 from which we didn't see sales that low again until 2008. I believe your chart on the story above says more than you are mining out of it. I will elaborate after I mention the obvious.
You are using a ratio of existing sales to new sales to I believe net out distressed sales. The last time housing really went bust was the early 1980's interest rate shock. It is also the only time new home sales were at a bottom compared to this recent action, dropping to 401K. Existing home sales in that recession/ bust were well below 3 million. You might note that existing home sales have remained above the prior record, despite the worst economy in a long time. This doesn't support the idea that home prices or building are falling because of a bust, but because of a collapse in market fundementals. There has been speculation all the way down. The population argument doesn't hold water because the real game is how many new households are needing houses and the boom generation was providing as many as ever. Thus the 4 million/800K of 1978 was a peak. There was also a speculative bubble going on in 78 to support such a sales figure. The bust that followed dropped sales to 50% on both accounts. Thus our totals here should be more in the 3.5 million range, not the over 5 million range we have seen as a bottom.
The other matter is the new home sales figures and how they stayed so high for so long during the 1997 to 2007 period. Your chart "comparing peaks and troughs for starts, new home sales and residential investment shows the truth. Though you can say a bottom might be in because new home sales are bouncing, remember that not all markets were glutted. They were building roughy 50K in units here in the DFW area before 2007 and scaled back early. I think DFW could probably consume 25,000 units this year, which would maybe by itself make up the change in construction last month. Other areas aren't coming back.
If you look at that chart, don't only look at the peak, but look at the duration of the climb and the size of the top. A big top means a big bottom and we are going to see something that is totally unexpected. Remember, prior overconstruction was always corrected every few years and only the 1972 era and 1978 era peaks lasted over a very short period of time, 2 and 3 years respectively and followed by plunges. it was the plunge that created the following peak and the 2 peaks played themselves out in the 1980's where we only saw a more moderate peak.
This is evidence that the supply of housing is so large that it will take years to work off the excess. Also, the high existing home sales figures tell me the speculators haven't quit speculating. I don't care to listen to NAR statistics as they have been lying for years and using bubble statistics to hide the fact that the bubble hasn't left. This is the true nature of the problem as I see it.
Thus we are going to see one of two things happen. Either we are going to see a rebound and another speculative bubble (the government has an interest in encouraging and recreating a bubble and would do nothing to stop it, including making FHA a subprime financing outfit) or we are going to see this rebound fizzle to lower prices and lower sales. We spent 5 years above the 5% GDP point in housing, which equated to all the time in the 30 plus years prior. We also spent 11 years in record annual sales territory, peaks that had only lasted 2 years prior. Thus, we are looking at a lot of years of surplus housing construction to wipe out.
If this does become a new bubble, I expect it to either bankrupt the US government or force them to drop FNM and FRE and let the market take the losses. If it doesn't, it will force the knife catchers to liquidate or join the groups of foreclosed. In any case, the economy won't be the way it was for a long time.
Monday, July 27, 2009
Sunday, June 28, 2009
The Water Gets Muddier
The bulls have been running now for over 3 months. The best question is, running where? Bernanke speaks of green shoots, but the unemployment claims continue to exceed 600,000 a week, a number that is roughly 1/2 of 1% of the US labor force. If 2% of the US labor force is losing their job on a monthly basis, then the idea that consumer spending is holding up is a long shot, despite the numbers. Also failing to support this idea is the fact that Japanese and Chinese exports are down between 20% and 40%. Being these 2 countries are the source of much of the US consumer goods, it would stand to reason that US consumer spending is down significantly. The same is true of an Asian economic rebound.
The story is the great rally in stocks around the world. The truth is the US market, save the speculative Nasdaq, is either flat or down for the year. The Chinese market, which began to rally earlier is not even to the 50% point, down from the top more severely than the US market. Commodities have rallied, but again this is an inflation play of massive speculation and not due to real supply and demand problems. In fact, oil is piling up in surplus around the world, being hoarded in tankers and OPEC is holding down production to boot. I believe any short term US demand rebound is due mainly to filling gas tanks to avoid the run up in prices. All the while Goldman Sachs promises record bonuses. Wonder who is behind the movement in price and who is going to be the next bailout by the government due to systematic risk?
I don't believe many understand where we are in the economic cycle. We are at a history changing juncture. The phenomenon of fractional reserve banking creates 2 problems, an imbalance of have money and have not monies and a mathematical problem of uncollectable capital. By that, I mean the money to make up the capital reserves on the balance sheets does not exist. This is why we have losses as far as the eye can see in the financial markets and why I don't believe the bailouts are over. They are over only because they might not be politically feasible. It is also why I believe Goldman will be the next systematic event, in that they won't have anyone to pass the bag to this time. For whatever reason and I suspect fraud, AIG took it last time. Their customers can only be fleeced so many times before they cease to be customers.
Much is made of the purchase of bonds and mortgage backs by the Fed and how this is printing money. It is no more printing money than using your Visa. Plus, where is all the money the Fed has printed in the past? My contention is it no longer exists in the banking system, which has been barren for years of socalled reserves, but instead has been withdrawn and put in hiding in third world countries for years. In the meantime the banks have been without money to pay each other and thus we have the credit crunch that won't let up. The banking system is giving up its best assets in this series of transactions while getting assets in return that don't pay any interest. Money don't exist in banks only in bank accounts.
There are a few things different between this time and the 1970's. One is we are not following up the collapse of Bretton Woods with 30 years of currency adjustments in a mere 5 years or so. Second, we are at the end of a worldwide spending spree, something that was just beginning in the 1970's. The oldest boomers in 1970 were not even 25 while the youngest were still in grade school. That generation created a wave whereever it progressed and it was progressing to adulthood in the 1970's wher it was going to need cars, furniture, homes, capital goods for jobs and social services. It didn't hurt that the world bank had loaned hundreds of billions for emerging markets to spend as well. Remember the financial crisis then was the banks going broke on loans to these countries going into default.
Today we have an overpaid generation X and a busted boomer generation. The boomers are now in panic and not about to continue to spend as they had in the past. The generation Xers are about to see their gravytrains derailed and their credit cards maxed out. Where is the demand to push prices higher going to come from? I highly doubt it will be China, where the socalled savings rate has very little to do with the population and a lot to do with the confiscatory corporate and financial system. Absent demand, the capital goods business in China goes into a shell.
There is a lot of mud in the water. All I write is as speculative as what we are seeing in the stock market. Until people as a whole start getting free money or new, financially irresponsible people begin to get more credit cards than the other financially irresponsible people are losing I find it hard to see where the money makes the cycle. The speculator needs someone to take the bag from him whether he is dealing in stocks, commodities or manufacturing inventory. In the meantime, 600,000 people a week are applying for unemployment in the US, exports that create jobs and income are remaining depressed overseas and massive bets are being placed against the trend on green shoots.
The story is the great rally in stocks around the world. The truth is the US market, save the speculative Nasdaq, is either flat or down for the year. The Chinese market, which began to rally earlier is not even to the 50% point, down from the top more severely than the US market. Commodities have rallied, but again this is an inflation play of massive speculation and not due to real supply and demand problems. In fact, oil is piling up in surplus around the world, being hoarded in tankers and OPEC is holding down production to boot. I believe any short term US demand rebound is due mainly to filling gas tanks to avoid the run up in prices. All the while Goldman Sachs promises record bonuses. Wonder who is behind the movement in price and who is going to be the next bailout by the government due to systematic risk?
I don't believe many understand where we are in the economic cycle. We are at a history changing juncture. The phenomenon of fractional reserve banking creates 2 problems, an imbalance of have money and have not monies and a mathematical problem of uncollectable capital. By that, I mean the money to make up the capital reserves on the balance sheets does not exist. This is why we have losses as far as the eye can see in the financial markets and why I don't believe the bailouts are over. They are over only because they might not be politically feasible. It is also why I believe Goldman will be the next systematic event, in that they won't have anyone to pass the bag to this time. For whatever reason and I suspect fraud, AIG took it last time. Their customers can only be fleeced so many times before they cease to be customers.
Much is made of the purchase of bonds and mortgage backs by the Fed and how this is printing money. It is no more printing money than using your Visa. Plus, where is all the money the Fed has printed in the past? My contention is it no longer exists in the banking system, which has been barren for years of socalled reserves, but instead has been withdrawn and put in hiding in third world countries for years. In the meantime the banks have been without money to pay each other and thus we have the credit crunch that won't let up. The banking system is giving up its best assets in this series of transactions while getting assets in return that don't pay any interest. Money don't exist in banks only in bank accounts.
There are a few things different between this time and the 1970's. One is we are not following up the collapse of Bretton Woods with 30 years of currency adjustments in a mere 5 years or so. Second, we are at the end of a worldwide spending spree, something that was just beginning in the 1970's. The oldest boomers in 1970 were not even 25 while the youngest were still in grade school. That generation created a wave whereever it progressed and it was progressing to adulthood in the 1970's wher it was going to need cars, furniture, homes, capital goods for jobs and social services. It didn't hurt that the world bank had loaned hundreds of billions for emerging markets to spend as well. Remember the financial crisis then was the banks going broke on loans to these countries going into default.
Today we have an overpaid generation X and a busted boomer generation. The boomers are now in panic and not about to continue to spend as they had in the past. The generation Xers are about to see their gravytrains derailed and their credit cards maxed out. Where is the demand to push prices higher going to come from? I highly doubt it will be China, where the socalled savings rate has very little to do with the population and a lot to do with the confiscatory corporate and financial system. Absent demand, the capital goods business in China goes into a shell.
There is a lot of mud in the water. All I write is as speculative as what we are seeing in the stock market. Until people as a whole start getting free money or new, financially irresponsible people begin to get more credit cards than the other financially irresponsible people are losing I find it hard to see where the money makes the cycle. The speculator needs someone to take the bag from him whether he is dealing in stocks, commodities or manufacturing inventory. In the meantime, 600,000 people a week are applying for unemployment in the US, exports that create jobs and income are remaining depressed overseas and massive bets are being placed against the trend on green shoots.
Thursday, May 28, 2009
The whole group of numbers are nonsense
Unemployment claims less than predicted? How many people on Friday decided to go do something else other than file unemployment? 1% of 630,000 is 6300, which is about where the number came in. They spin this like the figures peaked at 900,000, but from what I can remember the 650,000 range was pretty much the peak, so week after week we are having claims come in within 5% of the peak, with the better numbers I have seen come in on weeks surrounding hollidays. This next week will contain Memorial Day. I don't know how many of you have been to an unemployment office, but you have to be unemployed to have the time to go. I don't believe they are geared to process 5 days of business in 4 days.
The other news was the durable goods orders, up 1.9%. The decline in March was more than doubled to 2.1% from what I can't find without looking. Point here is that the increase was created in part off a decline that was over 1% more than stated for last month. Expectations were up .5%.
This whole matter, not just these figures, but the expectations for autos and other stuff is some of the biggest bullcrap I have seen in years. I saw yesterday where SPX earnings were actually worse than expected coming into the quarter, but the news has been about so many companies that have beaten expectations. They missed in the fall. Point is that Wall Street was trying to sell no recession in the fall, then the board that calls recessions said it started in December 2007, meaning in Wall Street statistical terms, they missed it. So since then they have been trying to sell recovery because statistically, the recession had been going on so long. But, up until it was called, Wall Street was trying to sell us on the idea we were going to miss it. Which end of this donkey does the truth come out of. It appears both ends are the rear.
My point is that I think Wall Street was right up to September, that indications were we could miss the recession. Of course, us bears would have no part of that idea because most of us were banking on this financial mess, though few of us had a clue how it was going to play out, being none of us had ever seen it. What we are looking at started September 7, not December 2007 or with the subprime crisis. This is when the unemployment claims went to the 600K mark and have stayed there. It is when the price of commodities collapsed. It is when the Treasury started crying. It is when the real depression started.
Bulls mine these figures because they have this golden fleece called consumer spending. They can't really figure out the difference between green shoots and green puke. The rest of us are at the mercy of Goldman Sachs officials appointed to government positions, where numbers can be spun. My feeling is the consumer isn't only not coming back, if that is what we are waiting for, then we might need to spot Santa Claus for evidence.
The bulls are trying to use an old horse to pull a large plow. I am reading Rothbards book, "The Mystery of Banking" and from what I can gather, their capacity to steal with credit has dried up to the point that they get the bill back now. Of course, everyone has to die except the big NY and London financial institutions, so they have the government give the bill to us, in order that they try the game again.
The other news was the durable goods orders, up 1.9%. The decline in March was more than doubled to 2.1% from what I can't find without looking. Point here is that the increase was created in part off a decline that was over 1% more than stated for last month. Expectations were up .5%.
This whole matter, not just these figures, but the expectations for autos and other stuff is some of the biggest bullcrap I have seen in years. I saw yesterday where SPX earnings were actually worse than expected coming into the quarter, but the news has been about so many companies that have beaten expectations. They missed in the fall. Point is that Wall Street was trying to sell no recession in the fall, then the board that calls recessions said it started in December 2007, meaning in Wall Street statistical terms, they missed it. So since then they have been trying to sell recovery because statistically, the recession had been going on so long. But, up until it was called, Wall Street was trying to sell us on the idea we were going to miss it. Which end of this donkey does the truth come out of. It appears both ends are the rear.
My point is that I think Wall Street was right up to September, that indications were we could miss the recession. Of course, us bears would have no part of that idea because most of us were banking on this financial mess, though few of us had a clue how it was going to play out, being none of us had ever seen it. What we are looking at started September 7, not December 2007 or with the subprime crisis. This is when the unemployment claims went to the 600K mark and have stayed there. It is when the price of commodities collapsed. It is when the Treasury started crying. It is when the real depression started.
Bulls mine these figures because they have this golden fleece called consumer spending. They can't really figure out the difference between green shoots and green puke. The rest of us are at the mercy of Goldman Sachs officials appointed to government positions, where numbers can be spun. My feeling is the consumer isn't only not coming back, if that is what we are waiting for, then we might need to spot Santa Claus for evidence.
The bulls are trying to use an old horse to pull a large plow. I am reading Rothbards book, "The Mystery of Banking" and from what I can gather, their capacity to steal with credit has dried up to the point that they get the bill back now. Of course, everyone has to die except the big NY and London financial institutions, so they have the government give the bill to us, in order that they try the game again.
Tuesday, May 5, 2009
Love the rally then sell it
There is a recovery going on. It is a recovery like life support is a recovery for a stroke. This is a NY banker manufactured story recovery, started by our commander in chief Ben Bernanke and carried forward by our emperor, Barach Obama. I am wondering what modern economic statistics are about? I am also wondering how many years they think we can put it on the account we can't pay in ever increasing amounts and actually call it a recovery? It is kind of like pumping blood in faster than it leaks out is called getting well.
The latest story is pending home sales have gone up. What is a pending sale? I spent a few years in real estate and I recall a pending sale is one that is under contract, but hasn't closed. From what I have been told by a sister that is a mortgage broker is that the staffs at the mortgage wholesales like Well Fargo, Chase, Citi and others have been cut so much that underwriting times are weeks now instead of hours as they were. This means there isn't any buying a home today and getting it closed in 3 days, which is Friday, but instead maybe 2 or 3 weeks. There is a mile of difference between preapproval of a mortgage and a closable loan package, which is necessary to have a closing. Thus saying there are more pending sales now is like saying there is more water because the river has been dammed. There is no more water coming down the river until is starts spilling over the spillway. In this sense, if you don't follow me, it is quite likely pending sales would go up if another week is added to the typical transaction.
There are other things that make a recovery in housing a lie. For one, barebottom sales in foreclosure aren't normal sales in a market. They could very well be the area that marks the market price of housing when all is said and done. Also, 4.5 million sales on an annual pace is hardly a housing bust, but instead a pre-bubble record. Thus we have seen a market go bust while rampant speculation has continued. There is more. The Fed and the government have manufactured a mortgage rate that is probably 1.5% below that the market would normally settle at. Also, there is the recent massive tax credit given first time homebuyers. Credit, under historical terms, isn't tight. It is probably still easier than it was in the 1980's here.
Next, we get into autos. I would guess that if autos get back to a 12 million to 14 million level, this is going to be called a boom. Thus a bust level of auto sales is a boom while a boom level of housing sales is a bust. How many thousands of dollars of US subsidy are we going to see per unit in the auto industry in order that Obama keep one of his pets, the UAW, in business? You can bet it will be enough that to pull the plug on this operation is going to be a big blow.
Then we have the banks. Has there ever been a bigger smokescreen in history? The US economy will be irrepairably ruined when this fiasco is done. Charlie Munger of Berkshire Hathaway fame has called for the end of credit default swaps. I wonder how we ever begin to float enough credit to keep the world afloat without the risk sharing added with default swaps, which are really nothing more than insurance, like PMI insurance or bond insurance for municipals. Who is to say that the depression didn't start in 2000 because of these instruments?
There is much more about the banks. For one, all the money the tax payers have given the banks is now owed back to the banks. Capital equals bonds and t-bills. It will never be extinguished. There is more, as they have done away with mark to market accounting. Plus it is plain to all that pay any attention that the big NY banks and Wall Street firms openly flaunt the capacity to manipulate the markets. Look at GE, a near bank riding a AA rating while being carried on lifesupport by the Fed? The whole thing is a farce and the ones that know it the best are the banks, who want nothing to do with other banks paper.
This is a different recession or depression or whatever one likes to call it. The game collapsed on its own. Few realize the long side speculation that has gone on all the way down. Sales of existing homes have never fallen below what were previous records. The price of oil is driven up with every rumor there might be a recovery, even though supplies are near 20 year records and growing. Copper is beyond $2 a pound, likely driven to that level by Chinese hoarding in light of the mechanizations of the Fed and the US government deficits. We are not looking at a demand shut down collapse, but an oversupply collapse where much of the oversupply is still subject to speculation.
There is not a lot being done for the reduction of debt. The US government has instead guaranteed the repayment of trillions of dollars that otherwise would be in default in markets that would be otherwise totally insolvent. Exports in Asia have collapsed, yet we are told every day how good these economies which depend on exports to run are doing and how they will lead the recovery. They aren't leading much of anything and if the US government didn't have the power it still possesses, I highly doubt they would be functioning. This is a collapse of the capacity to service debt along with a misalignment of assets and liabilities in the area of financial intermediation. Bank loans need bank credit to be paid and the credit represented by deposits rests in the hand of those that don't owe. At the same time, fed policy literally forces some to speculate to earn anything on their savings.
There are 2 avenues that we face. One is a slight recovery followed by the second dip of a recession. I think this is a manner of lying that we had a recovery, aka 1980, when the perception we were falling into a recession was interupted by some cloudy statistics. I don't buy the idea that 1980 was a double dip recession, but instead an easing of a Fed induced slowdown for political purposes. This wasn't a Fed induced slowdown as was 1980. This was a collapse.
The great secret is there aren't any Asian miracles. There are only excessive US credit expansions that Asian use to expand their own economies. US credit expansions have been inflation of home prices along with equity extraction for the past 40 years. The equity extractions are a done deal and there really isn't anything to drive demand in the US now with much of the excess equity gone. Absent a new equity driven recovery, we are to languish, much as the Japanese did once their real estate bubble burst.
There is one difference between the US and Japan. Japan had a huge export economy that was kept afloat for a long time out of the credit expansion in the US. Once that credit expansion ceased, exports in Japan collapsed close to 50%. The same happened in Germany, another country that had a rough 1990's. Countries have not been able to print credit for long and survive, which is about what surplus government spending amounts to. There are plenty of theories, but there is only one truth and the truth is the world is in for a long period of credit liquidation.
In the meantime, if you own stock, enjoy the rally. It could end tomorrow or it could go to 10,000 and above 1000 on the Dow and SPX. I believe in the end it will be compared to the rally that followed the 1929 crash. Many were looking for a crash, but I don't know what you call a move from roughly 11,000 to 8,000 in a matter of day if it is not a crash?
The latest story is pending home sales have gone up. What is a pending sale? I spent a few years in real estate and I recall a pending sale is one that is under contract, but hasn't closed. From what I have been told by a sister that is a mortgage broker is that the staffs at the mortgage wholesales like Well Fargo, Chase, Citi and others have been cut so much that underwriting times are weeks now instead of hours as they were. This means there isn't any buying a home today and getting it closed in 3 days, which is Friday, but instead maybe 2 or 3 weeks. There is a mile of difference between preapproval of a mortgage and a closable loan package, which is necessary to have a closing. Thus saying there are more pending sales now is like saying there is more water because the river has been dammed. There is no more water coming down the river until is starts spilling over the spillway. In this sense, if you don't follow me, it is quite likely pending sales would go up if another week is added to the typical transaction.
There are other things that make a recovery in housing a lie. For one, barebottom sales in foreclosure aren't normal sales in a market. They could very well be the area that marks the market price of housing when all is said and done. Also, 4.5 million sales on an annual pace is hardly a housing bust, but instead a pre-bubble record. Thus we have seen a market go bust while rampant speculation has continued. There is more. The Fed and the government have manufactured a mortgage rate that is probably 1.5% below that the market would normally settle at. Also, there is the recent massive tax credit given first time homebuyers. Credit, under historical terms, isn't tight. It is probably still easier than it was in the 1980's here.
Next, we get into autos. I would guess that if autos get back to a 12 million to 14 million level, this is going to be called a boom. Thus a bust level of auto sales is a boom while a boom level of housing sales is a bust. How many thousands of dollars of US subsidy are we going to see per unit in the auto industry in order that Obama keep one of his pets, the UAW, in business? You can bet it will be enough that to pull the plug on this operation is going to be a big blow.
Then we have the banks. Has there ever been a bigger smokescreen in history? The US economy will be irrepairably ruined when this fiasco is done. Charlie Munger of Berkshire Hathaway fame has called for the end of credit default swaps. I wonder how we ever begin to float enough credit to keep the world afloat without the risk sharing added with default swaps, which are really nothing more than insurance, like PMI insurance or bond insurance for municipals. Who is to say that the depression didn't start in 2000 because of these instruments?
There is much more about the banks. For one, all the money the tax payers have given the banks is now owed back to the banks. Capital equals bonds and t-bills. It will never be extinguished. There is more, as they have done away with mark to market accounting. Plus it is plain to all that pay any attention that the big NY banks and Wall Street firms openly flaunt the capacity to manipulate the markets. Look at GE, a near bank riding a AA rating while being carried on lifesupport by the Fed? The whole thing is a farce and the ones that know it the best are the banks, who want nothing to do with other banks paper.
This is a different recession or depression or whatever one likes to call it. The game collapsed on its own. Few realize the long side speculation that has gone on all the way down. Sales of existing homes have never fallen below what were previous records. The price of oil is driven up with every rumor there might be a recovery, even though supplies are near 20 year records and growing. Copper is beyond $2 a pound, likely driven to that level by Chinese hoarding in light of the mechanizations of the Fed and the US government deficits. We are not looking at a demand shut down collapse, but an oversupply collapse where much of the oversupply is still subject to speculation.
There is not a lot being done for the reduction of debt. The US government has instead guaranteed the repayment of trillions of dollars that otherwise would be in default in markets that would be otherwise totally insolvent. Exports in Asia have collapsed, yet we are told every day how good these economies which depend on exports to run are doing and how they will lead the recovery. They aren't leading much of anything and if the US government didn't have the power it still possesses, I highly doubt they would be functioning. This is a collapse of the capacity to service debt along with a misalignment of assets and liabilities in the area of financial intermediation. Bank loans need bank credit to be paid and the credit represented by deposits rests in the hand of those that don't owe. At the same time, fed policy literally forces some to speculate to earn anything on their savings.
There are 2 avenues that we face. One is a slight recovery followed by the second dip of a recession. I think this is a manner of lying that we had a recovery, aka 1980, when the perception we were falling into a recession was interupted by some cloudy statistics. I don't buy the idea that 1980 was a double dip recession, but instead an easing of a Fed induced slowdown for political purposes. This wasn't a Fed induced slowdown as was 1980. This was a collapse.
The great secret is there aren't any Asian miracles. There are only excessive US credit expansions that Asian use to expand their own economies. US credit expansions have been inflation of home prices along with equity extraction for the past 40 years. The equity extractions are a done deal and there really isn't anything to drive demand in the US now with much of the excess equity gone. Absent a new equity driven recovery, we are to languish, much as the Japanese did once their real estate bubble burst.
There is one difference between the US and Japan. Japan had a huge export economy that was kept afloat for a long time out of the credit expansion in the US. Once that credit expansion ceased, exports in Japan collapsed close to 50%. The same happened in Germany, another country that had a rough 1990's. Countries have not been able to print credit for long and survive, which is about what surplus government spending amounts to. There are plenty of theories, but there is only one truth and the truth is the world is in for a long period of credit liquidation.
In the meantime, if you own stock, enjoy the rally. It could end tomorrow or it could go to 10,000 and above 1000 on the Dow and SPX. I believe in the end it will be compared to the rally that followed the 1929 crash. Many were looking for a crash, but I don't know what you call a move from roughly 11,000 to 8,000 in a matter of day if it is not a crash?
Monday, February 23, 2009
Not Capitulation, DEFLATION
It is not the bottom Fred. There isn't any capitulation because there isn't any money. It doesn't occur to you guys that there isn't any money on the sidelines. At least not the expanding amount of money that is needed to inflate asset bubbles. We ripped a hole in the last bottom today. The problem is that the players are all in and those that stayed in are now watching their surplus retirement go away. I tried to talk some guys into selling out when it rebounded in October, telling them it was going to be their last chance. Look at the history of depression markets and deflation markets. [b]THE HALFWAY POINT BECOMES THE TOP FOR AROUND 20 YEARS[b]. Take a look if you don't believe me. 1937, the Dow made the 50% point then it sunk back into the abyss. You have to remember that FDR had the mechanism at his disposal of devaluing gold by decree then and the changing of the money. We are beyond the last change unless you want to consider wholesale printing without the acquisition of assets, which would totally deflate the system through the abandonment of the dollar around the world. Once money becomes worth less than the ink on some of the bills, it ceases to be a money supply. You can't defeat deflation in this manner, only destroy what is left of the economy. But, back to the market. We didn't get back to the 1/2 way point until the 1950's after that. If you look at Japan, it is now at a new low. It hit the 1/2 way point a couple of times in the mid and late 1990's. The second time actually caused a Super Cycle Bear like Robert Prechter to consider the Japan bear over while the US bear was beginning. At least that is what I recall reading. In any case, we are at a low after 19 years and it is 1/3 the 1/2 way point almost. You are looking at the top here.
It doesn't occur to anyone in bull land that the entire market of the past 20 years was one inflationary fiasco, built on an almost impossible level of debt, created in a time when the banking system was based totally on debt and the reserve currency of the world had created such a money supply that the entire world could participate. This game was up in 2000. In 2000, the US stock market hit a valuation of roughly 200% of GDP. Never had a US market reached over 80% of GDP. The US market was almost priced high enough to encompass what the entire world market should have been worth. But, we had bubbles in China and Europe as well. The housing bubble was the only thing that put the extra 7 years on that boom. As much as some people would like to blame the 2000's housing bubble, it saved us from collapse then. In fact, it was the actions of FNM and FRE in the 1990's that created the entire game, issuing high powered money in sums never imagined before. Go back and check if you don't believe me because I have been reading about this game for 9 years now and nothing about this is a surprise to me. FNM and FRE created this mess and you see the politicians all the time try to sweep this away. The US government is 20% of GDP and we had a stock market increase a full 100% against GDP in the 1990's. This meant the US government took in an entire years extra income out of the bubble. That is why it appeared we were going to have surpluses as far as the eye could see, because they projected the trend to continue and trends like this can't continue.
The problem is debt and the only solution is more debt. The reason Japan hasn't ever recovered is because their government debt merely replaced their private debt and the assets deflated all the same, meaning the private side can't inflate on its assets. We are about to see what a real depression is like in Japan as there is now a deflated US bubble as well. There is a lot of play on a China rebound now. There are a lot of Chinese assets that need to be liquidated so they need to interest a few fools into buying some of them. It really doesn't matter that maybe they only unload an excess $50 to $100 billion. That amount of money beats zero and is as much as any corporation in the world is going to earn over the next 5 years, unlike the previous 5. Remember, Citi was the most profitable company in the world in the early part of this decade.
The measurement for this decline is sub 5000 this time. It won't be the last, as this is going to be an extended wave that goes on another year and a half. We are only 16 months into something I believe is going to last around 34 months. And, the more debt they create trying to stop this, the longer this mess is going to last. It is clear that we are going back to gold and silver because people are going to have to find anything they can to exchange between themselves and the paper money is going to consume itself.
The best thing that could happen would be that the government help those that go bust to the point they lose their entire support to survive and liquidate the entire mess. Cash exchanged for assets to liquidate debt no longer exists and the loss is then taken. Not only is the money supply too large as it presents an unextinguishable liability as long as they try to preserve it, standing in the way prevents the wiping out of the bad debt which prevents the economy from beginning anew.
My point is this is an unwiding of what created the bull in the first place. This isn't a lack of confidence, but a mathematical equation reversing itself out of natural limitations. As such, we have a downtrend that will continue. There hasn't been a steady downtrend like this since 1930-1932, which should tell you something. It takes effective credit expansion to push markets upward and we are in the midst of a contraction that no one can do much about. The system is a black hole and it is going to consume every extra dime thrown into it.
It doesn't occur to anyone in bull land that the entire market of the past 20 years was one inflationary fiasco, built on an almost impossible level of debt, created in a time when the banking system was based totally on debt and the reserve currency of the world had created such a money supply that the entire world could participate. This game was up in 2000. In 2000, the US stock market hit a valuation of roughly 200% of GDP. Never had a US market reached over 80% of GDP. The US market was almost priced high enough to encompass what the entire world market should have been worth. But, we had bubbles in China and Europe as well. The housing bubble was the only thing that put the extra 7 years on that boom. As much as some people would like to blame the 2000's housing bubble, it saved us from collapse then. In fact, it was the actions of FNM and FRE in the 1990's that created the entire game, issuing high powered money in sums never imagined before. Go back and check if you don't believe me because I have been reading about this game for 9 years now and nothing about this is a surprise to me. FNM and FRE created this mess and you see the politicians all the time try to sweep this away. The US government is 20% of GDP and we had a stock market increase a full 100% against GDP in the 1990's. This meant the US government took in an entire years extra income out of the bubble. That is why it appeared we were going to have surpluses as far as the eye could see, because they projected the trend to continue and trends like this can't continue.
The problem is debt and the only solution is more debt. The reason Japan hasn't ever recovered is because their government debt merely replaced their private debt and the assets deflated all the same, meaning the private side can't inflate on its assets. We are about to see what a real depression is like in Japan as there is now a deflated US bubble as well. There is a lot of play on a China rebound now. There are a lot of Chinese assets that need to be liquidated so they need to interest a few fools into buying some of them. It really doesn't matter that maybe they only unload an excess $50 to $100 billion. That amount of money beats zero and is as much as any corporation in the world is going to earn over the next 5 years, unlike the previous 5. Remember, Citi was the most profitable company in the world in the early part of this decade.
The measurement for this decline is sub 5000 this time. It won't be the last, as this is going to be an extended wave that goes on another year and a half. We are only 16 months into something I believe is going to last around 34 months. And, the more debt they create trying to stop this, the longer this mess is going to last. It is clear that we are going back to gold and silver because people are going to have to find anything they can to exchange between themselves and the paper money is going to consume itself.
The best thing that could happen would be that the government help those that go bust to the point they lose their entire support to survive and liquidate the entire mess. Cash exchanged for assets to liquidate debt no longer exists and the loss is then taken. Not only is the money supply too large as it presents an unextinguishable liability as long as they try to preserve it, standing in the way prevents the wiping out of the bad debt which prevents the economy from beginning anew.
My point is this is an unwiding of what created the bull in the first place. This isn't a lack of confidence, but a mathematical equation reversing itself out of natural limitations. As such, we have a downtrend that will continue. There hasn't been a steady downtrend like this since 1930-1932, which should tell you something. It takes effective credit expansion to push markets upward and we are in the midst of a contraction that no one can do much about. The system is a black hole and it is going to consume every extra dime thrown into it.
Sunday, February 22, 2009
A Trail of Coins in the Fusebox
I wrote this as a comment in response to an article about the market on the Washington Post website. There was a lot of finger pointing at Bush and Obama, so I thought I would put in my 2 cents.
I see a lot of discussion here from a lot of people who are clueless as to what is going on. The US economy has been in a bubble since at least 1994. I would have to point to Volker for keeping rates too high, requiring excessive credit creation to keep the economy from collapsing in the 1980's and creating too much cash in depositors accounts. But, then again, maybe it was Nixon in the 1970's and Johnson in the 1960's. Or Bush in the late 80's, clinton in the 1990's along with Robert GS, citi Rubin and the balancing act of Bush in the 2000's. The 1929 and 1966 markets peaked at around 80% of GDP. The 2000 US stock market peaked at 200% of GDP, a bubble more than 2 times larger than any in US history. It took a lot of Greenspan to patch that bubble and blow a new on in US real estate. Bubbles aren't any fun when you are a politician, as millions lose money when they break, after going through the euphoria of thinking they are going to be rich.
What causes bubble? An imbalance of debtors and creditors and a system that feeds the imbalance until it collapses. Banks create almost all the stuff we call money in this world and they create it by lending it out of thin air. There isn't any real money in banks, only balance sheet debits and credits for which they can get some currency and coins from the treasury or the Fed. Once the debits become impaired, the credits cannot be satisfied and the capital position of banking deteriorates. It is a flaw in the system of banking that bites the economy every 60 to 80 years and politicians take credit and blame for the actions created out of credit expansions and collapses. This is not a Republican or Democratic problem, but a part of nature as old as the invention of money. You can read about it in the book of Genesis and the laws of Moses.
There seems to be a delusion that Bush caused this mess. It was a problem in 2000 and it was probably a brewing problem in 1992 as there was so much new spending power unleashed once the Volker rates of the 1980's were finally lowered to avoid collapse. Robert Rubin too actions to keep a boom going that probably should have been allowed to cool. I recall Greenspan being asked about the stock market in 1998 by a Congressman and his response was things like this usually end badly. There was not a peep out of the press about what he said and the market mavens spun his words to mean something good and the market roared on.
America thinks there is a free lunch. FDR and HST set up a system at the end of WW II called Bretton Woods. In this system the dollar was made the reserve currency, the medium of exchange. Without this arrangement, the US would have collapsed in the 1970's, but other countries were already stuck with the dollars. There was no means of enforcing the balancing of trade, thus what we spent was immediately loaned back to the US system. The result was double money around the world, collateral for foreign money systems and loans to continue US spending. The FNMA and FHLMC systems were securitized and the energized by the US Congress to loan to every risk out there. Do some searches on the net to see the Democratic Party Congressmen shooting down every effort to rein in this excessive lending. I have been reading about the moral hazard posed by FNMA and FHLMC since 2000. Some people believe that if something doesn't fall apart immediately when it is pointed out, that the guy that points it out is crazy, but the ball for this mess has been rolling for a long time and the world has been financed out of US home equity. The inflation of home equity is a done deal in the US. The lending capacity of the American banks is broken and the rest of the world has immediately followed, as it too is addicted to US debt. Obama is going to fail just like Bush appeared to fail. Minskey said the Great Depression was caused by too many coins in the fuse box and starting with Robert Rubin and going forward to Obama and Geithner, we are seeing more put in every day. The wiring is burned up and the economy is going to burn down for awhile. The banks are all broke save a few small ones and as much as it is a short term solution, lending more money is going to make the longer term worse.
I see a lot of discussion here from a lot of people who are clueless as to what is going on. The US economy has been in a bubble since at least 1994. I would have to point to Volker for keeping rates too high, requiring excessive credit creation to keep the economy from collapsing in the 1980's and creating too much cash in depositors accounts. But, then again, maybe it was Nixon in the 1970's and Johnson in the 1960's. Or Bush in the late 80's, clinton in the 1990's along with Robert GS, citi Rubin and the balancing act of Bush in the 2000's. The 1929 and 1966 markets peaked at around 80% of GDP. The 2000 US stock market peaked at 200% of GDP, a bubble more than 2 times larger than any in US history. It took a lot of Greenspan to patch that bubble and blow a new on in US real estate. Bubbles aren't any fun when you are a politician, as millions lose money when they break, after going through the euphoria of thinking they are going to be rich.
What causes bubble? An imbalance of debtors and creditors and a system that feeds the imbalance until it collapses. Banks create almost all the stuff we call money in this world and they create it by lending it out of thin air. There isn't any real money in banks, only balance sheet debits and credits for which they can get some currency and coins from the treasury or the Fed. Once the debits become impaired, the credits cannot be satisfied and the capital position of banking deteriorates. It is a flaw in the system of banking that bites the economy every 60 to 80 years and politicians take credit and blame for the actions created out of credit expansions and collapses. This is not a Republican or Democratic problem, but a part of nature as old as the invention of money. You can read about it in the book of Genesis and the laws of Moses.
There seems to be a delusion that Bush caused this mess. It was a problem in 2000 and it was probably a brewing problem in 1992 as there was so much new spending power unleashed once the Volker rates of the 1980's were finally lowered to avoid collapse. Robert Rubin too actions to keep a boom going that probably should have been allowed to cool. I recall Greenspan being asked about the stock market in 1998 by a Congressman and his response was things like this usually end badly. There was not a peep out of the press about what he said and the market mavens spun his words to mean something good and the market roared on.
America thinks there is a free lunch. FDR and HST set up a system at the end of WW II called Bretton Woods. In this system the dollar was made the reserve currency, the medium of exchange. Without this arrangement, the US would have collapsed in the 1970's, but other countries were already stuck with the dollars. There was no means of enforcing the balancing of trade, thus what we spent was immediately loaned back to the US system. The result was double money around the world, collateral for foreign money systems and loans to continue US spending. The FNMA and FHLMC systems were securitized and the energized by the US Congress to loan to every risk out there. Do some searches on the net to see the Democratic Party Congressmen shooting down every effort to rein in this excessive lending. I have been reading about the moral hazard posed by FNMA and FHLMC since 2000. Some people believe that if something doesn't fall apart immediately when it is pointed out, that the guy that points it out is crazy, but the ball for this mess has been rolling for a long time and the world has been financed out of US home equity. The inflation of home equity is a done deal in the US. The lending capacity of the American banks is broken and the rest of the world has immediately followed, as it too is addicted to US debt. Obama is going to fail just like Bush appeared to fail. Minskey said the Great Depression was caused by too many coins in the fuse box and starting with Robert Rubin and going forward to Obama and Geithner, we are seeing more put in every day. The wiring is burned up and the economy is going to burn down for awhile. The banks are all broke save a few small ones and as much as it is a short term solution, lending more money is going to make the longer term worse.
Thursday, February 19, 2009
When is it going to sink in again?
This was posted on a website. The date was May 8, 2008. http://contrarianadvisor.blogspot.com/2008_05_01_archive.html
That we are in a real mess? I think we are about to see a real crisis, the quasi public banks like the Fed, FHLB and the GSE's going into crisis. If you read the agreements behind this auction stuff, the Fed has the right to require repurchase or to sell the stuff any time they get ready. Since the books only have to balanced overnight, this stuff is actually repoed daily. What happens if the bank that has the stuff can't perform and the Fed is suddenly stuck with some illiquid stuff? Well, I would venture the taxpayer gets the bill until the Fed earns enough money to pay back the government. The government, probably in return for the New Deal owns 100% of the profits of the Fed, save the preferred stock dividend. The Federal Home Loan banks are somewhat different and I don't know how they work. It seems though that they might be somewhat like FNMA and FHLMC, except I don't exactly know how. I do know I read recently the one in Chicago and the one in Dallas were discussing a merger, which tells me they aren't exactly public entities any more. I am wondering what happens to the bank that has propped up CFC? I don't think CFC is going away as a problem and it will be bigger than Bear. There are significant problems that have nothing but a band-aid on them. The auction loans are one of them, as they are nothing more than a method of keeping insolvents solvent until hope and time bail them out. They are clearly hoping that bad paper can in fact rise from the grave and walk on water, across the Pacific to some sucker fund in China. Surely the world isn't so stupid as to make more deals for Wall Street junk? One thing that I keep bringing up that they keep bringing someone to the table on CNBC is that credit problems like these cause economic problems and I am not talking about cyclical recessions. FNM needs another $6 billion. How much is Merrill going to need the next go around? When is Goldman going to come clean with the losses out of their $60 billion in level 3 assets? When is Wells Fargo going to come clean with its mortgage losses, as it is next to impossible for me to believe that everyone in that business made across the board bad loans except them? We are just seeing the tip of the iceberg on the prime mortgage front of losses from mortgages. Truth is the good stuff was junk and the junk was basically akin to making loans to heroin junkies. There is a supply problem in housing. Nothing is going to make this go away except a hell of a lot of well to do population. Wetbacks from Mexico aren't going to float the housing market at todays prices or even prices 50% of todays prices. It is clear the consumer credit game isn't going to be the same and corporate profits are fueled with consumer bucks. Consumer spending isn't 70% of the economy, it is all the economy either directly or indirectly. Same for the rest of the world. 5% of the US economy is somewhere around $600 billion depending on whose figures you believe. This is about what is going to be missing out of home equity extraction due to refinance or sale the next few years. It is the entire trade deficit, something that has fed the rest of the world with money to create a boom. But, that money is now owed, not free to circulate and there has to be some new real credit. Credit that was being created by virtue of a myriad of derivatives that no longer can be marketed. These CDO losses I can assure you will be more than subprime mortgages by the time they are done.The boom was perpetuated by subprime financing. The other side of this game is the long term investment projects are in full swing, but at some point it is going to be clear that the money was loaned at too low a rate, according to Mises, and the game is going to fall apart. The game is being played in China, but it is being financed by American consumer credit. It won't be long before they suddenly realize they don't have money to finish what they started and the minerals game comes back to earth. They aren't breaking their necks to keep the American financials afloat because they like losing money, but because they need the fresh money created in the US. There are some statistics that tell us the game is coming back. I don't think the consumer balance sheet and some of the more speculative ventures are going to work. I don't think gasoline is the drag it is said to be, but more the idea that the consumer is out of credit and it is going to be that much more difficult to balance the trade balance. Ditto China and Asia, which could be sending more money to the US in trade, but having to send it to OPEC instead. One thing I read a long time ago was that 80% of GDP was the real valuation line for the entire stock market capitalization and we are still way above that, probably in the 140% range. 3% was the dividend rate that capped markets for the past century, but not now. It is clear that only financial bubbles prop markets at these rates. The bulls like to spout a lot of statistics, but few of them are true. The SPX reached it old top solely because stock buybacks reduce the divisor, while dividends don't. Had they back adjusted for the roughly $200 billion to $300 billion shortfall in dividends for the past 10 years, it would have clearly shrunk. Stock buybacks do little for the holder of stock other than increase his proportion of ownership only so far as the stock remains out of the market. It is what used to be called for tax purposes, a partial liquidation. The Dow is up only by virtue of some by chance almost perfect portfolio management. If we reversed the Dow splits and then allowed for the portfolio changes, we would have a hard time having a real new high in the Dow from 2000. There was 60 points of losses saved in the split of GE alone, not to mention another 100 roughly out of the split of INTC. Prior to the last inclusion of new companies, I think BAC and Chevron (CVT?) were put in place of MO and HON, just to make the index match the split adjusted points of 1/14/00, it took 12,610 to reach a real new high. Had they left these lost points in the index, the Dow would be even another 1000 points lower. Quite interesting, MO put about 500 points on the Dow, then they threw it out before it could be bashed apart. The Nasdaq also shows the bear never really ended, only making 50% of its prior high while the big cap NDX, never got close to 50% of its old high.I think this is a speculators market, which means that not one thing I have written means a damn thing, not even the news going forward. What it does mean is that buy and hold to make money in stocks is dead. There is no doubt until the true valuations are back in stocks in the market in general, holding for long term real gains is not going to work for a good while and faces a highly risky near future. No one with a brain would hold any portfolio of stocks, unless they knew how to rotate around losses.
That we are in a real mess? I think we are about to see a real crisis, the quasi public banks like the Fed, FHLB and the GSE's going into crisis. If you read the agreements behind this auction stuff, the Fed has the right to require repurchase or to sell the stuff any time they get ready. Since the books only have to balanced overnight, this stuff is actually repoed daily. What happens if the bank that has the stuff can't perform and the Fed is suddenly stuck with some illiquid stuff? Well, I would venture the taxpayer gets the bill until the Fed earns enough money to pay back the government. The government, probably in return for the New Deal owns 100% of the profits of the Fed, save the preferred stock dividend. The Federal Home Loan banks are somewhat different and I don't know how they work. It seems though that they might be somewhat like FNMA and FHLMC, except I don't exactly know how. I do know I read recently the one in Chicago and the one in Dallas were discussing a merger, which tells me they aren't exactly public entities any more. I am wondering what happens to the bank that has propped up CFC? I don't think CFC is going away as a problem and it will be bigger than Bear. There are significant problems that have nothing but a band-aid on them. The auction loans are one of them, as they are nothing more than a method of keeping insolvents solvent until hope and time bail them out. They are clearly hoping that bad paper can in fact rise from the grave and walk on water, across the Pacific to some sucker fund in China. Surely the world isn't so stupid as to make more deals for Wall Street junk? One thing that I keep bringing up that they keep bringing someone to the table on CNBC is that credit problems like these cause economic problems and I am not talking about cyclical recessions. FNM needs another $6 billion. How much is Merrill going to need the next go around? When is Goldman going to come clean with the losses out of their $60 billion in level 3 assets? When is Wells Fargo going to come clean with its mortgage losses, as it is next to impossible for me to believe that everyone in that business made across the board bad loans except them? We are just seeing the tip of the iceberg on the prime mortgage front of losses from mortgages. Truth is the good stuff was junk and the junk was basically akin to making loans to heroin junkies. There is a supply problem in housing. Nothing is going to make this go away except a hell of a lot of well to do population. Wetbacks from Mexico aren't going to float the housing market at todays prices or even prices 50% of todays prices. It is clear the consumer credit game isn't going to be the same and corporate profits are fueled with consumer bucks. Consumer spending isn't 70% of the economy, it is all the economy either directly or indirectly. Same for the rest of the world. 5% of the US economy is somewhere around $600 billion depending on whose figures you believe. This is about what is going to be missing out of home equity extraction due to refinance or sale the next few years. It is the entire trade deficit, something that has fed the rest of the world with money to create a boom. But, that money is now owed, not free to circulate and there has to be some new real credit. Credit that was being created by virtue of a myriad of derivatives that no longer can be marketed. These CDO losses I can assure you will be more than subprime mortgages by the time they are done.The boom was perpetuated by subprime financing. The other side of this game is the long term investment projects are in full swing, but at some point it is going to be clear that the money was loaned at too low a rate, according to Mises, and the game is going to fall apart. The game is being played in China, but it is being financed by American consumer credit. It won't be long before they suddenly realize they don't have money to finish what they started and the minerals game comes back to earth. They aren't breaking their necks to keep the American financials afloat because they like losing money, but because they need the fresh money created in the US. There are some statistics that tell us the game is coming back. I don't think the consumer balance sheet and some of the more speculative ventures are going to work. I don't think gasoline is the drag it is said to be, but more the idea that the consumer is out of credit and it is going to be that much more difficult to balance the trade balance. Ditto China and Asia, which could be sending more money to the US in trade, but having to send it to OPEC instead. One thing I read a long time ago was that 80% of GDP was the real valuation line for the entire stock market capitalization and we are still way above that, probably in the 140% range. 3% was the dividend rate that capped markets for the past century, but not now. It is clear that only financial bubbles prop markets at these rates. The bulls like to spout a lot of statistics, but few of them are true. The SPX reached it old top solely because stock buybacks reduce the divisor, while dividends don't. Had they back adjusted for the roughly $200 billion to $300 billion shortfall in dividends for the past 10 years, it would have clearly shrunk. Stock buybacks do little for the holder of stock other than increase his proportion of ownership only so far as the stock remains out of the market. It is what used to be called for tax purposes, a partial liquidation. The Dow is up only by virtue of some by chance almost perfect portfolio management. If we reversed the Dow splits and then allowed for the portfolio changes, we would have a hard time having a real new high in the Dow from 2000. There was 60 points of losses saved in the split of GE alone, not to mention another 100 roughly out of the split of INTC. Prior to the last inclusion of new companies, I think BAC and Chevron (CVT?) were put in place of MO and HON, just to make the index match the split adjusted points of 1/14/00, it took 12,610 to reach a real new high. Had they left these lost points in the index, the Dow would be even another 1000 points lower. Quite interesting, MO put about 500 points on the Dow, then they threw it out before it could be bashed apart. The Nasdaq also shows the bear never really ended, only making 50% of its prior high while the big cap NDX, never got close to 50% of its old high.I think this is a speculators market, which means that not one thing I have written means a damn thing, not even the news going forward. What it does mean is that buy and hold to make money in stocks is dead. There is no doubt until the true valuations are back in stocks in the market in general, holding for long term real gains is not going to work for a good while and faces a highly risky near future. No one with a brain would hold any portfolio of stocks, unless they knew how to rotate around losses.
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