Pop, Party und Politik
Es war eine gewaltige Kulisse, selbst für Polit-Popstar Barack Obama. 80.000 Fans pilgerten
zu seiner Krönungsrede in das Ivesco Field Stadion in Denver. Darunter: Super-Stars
und Sternchen. Hier sehen sie die Bilder der glänzend inszenierten Polit-Party auf dem
Parteitag der Demokraten. stern.de, Aug 29,2008
A Bankruptcy Filing Is Looming For Jefferson County, Ala.
WSJ, Aug 29, 2008
The Worst is to Come
Ouzilly, France
Tuesday, August 19, 2008
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*** A little break is in store for The Daily Reckoning ...the premier of I.O.U.S.A. is right around the corner – do you have your tickets yet?
*** We will stick with our views and investments until we are proven wrong or go broke, or both...the great dollar-based expansion is going to end with a bang and a whimper...
*** Blunt words on the worldwide credit crisis...a damning article in the Post...and more!
--- ONLY 2 DAYS LEFT ---
Burn After Reading...
In just a few minutes you will be invited into an exclusive circle that can actually predict which way stocks are headed. No kidding.
A few savvy investors have discovered a few “hidden” documents that give them an inside track on several of the latest stock moves.
And for the next 2 days, you can join them at an incredible discount. Just click the link below. But hurry. The clock is ticking...
The Power of “100-F” Documents
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Today, we take a break. Yes, dear, dear reader...there will be little reckoning today. Short Fuse will write tomorrow’s issue – and then The Daily Reckoning is taking the rest of the week off, as Fuse and Addison are traveling to Omaha for the premier of I.O.U.S.A. Elizabeth needs help preparing for her big hullabaloo. We’re expecting about 150 people for a soiree on Thursday night, about which, more below...
Before we leave you, though...we have just a couple thoughts...
We’re sticking with our views and our investments – either until we’re proven wrong or we go broke, or both.
Our view is that the great dollar-based credit expansion of the last half-century is coming to an end. And our guess is that it will end with BOTH a bang and a whimper – that is, both a deflationary contraction...and an inflationary blow-off. A deflationary contraction is the market’s normal response to an inflationary boom. And an inflationary blow-off is the market manipulators’ normal response to a deflationary contraction; but, we hasten to add, there is no guarantee that they can pull it off.
So, as usual, we live in a world of great unknowns...and lesser unknowns...and things we don’t even know we don’t know. What we do know is that stocks have not yet bottomed out (they are nowhere near their low points)...and bonds are still expensive (people still lend to the U.S. government for 10 years at less than 4% – that’s substantially less than the current consumer inflation rate)...and the dollar is still treated with respect, even though its long-term value is zero. There is a lot that can go wrong that hasn’t gone wrong yet, in other words. Until it does, we’ll stick with gold.
*** “The worst is to come.” Sometimes it’s nice to hear things laid out bluntly – and long time sufferers know that we aim to do that at The Daily Reckoning , as well. Former chief economist of the IMF, Professor Kenneth Rogoff is not one to sugarcoat or mince words. He told attendees of a conference in Singapore that in the worldwide credit crunch, “The U.S. is not out of the woods. I think the financial crisis is at a halfway point, perhaps. I would even go further to say the worst is to come.”
Professor Glass-is-Half-Full went on to say: “We’re not just going to see mid-sized banks go under in the next few months, we’re going to see a big one – one of the big investment banks or big banks.”
And the dark twins of mortgage finance didn’t escape unscathed, not by a long shot. Yesterday, on the heels of a report that suggested that the Treasury may have no choice but to nationalize Fannie and Freddie, investors began dumping shares.
The chance of nationalization of the mortgage giants scares the beejeezus of out foreign investors, especially our friends in Asia. And with good reason...while Japan wasn’t too exposed to subprime, they do hold around ¥9.6 trillion in bonds and mortgage-backed paper issued by finance groups. We all know that these securities aren’t guaranteed by the U.S. government. Whoops...
*** As if there wasn’t enough bad press for Fannie, David Hilzenrath at the Washington Post printed a pretty damning article, titled “Fannies’s Perilous Pursuit of Subprime Loans.”
The article is definitely worth a read through, and here are some highlights to tide you over:
In a confidential memo to his board, chief executive Daniel Mudd (has anyone ever had a more unfortunate last name?) “said one of Fannie Mae’s achievements in 2006 was expanding its involvement in the market for subprime and other nontraditional mortgages. He called it a step ‘toward optimizing our business.’”
We know...yikes. But wait, it gets worse. The Post continues:
“Internal documents show that even late in the housing bubble, Fannie Mae was drawn to risky loans by a variety of temptations, including the desire to increase its market share and fulfill government quotas for the support of low-income borrowers.
“Fannie Mae documents from the period, obtained by The Washington Post , paint a picture of a company with the dual incentives of fostering affordable housing and making money, and of one caught between the imperatives of increasing its market share while avoiding excessive risk. In a bid to juggle these demands, the company’s executives took on risks they either misunderstood or unduly minimized.
“Fannie Mae aimed to benefit from subprime loans and expand the market for them – and hoped to pass much of the risk on to others, documents show. Along with subprime loans, which were typically issued to borrowers with blemished credit, the company targeted so-called Alt-A loans, which were often made with no verification of the borrower’s income.”
And so on. While it’s not a pretty picture, the article doesn’t say anything that everyone didn’t already assume.
*** Meanwhile, back at home, people are already coming and going so fast – we can barely keep up with them. Jules came home last night. Henry is leaving today – as a first year student at the University of Virginia; he has to show up early. And as a “foreign student,” he has to go earlier still.
“Are you sure you’re a ‘foreign student’?” we wanted to know.
“Yeah...I haven’t lived in the U.S. since I was 6 years old. And I’ve only studied in French. So I’m considered as a foreigner.”
Tomorrow, cousins...daughters...and friends arrive for the big party.
The original reason for the party was a big birthday milestone. Your editor turns 60 in a couple of weeks. Then, we realized that most of our friends and family couldn’t make it to France...so we planned a another party for Annapolis, Maryland a week or two later. But since the party in France was already underway, we turned it into a “summer celebration.” Celebration of what? Well, we’ll have some explaining to do...
The Global Financial Panic of 2008
Behind the closed doors of a private meeting room at the exclusive Four Seasons restaurant in New York City, economic history was recently made.
By private invitation, 13 of the most respected financial advisers in the world came to New York City for a secret, economic summit.
Why? You already know why. The economy is teetering on the brink. The dollar is falling. Consumer confidence is at an all-time low. Gas prices are obscene. Food prices are going through the roof. And they’ve even begun to ration rice at some major food marts. This is scary stuff.
The agenda was simple: What are solutions that people can use now to protect them from the financial challenges? The response: an outpouring of financial secrets, advice and investment recommendations like nothing ever experienced.
Markets Rally as Financials Surge
July 16, 2008
A frenzied comeback in financial stocks and a second straight plunge in oil prices drove stocks
sharply higher Wednesday, as traders and analysts grew confident that the market's latest
bout of credit-related jitters may be over.
The Dow Jones Industrial Average leapt 276.74 points, or 2.5%, to 11239.28, boosted by big gains in all its financial components. Bank of America led the way, rising 22.4%, while J.P. Morgan Chase leapt 15.9% as investors placed bets ahead of the giant investment bank's earnings report due before the start of trading Thursday.
MARKETS ON THE MOVE
Track indexes and hot stocks, with roll over charting and headlines. Plus, comprehensive coverage of bonds, commodities and forex. Markets Data Center highlights:
Most Actives, Gainers, Losers
New Highs and Lows, Money Flows
Intraday Futures and CurrenciesThe S&P 500 jumped 2.5% to 1245.36, led by its financial sector, which roared 12.5% higher. The category snapped a five-day losing streak during which it plummeted 16.4%.
The big gains were driven by several factors, including a surprisingly strong earnings report from Wells Fargo and moves by regulators to curb bearish bets on key Wall Street names.
Investors cautioned that more revelations of credit-related losses are likely forthcoming from banks. But the questions that gripped the stock market on Wednesday were whether the potential for such developments is adequately reflected in share prices and whether financial names had fallen low enough to represent a good bargain for players waiting on the sidelines with cash in hand.
Many concluded that the answers to those questions was yes. The result: a rally that intensified as the afternoon wore on.
"A lot of people have been looking for an opportunity to get into the financial group, and this was it," said S&P strategist Alec Young. "The news from these companies isn't going to be great by any means, but you have to look at it relative to the expectations."
Wednesday, Wells Fargo said its net income fell 21% in the second quarter, but that topped analysts' expectations. The bank also boosted its dividend by 10%, sending a promising signal to investors ahead of reports from other financial institutions. Wells Fargo shares soared 32.8%.
Investors also parsed a mixed inflation picture after a Labor Department report showed a surprising 1.1% jump in consumer prices for June, the second-biggest rise since 1982. But oil fell sharply for a second straight day, off more than $4 a barrel in New York, a development that could make inflation pressures ebb if it is sustained.
The technology-focused Nasdaq Composite Index, which often benefits when investors' appetite for risk increases, rose 3.1% to end at 2284.95. The Chicago Board Options Exchange Volatility Index, an indicator of market stress, fell by nearly 12%. Treasury prices fell as investors felt little need for safe havens. The 10-year note was off 30/32, yielding 3.946%.
Trader Ryan Detrick, of Schaeffer's Investment Research in Cincinnati, said the financial sector seemed to benefit from a round of "relief" buying, or bargain hunting typical after a deep selloff. But he added: "There is some potential here to build on the gains, if they can hold up over the next few days. We are feeling a little more bullish for the first time in awhile."
The advance by the financial firms came a day after the Securities & Exchange Commission said that it was moving to curb short sales of stocks in more than a dozen top banks as well as Fannie and Freddie. Officials are cracking down on so-called naked short-selling, in which traders take a short position without first locating shares to borrow.
The sentiment shift was visible in the trading of some key ETFs. The ProShares Ultra Short Financial ETF fell 18.2%, and was the worst-performing exchange-traded fund on the day by a wide margin. By contrast, four of the top five ETFs on the day were long bets on banks. The ProShares Ultra Financial ETF jumped 18.9%; the Regional Bank Holdrs ETF was up 14.2%.
The SEC shied from reinstating a rule against shorting a stock that is already falling -- a practice that some brokers would like to see prohibited, as it was in decades past. The SEC voted unanimously on June 20, 2007, to relax the rule. Coincidentally, revelations of soured credit bets were beginning to surface on Wall Street around the same time, and the Dow has fallen more than 18% since.
"The volatility really started with the removal of the rule," said Doreen Mogavero, president of New York Stock Exchange floor brokerage firm Mogavero Lee & Co. "What they just did is an interesting backpedal of sorts. But I don't think the downtick rule is coming back, which is unfortunate."
Douglas Kass, head of hedge fund Seabreeze Partners Management, called the SEC's latest rule change targeting only short sales in certain financial names "an amazing attempt to intimidate shortsellers."
Mr. Kass maintains short positions in Fannie and Freddie, but has been bullish on big-name banks since last month – a bet that paid off handsomely on Wednesday. He believes the broader stock market is likely to remain under pressure in the months ahead because of shaky spending by tapped-out consumers who drive corporate profits.
"The average consumer is looking at big declines right now in his two biggest personal assets – homes and stocks," said Mr. Kass. "That makes it real tough to call the market as a whole. In that kind of environment, it's a good idea to err on the side of conservatism."
Lehman Brothers Holdings, which has complained recently of being the target of a rumor campaign by investors betting on a decline in the brokerage's shares, was up 20.6% on Wednesday. Other Wall Street giants, also being shielded from short bets, posted similar gains. Merrill Lynch advanced 12% and Morgan Stanley rallied 11.7%.
Troubled mortgage lenders Fannie Mae and Freddie Mac rose more than 29% each. Regional banks, which are expected to post painful credit-related losses this earnings season, were also on the march higher. National City jumped 22%, Zions Bancorp gained 22% and SunTrust Banks rallied 18%.
The stock gains came even as the inflation reported presented a challenge to monetary policy makers who are wrestling with both slow growth and rising inflation – a situation that creates uncertainty over the path of interest rates, a potential complication for banks.
The CPI report showed signs that food and energy prices are filtering into the broader economy, as evidenced by sharp price gains in housing, transportation and services. The so-called core consumer price index, which excludes energy and food, advanced 0.3%. Wall Street economists expected a 0.7% climb in the headline and 0.2% core increase, according to a Dow Jones Newswires survey.
Some Key Fundamentals of Socionomics
Financial Man is Not the Same as Economic Man
It is universally presumed that the primary law of economics, i.e., that price is a function of supply and demand, also rules finance. However, human behavior with respect to prices of investments is, in a crucial way, the opposite of that with respect to prices of goods and services. When the price of a good or service rises, fewer people buy it, and when its price falls, more people buy it. This response allows pricing to keep supply and demand in balance. In contrast, when the price of an investment rises, more people buy it, and when its price falls, fewer people buy it. This behavior is not an occasional financial market anomaly, it always happens. Look back at Figure 7-3, the graph of the dollar-valued trading volume in the U.S. stock market divided by the prevailing gross domestic product. As you can see, volume expands as stock prices rise and contracts as they fall. In economic matters, rising prices repel buyers, in investment matters, rising prices attract buyers. This difference is not incidental, it is fundamental.
Many market theorists argue that the law of supply and demand operates in finance but is simply “suspended” for periods of time because people “overreact” and “rationalize” with “elaborate arguments” why they should pay up for investments. The difference between any such idea and what happens in markets for goods and services is irreconcilable by conventional economic theory. People never act in any such way with respect to goods and services. Most investors can quickly rationalize selling an investment because its price is falling or buying it because its price is rising, but there is not a soul who desperately rationalizes doing with less bread because the price is falling or who drives his car twice as much because the price of gasoline has doubled. In economic behavior, the law of supply and demand does not lie dormant ever. It is like the law of gravity; it works all the time. It cannot “fail to apply,” even temporarily. Prices are the balance beam from which the scales of supply and demand hang. Changes in buying patterns are virtually instantaneous in responding to price changes for bread, cars, TV’s and shoes.
In the same way, investment behavior has its own law: The Wave Principle. This law governs unconscious, impulsive, collective herding behavior, while the law of supply and demand governs conscious, logical, individual economic decision-making. The former law governs prices for intangible values, whether associated with tangible goods or not, the latter law governs prices for utilitarian tangibles. Attempting to apply the law of supply and demand to investment markets is akin to attempting to apply the laws of physics to falling in love. They do not pertain.
The law of supply and demand always produces practical behavior in the realm of economics.
The Wave Principle, (despite its apparent value for life and progress per se) produces impractical behavior in the realm of finance. In the product marketplace, the rational goal of survival leads to price stability and objectivity. In the investment marketplace, prerational impulses of survival lead to wild overvaluation and undervaluation. Time and again, observers, particularly those who understand the iron law of economics, complain that the stock market’s action appears nreasonable. That observation is wholly correct. The decision to buy into rising prices and sell into falling prices is not governed by the reasoning neocortex but by the unconscious herding impulse, which generates inappropriate behavior in the financial realm as part of a generalized attempt to enhance the odds of survival. It is buffling only to those who insist that “supply and demand” rule finance.
It is not that reasonableness in finance is utterly absent; we are not talking about irrationality. People who invest in the markets know through cold reason that they value their own lives and prosperity. Those who buy in bull markets are following the very reasonable desire to enhance their sustenance, while those who sell in bear markets are following the very reasonable desire to survive. Unfortunately, the portion of the brain that generates unconscious urges directs their behavior in this regard. The primitive mechanism employed is so inappropriate to the situation that instead of enhanced success, it produces guranteed failure. Because these desires per se are rational, they work just fine in the world of goods and services. In the product marketplace, the consumer wants prices lower while the producer wants them higher, and for the same fundamental reasons: survival and self sustenance. The process of mediating these identical goals between polarized dealers produces an objective, natural balance expressed as price.
In the world of investments, however, the consumer (who buys it) and producer (who creates and wants to sell more of it) both want prices higher. Rather than become excited to buy as prices fall, as consumers of goods and services do, investors become excited to buy as prices rise. Since desire and hope are entirely on the side of price rise, only fear and despair can be on the side of price decline. Thus, when prices fall, investors are pressured past endurance to sell. Both of these impulses are contrary to the way consumers behave with respect to goods and services.
The dynamics of The Wave Principle underlie financial markets and lead to nonobjective valuation. Individual investors who desire to be objective in financial speculation face the inescapable requirement of understanding that fact and its implications. (The Wave Principle of Human Social Behavior and the New Science of Socionomics, 1999, Robert R. Prechter jr.)
Ganz oder gar nicht
Hedge Fonds
Donnerstag, 11. Oktober 2007
Seine Mutter war erst zufrieden, wenn er der Beste war und sein Vater prognostizierte seinen Untergang. Beide sollten recht behalten. Story>>Sentiment
Anleger erwarten steigende Aktienkurse
11. Oktober 2007
In ihrer aktueller Umfrage haben die Stimmungsforscher von Cognitrend herausgefunden, dass das Lager der Optimisten derzeit so groß ist, wie noch nie in diesem Jahr. So eindeutig das Votum der Befragten auch ausfalle, so unklar, fast schon rätselhaft, seien die Hintergründe dieser Begeisterung.
July 2007:
Dow suffers worst week in over 4 years
Credit markets worries again roil stocks, while higher oil prices add to investor fears, sending Dow down 200 points.
CNNMoney.com , July 27 2007
NEW YORK (CNNMoney.com) -- A rough and tumble trading session sent the Dow industrials plummeting for the second straight session Friday, with the 30-stock index falling more than 200 points, marking its worst week in over 4 years.
The Dow Jones industrial average (down 208.10 to 13,265.47, Charts) plunged 208 points, or 1.5 percent, leaving the 30-stock index up 6.4 percent for the year.
Women Gain DominanceIndia Elects First Woman To Ceremonial Presidential Post
Associated Press, July 22,2007
NEW DELHI -- India chose its first female president in an election hailed as a victory for women in a country where gender discrimination is deep-rooted and widespread. Still, it's not clear how much 72-year-old Pratibha Patil -- a lawyer, congresswoman and former governor of the northern state of Rajasthan -- can do in the mostly ceremonial post to improve the lives of her countrywomen. Ms. Patil won 65.8% of the votes cast by national lawmakers and state legislators, said P.D.T. Achary, the secretary general of Parliament. She had the support of the governing Congress party and its political allies, ...
Women Top Vietnam's Corporate Heap
Corporate success is not uncommon for women in Vietnam, where several big companies have top female executives. Women earned equal footing as a result of the war with the U.S., which forced the country to abandon strict gender roles
BARRON'S COVER
Looking for the Little Guy
The reluctance of retail investors to buy stocks as the Dow hits new highs suggests that the rally has further to run. Just be ready to grab your coat once Mom and Pop show up at the party. That's a sure sign it's time to go. Barron's July 21,2007Poor Trade-Offs in Global Trade
Michael T. Darda, chief economist of MKM Partners, warns that U.S. protectionist sentiment against a booming global economy could lead to antigrowth policies and hurt sales of American goods abroad. Barron's , July 20,2007The Dow industrials closed at 14000, lifted by IBM and SAP's results, as Bernanke was back on Capitol Hill for a second day of testimony. WSJ, July 20,2007
Up, Up and Gently Away From New York to New Mexico, balloon festivals make for high flying fun.
WSJ, July 20,2007
Blame it on Bernanke
Bernanke said inflation remains the Fed's major concern,
citing slower productivity growth as one risk. WSJ July 18,2007
Girl power returns
The Spice Girls announce plans to reunite for a world tour
CNN, June 30,2007June 27, 2007
Hey, Paris! What Are You Going to Do Now?
She is free, but are we?Konjunktur: ZEW- Index stürzt ab
Hoher Ölpreis, steigende Zinsen, teurer Euro: Trotz des Booms
an den Aktienmärkten schätzen professionelle Anleger und Analysten die Aussichten für die deutsche Wirtschaft wieder pessimistischer ein. Ihre Konjunkturerwartungen für Deutschland haben sich im Juli drastisch verschlechtert. Spiegel online, 17. Juli 2007Fashionweek Berlin
Kaviar statt Currywurst
Die Hauptstadt feiert die erste Mercedes Benz Fashionweek Berlin. Motto: Arm und sexy war gestern, ab heute sind wir glamourös. Focus, 14.Juli 2007Börsenhype
Steigt der Dax auf 9000 Punkte?
Nie standen die deutschen Aktien so hoch: Punkt 09:03 Uhr schoss der Dax, der die Kursentwicklung der 30 größten heimischen Börsenwerte widerspiegelt, auf 8151 Punkte - ein Allzeithoch. Es ist der 13. Juli 2007, ein Freitag. Stern.de, 13.7.2007"When trends reach extremes, reporters no longer require the services of financial professionals to express an opinion; the continuation of the trend is so obvious to them that they become convinced that anyone can do it, and they take on the forecasting themselves. Error at such times is guaranteed."(The Wave Principle of Human Social Behavior), July 13, 2007
STOCKS MOVED HIGHER, with the S&P breaking its seven-year-old intraday record, as traders considered GE's earnings and mixed economic data. WSJDow Soars to New Record Despite Unease
The Dow industrials surged 283.86, or 2.1%, to a record 13861.73, their biggest gain in nearly four years. The rally continues a pattern of seemingly defiant bullishness by uneasy investors. WSJ July 13,2007
Countrywide Financial reported a 33% drop in profit, amid losses on prime home-equity loans. The biggest U.S. home lender also slashed its outlook, citing an "increasingly challenging" housing market. Its stock dropped 10%.
WSJ, July 24,2007
Wie die Hedgefonds- Blase entstand
- und wieder platzte
Anfang des Jahres waren sie Milliarden wert, nun sind sie pleite: Die US-Investmentbank Bear Stearns hat sich mit zwei Hedgefonds verzockt. Spiegel online, 21.7.2007
Formel 1
"Hamiltonmania":Wunderkind hinter Gittern
Hamilton am Nürburgring verunglückt
Mit 200 km/h fast ungebremst in einen Reifenstapel - WM-Spitzenreiter Lewis Hamilton ist bei der Qualifikation am Nürburgring verunglückt. Ob er beim Rennen am Sonntag starten kann, ist noch unklar. Rivale Kimi Räikkönen sicherte sich die Pole. stern.de, 21.7.2007
BITTER ELECTION
Vote polarizes Turkey
In one provincial town, fragile democracy is laid bare before parliamentary elections. cnn, July 21,2007Simpsons mania
As "The Simpsons Movie" hits screens, CNN meets the creator of the world's favorite dysfunctional family.
cnn, July 26,2007
The Juggle
Pottermania:
The Morning After
WSJ, July 21,2007
Neuer Weltrekord: Der Milliardenturm zu Dubai
Vergesst Taipeh! Im Wettlauf in die Wolken liegt jetzt Dubai vorn. Mit 512 Metern ist nun der "Burj Dubai"
das höchste Gebäude der Welt - und der Turm wächst weiter. Spiegel online, 21.Juli 2007
JUMP TO IT
California bans 'roo shoes
German sports manufacturer Adidas must not
sell footwear made from protected species.
cnn, July 24,2007
Blame it on Subprime Debacle
THE DOW INDUSTRIALS rose 76.17 to 13577.87 as stock markets recovered from Tuesday's big losses, though jitters about subprime debt remained. WSJ 07/11/2007S&P and Moody's announced a wave of downgrades on bonds backed by subprime mortgages, a tacit admission that they had misjudged the risk of the securities. WSJ 07/11/2007
Ratingagenturen erneut unter Beschuss
Handelsblatt, 11. Juli 2007
Asienkrise, Enron, General Motors und Ford: In all diesen Fällen waren Ratingagenturen
heftig dafür gescholten worden, dass sie Investoren zu spät auf Risiken aufmerksam gemacht hatten.
Die späte Reaktion von Standard & Poor’s (S&P) und Moody’s auf die Hypothekenkrise in den USA
hat die Kritik an den Kreditwächtern neu entfacht.