Posted on
March 31, 2008,
2:00 pm.
Ben Bittrolff of The Financial Ninja provides more excellent analysis and commentary on the current crises in the financial sectors.
First, Bittrolff argues that the Fed has done nearly all that it can do to prevent a total collapse of confidence in the financial systems and markets when he writes, “The Fed has almost run out of ammo. Much like George Soros on Black Wednesday, when he ‘broke the Bank of England,’ global capitalists are damn near close to breaking the Fed. 60% [of the $700 billion in Treasury securities on his balance sheet] has been committed and it doesn’t seem to be working. Another push and things could unravel quickly…”
Second, it seems inevitable that Citigroup will be breaking itself up over the coming years. Bittrolf sees Citirgoup’s separation of its credit card business from its banking business is the first step of the pending dismantling of Citigroup.
But, what struck me the most is this simple statement: “It is truly humorous that the Socialists across the pond are the one’s considering taking the ‘laissez faire’ approach while the CHAMPIONS of Capitalism over here are pounding the table for mass intervention.” I don’t think there could be a more telling signal of the immense troubles of the financial sector.
Posted on
March 31, 2008,
9:04 am.
Chad Brand at The Peridot Capitalist points out one reason why Apple may have refused to return any of its $18 billion in the form of stock buybacks or dividend payouts: to come out ahead after an economic downturn.
Fortune senior editor Betsy Morris interviewed Apple CEO Steve Jobs in February, and this is what he said in regards to managing the company during an economic downturn:
We’ve had one of these before, when the dot-com bubble burst. What I told our company was that we were just going to invest our way through the downturn, that we weren’t going to lay off people, that we’d taken a tremendous amount of effort to get them into Apple in the first place — the last thing we were going to do is lay them off. And we were going to keep funding. In fact we were going to up our R&D budget so that we would be ahead of our competitors when the downturn was over. And that’s exactly what we did. And it worked. And that’s exactly what we’ll do this time.
Sounds like an excellent strategy to me. When most companies are probably skimping on R&D and trying to cut costs during a downturn, Jobs’ plan seems to guarantee Apple will be further ahead with new products and services that people will want.
Posted on
March 30, 2008,
3:45 pm.
The AP reports that BNSF Railway Co., the nation’s top hauler of container rail freight, is parking miles of railcars in Montana and elsewhere because there isn’t enough freight to keep them rolling:
Cars that often carry 40-foot containers of goods shipped from Asia stand like an iron fence between the Missouri River and this Montana burg known for world-class fly fishing. They stretch as far as Sandee Cardinal can see when she stands outside her home on the river’s west bank between Helena and Great Falls.
“What is that but a symbol of how America is down in the dumps right now?” Cardinal asked as she gazed at the cars that haven’t moved for about three months.
The cars parked are the type that haul cargo from ships on the coast to points inland, mainly imported goods — an area that’s starting to slow down due to the weak economy. Analysts say transportation usually is among the first sectors to show signs of a downturn in the economy and with Americans feeling pinched — employers eliminated 63,000 jobs last month amid declining consumer confidence — it could be a while before the idle cars move.
Another piece of bad news for this RR company is that Archer Daniels Midland is suing them. ADM is accusing the 5 big railroads of violating antitrust laws in fixing their fuel surcharges. Does not sound good for BNSF, does it?
Well, here’s a chart of BNSF Railway Co. (BNI). You can make the decision for yourself whether or not you would buy long or sell short.
As you can see, BNI recently made a new all-time high, but if you were going to trade on this news and chart, I think there’s a high probability that BNI will retrace.
Posted on
March 29, 2008,
5:55 pm.
Apparently, the Wii shortage is the result of a weak dollar. And before I had just thought Nintendo had just underestimated consumer demand. Shows how much I know.
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Posted on
March 27, 2008,
12:55 pm.
I’ve got two views that seem to be opposed to each other, both from blogs I frequent. The first comes from Todd Sullivan of ValuePlays. Sullivan does not seem to believe a recession is imminent or that we are even experiencing a recession at the moment. He argues that growth is just slowing and that we as a nation are simply spoiled:
It has been almost two decades since the last true recession in the US. I know we experienced slowdowns in the mid 1990’s and early 2001-2002 but if we are being honest, those were just simply bumps in the road. In Q4 1990, GDP fell 3% and Q1 1991 followed with a 2% drop from there. We have not had consecutive negative quarterly growth since then. In short, we are spoiled. Prior to the 1990-1991 recession, people had only go back 9 years in their memories to remember the last one. We are currently approaching year 19 which means there are a whole class of investors who have never actually experienced a recession in their investing lives…
The second view comes from Tim Iacono of The Mess That Greenspan Made. Tim looks at the same data as Sullivan, but seems to be much more cynical about the markets and the inevitable direction of GDP:
Earlier today, the Commerce Department reported that economic growth in the last quarter of 2007 was unchanged at 0.6 percent and growth slowed to 2.2 percent over the entire year, the slowest pace in five years.
The outlook is for zero real growth in the first quarter, which ends on Monday, and a contraction of one percent is now expected during the second quarter.
Those shrinking blue bars in the chart below will make all the difference in upcoming reports. The long-anticipated decline in personal spending may be at hand, though the demise of the American consumer has been oft-predicted, yet never realized before.
I am inclined to agree with the more negative outlook, but I would not mind if a recession does not manifest itself.
Posted on
March 27, 2008,
8:12 am.
Five experts from the American Enterprise Institute (a former employer of mine) have graded and assessed the Federal Reserve’s recent policy decisions. Each expert gives good analysis, but the feeling I get is that the majority of would give Fed should get an “A” for effort and good intentions but a “C” for delivery.
Next, the Resourceful Bear Blog says Lehman Brothers is likely another Bear Stearns. The fact that Golman Sachs and Lehman Brothers debt was downgraded on Good Friday by S&P is cited as an indicator of this possibility.
Finally, according to Oppenheimer analyst Meredith Whitney, Merrill Lynch and and UBS may suffer respective first-quarter write-downs of $6.03bn and $11.06bn.
Posted on
March 26, 2008,
11:07 pm.
The sky is blue, the grass is green, and Hillary Clinton is a liar. Please tell me something I don’t know.
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Posted on
March 26, 2008,
5:15 pm.
Based on Obama’s recently released tax returns, Ryan Ellis of the American Shareholder’s Association concludes that Barack Obama is a stranger to the investor class. This conclusion is based upon couple of factors. First, their reported qualified dividends are very low. Second:
Michelle Obama earned a quite lucrative annual self-employment contract from the University of Chicago Hospital System (in some years, over $1 million). Yet, Mrs. Obama didn’t appear to have a self-employed 401(k) plan or a SEP-IRA to make retirement contributions from. This implies that the Obamas are not exactly the best tax-deferred investors in the world.
And third, “In 2000, the Obamas cashed out $6260 from either a DB pension or a 401(k) plan.” Ellis says, “This is a sure sign of a household that does not build and accumulate a nest egg for their future.”
Posted on
March 26, 2008,
1:12 pm.
Throughout the years, many Democrats have complained of the so-called power and influence of “big oil,” the companies like Exxon who apparently have too much power and have gouged consumers by charging too much, especially after hurricanes and powerful weather events. I say this in sarcasm. But still, some politicians have called for taxing profits of these companies and now Obama has hinted that he would use the Strategic Petroleum Reserves to combat increased oil prices.
With all this in mind, the QandO blog does an excellent job of debunking the myth held by liberals and Democrats that “big oil” wields too much power. Some of the points made is that almost 80% of the oil market is controlled by foreign national oil companies. These are entities like the Saudi Arabian Co., National Iranian Oil Co., and the Iraq National Oil Co.
Another piece of evidence are the earnings of the oil industry. The oil and natural gas industry falls far behind many other industries in terms of earnings, so why is “big oil” constantly picked on by liberal politicians? Perhaps they’re just easy targets and scapegoats, but nevertheless, the so-called big oil companies wield a VERY insignificant amount of power and influence compared to the oil cartel OPEC and the foreign national oil companies.
Posted on
March 26, 2008,
9:21 am.
The slope of the 50 day moving average for SPY is still pointing down. There is also some evidence that chances of a pullback increase when the market closes higher 3 days in a row while under its 200 day moving average.
One last, large factor that indicates a pullback from this small rally is the lack of volume. Volume has decreased over the last few trading days, thus creating a negative divergence between volume and price, and this is not favorable for a rising market.
With all this in mind, I feel its highly unlikely the market will rise, but certainly more likely that the markets will be in a trading range or will be falling once again.
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