NOT VERY CONFIDENT
the consumer confidence report was a rude awakening for many forecasters and economists. the latest reading was 64, down 14.8 points from january's 78.8 reading, a level not seen since october 1993. the present situation reading came in at 61.6 and the expectations reading came in at 65.6, both equally as bad, showing very large drops from january and reaching levels not seen for a very long time. reasons for the drop were easy to find after the fact and included lack of jobs, fear of war and terrorism and rising energy costs. so why was the drop so surprising and unexpected? the pundits had no explainations for why this wasnt forecasted but were quick to forgive the analysts for there lack of accuracy and even quicker to brush the report aside as a result of the looming war. once the shock wore off, almost every commentator and analyst used the traditional rebuttal of, "dont watch what they say, watch what they do" and the housing report held ample data for this theory as it hit another record level. thus, after a sharp sell-off, the market rallied strongly as traders/investors put their chips on the hope that "what they do" will be better than "what they said".
what will really be a shocker is if "they do what they said" and stop spending money like they have been. as has been widely reported, the consumer(that would be you and i) has been the pillar of strength during the past 2 1/2 years. we have collectively been buying new homes at a record pace, new cars at a record pace, furniture for our new homes, clothing, cd's, computers, cellphones, and anything else walmart sells at a discount. we've also been eating out like we dont have stoves in our new homes. if that continues it will be the first time in our country's history that the consumer hasnt curbed its spending habits during an economic slowdown and a war.
most people are optimists and look to the future with hope and excitement. yet, thats a bit harder to do with an orange terror alert and a new press conference everyday discussing the plans for war. shopping does ease some of the pain of our currnet situation, but at some point we will all have to pay for the stuff we have been buying, charging and getting for no money down with 0% financing. and since interest rates have been low for so long, we cannot get stimulated anymore with cheap money. so unless we get some new job growth and we resolve the war quickly, look for further weakness in confidence and possibly weakness in spending patterns.
its no surprise that confidence is so low. we have no money left and we are worried about losing our jobs. if that happens, how will we pay back the 0% money we borrowed?
have a grateful day!
larry
Wednesday, February 26, 2003
MORE RISK NOT LESS
there seems to be an overwhelming collective thought process suggesting that once the US begins the war on IRAQ (BOMBING/INVADING/OVERTHROWING) (which actually began a few months ago) the risks going forward will be deminished.
alot of this thought process is based on the "hope" that the war will be quick and decisive and as effective as the 1991 conflict results. i would contend that not only would the risk not be deminished but it would be GREATLY increased for the following reasons.
currently, with no hostilities and just political wrangling, there is much less risk of "unknown" events happening. once we start to 'officially' attack iraq, all the 'unknowns' that we fear come into play. i.e. destruction of oil wells, disruption of oil supply, chemical attack on US troops, scuds to nieghboring countries, terror attack retaliation in the US or on interests overseas, etc, etc, etc. by the way, these so called 'unknown' events are very known and somewhat ANTICIPATED and EXPECTED! but that will not alleviate there disasterous and scary effects.
in the last few days we have seen the market cave in upon the news of an explosion in staten island(just an industrial accident according to US investigators) and an oil well explosion in iraq(just another industrial accident according to the iraqis?). what will happen if and WHEN our troops get hit with chemicals? what will happen if saddam blows up an oil tanker or starts pumping oil into the persian gulf? what will happen if he lobs a scud at kuwait, saudi arabia, turkey, or g-d forbid ISRAEL (sharon stated clearly that the israeli military will retaliate if saddam attacks israel...and they wont wait for a UN resolution!). and what if something we are not prepared for happens?!? how will the market react then? how will the world react? i do not know the answers but it wont make the fears or risks go away.
my point is that once the WAR begins the risks we are all fearing will become much more likely. our leaders are warning us to be prepared for a long and difficult battle against terror and continue to warn us of attacks in the US. my sense is that we should heed the warnings and get prepared for lots of "unknowns" and a much more risky world.
have a grateful day!
larry
there seems to be an overwhelming collective thought process suggesting that once the US begins the war on IRAQ (BOMBING/INVADING/OVERTHROWING) (which actually began a few months ago) the risks going forward will be deminished.
alot of this thought process is based on the "hope" that the war will be quick and decisive and as effective as the 1991 conflict results. i would contend that not only would the risk not be deminished but it would be GREATLY increased for the following reasons.
currently, with no hostilities and just political wrangling, there is much less risk of "unknown" events happening. once we start to 'officially' attack iraq, all the 'unknowns' that we fear come into play. i.e. destruction of oil wells, disruption of oil supply, chemical attack on US troops, scuds to nieghboring countries, terror attack retaliation in the US or on interests overseas, etc, etc, etc. by the way, these so called 'unknown' events are very known and somewhat ANTICIPATED and EXPECTED! but that will not alleviate there disasterous and scary effects.
in the last few days we have seen the market cave in upon the news of an explosion in staten island(just an industrial accident according to US investigators) and an oil well explosion in iraq(just another industrial accident according to the iraqis?). what will happen if and WHEN our troops get hit with chemicals? what will happen if saddam blows up an oil tanker or starts pumping oil into the persian gulf? what will happen if he lobs a scud at kuwait, saudi arabia, turkey, or g-d forbid ISRAEL (sharon stated clearly that the israeli military will retaliate if saddam attacks israel...and they wont wait for a UN resolution!). and what if something we are not prepared for happens?!? how will the market react then? how will the world react? i do not know the answers but it wont make the fears or risks go away.
my point is that once the WAR begins the risks we are all fearing will become much more likely. our leaders are warning us to be prepared for a long and difficult battle against terror and continue to warn us of attacks in the US. my sense is that we should heed the warnings and get prepared for lots of "unknowns" and a much more risky world.
have a grateful day!
larry
Monday, February 24, 2003
COMING SOON...WAR RALLY
if you expect the stock market to rally when we go to war you are not alone. i have been wrestling with this theory, certainty according to some people, for some time now. more precisely, ever since president bush projected his intention of removing saddam from power, i have been concerned, as i am a bear, that the market will surge upon the commencement of bombing. that was about 4 months ago. and ever since then, all i hear is that as soon as we attack iraq and defeat saddam hussein, the economy will recover from the malaise and the stock market will rally strongly. so far, no war and just lots of talk and bickering between the 'free-world' about how or if we should take-out saddam.
today, the long awaited 2nd resolution was submitted to the u.n. for their consideration. regardless of their repsonse, we are going to invade iraq in the next 2-3 weeks. as a sideshow to our actions, saddam asks for a debate with president bush and says his missles are in compliance. france, germany and russia submitted another plan to continue inspecting and disarming iraq. and our troops continue to amass in the region around iraq planning for the imminent military action. get ready for the rally!
so counter intuitive is the war rally theory that it almost seems ridiculous. why would the market go up in value just as the risks get really serious? the common response is "thats what happened in 1991 when we started military actions in kuwait". my response, "so what"! this is not a matter of pushing an invading country out of a soveriegn country. this is an overthrow of a government and its leader who has done some pretty nasty things in the past. to think that he will just lay down his weapons and go away is niave and foolish. thus, when we invade with overwhelming force, my guess is that saddam will react in some crazy way and blame us for his actions. without full backing of the rest of the world, saddam will think he is justified in his defense/retaliation and we will look like war mongers and suffer very serious casualties to our soldiers and interests in the region or maybe even in the united states.
war rally. NO WAY! maybe some quick pop, but nothing worth investing good money in. in fact, maybe the war will ignite a huge sell-off. like a capitulation crash, where all the mutual fund hold-outs finally realize that their money is lost forever and having liquid cash to live out the rest of their lives is a better idea. thats what i think could be the result. and 1 more thing, since most people are waiting for the rally to come, the market will do what it always does and make most of the people wrong most of the time.
have a grateful day!
larry
if you expect the stock market to rally when we go to war you are not alone. i have been wrestling with this theory, certainty according to some people, for some time now. more precisely, ever since president bush projected his intention of removing saddam from power, i have been concerned, as i am a bear, that the market will surge upon the commencement of bombing. that was about 4 months ago. and ever since then, all i hear is that as soon as we attack iraq and defeat saddam hussein, the economy will recover from the malaise and the stock market will rally strongly. so far, no war and just lots of talk and bickering between the 'free-world' about how or if we should take-out saddam.
today, the long awaited 2nd resolution was submitted to the u.n. for their consideration. regardless of their repsonse, we are going to invade iraq in the next 2-3 weeks. as a sideshow to our actions, saddam asks for a debate with president bush and says his missles are in compliance. france, germany and russia submitted another plan to continue inspecting and disarming iraq. and our troops continue to amass in the region around iraq planning for the imminent military action. get ready for the rally!
so counter intuitive is the war rally theory that it almost seems ridiculous. why would the market go up in value just as the risks get really serious? the common response is "thats what happened in 1991 when we started military actions in kuwait". my response, "so what"! this is not a matter of pushing an invading country out of a soveriegn country. this is an overthrow of a government and its leader who has done some pretty nasty things in the past. to think that he will just lay down his weapons and go away is niave and foolish. thus, when we invade with overwhelming force, my guess is that saddam will react in some crazy way and blame us for his actions. without full backing of the rest of the world, saddam will think he is justified in his defense/retaliation and we will look like war mongers and suffer very serious casualties to our soldiers and interests in the region or maybe even in the united states.
war rally. NO WAY! maybe some quick pop, but nothing worth investing good money in. in fact, maybe the war will ignite a huge sell-off. like a capitulation crash, where all the mutual fund hold-outs finally realize that their money is lost forever and having liquid cash to live out the rest of their lives is a better idea. thats what i think could be the result. and 1 more thing, since most people are waiting for the rally to come, the market will do what it always does and make most of the people wrong most of the time.
have a grateful day!
larry
Wednesday, February 19, 2003
HOW-ZING
according to the housing industry, the housing market is not experiencing a bubble. executives of every publicly traded housing company concur that there is no bubble and in fact, housing growth is expected to continue for the next 20 years. not only that, housing is no longer cyclical, and is not subject to normal business cycles. whew! problem is, i am trying to sell my house and i can't find a buyer. no need to worry. FED chairman greenspan says theres no housing bubble. fannie mae's CEO frank raines says that housing market is healthy and will continue to grow...no bubble. wall street analysts say no bubble. who else? OK, i say theres no bubble too.
so how is it that the only sector of the economy that is growing is the housing sector? this is the first time in history that the housing market has been uneffected by a significant downturn in the economy and the stock market. in fact, the housing market is hitting records in all data points. so how does the housing sector get its 'zing'. enter our fearless FED chief. during the downturn he has lowered interest rates so aggressively he has effectively made a house cheaper to own. just like 0% auto financing spurs demand even when there is none, the same dynamic has occured in the housing market. sure demand is there. you have to have a place to live so why not buy instead of rent. or why not buy bigger for the same cost? i have no good answer except go buy a house.
at some point the 'incentive' will lose its power and everybody who wants to own a home will have one or maybe two. after 2 full years of low rates, the time may be coming for housing to lose its momentum and become say, cyclical again. i know its a long shot but i wouldnt bet on further housing records to be set. and when the howzing boom slows, dont expect mr greenspan to be there to help, because his next move may be to raise rates and then that house will become somewhat more expensive to own for the buyer you may need to find.
have a grateful day!
larry
according to the housing industry, the housing market is not experiencing a bubble. executives of every publicly traded housing company concur that there is no bubble and in fact, housing growth is expected to continue for the next 20 years. not only that, housing is no longer cyclical, and is not subject to normal business cycles. whew! problem is, i am trying to sell my house and i can't find a buyer. no need to worry. FED chairman greenspan says theres no housing bubble. fannie mae's CEO frank raines says that housing market is healthy and will continue to grow...no bubble. wall street analysts say no bubble. who else? OK, i say theres no bubble too.
so how is it that the only sector of the economy that is growing is the housing sector? this is the first time in history that the housing market has been uneffected by a significant downturn in the economy and the stock market. in fact, the housing market is hitting records in all data points. so how does the housing sector get its 'zing'. enter our fearless FED chief. during the downturn he has lowered interest rates so aggressively he has effectively made a house cheaper to own. just like 0% auto financing spurs demand even when there is none, the same dynamic has occured in the housing market. sure demand is there. you have to have a place to live so why not buy instead of rent. or why not buy bigger for the same cost? i have no good answer except go buy a house.
at some point the 'incentive' will lose its power and everybody who wants to own a home will have one or maybe two. after 2 full years of low rates, the time may be coming for housing to lose its momentum and become say, cyclical again. i know its a long shot but i wouldnt bet on further housing records to be set. and when the howzing boom slows, dont expect mr greenspan to be there to help, because his next move may be to raise rates and then that house will become somewhat more expensive to own for the buyer you may need to find.
have a grateful day!
larry
Wednesday, February 05, 2003
NOW WE CAN ATTACK
today was our generations version of the cuban missle crisis. secretary of state colin powell did his best impression of adlai stevensons u.n. presentation in 1962 where he presented satellite photos of nuclear weapons in cuba. today we saw photos of trucks, buildings and weapons systems that prove beyond a shadow of a doubt that saddam has, and is actively trying to conceal, his weapons of mass destruction. mr. powell also let us listen to intercepted phone calls of iraqi generals and lieutenants urgently discussing how to mislead the inspectors. AH-HA! now we've got you. send in the B-52's!
unfortunately, it was about as anti-climactic as it was dramatic. as great as powell may have been, it basically did nothing to further the case for an attack on iraq. either you believe saddam is lying and readying WMD's for a terror attack sometime soon or you dont. todays multi-media presentation, with all its photos and telephone transcripts, did nothing but reinforce everything we have heard before. for anybody on the fence, you can stay there for now. until saddam says he is ready to launch an attack rather than what he has been saying which is "who me", our proof is old news and we still dont have worldwide support to change the regime.
back to the waiting game. maybe next week when chief u.n. scavenger hunt leader, hans blix, makes his 2nd report to the u.n. we will be justified in attacking. but only if he throws up his hands and pulls out his fellow u.n. wild goose chasers. as long as france, germany , russia, china and various others countries continue to further the inspection process, we will be as powerless as switzerland. so like a boxer dancing around the ring before the big fight, our determined president continues to amass our countrys bravest and best sons all around iraq.
by my calculations, based on the latest deployment announcements and the time-table set down by mr. powell, sometime between valentines day and the ides of march we will begin removing saddam from power. according to the press reports i have read, the process(war) will start with a bombing attack using some 3000 precision guided bombs to 'soften' the iraqi army and disrupt the political power base. this will be coordinated with a ground assault on the oil fields to secure them. once these objectives are met we are going to invade over land from every country that touches iraq with some 50,000 - 100,000 troops, all the tanks they can drive and apache helicopters they can fly. by the beginning of spring we should have it all wrapped up and oil will be $20/barrel just in time for the summer driving season. bush will declare another victory in the war on terror and he will set his sights on nuclear korea. the victory will give the economy a needed boost of confidence and that will set him up to get the tax plan pushed through which in turn will set up an easy victory in the 2004 election.
hopefully thats how it works out. if it does i would sell my gold and by stocks again. if it doesnt, i wont. i will say this, i am getting a bit scared at the urgency our leaders seem to feel iraq deserves. do they really know saddam is a clear and present danger? why not show us all the proof? would it be too scary and cause a panic of some sort? all i do know is that they have put forth such a forceful and solid case that we must go forward with the removal of saddam.
tonight my daughter asked me when we were going to war. i cant even believe thats a part of her world. she said it like its a hockey game. "dad" she said, "when are we going to war?" i thought for a second or two deciding how to answer and then i said, "i think by the end of february, but i'm not sure". she said "why do we want to go to war"? i said "we dont but we have to in order to keep the world safe". she said that didnt make sense. and i couldnt really explain it so we went upstairs and read a book. the whole thing is a bit crazy.
have a grateful day!
larry
today was our generations version of the cuban missle crisis. secretary of state colin powell did his best impression of adlai stevensons u.n. presentation in 1962 where he presented satellite photos of nuclear weapons in cuba. today we saw photos of trucks, buildings and weapons systems that prove beyond a shadow of a doubt that saddam has, and is actively trying to conceal, his weapons of mass destruction. mr. powell also let us listen to intercepted phone calls of iraqi generals and lieutenants urgently discussing how to mislead the inspectors. AH-HA! now we've got you. send in the B-52's!
unfortunately, it was about as anti-climactic as it was dramatic. as great as powell may have been, it basically did nothing to further the case for an attack on iraq. either you believe saddam is lying and readying WMD's for a terror attack sometime soon or you dont. todays multi-media presentation, with all its photos and telephone transcripts, did nothing but reinforce everything we have heard before. for anybody on the fence, you can stay there for now. until saddam says he is ready to launch an attack rather than what he has been saying which is "who me", our proof is old news and we still dont have worldwide support to change the regime.
back to the waiting game. maybe next week when chief u.n. scavenger hunt leader, hans blix, makes his 2nd report to the u.n. we will be justified in attacking. but only if he throws up his hands and pulls out his fellow u.n. wild goose chasers. as long as france, germany , russia, china and various others countries continue to further the inspection process, we will be as powerless as switzerland. so like a boxer dancing around the ring before the big fight, our determined president continues to amass our countrys bravest and best sons all around iraq.
by my calculations, based on the latest deployment announcements and the time-table set down by mr. powell, sometime between valentines day and the ides of march we will begin removing saddam from power. according to the press reports i have read, the process(war) will start with a bombing attack using some 3000 precision guided bombs to 'soften' the iraqi army and disrupt the political power base. this will be coordinated with a ground assault on the oil fields to secure them. once these objectives are met we are going to invade over land from every country that touches iraq with some 50,000 - 100,000 troops, all the tanks they can drive and apache helicopters they can fly. by the beginning of spring we should have it all wrapped up and oil will be $20/barrel just in time for the summer driving season. bush will declare another victory in the war on terror and he will set his sights on nuclear korea. the victory will give the economy a needed boost of confidence and that will set him up to get the tax plan pushed through which in turn will set up an easy victory in the 2004 election.
hopefully thats how it works out. if it does i would sell my gold and by stocks again. if it doesnt, i wont. i will say this, i am getting a bit scared at the urgency our leaders seem to feel iraq deserves. do they really know saddam is a clear and present danger? why not show us all the proof? would it be too scary and cause a panic of some sort? all i do know is that they have put forth such a forceful and solid case that we must go forward with the removal of saddam.
tonight my daughter asked me when we were going to war. i cant even believe thats a part of her world. she said it like its a hockey game. "dad" she said, "when are we going to war?" i thought for a second or two deciding how to answer and then i said, "i think by the end of february, but i'm not sure". she said "why do we want to go to war"? i said "we dont but we have to in order to keep the world safe". she said that didnt make sense. and i couldnt really explain it so we went upstairs and read a book. the whole thing is a bit crazy.
have a grateful day!
larry
Monday, February 03, 2003
SO GOES JANUARY...SO GOES THE YEAR
uh oh! if this relatively meaningless historical indicator of stock market performance holds true, 2003 will be a down year for stocks. i know it seems silly but many market forecasters, equity strategists and wall street guru types look to this for guidance on how to invest your money. unfortunately they probably will not put much credence in it for the upcoming year because then they would be out of business till 2004. but nonetheless it is a fairly reliable indicator predicting the broad market outcome accurately some 90% of the time...i.e. when january is up the year is up and when january is down the year is down. in fact for the past 40 years it has a near perfect record on the downside forecast. so sell 'em now and come back in december for next years "january effect", which by the way wasnt very effective this year.
what i mean is this. wall street has a way of creating reasons to trade even when there is no reason to trade. so they make up things to get you to trade. the "january effect" trade idea is a perfect example. many traders buy stocks in late december anticipating a new years rally. as for the fundamental reasons that there is the so-called "january effect", there are some very real reasons why january is normally an up month. new year optimism, portfolios have been purged in december and get rebuilt in january after the 31 day tax wash rule timeframe, many people get bonuses in late december or early january, contributions to 401k accounts start up strong as high earners put in big amounts at the beginning of the year and very little or none towards the end of the year, and pension inflows get invested. other than these trends and inflows of money, there is no business reason for january to be up.
that being said, january is normally an up month. but as we've seen throughout the last few years, lots of things that used to happen arent happening, and lots of the things that used to work arent working. so with this year starting off with the major indices down between 1% and 4% we ought to hope that this indicator doesnt work as well as it has in the past.
have grateful day!
larry
uh oh! if this relatively meaningless historical indicator of stock market performance holds true, 2003 will be a down year for stocks. i know it seems silly but many market forecasters, equity strategists and wall street guru types look to this for guidance on how to invest your money. unfortunately they probably will not put much credence in it for the upcoming year because then they would be out of business till 2004. but nonetheless it is a fairly reliable indicator predicting the broad market outcome accurately some 90% of the time...i.e. when january is up the year is up and when january is down the year is down. in fact for the past 40 years it has a near perfect record on the downside forecast. so sell 'em now and come back in december for next years "january effect", which by the way wasnt very effective this year.
what i mean is this. wall street has a way of creating reasons to trade even when there is no reason to trade. so they make up things to get you to trade. the "january effect" trade idea is a perfect example. many traders buy stocks in late december anticipating a new years rally. as for the fundamental reasons that there is the so-called "january effect", there are some very real reasons why january is normally an up month. new year optimism, portfolios have been purged in december and get rebuilt in january after the 31 day tax wash rule timeframe, many people get bonuses in late december or early january, contributions to 401k accounts start up strong as high earners put in big amounts at the beginning of the year and very little or none towards the end of the year, and pension inflows get invested. other than these trends and inflows of money, there is no business reason for january to be up.
that being said, january is normally an up month. but as we've seen throughout the last few years, lots of things that used to happen arent happening, and lots of the things that used to work arent working. so with this year starting off with the major indices down between 1% and 4% we ought to hope that this indicator doesnt work as well as it has in the past.
have grateful day!
larry