Face-to face with the bears: Marc Faber and Mish Shedlock

Monday, March 15th, 2010

In the three-part interview below, Aaron Task and Henry Blodget of Yahoo Finance - Tech Ticker interview Marck Faber, publisher of the Gloom, Boom and Doom Report, and Mish Shedlock, investment advisor at Sitka Pacific Capital and author of the economics blog, Mish’s Global Economic Trend Analysis. They discuss, among others, the economic outlook, inflation vs deflation, and the prospects for stock markets.

These are admittedly two of the most bearish commentators around, but well worth listening to.

Part 1: Economic outlook

Source: Yahoo Finance - Tech Ticker, March 12, 2010.

Part 2: Inflation vs deflation

Source: Yahoo Finance - Tech Ticker, March 12, 2010.

Part 3: Prospects for stock markets

Source: Yahoo Finance - Tech Ticker, March 12, 2010.

Tags: Advertisement, Bears, Boom, Commentators, Deflation, Doom, Economic Outlook, Economic Trend, Economics, Face To Face, Gloom Boom And Doom Report, Henry Blodget, inflation, Investment Advisor, Marc Faber, Marck, Prospects, Stock Markets, Trend Analysis, Yahoo Finance
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Rogoff: Economy to crash if it keeps debt appetite

Friday, January 29th, 2010

The world economy is likely to crash and burn if it keeps gorging on debt, Kenneth Rogoff, professor of economics at Harvard University, told CNBC in Davos on Thursday.

Source: CNBC, January 28, 2010.

Tags: Appetite, Cnbc, Crash And Burn, Crash Burn, Davos, Economics, Harvard University, Kenneth Rogoff, World Economy
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James Galbraith on the Crisis

Friday, December 18th, 2009

The three-part video presentation below features James Galbraith, professor of economics and government at the University of Texas (Austin) and author of a number of books, speaking at The Economics of Peace Conference in Sonoma, California in October of 2009.

Part 1:

Part 2:

Part 3:

Source: Vimeo, November 23, 2009 (hat tip: Credit Writedowns).

Tags: Advertisement, Books, Economics, Economics Conference, Hat Tip, James Galbraith, Peace Conference, Sonoma California, Tip Credit, University Of Texas, University Of Texas Austin, Video Presentation
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John Ryding on the US economy, inflation and unemployment

Monday, November 16th, 2009

John Riding, chief economist of RDQ Economics in New York, sits down with Michael Mackenzie, US markets correspondent of the Financial Times, to discuss Fed policy, inflation versus deflation and the US employment outlook.

Part 1: On Fed policy
Riding says the Federal Reserve will not raise interest rates until 2011 at the earliest. He says an extended period of easy monetary policy is laying the ground for the next bubble and that the Fed itself is engaged in the biggest carry trade out there through its policy of quantitative easing.

Click here or on the image below to view Part 1 of the interview.

Part 2: On the inflation versus deflation debate
Riding says the debate between inflation and disinflation or potentially even deflation will be settled on the side of inflation, though it may take two or three years to come through.

Click here to view Part 2 of the interview.

Part 3: On the US employment outlook
Riding says should current labor trends continue, the US economy is about 20 weeks away from starting to see the emergence of job creation. The actual rate of unemployment is 17.5%, not the official rate of 10.2%.

Click here to view Part 3 of the interview.

Source: Michael Mackenzie, Financial Times (here, here and here), November 13, 2009.

Tags: Carry Trade, Chief Economist, Correspondent, Deflation, Disinflation, Economics, Economy Inflation, Emergence, Employment Outlook, Fed Policy, Federal Reserve, Financial Times, Inflation And Unemployment, interest rates, Interview Source, Job Creation, Labor Trends, Mackenzie Financial, Michael Mackenzie, Monetary Policy, Quantitative Easing
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Taiwan, the Alternative China

Monday, November 16th, 2009

In the 60 years since Chinese nationalists moved to Taiwan, the country has grown up in a very different way from mainland China. Matthew Rivera reports from Taiwan on how culture, democracy and economics there offer an alternative China.

Source: MarketWatch, November 11, 2009.

Tags: China, Chinese Nationalists, Democracy, Economics, Emerging Markets, Mainland China, November 11, Taiwan China, Taiwan Culture
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Economic recovery in review with Galbraith

Tuesday, November 3rd, 2009

The Dow’s up, but why are Main Street Americans still reeling from last year’s economic collapse? With Americans still facing rising unemployment, foreclosures, and declining property values, Bill Moyers discusses with renowned economist James Galbraith,  professor of economics at the University of Texas, whether we have averted the crisis and how to get help for the middle class.

Click here for the full transcript.

Source: Bill Moyers, PBS (via YouTube), October 30, 2009.

Tags: Advertisement, Bill Moyers, Bill Moyers Pbs, Dow, Economic Collapse, Economic Recovery, Economics, Foreclosures, Full Transcript, James Galbraith, Middle Class, Pbs, Property Values, Renowned Economist, Unemployment, University Of Texas, Youtube
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WealthTrack: Is the efficient market theory still valid?

Monday, October 19th, 2009

This week on WealthTrack, Consuelo Mack calls into question the long-dominant efficient market theory and explores what models should be used by investors to navigate the markets. She discusses this with two top fund managers, Jerry Senser, a former Morningstar Fund Manager of the Year and the lead portfolio manager for all of ICAP, including their MainStay ICAP Funds, and noted contrarian Robert Kleinschmidt, who manages the top-rated Tocqueville Fund. Also joining the conversation is Justin Fox, Time magazine’s economics columnist and author of “The Myth of the Rational Market”. As always with WealthTrack this is excellent viewing material.

Note: The transcript of this interview is not available yet, but will be posted here as soon as it arrives.

Source: Wealthtrack, October 16, 2009.

Tags: Advertisement, Columnist, Consuelo Mack, Economics, Efficient Market Theory, Fund Managers, Investors, Justin Fox, Lead, Mainstay, Models, Morningstar, Myth, Portfolio Manager, Robert Kleinschmidt, Time Magazine, Wealthtrack
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David Rosenberg: Equities on a roll, but still overvalued

Monday, August 31st, 2009

David Rosenberg, formerly the Chief North American Economist at Merrill Lynch in New York, returned to his native Canada to settle at Toronto-based Gluskin Sheff, following the Bank of America acquisition. He is highly respected and one of the most candid and lucid macro-economists and his grasp of the market related economics is refreshing. Rosenberg says there is no point in making economic forecasts that are not backed up by actionable investment calls. His Breakfast, Lunch, Coffee and Tea With Dave newsletters are worth reading.

Last week, Rosenberg shared his thoughts on the question, “Is the financial crisis over?” (08/25)

Not if you’re not too big to fail. We are now up to 77 failed U.S. banks so far in 2009. This already matches, in just eight months, the number of lenders who failed in the previous 16 years combined.

About bear markets and valuation:

One should always keep an open mind. Practically all bear markets have a 50% retracement and this cycle has been no different. However, what we have witnessed is unprecedented because at no time in the past has the stock market rallied more than 50% ahead of the supposed end of a recession. Normally, the
move off the lows to the official end of the economic downturn is 20%. And, the trailing P/E multiple on operating earnings is now north of 25, a record eight point expansion in a short time frame (the P/E on reported earnings is nearly 130x!).

Go back to the March lows, and the market was down around 60% from the peak,but then again, earnings plunged the same amount. At the lows, valuation levels
suggested that equities were pricing in $50 of operating earnings and -2.5% real GDP growth for 2009. And guess what? That’s exactly what we are likely to get.

What’s priced in five months and 50% later? Call it $70 on operating EPS for the coming year and +4.0% real economic growth. In other words - the stock market is fully priced and then some. But for the time being, the technicals and sentiment - the high level of enthusiasm - and the risk of a “buying panic” by lagging portfolio managers are very likely going to make folks, like Walter Murphy, look prescient.

About last week’s so called good news (08/26):

1. Bernanke reappointed

We really fail to see how it could possibly be that the same central bank official, who, over a span of a decade, presided over two massive bubbles and their busts, can be viewed as being a positive force for the markets. Perhaps there is some solace in knowing that the same person who created this awesome and complex $2 trillion Fed balance sheet will be around to dismantle the largesse since he’s probably the only one that knows how.

2. The first monthly increase in the Case-Shiller home price index

As for the second point, there is a difference between a trendline and the noise around that trendline. Home prices are down a massive 31% from their peak and have been in a vertical-down pattern for nearly three years. Perhaps a respite is in order, but with the true underlying unsold inventory near 12 months’ supply, which is double what would typify a balanced housing market, it would seem like wishful thinking that we have suddenly achieved a fundamental low in residential real estate values (especially at the high end).

3. The seven-point jump in consumer confidence in August

With regard to point number three, we welcome any rise in consumer confidence but an honest appraisal of the data would show that 54.1 is still a very depressed level. In fact, the average index level during recessions is 73.0 - August’s reading was nearly 20 points below that. So, if the recession is indeed over and done, somebody forgot to tell this 70% chunk of GDP otherwise known as the consumer.
Now, what about Mr. Market, who is still in a most joyful mood. Well, the normal level of consumer confidence in the month in which the S&P 500 is up 55% from an oversold bear market low is 100. So, the stock market is behaving as if consumer confidence is twice the level it really is.

What is the enemy of this bear market rally?

The real enemy for the equity market is Mr. Bond - that pesky Treasury market that just won’t sell off and validate the great reflation trade. Indeed, if we were seeing a real asset allocation move on the part of investors, as opposed to massive and ongoing short covering, then the 10-year Treasury note yield would be trading close to 5.0% - especially with these freshly minted Obama debt forecasts. But instead, the 10-year note is now getting perilously close to the July 10 low of 3.32%. Keep in mind that July 10 was the day when Meredith Whitney gave the green light to Goldman, and Roubini declared the recession to be ending, and what a spark that provided to this last leg of the bear market rally. Now what if Doug Kass’ declaration yesterday that the major averages have hit their highs for the year proves as prescient in the other direction? Come on, not only is the market trading at a nutty 130x multiple, but September-October is right around the corner (as is H1N1).

Equities are on a roll… but still overvalued (08/28):

We continue to hear how undervalued the stock market got to this cycle, but it was really the corporate market that was priced for Armageddon. The equity market, at the lows, was discounting -2.5% real GDP, but if it was pricing in the same outlook as corporates, Baa spreads pierced the 600 basis point threshold, then the S&P 500 would have bottomed near 315, not 666. (Hey, that still would have been a triple-bagger from the 1982 lows!)

Be that as it may, what we have on our hands is a liquidity-induced and technically-strong equity market, and as Bob Farrell has been known to say, these types of rallies quite often “go further than you think” but they do not generally correct by “going sideways”. Even if the recession is over, the market usually is up 20% from the time of the bottom to the end of the downturn. By the time we are up over 50% on the S&P 500, what is “normal” is that we are heading into the second year of recovery (recession being over isn’t even a debate), the economy has shown an ability to expand without the need for government assistance and GDP would have risen nearly 5.0% by now and helped create about 1 million jobs. In other words, after the market has jumped over 50% from the low, we have moved beyond hope and into reality.

You can sign up to receive David Rosenberg’s letters by email here.

Tags: Acquisition, American Economist, Bank America, Bank Of America, Bear Markets, Breakfast Lunch, Canada, Candid, Coffee And Tea, Core Beliefs, David Rosenberg, Economic Downturn, Economic Forecasts, Economics, Economists, Eight Months, Five Months, GDP Growth, Gluskin Sheff, Gold, Grasp, Lows, Merrill Lynch, Native Canada, Real Gdp, Recession, Retracement, Stock Market, Technicals, Valuation Levels
Posted in Gold, Markets | No Comments »

Economists: not the best recovery forecasters

Sunday, August 16th, 2009

This post is a guest contribution by Rebecca Wilder*, author of the of the News ‘n’ Economics blog.*

I wrote an article some time back about the pathetic recovery expected by Economists. In that article, Spencer (of Angry Bear) gave the following comment (please read the entire comment, as Spencer’s argument is not represented here in full):

Maybe this time will be different and we may actually have a weak recovery, but just remember that economist have a long and repeated history of underestimating the strength of recoveries.

I myself did not know that Economists have a very good track record of undershooting recoveries. However, I did a little digging through old files at work and found Blue Chip forecasts around the end of the 1981-1982, 1990-1991 recessions, and a DRI forecast (now known as Global Insight, couldn’t get Blue Chip) at the end of the 2001 recession (recession end determined much later by the NBER). The forecast way undershot the actual growth rate for the first year of recovery in two of the last three recessions - by 2.3% in the 1983 recovery!

Ahem. Don’t be too surprised if they mess it up again!

Rebecca Wilder

Rebecca Wilder is an economist in the financial industry. She was previously an assistant professor and holds a doctorate in economics.

Tags: Assistant Professor, Blue Chip, Doctorate, Dri, Economics, Economist, Economists, Forecasters, Global Insight, Guest Contribution, Nber, Rebecca, Recession, Recessions, Spencer
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Faber and Roubini: Dr. Doom Double-Dose

Thursday, August 13th, 2009

The two “Dr Dooms” - Marc Faber, editor of the Gloom, Boom and Doom Report, and Nouriel Roubini, professor of economics at the Stern School of Business, New York University and chairman of RGE Monitor - discuss the outlook for the economy and financial markets.

As always with these two commentators, they provide a stimulating discussion that is well worth watching.

Source: CNBC (via YouTube.com), August 12, 2009.

Tags: Boom, Business New, Cape Town, Cnbc, Commentators, Dooms, Double Dose, Dr Doom, Economics, Economy, Financial Markets, Gloom Boom And Doom Report, Marc Faber, New York University, Postcards, Roubini, School Of Business, Stern School Of Business, Target, Youtube
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Yamada Sees 44% of NYSE Stocks Under $10 as `Shocking’

Sunday, March 8th, 2009

This may seem as yet another gloomy outlook for US Stocks and for that matter stocks in general, however, its source, Louise Yamada, is by far, one of the most highly regarded technical analysts, globally, and with a superlative track record. Though she is a technical analysts she confirms that supply is still outstripping demand for stocks, and as long as their are less buyers than sellers, the Dow could sail through 6,000 to her secondary target of 4,000.

Here, she is covered by CNBC, Bloomberg, and Barrons:

Louise Yamada, the doyenne of market technicians, says the market “looks awful” and is calling for a primary target for the Dow of 6,000 pts, and her secondary target at 4,000 pts. She is one of the most widely followed technical analysts working today. Click play to view (transcript provided below if you can’t watch now)

 
Melissa Francis (CNBC): You have said, “Hope is not an investing strategy.”

Louise Yamada: Yes, thats true. I think there’s a lot of hope that things won’t go lower. I’m inclined to agree with prior comments that there’s not a lot to see that we have bases; that we have accumulation under way. Basically, what’s happening in the stock market as with everything that we follow in price is the study of supply and demand in the marketplace.

What we see is that the rallies are all being met with more supply, whether its mutual fund closings, whether its hedge fund closings, whether its people just trying raise some cash because they’re just unemployed, there seems to be a very consistent supply coming into the rally attempts.

MF: You say you think we’re going to go through 6,000?

LY:I think so. I think one of the things that we’ve been concerned about is that as price was approaching the 2002 low, that that 2002 low represents a 10-year support and its very familiar to what we have been seeing over the past year and a half, a lot of the overall sector work in 2006 and 2007 when the financials were creating this 10 year top and finally broke the support of the 2002 low.

The implication of the ‘bigger the top, the bigger the drop,’ is very real, and its always for reasons that we don’t always know, because the market is a discounting mechanism. But, it was clear at the time that what was happening in a 10 year breakdown, was very different to what was happening in 1998 financial crisis, or 1990 which were very small, and we said the implications here are greater than are being perceived.

And the same thing now could be said of the equity market with the break below the 2002 low. It concerns us greatly. You have 15 of the Dow stocks that are already broken below their 2002 low. Over the past year and a half, forget the teenagers and the toddlers that many of those stocks have regressed to, but you know, I disagree with the comment made about, “You could buy a stock at $2 because it’s like an option, but recognize that if you do that and it goes to $1, you’ve lost 50%.

MF: Louise, I know that you say that your next target after that is 4,000. You also say that Buy and Hold died a long time ago. A long time ago, you know, people who bought and held until the market hit 13,000, 14,000 did okay. Why do you think it died a long time ago? 

…If they sell, If they sold. But a lot of people didn’t. And therein lies the problem. People that bought in the 80s and 90s held through the 2000 crash, and then were in it again, for what has turned out to be a double top; perhaps a 10 year double top; many are still holding on.

I think its important to recognize, when the distribution starts to occur, the way it did for technology in 2000, and recognize that the Dow replaced stocks with Microsoft and Intel, right at the top in 1999, and Dow is a price-weighted average, so the larger priced stocks carry a lot more weight.

MF: So you’re saying that you have to be vigilant, and be awake, and sell stocks, now be a hog, and sell your stocks when you’ve made a little money. Or you’re saying you’ve got to be a day trader, that buying in your 401K is gone.

No, i don’t think you’re a day trader buying in your 410K. Technical analysis really helps people understand about when the structural run is over, in a sector or in a stock, just as in the 1973, Avon Products went from, 200 to 19. In 1986, Digital Equipment went from 200 to 19. There are ways to identify those breakdowns.

Enron, we were getting out under 60. There is an important characteristic of supply, that makes itself evident in a major top.

MF: Gotcha!, Louise Thanks so much. 

Listen to Louise Yamada, on Bloomberg discussing “shocking” state of the market.

Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser.

And from Barron’s, Friday, March 6, 2009
http://online.barrons.com/article/SB123631957962750593.html

The eponymous head of Louise Yamada Technical Research Advisors points to broad market measures’ breaking their 2002 lows, which would equate to around 800 on the Standard & Poor’s 500, as the key indicator of the market’s overall trend. (The S&P 500 closed down at 682.55 Thursday, down 30.32 or 4.25%.)

In other words, after the dot-com crash of 2000-02, stocks rallied only to give back those gains, and them some.

That’s important, Yamada explains, because following the Crash of 1929, the great loss of wealth didn’t come in the initial decline. Fortunes were wiped out among investors who had tried to pick a bottom during the initial phase of the bear market of the early ‘Thirties.

“You never know how low is the low,” she remarks. Yamada sees the downside risk on the Dow Jones Industrial Average in the range of 4000 to 6000 (down from 6,594.44 Thursday) and 400 to 600 on the S&P 500.

Given the widespread talk of “capitulation” (See Thursday’s column, “Not There Yet?”) the desire to pick a bottom seems as strong as in the early 1930s. Consider a market bellwether such as General Electric . It traded at 30 last summer and had fallen below 13 at the worst of the November’s rout. But it’s been cut in half from those former lows since then.

While prices plunge, Yamada observes investors have far less they can count on. Buyers of preferred shares in banks, which offered them seemingly bond-like protection, are being turned into common stock, which puts them on the front lines to absorb losses.

Louise Yamada, founder of Louise Yamada Technical Research Advisors, was formerly Senior Technical Analyst, Vice-President for Research at Salomon Smith Barney, where she was responsible for sector analysis of the U.S. and global markets. She writes for widely acclaimed reports, including Portfolio Specialist, Market interpretations, Japan Portfolio Strategist, Latin American Strategist, Group Spectrum, and special research Trends reports. Her work has been the subject of two featured interviews in Barron’s. A graduate of Vassar College, Ms. Yamada teaches at the New York Institute of Finance and frequently appears as a guest on CNBC.

Tags: Accumulation, Barron's, Bloomberg, Cnbc, Consistent Supply, Doyenne, Economics, Economy, Gloomy Outlook, Hedge Fund, Louise Yamada, Market Technicians, Mf, Mutual Fund, Nyse Stocks, Primary Target, Rallies, Secondary Target, Sector Work, Stock Market, Supply And Demand, Technical Analysts
Posted in Bonds, Economy, Markets, Outlook, US Stocks | No Comments »

Predicting Crisis: Dr Doom & the Black Swan

Tuesday, February 10th, 2009

While on the road in Europe, I am posting a thought-provoking video featuring Nouriel Roubini, professor of economics at New York University and chairman of RGE Monitor, and Nassim Taleb, author of The Black Swan. The discussion deals with how to predict a financial crisis and the five signs of a bear. They also convey important knowledge on how to cope with the crisis, both on a structural and personal level.

Click here or on the image below to view the video

Source: CNBC, February 9, 2009.

Tags: Black Swan, Cnbc, Dr Doom, Economics, Europe, Financial Crisis, Five Signs, Image, Nassim Taleb, New York University, Personal Level, RGE Monitor, Swan, Video Source
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