February 07, 2008

Anyone surprised at how bad this asset deflation is getting now?

Open thread to talk about where you're stashing your loot as the US bogs down in recession and The Great Unwinding continues.

Bernanke's panicked, massive and historic rate cuts are looking pretty ineffective so far, at least on investor psychology and consumer confidence.

It's also tough to create a new bubble when the banks can't and won't lend. Bubbles need leverage. Bubbles need debt. Bubbles need speculators. So are we out of bubbles?

Cash still feels king. But damn, some of these stocks are getting stupid cheap, if they'd just make a bottom.




85 comments:

Idiots... said...

Stocks wont hit bottom until this current cycle ends - figure another 5-12 years... Commodities - that's the current bull market - another 5-12 years of that moving up. If you're a trader, you can play the bounces - but long term money - expect to see more of the same - which between the DOW and the S&P500 - 0% for the past 8 years.

Anonymous said...

I like this headline much better.

They claim they fear inflation when in truth their worst enemy is deflation.

How can they fear inflation, if inflation is what they want. But deflation, out of control deflation is what will end this ponzi scheme.

You know who it is.
Danny

Trevor Cordes said...

Stocks getting cheap, Keith? You're not eating your own cooking! Look at a chart of 2000-2002, and while you're at it, 29-31, 37-38, 46-47, 68-70, 73-75, 76-78, 81-82. Those are all 4 year cycle bears in 32 year secular bears. In fact, only 2 4 year bears in 32 secular bears didn't turn out worse than we already are. You want to bet those odds? Especially after the biggest credit binge in history and out of control (but underreported) inflation?

I shorted (Feb puts) every 100 DJIA points up starting at 12300 in this dead cat bounce bear-flag rally and I just made a killing (and more to make today as I sell the last tranche)!

Short all rallies! Bear market is in force, and will be so for at least 1 year. The only thing you have to be careful with is the rallies may last 4+ weeks, meaning front-month puts are risky, so be careful, or buy 2010 LEAPS on the rallies. Or, just old-fashioned short the market, but keep enough cash for margin calls.

I'd say less than 10% of the stocks out there are "cheap". Good luck finding them. P/E is a lie right now as earnings will tumble and P/E's will contract because of slowing growth and historical overshoot-the-mean PE contraction dynamics.

You know the Fed won't save you as they cut hand over fist 2000-2002 and it didn't stop huge (40-80%) stock losses.

Marky Mark said...

Cash still feels king. But damn, some of these stocks are getting stupid cheap, if they'd just make a bottom.

Which ones?

Anonymous said...

On another note.

Be careful with those stocks, they might seem "cheap", but they are not. I can testify to this, being bunrt after the tech bubble.

Danny

I am a failure said...

No surpise here.ttill your friends are pushing shopping carts around town and camping in walmart parking lots.Or even better when your kids teacher is turning tricks on main street.Dollar dollar bill ya'll!!!!!!!Cash moves everything around me.

LauraVella said...

Even though stocks look cheap today, doesnt mean they are a good deal...it's the mirror image of housing.

Housing and stock prices will both deflate.

cobra2411 said...

I'm surprise how fast this is starting to move...

Not that I didn't expect it though...

It's kinda like going to the Empire State Building or Niagara Falls. You know it's big, but when you see it you're still surprised by how big...

Anonymous said...

EVERYTHING is and remains in a bubble.

iglooman said...

I think it is waaay too early to consider buying stocks. The psychology has to be that we are out of the woods before I will buy long. I don't even think we are really in the woods yet...

I have my "cash" in shorts and treasuries.

satan said...

I have a new word for this economy

'The Origami Economy'

It is built of paper and it looks good. But it cannot withstand a rainstorm (recession) or small fire (subprime). Indeed, the small fire is setting of a series of chain reactions that is burning up previously 'healthy" parts of the economy.

Tanker said...

Keith:
What stocks are you talking about that are so cheap? Based on what? The market as a whole is only down about 15% from peak. The average decline during a recession is 27%. And I don't think any of us believe that this will be an average recession. We're not even officially in bear market territory yet. Please let us know what you're thinking.

resisting husband said...

I have a great strategy:

I HAVE NO LOOT TO WORRY ABOUT STASHING!!!!!!! HAHAHAHA


Although, i am protecting my future loot by financing my education with student loans that are fixed @ 2.875%

Not too shabby, inflation rate is higher than that. Any advice for a no loot havin' person entering the real world in the next six months?

keith said...

"Cheap" is relative. 30% off condos in Miami seemed cheap, but we all know they're going to 50% off, 60% off and maybe even more

50% off on pets.com stock seemed "cheap". 100% later when it hit zero, now that was cheap.

But damn, it's tough NOT to buy Apple at these levels. Or google. Or more conocophillips. Or EWZ, EWG, EWJ, PBR, MRK, MO, T, PBW, MVL, BRK-A, SBUX and RSX. Just for starters.

I'm trying to game this out. The government is gonna throw hundreds of billions at the problem. Bernanke is going to take rates to zero. There's a wall of money in Asia and Russia looking for a place to go.

At one point, it's going to be GREAT to buy stocks again. It's going to be GREAT to have cash to use. Blood is in the streets, but it's still getting bloodier.

Anyone nibbling?

Mammoth said...

“Open thread to talk about where you're stashing your loot”
------------------------------
So far, nobody has said where they’re stashing their loot.

Called my accountant after selling my rental house in October, and he advised me to set aside $25K to pay the IRS for capitol gains tax. So I gambled and stashed the loot in gold – the physical, hold-in-your-hand stuff – with the aim of redeeming it between now and April 15th.

Am now following the ups & downs of the gold price, sweating when reading about a possible ‘correction’ and smiling when it jumps up in price.

What to do, what to do...? Go ahead and wait ‘til April, or cash out now while ahead ~$200/oz and play it safe? Sh!t, it’s all a crapshoot these days…
-Mammoth

Mammoth said...

“Any advice for a no loot havin' person entering the real world in the next six months?”
--------------------------
After you start getting a regular paycheck, continue to live and spend prudently like you did during your student years.

And save, save, save.

Marky Mark said...

But damn, it's tough NOT to buy Apple at these levels. Or google. Or more conocophillips. Or EWZ, EWG, EWJ, PBR, MRK, MO, T, PBW, MVL, BRK-A, SBUX and RSX. Just for starters.

Just to play devils advocate:

Apple – still way overpriced and over hyped tech stock (F P/E at 19) – who is going to buy thier new $500 iphone or ipod?
Google - still way overpriced and over hyped tech stock (F P/E at 20)
Conoco Phillips – Don’t see as a raging buy right now
EWZ – Brazil? Everyone likes it. Even Cramer has been hyping Brazil for the last few weeks. Missed the boat
EWG – Germany? That is a maybe And no housing bubble.
EWJ – Japan? That is a maybe
PBR – Think we missed the boat on that. Even Cramer is hyping it.
MRK – Hmmm – big Pharma under Hillary? If so, I like BMY better
MO - Everyone likes it. Even Cramer has been hyping MO for the last few weeks
T- That is a maybe
PBW – Are you kidding me? “Green Energy” is as big a bubble as housing was.
MVL – About 2 years late on this one
BRK-A = OK – Who has $140,000 to buy ONE share?
SBUX – STARBUCKS????? All those FB are going to be cutting back big time. $4 cups of coffee will be the #1 on the list
RSX – Russia? – That is a maybe (although they have their own huge housing bubble)

I do not see any HOLY COW picks. But to be fair - I do not have any either. I think the best place to go if you have to be in stocks is High Dividend Energy Limited Partnerships (such as EPD, GLNG, NGT, etc.) that pay a good dividend (6-10%) and have tax advantages.

pwnd said...

I'm 100% invested in the stock market. My top pics:

MGU (global infrastructure)
PHO (water)
NTDOY (video games)

But...

I also roll out of the $ puts for insurance. I have puts on:

AMZN (super expensive)
FXI (china stocks=bubble)
KBH (see housingpanic.com)

So far (knock wood) it's been a great strategy. Buy long-term themes, short overvalued equities.

There is too much money in the world, and $ supply is still growing. People will continue to buy stocks because there is not many great options.

Treasury Bills are a bubble.

Euro is a bubble.

Gold is being hoarded based on fear; fear & greed are horrible reasons to buy anything.

satan is a republican said...

Is there any truth to the rumor that 'Suzanne' the realtor is now turning tricks on Ventura Blvd. in between breaks at the local hamburger joint?

Anonymous said...

Short this sucker because you're all pefectly correct about the subprime crash and banks, etc being in the toilet. Check out Proshares Ultra Short ETFs (Exchange Traded Funds) such as DXD and SKF (finacials) easier than short positions on the DOW which can move so hard against you. Like taking candy from a baby now!

Anonymous said...

I'm quite enjoying those 5% CDs people were shunning last year.

Budvar said...

I still remember the "Gold will see $200 before it sees $1000" bozos when gold was knocking on $600. Anyone out there still willing to take that bet?
Keith, I told you to buy and hang on, and I bet you wish you had instead of selling when the price dropped a buck fifty.

PONCH said...

Not too shabby, inflation rate is higher than that. Any advice for a no loot havin' person entering the real world in the next six months?



Well, the fact that you are on here means you will probably turn out OK. Get a job...maybe worst case, compromise between what you would love to do and what you can make decent money at. And then, do this: live below your means. This is not something that has to be a bummer. I am 35, and I work on the TV show The Office. I have really only worked "full time" for 2+ years of my life. But I buy and sell a ton on Ebay, go to swap meets for pretty much everything, and am dedicated to living wayyyy below my means. I live with a 24 year old recent graduate. I have been teaching her the joys of this lifestyle, and she is taking to it like you wouldn't believe. She has a whole line of great-looking business attire that she has bought for about $1 a piece. She hasn't been making a lot of money yet (she's temping to stay somewhat free like me), but she is already paying off loans completely and starting to bank thousands. From working 2+ years full time, and saving like a whore my whole life, I am almost to the point where I could buy a house outright in Los Angeles. But I won't, until I'd be an idiot not to.

So another point I am trying to make is this: you can find a hot chick that will share whatever life view you choose. This is important...lots of lame sororety-type chicks in this materialistic country...avoid them like the plague. Also avoid anyone wearing Ugs. Lame! }:^)

I want for nothing. Since we go to swap meets all the time (the cheap ones...not that antiques and collectables BS), I have an insane amount of cool shit. For example, maybe you are big into video games like me. I refuse to get into Xbox 360 or PS3 for about 5 years, until I can do it a lot cheaper. I only recently got into PS2 and Xbox, since I could finally do it very cheaply. I collect games, so I have probably 200 Xbox and PS2 games. And since I bought and sold games as I was collecting, I basically paid zero dollars for my video game collection, minus my time...which I enjoyed anywany. Same thing with PSP...bought and sold a bunch of crap to pay for a system and about 40 games. Awesome.

Two other things I like: always drink water when you eat out. And don't see to many first run movies. It's just too much...it's lame. I'd rather save and be rich. Idiots in America will whine...but you're not even really living...why not spend your money while you can?? Douches. I hate the America mentality that has been around forever now, and I hope to God it changes going forward. And by the way, those people are likely slaves, while I am rollerblading down the beach in life. I live an amazing life. I have everything I want for little cost, and I basically make a game out of living cheaply. I don't go overboard, and I do treat myself (and others) more and more as I become more wealthy.

I'm rambling, so I will stop. Good luck, my son! ha. PS...most states won't have good swap meets like Los Angeles, so I guess thrift stores are the best equivalent. The only clothes I don't get at thrift stores are underwear, shoes and jeans. And my wardrobe is awesome, crazy shiat. Fun.

ps...even if you just haveeee to get into PS3 or Xbox 360 now, you can still buy and sell to pay for it, I am sure. If you are smart, you can do this with probably anything.

Westparker said...

Keith,
I'm surprised at your thinking. AAPL was 80$ less than a year ago, now it's still $120. Just because is was $200 doesn't mean sh*t. Bubbles burst. AAPL is a pure momentum stock and right now, the momentum is down.
As for the other ideas, if you want to go long, why not get into something that benefits from this super loose monitary policy, maybe one of the better run banks or insurance companies. We all know there is still a lot of pain in this area, but the ones that emerge will be big long term winners.
Full Discolusre - I'm 80% cash, the rest in BEARX and FDPIX.

Anonymous said...

It amazes me that after two years of successfully predicting the housing train wreck, Keith can be so blind about stocks.

The recession's barely started, stocks that look cheap today will seem overpriced in the near future.

Keith seems to think that the Fed money drop will inflate select stocks, and that it must be "a great time to buy"... something, somewhere.

This is the same Fed, and the same US government that Keith rants about almost every day, calling them incompetent and corrupt? They've been behind the curve through all of this, and their efforts so far have amounted to very little.

Faith In The Fed: The Last Bubble To Pop
http://tinyurl.com/2ayydo

Looks like Keith is finally coming around. Are you a "deflationista" yet, Keith?

http://tinyurl.com/2fd76w

Whether it's deflation, inflation, stagflation, or stag-deflation - stocks will most likely continue to fall.

(Only the hyper inflationary scenario has nominal stock prices rising).

My CMG puts have just become profitable.

Buy when the streets are red said...

Keith, you are spot on. During the housing bubble, a lot of people were moving money out of stock and in to housing, so the PE was low anyway. People were not pleased with the returns they were making in the market vs. RE, but now you have deflation in everything. A lot of these bounces are bear traps, but, when there is a big panic like Jan 22, you can scoop up big positions in good stocks, and make A LOT of short term money. Trust me, Jan 22 was a REALLY good day. The next BIG event is going to be the downgrades and bankruptcy of the bond insurers. When that happens, it is buy time. It is a traders market for now, and keep cash at hand for the BIG news that dumps the market in big moves. However a core position should be built in cash rich, market segment leaders that pay good dividends. When you can earn 7% buying a stock, even though it temporarily goes down, you are still better on a return basis than sitting that cash in a money market earning 1%. Just make sure the company is in sound financial footing and does not need a bank to fund operations or aquisitions. Also, when possible, purchase preferred stock. This is NOT a momentum market, it is a dividend market. Safety is king, but the fed has mandated money deployment, so deploy wisely.

Max said...

keith, you are seriously misguided about what cheap means. At AAPL P/E around 25-30, the stock is nowhere cheap, the numbers are even worse for GOOG.

Why the obsession with these stocks anyway? Just because they've had a great run and you've missed it, doesn't mean you have to chase is now to prove something to yourself. Relax, and don't get burned.

Re Asia/Russia flush with cash - they have other perfectly good uses for it, to think they're going to go out and buy overpriced POS stocks sight unseen is the same logic that suggested the rich Chinese will buy up all real estate in Merced and Sacramento. We know how that one turned out.

Lady Di said...

All cash and just waiting for the fire sales to begin.

Still buying gold and silver too.
I am hedging my bets.

Brian said...

I'm still in inverse ETFs.

There is not enough blood in the streets yet. Remember, Warren Buffet did his buying in the early 80's when people thought stocks were dead forever.

And I'd avoid like the plague anything that is tied to consumer spending, like Apple.

Infrastructure, mines, anything with a WPA-like feel may do well.

Brian

Anonymous said...

Have you ever tried this exercise...

We know that since 1982, rates have been on a downtrend. And declining rates push up the PE multiple, thus boosting stocks.

We could agrue that rates are close to the trough so maybe we should be comparing the future returns to the 1957-1982 growth period. If you use the annualized return from that time period, stocks would need to correct by anywhere from 30 to 50% to become fairly valued!

Tanker said...

Apple at 27x trailing earnings and 20x expected "fantasy" projections? Do you really think people are gonna be spending 3k on a laptop when you can get a Compaq for 500 bucks at Best Buy? Or spend $400 on a telephone that they can get for free with a plan? These are consumer discretionaries and will be the first to go during a recession.

Anonymous said...

OMG, listen to these morons turn economics on it's head while Schiff tries to drum some sense into these mentally retarded twits. Seriously, where do they find these people like Mike Norman (the local used car dealership?):

http://www.europac.net/Schiff-FBN-2-06-08_lg.asp

NoHouseNoCarNoDebtJustGoldAndCash said...

In the last couple days we've dropped below major support levels (AGAIN--not the first time this year) on all the US indexes. I think the next support levels are another 10% down or so, and take us back to 2006 prices.

If you want back in, wait until the front page of Investor's Business Daily says we've CONFIRMED a rally attempt.

Or

Wait until all the TV talkers stop saying stocks are cheap enough now to buy.

Or

Wait until the day another war starts.

Or

Wait until most important growth companies have already dropped their GROWTH forecasts, thereby compressing their PEG ratios and tanking their stock prices.

Or

Wait until the April or July or October earnings season is over, AND all the at-risk lending banks seem to have found and booked all their losses from subprime, etc (probably October, that's when we'll be over the biggest hump of loan resets.)

Or

Wait until the first Fed rate INCREASE happens--or at least until they start talking about raising; or AT LEAST wait until they stop lowering!

Anonymous said...

Cash isn't king.

Gold and silver are.

Anonymous said...

As I've said before, Keef is the last one you should follow regarding trading/investing. He has no competence in this area.

He called the housing market plunge, but any idiot who reads Financial Sense, Prudent Bear, the Mogambo Guru or the Daily Reckoning also knew what was going to happen.

keith said...

I agree - do NOT listen to me when it comes to investments.

Don't listen to Cramer, don't listen to Kudlow, don't listen to Ben Stein, don't listen to Shiller, don't listen to ANYONE

You're on your own when it comes to investments. You are truly on your own when it comes to investments. Because in the end, you'll only have yourself to blame or credit.

And as we all know, the stock market is manipulated something fierce. It's set up for the institutions to win and the individual investor to lose.

Anonymous said...

If you buy stocks now, you're going to lose your shirt. The smart money is trying hard to create fake rallies just to sell. The same is happening with the phony "global growth" stocks, which the corrupt MSM helps to push with tools like Kudlow and Bartiromo. Nothing but pumping and dumping going on.

Cash is king!

Heres a fresh interview with Jim Rogers for Fortune Magazine:

'It's going to be much worse'
Famed investor Jim Rogers sees hard times ahead for the United States

"I'm extremely worried," he says. "I have been for a while, but I just see things getting much worse this time around than I expected." To Rogers, a longtime Fed critic, Bernanke's decision to ride to the market's rescue with a 75-basis-point cut in the Fed's benchmark rate only a week before its scheduled meeting (at which time they cut it another 50 basis points) is the latest sign that the central bank isn't willing to provide the fiscal discipline that he thinks the economy desperately needs.

"Conceivably we could have just had recession, hard times, sliding dollar, inflation, etc., but I'm afraid it's going to be much worse," he says. "Bernanke is printing huge amounts of money. He's out of control and the Fed is out of control. We are probably going to have one of the worst recessions we've had since the Second World War. It's not a good scene."

Rogers looks at the Fed's willingness to add liquidity to an already inflationary environment and sees the history of the 1970s repeating itself. Does that mean stagflation? "It is a real danger and, in fact, a probability."


http://tinyurl.com/3838d8

Anonymous said...

Dow will bottom around 8000 this fall.
Don't buy, buy QID if you want to short it all the way down

Mr. Sulu said...

>> Cash isn't king. Gold and silver are.

Went to SafeWay yesterday, tried to purchase groceries with some gold coins. Manager called the police, had me thrown out of the store for trying to use unlawful currency.

The king, evidently, has no clothes.

Would one of you gold hoarders please tell me WHY, when the shit finally hits the fan, is my grocer all of a sudden going to be accepting gold in lieu of cash? I believe when the fateful moment finally arrives, the only people coming out of the grocery store with food will be the ones who went in with guns, not gold.

Anonymous said...

Nothing says market "rally" like today's headlines:

* Wal-Mart's distress signal
The world's largest retailer leads a parade of sales misses in January, indicating trouble in the U.S. economy.

* Home prices set to slide in '08
National Association of Realtors pulls back on outlook and forecasts second consecutive annual decline in prices and sales

* Freddie, Fannie debt may pose risk to economy
The housing slump has compelled the two entities to buy up mortgages on the secondary market that banks are backing away from. But that could end badly, charges one regulator.

* Sales at U.S. retailers languished in January as discounts failed to lure consumers concerned about losing their jobs.

* Macy's Inc., struggling to shore up sales and profits, said Wednesday it will cut some 2,550 jobs and consolidate regional divisions.

* The euro fell to the lowest level in more than two weeks against the dollar as European Central Bank President Jean-Claude Trichet said the U.S. economic slowdown may curb growth in Europe.



These market rallies are all rigged to shave the sheep!

ilovesusy said...

"Is there any truth to the rumor that 'Suzanne' the realtor is now turning tricks on Ventura Blvd. in between breaks at the local hamburger joint?"

no, she's dating me... cause none of my friends own homes, we all rent; She wants to hook us up!

Anonymous said...

The Republican thieves on Wall Street now want to fake a "reform":

Cuomo Says S&P, Moody's Reforms Too Little, Too Late

(Bloomberg) -- New York Attorney General Andrew Cuomo said ``supposed reforms'' by Standard & Poor's and Moody's Investors Service, which gave high ratings to subprime debt that later plummeted, are ``too little, too late.''

S&P, the world's largest credit rating service, announced earlier today what it called ``a broad set of new actions'' to strengthen its ratings. Moody's, the second-largest credit-rating company, said this week it was considering a new rating system, based on numbers.

``Both S&P and Moody's are attempting to make piece-meal changes that seem more like public relations window dressing than systemic reform,'' Cuomo said in the statement.

If you dont hold it, you dont own it said...

"Cash isn't king.

Gold and silver are."

Why would anyone put their wealth in precious metals, which have been used as money for thousands of years, when they can put their trust in the "full faith and credit" of the US?

Surely nothing can be more secure than the credit of the US.

Then again, what do I know.... I still own the barbarous relics.

SeattleMoose said...

FED is out of control....they are desperate. Perception/fear will rule the day and all will fall.

The only stock worth buying is MS because Zune (the Apple killer) Service Pack 97 is due out soon :-)

Anonymous said...

Keith,

I hear you. I was even thinking of GOOG the other day. I thought that would be a stock that would weather this storm well.

Only thing is their biggest client base is in North America. Yikes.

Danny

Anonymous said...

Also,

I dont believe we'll be out of this in a year. Consider the Tech bubble (late 2000 - to early 2003). This bubble is way bigger than that and will take more to deflate.

That's why I say Apple and Google are not cheap by any means yet.

Danny

Anonymous said...

"I'm delighted to see what's happening in Shanghai and Hong Kong," he says. "As I've said, if things hadn't cooled off, the Chinese market was in danger of turning into a bubble. I find this most encouraging. The government's been doing its best to try and cool things off. Mainly they've been trying to deal with real estate but it's having an effect on stocks, too. I would suspect the correction isn't quite over in China. But I'm gearing up. I didn't put in any orders for tomorrow but I'm starting to prepare my list of things to buy in China. Whether I buy this week or this month or this quarter, who knows. But I'm starting to think about buying new shares in China for the first time in a while. And I'm not thinking about buying in America."

Ultimately, Rogers doesn't think that the troubles in the United States will be much of a drag on the prospects for the People's Republic. "Anybody who sells to Sears (SHLD, Fortune 500) or Wal-Mart (WMT, Fortune 500) is going to be affected, without question," he says. "Some parts of the Chinese economy are going to be untouched, however. They won't even know America's in recession. They won't care if America falls off the face of the earth."

Jim Rogers just mail your passport back, we should shoot you at the airport once we start our own little manufacturing and BUY AMERICAN ONLY.
The earth cant stand shipping crap from China anymore, its killing us all.

Have It Eur Way said...

Burger is king!

Anonymous said...

Anonimous said:

Cash isn't king.

Gold and silver are.

This guy might be in for a rude awakening soon. If the stock market tanks, gold and silver will tank.

Danny

Anonymous said...

Two lessons here:

1. Dollar is in the toilet

2. Europeans are the new Americans, going in a out of control shopping spree for crap that they don't need, while over extending themselves, and being hypocrites by criticizing the American consumerism lifestyle.


"Euros Accepted" signs pop up in New York City

NEW YORK (Reuters) - In the latest example that the U.S. dollar just ain't what it used to be, some shops in New York City have begun accepting euros and other foreign currency as payment for merchandise.

"We had decided that money is money and we'll take it and just do the exchange whenever we can with our bank," Robert Chu, owner of East Village Wines, told Reuters television.

The increasingly weak U.S. dollar, once considered the king among currencies, has brought waves of European tourists to New York with money to burn and looking to take advantage of hugely favorable exchange rates


http://tinyurl.com/369ytr

Anonymous said...

I'm afraid that we may be entering into a Kondratieff Cycle, i.e. winter. If this is true, then the stock market will go down much lower from here.

Root cause of the problem said...

I am curious that all this talk of inflation has not brought up the HUGE subsidy the US government is giving to the Ethanol business. This is the primary cause of the "inflation" problem. If you look at other commodities, they are starting to top out, and in some cases like oil futures, have plummeted. The simple fix to this "inflation" is going be oil's collapse. The petroleum chain will fall as crude falls. That alone will moderate inflation. It also will in turn, cause Ethanol demand to slow, and hopefully our no nothing Government will quit the subsidies which will lower prices on the food chain front. Other commodities, other than the mighty gold trade have already fallen. I would not put money on gold, that is for sure.....

DTEJD said...

STOCKS?

There are certainly some bargains out there...

How about an electronics company at $9/share. Virtually no debt, $6/share in the bank, 9.8% dividend (raised recently). Oh yes, the P/E ratio on it is 7. I have bought some and will be buying more at $9 & under.

How about specialy finance companies that are OLD SCHOOL conservative in their capitilazation that are trading at 6 & 7 P/E's?

I like some of the cash rich retailers, but they ran up to quick & I couldn't get any.

There are LOTS & LOTS of companies that are starting to look good.

I would ONLY consider them if they are cash rich AND how low/no debt.

Roberto

Anonymous said...

Idiots... said...
Stocks wont hit bottom until this current cycle ends - figure another 5-12 years... Commodities - that's the current bull market - another 5-12 years of that moving up. If you're a trader, you can play the bounces - but long term money - expect to see more of the same - which between the DOW and the S&P500 - 0% for the past 8 years.

February 07, 2008 1:38 PM

-------------------

Stocks of commodity producers should do well. Some of the big oil companies are now paying better yields than are available on "cash," and their shares are backed by oil.

LauraVella said...

Trevor said:"I'd say less than 10% of the stocks out there are "cheap". Good luck finding them. P/E is a lie right now as earnings will tumble and P/E's will contract because of slowing growth and historical overshoot-the-mean PE contraction dynamics."


I agree completely Trevor, thats why I'm staying out of the market till at least Dec 08'.

John K. said...

Avoid all things paper. No stocks, bonds, or dollar bills. All paper will get burned!

The Fed is now inflating the money supply at the rate of 20-30% per year. The dollar is getting crushed. It will become worthless.

Exchange your paper for real money, the kind that has held its value for 5,000 years. Gold and Silver are the only things that you can depend on to get you through this in one piece. Don't trade and don't use leverage, just buy, take physical possession, and hold until the depression has passed.

LauraVella said...

Keith, I agree with you the feds will throw tons of money at the huge credit problem.

We're going into one heck of a recession - sales have to be greater than the quarter before or stock prices will drop. I dont see any growth in stock prices only retraction. Just my opinion...

I can tell, you are just biting at the bit to purchase APPL shares...

IMO, APPL is way overpriced, as are most stocks. Remember what APPL's price was back in the late 1980's? It dropped all the down to $12. Steve Jobs had to sell off some of his buildings down in Cupertino just to stay afloat. I think it will happen again.

I only wish Larry Ellison would have to sell some of his building during this recession. He's one magnant that needs a good dose of reality.

cobra2411 said...

"But damn, it's tough NOT to buy Apple at these levels."

Uh... Yeah until you realize that after the tech wreck AAPL was a 7 dollar stock...

Lets see, 7 - 120 is a $113 per share loss... Where do I signup? At the Jim Cramer brokerage I'll bet... :)

DADO DADO DADO...

Anonymous said...

Keith,

Another thing I forgot to mention is that the dollar is rallying. You got that right, it is rallying and it will keep rallying. Careful with the metals boys.

Mish had a good write on it today.

Danny

SteveInMN said...

Keith:
"Because in the end, you'll only have yourself to blame or credit.

And as we all know, the stock market is manipulated something fierce."

Wise words...I would only add 'The only mind and words you can trust to be true to you are your own.'

Anonymous said...

LA-Thrifty sez:

Hey Ponch!

You have to answer a question --

I live like you do, but I comb thrift stores MERCILESSLY. I love it. I have closet full of clothes and I hardly pay a dime for it. But what swap meets are you talking about? The one on Vermont near LACC? Melrose at Fairfax? Which???

Anonymous said...

Anyone selling puts on ultrashort ETFs?

ETFs like SRS and SKF are great for trading.

Anonymous said...

Although, i am protecting my future loot by financing my education with student loans that are fixed @ 2.875%
___________________________________
Who cares? You still have to pay it back. It's not free money.

Anonymous said...

RSX – Russia? – That is a maybe (although they have their own huge housing bubble)
-----------------------------------
Yep, they have it.
When we were leaving Russia, we sold our 2 bedroom (1 bedroom in USA) condo for $9400. This days you can buy the same condor I guess for $50000-$60000. What about median salary? Yep, it went up too, maybe 2 or 3 times. Do the math.

Anonymous said...

Keith, you are a loser. You keep predicting The Great Unwinding as if you are some sort of a master predictor. You don't know shit. For several years people like you and others (Robert Prechter, Peter Schiff, Stephen Roach, etc...) keep predicting that the end is near and it never happened. So keep hoping for an epic financial disaster while I laugh all the way to the bank.

Anonymous said...

"If you buy stocks now, you're going to lose your shirt. The smart money is trying hard to create fake rallies just to sell. The same is happening with the phony "global growth" stocks, which the corrupt MSM helps to push with tools like Kudlow and Bartiromo. Nothing but pumping and dumping going on.

Cash is king!"

That comment is worth another read!
I enjoy the insights from the smart people on this board. A lot of weird things going on. I've noticed a lot of REITs rallying during the day and then being dumped down in the after hours market. You have to wonder what secret dealings are going on.

Anonymous said...

Well well, look what I found. Confirmation that we are having fake rallys so the insiders can dump their stock.

http://www.cnbc.com/id/23055625

Market "Jinx" Broken, But Troubles Still Hanging Around

Posted By:Bob Pisani

The good news is that we broke the three day jinx and did not end at our lows for the day. More good news: retailers for the most part did not drop, despite poor January sales.

The bad news: a stronger midday rally was quashed. Worse, selling intensity picked up notably at the top, which occurred right after 2 PM ET.

In other words, traders sold right into the rally, heavily.

This illustrates the central problem: buying conviction (demand) is not that strong.

Absent some catalyst (like dramatic rate cuts) that sends sellers temporarily to the sideline, supply of stock (i.e. sellers) is readily available.

This means that the stocks that rallied most off the January bottom--retailers, financials--are in a bit of a no-man's land right now.

crashdummy said...

response to danny's deflation prediction

Deflation? The BLS didn't count the huge home price increases into the inflation numbers for the last 5 years. Why would they work those declining home prices in now?

Fed Reserve will continue to lower rates, causing more inflation.

China is going to strengthen the yuan over the next few years, preventing prices in the US to drop.

I understand real estate will drop, but everything else has to go up.

In fact, we are going through stagflation right now.
Stagnant growth, and growing inflation.

Now if foreign countries, especially OPEC, drop the dollar as the reserve currency and medium of international exchange, we could see hyperinflation.

Think about it. International trade is done in dollars. If everyone stops using the dollar, all of that money will flood back in to the US. and the only way to control that is to raise interest rates.

crashdummy said...

Look to Argentina my friends. Not as a way out but a solution. Argentina had a terrible recession and hyperinflation. People lost their houses, business and factories shut down. With so many people losing homes there was no where for them to go except the streets. Instead everyone went back to their houses and their bankrupt factories and took over. They ignored the laws and govt. What is the govt going to do? arrest them? kill them? nope. nothing. The govt is allowing people to live in their houses and work in their businesses. Not having to pay their mortgage/rent is allowing the economy to grow again.

Anonymous said...

response to crashdummy's deflation prediction

We know better then them, don’t we? There was high inflation the last 8 years. There will be deflation the next 5.

If you agree with the same definition of inflation and deflation that I do, than no, there will be deflation. Definition of inflation: Expansion of money and credit. Definition of deflation: Decrease of money and credit. Even though I agree with you to some extent that lowering the rates is an attempt to create inflation, it will fail. If you do your homework on this, you will find out that money and credit are now contracting. It ties in with the huge write offs at banks. And no, I don’t believe in Helicopter Ben. The fed is actually shrinking the money supply at this moment.

I don’t see how China can strengthen the yuan. But let’s just say that when you’re clients are too broke to pay for your goods in the first place, I doubt you would like to increase the price. That does not seem like a reasonable business decision.

I find it hard to believe that most things will not go down in prices. Just go to Walmart, Kohl’s, Target, Macy’s, Sears, K-mart, etc, etc, and you’ll see how they are slashing prices to remain competitive in this terrible economic environment. That sounds like deflation to me my friend. Even Starbucks is contemplating a $1 cup. I am not arguing that everything will drop either. Just do some research in Japan’s deflation experience for your answer.

I don’t think it’s in those countries’s interest to drop the dollar. If they all do drop the dollar, than yes there will be hyperinflation for us, and a depression for them. I don’t see how this can play out, if they stand more to loose than we do. Another thing is, the dollar will start to rally against all major currencies in the next few years, and it already started to rally. The dollar is way oversold. So soon, we will not be talking about how they will dump the dollars.

bank dick said...

"I don’t believe in Helicopter Ben. The fed is actually shrinking the money supply at this moment."

Better look again anon:

http://tinyurl.com/m7bs7

M3 increased $10 billion last week and is growing at an annualized arte of about 16%. Our buddy Ben hasn't even brought the 'copter engines past idle yet. Listen to what Warren Buffett says

"I wouldn't quite call it a credit crunch," he said. "Money is available, and it's really quite cheap because of the lowering of rates that has taken place."

However, he said what had taken place was "a re-pricing of risk," leading to an "unavailability of what I might call 'dumb money', of which there was plenty around a year ago."


Plenty of money available at interest rates that reflect true borrowing risks -- leading to -- inflation.

The politicians and bankers need inflation to stay in power. They will do whatever it takes.

Anonymous said...

I don't know if AAPL is so cheap in a recession. People can buy a nice $200 phone from Motorola, Samsung or LG instead of a $600 iPhone. People can buy a nice mp3 player for $100 instead of a $300 iPod. When AAPL starts cutting prices and profit margins fall, what will the EPS be? Cut the profit margins in half, and the stock doesn't look so cheap anymore.

Anonymous said...

Do you guys realize that the DOW is a price-weighted index? It's a total scam.

The S&P is a market-weighted index, which is representative of the performance of the index. The S&P has been flat since March 2000. That's 8 years with zero gains.

Anonymous said...

They won't dump the dollar because there are not enough buyers to take $4 trillion sloshing around the world's CB's. They will continue to use the dollar reserves to buy US assets and companies. The Chinese and Arabs will soon own Wall Street. They will use that knowledge to build their own capital markets and dump us when they're ready.

Stuck in So Pa said...

Anonymous said...
LA-Thrifty sez:

Hey Ponch!

You have to answer a question --

I live like you do, but I comb thrift stores MERCILESSLY. I love it. I have closet full of clothes and I hardly pay a dime for it. But what swap meets are you talking about? The one on Vermont near LACC? Melrose at Fairfax? Which???
============================

I stop in the Goodwill store whenever I am in town, and the place is now packed every time I go in. You are hard put to find a parking place on the lot (old abandoned food store.)

The regular clientele has been replaced by middle to upper middle class patrons and the place has been re-designed to look like a boutique. They are also getting VERY selective as to what goods they will accept as donations for resale.

United Way has also gone the same direction, set up like a boutique, taking only designer clothes, collectables, and antiques (yes, I said antiques!)

Looks like second hand is becoming big business!

Anonymous said...

Bank dick,

Mish explains M3 and M prime pretty good in this write.

http://tinyurl.com/yvew95

Buffet might be right when he says that there is plenty of money at cheap prices, but what he is not telling you is that no one wants to lend money, and no one wants to borrow money.

Another good write about this.

http://globaleconomicanalysis.blogspot.com/2007/09/is-us-printing-money-like-mad.html

Danny

RSJ said...

RE: Apple and AAPL share prices

1) Poor people don't buy Apple products
2) ditto for cheap-ass IT types/Dell fanboys
3) The rich don't share your Wal-Mart mentality

There will always be a market for high-end, quality products. IMO AAPL is oversold at these prices.

Anonymous said...

Anonymous said...
Keith,

Another thing I forgot to mention is that the dollar is rallying. You got that right, it is rallying and it will keep rallying. Careful with the metals boys.

Mish had a good write on it today.

Danny

February 08, 2008 2:24 AM

------------------

And yet gold keeps going up. It is inevitable that gold will rise against all the paper currencies. See, gold is much harder to produce than colored pieces of paper with numbers and pictures on them.

Anonymous said...

Anonymous said...
Although, i am protecting my future loot by financing my education with student loans that are fixed @ 2.875%
___________________________________
Who cares? You still have to pay it back. It's not free money.

February 08, 2008 5:09 AM

------------------

The real question is whether the investment in education pays off with higher future earnings. Thanks to the wonders of globalization, that is not the nearly sure thing it used to be.

Anonymous said...

Anonymous said...
Keith, you are a loser. You keep predicting The Great Unwinding as if you are some sort of a master predictor. You don't know shit. For several years people like you and others (Robert Prechter, Peter Schiff, Stephen Roach, etc...) keep predicting that the end is near and it never happened. So keep hoping for an epic financial disaster while I laugh all the way to the bank.

February 08, 2008 6:43 AM

-------------------

Actually, Schiff's predictions have been pretty good. Someone following his advice over the past few years would have done very well indeed.

bank dick said...

Anon 5:13

From your link: "M Prime approximates M1 with sweeps added back in"

OK, so let's look at the OBVIOUS reason it's gone negative. The reason M Prime is down is that a lot of people and institutions are moving their money out of U.S. banks and those big sweep accounts are disappearing.

In our fractional reserve system there really is no distinction anymore between money and debt. They are interchangeable as any hedge fund manager will testify. The broad supply measure of "money", M3, is up and increasing rapidly. When you see M3 drop for a month or two in a row, come back and talk deflation.

Anonymous said...

To anonimous above,

I am no trying to argue against gold here. As I have said before, gold is a risk hedge, and therefore should do good in times of economic turmoil, i.e. now.

But I do believe in the deflation camp.

Danny

Princess Mononoke said...

ponch said...
>>>I live an amazing life. I have everything I want for little cost, and I basically make a game out of living cheaply. I don't go overboard, and I do treat myself (and others) more and more as I become more wealthy.
February 07, 2008 5:20 PM
=====================

I like your style Ponch! Your girlfriend is lucky to have found a man like you, seriously. It's great to know there are others out there who don't believe in WASTE.

I used to be a clothes whore once upon a time. I loved shopping at the Gap, A&F, Banana Republic etc. until I found out their clothes were manufactured using slave labor and child labor in China and other countries! So I stopped supporting them.

I now purchase my clothes from the Studio's second hand stores. The actors only wear the clothing items once or twice. So I buy $200+ jeans for $35 or less etc. I too love the thrill of the hunt on EBay when I NEED (key word) to buy an item. I still own a PS1 and am happy with it, bought it used many years ago.

Anonymous said...

Bank dick,

M2 and M3 represent credit transactions which are different from monetary printing. VERY KEY TO THIS ARGUMENT.

Refer http://tinyurl.com/32pph3


If you read this article, which I provided you will find the following conclusions, which I agree with:


-Credit is expanding rapidly but with fractional reserve lending via sweeps and other mechanisms such as GSE debt creation and various carry trades, actual money itself is now contracting.

-This is further proof that the Fed has now totally lost control. What else can it mean when credit is soaring in the face of what otherwise appears to be rather tight monetary policy?

***-The distinction between money and credit is significant. A huge expansion in money supply leads to hyperinflation like the Weimar Republic or Zimbabwe.***

***-A huge expansion in credit eventually leads to things like the tulip mania implosion, the railroad bust, and the great depression.***

-The Fed will fight this tooth and nail but right now their hands are tied. When the Fed starts lowering rates to combat this malaise, look for gold to soar.

-Long term, there is no way out. The policies of Greenspan and Bernanke will be repudiated.

Therefore, you do not need to see M3 drop to see deflation. M' is a more accurate predictor of deflation than M3.

I do agree with you that the FED will do anything in its power to create inflation.

Danny

Anonymous said...

I'm with you keefer. I don't dabble too much in the stock market lately. I am keeping my investments in the three "Gs"

Guns
Groceries
GMC pickup truck