CUTTING OFF THE HEAD DOESN'T KILL THE SNAKE
the Board of Directors of the NYSE decided to ask for dick grasso's resignation yesterday. and, as all well paid CEO's do, he bowed to the request and reluctantly resigned. his resignation is a continuation of the cleansing process that the financial markets have been undergoing for the past year in its quest for a fair and transparent trading enviroment. what makes no sense at all is why mr. grasso was asked to resign by a board that decided to give him the outrageous pay package.
in the coming weeks, or possibly days, the question of responsibility and lack of oversight will surely come into play here. conflicts of interest will be examined. lack of competent governance will be discussed. and more resignations will be tendered.
the NYSE is a SRO or self regulatory organization, that presides over the trading of securities on the largest exchange in the world. during the boom time and the subsequent downturn, the NYSE discovered, or was informed about, lots of business being conducted on its floor that was illegal or unethical. now its in the process of fixing itself and the systems that were, and still seem to be, broken. cutting off dicks head, i know that sounded painful, will not correct the problems or kill the snake!
have a grateful day!
larry
Thursday, September 18, 2003
Thursday, September 11, 2003
"I'M BLESSED, THANK YOU" by NYSE BALD HEAD GRASSO
as howie mandel would say, "well...what would you say?" if i was given a pay package like grasso was, i think that his response was well thought out and proper. "no thanks thats way too much" would have been silly and frankly, stupid.
as the head, bald head, of the NYSE, grasso was at the helm during the most widespread wave of corporate crime and fraud in the exchanges history. and thats just the stuff we know about. he claims to have saved the exchange from the electronic trading assault that is still ongoing. he claims to have preserved the antiquated open call-out system manned by specialists. he claims to have grown the number of companies listed. he claims lots of stuff that seem somewhat meaningless, compared to the investor assets lost during the corporate crime spree of the 1990's.
what exactly he was doing to oversee the exchange and ensure that the investor was being protected is not clear. the exchange has investigated many companies after the fact. the exchange has been notified of every kind of illegal activity going on under its not so watchful eye. it has done nothing to protect the small investor from the wolves that dominate the exchange activity. in fact, those wolves are the very people who sit on the board of the NYSE and make up the compensation committee that determined what grasso was worth.
the ole boy system at its very best. certainly not capitalism. no checks, and no balances, just lots of pats on the back and undeserved kudos for a job not very well done. in an effort to quell public and private outrage, grasso has agreed to forego an additional $48 million he didn't deserve. the $140 million he claims is due and payable for services rendered over his 35 year career he'll take. a good part of that was "earned" in the last few years as he was compensated like a dot-comer.
as he claims to be fixing the problems of the past and protecting the interests of the 85 million investors who have money under his watch, he is bilking the exchange and proving that nothing has changed and nothing will change.
have a grateful day!
larry
as howie mandel would say, "well...what would you say?" if i was given a pay package like grasso was, i think that his response was well thought out and proper. "no thanks thats way too much" would have been silly and frankly, stupid.
as the head, bald head, of the NYSE, grasso was at the helm during the most widespread wave of corporate crime and fraud in the exchanges history. and thats just the stuff we know about. he claims to have saved the exchange from the electronic trading assault that is still ongoing. he claims to have preserved the antiquated open call-out system manned by specialists. he claims to have grown the number of companies listed. he claims lots of stuff that seem somewhat meaningless, compared to the investor assets lost during the corporate crime spree of the 1990's.
what exactly he was doing to oversee the exchange and ensure that the investor was being protected is not clear. the exchange has investigated many companies after the fact. the exchange has been notified of every kind of illegal activity going on under its not so watchful eye. it has done nothing to protect the small investor from the wolves that dominate the exchange activity. in fact, those wolves are the very people who sit on the board of the NYSE and make up the compensation committee that determined what grasso was worth.
the ole boy system at its very best. certainly not capitalism. no checks, and no balances, just lots of pats on the back and undeserved kudos for a job not very well done. in an effort to quell public and private outrage, grasso has agreed to forego an additional $48 million he didn't deserve. the $140 million he claims is due and payable for services rendered over his 35 year career he'll take. a good part of that was "earned" in the last few years as he was compensated like a dot-comer.
as he claims to be fixing the problems of the past and protecting the interests of the 85 million investors who have money under his watch, he is bilking the exchange and proving that nothing has changed and nothing will change.
have a grateful day!
larry
SCARED TO CRY WOLF AGAIN
yesterday, the US State Department issued its latest warning, classified as a "Worldwide Caution", of a possible terrorist attack against US interests abroad. the warning said that it could not rule out the potential for al-qaida to attempt a second catastrophic attack within the US. the warning is fairly clear and lists basically every type of venue as a potential target. the warning is ominous in its scare level, as it states that the attack could include the use of nonconventional weapons such as chemical or biological agents. YIKES!
something new about the latest warning is that it was not followed by an increase in the "Terror Alert Level". previous warnings of this type, were accompanied by an increase to an 'orange' or heightened level of alert that would mobilize certain emergency agencies to increase staffing levels, security procedures at bridges and tunnels and heightened levels of checks at airports and seaports. i'll assume for the time being that those areas are being addressed in the proper way based on the state departments concerns.
what is a bit disturbing is that the government is trying to keep this warning "quiet" in order to save money, as the heightened alert status causes many state and local government agencies to have to spend extra money, and to keep the general public from altering plans to travel and go about there daily activities. if there is a potential for an attack, shouldn't we reconsider our plans?
on the second anniversary of the 9/11 attacks, we are almost ready to abandon one of the first systems put in place to prevent another attack from occuring. we all would like to forget what happened, but the reality is that the longer we go without an attack, the more likely one will happen. so to get lax with the alert level is just what we should not be doing.
i have said that the alert system is a bad idea and won't stop another attack or get the general public to behave differently. but, i think that if there is a system, we should use it. just because we have had 4 alert increases with no subsequent attack does not mean that we should not use it if it is still a viable system. if it isnt reliable, abandon it. we will never go below yellow alert and we will never go to red alert. so why not just be on alert until we ultimately win the war on terror. until then, all these alerts are useless.
the boy that cried wolf was soon ignored. for fear of that same consequence, abandon the alert system. then just tell us when the wolf is here.
have a grateful day!
larry
yesterday, the US State Department issued its latest warning, classified as a "Worldwide Caution", of a possible terrorist attack against US interests abroad. the warning said that it could not rule out the potential for al-qaida to attempt a second catastrophic attack within the US. the warning is fairly clear and lists basically every type of venue as a potential target. the warning is ominous in its scare level, as it states that the attack could include the use of nonconventional weapons such as chemical or biological agents. YIKES!
something new about the latest warning is that it was not followed by an increase in the "Terror Alert Level". previous warnings of this type, were accompanied by an increase to an 'orange' or heightened level of alert that would mobilize certain emergency agencies to increase staffing levels, security procedures at bridges and tunnels and heightened levels of checks at airports and seaports. i'll assume for the time being that those areas are being addressed in the proper way based on the state departments concerns.
what is a bit disturbing is that the government is trying to keep this warning "quiet" in order to save money, as the heightened alert status causes many state and local government agencies to have to spend extra money, and to keep the general public from altering plans to travel and go about there daily activities. if there is a potential for an attack, shouldn't we reconsider our plans?
on the second anniversary of the 9/11 attacks, we are almost ready to abandon one of the first systems put in place to prevent another attack from occuring. we all would like to forget what happened, but the reality is that the longer we go without an attack, the more likely one will happen. so to get lax with the alert level is just what we should not be doing.
i have said that the alert system is a bad idea and won't stop another attack or get the general public to behave differently. but, i think that if there is a system, we should use it. just because we have had 4 alert increases with no subsequent attack does not mean that we should not use it if it is still a viable system. if it isnt reliable, abandon it. we will never go below yellow alert and we will never go to red alert. so why not just be on alert until we ultimately win the war on terror. until then, all these alerts are useless.
the boy that cried wolf was soon ignored. for fear of that same consequence, abandon the alert system. then just tell us when the wolf is here.
have a grateful day!
larry
Wednesday, September 10, 2003
WHERE DOES ALL THE RISK LIE? the banks!
i know its not unusual for me to focus on the potential negatives, but here i go again.
during the past few years of easy money, banks & financial institutions have had a wonderful opportunity to exploit low interest rates in order to dramatically increase their lending to businesses and consumers. recently, in an effort to maintain the volumes and activity levels in their lending businesses, the banks, and all other companies who are now acting like banks(i.e. auto cos., consumer elec. retailers, computer cos., furniture cos., tax prep. cos., etc) have all foregone good risk management and lowered credit standards in order to qualify more borrowers in order to keep the volume of loans up. while doing that, they have also foregone profits/returns on the loans, i.e 0% financing or very low rates on loans. in effect, what they have done is the most dangerous thing a bank can do. THEY HAVE TAKEN ON MUCH MORE RISK WHILE ACCEPTING MUCH LESS RETURN!
that leaves banks in a very bad place. they have huge portfolios of riskier loans that have low or no returns. the banks in effect own all the new homes, cars, and everything else sold with these financing incentives and they have a potential for higher loss rates as the quality of the borrowers has declined and the assets that support those loans decline. furthermore, in order to handle the unprecedented demand for loans, the financial institutions mentioned above have utilized computers to qualify borrowers. these computer programs are unproven during difficult economic periods, or any periods for that matter, and could result in even more bad credits that the banks are unaware of because only the computers know, until the loans go bad.
lastly, a large portion of the lending has been refi's on homes that have risen in value, some much more than others. if the loan to values prove to be to high, or way too high, once again banks will be left in an even worse place...holding lots of bad mortagages on homes that drop in value significantly.
finally, as the credit situation could be an issue, so to will the demand for new lending. we have all refied at least once. we have bought autos for 0%(autos on the road are the youngest ever & have great warranties). we have decorated our new homes w/ loans that don't require payments until 2004. what will we borrow money for next? i think the consumer is full up with stuff and loans on that stuff.
i know that my view is unpopular, yet if it is thought through and analyzed in a quiet room without all the bulls screaming about the recovery and the end of the bear market, it makes much more sense than the unsupported bull case for nothing but up. if the banks come under pressure from this, it could result in the catalyst that ends this CYCLICAL BULL market we have been in for the past 4 months and the SECULAR BEAR market we are STILL IN will resume in full force.
its very hard to fight all the cheerleading, yet it is sheer stupidity to ignore the facts of dangers that still loom large in our economy.
have a grateful day!
larry
i know its not unusual for me to focus on the potential negatives, but here i go again.
during the past few years of easy money, banks & financial institutions have had a wonderful opportunity to exploit low interest rates in order to dramatically increase their lending to businesses and consumers. recently, in an effort to maintain the volumes and activity levels in their lending businesses, the banks, and all other companies who are now acting like banks(i.e. auto cos., consumer elec. retailers, computer cos., furniture cos., tax prep. cos., etc) have all foregone good risk management and lowered credit standards in order to qualify more borrowers in order to keep the volume of loans up. while doing that, they have also foregone profits/returns on the loans, i.e 0% financing or very low rates on loans. in effect, what they have done is the most dangerous thing a bank can do. THEY HAVE TAKEN ON MUCH MORE RISK WHILE ACCEPTING MUCH LESS RETURN!
that leaves banks in a very bad place. they have huge portfolios of riskier loans that have low or no returns. the banks in effect own all the new homes, cars, and everything else sold with these financing incentives and they have a potential for higher loss rates as the quality of the borrowers has declined and the assets that support those loans decline. furthermore, in order to handle the unprecedented demand for loans, the financial institutions mentioned above have utilized computers to qualify borrowers. these computer programs are unproven during difficult economic periods, or any periods for that matter, and could result in even more bad credits that the banks are unaware of because only the computers know, until the loans go bad.
lastly, a large portion of the lending has been refi's on homes that have risen in value, some much more than others. if the loan to values prove to be to high, or way too high, once again banks will be left in an even worse place...holding lots of bad mortagages on homes that drop in value significantly.
finally, as the credit situation could be an issue, so to will the demand for new lending. we have all refied at least once. we have bought autos for 0%(autos on the road are the youngest ever & have great warranties). we have decorated our new homes w/ loans that don't require payments until 2004. what will we borrow money for next? i think the consumer is full up with stuff and loans on that stuff.
i know that my view is unpopular, yet if it is thought through and analyzed in a quiet room without all the bulls screaming about the recovery and the end of the bear market, it makes much more sense than the unsupported bull case for nothing but up. if the banks come under pressure from this, it could result in the catalyst that ends this CYCLICAL BULL market we have been in for the past 4 months and the SECULAR BEAR market we are STILL IN will resume in full force.
its very hard to fight all the cheerleading, yet it is sheer stupidity to ignore the facts of dangers that still loom large in our economy.
have a grateful day!
larry
Monday, September 08, 2003
THE CLEANSING CONTINUES
just when you thought the bubblesque malfeasence was over and done with, eliot spitzer strikes again. now its the mutual funds who have been called out to account for their improprieties. it seems that the fund families have been treating some of their customers like children and some like step-children. the funds have been allowing hedge funds to front-run retail clients and make short term trading profits.
the subpeonas went out last week and already 2 of the majors, janus and Bank of America, have admitted to the scam and agree to stop it now. i'm sure there is more to come as the information requests get completed. emails will be a great source of information and, if recent history is any guide, they will shed the most light on this latest bout of wall streets untrustworthiness.
the public seems immune to the latest news as it is now clearly taken for granted that the small investor invests in the market at a signifcant disadvantage to the institutions. so whats another round of sunlight going to do to change things? there will be more fines levied with no admitting or denying of the charges. there will be more compliance officers hired and oversight committees formed. there will be more ceo's saying that they will do whatever necessary to regain customer confidence. and on we will go.
it is just another stark admission of how broken wall street really is and how the rules and regulations do nothing to protect the average investor. the more things change, the more they remain the same.
have a grateful day!
larry
just when you thought the bubblesque malfeasence was over and done with, eliot spitzer strikes again. now its the mutual funds who have been called out to account for their improprieties. it seems that the fund families have been treating some of their customers like children and some like step-children. the funds have been allowing hedge funds to front-run retail clients and make short term trading profits.
the subpeonas went out last week and already 2 of the majors, janus and Bank of America, have admitted to the scam and agree to stop it now. i'm sure there is more to come as the information requests get completed. emails will be a great source of information and, if recent history is any guide, they will shed the most light on this latest bout of wall streets untrustworthiness.
the public seems immune to the latest news as it is now clearly taken for granted that the small investor invests in the market at a signifcant disadvantage to the institutions. so whats another round of sunlight going to do to change things? there will be more fines levied with no admitting or denying of the charges. there will be more compliance officers hired and oversight committees formed. there will be more ceo's saying that they will do whatever necessary to regain customer confidence. and on we will go.
it is just another stark admission of how broken wall street really is and how the rules and regulations do nothing to protect the average investor. the more things change, the more they remain the same.
have a grateful day!
larry
DID YOU HEAR WHAT HE SAID?
we will not leave until our goals are achieved. its a worthy and just cause. we will spend whatever is necessary to achieve the goal of a free iraq. its vital to the stability of the middle east and the security of america. bush did an "i told you so as well by stating that "i told you this would be a long and hard war, fought on many fronts and iraq is currently the main front". here are some of the other important quotes...
"The terrorists have cited the examples of Beirut and Somalia, claiming that if you inflict harm on Americans we will run from a challenge. In this they are mistaken.''
"The surest way to avoid attacks on our own people is to engage the enemy where he lives and plans."
"We are fighting that enemy in Iraq and Afghanistan today, so that we do not meet him again on our own streets, in our own cities.''
“The Middle East will either become a place of progress and peace, or it will be an exporter of violence and terror that takes more lives in America and in other free nations,”
“This will take time and require sacrifice. Yet we will do what is necessary, we will spend what is necessary, to achieve this essential victory in the war on terror, to promote freedom and to make our own nation more secure.”
the stage is set for this generations' war. get ready to pay for it with blood, tears and money.
have a grateful day!
larry
we will not leave until our goals are achieved. its a worthy and just cause. we will spend whatever is necessary to achieve the goal of a free iraq. its vital to the stability of the middle east and the security of america. bush did an "i told you so as well by stating that "i told you this would be a long and hard war, fought on many fronts and iraq is currently the main front". here are some of the other important quotes...
"The terrorists have cited the examples of Beirut and Somalia, claiming that if you inflict harm on Americans we will run from a challenge. In this they are mistaken.''
"The surest way to avoid attacks on our own people is to engage the enemy where he lives and plans."
"We are fighting that enemy in Iraq and Afghanistan today, so that we do not meet him again on our own streets, in our own cities.''
“The Middle East will either become a place of progress and peace, or it will be an exporter of violence and terror that takes more lives in America and in other free nations,”
“This will take time and require sacrifice. Yet we will do what is necessary, we will spend what is necessary, to achieve this essential victory in the war on terror, to promote freedom and to make our own nation more secure.”
the stage is set for this generations' war. get ready to pay for it with blood, tears and money.
have a grateful day!
larry
Sunday, September 07, 2003
MISERY LOVES COMPANY...bears of a feather
a few blogs ago i mentioned some of my favorite mentors. like they could hear my call, they both fed me with my weekly juice to keep me steadfast in my beliefs about the financial and geopolitical risks we face in our world and how over valued the stock market is. fleck quotes roach in his latest piece. get a load of this and tell me your ready to buy more stocks.
Sounding an alarm on global disequilibrium
The folly of that approach was articulated recently in a brilliant piece by Morgan Stanley’s Steve Roach, "Do Global Imbalances Matter?" I’d like to share some of it with readers. He has been one of the few people to understand the mania and its consequences. In other words, he's not your typical Wall Street hack economist. His discussion puts into perspective the risks assumed by folks who play beat the number with other people's money, and what they will ultimately face when the psychology changes:
"As the summer of 2003 winds down, the markets are going through a classic cyclical drill. Around the world, financial assets are being priced for recovery, renewed inflationary pressures, and central bank tightening. It's a scenario we've all been through before, time and time again. . . . It's times like this that test any macro practitioner. Resolve and discipline are one thing. But in this mark-to-market world of momentum investing, you can't afford to be wrong for long.
"While I am acutely sensitive to this feedback, I see little in the tea leaves that convinces me to abandon the basic framework that has guided my thinking over most of the past four years. As I continue to see it, the macro conundrum remains very much a tug-of-war between policy reflation and an extraordinary confluence of global imbalances. In the end, it boils down to whether the authorities have the wherewithal to spark a cyclical revival that offsets these excesses.
"There is always the issue of timing -- that fundamental imbalances are more of a distant concern that do not translate into a near-term macro call. While I have to concede that's always possible, I fear that the excesses have now gone to such extremes that vigorous growth in the global economy cannot be sustained. My bet is that today's imbalances are different. Believe me, I know full well that financial markets are now telling me that I'm dead wrong. In all my years in this business, I've never come across such a worrisome and potentially lethal confluence of imbalances. . . . "
He then goes on to cite these, most of which I have covered over time. Not surprisingly, I basically agree with his every word.
He sums up:
"Can policy traction 'paper over' the imbalances of a U.S.-centric world? This is where the rubber meets the road, as far as I am concerned. Reflationary policy initiatives are no substitute for global rebalancing. In the case of the United States, another burst of deficit-financed domestic demand will only exacerbate the excesses of debt, saving, and the current account. In the cases of Japan and Europe, competitive currency devaluation will only inhibit the very reforms that are needed to unshackle domestic demand.
"And, at the same time, politically inspired China-bashing can only threaten the global trade dynamic that now plays such an important role in driving world economic growth. That underscores the ultimate irony of the so-called reflation play -- that any policy-inspired rebound may well exacerbate the imbalances of the U.S.-centric world. Financial markets that bet on a quick and easy fix do so at considerable peril, in my view."
I agree completely. The risk/reward proposition is totally out of whack. While it may seem fun to bet on the upside for now, which may last a bit longer, after this party ends, it will be worse than when the bubble burst the first time. A lot worse.
don't you just love these guys. unashamed to be honest and bearish. as fleck agrees with roach, i agree with fleck and roach!
have a grateful day!
larry
a few blogs ago i mentioned some of my favorite mentors. like they could hear my call, they both fed me with my weekly juice to keep me steadfast in my beliefs about the financial and geopolitical risks we face in our world and how over valued the stock market is. fleck quotes roach in his latest piece. get a load of this and tell me your ready to buy more stocks.
Sounding an alarm on global disequilibrium
The folly of that approach was articulated recently in a brilliant piece by Morgan Stanley’s Steve Roach, "Do Global Imbalances Matter?" I’d like to share some of it with readers. He has been one of the few people to understand the mania and its consequences. In other words, he's not your typical Wall Street hack economist. His discussion puts into perspective the risks assumed by folks who play beat the number with other people's money, and what they will ultimately face when the psychology changes:
"As the summer of 2003 winds down, the markets are going through a classic cyclical drill. Around the world, financial assets are being priced for recovery, renewed inflationary pressures, and central bank tightening. It's a scenario we've all been through before, time and time again. . . . It's times like this that test any macro practitioner. Resolve and discipline are one thing. But in this mark-to-market world of momentum investing, you can't afford to be wrong for long.
"While I am acutely sensitive to this feedback, I see little in the tea leaves that convinces me to abandon the basic framework that has guided my thinking over most of the past four years. As I continue to see it, the macro conundrum remains very much a tug-of-war between policy reflation and an extraordinary confluence of global imbalances. In the end, it boils down to whether the authorities have the wherewithal to spark a cyclical revival that offsets these excesses.
"There is always the issue of timing -- that fundamental imbalances are more of a distant concern that do not translate into a near-term macro call. While I have to concede that's always possible, I fear that the excesses have now gone to such extremes that vigorous growth in the global economy cannot be sustained. My bet is that today's imbalances are different. Believe me, I know full well that financial markets are now telling me that I'm dead wrong. In all my years in this business, I've never come across such a worrisome and potentially lethal confluence of imbalances. . . . "
He then goes on to cite these, most of which I have covered over time. Not surprisingly, I basically agree with his every word.
He sums up:
"Can policy traction 'paper over' the imbalances of a U.S.-centric world? This is where the rubber meets the road, as far as I am concerned. Reflationary policy initiatives are no substitute for global rebalancing. In the case of the United States, another burst of deficit-financed domestic demand will only exacerbate the excesses of debt, saving, and the current account. In the cases of Japan and Europe, competitive currency devaluation will only inhibit the very reforms that are needed to unshackle domestic demand.
"And, at the same time, politically inspired China-bashing can only threaten the global trade dynamic that now plays such an important role in driving world economic growth. That underscores the ultimate irony of the so-called reflation play -- that any policy-inspired rebound may well exacerbate the imbalances of the U.S.-centric world. Financial markets that bet on a quick and easy fix do so at considerable peril, in my view."
I agree completely. The risk/reward proposition is totally out of whack. While it may seem fun to bet on the upside for now, which may last a bit longer, after this party ends, it will be worse than when the bubble burst the first time. A lot worse.
don't you just love these guys. unashamed to be honest and bearish. as fleck agrees with roach, i agree with fleck and roach!
have a grateful day!
larry
HE LEFT OUT THE ECONOMY...stupid
i guess i was wrong. it was all iraq. i would have thought he might have given the economy an honorable mention, but why mess up a perfectly good chest banging, war mongering speech. or, maybe it was intentional. it must be that he and his strategists feel that his achievements in iraq relative to his record on the economy make it a lay down for what he will have us focus on. and since the iraq democratization is as the president put it, "a just cause", lets try to get everybody on board for the third world war that we must complete in order to make the world a safer place. as for the economy, since he didn't mention it, maybe he thinks that it will take care of itself.
now for the speech. actually, i would say it bordered on a fundraiser for the war in iraq. president bush confidently asked the american taxpayer for an additional $87 billion to pay for the war and reconstruction of iraq. president bush likened what we face currently to the destruction and subsequent reconstruction of germany and japan after WWII. in fact he tried to place a spin on it by stating that, "we have been repaid many times over for the money spent to rebuild those countries". so in a way he's saying that its an investment in our country's future.
in case anyone was wondering when or how the war on iraq will end, tonights speech made it very clear that he has no answers right now, yet he is prepared to see it through without "backing down". continuing his tough talk, the president unambiguously recommitted himself and the resources of our country, both money and lives, to the fight. seems to me that its coming a bit after the fact, and what are we all to do now? i don't think many people are prepared for this war to be a real war. this is starting to cost much more than most people signed on for and i think that many will be revoking their support shortly.
as that happens, unless the economy is really humming along and jobs are being created, support for the war will disipate, and so will the presidents hopes for a second term. it will be quite interesting to see a second bush win the war and lose the presidency. in fact, it looks like he may lose the war as well.
have a grateful day!
larry
i guess i was wrong. it was all iraq. i would have thought he might have given the economy an honorable mention, but why mess up a perfectly good chest banging, war mongering speech. or, maybe it was intentional. it must be that he and his strategists feel that his achievements in iraq relative to his record on the economy make it a lay down for what he will have us focus on. and since the iraq democratization is as the president put it, "a just cause", lets try to get everybody on board for the third world war that we must complete in order to make the world a safer place. as for the economy, since he didn't mention it, maybe he thinks that it will take care of itself.
now for the speech. actually, i would say it bordered on a fundraiser for the war in iraq. president bush confidently asked the american taxpayer for an additional $87 billion to pay for the war and reconstruction of iraq. president bush likened what we face currently to the destruction and subsequent reconstruction of germany and japan after WWII. in fact he tried to place a spin on it by stating that, "we have been repaid many times over for the money spent to rebuild those countries". so in a way he's saying that its an investment in our country's future.
in case anyone was wondering when or how the war on iraq will end, tonights speech made it very clear that he has no answers right now, yet he is prepared to see it through without "backing down". continuing his tough talk, the president unambiguously recommitted himself and the resources of our country, both money and lives, to the fight. seems to me that its coming a bit after the fact, and what are we all to do now? i don't think many people are prepared for this war to be a real war. this is starting to cost much more than most people signed on for and i think that many will be revoking their support shortly.
as that happens, unless the economy is really humming along and jobs are being created, support for the war will disipate, and so will the presidents hopes for a second term. it will be quite interesting to see a second bush win the war and lose the presidency. in fact, it looks like he may lose the war as well.
have a grateful day!
larry
BUSH BABBLE
tonight the president of the united states will make a prime-time speech to the world in order to reassure all interested observers that, despite the seemingly unending news of terror bombings and economic malaise, everything is under control and is going according to plan. not many people know what that plan is, but its going according to it. with all his popularity and money from fund raising, it would seem that he has a firm grip on the white house through 2008 so this speech is sort of a reminder of how well things are going, or will be going shortly.
the president is in a full court press to keep business rolling along and to squelch discontent with the war just enough to obscure the facts of what is really going on and just how dangerous each of these two policy initiatives have become not only to the US and the world, but to his stay in the white house.
this week, instead of firing elaine chou, the secretary of labor, for her lousy job of creating jobs, not that its her fault, but that has never stopped bush from firing a cabinet member, he hired a deputy secretary of labor to preside over new job creation. nice public relations move but probably won't creat any new jobs, except for the job of deputy labor secretary. one down 1,999,999 to go! well its a start anyway.
in addition, president bush sent john snow over to china, the next great economic super power, in order to convince the chinese government that allowing their currency to float, read 'drop in value', would help them to be even more economically powerful. i'm not sure why the chinese would want to listen to secretary snow when he is clueless about foriegn exchange policy, but i will assume that he went with enough academic and economic data to prove the point and ask them, read 'beg them', to consider helping the US out of its financial problems. because of course, that would undoubtledly help the chinese. for the past few years they haven't seemed to need our help so why will they concede now? can you say "protectionism"? the truth is, snow brought with him a message of "tariffs till you drop" if you don't do what we want.
both of these recent moves were made out of desperation rather than strength, no matter how the administration couches them. both moves will probably be ineffective at achieving their stated goals, but they may stem some of the criticism being levied at the administration for their handling of the economy.
facts are facts, and here is one. corporations will not start hiring workers, or for that matter stop firing workers, until the economy is clearly and sustainably growing without all the help from government overspending and historically low interest rates. and china will not do what washington wants, because they never have and don't need to in order to prosper. remember tieneman square, that was supposed to change things in china. fast forward to tady, and basically, nothing has changed except the way we percieve it. that fact is we need china's cheap labor and sourcing in order to maintain our standard of living. kind of like we need illegal immigrants to build houses and do manual labor that americans will not do. and we don't have the ability to change a country that has 1 billion people and is still communist.
the bottom line here is that the president will babble on about how strong our nation is and how fundamentally sound our consumer based economy continues to be. especially due to his tax cuts and economic policy. he will reiterate that we will not leave iraq until we democratize it, no matter the cost militarily, financially or in human life, because it is a worthy cause. and becaus ehe says so. he will reassure the country that good times are upon us and that we have exited a bleak period of time and sunny skies are here to stay. just as long as I get re-elected and am at the helm of the country. can you say 'titanic'? the speech will be a great way to start off the 2004 election campaign.
god bless america...we are going to need all the blessings we can get!
have a grateful day!
larry
tonight the president of the united states will make a prime-time speech to the world in order to reassure all interested observers that, despite the seemingly unending news of terror bombings and economic malaise, everything is under control and is going according to plan. not many people know what that plan is, but its going according to it. with all his popularity and money from fund raising, it would seem that he has a firm grip on the white house through 2008 so this speech is sort of a reminder of how well things are going, or will be going shortly.
the president is in a full court press to keep business rolling along and to squelch discontent with the war just enough to obscure the facts of what is really going on and just how dangerous each of these two policy initiatives have become not only to the US and the world, but to his stay in the white house.
this week, instead of firing elaine chou, the secretary of labor, for her lousy job of creating jobs, not that its her fault, but that has never stopped bush from firing a cabinet member, he hired a deputy secretary of labor to preside over new job creation. nice public relations move but probably won't creat any new jobs, except for the job of deputy labor secretary. one down 1,999,999 to go! well its a start anyway.
in addition, president bush sent john snow over to china, the next great economic super power, in order to convince the chinese government that allowing their currency to float, read 'drop in value', would help them to be even more economically powerful. i'm not sure why the chinese would want to listen to secretary snow when he is clueless about foriegn exchange policy, but i will assume that he went with enough academic and economic data to prove the point and ask them, read 'beg them', to consider helping the US out of its financial problems. because of course, that would undoubtledly help the chinese. for the past few years they haven't seemed to need our help so why will they concede now? can you say "protectionism"? the truth is, snow brought with him a message of "tariffs till you drop" if you don't do what we want.
both of these recent moves were made out of desperation rather than strength, no matter how the administration couches them. both moves will probably be ineffective at achieving their stated goals, but they may stem some of the criticism being levied at the administration for their handling of the economy.
facts are facts, and here is one. corporations will not start hiring workers, or for that matter stop firing workers, until the economy is clearly and sustainably growing without all the help from government overspending and historically low interest rates. and china will not do what washington wants, because they never have and don't need to in order to prosper. remember tieneman square, that was supposed to change things in china. fast forward to tady, and basically, nothing has changed except the way we percieve it. that fact is we need china's cheap labor and sourcing in order to maintain our standard of living. kind of like we need illegal immigrants to build houses and do manual labor that americans will not do. and we don't have the ability to change a country that has 1 billion people and is still communist.
the bottom line here is that the president will babble on about how strong our nation is and how fundamentally sound our consumer based economy continues to be. especially due to his tax cuts and economic policy. he will reiterate that we will not leave iraq until we democratize it, no matter the cost militarily, financially or in human life, because it is a worthy cause. and becaus ehe says so. he will reassure the country that good times are upon us and that we have exited a bleak period of time and sunny skies are here to stay. just as long as I get re-elected and am at the helm of the country. can you say 'titanic'? the speech will be a great way to start off the 2004 election campaign.
god bless america...we are going to need all the blessings we can get!
have a grateful day!
larry
THE LITTLE STOCK MARKET THAT COULD
remember that story about the train loaded with all the toys for christmas that couldn't make it up the mountain. then it got this great positive attitude and kept saying to itself, "i think i can, i think i can, i think i can". with that it slowly made its way to the top of the mountain and was able to get over the top and make its way down to the town to deliver the its payload to the town. the moral of the story is that if you think you can, you can. aren't fairytales great!
for the past few months, the stock market has had a wonderful attitude and in turn has had a wonderful rally. we are all convinced that the economy either is or will recover and that in turn, the stock market will (or has) recover as well. attitude is everything!
as long as we all keep believing that the market will rise, it may do just that. lots of what happens in the stock market is about perception and attitude. right now, we have a great attitude and consequently we have a great market. yet, unlike personal motivation that can lift our spirits and help us to achieve personal goals, stocks need fundamental business strength and profits to justify valuations. attitude can help us to achieve our goals but it can't fix structural problems in the economy or in business operations.
businesses can't operate from an attitude of "i think i can" for very much time if revenues and profits don't grow. the stock market can't maintain its gains or rise further, if the valuations are based on "positive attitude" influenced valuations. business and economic fundamentals must follow, and soon, or else the positive attitude will fade and gains will as well.
have a grateful day!
larry
remember that story about the train loaded with all the toys for christmas that couldn't make it up the mountain. then it got this great positive attitude and kept saying to itself, "i think i can, i think i can, i think i can". with that it slowly made its way to the top of the mountain and was able to get over the top and make its way down to the town to deliver the its payload to the town. the moral of the story is that if you think you can, you can. aren't fairytales great!
for the past few months, the stock market has had a wonderful attitude and in turn has had a wonderful rally. we are all convinced that the economy either is or will recover and that in turn, the stock market will (or has) recover as well. attitude is everything!
as long as we all keep believing that the market will rise, it may do just that. lots of what happens in the stock market is about perception and attitude. right now, we have a great attitude and consequently we have a great market. yet, unlike personal motivation that can lift our spirits and help us to achieve personal goals, stocks need fundamental business strength and profits to justify valuations. attitude can help us to achieve our goals but it can't fix structural problems in the economy or in business operations.
businesses can't operate from an attitude of "i think i can" for very much time if revenues and profits don't grow. the stock market can't maintain its gains or rise further, if the valuations are based on "positive attitude" influenced valuations. business and economic fundamentals must follow, and soon, or else the positive attitude will fade and gains will as well.
have a grateful day!
larry
AND YOU THOUGHT I WAS NEGATIVE
its hard for me to find people in my world that are as concerned about the furture as i am. most of my blogs have a kind of negative skew. most of my near and intermediate forecasts about the economy are bearish. most of my opinions about our government policies are critical and skeptical. and most of my general evaluations about the state of our society are less than complimentary.
in order to feed my need for realism about what is actually going on around me, i seek out others who are not fooled by the rhetoric, propaganda and outright lies from popular press, respected pundits and elected officials. some of my favorite realists include sir john templeton, stephen roach, richard russel, and bill fleckenstien. i enjoy jim grant, barton biggs, bill gross and robert prechter is my hero.
i also like reading marc fabers commentary on the state of the world. his website has a catchy name... www.gloomboomdoom.com. perfect for the ultimate pessimist. and his latest piece is pretty grim. he basically compares the iraq war to frances conflict with algeria in the 1950's and israels conflict with lebanon in the 1980's. he makes a brief mention of the US conflict in vietnam, but suffice to say, he's not too upbeat about the prospects for democracy speading in the middle east. or for that matter global peace and prosperity. he clearly labels the iraq situation as a guerrilla war that will end in defeat for the US & coalition forces and believes it will have dire consequences for the US financially and geo-politically.
i highly recommend the site for all who want some balance in what they read and hear about the state of the world. we are very fortunate to live in this country and to have the freedom and prosperity it affords us. yet to live in a fabricated, media coordinated world where our society hopes its way to the next generation is crazy. we all need balance in our understanding of what is going on in the world and our country in order to be able to live our lives realistically. faber brings reality to a new level.
have a grateful day!
larry
its hard for me to find people in my world that are as concerned about the furture as i am. most of my blogs have a kind of negative skew. most of my near and intermediate forecasts about the economy are bearish. most of my opinions about our government policies are critical and skeptical. and most of my general evaluations about the state of our society are less than complimentary.
in order to feed my need for realism about what is actually going on around me, i seek out others who are not fooled by the rhetoric, propaganda and outright lies from popular press, respected pundits and elected officials. some of my favorite realists include sir john templeton, stephen roach, richard russel, and bill fleckenstien. i enjoy jim grant, barton biggs, bill gross and robert prechter is my hero.
i also like reading marc fabers commentary on the state of the world. his website has a catchy name... www.gloomboomdoom.com. perfect for the ultimate pessimist. and his latest piece is pretty grim. he basically compares the iraq war to frances conflict with algeria in the 1950's and israels conflict with lebanon in the 1980's. he makes a brief mention of the US conflict in vietnam, but suffice to say, he's not too upbeat about the prospects for democracy speading in the middle east. or for that matter global peace and prosperity. he clearly labels the iraq situation as a guerrilla war that will end in defeat for the US & coalition forces and believes it will have dire consequences for the US financially and geo-politically.
i highly recommend the site for all who want some balance in what they read and hear about the state of the world. we are very fortunate to live in this country and to have the freedom and prosperity it affords us. yet to live in a fabricated, media coordinated world where our society hopes its way to the next generation is crazy. we all need balance in our understanding of what is going on in the world and our country in order to be able to live our lives realistically. faber brings reality to a new level.
have a grateful day!
larry
Thursday, September 04, 2003
ITS ALL BAKED IN THE CAKE...now for the frosting
the news of the economic recovery is baked in and now we get to let the cake cool as we ready to spread the frosting. analogies are the best way for the human brain to understand things. with that in mind, the market has fully cooked the economic data and has baked a beautiful cake for us all to enjoy. but, just as we make our children wait to spread the frosting and then eat the cake, we all must allow the proverbial cake, that would be the stock market, to cool and then we should be able to put the frosting on, that would be another 5-10% rally, and then we can enjoy the finished dessert. just in time for the holiday season. sounds good doesn't it?
unfortunately, lots of times during the cooling process, unforeseen things can happen to the cake. sometimes the nice rounded top of the cake falls inward making it look yucky and difficult to frost. sometimes a sneaky child comes by and takes a finger to the cooling pastry. other times, the impatient parent or child starts to frost the cake before it cools and the whole cake gets messed up.
and just as a baked cake can get ruined, so too can a stock market rally. as the cooling process has begun, it seems that the bulls are anxious to spread the frosting. maybe even before the rally cools and the economic and business data confirm what is already believed to be a foregone conclusion. that we are in the early stages of a full blown and sustainable economic recovery.
the cake is baked. let it cool and maybe we will get to frost it properly and then enjoy eating it.
have a grateful day!
larry
the news of the economic recovery is baked in and now we get to let the cake cool as we ready to spread the frosting. analogies are the best way for the human brain to understand things. with that in mind, the market has fully cooked the economic data and has baked a beautiful cake for us all to enjoy. but, just as we make our children wait to spread the frosting and then eat the cake, we all must allow the proverbial cake, that would be the stock market, to cool and then we should be able to put the frosting on, that would be another 5-10% rally, and then we can enjoy the finished dessert. just in time for the holiday season. sounds good doesn't it?
unfortunately, lots of times during the cooling process, unforeseen things can happen to the cake. sometimes the nice rounded top of the cake falls inward making it look yucky and difficult to frost. sometimes a sneaky child comes by and takes a finger to the cooling pastry. other times, the impatient parent or child starts to frost the cake before it cools and the whole cake gets messed up.
and just as a baked cake can get ruined, so too can a stock market rally. as the cooling process has begun, it seems that the bulls are anxious to spread the frosting. maybe even before the rally cools and the economic and business data confirm what is already believed to be a foregone conclusion. that we are in the early stages of a full blown and sustainable economic recovery.
the cake is baked. let it cool and maybe we will get to frost it properly and then enjoy eating it.
have a grateful day!
larry
ARE YOU A "NEWMAN" FAMILY
i make a habit of reading an investment outlook monthly newsletter written by pimco's bill gross. for those of you who aren't familiar with mr. gross, he is the largest bond fund manager in the world. and for full disclosure purposes, mr. gross was the crazy who predicted, and i think still predicts, that the dow will go down to 5,000. actually, in an interview after he wrote his piece called "dow 5000", he hedged a bit and said that 6,000 would be a better target but 5,000 was possible. now you might think that a bond guy saying nasty things about the stock market is just sour grapes. for what its worth, he also called the top of the long bond rally we experienced over the past few years and that could have exacerbated the recent swings in the bond market and caused losses in some of the funds he manages.
with that being said, he has been fairly downbeat on the prospects for the US economy going forward. in fact, as i have mentioned, he is calling for a huge decline in equity valuations based primarily on the fact that he believes equities are way overvalued based on all sorts of methodologies. instead of boring you with numbers and graphs, his most recent piece is one the best i have read. i highly recommend reading it and digesting the full gravity of his scenario and susequent thesis of what may or may not happen to our country and all of us who are fortunate enough to live here.
you can read it at www.pimco.com. hopefully you are not a newman. but, if his analysis of what the current state of our country, or its mainstream middle class families, is even a little bit correct, dow 6,000 or for that matter 5,000 may be optimistic.
have a grateful day!
larry
i make a habit of reading an investment outlook monthly newsletter written by pimco's bill gross. for those of you who aren't familiar with mr. gross, he is the largest bond fund manager in the world. and for full disclosure purposes, mr. gross was the crazy who predicted, and i think still predicts, that the dow will go down to 5,000. actually, in an interview after he wrote his piece called "dow 5000", he hedged a bit and said that 6,000 would be a better target but 5,000 was possible. now you might think that a bond guy saying nasty things about the stock market is just sour grapes. for what its worth, he also called the top of the long bond rally we experienced over the past few years and that could have exacerbated the recent swings in the bond market and caused losses in some of the funds he manages.
with that being said, he has been fairly downbeat on the prospects for the US economy going forward. in fact, as i have mentioned, he is calling for a huge decline in equity valuations based primarily on the fact that he believes equities are way overvalued based on all sorts of methodologies. instead of boring you with numbers and graphs, his most recent piece is one the best i have read. i highly recommend reading it and digesting the full gravity of his scenario and susequent thesis of what may or may not happen to our country and all of us who are fortunate enough to live here.
you can read it at www.pimco.com. hopefully you are not a newman. but, if his analysis of what the current state of our country, or its mainstream middle class families, is even a little bit correct, dow 6,000 or for that matter 5,000 may be optimistic.
have a grateful day!
larry
Wednesday, September 03, 2003
AMERICA...WHERE NOTHING CAN GO WRONG, wrong, wrong...
when i was a child i saw a movie called "westworld", which was about a vacation land where the visitor could create a fantasy for themselves with everything happening in real life but with predetermined outcomes which would always be what they wanted. those outcomes were controlled by the people who ran the resort by computers and the outcomes were all designed to fulfill the desires and dreams of the visitor. sounds pretty neat, huh. the movie was great. yet, the best part was when the computer operated clones in the fantasies went out of control and things started to go very WRONG.
lately, that is how our great nation, and the stock market, is being portryed. "AMERICA, the strongest most resilient nation in the world with an economy that is fundamentally sound". our leaders have convinced everybody that they are in control of the world and the economy and basically, nothing can go wrong.
with that as our national slogan, retail and institutional investors alike are pouring money back into the stock market as if that is a foregone conclusion. and its not only in the stock market where the fanatsy is alive. the terror alert system is all but defunct, even with the 2nd anniversary of 9/11 approaching; last year the alert level was raised due to the fact that terrorist organizations attempt attacks to coincide with previous attacks, not a mention of terror issues in this country. terror attacks in iraq, indonesia and elsewhere are seen as far away and of no consequence to the US. news reports of soldiers being killed and wounded are now a given, and it is seen as a part of an ongoing operation(war) to democratize iraq. did someone say "vietnam"?
since these issues are not effecting the US, it certainly feels good and makes most of us act like 'good' americans and shop with all the credit at there fingertips and equity in their homes, thanks in no small part to the bush/greenspan bubble blowers. even with jobs continuing to be shipped overseas we continue to hear that the recovery will produce new jobs, it'll just take some more time. during that time, we will hear lots of upbeat news about the great productivity gains we have made during the 3 year downturn, and how that will help the economy grow even stronger. but, very little will be said of how those productivity gains continue to hurt employment and weakens our jobs market. but once again, the 'controllers' of this westworld will assure us that nothing can go wrong and jobs will be available for all americans soon.
the stock market seems to have no problems with the rosy outlooks and forecasts for continued growth and in turn higher stock prices. bulls and bull believers continue to bid up prices while the bears and disbelievers continue to reluctantly get in, despite valuations and reliance on 'hope', rather than hard data, for the recovery to continue. with so many on one side of the boat, lots of people could fall in if things don't go as planned or if the computers that control all the credit reports and bank transfers break down for some reason, i.e. an unexplainable blackout, a terrorist attack in the US, a bond market blow-out, or some other unforeseen breakdown. a very lonely position to take, yet one that seems prudent considering what has happened over the past few years.
corporate america isn't quite as complacent and seems a bit more leary of all the optimistic talk coming from washington and wall street. don't get me wrong though, corporate leaders are thrilled with the upbeat mood and may very well take advantage of new tax laws and the corporate downsizing wave in order to keep profits coming in. that being said, capital spending still has not picked up and layoff announcements continue. corporations are taking full advantage of the low interest rates to lower borrowing costs and are issuing equity to raise capital at a brisk pace. yet, ceo's and cfo's are very reluctant to say that things have improved markedly. i think stabilized is the word of choice with some mention of slight improvement, with hedges about if the improvement can be sustained.
the controllers of the outlook and propaganda machine have their hands full. this westworld is at full occupancy and the computers are keeping things humming along just fine for now. president bush has the bulley pulpit to operate from and the FED chief is in his pocket. wall street is loving the support and looks forward to its first round of bonus checks in a few years. the general public is happy to believe after 3 hard years. my fear is that just as in the movie, when you think that nothing can go wrong, watch out for what can!
have a grateful day!
larry
when i was a child i saw a movie called "westworld", which was about a vacation land where the visitor could create a fantasy for themselves with everything happening in real life but with predetermined outcomes which would always be what they wanted. those outcomes were controlled by the people who ran the resort by computers and the outcomes were all designed to fulfill the desires and dreams of the visitor. sounds pretty neat, huh. the movie was great. yet, the best part was when the computer operated clones in the fantasies went out of control and things started to go very WRONG.
lately, that is how our great nation, and the stock market, is being portryed. "AMERICA, the strongest most resilient nation in the world with an economy that is fundamentally sound". our leaders have convinced everybody that they are in control of the world and the economy and basically, nothing can go wrong.
with that as our national slogan, retail and institutional investors alike are pouring money back into the stock market as if that is a foregone conclusion. and its not only in the stock market where the fanatsy is alive. the terror alert system is all but defunct, even with the 2nd anniversary of 9/11 approaching; last year the alert level was raised due to the fact that terrorist organizations attempt attacks to coincide with previous attacks, not a mention of terror issues in this country. terror attacks in iraq, indonesia and elsewhere are seen as far away and of no consequence to the US. news reports of soldiers being killed and wounded are now a given, and it is seen as a part of an ongoing operation(war) to democratize iraq. did someone say "vietnam"?
since these issues are not effecting the US, it certainly feels good and makes most of us act like 'good' americans and shop with all the credit at there fingertips and equity in their homes, thanks in no small part to the bush/greenspan bubble blowers. even with jobs continuing to be shipped overseas we continue to hear that the recovery will produce new jobs, it'll just take some more time. during that time, we will hear lots of upbeat news about the great productivity gains we have made during the 3 year downturn, and how that will help the economy grow even stronger. but, very little will be said of how those productivity gains continue to hurt employment and weakens our jobs market. but once again, the 'controllers' of this westworld will assure us that nothing can go wrong and jobs will be available for all americans soon.
the stock market seems to have no problems with the rosy outlooks and forecasts for continued growth and in turn higher stock prices. bulls and bull believers continue to bid up prices while the bears and disbelievers continue to reluctantly get in, despite valuations and reliance on 'hope', rather than hard data, for the recovery to continue. with so many on one side of the boat, lots of people could fall in if things don't go as planned or if the computers that control all the credit reports and bank transfers break down for some reason, i.e. an unexplainable blackout, a terrorist attack in the US, a bond market blow-out, or some other unforeseen breakdown. a very lonely position to take, yet one that seems prudent considering what has happened over the past few years.
corporate america isn't quite as complacent and seems a bit more leary of all the optimistic talk coming from washington and wall street. don't get me wrong though, corporate leaders are thrilled with the upbeat mood and may very well take advantage of new tax laws and the corporate downsizing wave in order to keep profits coming in. that being said, capital spending still has not picked up and layoff announcements continue. corporations are taking full advantage of the low interest rates to lower borrowing costs and are issuing equity to raise capital at a brisk pace. yet, ceo's and cfo's are very reluctant to say that things have improved markedly. i think stabilized is the word of choice with some mention of slight improvement, with hedges about if the improvement can be sustained.
the controllers of the outlook and propaganda machine have their hands full. this westworld is at full occupancy and the computers are keeping things humming along just fine for now. president bush has the bulley pulpit to operate from and the FED chief is in his pocket. wall street is loving the support and looks forward to its first round of bonus checks in a few years. the general public is happy to believe after 3 hard years. my fear is that just as in the movie, when you think that nothing can go wrong, watch out for what can!
have a grateful day!
larry