Tuesday, November 11, 2008

Something for Underneath your Hat: Faber


Christophe

Villedary (click on image)


If you were to put anything under your hat today, I would recommend that you partake of this gem of a broadcast from Bloomberg. It has both Marc Faber and Charlie Maxwell in it ~~ http://tinyurl.com/3g359f:

In listening to this broadcast, I felt that a few of my ruminations as I try to make sense of all of this 'stuff' were affirmed . . .
  • the probability of "L-bottom" recession;
  • that CB's efforts are small relative to the scale of of the asset deflation;
  • the scale of our commodity consumption and the linkage to that of China's;
  • that deflation would be with us prior to inflation.
I also appreciated his reflection on comparing S&P earnings yields with that of junk bonds (rather than traditional corporate bonds). While I have far to go in terms of thinking facilely about asset allocations, I'm becoming more comfortable with understanding the movements among asset classes in addition to the effects of currency disparities. That comfort is centered on nothing more than a rudimentary (if that understanding), but even having cognition of these issues puts me a little further up on the learning curve than I used to be.

2 comments:

nice said...

Just popped back to check in...

Have been sidetracked with other activities past 10 days..

Looks like the Market was program traded down over the bond holiday
(F M T) (ie: money moved into bonds last Fri ahead of the GM spectacle)

Also seems to me that with the government transition - perhaps all the 'planners' are not on the same side now... adds to uncertainty

Can't see the market having anymore lame rallies on bailouts anymore either.

Paulson seems focused on the bond market and credit markets with his TARP stuff - stock market is probably of little consequence at this point.

What he and everyone fails to mention is why portions of the bond market have stopped working - and why he changed tactics after getting the 700B....

It is not because of a 'lack of confidence' - it is because of insolvency.

Notice how fast the market dropped after the bankers got their 'bailout' to plug the holes in the derivative market created by LEH/AIG?

Once the bankers got their money - the prop on the market was removed.. pretty sad

--

Also, every advisor, newsletter writer, commodity guru, talking head - keeps saying buy..

So many averaging down..

Persistent bullisness into a declining market is always a red flag to me - or have traders got smarter?

I'd rather see more 'throwing in the towel'

And what happened to trade the trend? (the trend is down)

However, optimism is borne out of pessimism - and fear will turn to greed..

And things do look more favorable today - with Oil nearing the $55 level

The drop in gas prices will do a heck of a lot more than any useless stimulus package.

So let's watch the US dollar - in particular the OCT 27th level
(Notice that the day before the election and on Fri when Obama was speaking - they let the dollar drop to give the markets a kick?)

Other than value buyers - a falling US Dollar is probably the markets fuel now...

Taking a stab at a few longs today with a longer term horizon
... and removing some of the short term shorts/hedges

Still very cautions - but like the fact that the market is trading down - and I cant' see any reason why we won't make new lows on some markets... still surprised more aren't calling for a continued decline.

So I await to be proven wrong...

Let someone else pick the bottom - they seem to be obsessed with calling bottoms - it could be today, tomorrow, next week, next spring..

I'll take whatever the market gives...

good luck all

nice

(btw Leisa you were correct about how the Insurance co's would be affected- even MET - Snoopy can't be happy LOL - 'nice' call)

Leisa said...

Hi Nice--good to see you back. The market is not being 'nice' today.

Too many pundits had a poor grasp of liquidity v. solvency arguments. Cheap just gets cheaper.

This is price discovery--and it ain't pretty! GS being grabbed in the shorts by the shorts and shaken handily.