We've heard from the U.S. Treasury and the Federal Reserve and they say that our recession is ending. We have a 50% bounce in the stock market and we have loads of statistics pointing to a recovery, Now, however, we hear a different voice, one that is steeped in reality, that takes the pulse of business, that is on the front lines, in the trenches so to speak. Let's listen in:
The U.S. is still in a recession which may last until 2010 according to the Association for Financial Professionals. The poll was carried out on Monday and surveyed 1,000 chief financial officers and treasury executives. Here are their findings:
Once again Micheal Covel is back with a new take on the finance industry, but this time on the big screen with Broke: The New American Dream. Already a renowned author of two best selling books, The Complete Turtle Trader and Trend Following, this market veteran has now directed a clear and concise documentary that illustrates his and other traders takes on the recent market meltdown.
Here is the trailer for the movie:
While teaching the average investor how to adapt to this grueling market environment, Covel describes how the credit bubble was created – from Wall Street to the average Joe. In order to prepare for the future we must better understand the past. It is not only useful, but should be required to listen to the opinions expressed by many prominent economists, successful hedge fund managers and Nobel prize winners featured in this film.
This morning Warren Buffett was interviewed and said he would be in favor of the federal government passing legislation for a second stimulus bill -- increasing the money supply again by gargantuan proportions.
While "my pal" Warren got plenty of ink (and pixels) for his comments it left me wanting more. Buffett has the most to gain, and the most to lose -- and at the same time he cannot really lose.
Since Buffett has so many billions of dollars and controls billions more, and influences still more in the hundreds of billions, he clearly has been and continues to be negatively affected by our economic firestorm more than almost any other individual could be.
After interviewing 10 US-based financiers in this post and here, I decided to cross the border and ask our neighboring Canadian investors for their insight on the current market conditions and forecast for the year to come.
In this post from late April, I asked several financial experts where they thought the stock market was headed. Here's another round of predictions with a new batch of experts.
Neal Berger,the fund manager who called the market top, founder of fund-of-funds Eagle's View Asset Management, is always seeking undiscovered fund managers who exploit a legitimate "edge" or inefficiency in the market. With decades of experience at prominent firms such as Fuji Bank, Chase Bank, and Millennium Partners, he now manages the investments of wealthy families/individuals.
This is the market view from five prominent stock market bloggers. I asked them each one simple question: Where do you think the market is headed, and why? Here are their responses (listed in alphabetical order):
"The market sold off too much. S&P 700 was anticipating the apocalypse, which is not happening. With $15 trillion in stimulus worldwide happening over the next one to four years there is only one hedge for inflation: owning a broad spectrum of stocks. Buy internets, nuclear energy (Altucher mentions Shaw Group (NYSE: SGR), Cameco Corp (NYSE: CCJ) and USEC Inc (NYSE: USU) in THIS video segment), gold producers, and healthcare stocks."
This morning General Electric (NYSE: GE) finally spoke up about the financial situation of the company. GE's chief financial officer, Keith Sharon, says worries about GE Capital are overdone, reports CNBC's David Faber. I have been ranting about this for months, most recently in Silence is not golden when it creates doubt.
One of George W. Bush's professors at Harvard Business School said, "He showed pathological lying habits and was in denial when challenged on his prejudices and biases. He would even deny saying something he just said 30 seconds ago."
Exploiting a weakness in the U.S. Constitution, Bush became president in 2000 despite losing the popular vote. He ignored an August 2001 Presidential Daily Brief titled: Bin Laden Determined to Strike in the U.S. Then he used that attack -- along with some trumped up evidence of WMDs -- to justify an invasion into Iraq that killed thousands of people and cost trillions.
Now as Bush goes on his self-pity tour before he (hopefully) leaves office in less than a week, bin Laden is apparently still alive and enjoying a last laugh at Bush. Bin Laden's latest video blames Bush for weakening America which permitted Israel to invade Gaza. Bin Laden is partially right -- Bush has weakened America.
So spooked by the market that you've withdrawn cash from your investments to stuff beneath your mattress? Or do you simply crumple every mutual fund statement without opening?
Yesterday as I sipped my coffee, Payson Swaffield, vice president and chief income investment officer of Eaton Vance of Eaton Vance (NYSE: EV) in Boston, shared with me by phone some current alternatives in fixed-income investments. There are two worlds of fixed-income investments (bonds, essentially), according to Swaffield. One is very low risk and low return. The other is slightly higher risk but has equity-like return possibilities.
First some definitions: A fixed-income instrument is an investment in a bond or another debt security issued by a government or government agency, such as Fannie Mae or Freddie Mac, a municipality, or a private enterprise. Fixed-income investments have traditionally provided lower volatility than equity investments as well as risk diversification, Swaffield says.
The Oracle of Omaha, Warren Buffett, of Berkshire Hathaway (NYSE: BRK.A) spent a few moments on CNN answering some key questions about the economy at a Fortune Magazine Forum. He was asked where he would place the blame for the current financial crises being played out on the world stage, and he said he is not one to point fingers. There is plenty of blame to go around.
Initially Buffett quipped that "every saint has a past, and every sinner has a future." He went on to say that the everyone participated in the creation of the housing bubble with the unrealistic expectation that prices would continue to rise.
He summarized that home ownership is worshiped in the United States, and once cheap funding became available and prices started to rise there became the feeling that if you did not buy a home now you would be facing higher prices next year and perhaps less favorable interest rates as well.
Since Friday's surprise announcement that John McCain picked Alaska governor Sarah Palin as his VP, numerous unpleasant facts have emerged which may make McCain regret his hasty choice. And since she has not been officially nominated by the Republican convention, it's not too late for McCain to pick Karl Rove favorite Mitt Romney instead.
Here are some of the reasons that McCain should reconsider his decision:
Hearbeat away. She has had very little experience governing and none with foreign policy. This would be fine if McCain was in robust good health. Unfortunately, that is not the case. She could actually become President and it is far from obvious that she has the most executive experience among all the potential VP candidates that might need to step in if McCain could no longer do the President's job.
No longer a shoe-in for Evangelical vote. She was strongly supported by the Evangelical wing of the Republican party due to her religious beliefs and her decision to keep her fifth child after she learned it would have Down syndrome. But with her 17-year old daughter having a child, some might question how strongly Palin believes in abstention until marriage.
Corruption concerns. It is not clear whether McCain knew that Palin was under investigation for firing a public safety commissioner who refused to fire her brother-in-law. And did he know that she denied involvement with lobbyists in an interview with Maria Bartiromo, even though a TransCanada lobbyist played a central role in getting a $500 million subsidy for that Canadian company to build a gas pipeline she was pushing?
Our government has been doing its share of bailouts in the last year. It put $29 billion of taxpayer money at risk to finance the takeover of Bear Stearns. It stands ready to use $800 billion to bailout Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). And now General Motors (NYSE: GM) wants $50 billion in government guarantees to finance fuel efficient cars. I have been looking into the bailout issue and whether it is beneficial or a misuse of funds - and there is a lot of debate about this issue. These bailouts may make political sense but are they in the long-term economic interests of the country?
A colleague of mine who was a Budget and Cost Analyst for a top government agency has been thinking about the political aspect of bailouts and shared his thoughts with me. As he wrote, "It is a sure thing that either party could get votes from a bailout, but they might loose some as well. Where a party could really improve its position would be to support a bailout, but lose."
He suggests that this outcome would pay off in the short-run but could damage long-term economic outcomes. As he suggested, If the party supported a bailout but lost, "it could claim that it was trying to support the victims, but had been frustrated by the other party. And this could be used to promote the party for many years in efforts to get votes. While maneuvers of this sort may get short run votes, over the long term they might be hurtful of sound economic growth and performance."
Bloomberg News reports that hedge fund Bridgewater Associates has estimated that the total write-downs from the current credit crisis will total $1.6 trillion. With $400 billion in write-downs taken so far, this $1.6 trillion estimate would put us about a quarter of the way through the crisis. So far, banks have raised $321 billion in capital to buffer those write-downs.
And Teddy Forstmann, a private equity veteran, agrees with this assessment. In an interview from Saturday's Wall Street Journal, he said the current credit crisis is the worst he's seen. As he said, the problem started after 9/11 with the Fed giving away money at negative real interest rates. This created so much cash that banks could not find ways to lend it out where risk and reward were in balance.
So they created new ones which mis-priced risk. These include loan syndication -- in which banks originate loans and take a fee for selling them to someone else -- and securitization -- in which banks packages lots of loans as securities and sell those to hedge funds and other institutional investors. Unfortunately, these only work when the prices of the underlying assets are going up.
Hedge Fund guru George Soros warned over the weekend, in an interview with The Daily Telegraph, that " the crude oil market had been significantly affected by speculation." Because of all the speculators driving the price of crude higher and higher, Soros went on to say, "Speculation... is increasingly affecting the price, the price has this parabolic shape which is characteristic of bubbles."
While I tend to disagree with Soros when he predicts that we are headed for a very deep recession, I do think that there isn't much justification to $130+ per barrel of crude. After all, the continuing cry of increasing demand falls short, when the big consumers of oil, are experiencing slower economic growth. After the Olympics, I wouldn't be surprised to see Chinese growth take a sharp fall as well, as many of the public works projects come to an end.
I think that potentially, we will see crude oil fall back to the $50-60 per barrel level.
Aaron Katsman is Senior Portfolio Manager of the Israel Growth Portfolio, of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 5/27/08
We've heard from the U.S. Treasury and the Federal Reserve and they say that our recession is ending. We have a 50% bounce in the stock market and we have loads of statistics pointing to a recovery, Now, however, we hear a different voice, one that is steeped in reality, that takes the pulse of business, that is on the front lines, in the trenches so to speak. Let's listen in:
This morning Warren Buffett was interviewed and said he would be in favor of the federal government passing legislation for a 
After interviewing 10 US-based financiers in 
In 
This morning 
One of George W. Bush's professors at Harvard Business School 
So spooked by the market that you've withdrawn cash from your investments to stuff beneath your mattress? Or do you simply crumple every mutual fund statement without opening? 
The Oracle of Omaha, Warren Buffett, of 
Six top trades for the rest of 2009
Comfort Zone Investing: Buffett buys Burlington
Senator Sanders proposes legislation to break up large banks
