Blogs

  • Week of 10/02/2008

    In This Issue:

    A Nasty, But Not A Calamitous, Stock Plunge
    Our Contrary Opinion
    A Cure For The Crisis Is Already Being Applied
    It's Time To Do Some Cautious Buying
    Stock Buyers Should Sip, Not Gulp
    The Bottom Line This Week

    People who enjoy excitement must envy investors right now. Not even thrill seekers who travel to New Zealand for the world's highest bungee jump have anything on us. When it comes to big bounces, Wall Street is the place to be.

    On Monday of this week, we completed the jumping part of the stock market's bungee experience. The rebound on Tuesday was nearly as exhilarating. Wednesday, thank goodness, was a quiet day of recuperation.

    Of course the rubber cord could break at any time, in which case the game will be over. However, that seems very unlikely. If a crash was in the works, we think it would have happened on Monday when deep pessimism was rampant.

    The market action we are having now is all the more exciting because there was no hint of it last week. The Dow dropped a tepid 2.2% while the Nasdaq just about doubled it with a 4.0% decline. It was barely enough to be a good warm-up for this week's main event.

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  • Senate Passes The Bailout Package!

    * Euro falls to 1-year low.... * Bailing out foreign investors? * O'Neill has a better plan... * ISM collapses! But the dollar rallies... ** Senate Passes The Bailout Package! Good day... And a Tub Thumpin' Thursday to you! Rocktober started off with a bang for the dollar, as the green/peachback continued to gain VS the euro and other currencies, pushing the euro to a one-year low VS the dollar. We all sat here and shook our heads in disbelief yesterday, as the U.S. ISM Index (manufacturing) collapsed in September, but the dollar rallied anyway. The ISM Index fell from 49 to 43.5, the lowest print since Rocktober 2001, which happened to be near the end of the 2001 recession and right after the awful period following 9/11. So... To me... This really paints the recession picture clear and bright for all to see... So, why did the dollar rally with this albatross around its neck?...
  • The New President and the Global Landscape

    In times of crisis, those with psychological fortitude discover opportunities that most people miss. A friend of mine in Houston tells me of unending piles of tree limbs broken down by the hurricane. The homeowner laments his disaster; the tree trimmer and the roofer order a new Mercedes. Most of the world sees a Wall St. meltdown. Buffett takes the opening to deploy billions from his cash hoard. They're all seeing the same thing, but they're reacting differently based on different visions of the future. I've included a piece today from my friend George Friedman over at Stratfor about the landscape the next US President will face. This article is a perfect example of why I rely on Stratfor for my geopolitical intelligence. The newspapers and other media do better or lesser jobs of telling me about what's happening right now. But that's not what an investor needs. What I need - and I recommend for you - is an analysis of what we're going to be facing. That's where George and his team absolutely excel. For at least the next month, the public conversation is going to be completely dominated by the November election and the political maneuvering to address the financial crisis. There will be tremendous drama. There will be dizzying swings back and forth in emotions, expectations, and more than likely the markets. And if you focus on it, you'll miss the real opportunities to position yourself for the emergence....
  • Banking Crises Around The World

    Do government bailouts in times of banking crises work? Philippa Dunne & Doug Henwood of The Liscio Report highlight a major study of 42 fairly recent banking crises around the world. Result? Some types of government intervention works and some don't. One characteristic that is needed though is speed. Dithering, a la Japan, is a recipe for disaster. This is a brief summary of the report (to which they provide a link) and their conclusions as to the basic outlines of what the US should do. Given that Europe is already in the throws of its own bank crisis, and the rest of the world could experience problems, this should be useful reading. They also provide graphs of banking crises and comparisons with developed countries and the resulting market experience....
  • Looking Beyond the Panic

    Warren Buffett may have been way too premature when he declared in May of this year that the panic phase of the credit crisis was over. Recent developments suggest, however, that there are good reasons to conclude that Mr. Buffett's prediction is...
    Posted to Musing on the Markets by Vinny Catalano, CFA on 10-01-2008
    Filed under: ,
  • The Bailout Lives!

    * The Senate to the rescue? * Dollar rallies big time... * Rumor day... * Consumer Confidence stronger? ** The Bailout Lives! Good day... And a Wonderful Wednesday to you! Welcome to October! Or as we say in St. Louis... Rocktober! September went by in a flash, let's hope Rocktober slows down a bit! Well... Monday we had carnage in stocks, and yesterday in currencies, while stocks rebounded. What a difference a day makes! On Monday, the House voted down the Bailout package (doesn't it just get your goat that it's still being referred to as the "rescue plan"?), and yesterday, seeing the collateral damage caused by the "no" vote, Congress decided to try and rescue the bailout plan....
  • The Room - 09/26/2008

    What a world I have returned to from my cloistered retreat at the beautiful Vivenda Miranda, scenically situated on a cliff outside of the quaint port town of Lagos, Portugal. Everything has changed. Everything is changing. The storm we have so long tried to help you prepare for is upon us. At this point, I can only hope you have your sails rigged for the storm now breaking, because time is running out. The violent volatility I warned of when last I wrote has arrived, with towering waves now rising up and smashing into the economy - and as an unavoidable consequence, our personal portfolios -- from all sides. Overnight the holders of my mortgage, WaMu, failed, the largest bank failure in history. This week, the golf course that I usually play on was taken over by the government... last week it belonged to AIG. As you don't need me to tell you, that same government now wants to spend over a trillion dollars to bail out Wall Street and to shore up the money market mutual funds - which have so far flown under the radar screen despite portfolios stuffed to the brim with bad paper. While no one was paying attention, U.S. automakers used their election year leverage to win approval for $25 billion in low-interest loans....
  • After the Bailout

    After the Bailout I can’t help but wonder if Monday’s bailout vote would have been different if the Dow Industrials were down 770+ points before they started the roll call. Members of Congress that voted against the Paulson Asset Management...
  • Might Uncle Sam Make Money On The Bailout?

    The entire country is in a tizzy over the massive government bailout plan. The credit markets have seized up even further, risking a real credit crisis or worse. Banks are dropping like flies. Yet the $700+ billion bailout was voted down yesterday in the House of Representatives. But it is far from dead. This week, I will summarize the latest bailout plan, both the good and the bad and the risks. Actually, there are some smart people who believe the government will make money on the bailout plan, maybe a lot of money. I'll explain that as well, although I don't necessarily agree. Hopefully, this week's discussion will be helpful. Let's jump in....
  • King Henry Was Wrong Again!

    * Bailout package is voted down! * Biggest one day point drop for the DOW! * Dollar rallies hard... * Carry trades unwind... Again! ** King Henry Was Wrong Again! Good day... And a Terrific Tuesday to you! Well... Guess who was wrong AGAIN! That's right, King Henry Paulson, he of the U.S. Treasury Sec. throne... He told the world on Friday, that the bailout package was a "done deal"... And he told us again on Sunday that it was a "done deal"... The markets rejoiced, the stock jockeys danced in the streets, the karma flowed and all the stars were in alignment... And then... A (not so) funny thing happened on the way to the forum... King Henry's men revolted, and the bailout package did NOT have the votes to pass it, and the "done deal" was "undone"! Once again this man has led investors down the wrong path. I've documented the wrong statements by this man in the past year, and still, investors hang on every word by King Henry... When will they ever learn? When, will, they, ev-er learn?...
  • What's In A Name?

    A bailout by any other name would smell just a foul. Or would it? The Bard may have captured the essence (pun intended) of the smell test, but then again he didn’t run for elected office. Nor did he live in a media saturated, image drenched world...
  • Haste Makes Waste

    The purpose of Outside the Box is to present views which cause us to think through our basic assumptions. This week our old friend Michael Lewitt of Hegemony Capital Management gives us a view as to why the bailout bill going down may not be as bad as I think it might. There is much we agree on, however. And part of our agreement is that a deeper recession is in our future. Let me be clear. Muddle Through is now at risk. I have talked with my publisher, and for the next few weeks of The continuing Crisis, we are going to send more than one OTB per week, and I may also add some short commentary. These are extraordinary times, and I know a lot of you (as I can tell from phone and emails) are worried and are interested in analysis that is not biased with either a perma-bull or perma-bear stance. I will call it as I see it, as always, and forward you material from my best sources. That being said, we will get through this, one way or another. Sanity and clarity will return, as it always does after times of crisis. I wish you the best in your situation....
  • Cutting Off Your Nose to Spite Your Face

    Today, the House of Representatives has dealt a huge blow toward stabilizing the financial markets and avoiding a world economic crisis. The less than perfect Paulson bill would have accomplished that goal in numerous ways. One of them, which has been...
  • Bailout Package Is Ready...

    * Ready to spend $700 Billion... * Wachovia wants to sell itself... * Dollar rallies hard... * The rot on the vine spreads... ** Bailout Package Is Ready... Good day... And a Marvelous Monday to you! A Wonderful Weekend for yours truly, as the weather was Chamber of Commerce like, I got to see all the kids, and little Delaney Grace two days! I also got to enjoy two football games, one that Alex played in, and one that Alex went with me to! Fabulous stuff! OK... The data on Friday was the stuff that should have sent the dollar to the woodshed, but like all the data lately, it just gets swept under the rug, as the market movers are myopic with the Bailout package. Lawmakers worked all weekend to iron out the details of the package, and King Henry (U.S. Treasury Sec.) has announced again that the package has been agreed on by Congress. The vote doesn't actually take place until tomorrow or Wednesday, but that hasn't stopped King Henry from pounding his chest over his latest victory. I like what I heard from former Fed Gov. (and Mark Twain Bank economist) Laurence Meyer, who said: "This has a reasonable chance of pulling back from the brink and having some success, but it's far from certain that will be the case."...