Petition to remove June from the Calendar
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"Maybe this time, it is different." Given the numerous times this statement has been exclaimed in the past and proven wrong, it could be considered "contrarian" to say it now. Count me a "contrarian", then. I personally see no areas of strength, in our economy, that might provide a base with which to get out of this stagflation: A weak dollar, excessive (government and personal) debt, and a strong sense of entitlement among the masses. Any attempts to stengthen the dollar and/or reduce debt will put the kibosh on any recovery, as well as the political careers of numerous hacks. So, I don't see the light at the end of the tunnel. As for my clients, I've been allocating increasing amounts to foreign stocks with little or no relationship to the U.S. economy. However, to do so all at once, would bring their wrath down upon my head. So, I've been doing it little by little, as they come to realize that I'm right. However, I wish someone had the numbers to prove me wrong. To be sure, many of responses countering my post will consist of platitudes; such as, We're the US!, We're the world's reserve currency!, etc. Remove the obstacles of government taxes, debt, regulation, etc. and I'd accept these platitudes. However, I don't see these obstacles going away anytime soon. I believe in the empowerment of individuals to take matters into their own hands and make a decent life for themselves. However, given the obstacles in their way, I don't see a way out. Numbers beat platitudes, for now....My Sunday paper had oodles of negative stories (foreclosures will skyrocket, what is wrong with the market, gas, etc.). I am of the belief that the contrarian indicators are all around and we are due for a bounce, if even a dead cat. Months that are down almost double digit are usually not followed by the same. That being said, I am holding on to my hedges for the time being!
I guesss the contrarian opinion to your opinion is that all of what you said is being factored into the market. I remember in the summer of 02 when all the stuff was hitting the fan, it felt similar to how it feels right now. Maybe it’s something about the summer months or something. I would say if you are so negative on the US, how the heck do you think the rest of the world is going to grow? You get zero benefit from being “diversified” overseas right now.
Currently, approximately 60-70% of our total national debt is held by foreigners. "They own more of us, than we do." - to quote Warren Buffett. As an analogy: pretend you're a grocer and you sell me groceries and in return I give you IOU's. I'm one of your best customers. One day, you sit down and figure up all the IOU's I've given you. The total shocks you. I could hand you my paycheck every week for an entire year and still could not pay what I owe you. Now, you have a decision to make; do you continue to sell me groceries for IOU's or do you stop until I pay my debt? Sure, if you stop selling me groceries, sales will drop and you might have to lay-off some employees. But, at least, you're now getting paid with real money, instead of IOU's. Foreigners have lent us cheap money (by buying treasuries) and in return, we've bought their products. We don't have the capacity to pay them back. We could levy a 100% tax on every American and we still could not pay our debt. Given this fact, as a foreigner, do you continue to lend U.S. consumers money and, in turn, have these consumers buy your products? Tell me, how long do you think this will continue? Remember subprime? LTCM? Internet stocks? "Everything that can end, will end." Again, keep in mind, that much of the U.S. part of the world economic growth was built on debt. The easy credit that foreigners have given us, by virtue of owning so much of our debt, is going away. Bottomline, when it's all said and done, the foreign economies will do just fine without the U.S.I guesss the contrarian opinion to your opinion is that all of what you said is being factored into the market. I remember in the summer of 02 when all the stuff was hitting the fan, it felt similar to how it feels right now. Maybe it’s something about the summer months or something. I would say if you are so negative on the US, how the heck do you think the rest of the world is going to grow? You get zero benefit from being “diversified” overseas right now.
[quote=doberman]
As for my clients, I've been allocating increasing amounts to foreign stocks with little or no relationship to the U.S. economy. However, to do so all at once, would bring their wrath down upon my head. So, I've been doing it little by little, as they come to realize that I'm right. [/quote] I have a couple instances that I wish I had eased into this year, but didn't. I'm sure I'm not the only one. I know you don't see a bounce coming Dobe, but it would be nice so I can reallocate some funds. I really like the idea of an absolute return fund here. I've already been using plenty of Ivy starting over a year or two ago.“Bounces” will come and go. And another bounce may come along to give you that opportunity to reallocate. Bottomline though, what is the overall health of our economy?
Another analogy: It's expected that Tiger Woods would be a strong favorite in any golf tournament. Sometimes he'd win, sometimes he wouldn't. Fundamentally, Tiger was the same. However, now he's having knee surgery. No one in the history of the game, who has ever had such surgery has recovered to win a major. Fundamentally, he's different now and not in a good way. Our economy is fundamentally different, now. But instead of surgery, we're still playing on 2 bad knees (high debt and a falling dollar). Now, our back is starting to bother us (high gas prices). (Sorry for the analogy overload, but I've been focusing on using more analogies to explain my point to prospects. Sometimes it sounds good, but when rereading it, eh, not so much..)Actually as someone that has been a bear for awhile, I find these posts as a positive. Once realistic expectations are in the market, we can rebuild. Until then people’s hopes will be dashed again and again. Get things in line, move forward. That is the thing that isn’t different this time. We will recover, but not until people’s expectations become realistic. Does anyone really believe Citibank will go bankrupt? Or even GM for that matter? If that were to happen, then we have a serious problem because the US is not in the position to bail either one out. Until then, it is just fear driving the markets. I am not saying either of those companies have hit bottom, I don’t know, but I do know that the fear of what is still out there is currently beating the reality of what is out there.
Yes we have very severe problems right now, yes people are scared and hurting, but as many punches, bombs, and bullets as our markets have taken, we are still standing. The Dow is just reaching bear market numbers and put in perspective of the damage that has been done to our financial system, that "ain't bad".Ice- As your rant suggests, yes we will move on. But people who have saved up $1MM-$2MM, are around 60 years old and are on the cusp of retiring, don’t want to be told they will have to cut back, possibly substantially in the beginning. In fact, they probably won’t even believe us.
From some of the clients I have in this position, they just want to be in CDs or bonds or something like that. If they do that, they won't have to worry much now, but their lifestyle might be drastically cut 20 years from now, if they even have enough money left. So they have to have a decent amount in the market. Right now, it's damned if you do, damned if you don't for these people.Does anyone know an easy site to track gallons consumed in the US (of oil, not beer after this month? I hear that consumption is down with oil at 143 and climbing but I don’t how to track.
[quote=new_indy] Actually as someone that has been a bear for awhile, I find these posts as a positive. Once realistic expectations are in the market, we can rebuild. Until then people’s hopes will be dashed again and again. Get things in line, move forward. That is the thing that isn’t different this time. We will recover, but not until people’s expectations become realistic. Does anyone really believe Citibank will go bankrupt? Or even GM for that matter? If that were to happen, then we have a serious problem because the US is not in the position to bail either one out. Until then, it is just fear driving the markets. I am not saying either of those companies have hit bottom, I don’t know, but I do know that the fear of what is still out there is currently beating the reality of what is out there.
Yes we have very severe problems right now, yes people are scared and hurting, but as many punches, bombs, and bullets as our markets have taken, we are still standing. The Dow is just reaching bear market numbers and put in perspective of the damage that has been done to our financial system, that “ain’t bad”.[/quote]
Actually, I would not bet AGAINST GM going bust. The Big 3 have some serious fundamental problems. SERIOUS. Citi, on the other hand, will be fine. They will write down billions and move on to doing the businesses they are good at. The problem with GM and the Big 3 is that, well, they’re not really good at anything. It was not some “bad bet” they made that they can recover from. These are just plain bad companies. Bad business plans, bloated, overpaid employees, bad products (argue all you want, perception is reality), WAY too many product lines, outdated factories, you name it. They are screwed.
Its unfortunate, I think that GM has really cleaned up their act. I dont recall the details, but I remember about a year ago, they got rid of their huge healthcare costs for retirees. The quality of their product is very competitive. Unfortunatley, it seems, its just too little too late. And they relied way too much on GMC Trucks and Cadillac (where the Escalade is the most profitable product), which are now completely not salable, with gas prices as they are.
I think they are done, and ditto for Ford. Citi will be fine, but i think in a different form. As much as they deny it, they are going to have to sell SB, they need th money, and the market demands it. They will go back to being a pure bank. Deposits and lending. As far as the markets - anybody see the coverr of Barrons this weekend? Headline: The Bear is Back!. With big picture of said animal with teeth showing. This is a very good sign, at least short term.I remember debating with others, on these boards, whether GM was a viable company, just 2 or 3 years ago. At that time, GMAC was the strongest of the 2 parts (mortgage & auto) and, as such, was considered to be the only thing keeping GM afloat. I fell on the side of GM’s ultimate demise; thus, never recommending any of their securities for investment…Surprise surprise, now both parts of the company are cr*p.
[quote=iceco1d][quote=pratoman]
They will go back to being a pure bank. Deposits and lending. [/quote] Gasp! Will they keep Primerica?!?!?! [/quote] Are you kidding Ice? Primerica? Thats the crown jewel of the firm!! Actually now that I;ve looked at my previous post, I withdraw it. Citi WILL be fine, and the WILL look a lot different a year or two from now, but they wont be just deposits and lending. They will still be in the Wealth Management business, in some way, although I am not convinced that they wont sell SB. If they keep Primerica though, thats a joke!!! But to say they will be just deposits and lending is a little too bold. Possible, but bold. My badAmway is obviously the better fit!They could sell Primerica to Waddell & Reed…or even Amway for that matter!
[quote=doberman]“Bounces” will come and go. And another bounce may come along to give you that opportunity to reallocate. Bottomline though, what is the overall health of our economy?
Another analogy: It's expected that Tiger Woods would be a strong favorite in any golf tournament. Sometimes he'd win, sometimes he wouldn't. Fundamentally, Tiger was the same. However, now he's having knee surgery. No one in the history of the game, who has ever had such surgery has recovered to win a major. Fundamentally, he's different now and not in a good way. Our economy is fundamentally different, now. But instead of surgery, we're still playing on 2 bad knees (high debt and a falling dollar). Now, our back is starting to bother us (high gas prices). (Sorry for the analogy overload, but I've been focusing on using more analogies to explain my point to prospects. Sometimes it sounds good, but when rereading it, eh, not so much..) [/quote] Just to nit pick, Tiger did have knee surgery before winning his last major, the U.S. Open. He was the guy limping all over the course saying "Jesus Rocco, cut me a frickin break!"Time out Dobi! I was one of those who debated GM/GMAC with you. At the time you were recommending prospects take steep loses in the bonds of these companies. With the benefit of 20/20 hindsight it appears to be a good call. And in a few cases it may be just that. However, there is this: in the interim between then and the summer of 07 the bonds of both these companies recovered significantly. In some cases the bonds recovered 100% of their lost value giving holders of these bonds a much more palatable exit point. Selling at the low, as you did, was a wrong call. And because the story is still unfolding, it may still be a wrong call. The fact is, you were wrong before you were right. It took the unknowable at the time subprime meltdown to knock GM/GMAC down again. In hindsight, good call? Only if you were looking to max your loses. Moving on, while i'm not recommending GM I'm not so ready to write them off. Essentially, from a cash burn POV, they've got to get through the next year or so until a recovery takes place. And they've got some big issues, mainly how to replace the cash cow SUV segment that is now a dead for good market. Buttt, as a long time trader of GM issues they've been here before. Round about 1990 they came within about $100 million of bankruptcy. They had something like 103 days of cash in the bank and that was only if noone bought lunch. Seriously, They have plenty of avenues for raising cash and borrowing their way out of this mess. As for investing in them ? Youbetcha! As soon as i see a turn in their biz.I remember debating with others, on these boards, whether GM was a viable company, just 2 or 3 years ago. At that time, GMAC was the strongest of the 2 parts (mortgage & auto) and, as such, was considered to be the only thing keeping GM afloat. I fell on the side of GM’s ultimate demise; thus, never recommending any of their securities for investment…Surprise surprise, now both parts of the company are cr*p.
I’m not saying GM is in good shape by any means. I am just saying the effect of GM going bankrupt would be more expensive and severe on the US economy that doing some propping up by the Feds. I also think they have a viable business and are on the right track. Stating that… I wouldn’t recommend anyone go out and buy the stock right now.
If the US Government really wanted to give the economy a boost, they would start upgrading goverment vehicles (to GM and Ford), dropping contracts on Boeing instead of foreign competitors, and upgrading our failing infrastructure. Those things would create jobs, save GM and Ford, and of course the jobs would boost the banks. These stupid checks they are talking about mailing out (yet again) are a drop in the bucket compared to the problems that exist.Amway is obviously the better fit![/quote] They could sell Primerica to WalMart. But it probably wont happen because WalMart wouldnt allow their brand to be diluted! Imagine, a Primerica broker in evey walmart, sort of like a SB broker in every citibank[quote=iceco1d]They could sell Primerica to Waddell & Reed…or even Amway for that matter!