Meanwhile, while it may be slightly ancient news, the Commerce Dept. reported today that manufacturing and trade shipments for Sept. were $988 B, down 0.3% from August and down 13.1% from the year earlier. The inventory/sales ratio was stable month on month at 1.32.
Thought you might like to know. End of recession/depression turning point? Could well be. But we must be careful in watching large percentage moves off of a low base.
And for all the excitement about retail sales and the moves in stocks, these moves are matched by gold once again.
More to the point: platinum, palladium and silver are screaming to the upside.
More and more to the point: Longer-dated Treasuries are up in price.
Money is chasing all sorts of financial assets. In times like this, the safest short-term strategy is to go with the flow. And so prices of metals are being bid up. Louise Yamada had spied strength in silver as she stated in a recent interview. Great call! And breaking out silver is, attracting new buying as it does so.
Its back to the reflationary '30s for now
Copyright (C) Long Lake LLC 2009
Showing posts with label Louise Yamada. Show all posts
Showing posts with label Louise Yamada. Show all posts
Monday, November 16, 2009
Monday, October 26, 2009
On Longer-Dated Treasuries as an Investment Choice: Part 1
Probably the most detested asset class is Treasury bonds. That is why they are worth a look. That, and the chart. Click HERE and HERE for 1-year and long term views of the 10-year T-note. After every recession, people have tried to pick the low in rates. Of course, in the 1950s and perhaps even into the 1970 recession and beyond, people were thinking that rates could go lower, remembering the Depression.
Historically, rates are volatile coming out of a recession; less so coming out of a depression. Since the peak in rates in the early 1980s, there have been new cycle lows in rates during every downturn and lower highs in the upturns.
While there are great arguments about why Treasury yields should now head upward, perhaps fast and high, one generally not-discussed argument for why they may stay low and even head lower is that a slow-growth, moderate inflation scenario could allow the Fed and the banks to make money on their current troubled assets. Perhaps the free market will take mortgage rates to 4.5% on their own, and the 10-year Treasury to 2% if the prevailing inflation rate is 1.4%. So I continue to respect the downtrend that is in force.
As stated above, Treasuries are detested by individual investors, who tend to believe that the world owes them a higher yield. Thus, Treasuries are bought and held by "smart money": governments, banks, insurance companies.
What might have happened last year was the beginning of an end to the secular trend toward low interest rates in non-governmental debt. It might be that Treasuries will experience a rally spurred by public buying that could have a blow-off top similar to that which occurred in the tech sector in the late 1990s into 2000, lunatic though we now see it to have been.
In addition, Louise Yamada has demonstrated that over the history of the U. S., creating a bottom in rates has been a longer process than coming off a peak. So, even if we have seen a long-term bottom in rates, they might meander in the 3-4% range for longer than one might think.
Leaving inflation-linked bonds aside, there are two different basic types of debt, zero coupon (the purer type) and conventional par bonds.
Tomorrow, I intend to go into some basic and unexpected considerations regarding the risks and benefits of zero coupon vs. par Treasuries.
Copyright (C) Long Lake LLC 2009
Historically, rates are volatile coming out of a recession; less so coming out of a depression. Since the peak in rates in the early 1980s, there have been new cycle lows in rates during every downturn and lower highs in the upturns.
While there are great arguments about why Treasury yields should now head upward, perhaps fast and high, one generally not-discussed argument for why they may stay low and even head lower is that a slow-growth, moderate inflation scenario could allow the Fed and the banks to make money on their current troubled assets. Perhaps the free market will take mortgage rates to 4.5% on their own, and the 10-year Treasury to 2% if the prevailing inflation rate is 1.4%. So I continue to respect the downtrend that is in force.
As stated above, Treasuries are detested by individual investors, who tend to believe that the world owes them a higher yield. Thus, Treasuries are bought and held by "smart money": governments, banks, insurance companies.
What might have happened last year was the beginning of an end to the secular trend toward low interest rates in non-governmental debt. It might be that Treasuries will experience a rally spurred by public buying that could have a blow-off top similar to that which occurred in the tech sector in the late 1990s into 2000, lunatic though we now see it to have been.
In addition, Louise Yamada has demonstrated that over the history of the U. S., creating a bottom in rates has been a longer process than coming off a peak. So, even if we have seen a long-term bottom in rates, they might meander in the 3-4% range for longer than one might think.
Leaving inflation-linked bonds aside, there are two different basic types of debt, zero coupon (the purer type) and conventional par bonds.
Tomorrow, I intend to go into some basic and unexpected considerations regarding the risks and benefits of zero coupon vs. par Treasuries.
Copyright (C) Long Lake LLC 2009
Friday, April 24, 2009
Ford-tastic?
Ford Motor Co. had an earnings "beat" (surprise!). In Bloomberg's Ford Loss Is Smaller Than Estimates as Cash Use Drops (Update2), the following quote is presented:
Excluding items the second-largest U.S. automaker considers one-time costs, the loss of $1.8 billion, or 75 cents a share, beat the $1.24 average of 11 analyst estimates compiled by Bloomberg.
“This is a fantastic performance,” John Wolkonowicz, an IHS Global Insight analyst in Lexington, Massachusetts, said today. “They’re burning cash at a much lower rate. They’re going to come out of this OK. I now believe they won’t need a government handout.”
What Bloomberg goes on to report (below-the-fold, as it were) is:
Ford’s U.S. vehicle sales fell 43 percent, contributing to its largest first-quarter loss since 1992.
The net loss was $1.4 billion, or 60 cents a share, compared with net income of $70 million, or 3 cents, a year earlier, the company said.
Revenue fell to $24.8 billion from $39.2 billion, excluding special items, as Ford slashed North American production by half. The average analyst estimate was for $23.2 billion.
The automaker has been able to forgo U.S. aid because it borrowed $23 billion in 2006 before credit markets froze. As collateral for that financing, which Mulally called “the world’s largest home equity loan,” Ford put up all major assets, including its headquarters and blue oval logo.
Ford lost a record $14.7 billion in 2008, and analysts expect the company to be unprofitable this year and next. Mulally has said he expects to break even by 2011.
Here are some of Ford's financials as of 12/31/08 as reported to the SEC (per Yahoo's Finance section):
Net tangible assets: Negative $19 B
Net working capital: Negative $31 B
Ford is going to continue to lose money year after year. Some "performance".
On second thought, it is a performance: the stock market is now more of an act than usual. Much of it is a bad act. Perhaps Mr. Mulally is a better actor than Cerberus and the unending stream of guys whose names all kind of sound the same who have run GM into the ground decade after decade.
Re the stock market as a whole, Louise Yamada continues to hold to her bearish technical view as she recently has been pointing out that the averages are continuing the trend of finding resistance at progressively lower levels. Resistance now is around Dow 8000, down from 10,000 and then 9000.
Unfortunately supporting this bearish view is the alacrity with which insiders have jumped to the sell side, as Bloomberg reports in Insider Selling Jumps to Highest Level Since ‘07 as Stocks Gain":
Executives and insiders at U.S. companies are taking advantage of the steepest stock market gains since 1938 to unload shares at the fastest pace since the start of the bear market. . .
Insiders from New York Stock Exchange-listed companies sold $8.32 worth of stock for every dollar bought in the first three weeks of April, according to Washington Service, which analyzes stock transactions of corporate insiders for more than 500 mostly institutional clients.
That’s the fastest rate of selling since October 2007, when U.S. stocks peaked and the 17-month bear market that wiped out more than half the market value of U.S. companies began. The $42.5 million in insider purchases through April 20 would represent the smallest amount for a full month since July 1992 . . .
Excluding items the second-largest U.S. automaker considers one-time costs, the loss of $1.8 billion, or 75 cents a share, beat the $1.24 average of 11 analyst estimates compiled by Bloomberg.
“This is a fantastic performance,” John Wolkonowicz, an IHS Global Insight analyst in Lexington, Massachusetts, said today. “They’re burning cash at a much lower rate. They’re going to come out of this OK. I now believe they won’t need a government handout.”
What Bloomberg goes on to report (below-the-fold, as it were) is:
Ford’s U.S. vehicle sales fell 43 percent, contributing to its largest first-quarter loss since 1992.
The net loss was $1.4 billion, or 60 cents a share, compared with net income of $70 million, or 3 cents, a year earlier, the company said.
Revenue fell to $24.8 billion from $39.2 billion, excluding special items, as Ford slashed North American production by half. The average analyst estimate was for $23.2 billion.
The automaker has been able to forgo U.S. aid because it borrowed $23 billion in 2006 before credit markets froze. As collateral for that financing, which Mulally called “the world’s largest home equity loan,” Ford put up all major assets, including its headquarters and blue oval logo.
Ford lost a record $14.7 billion in 2008, and analysts expect the company to be unprofitable this year and next. Mulally has said he expects to break even by 2011.
Here are some of Ford's financials as of 12/31/08 as reported to the SEC (per Yahoo's Finance section):
Net tangible assets: Negative $19 B
Net working capital: Negative $31 B
Ford is going to continue to lose money year after year. Some "performance".
On second thought, it is a performance: the stock market is now more of an act than usual. Much of it is a bad act. Perhaps Mr. Mulally is a better actor than Cerberus and the unending stream of guys whose names all kind of sound the same who have run GM into the ground decade after decade.
Re the stock market as a whole, Louise Yamada continues to hold to her bearish technical view as she recently has been pointing out that the averages are continuing the trend of finding resistance at progressively lower levels. Resistance now is around Dow 8000, down from 10,000 and then 9000.
Unfortunately supporting this bearish view is the alacrity with which insiders have jumped to the sell side, as Bloomberg reports in Insider Selling Jumps to Highest Level Since ‘07 as Stocks Gain":
Executives and insiders at U.S. companies are taking advantage of the steepest stock market gains since 1938 to unload shares at the fastest pace since the start of the bear market. . .
Insiders from New York Stock Exchange-listed companies sold $8.32 worth of stock for every dollar bought in the first three weeks of April, according to Washington Service, which analyzes stock transactions of corporate insiders for more than 500 mostly institutional clients.
That’s the fastest rate of selling since October 2007, when U.S. stocks peaked and the 17-month bear market that wiped out more than half the market value of U.S. companies began. The $42.5 million in insider purchases through April 20 would represent the smallest amount for a full month since July 1992 . . .
Obviously the data only covers 2/3 of April, but considering that the Dow has almost tripled since the 1992 comparison month, we are looking at a huge diminution in insider buying over time.
As Nassim Taleb keeps reminding us, the past is a very imperfect predictor of the future, but I for one find the unchanging emphasis and dubious enthusiasm about beating (managed, lowered and poor) analysts' estimates; government-created bank "earnings"; and the refusal of many of the most eminent pre-bear market bears such as Louise Yamada, Nouriel Roubini and Meredith Whitney to change their tune to be important considerations. The Great Depression had shoots of green as well, with ECRI's long leading indicators showing largely positive year on year comparisons for about an entire year between 1930 and 1931.
Finally for now, please consider Mish's Let the Criminal Indictments Begin: Paulson, Bernanke, Lewis. This blog has used/reported on the term "looting" for what has happened to the use of taxpayer funds to support stockholders and bondholders of financial companies.
EBR continues to believe that there are elements of both the Great Crash of 1929-32 and Watergate/S&L looting crisis extant. Anyone perhaps outside of Barack Obama and other insiders of the highest levels who believes he or she has a good read on how the future will unfold, including pricing of almost any asset, is in my humble opinion overly confident.
Copyritght (C) Long Lake LLC 2009
Tuesday, March 10, 2009
Breakfast Commentary: It's About Time for a Free Lunch
For those who are interested in seeing and hearing the views of Louise Yamada, please go to http://www.lyadvisors.com/ and click on the "Recent Events" bar. The most informative of these is the lengthy interview she did with Tom Keene for Bloomberg Radio. Ms. Yamada has been on the correct side of the following mega-trends:
Long stocks, 1982
Called stock market top, 2000
Pounded the table to buy stocks, spring 2003
Bearish on financials, 2006
Bearish on stocks, spring 2007
Continuously bearish on stocks since then
Current target on DJIA/S&P 500: 6000/600 as first target, then 4000/400 next target.
Turned bullish on gold early part of this decade around $300/ounce price. Continues positive though not wildly so.
Correctly predicted moon shot move up in oil this decade. Turned noticeably unenthusiastic on oil over $130/bbl. Did NOT predict collapse in oil price, though.
Ms. Yamada is a technician. She said in her interview that she ignores "fundamentals", as the market prices those in. She says she uses simple charting tools to determine what forces of supply and demand are moving assets up or down.
There's no question that her recommendations for being long or out of the stock market have massively beaten a buy-and-hold strategy, or a strategy based either on past year's earnings or projected earnings for the coming year.
Re the news of the day, this is a turnaround Tuesday for stocks in Europe and looks to be so here. The pattern of this bear is that even on most "up" days, certain previously-outperforming sectors lagged, and the most beaten-up ones rallied. If that pattern continues today, the NASDAQ will be relatively weak and the best-performing Dow stocks will also underperform laggards such as the financials and P&G. Thus, watch whether BofA, Citi and P&G outperform such relatively strong stocks as IBM and MCD.
Yesterday, Warren Buffett emitted positive sentiments about Wells Fargo, which stock dutifully surged, along with BofA. Today, Citigroup is gushing about how profitable it was the first two months of this year. Without being a sourpuss, I might point out that the U.S. Government has just given it vast amounts of money as direct investment and as a subsidy, and the Federal Reserve (which has almost completely ceased to be independent of the Government) has showered it with free money, guarantees, etc.
Even if "C" is profitable, no doubt this is on an "operating" basis. On a mark to market basis, which is to say in the real world in which you and I live, and Citi unfortunately has to live (or die), the deterioration in the value in its assets this quarter almost certainly is greater than any alleged profits it is booking. From a stock standpoint, the Federal Government can make Citi a $50 stock again if it keeps giving it free money (along with the complaisant Fed). But from a general corporate standpoint, Citi, as repeatedly pointed out here and all over the blogosphere, is a gross distorted monstrosity. Its predecessor National City Bank helped cause the 1927-9 stock bubble; it was bailed out in 1980 and 1990; its very name is toxic, and thus it should die and be chopped up, its parts distributed to better companies.
Now for the new bad news. From Calculated Risk today one sees two important posts, "FDIC's Bair on 'Aggregator Bank'"; and "S&P Puts $552.8 billion Alt-A MBS on Downgrade Watch".
CR, who is generally much more of a reporter than an opiner, is sarcastic about Ms. Bair's views, and he does this with full knowledge that she has had better press than Mr. Geithner, Mr. Paulson, or even Dr. Bernanke: he comments that in her view, "Insolvency is success".
CR also reports that S&P is likely to downgrade over half a trillion dollars worth of mortgage-backed securities ("MBS"). Though one might think that all this downgrade activity has been discounted by the stock and general financial markets, such has not been the case to date; there is thus no reason to expect it to be so with this latest giant set of MBS. One day, we all expect that downgrades will have been fully discounted by the markets; if that day is today, and we have seen the bottom of the stock market, that would certainly be marvelous. For now, the technicals per Yamada and the obvious fundamentals continue to argue for caution. This blog said the same thing 2000 Dow points higher 2 months ago. The action of the markets points out the importance of preservation of capital during uncertain and bearish times.
As the economy and financial markets twist slowly, slowly in the wind, and we all hope that the worst of the news has already been heard or at least over-discounted, it may be apt to quote some lines from T. S. Eliot's 1941 poem "The Dry Salvages", written in Britain during perhaps Britain's darkest days of World War II:
Where is there an end of it, the soundless wailing . . .
Where is there an end to the drifting wreckage . . .
There is no end, but addition: the trailing
Consequence of further days and hours,
While emotion takes to itself the emotionless
Years of living among the breakage
Of what was believed in as the most reliable-
And therefore the fittest for renunciation.
There is the final addition, the failing
Pride or resentment at failing powers,
We cannot think of a time that is . . .
. . . not liable
Like the past, to have no destination.
There is no end of it, the voiceless wailing,
No end to the withering of withered flowers,
To the movement of pain that is painless and motionless,
It seems, as one becomes older,
That the past has another pattern . . .
Not fare well,
But fare forward, voyagers.
No matter what the future holds for us, perhaps the next saying, also coined during World War II, is the more important:
Illegitimi non carborundum:
Don't let the bastards wear you down.
Copyright (C) Long Lake LLC 2009
Long stocks, 1982
Called stock market top, 2000
Pounded the table to buy stocks, spring 2003
Bearish on financials, 2006
Bearish on stocks, spring 2007
Continuously bearish on stocks since then
Current target on DJIA/S&P 500: 6000/600 as first target, then 4000/400 next target.
Turned bullish on gold early part of this decade around $300/ounce price. Continues positive though not wildly so.
Correctly predicted moon shot move up in oil this decade. Turned noticeably unenthusiastic on oil over $130/bbl. Did NOT predict collapse in oil price, though.
Ms. Yamada is a technician. She said in her interview that she ignores "fundamentals", as the market prices those in. She says she uses simple charting tools to determine what forces of supply and demand are moving assets up or down.
There's no question that her recommendations for being long or out of the stock market have massively beaten a buy-and-hold strategy, or a strategy based either on past year's earnings or projected earnings for the coming year.
Re the news of the day, this is a turnaround Tuesday for stocks in Europe and looks to be so here. The pattern of this bear is that even on most "up" days, certain previously-outperforming sectors lagged, and the most beaten-up ones rallied. If that pattern continues today, the NASDAQ will be relatively weak and the best-performing Dow stocks will also underperform laggards such as the financials and P&G. Thus, watch whether BofA, Citi and P&G outperform such relatively strong stocks as IBM and MCD.
Yesterday, Warren Buffett emitted positive sentiments about Wells Fargo, which stock dutifully surged, along with BofA. Today, Citigroup is gushing about how profitable it was the first two months of this year. Without being a sourpuss, I might point out that the U.S. Government has just given it vast amounts of money as direct investment and as a subsidy, and the Federal Reserve (which has almost completely ceased to be independent of the Government) has showered it with free money, guarantees, etc.
Even if "C" is profitable, no doubt this is on an "operating" basis. On a mark to market basis, which is to say in the real world in which you and I live, and Citi unfortunately has to live (or die), the deterioration in the value in its assets this quarter almost certainly is greater than any alleged profits it is booking. From a stock standpoint, the Federal Government can make Citi a $50 stock again if it keeps giving it free money (along with the complaisant Fed). But from a general corporate standpoint, Citi, as repeatedly pointed out here and all over the blogosphere, is a gross distorted monstrosity. Its predecessor National City Bank helped cause the 1927-9 stock bubble; it was bailed out in 1980 and 1990; its very name is toxic, and thus it should die and be chopped up, its parts distributed to better companies.
Now for the new bad news. From Calculated Risk today one sees two important posts, "FDIC's Bair on 'Aggregator Bank'"; and "S&P Puts $552.8 billion Alt-A MBS on Downgrade Watch".
CR, who is generally much more of a reporter than an opiner, is sarcastic about Ms. Bair's views, and he does this with full knowledge that she has had better press than Mr. Geithner, Mr. Paulson, or even Dr. Bernanke: he comments that in her view, "Insolvency is success".
CR also reports that S&P is likely to downgrade over half a trillion dollars worth of mortgage-backed securities ("MBS"). Though one might think that all this downgrade activity has been discounted by the stock and general financial markets, such has not been the case to date; there is thus no reason to expect it to be so with this latest giant set of MBS. One day, we all expect that downgrades will have been fully discounted by the markets; if that day is today, and we have seen the bottom of the stock market, that would certainly be marvelous. For now, the technicals per Yamada and the obvious fundamentals continue to argue for caution. This blog said the same thing 2000 Dow points higher 2 months ago. The action of the markets points out the importance of preservation of capital during uncertain and bearish times.
As the economy and financial markets twist slowly, slowly in the wind, and we all hope that the worst of the news has already been heard or at least over-discounted, it may be apt to quote some lines from T. S. Eliot's 1941 poem "The Dry Salvages", written in Britain during perhaps Britain's darkest days of World War II:
Where is there an end of it, the soundless wailing . . .
Where is there an end to the drifting wreckage . . .
There is no end, but addition: the trailing
Consequence of further days and hours,
While emotion takes to itself the emotionless
Years of living among the breakage
Of what was believed in as the most reliable-
And therefore the fittest for renunciation.
There is the final addition, the failing
Pride or resentment at failing powers,
We cannot think of a time that is . . .
. . . not liable
Like the past, to have no destination.
There is no end of it, the voiceless wailing,
No end to the withering of withered flowers,
To the movement of pain that is painless and motionless,
It seems, as one becomes older,
That the past has another pattern . . .
Not fare well,
But fare forward, voyagers.
No matter what the future holds for us, perhaps the next saying, also coined during World War II, is the more important:
Illegitimi non carborundum:
Don't let the bastards wear you down.
Copyright (C) Long Lake LLC 2009
Subscribe to:
Posts (Atom)