My dad grows tomato’s in his garden. This year one came up looking like a duck and is now famous. Yep, it has appeared on TV (YTV’s Calendar) and, this morning, made The Express Newspaper (page 23). Wow – whatever next. Here is the picture – without salt.
Tom the magic Duck
Many people were recently impressed by the prediction of Abby Joseph Cohen, of Goldman Sachs, that the S&P would be at 1,100 by year end. I thought it would be worth looking at some of her recent predictions.
In an August 10, 2007 appearance on CNBC Abby Joseph Cohen predicted the S&P 500 would rally to 1,600 by December. – Wrong
In December 2007 Abby Joseph Cohen predicted the S&P 500 index would reach 1,675 in 2008. The S&P 500 traded as low as 741.02 by November 2008. – Wrong
On May 1st, 2009 Abby Joseph Cohen predicted, “The Standard & Poor’s 500 Index may jump 20 percent to 1,050 over the next six to 12 months as investors buy stocks trading at low valuations” – Near enough, so Correct.
On August 6th, 2009 Abby Joseph Cohen declared, “the new bull market has begun,” and proclaimed Goldman Sachs sees the benchmark Standard & Poor’s 500 index .SPX in a range of 1,050-1,100 toward year-end. The S&P 500 index traded around 1,000 on August 6th, 2009, after a 50% run-up from the year’s low. – We will see.
So out of the 3 recent predictions that can be verified 2 out of 3 were wrong. Paraphrasing Meatloaf : 1 out of 3 is bad. based on her prior predictions I would put the chances of her recent prediction being correct at less than 50% – which makes her less useful than tossing a coin.
For all momo lemmings I give you the famous far side cartoon, by Gary Larson:
Momentum trading Lemmings
Remember – taking profits or buying insurance (puts) is sometimes good.
Corporate IG Bonds have been a tell on the last few crashes so are worth watching at the moment. Here is the current graph, which tells me we are at an inflextion point.
lqd
And here is the weekly…
lqd weekly
2008 all over again. The parallels continue:
From August 15 2008
Lehman Brothers Inc. received a vote of confidence from the man who broke the Bank of England. The billionaire financier George Soros, through his Soros Fund Management LLC, hiked his stake in the beleagured investment bank to 9.5 million shares as of June 30 from just 10,000 shares, giving him a 1.4% stake, according to a regulatory filing on Thursday.
And then today:
John Paulson Buys 168M Shrs In Bank Of America. In the 2Q of 2009 John Paulson bought a load of of BAC covertible, then converted it to common – making a load of money on the arb. I wonder if he still owns the stock or if he has sold it or used it to cover a short (to balance the long preferred).
My regular attempt to translate the FOMC minutes into English / Bearish:
“Information received since the Federal Open Market Committee met in June suggests that economic activity is leveling out. Conditions in financial markets have improved further in recent weeks. “ – The stock market is still going up. yee haa.
“Household spending has continued to show signs of stabilizing but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. ” - Unemployed people spend less and there are more unemployed people.
“Businesses are still cutting back on fixed investment and staffing but are making progress in bringing inventory stocks into better alignment with sales.” - Sales are down and so inventories are not going back to 2007 levels.
“Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.” – PPT has been busy lately.
“The prices of energy and other commodities have risen of late. However, substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time.” – Oil prices are going back up, however lack of demand mean that it will probably go down again.
“In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. ” – PPT is on standby
“The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. ” - Cheap Money to be kept available for sometime in a failed attempt to reflate a puntured bubble.
“As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve is in the process of buying $300 billion of Treasury securities. To promote a smooth transition in markets as these purchases of Treasury securities are completed, the Committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.” – This phrase intentionally left meaningless
CNBC is supposed to be a news channel – right?
If so why are there so many questions, concerning the honesty of reporting on CNBC. I think I might have figured it out. They are not really lying, just like its parent company wasn’t blatently fixing its books. They are just being creative with the truth, just like GE is creative in its accounting.
In a way its a bit like in an informercial. You present data in a way that is good for the product you want to sell. What does CNBC want to sell, you may ask? They want to sell advertising to Financial Institutions. They also do not want anyone questioning the solvency of GE.
So I ask again – is CNBC a news channel? The answer is no, its an infomercial for financial stocks.
Why does every attempt to rob the american people have a catchy title? I am just starting to put this article together and need help for E thru Z, and also additional A thru D’d. Here is what I came up with in 20 seconds..
Agricultural Adjustment Administration began its operations in 1933. The agency oversaw a large-scale destruction of existing cotton crops and livestock in an attempt to reduce surpluses. No other crops or animals were affected in 1933, but six million piglets and 220,000 pregnant cows were slaughtered in the AAA’s effort to raise livestock prices. Many cotton farmers plowed a quarter of their crop under in accordance with the AAA’s plans.
Billions for Banks, also known as TARP. Money is taken from the Poor and Middle class and given to rich Bankers.
Cash for Clunkers: Suprisingly when the government is willing to give away free cars, people are willing to take them.
Defying Debt: Want to issue debt, but don’t have the ability to repay it? Don’t worry the goverment will guarantee it – also known as TALF.
The Cash for clunkers deal reminds me of the parable of the broken window, by Frederic Bastiat. The program is the equivalent of the government breaking window, or in this case breaking cars. Which area of the economy will be a victim of the unseen?
‘Have you ever witnessed the anger of the good shopkeeper, James Goodfellow, when his careless son happened to break a pane of glass? If you have been present at such a scene, you will most assuredly bear witness to the fact, that every one of the spectators, were there even thirty of them, by common consent apparently, offered the unfortunate owner this invariable consolation—”It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?”
Now, this form of condolence contains an entire theory, which it will be well to show up in this simple case, seeing that it is precisely the same as that which, unhappily, regulates the greater part of our economical institutions.
Suppose it cost six francs to repair the damage, and you say that the accident brings six francs to the glazier’s trade—that it encourages that trade to the amount of six francs—I grant it; I have not a word to say against it; you reason justly. The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen.
But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, “Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen.”
It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.’
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