Tuesday, January 25, 2011

Hussman: "We've laid a lovely turf over a toxic waste dump"

In John Hussman's latest commentary he explains the constraints of Monetary Policy, but he also takes a shot at how the United States has handled our financial crisis:

As for the U.S. financial system - particularly major banks - I am continually perplexed by the juxtaposition of tens of millions of underwater mortgages and millions of delinquent and unforeclosed homes, coupled with a set of FASB accounting rules (revised at the height of the recent crisis) that allows these debts to be carried at face value upon the discretion of the banks that report the data. I'll say one thing - it should take less than two seconds of thought to recognize that allowing dividends, bonuses, and other withdrawals of capital - without the requirement that banks mark their assets to market - is quite literally how Ponzi schemes function. We've laid a lovely turf lawn over a toxic waste dump, and are all too willing to assume that the underlying issues have been solved. The FASB and the Fed have turned the U.S. banking system into the Love Canal.

John's observation that we shouldn't allow banks to pass out money to shareholders and management while an enormous amount of toxic assets remain on the balance sheet is important, we will soon see how far regulatory capture has gone.

Scott Dauenhauer CFP, MSFP, AIF

Friday, January 21, 2011

Mass Supreme Court to Consider Whether Buyers Out of Faulty Foreclosures Actually Own Property

Mass Supreme Court to Consider Whether Buyers Out of Faulty Foreclosures Actually Own Property

So you bought a home in foreclosure, you own it - right? Not so fast. The Mass Supreme court may make things very uncomfortable for the banks. This is a case that everyone who owns bank stocks (or any stocks) should be following closely.

Scott Dauenhauer

Wednesday, January 19, 2011

PragCap: Putting the Muni Bond Panic Into Perspective

Cullen Roche has a well timed, short blog post on the latest Meredith Whitney "call" on the muni markets - the smart money isn't buying it.

First of all, if the USA is willing to save banks and let states fail then the purpose of this country has failed and we should just fold up shop and thank everyone for being a citizen for all these years. Second, we have the mechanism in place to avoid a Euro style crisis. Unlike the Europeans, who lack the proper tools to deal with their own crisis, the USA is fully united and established a central treasury long ago. The funding mechanism for crises is ready to roll should it ever be needed. If ever there was a need for a “Geithner Put” I have little doubt that this administration would utilize it. After all, no one fails in this “capitalist” world anymore. Third, we’re far more likely to see increased austerity measures (such as the tax increases in Illinois) as opposed to defaults. The credit crisis is still causing ripples across the world, but one thing it is not doing is turning the USA into Europe.

The entire piece can be read in three minutes and is worth a read if you own muni's or are looking to.


Wednesday, January 12, 2011

Dongguan Ghost Mall Haunts China's Property Boom

Goldman Sachs: S & P 500 Will be up 18% in 2011 - Should You Trust Them?

Can you trust Goldman Sachs? The answer has to be no. But can they forecast? Well, David Kostin is out with his latest forecast and says the S & P 500 will rally 18% in 2011. It very well may, or it may not - but how has Goldman done in the recent past and did they predict the stock market crash (I'm not saying I did, I don't make short term predictions)? Well, below is from wikipedia, it is a short synopsis of their old Chief Prognosticator Abby Joseph Cohen:

A Little Goldman History - Abby Joseph Cohen

She is famous for predicting the bull market of the 1990s early in the decade. However, she failed to predict the dramatic stock market decline of the early 2000s and developed a reputation as a so-called "perma-bull" and was ridiculed for her continuous bullish predictions after March 2000 as market indices fell. Her reputation was further damaged when she failed to foresee the great crash of 2008.

On a CNBC appearance in March 2008, she predicted S&P 500 at 1550 by end 2008.

In an August 10, 2007 appearance on CNBC Abby Joseph Cohen predicted the S&P 500 would rally to 1,600 by December.

In December 2007 Abby Joseph Cohen predicted the S&P 500 index would reach 1,675 in 2008. The S&P 500 traded as low as 741.02 by November 2008.

On March 8, 2008 Goldman Sachs announced that Abby Joseph Cohen was being replaced by David Kostin as the bank's chief forecaster.

I wouldn't put much "stock" in Goldman forecasts (unless of course they are building a financial product they want to short).

Scott Dauenhauer CFP, MSFP

Sunday, January 09, 2011

Thursday, January 06, 2011

Gallup Finds Unemployment at 9.6% in December

Unemployment should be falling, in fact at this point in time in a "recovery" we should be seeing steady net job creation. Instead the most broad measure of unemployment continues to rise.

Gallup Finds Unemployment at 9.6% in December

Wednesday, January 05, 2011

Schiller: S & P 500 will be up 13%...between now and 2020

Famed economist Robert Schiller who was one of the first to call the stock market and real estate bubbles believes that the stock market in general will rise by a total of 13% over the next decade. An extremely bearish forecast, but based on very real analysis of historic valuations. Schiller is not making this determination based upon any view of the current economy, it is a simple historic extrapolation of stock market mean reversion.