Saturday, 28 February 2009

There is at least one good CEO




I just did a post on how CEOs are paid way too much. We have one guy who decides too pay his employees.
Excerpt:
When President Barack Obama gave his address to Congress on Tuesday night, he offered up an alternative vision of government, business and the economy that stood in bold relief to the rampant capitalism that had prevailed under George Bush.
And to prove this wasn't just fanciful talk he cited Leonard Abess (pictured with his wife Jayne at Obama's address), the hotshot businessman who took $60 million from his share of the sale of his shares in Miami-based City National Bank and handed it out to the bank's workers, tellers and bookkeepers....
....he said: "I didn't feel right getting the money myself." This sentiment was duly recognised by the president: "In my life, I have also learned that hope is found in unlikely places; that inspiration often comes not from those with the most power or celebrity, but from the dreams and aspirations of ordinary Americans who are anything but ordinary.
"I think about Leonard Abess, the bank president from Miami who reportedly cashed out of his company, took a $60 million bonus, and gave it out to all 399 people who worked for him, plus another 72 who used to work for him," Obama said. "He didn't tell anyone, but when the local newspaper found out, he simply said, I knew some of these people since I was 7 years old. I didn't feel right getting the money myself."
Source:
The First Post
February 27, 2009

Wednesday, 25 February 2009

364 times that of the average American worker


I found an article saying that a "study by the Institute for Policy Studies and Boston-based group United for a Fair Economy found that the CEOs of the 500 largest U.S. companies took home an average of $10.8 million in total compensation in 2006." Now, the graphic I have posted above and the article that I read are a few years old, but I think the point has been made. These guys get paid way too much, and it is very simple to see in a chart. If this chart was a stock, I would the short the hell out of it. But oddly (or not), CEO pay continues to rise even as we progress into the coming depression. You are hearing a lot of CEOs recently saying they won't take their bonuses because it wouldn't be right. Their bonus doesn't matter because they get paid 364 times more than the "little guy", they could care less. So, now tax-paying citizens are supposed to bailout these failed institutions with incompetent and overpaid CEOs who are the ones who ran these companies into the ground. That seems fair.

Tuesday, 24 February 2009

Chart Perusal: Your source for charts on the stock market and economy

Possible Multi-Decade Head and Shoulders

I found this chart on Ritholtz's The Big Picture blog, and he was mentioning the fact that the 50% retracement from the beginning of the great bull run from 1982 was impressive. At this point, the important thing is what happens going forward. The market rallied impressively today. The DJIA was up 3.32%. The S&P was 4.01%. The NASDAQ was up 3.90%. There isn't a doubt in my mind (even with today's rally and the forthcoming rally that is around the corner) that the indices are going much lower over the coming years. Take a look at the long term chart of Japan. They have been in a bear market for almost 20 years. Every single rally should have been sold over that 19 year period. I think we could see the same type of thing in the U.S. Every time the market rallies, just sell into it. Back to the chart, could it be forming a huge multi-decade head and shoulders pattern? Anybody who thinks the DJIA is going back to 14,000 in the next 3 years might be crazy.

Monday, 23 February 2009

Commentary: Your source for news, commentary, and stock info

Guess when this was?

This was October 22, 1929. The market fell for 1,039 days ( or 2 years, 10 months, 5 days) resulting in a 89% decline from top to bottom. This newspaper is precisely why you don't want to make investment decisions reading newspapers, newsletters, and gurus. You will get terrible advice. Learn to read charts, do your own research, and come up with your own conclusions. Jesse Livermore said, “Familiarize yourself with a stock, or different groups of stocks, and if you figure the timing element correctly in conjunction with your records, sooner or later you will be able to determine when a major move is due. If you read your records correctly, you can pick the leading stock in any group. You must, I repeat, keep your own records. You must put down your own figures. Don't let anyone else do it for you. You will be surprised how many new ideas you will formulate in so doing; ideas which no one else could give you, because they are your discovery, your secret, and you should keep them your secret." He also stated that, "the fruits of your success will be in direct ratio to the honesty and sincerity of your own effort in keeping your own records, doing your own thinking, and reaching your own conclusions.” Take a look at the post below. I think when this bear market comes to close the line on the chart of the current 2007-2009 bear market will be sticking out down there, just like 1929-1932. So, when financial pundits, magazines, and newspapers start to coming out later this year saying the “worst is behind us, and it’s time to buy stocks” . Keep the above newspaper article and the chart below in mind.

Chart Perusal: Your source for charts on the stock market and economy


And the bear keeps growling....

I found this chart on the Barry Ritholtz's The Big Picture. Gives you a comparative look at the previous bear markets.

I thought this was funny

Friday, 20 February 2009

Quote of the Day


"The ultimate effect of deflation is to reduce the supply of money and credit. Your goal is to make sure that it doesn't reduce the supply of your money and credit. The ultimate effect of depression is financial ruin. Your goal is to make sure that it doesn't ruin you."

- Robert Prechter, Jr.

Source:
Conquer the Crash by Robert Prechter, Jr.

Thursday, 19 February 2009

Commentary: Your source for news, commentary, and stock info

The Big Picture

In a society that has become so focused on the short term, I think it makes sense to look at the longer term picture. Why? Because no one is looking at it; hence, the reason that people get clobbered when the long term trend really gets going. I put this chart up because it shows the progress of the stock market from the start of the 20th century. The red areas were major bear market periods. Doubtlessly, you will be able to deduce your own conclusions from the chart. What I want to talk about is the nature of the time period we are in. For those of you that know your history, it might be a little easier to understand what the possible consequences of the rest of this major bear market period will look like. We have been in a bear market that started in 2000. If history is any guide then the current bear market, will last until 2014-2016. The current period is deflationary just like 1929-1949, but this time around the Fed is printing money like crazy. In the 1930s, the Fed didn't try to come to the rescue until a lot of the damage from deflation had been done (i.e. banks failures, panics, skyrocketing unemployment). Can the Fed really stop deflation? It's a question I would really like to know, because it would help me position my investments/trades. I do think that a major low in this current bear market has to finish below the October 2002 lows. If the Fed is unable to stop deflation, I think it should look something like the 1929-1932 spike downward (see above). It has to. There is nothing else that a deflationary crash would look like. If the Fed is able to arrest deflation, then I think the market makes a new low just near the October 2002 lows. But then a serious currency devaluation for the U.S. dollar is coming. Either way it isn't going to be pretty, and people who are trying to fool themselves into thinking everything is going to be okay are going to end up with a seriously impaired standard of living.

Tuesday, 17 February 2009

My Thoughts on Deflation

As the inflation/deflation debate rages on, I want to talk about what's happening in reality. What we are seeing today is deflation. How can you argue with that? We have seen house prices tumble, commodity prices plummet, and the bonds of weak issuers disintegrate. These things are all deflationary. Some people will say that will all the money printing going on that hyperinflation will come. They might be right, but they are not right today. Right now, the purchasing power of all the fiat currencies is going up in relation to real things. You can now buy more stocks with your money. You can now buy more oil with your money. You can buy more houses (I wouldn't advise that now) with your money. Everything is cheaper. It's going to continue to get cheaper, too. The deflation (or more importantly credit contraction) is not over yet. You are getting a total de-leveraging of society. People are starting to realize that being totally in debt is reckless and are starting to save instead of spend. Hedge funds are pulling in the reins on their leverage (Having leverage of 30 to 1 is no longer considered prudent). Banks are also doing their thing by not lending a penny to anyone. They are just trying to save themselves. The government is giving banks money and telling them you must lend. The banks are just ignoring them and holding on to it, saying to themselves, “Nobody else is lending, why should we? Why don't we just hold on to it for awhile and see what plays out". What's the end game? Well, prices of things have to fall to their intrinsic values before long term investors will come in. The more the governments keep intervening in markets, the longer it will take to get to the end. But when the deleveraging is over (which I think will be 2014 for stocks, 2012-13 for houses, and 2012 for commodities) you are going to get serious inflationary pressures coming back. The governments of the world are taking unprecedented action to unlock the credit markets in order to save the financial system, but they are not considering what the consequences of their actions will be. It's a policy of "let's just do something, anything, and see if it works. If it doesn't work, we will keep doing more of it." It doesn't make sense to me, but I can see what they are doing will be very detrimental in the long run. Keep in mind the price of gold. It's been going up for 8 years straight and looks like it's going to continue its run. When the deflation is over, you want to have some assets in gold (50% or more, in my opinion). Gold is trading above $960 today for the first time in 7 months. I think gold market is up because people are anticipating the end of deflation (even though it is years away, in my opinion) and know it's going to be terrible for fiat currencies. People aren't even waiting for the end of deflation. The demand for gold right now is ridiculous. There is a premium if you are trying to get the physical, because there is little supply. The only thing backing these fiat currencies is CONFIDENCE because they aren't backed by anything. Gold has been considered money and I think will always be considered money. What do you think will happen if the entire world loses faith in these pieces of paper we call money? They will instantly become worthless, and anyone with real wealth (i.e. gold bars, real estate, machinery/equipment, commodities, "real things") will not suffer the devastation that will come to people who have electronic 1s and 0s in their bank account.

"A Completely New Global, Political, and Economic Settlement"

I have posted a recent interview with Paul Keating, who is the ex-Prime Minister of Australia. If you want to know the true scope of the economic crisis, this interview with Keating will give you the in your face version.







Saturday, 14 February 2009

Gerald Celente - Trend Forecaster



I will probably get this guy's subscription to his newsletter because when it comes to forecasting future trends this guy has been right on point since the '80s.
He has also got a website if you want to check his credentials: http://trendsresearch.com/

Thursday, 12 February 2009

Chart Perusal: Your source for charts on the stock market and economy

Where are U.S. tax dollars going?: This is a chart I found giving some details about where the economic stimulus the Obama administration is proposing. Take a look and tell me if you see something that will create a sustainable recovery in the economy.

An Inconvenient Debt

A quick 2-minute video showing the reckless insanity of the government trying to add more "leverage and debt" to fix the crisis of too much "leverage and debt". You don't have to be a financial genius to figure out that it cannot be the solution. You don't give a crackhead more crack.

Commentary: Your source for news, commentary, and stock info

Bottom Callers: The market's plummeted all the way through 2008. At every intermediate bottom, so-called financial experts and pundits were telling investor's what a fantastic "buying opportunity" it was, and valuations were "so cheap". The pic above hits the issue on the head. What they didn't realize is that stocks that are supposedly "cheap" can get "cheaper and cheaper still". Fundamental analysis is great in bull markets. It makes you look like a genius, but in bear markets it makes you look foolish.

Wednesday, 11 February 2009

The Challenge of Speculation

"To invest or speculate successfully, one must form an opinion as to what the next move of importance will be in a given stock. speculation is nothing more than anticipating coming movements."....
"The good speculators always wait and have patience, waiting for the market to confirm their judgment.".....
".....you must entirely ignore personal opinion and apply strict attention to the action of the market itself. 'Markets are never wrong--opinions often are.'"
"...do not be too anxious to get into it (a stock). Wait and watch the action of that stock for conformation to buy. Have a fundamental basis to be guided by."

-Jesse Livermore

Source:
How to Trade in Stocks by Jesse Livermore

Tuesday, 10 February 2009

Deflation



There is a lot of debate about whether we are going to have inflation or deflation. A lot of people are scared about inflation getting out of control because all the government's of the world are printing massive amounts of money to solve all our problems (i.e. issuing credit; monetizing debt). What these people don't understand is that asset deflation is happening faster than credit creation. Basically, the central banks can't create credit at the same rate credit is being destroyed. So the end result is deflation. I was listening to a Youtube interview of Mike "Mish" Shedlock, a well-known financial blogger, and he made some good points in that interview that i want to point out.

"I go back and look at the last time that money supply soared (base money supply soared) like it is now. Guess what? There are only two other occurrences. One was in World War II and the other one was in the Great Depression."

Essentially there are only two times in the last 100 years that money was being printing like it is today. He also goes on to say:

"Here are the conditions that one would expect to see in deflation: falling Treasury yields, falling home prices, rising corporate bond yields, a strengthening dollar, falling commoditiy prices, falling consumer prices, rising unemployment, a negative GDP, a falling stock market, a falling credit mark-to-market.....and a spiking base money supply as the government attempts to fight it. We would see banks hoarding cash. We would see a rising savings rate, and we would see the purchasing power of gold rise."


Source:
Stock Shotz Interview
January 4, 2009

For more details, you can check out his article about inflation/deflation on his blog:

Only Government That Can Jolt Economy?!

Did Obama really say that? I only watched the first two minutes to see if he actually said that. He did say it, and then I stopped watching. There is no reason in the world to think that what Obama said is true. Think about it? If it were true that the government is the only thing in the world that can get the economy going, why haven't all the things they have done in the past 15 months worked? I will tell you why, because it is not in their control. They have no control over the situation, but want to give the illusion of control. The collective human psychology of the world moves to its own drum beat. We are now experiencing a turn down in social mood from a two decade long rising trend of social mood. That trend has now turned down, and the world will not recover until the social mood recovers. It is that simple. So, when people start feeling better about things the economy will improve, companies will start hiring, credit will be giving out more freely. But don't be fooled into thinking that the government is the "ONLY" thing that can turn it around.


Obama's speech on Bloomberg Video:
http://www.bloomberg.com/avp/avp.htm?N=av&T=Obama%20Says%20Government%20Only%20Entity%20That%20Can%20Jolt%20Economy&clipSRC=mms://media2.bloomberg.com/cache/vmwu3ZYAKXL8.asf

Friday, 6 February 2009

Commercial Real Estate


I have been hearing that commercial real estate is the new shoe to drop. Empty malls, half-built hotels, etc.

Thursday, 5 February 2009

Close above 8,000

The bulls were successful in getting the DOW back above 8,000. It was a volatile day, but you could sense the manipulation upward.

Manipulation

You are witnessing manipulation today. When the S&P 500 goes up 20 points in just over an hour with no news, it's being manipulated. Not only do you have to deal with making investment decisions in a difficult economic environment, you have to deal with manipulation in the markets too.

Quotes of the Day

"... the markets have learned throughout the last few centuries; that you can always bet against the central banks and you will make money eventually. So, when a central bank says, "Don't you worry! The pound is gonna stay here or the ruble is gonna stay here; whatever. Ultimately, that has always failed if the fundamentals are not sound. And it will fail again. And everybody knows what the target is."
"Whenever a currency fails (throughout history), it has always started internally. The foreigners always get the blame because the politicians like to blame all their problems on foreigners 'cause they can't vote., and they are not there"...
"It always starts with the local people because the local people know best what's going wrong and they start moving out. The speculators (historically) have always joined in later."

- Jim Rogers

Source:
Bloomberg Interview
February 5, 2009
http://www.bloomberg.com/avp/avp.htm?N=av&T=Rogers%20Says%20Russia%20May%20Break%20Up%2C%20Mulls%20Bet%20Against%20Ruble&clipSRC=mms://media2.bloomberg.com/cache/vevJ5ht8NmQw.asf

"Acts of Insanity"

"The administration and others are in un-chartered waters. You won’t be told this, but this is an experiment. Protecting banks, mortgages and other loans against loss is not the province of government. This is not protecting the people. A bank for toxic assets is not the answer either. It just passes debt from lenders to the public. Why inject funds into bankrupt banks and other financial firms?"...
"The madness of espousing invasive fiscal and monetary stimulus to ward off the horrible evils of deflation is an excuse to lay the groundwork for a greater depression and a greater collapse."...
"We say it is insane to target asset prices, rig all stocks, forex and commodity markets, to suppress prices in one area and increase them in another. It is insane to bailout banks, brokerage firms, insurance companies and select elitist transnational corporations. It is insane to borrow and print money and credit to support prices in the debt securitization marketplace. It is insane to try to bail out one quadrillion dollars worth of derivatives. There is no way you can reverse a black hole."...
"The next bomb to hit will be the pension bomb. Both the stock market and bond markets are headed much lower; 50% lower. That is bad news for pensions and insurance companies, as well as anyone invested in those markets. "...
"The implosion will probably begin in state, local and private pension plans. Good portions of their assets are illiquid, perhaps 15% to 20% and there is no telling how long they will remain that way."...
"People will start to realize over the next six months how serious this depression is when they see ¾’s of malls empty and whole buildings in Manhattan without a tenant. The entire brokerage, insurance and banking industries are frozen and huge amounts of money will be lost taking down banks, insurance companies and private equity groups. This depression we are already in will be far worse than the 1930s."...

Source:
The International Forecaster
http://www.theinternationalforecaster.com/
February 4, 2009
http://theinternationalforecaster.com/International_Forecaster_Weekly/Acts_Of_Insanity_Are_What_Destroyed_The_Economy

General Motors




General Motors hit a new closing low today. $2.72 Does anybody (besides the US government) expect this company to make it? Personally, i don't. The US automakers are a blackhole for the bailouts. The US government (by way of its tax-paying citizens) is giving money to incompetent managers expecting a different result. Emphasis on "expecting a different result". Why would you think giving the automakers a bailout is going to help them make cars that people actually want to buy. The long-term chart of GM says it all. Do you remember these companies, Skyline, Sunstrand, and Aileen? Exactly, neither do I. If the government does not nationalize the automakers, they will go the way of ALL extinct companies with incompetent management.



Wednesday, 4 February 2009

Oil's future...


Oil has gone from everyone thinking that oil was headed to $200 a barrel, to eveyone now thinking that oil is going to $25. There are many sides to the oil debate. The bulls says we aren't finding anymore (Watch this video link for the bull case: http://youtube.com/watch?v=4nyMZ2jIcmQ), and the bears are saying that there is plenty of oil. (Watch this video link for the bear case: http://youtube.com/watch?v=41wRcvU_vjY&feature=related). Your guess is as good as mine, but i don't care much for fundamentals when it comes to trading. Back in June the trade was to be looking to go short oil; and after a chart like above, the trade now is to be looking to go long.

Where a barrel of refined oil goes....


It's not an everyday thought to wonder where that barrel of oil goes, but here it is.

Below 8,000

The DJIA closes below 8,000 for the 2nd time in 3 days. This is significant because the everyone is watching the 8,000 level to see if it can hold. I don't even think it is a question of if, but when will it happen. The market should continue to move lower in the month of February and March, bringing a new round of selling to the markets.

Monday, 2 February 2009

Commentary: Your source for news, commentary, and stock info

Waiting for the Break

Just waiting for the breakdown in the market. The market looks very weak, and should break to new lows in the month of February. If it doesn't start to break this week or the next, then look to the last week of February or first week of March.

Labels