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Deep Thoughts From Bob Janjuah
My last cmmt, from 5th June, is re-presented below.
Plse read it. The
following - which is in response to a very large number of requests -
will make more sense once you have read it, and if you have read what I
have been putting out all yr:
Both Kevin and I have been saying all year that this yr was going to
surprise, with H1 09 far better than the consensus was forecasting back
in Jan/Feb (and H2 much worse). Take yourselves back to the dark days of
Jan/Feb. I know that I have the reputation of an uber Bear, and I think
this sometimes means that some folks may sometimes ASS-U-ME they know
what I am saying, rather than actually carefully reading what I am
actually saying. However, I don't know of any (other?!) 'uber Bears' who
were telling you back in the dark days of Jan/Feb that risk assets would
rally and surprise to the upside. The entire Street was telling you H1
09 would be terrible. Not Me, and not Kevin.Virtually every client we
spoke to in Jan/Feb was telling us that this year was going to be a
disaster, with some small hopes of a bottom and turnaround at 09
year-end. Not Me, and not Kevin.
What is the point of this? Well, simply put SO FAR this yr economies and
mrkts have broadly followed the route map we suggested. OK, we could
have been a little more aggressively bullish. On a scale of -10 (max
bear) to +10 (max bull), having been at -10(00!) over 07 and 08, we only
went to +3/+5 or so on risk assets. We should have gone to +10, but for
us a move from -10 to +3/+5 was pretty significant. Fortunately, enough
clients did follow our words (rather then any pre-set belief of what our
words were saying) to mean that, SO FAR, 09 is working out pretty well.
At the very least, some folks as well as ourselves realised that pretty
much EVERY major bear mrkt in history has AT LEAST one major 50% retrace
along the way. From the all time highs in Oct 07, thru to the dark days
of Jan/Feb 09, we had not seen even a single retracement anywhere near
these % move levels, and thus we were well overdue one. We are having it
NOW, from the lows in March 09, to the highs which I think we see in the
next few weeks.
If you have read my previous cmmt (below) CAREFULLY, you will see that
on the day of writing, June 5th, I said that the risk asset rally has
further to run. On June 5th S&P traded at 950, the iTrx XO index traded
in the mid-low 600s. As you will see below I suggested that the Jul thru
to Sept period would be the 'tipping zone' and that during this period
we could see another 5 to 10% gains in the S&P before rolling over.
Between 5th June and now we had a mini-retrace (869 early-July S&P low,
from an early-June high of 956, nearly -10%) but are now in the middle
of a parabolic spike up. This spike higher/better in risk assets is as
expected and fully within the levels I said in early June.
I expect this risk rally to CONTINUE, into and maybe even thru a large
part of AUG. I see scope, as I said in early June, for a move in the S&P
up to 1000 (no doubt)/1050 (potentially), this equity move will drag all
risk assets better and lead to further weakness in govvies and the USD
too.
What happens after that? Well, SO FAR, nothing has happened to alter the
views I have set out already below - namely that the next ugly leg of
the bear mrkt begins as we get into the end of the Jul thru Sept tipping
zone, driven by failure of the data to validate the V that is now FULLY
priced in into markets, with new equity lows forecast for late
2009/early 2010. I see late Aug/early Sept as the most likely best spot
to short stks/credit/risk assets, as I expect the S&P to peak for the yr
at 1000/1050 around then, and I see this same timeframe as a great oppo
to buy BUNDS again, when 10yr bund yields could well be back up in the
3.70s/3.80s yield area.
Some will say the data - macro and earnings - are validating the V.
Well, if for some reason your time clock only started working the day
after Lehman, then of course you are right, and it is such comparisons
which have driven the current bear mrkt rally post early-March. But
compare the data to the day before Lehman - do this and you will see
things are in much poorer shape, on almost every metric. The Lehman
event is, as Kevin puts it, going to be seen as the head fake when this
crisis is looked back upon in the history books of tomorrow. I had my
own staggering version of this recently. One client at a leading
investment firm told me the other day that I was too bearish long term
because Q2 earnings were UP. Up? Up against what? Against the utterly
bogus guidance given to you by companies themselves, which have been
trimmed down continuously into the reporting date? Yes!! Yippee - I
guess. Up vs the results of Q4 and Q1, which were amongst the 2 worst
qtrs in global economic history EVER? Yes, but again, yippee - how could
they NOT be up considering governments around the world have thrown
TRILLIONS of taxpayer money at the hole. But Up against the same qtr
last yr - NO NO NO. Q2 S&P operating earnings are DOWN over 20% vs Q2
last yr, and that measure is AFTER the dramatic 'changes' on accounting
policies re earnings from the financial sector.
I am of course aware of the risks to this call. Specifically, I could be
putting too much emphasis on policymakers making the right longer term
decisions rather than shorter term populist decisions, which will almost
certainly end in disaster, albeit disaster delayed. Policymakers can
decide to create another asset price bubble thru running non-credible
and ultimately disastrous monetary and fiscal policy. They can blow up
another bubble in asset prices by inflating, no doubt to breaking point,
the public sectors' balance sheets (government accts and central bank).
This will give all us supposed market pros exactly what we deserve - a
shrt term illusion of wealth and gain. I use the word 'supposed'
because, frankly, we should all by now have learnt the consequences of
greed & letting policymakers put short-term 'populist' DEBT policies in
place over sound longer term policy. Short-termism and Greed gave us the
mother of all debt collapses which we are now working thru. Deepdown
investors and analysts must realise they are AGAIN being sucked back
into the game where 'markets make opinions', where 'excess liquidity' is
the driving investment rationale - surely we must all know that
investing purely because of price action and excess liquidity NEVER ends
well. However, whilst I still HOPE and believe that we will now see
sound longer term polices to deal with this debt-bust, which will mean
PAIN over the next 12mths at least, my FEAR is that
policymakers/governments will blow up sovereign credit worthiness so
that we can again con ourselves that all is well, at least for a little
while.
TRUST ME, we should NOT choose the shrt-term 'new bubble' route now.
Why? Because the end-game to this type of bubble, if unchecked, is
almost always, IMHO, UTTER disaster in the form of protectionism,
horrible levels of sustained unemployment & inflation, and maybe even
social/civil unrest - history is pretty consistent on this point. There
is NO new paradigm here. Sadly the majority of sell-side analysts &
policymakers in the world - the same crew that did not see the credit
disaster coming even when it was inches away from their collective noses
- have chosen to forget these basics and instead spout output gap,
valuation & other such rubbish to you, like the 1970s (or indeed 07 &
08) never happened. Still, what do you expect. My real disappointment is
not with such folks - they are doing their jobs - but rather with all of
us, because we are so eager to forget their failures, and are so eager
to believe their bull-hype without seriously thinking thru the
consequences. Ask yourself this: who bails out Government after they
have bailed out everyone. Reckless fiscal and monetary policy, which is
being used to pretend that the debt-bust didn't happen, will - if it
runs unchecked - be the worst possible outcome for the UK and US
economies. It might trick us - in the short term - into believing all is
well, into causing UK and US house/equity/asset prices to rise and into
believing that 07/08 weren't really that bad, but this will all largely
be a MYTH/money illusion that will not last much beyond mid-2010. Into
late 2010 and 2011/2012, the costs of such reckless policy will I think
make the events of the last 18/24mths seem like a walk in the park.
Think of unemployment, inflation and bond yields up in the teens and
then ask yourself how you will feel. Trust me, if unemployment,
inflation and govvie yields are in the teens, buying risky assets like
credit, equity and EM at current levels now will be exposed as hugely
loss making endeavours.
In order to protect against this fear, that policymakers can't bring
themselves to do the right thing and instead do the short-term thing
AGAIN, with no heed to the l-t consequences as a result, then sensible
Stop Losses are needed. I will go with the same Stop Loss I set out
below on 5th June. So, if the S&P cash index closes ABOVE 1022 for 4
consecutive days, I will be stopped out and it will very likely be the
case that policymakers are going the 'shrt-term next bubble' money
illusion/nominal route rather than the longer term route which would be
more painful shrt term but which will pave the way for the next 20yr
boost to real productivity and real wealth gains.
Lets see. I fully expect S&P to move up to 1000/1050, but holding above
1022 for 4 consecutive days, as opposed to a single day spike up to
1050, will tell me a lot. If what I fear (as opposed to what I hope)
plays out then I will have to concede that the lunatics that ran the
asylum pretty much into the ground, culminating in the events of Q4 last
yr, are back in control. Sadly, if this is indeed what plays out, then
when the public sector balance sheet bubble bursts, maybe in a year, but
almost certainly within 24mths, I will hopefully be far far away from
the madness. I am deeply troubled by what we could see - a REDUX of the
Greenspan Fed 2003 thru to 2005, where the WRONG polices were kept in
place far too long, validated by nonsense around productivity and global
savings glut, which DIRECTLY lead to the terrible failure of global
credit markets over the last 2 yrs, and where the new paradigm was that
house prices could go up for ever and that nothing could ever
default....Ben Bernanke - PLEASE do not make the same mistake as your
predecessor!! You and other policymakers should be applauded for dealing
with the post-Lehman fall-out, but even you used the term 'Emergency
Policy' when dealing with this. You must deep down know that such
Emergency Policy is NOT the right policy going forward, as Lehman has
been 'dealt' with. Sadly, your most recent testimony and the way you
talked so vaguely abt exit policies - whilst 'bought' by the mrkt -
leaves me extremely nervous as you said NOTHING concrete abt exit.
Some of you will feel I am talking rubbish. Others will say 'who cares
abt the l-t, I only care abt this week/month/qtr/year as it relates to
my PnL & payout'. And some others will say 'sure, you may be right but I
will be smart enuff to get out in time'. All Fair Enough. But ALL of us
(I reckon) want to live for another 20/30/40+ yrs and in most cases
either have or want to have offspring. If you are in this camp, then YOU
should care DEEPLY abt the risk of policymakers favouring short-termist
populist, 'immediate gratification giving' policy over sound long term
policy choices, because policy mistakes NOW will make life more
miserable for ALL of us for a sustained period of time not too far down
the road.
On that cheery note, I need to let you all know that I am away
travelling and on hols for the whole of August, and will hardly be able
to check bberg/e_mail. I will mention that this will be the third Aug in
a row that the Janjuah clan are in Barbados (and yes, it was all booked
in March, when the deal was staggeringly cheap). I mention this merely
because that last two Augusts' proved to be pretty pivotal turning
points, Aug 07 being the +ve head fake when everyone wanted to believe
that policymakers had seen off the Credit disaster at the pass (of
course it merely served to suck everyone into risk again before the real
nastiness began), and Aug 08 being the calm before the utter collapse of
Sept/Oct/Nov.....3rd time lucky anyone?
Normal service will resume in Sept, in the interim Andy Chaytor will be
here for you.
Cheers
Bob
Bob's World from 5th June 2009:
U won't hear much from me over the next 5 wks or so as I am on the road.
So:
1 - We are - as Kevin has said - in the fag-end of the H1 09 rally we
called at the beginning of the year. We may have another 5/10% in S+P
gains from here.
2 - July thru Sept looks like the tipping zone. The driver will be
failure of the V, which is now almost fully priced in, to materialise.
The focus for seeing this will be leading indicators of private sector
capex, demand, incomes, spending, jobs, earnings (incl. core bank
earnings). Of course housing and banks still matter, but these will
increasingly be led by and not lead the above factors. For the V in
global risk asset pricing to be validated we need to see a surge higher
in the above real indicators, not just 'less bad' data and not just a
hovering around at these levels. I think we'll see a weakening trend.
3 - The next issues are inflation and rates. I am not worried abt core
over the next 6/9 mths pretty much anywhere globally. The concern is the
commodity area, esp. crude. We may want to cling to hopes that the rise
in commodities (and rates) over the last few mths are signs of grwth,
but as already mentioned the grwth data needs to improve meaningfully
now if such hopes are not to be dashed painfully.
4 - Sustained increases in commodity prices/non-core inflation and
rising bond yields driven more by global investor fears - especially in
the US and UK, but also in most 'developed' and EM sovereigns running
meaningful trade + fiscal deficits - around the issues of monetisation,
debasement, currency concerns, sovereign 'credit' quality, massively
higher QE needs, political concerns etc would cause serious damage to
risk assets, and very severe damage if the data on the grwth side also
deteriorates.
5 - Over the next 4/8 wks, as the rest of the rally leg plays out, and
subject of course to data:
* Equities are at or near the highs for the rest of the year and will I
think revisit the March lows. A move to new lows (mid 500s S+P) is still
highly likely this year (risk is it may take 3 mths or so longer) if we
get the combo of the grwth, commodity/inflation and rate concerns
highlighted above.
* Depending on what you think in respect of these 3 factors - and if
like me you are worried on all fronts but esp. on grwth - govvies are
cheap outright at the peak yield levels seen over the last few weeks,
but the real gem even if you are not as bearish on grwth is long bunds,
shrt USTs (looking for USTs to trade +50/+100 to bunds in 10yrs).
* In FX I like buying VOLA generally but, because I expect to see much
higher QE needs - this is just abt all that policymakers, esp. in the US
and UK, have left as a tool to create inflation/nominal grwth - I like
buying puts/vola on the twin deficit balance sheet impaired currencies,
most obviously USD + GBP, mostly vs NOK, Surplus Asia and EUR. These
currencies will be risked for the sake of control over yield curves if,
as I fear, the grwth story does not materialise as discussed. A 20% move
lower in the USD would not shock me.
* In EM the relative winners in the grwth + risk asset front will be the
strong balance sheet, no/low deficit economies, and the big commodity
plays. However equity performance in particular will only be a
'relative' win.
* Clearly I like crude and gold, esp. longer terms (12/24 mths) where I
see $150 crude/$1500 gold.
* And finally in credit, no longer the lead indicator but very much an
asset class that will be pushed around by rates, FX and equity moves, as
well as by policy involvement, if the scenario I have outlined and
favour plays out I expect to see new wides in HY/SME credit driven by
default risk, and a revisit to wides in the IG/big cap arena driven by
technical imbalances in supply/selling, vs demand/dealer bid.
Essentially, illiquidity and gap moves. I expect to see cash to
underperform, big senior fins to relatively outperform IG corps, and in
indices I am looking for a ITraxx X0 S11 up at 1250, Main up above 200,
with HY12 in the 60s and IG12 up at 200.
6 - No doubt there will be twists and turns, as well as other, maybe
even unexpected developments. I will do my best to stay in touch, but
don't bank on anything too timely. Andy Chaytor will be here for you in
any case.
7 - Clearly the mini-May turn did not quite wrk out. Rather than a
decent interim sell-off we saw something smaller - S&P peaked in early
May at 930 and bottomed in mid/late May at 880-ish. So more of a
sideways consolidation. The driver seems to be
fear/greed/hope/liquidity, but as is clear from all of the above, this
fear/greed/hope/liquidity driven trade now needs to start seeing real
data validation. Plse see above for where we go from here (better in
risk over the next few weeks, and then the risk outlook turns much more
bearish).
8 - If Kevin and I are wrong abt the V and the data does provide
validation that the V is real (less than 1 in 5 chance based on what we
see now, vs what seems to us a 4 in 5 chance that the data shows a
failure in the V), then we need some stop losses to protect ourselves.
In the V environment Risk will Win, esp Equities, HY, EM, and
Commodities, and Govvies (esp US) will do badly. And, in a V, Europe
will have 'less' of a V so we will see Bunds relatively outperform USTs,
and European risk relatively underperform. The EASY stop-loss is at 1050
on the S&P, based on 4 consecutive closes above this level. The tougher
stop-loss levels, again based on 4 consecutive closes, are 950 S&P or
1000 S&P. I think the right one to use is somewhere between 1000 and
1050, and talking to Tom Pelc 1022 S&P seems like an good level. So, in
case we are wrong on the V (becoming a U or W), I am gonna go with S&P
1022 stop loss, based on 4 consecutive closes. BASED on the current 940
S&P closing level, one is risking 8/9% downside vs potentially 30/40%
upside if I am right and we rollover during Jul/Sept and do end up, as I
fear, down at new lows on equities in H2 09/early 10.
The key going fwd is data, focused on the private sector demand
indicators/drivers, and the policy responses. The risk is of significant
spikes in VOLA, the breakdown of old correlations and the beginning of
new paradigms/paradigm shifts. As such, one has to keep an open mind and
not rely too heavily on conventional thinking.
I think we are gonna have
some fun.
Cheers. Bob.
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That dude is too lazy to type.
His valid points, if any, ignored.
Ever heard of English ?
but he has been right so far.
I follow him and it has paid off.
ok so he was successful in his contrarian call. don't you think it could have gone the other way? many did? even here on this website, how many times have we seen TD discuss strange happenings in the markets with upward momentum and thin trading volumes? the question may be this. is he so right on his call, or has this upward movement been totally caused by black box trading, etc? if this upward direction was totally caused by dark pool activity, then i would have to say, that his contrarian call, if that is what it is, was just a total lucky educated guess and we have many guessers in this biz, don't we?
It's not too bright to ignore a man's valid points because he's a lousy typer.
Senate wants GS/JPM banned from Carbon market
http://www.businessinsider.com/senate-wants-to-keep-goldman-sachs-jp-mor...
A bone to the peasants to support 'cap'n'trade' ?
Fucking hilariously, JP Morgan was suggesting if they are banned from this, that global temperatures might rise by 2oC.
Here's the bberg link:
http://www.bloomberg.com/apps/news?pid=20601087&sid=a82qt5fzM7Co
"Carbon markets “will die, and the temperature on the planet will go up by a couple of degrees, more than it would have otherwise, and we’ll be really sorry about it,” Winters said. "
Awww.
You can't make that stuff up. Chase is Un-fucking-believable
in many ways too. especially when you fall behind on your credit card bills. you will love chase then, oh so much...:)
His message was being spread and gaining even more support...therefore he needed to be censored.
Until we have guys like Black back as regulators nothing will change. We just
good articles; my newest bookmarked finance site ..http://www..
hat tip: finance news & finance opinions
sounds like that came right from the mouth of Mistress Masters.
wonder if she took the dildo out of Bill's bum before she gave him the talking points....
The single funniest thing I have heard for a very long time!
His message was being spread and gaining even more support...therefore he needed to be censored.
Until we have guys like Black back as regulators nothing will change. We just
good articles; my newest bookmarked finance site ..http://www..
hat tip: finance news & finance opinions
The Bloomberg reporters make the general statement that: "Credit-default swaps are derivatives created primarily to protect lenders and bondholders from company defaults."
Unfortunately, they fail to mention that
"As much as 80 percent of the $26.4 trillion credit-default swap market is traded by investors who don’t own the underlying debt, according to Eric Dinallo, who stepped down this month (July)as superintendent of the New York State Insurance Department." (per Bloomberg http://www.bloomberg.com/apps/news?pid=20601087&sid=asyuwpIR5QaA)? which is, after all, a big part of the rationale for the legislation.Nice catch, thank you.
Yeah, for how long? I hate the whole idea of that fucking cap and trade.
this crap has to be stopped. so many things are going on right now. national health care, gun control, cap and trade, and the list goes on and on. is it becoming quite apparent that there is something very sinister afoot with all of this? i wish ameircans would wake up from their slumber before it is too late, at least while we still have something of a country left....
So happy Victoria Beckham is now a judge on Americon Idol, she is a great role model!
American what? Idol? WTF is that?
HEY! YOU think they're bad; others think they're good - or perhaps a good/bad mixture - for the country. Sounds like you're getting out the old "I'm more patriotic than you," "I'm better than you" horseshit as directed against those who differ.
Is that Obama-bashing, or do you share the belief that the wish to get those programs through transcends so-called party boundaries? Cap and trade is a scam of incredible proportions, and Wall Stret can't wait for another marke to manipulate. Health care is a side show to distract us - increase copays, tax health benefits (in the context of an overall reduction of tax rates) and demand for services will decline. Gun control? Supreme Court already checked in on that, and the Second Amendment as a (paper) guarantor of your personal right to bear arms, not some mythical militia, has been confirmed.
You don't fit in here, they will appreciate your rightie rambling over at http://ace.mu.nu/ im sure.
Is there any limit that could be put on banksters where they DON'T use "the world will explode if you regulate us" argument? Jagoffs, the lot of em
That quote is truly incredible, it just goes to show what control they think they have of the whole world.
They think they rule the world until it doesn't do what they want and it will all come crashing down... again like the last time and they will go crying to the citizens to bale them out.... again
Yeah, except this time we might give them the Marie Antoinette treatment.
They will find a way to weasle in and manipulate.
It's in their blood.
The markets are trading on coke and meth. They are on the high now, commeth the crash, which it eventually must but by then I'll have run out of money to short the market with *sigh*
This freakin bear rally has been a disaster. When reality hits, we're so fucked.
fucked, but itll be a good thing. this country needs the RESET button pushed asap
perhaps you should stand back and think for a minute about what you just said. reset would mean hell on earth here in the states. are we ready for this? i say not. we are soft and have lost our way. we are not like the americans of 1776. far from it. does the blood of freedom and liberty run in the veins of many? yes it does. but the problem is that the rest of the americans are now sleeping and may never wake up to what is happening, until they are in the camps, which incidentally are being prepared right now , as i type.
so i say i agree with you. but i am not sure if many people really know what this means. hell is coming to america.
Better get ready.
Bring it! I can't wait...
Word.
Expect the change in 2012. Not the end of the world, just as we knew it.
Good stuff, Thank you!
i value substance over form....
he said more in his fractured english than most could say in their king's.....
too bad you had nothing of value to contribute to the conversation.
anom #35893 FTW.
imho, he sounded like a literal genius in the halls of an insane asylum.
He makes a whole lot more sense than any of the jibberish coming out of the Fed's announcements.
When are they going to use a decipher machine to figure out the secret code language the Fed is using to warn their best friends in the US and abroad.
I am not making this up. They're speaking code.
Propaganda for the people is at an all time high.
Green shoots, better than expected, recession is easing
fact: unemployment rising, RE values dropping, foreclosures increasing, loan defaults higher, corporate bankruptcies up and on and on the list goes.
I've seen the usage of code and propaganda before.
It's obvious and its heinous to deceive your own people that way in a so called "free" country.
excellent point.
that's exactly what they're speaking.
both to the powers and the proles
of course they are saying a different thing to each of them
ZH should sell a super secret decoder ring in the store.
excellent point.
that's exactly what they're speaking.
both to the powers and the proles
of course they are saying a different thing to each of them
ZH should sell a super secret decoder ring in the store.
I second that motion.... His grammar is lovely. He simply abbreviates.
Great piece.
Only wish he had abbreviated "H1 09" as "1H09".
He's wasting a space.
Trichet will push the *RAISE* button within weeks...
http://www.istockanalyst.com/article/viewarticle/articleid/3410207
this market looks just like the dotcom days alright but this time with more trailing stops and because there hasn't really been a proper pullback to get virtually any longs out this will be a waterfall event like Oct 1987
when it will happen, tomorrow, next week or year, but the more it goes to the sky the faster it will fall
Exactly. Markets like this one never correct slowly over time. The drop will be precipitous.
1600 in one day on the Dow. I would not recommend going outside that day.
In the end, only one thing matters....the level of debt. The amount of debt out there is insurmountable (and incomprehensible). No amount of printing can fix it. No way to overcome this fact. In the long run, you can never spend more than you have. Even Benny B. would admit to that with a gun to his head. A plain and simple rule we where once taught to live by. Again, this is a game of timing and endurance. Be thankful they are giving you time to prepare if you have not already. Take advantage of it because when they decided the jig is up, it will come like a "thief in the night".
Exactly. Which is why all those people yammering about a bailout in CRE are essentially math-challenged.
Let them try. It's like pissing into an erupting volcano.
"it will come like a "thief in the night"..."
Or like Godzilla stomping the crap out of everyone, with just enough time to scream "NOOO!" into the uncaring void.
Bob is correct.
Unfortunately, he presents his material like a teenage girl on MySpace rather than as a professional -- and for this reason is considered an idiot by many of his peers.
Nonsense. One of the more respected strategists in the industry.
His peers? Good one.
Fully agree with this guy except it was semi-hard to read.
It's really not if you follow him as much as I have.
You learn his style and abbreviations pretty quick.
I tell you he has been right.
Also been wondering why TD didn't post Bob's June report. Too bullish?
we wish we had access to every single report ever written by everyone. bob is also welcome reading here, regardless of stance.
Another long-term bear who was bullish earlier this year was Jeff Gundlach, Chief Investment Officer of TCW (Trust Company of the West). He gave a presentation in March titled "You're Too Bearish" that forecast a big rally in risk assets, particularly junk bonds and equities. However, in his most recent presentation in June and in a June letter titled "The Jalopy Economy" he warns not to mistake this for anything other than a bear market rally.
Gundlach has been right on the money for quite a while, warning that subprime was a pending disaster several years ago. You can find his letters and presentations on TCW's website.
Here's the beginning of Gundlach's June letter "The Jalopy Economy":
"Once upon a time, not really very long ago, the world was a simpler place. There was self-sufficiency. Men could fix their own cars. And a loud whine from the gearbox warned the driver to replace its crudely milled gears before they failed completely. Today the racket from America's financial gearbox is earsplitting, but unlike Grandpa, our government has chosen to forego repairs. Instead, Washington is acting like an "Honest John" car dealer from those old days. Back then, stuck with a beater with a noisy transmission, a bad dealer would pack the gearbox with extra-heavy lube, sometimes mixing in sawdust. The thickened gel would quiet the gears long enough to sell the car off the lot. The buyer wouldn't notice a thing - until a week or so when the transmission burned out for good.
The financial breakdown of 2007-2008 marked a bursting of America's long-running debt culture. Now Washington is trying to "solve the problem" with much more of the same: a massive upsizing of deficit spending combined with unprecedented monetary stimulus. These measures amount to the economic equivalent of a lube-and-sawdust fix. The fundamental gear works needed to honor America's IOUs are stripped. On its present trajectory, our economy cannot honor its existing IOUs, let alone pay back a further build-up in future claims. The new debt binge might buy a little time, maybe even a spell of economic growth. But once the gears churn up the lube and sawdust, the old jalopy will grind to a stop. Then we will witness the sequel to 2007-2008. All this implies a range of default and inflation scenarios; the task before us is to prepare for those possible outcomes."
is he suggesting a move to bonds from risky assets?
Thanks TD, much appreciated.
Steve
Seconded.
He is really insightful... and not just because I agree with him... but because he clearly and specifically states what he thinks will happen... in a humble manner without a lot of ego. Many people are competing out in the MSM world to sway our opinion... and trying to "sell" us daily... Bob Janjuah is refreshing... and his writing style is quite unique also with an 'unvarnished feel' versus the 'high gloss' of CNBC.
So Ben's slow drip end of QE fits almost perfectly into this scenario. I guess the signal will be if we have real break in the markets in Sept. if he hits the print button.
When it comes right down to it the $300 billion wasn't that much. Another wouldn't be either in the big scheme of things.
The fiscal side has two sides, revenue and spending. Revenue if we are lucky will stabilize there is not the slightest hint spending will wane.
Which all is to say his cut and dried scenario of some final decision on these matters being decided within the next month or two is probably not exactly right. A little more QE and another $1.5T deficit for fiscal 10, could produce a muddle through.
How much of that $300b is left anyway? They bought $27b worth in the last week.
I was just outside and there is no 'V' anywhere to be seen, I go to Georgetown half the stores are empty of customers + "60% off" or 'Storewide Clearance!" and more just shut down with "For Lease" and this is one of the high- end shopping districts. The malls/stores are dead, the DOD is okay and the Treasury still fills up the bankers' semis with cash @ the Treasury loading dock.
That's it ...
Traffic is insane w/ people going nowhere in particular and China oil demand creeping upward for the same reason. Cup 'n' handle in NYMEX @ $70 give or take so look for a good rise from $75. I think there is a lot of money sitting around waiting for oil to jump past $80; if that happens the economy is a dead duck- it is already dying @ $50, it lives @ $35, hates $45.
http://futures.tradingcharts.com/chart/CO/99
There are also plenty of oil bears so there is good depth to this market on expanding open interest.
The oil market is less manipulated than the S&P (I will stand by that accusation) and the fundamentals are borderline bullish, at least that is what the IEA sez. EIA inventories aren't enough to drive prices lower - only another deleverageing leg can murder prices ... China is driving oil now and watch the price. $80 - 90 oil will be the stock market stake through the heart, not banks, not employment data which will be bad news, anyway.
We are all poorer than we were in 2008. $147 is not necessary.
Putting together my survival kit, an M-14 with felony mags, and a map to the 5 most affluent mormons in the area.
Ha!
LOL!
Dig the Zappa avatar. Nearly got fired from Merrill several yrs back for mocking it up on my office wall...
Yeah... cause those Mormons probably don't have guns... and probably won't shoot your ass dead. Probably not.
Me, it's 2 acres in a rural area I call home, close to the Amish. My chickens are doing great, and the gun and ammo collection is about there (Amish will need to barter for protection). The propane tank for the generator is full and ready too. Ooops, keep meaning to order another cord of wood. Need more beans and rice too, and the ultimate currencies: toilet tissue and cigarettes. What else.....
India experiencing food inflation:
http://debtsofanation.blogspot.com/2009/08/debts-of-lenders-india-begins...
They are having to work harder and harder to get the gains going on this market, today they squeezed out 36 points on the dow and it took all day to do it and they even had some bad news to get shorters in as well!
Hmm, will a good news day be the killer... no shorters and all the buyers are already in and the market is going up on fumes/shorts blood
I've been following Bob's work for some time. This guy (who I've met) does not BS and is even more hardcore in person. It's easy to say someone is right in hindsight but I have to say, his calls have been seriously gutsy and spot on given his team's command in balancing fundamentals and technical mayhem in today's markets.
Liked the comment and the presentation but need help with some fo the lingo.
BUNDS? What is this a reference to please.
Thanks.
http://www.eurexchange.com/market/quotes/INT/FIX/FGBL_en.html
Bonds.
is he suggesting a move to bonds from risky assets?
yes
Which one is better option to hide till stocks are attractive.
FID STRATEGIC INCOME
FIDELITY GOVT INCOME
PIMCO TOT RETURN ADM
TMPL GLOBAL BOND A
Any money market fund you trust will stick around and let you withdraw.
That and shorting to new lows for late 2009/
or early 2010. It's lack of V....we may
have a recovery but it's strictly a
statistical anamoly that is actually
a horrible recession. It's totally obvious,
isn't it? Doh!!!
German bonds, specifically.
German Govn Bonds
The JP Morgan quote is highly underrated. Thats the funniest thing Ive ever seen. If a bank doesnt get to participate, the whole globe will be affected.........L.Fucking.O.Fucking.L
Totally agree. ZH should put that gem on their shirt
Bunds= German Government Debt.
It´s the equivalent of the tresuries
Dont insult the Bunds like that. Unlike the Treasuries, they aint got the QE cancer.
"inadequate liquidity without bank participation"
Wah wah, someone taking our dummy away, wah, wah, I want my toy back, wah wah
Absent a black swan event(which by definition has unknown nature and timing),the market is not going down in the forseeable future. This is the "confidence building stage". And since everything is arranged with (0s and 1s)it is done pretty easily through the direct connection with the fed. After all, Jim Rogers is not stupid, and when asked why he dosn't short the market,he said for all I know the dow could reach 18k but it would be worthless. Granted,he is an economist, but I am also sure he has made himself few friends here and there in his way up.
Bwahahahahahaha.....Wiley Coyote?
Sure, but when you turn off the 0s and 1s, and step into the tangible real world, the confidence evaporates in seconds. I agree that the smoke and mirrors can drive the market, but I can definitely foresee a point in the future when the lack of actual economic drivers creates an "emperor has no clothes" moment.
I think Steve nailed it on the head with #35924.
All I can say is be very nimble when you play in a confidence game...
Jim Rogers believes that the market could go exponentially because of dollar devaluation, not due to real price appreciation.
Jim Rogers is *not* an economist!!
He graduated with a Philosophy degree and a History (or polisci degree). He then ran a highly successfuly hedge fund and quit over some infantile spat with Soros which still leads him to throw idiotic temper tantrums every time somebody mentions Soros' name to him during an interview.
Absolutely brilliant fucking investor. No economics background, though
He said Dow could go to 1mm, to make his exaggerated point:
http://jimrogers-investments.blogspot.com/2009/06/s-can-go-to-50000-dow-...
1s and 0s are not gonna feed people. If you lose your job because the company you worked for has no consumers who can afford the products anymore because they lost their jobs as well, S&P could be at 3000 off the freshly printed money and you still won't give a damn.
How do the A-holes in charge think that curing a problem caused by debt is going to be solved by more debt? The crash is coming, just dunno when.
They were the ones that didn't see it coming, what do you expect?
Logic?
A third of all home loans in negative equity?
Now there's a headline that isn't bandied about in big headlines in the media during the trading day!!!!
Shush, hide it under the carpet and the bogey man will go away
"A third of all home loans in negative equity"
Fuck that, the sheeple are waking up and stopping
paying their mortgages in order to get the banks
to talk to them. They think they are entitled to
a mortgage rewriting and thats what lawers tell
them too and word of mouth spreads like a wild fire.
2 neighbours did it. 3 coworkers of wife doing it.
I think that will finish the banks. Imagine people
stopping paying in droves. Whoever architected this
cannot be that stupid. Unintended consequences ? BS !
This is by design. I just cant wrap my mind what the
fuck the purpose might be... Like Janet HELLen's
"creative destruction" so far wasnt enough ? What
do they want ? Complete fuck'n destruction ???
>The Lehman event is, as Kevin puts it, going to be seen as the head fake when this crisis is looked back upon in the history books of tomorrow.<
Thank you, Amen.
See Tilson's July 3 presentation for much more insight into the dire state of the resi mortgage market. If the rest of the above didn't scare you, that should certainly do the trick....
HAHAHA ! DRAMA !
http://www.frbsf.org/education/activities/chairman/
His message was being spread and gaining even more support...therefore he needed to be censored.
Until we have guys like Black back as regulators nothing will change. We just
good articles; my newest bookmarked finance site ..http://www..
hat tip: finance news & finance opinions
"the next ugly leg of the bear mrkt begins as we get into the end of the Jul thru Sept tipping zone, driven by failure of the data to validate the V that is now FULLY priced in into markets"
Talk about "failure of the data to validate" with today's news on retail sales, foreclosures, and jobless claims. I think the market did actually start reacting today - if on the other hand the news had showed improvement instead of deterioration, the market would have been up huge, and rightly so.
Does anybody know what VOLA stands for? Thanks
i *think* he's talking about volatility. His comment about buying "puts/vola" in light of the potential for much more quantitative easing leads me to believe he's purchasing options now anticipating that FX volatility will increase in the near future, driving up option value. The puts indicate he favors the downside (of the USD I think?) rather than the upside, otherwise he would go long straddles.
please correct me if i'm wrong!