“In the end, alchemy, whether it is metallurgical or financial, FAILS.”
-Warren Buffet
Wishing you and yours a healthy, happy, and prosperous New Year!
Till next time,
Bill
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A disclaimer: None of the content published on billtatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Thursday, December 31, 2009
Thursday, December 17, 2009
Person of the Year?
Beginning on June 18th 2002 in East Central Arizona, a wildfire burned and was not controlled until July 7th 2002. It was the worst forest fire in Arizona’s recorded history to date, consuming 467,000 acres of woodland. In addition, several local communities were threatened and had to be evacuated. In actuality, there were two separate fires that combined into one. The first was set by a stranded motorist, trying to signal to a news helicopter. Understandable but stupid. The second, the Rodeo fire, was set by an arsonist who worked as a seasonal fire fighter. He told investigators he set two fires that morning (the first was quickly put out) in hopes of getting hired by the Bureau of Indian Affairs (BIA) for a quick response fire crew position. He had previously worked as a BIA fire crew member, and was indeed among the first to be called in order to fight the Rodeo fire.
Now, let’s shift gears for a moment. The Federal Reserve, a clandestine and questionable organization at best, has created every bubble since the mid 1990’s. (I don’t have time to tell you what they’ve done since inception, that’s another story.) First, it was the dot com expansion with semi-loose lending practices. Next, it was the encouragement of subprime lending, with interest rates at a ridiculously low 1%. Now, it’s the Wall Street big banks world-at-large-printing-press-gone-crazy-carry-trade-bailout, with interest rates again at 1% to 0.25%.
The maestro of this financial catastrophe was Allen Greenspan. But in lock step, as a member of the Board of Governors of the Federal Reserve, and now Chairman of the Federal Reserve, was the newly chosen 2009 Time Magazine Person of the Year, Ben Bernanke. It seems as though the job of the Fed is to create a bubble, and then become the rescuer by creating an even greater bubble. It would appear the thinking is that the American public will only be looking backwards and grateful and not looking forward to what is coming next. Well, maybe they’re right. Did you see the dot com crash coming? Did you foresee the subprime meltdown? Do you believe the credit crisis is about to implode, and be worse than either of the past two bubbles combined? Of course not, you’re hopeful and optimistic. So am I. But facts are facts.
I’m sure the fireman in Arizona didn’t imagine what havoc he created. Perhaps he thought it was all in everyone’s best interest. We know the result. I’m sure Ben Bernanke is hopeful, but Person of the Year? Maybe they should have named the arsonist as Fireman of the Year. Oh well, Obama got the Nobel Peace Prize, and rumor has it that Tiger Woods will be named Husband of the Year!
Till next time,
Bill
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Now, let’s shift gears for a moment. The Federal Reserve, a clandestine and questionable organization at best, has created every bubble since the mid 1990’s. (I don’t have time to tell you what they’ve done since inception, that’s another story.) First, it was the dot com expansion with semi-loose lending practices. Next, it was the encouragement of subprime lending, with interest rates at a ridiculously low 1%. Now, it’s the Wall Street big banks world-at-large-printing-press-gone-crazy-carry-trade-bailout, with interest rates again at 1% to 0.25%.
The maestro of this financial catastrophe was Allen Greenspan. But in lock step, as a member of the Board of Governors of the Federal Reserve, and now Chairman of the Federal Reserve, was the newly chosen 2009 Time Magazine Person of the Year, Ben Bernanke. It seems as though the job of the Fed is to create a bubble, and then become the rescuer by creating an even greater bubble. It would appear the thinking is that the American public will only be looking backwards and grateful and not looking forward to what is coming next. Well, maybe they’re right. Did you see the dot com crash coming? Did you foresee the subprime meltdown? Do you believe the credit crisis is about to implode, and be worse than either of the past two bubbles combined? Of course not, you’re hopeful and optimistic. So am I. But facts are facts.
I’m sure the fireman in Arizona didn’t imagine what havoc he created. Perhaps he thought it was all in everyone’s best interest. We know the result. I’m sure Ben Bernanke is hopeful, but Person of the Year? Maybe they should have named the arsonist as Fireman of the Year. Oh well, Obama got the Nobel Peace Prize, and rumor has it that Tiger Woods will be named Husband of the Year!
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Friday, December 11, 2009
Merry Christmas!
Dear Clients and Friends,
This has been a difficult year economically and emotionally for many people. In the spirit of holiday giving, all of us here at Eagle Steward LTD. have decided rather than throw a Christmas party for clients or send Christmas gifts to clients, we would like to support an organization that in turn can provide shelter, love and comfort to those in need.
In the past Caprice and her staff have supported the White Mountain Safe House in Pinetop, Arizona, and this year we would like to offer them our support.
White Mountain Safe House is a place where victims of domestic violence can find shelter for up to 120 days, and where families can learn better ways of relating and getting along. Anyone who has been in a situation of physical, emotional or sexual abuse can use the services. Family violence is a way of life. It happens in all religious and ethnic groups and occurs among the rich and poor alike. 95% of all victims are women. Every 12 seconds in America a woman is beaten by her partner. 63% of all boys between the ages of 11 and 20 who commit murder kill the man who abused their mother. Children that observe their parents fighting often exhibit severe emotional/behavioral problems, and children raised in violent homes are 74% more likely to commit assault. Children learn what they live. And in tough economic times, when jobs are lost and money is tight, domestic violence rises.
We believe in not only the sanctuary White Mountain Safe House provides for domestic abuse victims, but also applaud the domestic violence education programs that prepare the residents to break the cycle of fear and abuse by fostering confidence and independence, providing assistance in finding employment and assistance creating an independent living environment that is conducive to the safety for which every mother yearns, and the love and trust every child deserves.
We need your help! On Christmas Eve, Caprice and I will be delivering a Christmas Pajama Tree to the adults and children of this very special shelter. Pajamas and slippers are needed for toddlers, girls and women of all ages, and boys up to the age of 12. On Christmas Eve the women and children will be able to select a gift, your gift, from the tree, and greet Christmas morning wrapped in the fuzzy comfort of warm slippers and cozy flannel and cotton PJ’s. We have set up the Pajama Tree in our office lobby in Phoenix, and you can mail your donations of Pajamas and Slippers between now and December 18th to the following:
Bill Tatro
2701 E Camelback Rd. Ste. 170
Phoenix, AZ 85016
This year we will also be making a financial donation to the Healing Hearts Animal Sanctuary which provides a similar type of shelter and love to abused animals
So please join us in giving of ourselves to those in need, and help us provide love, warmth and a little magic at Christmas.
For you and yours, we wish you a very Merry Christmas, and much Health, Happiness and Prosperity for the New Year.
Eagle Steward LTD
Bill, Caprice, and Staff
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
This has been a difficult year economically and emotionally for many people. In the spirit of holiday giving, all of us here at Eagle Steward LTD. have decided rather than throw a Christmas party for clients or send Christmas gifts to clients, we would like to support an organization that in turn can provide shelter, love and comfort to those in need.
In the past Caprice and her staff have supported the White Mountain Safe House in Pinetop, Arizona, and this year we would like to offer them our support.
White Mountain Safe House is a place where victims of domestic violence can find shelter for up to 120 days, and where families can learn better ways of relating and getting along. Anyone who has been in a situation of physical, emotional or sexual abuse can use the services. Family violence is a way of life. It happens in all religious and ethnic groups and occurs among the rich and poor alike. 95% of all victims are women. Every 12 seconds in America a woman is beaten by her partner. 63% of all boys between the ages of 11 and 20 who commit murder kill the man who abused their mother. Children that observe their parents fighting often exhibit severe emotional/behavioral problems, and children raised in violent homes are 74% more likely to commit assault. Children learn what they live. And in tough economic times, when jobs are lost and money is tight, domestic violence rises.
We believe in not only the sanctuary White Mountain Safe House provides for domestic abuse victims, but also applaud the domestic violence education programs that prepare the residents to break the cycle of fear and abuse by fostering confidence and independence, providing assistance in finding employment and assistance creating an independent living environment that is conducive to the safety for which every mother yearns, and the love and trust every child deserves.
We need your help! On Christmas Eve, Caprice and I will be delivering a Christmas Pajama Tree to the adults and children of this very special shelter. Pajamas and slippers are needed for toddlers, girls and women of all ages, and boys up to the age of 12. On Christmas Eve the women and children will be able to select a gift, your gift, from the tree, and greet Christmas morning wrapped in the fuzzy comfort of warm slippers and cozy flannel and cotton PJ’s. We have set up the Pajama Tree in our office lobby in Phoenix, and you can mail your donations of Pajamas and Slippers between now and December 18th to the following:
Bill Tatro
2701 E Camelback Rd. Ste. 170
Phoenix, AZ 85016
This year we will also be making a financial donation to the Healing Hearts Animal Sanctuary which provides a similar type of shelter and love to abused animals
So please join us in giving of ourselves to those in need, and help us provide love, warmth and a little magic at Christmas.
For you and yours, we wish you a very Merry Christmas, and much Health, Happiness and Prosperity for the New Year.
Eagle Steward LTD
Bill, Caprice, and Staff
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Tuesday, December 8, 2009
Get Serious
Credit rating agency Moody’s Investors Service has warned that the United States and Great Britain may have their triple A (AAA) credit rating jeopardized due to “deteriorating public finances.” Are they serious? This is the same group that rated subprime slime triple A (AAA), and the same group that got paid by the underlying issuer, as opposed to an independent third party. They bluster after the horse has left the barn.
However, the real issue could be the country of Greece, whose potential bond defaults could lead to a cascade of other countries following suit. Yes, major trouble might be on the horizon, and yes, the U.S. financial position is bad. But for the sham ratings agency to acknowledge it now makes their actions ludicrous.
Till next time,
Bill
P.S. – Don't forget to listen to “It’s All About Money” right here on billtatro.com.
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
However, the real issue could be the country of Greece, whose potential bond defaults could lead to a cascade of other countries following suit. Yes, major trouble might be on the horizon, and yes, the U.S. financial position is bad. But for the sham ratings agency to acknowledge it now makes their actions ludicrous.
Till next time,
Bill
P.S. – Don't forget to listen to “It’s All About Money” right here on billtatro.com.
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Wednesday, December 2, 2009
The Risk Trade is Alive and Well Until it Isn't
As the Nikkei approached 40,000, or the NASDAQ approached 5000, shouts rang out like the man eating plant in Little Shop of Horrors: “Feed me, feed me.” So it is today, as gold, the Dow, and oil, move aggressively and parabolically onward and upward. Excess liquidity and momentum have been the rocket fuel to transport prices ever higher. Borrowing to leverage the trade has been as American as apple pie. Central bankers have slashed interest rates and poured billions into their systems to prevent the inevitable collapse. However, in their efforts to save themselves, they have ignored the populous, as foreclosures run rampant, unemployment shoots higher, and bankruptcies are a matter of course. But, oh, how bonuses will be grandiose on Wall Street this Christmas.
The common denominator of all the market participants, from Shanghai to Luxembourg, Wall Street to Main Street, bankers, hedge funds, sovereigns, or just plain folk, it’s one foot out the door. You see, all know it will end, and could end badly, but each think that he or she can get out before the other. This strange situation of fully invested bears could create the real possibility that some negative event could precipitate a route like 1987, as everyone heads for the exit at the same time.
Dubai, Afghanistan, Iran, anyone?
Till next time,
Bill
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
The common denominator of all the market participants, from Shanghai to Luxembourg, Wall Street to Main Street, bankers, hedge funds, sovereigns, or just plain folk, it’s one foot out the door. You see, all know it will end, and could end badly, but each think that he or she can get out before the other. This strange situation of fully invested bears could create the real possibility that some negative event could precipitate a route like 1987, as everyone heads for the exit at the same time.
Dubai, Afghanistan, Iran, anyone?
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Tuesday, November 17, 2009
Everybody Loves Gold
Yes, I know everybody loves gold. In fact, everybody also loves oil, and they love stocks. It seems the world is celebrating an Obama love fest. I’ll deal with the other at another time, but for now, “It’s All About Gold.” (Hmmmm, catchy title. I wonder if it has a future somewhere. But, I digress.)
The daily sentiment index (DSI) for gold measures gold bulls vs. gold bears. For ten consecutive trading days, the index has been above 90%. A comparable streak over the past twenty-two years (time of measurement) was 12/2/04, when the DSI was above 90% for twenty consecutive days, made a high, and then gold promptly declined 10%. Yesterday, the index hit an unprecedented 97%, indicating the potential for a much steeper gold price decline.
In 1929, My grandfather knew the stock market top was in when his shoeshine boy was giving him stock tips. Could the same be occurring again as the “Friendly’s” restaurant waitresses were overheard discussing using their tips to buy gold coins? Just a thought.
Till next time,
Bill
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
The daily sentiment index (DSI) for gold measures gold bulls vs. gold bears. For ten consecutive trading days, the index has been above 90%. A comparable streak over the past twenty-two years (time of measurement) was 12/2/04, when the DSI was above 90% for twenty consecutive days, made a high, and then gold promptly declined 10%. Yesterday, the index hit an unprecedented 97%, indicating the potential for a much steeper gold price decline.
In 1929, My grandfather knew the stock market top was in when his shoeshine boy was giving him stock tips. Could the same be occurring again as the “Friendly’s” restaurant waitresses were overheard discussing using their tips to buy gold coins? Just a thought.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Friday, November 6, 2009
2+2=1?
On November 5, the Labor Department reported the number of people filing initial claims for state unemployment benefits fell to 512,000 in the week ending October 31, 2009. (For seven days in October, not counting the rest of the month, 512,000 people lost their jobs!)
On November 6, the Labor Department reported jobs lost in October were 190,000 total (non-farm.)
What is this, the new math?
The unemployment rate continues to climb, and has now reached 10.2%. However, true unemployment, which includes everyone (called U6, according to the government), is 17.5%.
Thoughts???
Till next time,
Bill
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
On November 6, the Labor Department reported jobs lost in October were 190,000 total (non-farm.)
What is this, the new math?
The unemployment rate continues to climb, and has now reached 10.2%. However, true unemployment, which includes everyone (called U6, according to the government), is 17.5%.
Thoughts???
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Thursday, October 29, 2009
GDP Up on Stimulus Kick-In - Hooray, Hooray (Surprise, Surprise) Neville Chamberlin Announces Peace in Our Time - Hooray, Hooray (Surprise, Surprise)
In 1936, Germany re-took the Rhineland, the first move in an attempt to satisfy Hitler’s quest for world domination. The reaction of the free world was mute. In 1938, Hitler started pressing Austrian officials to allow a union between Germany and Austria. Again, a mute reaction from England, the leader of the free world. Austria became a part of Germany in March 1938. The next target for Hitler was obvious, the Sudetenland region of Czechoslovakia, which was heavily populated by ethnic Germans. England gave a response which commenced a series of high-level negotiations. A few border incidents and heavy sabre rattling resulted in the Munich Agreement, a promise by Hitler to stop rolling through Europe, if handed the Sudetenland. England and France agreed. However, Czechoslovakia, not involved in the negotiations, had a different opinion. Too bad, country lost to Hitler to appease the world.
Neville Chamberlain returned to England and disembarked from his plane holding the agreement that was “symbolic of the desires our two peoples never to go to war again.” In other words, the classic statement, PEACE IN OUR TIME. He was wildly applauded by fellow politicians. The press called him brilliant. And everyone went about their business, and their next cup of tea. Everyone that is, except for Winston Churchill. The rest of the story is history.
It has been said that history does not repeat, it rhymes. This morning, we heard praises from politicians, financial analysts, and television pundits that the recession is over. GDP exceeds expectations, the turnaround is at hand, and happy days are here again. The hand is raised, the paper is shown, and relief is felt. But is it?
Cash for clunkers, housing credits, back-to-school-payouts, and on, and on, and on, lend me to ask: With record infusions of cash by the government, and printing presses running 24/7, 3.5% GDP is the best you can do? What happens when that ends?
The reality can be summed up in two stories this morning. First, 530,000 first-time unemployment checks. That’s another 500,000-plus people (per week) that have lost their jobs. Second, a very well known tire company announced yesterday that a gain of $2 million in the third quarter will ultimately lead to a fourth quarter loss of $123 million. A hidden bombshell finally released to the public. How many more of these little “bombs” will be released in the weeks and months ahead?
People want to see and believe the illusion, because sometimes the reality is too difficult to face. Whether it was Neville Chamberlain and the appeasers of the 1930’s, or the green-shootists of 2009, the ability to understand what is happening allows us to not only prepare, but also to protect, and potentially even thrive when the inevitable occurs.
Yes, the recession could be over. Welcome to a possible depression.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Neville Chamberlain returned to England and disembarked from his plane holding the agreement that was “symbolic of the desires our two peoples never to go to war again.” In other words, the classic statement, PEACE IN OUR TIME. He was wildly applauded by fellow politicians. The press called him brilliant. And everyone went about their business, and their next cup of tea. Everyone that is, except for Winston Churchill. The rest of the story is history.
It has been said that history does not repeat, it rhymes. This morning, we heard praises from politicians, financial analysts, and television pundits that the recession is over. GDP exceeds expectations, the turnaround is at hand, and happy days are here again. The hand is raised, the paper is shown, and relief is felt. But is it?
Cash for clunkers, housing credits, back-to-school-payouts, and on, and on, and on, lend me to ask: With record infusions of cash by the government, and printing presses running 24/7, 3.5% GDP is the best you can do? What happens when that ends?
The reality can be summed up in two stories this morning. First, 530,000 first-time unemployment checks. That’s another 500,000-plus people (per week) that have lost their jobs. Second, a very well known tire company announced yesterday that a gain of $2 million in the third quarter will ultimately lead to a fourth quarter loss of $123 million. A hidden bombshell finally released to the public. How many more of these little “bombs” will be released in the weeks and months ahead?
People want to see and believe the illusion, because sometimes the reality is too difficult to face. Whether it was Neville Chamberlain and the appeasers of the 1930’s, or the green-shootists of 2009, the ability to understand what is happening allows us to not only prepare, but also to protect, and potentially even thrive when the inevitable occurs.
Yes, the recession could be over. Welcome to a possible depression.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Tuesday, October 27, 2009
Ignoring the Obvious at Your Own Peril
Insiders are selling faster than at any time in history. Since August, mutual funds have seen large net redemptions. Money markets are at the same level as before the bear market rally. Market indicators exhibit greater risks than at the top of 2000 and 2007. Accounting gimmicks have reached an all time high (low). What does it all mean?
It means that sometimes the expression “you can’t see the forest for the trees” is as accurate today as when it was coined years ago. The next leg down should be a doozy!
Till next time,
Bill
P.S. - On Thursday, Chamberlin returns with his report. Stay tuned.
Sources: Bloomberg
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
It means that sometimes the expression “you can’t see the forest for the trees” is as accurate today as when it was coined years ago. The next leg down should be a doozy!
Till next time,
Bill
P.S. - On Thursday, Chamberlin returns with his report. Stay tuned.
Sources: Bloomberg
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Monday, October 19, 2009
Main Street USA
The flag (Dow 10,000) has been captured. The march to the top has been strong, consistent, and straight up. Or has it? Since September 16th (one month ago Friday), the Dow Jones Industrial Average has appreciated 204 points (as of close 10-16-09.) However, consider that during that same time frame, The Dow Jones Composite Average is up only 3.47 points, and the Dow Transportation Average is plus a mere 0.87. Therefore, the rise over the past month could be considered, at best, labored. Also during this past month, I’ve spent much time driving across the country, and speaking with citizens of our great nation. The disconnect between Wall Street, Congress, T.V. commentators, and the average citizen of Main Street, is miles wide. While the former contend that prosperity is right around the corner, the latter know that the corner is several blocks away. Unemployment, foreclosures, deficits, wars, and most important, lies, all add up to immeasurable difficulties, not only in the short term, but for several years ahead. From the blue collar worker to the corporate retiree, from the unemployed mom to the furloughed line worker, all are worried, and all feel threatened.
The stock market is always a reflection of the economy. If Wall Street, Congress, and the T.V. commentators are correct, and prosperity is just around the corner, then Dow 10,000 will be a springboard to much higher levels, and the past month will only have been a resting spot. However, if Main Street is correct, and prosperity is a wishful thought, then the past month may be the beginning of the end for the stock market. Only time will tell.
After travelling 2,000 miles across the country, my money is on Main St. They know what the truth is.
Till next time,
Bill
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
The stock market is always a reflection of the economy. If Wall Street, Congress, and the T.V. commentators are correct, and prosperity is just around the corner, then Dow 10,000 will be a springboard to much higher levels, and the past month will only have been a resting spot. However, if Main Street is correct, and prosperity is a wishful thought, then the past month may be the beginning of the end for the stock market. Only time will tell.
After travelling 2,000 miles across the country, my money is on Main St. They know what the truth is.
Till next time,
Bill
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Friday, September 25, 2009
Spending Spree?
The evidence continues to mount that the similarities between March of 2000 and now are rising. Sentiment indicators and options speculation are at levels last seen during the tech bubble. In fact, they’re becoming more elevated. The stated P/E ratio is 130, a number never seen before. Not to be outdone, day trading by Joe Q public has risen to 1999 levels.
However, maybe the most interesting fantasy is the performance of the retail stocks, posting their strongest relative performance since March of 2007. This strength assumes an approximate 3% increase over the next year. That 3% rise would be the equivalent of $470 billion of retail sales. Keep in mind, current retail sales are now declining at an annual rate of $331 billion. You first have to make that up, and then rise another $470 billion. An $800 billion total swing! On whose credit card is that going to be put?
I’ll still stake my lot on the bond market. For you dreamers, good luck and keep spending.
Till next time,
Bill
Sources: Barons (9/09) and Bloomberg
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
However, maybe the most interesting fantasy is the performance of the retail stocks, posting their strongest relative performance since March of 2007. This strength assumes an approximate 3% increase over the next year. That 3% rise would be the equivalent of $470 billion of retail sales. Keep in mind, current retail sales are now declining at an annual rate of $331 billion. You first have to make that up, and then rise another $470 billion. An $800 billion total swing! On whose credit card is that going to be put?
I’ll still stake my lot on the bond market. For you dreamers, good luck and keep spending.
Till next time,
Bill
Sources: Barons (9/09) and Bloomberg
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Wednesday, September 16, 2009
Choosing Sides
I’d like to take a stroll down memory lane, and share with you a reprint of my email dated September 28, 2006:
As a money manager, everyday you are required to make decisions. Those decisions are driven by an over-riding strategy predicated on facts, assumptions, experience and gut instinct. So let’s take a walk inside my mind to get a better handle as to why our stock portfolio is positioned as it is.
Remember, I’m only talking about the stock portfolio, or as we call it, the growth side. Many of you have large positions in alternative investments non-correlated to the stock market.
Currently, there is a clear disagreement as to the direction of the economy and thus the stock market.
The Federal Reserve position (5 ¼ % daily funds rate) suggests:
1. Oil prices are no longer an issue and will continue to move lower.
2. The housing market has bottomed, and after a few months, the uptrend will continue.
3. Geopolitical risks (Iran, Venezuela, China, Russia, Iraq, North Korea, Nigeria, India, and terrorism) have calmed down and will no longer be an issue.
4. Hurricanes like Katrina are once in a lifetime, and therefore, concerns are un-founded.
5. We are awash in oil and gas, thus high prices for gasoline, natural gas, and home heating fuel are a thing of the past.
6. The fact that interest rates are inverted, with long rates lower than short rates, makes no difference, because this time it’s different.
7. The consumer will shrug off higher adjustable-rate mortgage increases because they are paying less at the pump, and will continue to spend.
8. Foreigners will continue to buy our debt (dollars), to support our deficit.
9. There will be no recession.
10. The stock market will soar from here.
The Bond Market (4.60% 10-year bond yield) suggests:
1. Oil will continue to be an issue, as our dependency on foreign oil increases. Alternative fuel sources have been talked about since the 1973 Oil Embargo with little success.
2. The housing market will be as severe and problematic as 1989-1991, and could be as bad as the 1930’s. The homebuilders have not bottomed and the downtrend will continue.
3. Geopolitical risks ( Iran, etc.) are a fact of life and will continue to be with us for a very long time.
4. The weather, from hurricanes to drought, will have significant impact on all aspects of our economy.
5. The inversion of interest rates, with longer rates lower than short rates, is significant because it’s NOT DIFFERENT THIS TIME.
6. The consumer will be impacted by higher adjustable-rate mortgages, higher energy costs, and excessive credit card debt.
7. Foreigners will think twice about increasing their U.S. dollar purchases, and that position will impact our deficit.
8. The stock market will move lower from here.
9. There will be a recession.
There you have it. Two diametrically opposed positions. Which side do you think is right? Most people will initially answer “I don’t know.” I, however, do not have that luxury. I’m paid to make a decision, to use my judgment. I’ve done my homework, and strongly believe that the bond market is the correct position. Unfortunately, for the last several months, the stock market has disagreed. Because of my position that a recession is looming, geopolitics is significant, and there will be a significant collapse in the housing market. I’ve:
1. Raised a lot of cash.
2. Shorted the homebuilders.
3. Shorted the overall market.
For the last few months, that position has been contrary to the broad market. But given the world we live in, I don’t believe it will be contrary for long. Setting the right strategy and sticking with it is sometimes hard, and sometimes difficult, but always worthwhile in the end.
Fast forward to September 2009. It seems the more things change, the more they stay the same.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
As a money manager, everyday you are required to make decisions. Those decisions are driven by an over-riding strategy predicated on facts, assumptions, experience and gut instinct. So let’s take a walk inside my mind to get a better handle as to why our stock portfolio is positioned as it is.
Remember, I’m only talking about the stock portfolio, or as we call it, the growth side. Many of you have large positions in alternative investments non-correlated to the stock market.
Currently, there is a clear disagreement as to the direction of the economy and thus the stock market.
The Federal Reserve position (5 ¼ % daily funds rate) suggests:
1. Oil prices are no longer an issue and will continue to move lower.
2. The housing market has bottomed, and after a few months, the uptrend will continue.
3. Geopolitical risks (Iran, Venezuela, China, Russia, Iraq, North Korea, Nigeria, India, and terrorism) have calmed down and will no longer be an issue.
4. Hurricanes like Katrina are once in a lifetime, and therefore, concerns are un-founded.
5. We are awash in oil and gas, thus high prices for gasoline, natural gas, and home heating fuel are a thing of the past.
6. The fact that interest rates are inverted, with long rates lower than short rates, makes no difference, because this time it’s different.
7. The consumer will shrug off higher adjustable-rate mortgage increases because they are paying less at the pump, and will continue to spend.
8. Foreigners will continue to buy our debt (dollars), to support our deficit.
9. There will be no recession.
10. The stock market will soar from here.
The Bond Market (4.60% 10-year bond yield) suggests:
1. Oil will continue to be an issue, as our dependency on foreign oil increases. Alternative fuel sources have been talked about since the 1973 Oil Embargo with little success.
2. The housing market will be as severe and problematic as 1989-1991, and could be as bad as the 1930’s. The homebuilders have not bottomed and the downtrend will continue.
3. Geopolitical risks ( Iran, etc.) are a fact of life and will continue to be with us for a very long time.
4. The weather, from hurricanes to drought, will have significant impact on all aspects of our economy.
5. The inversion of interest rates, with longer rates lower than short rates, is significant because it’s NOT DIFFERENT THIS TIME.
6. The consumer will be impacted by higher adjustable-rate mortgages, higher energy costs, and excessive credit card debt.
7. Foreigners will think twice about increasing their U.S. dollar purchases, and that position will impact our deficit.
8. The stock market will move lower from here.
9. There will be a recession.
There you have it. Two diametrically opposed positions. Which side do you think is right? Most people will initially answer “I don’t know.” I, however, do not have that luxury. I’m paid to make a decision, to use my judgment. I’ve done my homework, and strongly believe that the bond market is the correct position. Unfortunately, for the last several months, the stock market has disagreed. Because of my position that a recession is looming, geopolitics is significant, and there will be a significant collapse in the housing market. I’ve:
1. Raised a lot of cash.
2. Shorted the homebuilders.
3. Shorted the overall market.
For the last few months, that position has been contrary to the broad market. But given the world we live in, I don’t believe it will be contrary for long. Setting the right strategy and sticking with it is sometimes hard, and sometimes difficult, but always worthwhile in the end.
Fast forward to September 2009. It seems the more things change, the more they stay the same.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Thursday, September 10, 2009
Random Thoughts After An Historic Speech
“The economy is back from the precipice.” – President Obama (9-9-09)
You may think the historic speech I’m referring to was President Obama’s. You’d be wrong. That speech was politics as usual. Yesterday’s real historic speech was the one given by Zhu Min, Group Executive Vice-President of the Bank of China. He said bankers on Wall Street are suffering from “over-confidence” and are “myopic” in the face of the continuing financial crisis. He went on the say: “THE REAL ECONOMIC CRISIS HAS JUST STARTED.” He then added that the Chinese and the world are once again developing bubbles in real estate, credit, and the stock market.
The stock market keeps rising. If one is to believe that the market is a predictor of the future, you could make a case that the U.S. economy is headed for a strong recovery. However, if you are to believe the U.S. government bond market, just the opposite viewpoint is being supported. The demand for one-year to ten-year treasuries is increasing at a very brisk pace, and not just from our own government. It would appear the bond market is not worried about inflation in the future. If it was concerned, bond prices would fall, and rates would rise. However, just the opposite is happening. Rates are falling, and bond prices are rising. Maybe foreigners (Mr. Min) know something we don’t. This connotes deflation and an economic relapse. Who is right? In addition, sectors of stocks are being swapped for other sectors. That might be a game of musical chairs being orchestrated by the high-frequency traders, which could very well end badly.
No new money is coming into the stock market. Savings rates are accelerating, incomes are being cut, margin balances (borrowing) is not increasing, and money markets have remained where they were last February. Foreclosures are up 18% year over year, and U6 complete statistics unemployment is approaching 17%.
Obama said “we’re back.” To quote Barney Frank, “What planet is he living on?”
Just some random thoughts.
Till next time,
Bill
Source: Bloomberg
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
You may think the historic speech I’m referring to was President Obama’s. You’d be wrong. That speech was politics as usual. Yesterday’s real historic speech was the one given by Zhu Min, Group Executive Vice-President of the Bank of China. He said bankers on Wall Street are suffering from “over-confidence” and are “myopic” in the face of the continuing financial crisis. He went on the say: “THE REAL ECONOMIC CRISIS HAS JUST STARTED.” He then added that the Chinese and the world are once again developing bubbles in real estate, credit, and the stock market.
The stock market keeps rising. If one is to believe that the market is a predictor of the future, you could make a case that the U.S. economy is headed for a strong recovery. However, if you are to believe the U.S. government bond market, just the opposite viewpoint is being supported. The demand for one-year to ten-year treasuries is increasing at a very brisk pace, and not just from our own government. It would appear the bond market is not worried about inflation in the future. If it was concerned, bond prices would fall, and rates would rise. However, just the opposite is happening. Rates are falling, and bond prices are rising. Maybe foreigners (Mr. Min) know something we don’t. This connotes deflation and an economic relapse. Who is right? In addition, sectors of stocks are being swapped for other sectors. That might be a game of musical chairs being orchestrated by the high-frequency traders, which could very well end badly.
No new money is coming into the stock market. Savings rates are accelerating, incomes are being cut, margin balances (borrowing) is not increasing, and money markets have remained where they were last February. Foreclosures are up 18% year over year, and U6 complete statistics unemployment is approaching 17%.
Obama said “we’re back.” To quote Barney Frank, “What planet is he living on?”
Just some random thoughts.
Till next time,
Bill
Source: Bloomberg
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Wednesday, September 2, 2009
Possible or Probable
Does the government want the stock market to drop, decline, consolidate, crash, or all of the above? I believe that it is not only possible, but probable, and here’s why.
As long as the market is moving higher, money flows will continue out of safe havens such as treasuries, thus dropping the value of the dollar. Since oil is denominated in dollars, as the dollar drops, oil moves higher. As oil moves higher, gasoline likewise moves up, thus impeding this so-called global recovery. Oil inventories are at their highest in years, and refining capacity is at it’s highest in fifteen years. OPEC continues to over-produce. All in all there is no demand; oil is appreciating because of the drop in the dollar.
In addition, as the dollar drops, interest rates rise. This doesn’t help the billions of dollars of refinancing in both the commercial and residential areas of real estate estimated to occur in the next eighteen months. A collapse in real estate, greater in proportion than previously seen, is lurking right around the corner, and higher rates compound the impending disaster.
FDIC Chairman Sheila Bair said: Commercial real estate loans were “catching up” with residential mortgages as a threat to bank’s balance sheets. “Commercial real estate is a looming problem. It’s going to be a bigger driver of bank failures toward the end of this year, and into next year.”
Therefore, I contend, the dollar must rise, oil must come down, and interest rates must come down.
Here’s how to do it. If fear and panic could be created, that would drive money out of the stock market, and into the safe haven of the dollar and treasuries.
It happened in November and December of 2008. Could it happen again? I believe it could.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
As long as the market is moving higher, money flows will continue out of safe havens such as treasuries, thus dropping the value of the dollar. Since oil is denominated in dollars, as the dollar drops, oil moves higher. As oil moves higher, gasoline likewise moves up, thus impeding this so-called global recovery. Oil inventories are at their highest in years, and refining capacity is at it’s highest in fifteen years. OPEC continues to over-produce. All in all there is no demand; oil is appreciating because of the drop in the dollar.
In addition, as the dollar drops, interest rates rise. This doesn’t help the billions of dollars of refinancing in both the commercial and residential areas of real estate estimated to occur in the next eighteen months. A collapse in real estate, greater in proportion than previously seen, is lurking right around the corner, and higher rates compound the impending disaster.
FDIC Chairman Sheila Bair said: Commercial real estate loans were “catching up” with residential mortgages as a threat to bank’s balance sheets. “Commercial real estate is a looming problem. It’s going to be a bigger driver of bank failures toward the end of this year, and into next year.”
Therefore, I contend, the dollar must rise, oil must come down, and interest rates must come down.
Here’s how to do it. If fear and panic could be created, that would drive money out of the stock market, and into the safe haven of the dollar and treasuries.
It happened in November and December of 2008. Could it happen again? I believe it could.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Monday, August 31, 2009
Shanghai Surprise
Lou Jiwei, Chairman of the China Investment Corporation (CIC), which controls China’s $298 billion sovereign wealth fund, said: “Both China and America are addressing bubbles by creating more bubbles, and we’re just taking advantage of that, so WE can’t lose.” (Emphasis added by me.)
The great growth engine of the world seems to be sputtering. Mr. Jiwei, can the United States be far behind?
Till next time,
Bill
P.S. – Could the DPJ power sweep in Japan be the first shot across the bow of international protectionism?
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
The great growth engine of the world seems to be sputtering. Mr. Jiwei, can the United States be far behind?
Till next time,
Bill
P.S. – Could the DPJ power sweep in Japan be the first shot across the bow of international protectionism?
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Tuesday, August 25, 2009
An Open Letter to Ben Bernanke
Dear Ben:
Congratulations on your re-appointment as Chairman of the Federal Reserve. I’m sure that as the President pondered your re-appointment, he took last year’s “Looking into the Abyss” (a CNBC quote), and decided you were the man for the job. However, he probably disregarded:
1) Most banks may be insolvent.*
2) 81 banks have failed this year, and the number continues to climb each week. (Some say as many as 1000 over the next 18 months)*
3) Disregarding the S& L crisis, this is the worst bank failure since the Great Depression.*
4) Trade, as measured by shipping and rail, is down 20%.*
5) Foreclosures are not only rising, but accelerating.*
6) One-third of all mortgages are under water.*
7) Unemployment is rising, as real unemployment approaches 20%.*
8) The Federal Reserve continues to buy treasuries, thus monetizing the debt.*
9) Sales are non-existent, except for government giveaways. (How about cash for old washing machines?!)
10) The federal budget deficit just went from $7 trillion to $9 trillion.*
Ben, keep up the good work. I can’t wait to see what you have in store for the next four years. You are definitely the man for the job.
Sincerely,
Bill Tatro
*Source: Bloomberg
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Congratulations on your re-appointment as Chairman of the Federal Reserve. I’m sure that as the President pondered your re-appointment, he took last year’s “Looking into the Abyss” (a CNBC quote), and decided you were the man for the job. However, he probably disregarded:
1) Most banks may be insolvent.*
2) 81 banks have failed this year, and the number continues to climb each week. (Some say as many as 1000 over the next 18 months)*
3) Disregarding the S& L crisis, this is the worst bank failure since the Great Depression.*
4) Trade, as measured by shipping and rail, is down 20%.*
5) Foreclosures are not only rising, but accelerating.*
6) One-third of all mortgages are under water.*
7) Unemployment is rising, as real unemployment approaches 20%.*
8) The Federal Reserve continues to buy treasuries, thus monetizing the debt.*
9) Sales are non-existent, except for government giveaways. (How about cash for old washing machines?!)
10) The federal budget deficit just went from $7 trillion to $9 trillion.*
Ben, keep up the good work. I can’t wait to see what you have in store for the next four years. You are definitely the man for the job.
Sincerely,
Bill Tatro
*Source: Bloomberg
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Monday, August 17, 2009
The Yellow Bubble
When the central government of China issued an edict about asking permission before a company may lay off 40 employees or more, it should have raised a few eyebrows.
Why would an edict like this be necessary if the GDP (growth) of China is accelerating, like they said it is, at 8%?
Why would you think about protecting your manufacturing base if the world was embarking on a global turnaround?
Why would you get protective when your stock market is up 90% and real estate prices are soaring?
Why would you even entertain a thought of layoffs if banks lent aggressively to anyone who walked through their front door?
Is it possible China embarked on the same path we traveled in reckless lending and spending and sees the same end result?
If that is the case, what’s to become of the rest of the world which has hitched itself to the Great Chinese growth engine?
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Why would an edict like this be necessary if the GDP (growth) of China is accelerating, like they said it is, at 8%?
Why would you think about protecting your manufacturing base if the world was embarking on a global turnaround?
Why would you get protective when your stock market is up 90% and real estate prices are soaring?
Why would you even entertain a thought of layoffs if banks lent aggressively to anyone who walked through their front door?
Is it possible China embarked on the same path we traveled in reckless lending and spending and sees the same end result?
If that is the case, what’s to become of the rest of the world which has hitched itself to the Great Chinese growth engine?
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Friday, August 14, 2009
Hot Off the Press
According to Standard & Poor’s, the current P/E ratio on the S&P 500 is 145 times reported earnings. This is a record high which is triple the P/E ratio at the top of the 2000 stock market. In addition, the S&P 500 is 15.39% above its simple 40-week moving average, the highest value since April 1999.
Mmmmmmmmmmmmmm…………..
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Mmmmmmmmmmmmmm…………..
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Monday, August 10, 2009
Inflection Point Decisions
Let’s start with what we know. The stock market has been going up. Some of us call it a rally in a bear market, and others say it’s the “start of the new bull market.” (Abby Cohen – Goldman Sachs.) Regardless of who is right; the market has come a long way since the March low. (Notice, I didn’t say bottom.) At this moment in time, the question becomes, “what is the right move going forward?” I say “this moment in time,” because it would appear the rally is showing some fatigue, and could be in the beginning throws of rolling over. However, it could be just catching its breath for an assault on 10,000, 11,000, or even 12,000. How about the old high of 14,000, and beyond? Anything is possible.
But, I said let’s start with what we know. Consumption (the consumer) is 70% of the economy, and the government is the other 30%. During recessions, consumer credit growth rarely goes negative. The exceptions are just after World War II, 1991 through 1992, and right now. This is significant because the consumer always leads the economy out of the recession. It’s the consumer getting jobs, earning money, and buying goods that ultimately creates a cycle that reinvigorates an economy. Government stimulus can help for just so long, but no economy can be resurrected without the consumer consuming. Every recession has been similar in that the consumer has had a large pot of savings, equity in their home, and a revolving line of credit cards to draw from. The key component stimulating the consumer to consume is confidence. Confidence that the consumer has a job, confidence that inflation will be under control, confidence they have a roof over their head, and confidence that tomorrow will be better than today.
As the government cranked up the printing presses in the Spring, people’s confidence level rose, as exhibited by the Consumer Confidence Index. However, real unemployment continued to decline, foreclosures continued to escalate, and confidence came down like a lead balloon. The consumer effectively stopped consuming. Yes, cash for clunkers was a large success, if you consider drawing demand from future auto sales successful, and if you consider adding several billions of dollars onto the balance sheets of people who can’t afford their next credit card payment. But this has been the government’s strategy, to get consumers spending again. Unfortunately, the consumer has, other than what the government doles out, nothing left. They are maxed on their credit cards, upside down on their house, out of a job, and scared to death. Thus, the government’s gambit of lowering interest rates, encouraging lending, and promoting giveaways all in the name of consumer stimulus has failed. Not because of a lack of credit, as politicians would have you believe, but because there is no demand from credit worthy borrowers. The American public has decided to close their wallets, and not take on any more debt.
However, the stock market continues to rise, and continues to ignore manipulated unemployment figures, rising deficits, accelerating foreclosures, P/E ratios not seen since early 2000, and insider selling at all-time highs. “Thus viewed, the stock market is but a mirror, which perhaps as in this instance, somewhat belatedly, provides an image of the underlying or fundamental economic situation. Cause and effect run from the economy to the stock market, never the reverse. In 1929, the economy was headed for trouble. Eventually, that trouble was violently reflected on Wall Street.” (– John Kenneth Galbraith) The real substance of economic life rests in production, employment, sales and personal income. In 2009, as in 1929, all four continue to decline. However, knowing all this, the inflection point says “It doesn’t matter.” The stock market could go dramatically higher; we should be long the market. It also says “It matters a great deal,” the stock market could go dramatically lower; we should be out of the market. Thus were developed hedges to take the guesswork out of a manipulative, frothy, and bizarre marketplace. The end point is known, it’s how to get there is the question.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
But, I said let’s start with what we know. Consumption (the consumer) is 70% of the economy, and the government is the other 30%. During recessions, consumer credit growth rarely goes negative. The exceptions are just after World War II, 1991 through 1992, and right now. This is significant because the consumer always leads the economy out of the recession. It’s the consumer getting jobs, earning money, and buying goods that ultimately creates a cycle that reinvigorates an economy. Government stimulus can help for just so long, but no economy can be resurrected without the consumer consuming. Every recession has been similar in that the consumer has had a large pot of savings, equity in their home, and a revolving line of credit cards to draw from. The key component stimulating the consumer to consume is confidence. Confidence that the consumer has a job, confidence that inflation will be under control, confidence they have a roof over their head, and confidence that tomorrow will be better than today.
As the government cranked up the printing presses in the Spring, people’s confidence level rose, as exhibited by the Consumer Confidence Index. However, real unemployment continued to decline, foreclosures continued to escalate, and confidence came down like a lead balloon. The consumer effectively stopped consuming. Yes, cash for clunkers was a large success, if you consider drawing demand from future auto sales successful, and if you consider adding several billions of dollars onto the balance sheets of people who can’t afford their next credit card payment. But this has been the government’s strategy, to get consumers spending again. Unfortunately, the consumer has, other than what the government doles out, nothing left. They are maxed on their credit cards, upside down on their house, out of a job, and scared to death. Thus, the government’s gambit of lowering interest rates, encouraging lending, and promoting giveaways all in the name of consumer stimulus has failed. Not because of a lack of credit, as politicians would have you believe, but because there is no demand from credit worthy borrowers. The American public has decided to close their wallets, and not take on any more debt.
However, the stock market continues to rise, and continues to ignore manipulated unemployment figures, rising deficits, accelerating foreclosures, P/E ratios not seen since early 2000, and insider selling at all-time highs. “Thus viewed, the stock market is but a mirror, which perhaps as in this instance, somewhat belatedly, provides an image of the underlying or fundamental economic situation. Cause and effect run from the economy to the stock market, never the reverse. In 1929, the economy was headed for trouble. Eventually, that trouble was violently reflected on Wall Street.” (– John Kenneth Galbraith) The real substance of economic life rests in production, employment, sales and personal income. In 2009, as in 1929, all four continue to decline. However, knowing all this, the inflection point says “It doesn’t matter.” The stock market could go dramatically higher; we should be long the market. It also says “It matters a great deal,” the stock market could go dramatically lower; we should be out of the market. Thus were developed hedges to take the guesswork out of a manipulative, frothy, and bizarre marketplace. The end point is known, it’s how to get there is the question.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Wednesday, July 22, 2009
Economic White Paper - Uncle Ben, Are We There Yet?
Recently, in front of a Congressional committee, Ben Bernanke stated that there were, “tentative signs of the economy stabilizing.” Does that mean recovery? Uncle Ben, are we there yet?
The National Bureau of Economic Research declares when recessions officially begin, and when recessions officially end. Since 1967, recession ending declarations have dovetailed with four economic factors. Some would call it coincidence. I call it the necessary building blocks for long-term recovery, and the foundation for a strong stock market.
1) Sales: Nothing happens until you sell something. Currently, about 80% of corporate earnings reports are positive because of cost cutting, not revenue growth. Savings rates, a much misused term, have been climbing over the past six months and are currently approaching 7%. This means that the consumer is shopping for needs over wants, and thus sales have diminished.
2) Production: Currently, industrial capacity utilization is at a four-decade low of 68.3%. Manufacturing capacity is at a six-decade low of 65%. If you’re not selling, then you don’t need production. Of course, there will be the occasional inventory restocking, which will create the sense of increased production. However, when the items, once produced, sit on the shelf collecting dust and are not sold, then the quick euphoric spurt will evaporate in despair. Currently, we are experiencing that spurt.
3) Employment: Once sales take off and production is ramped up, employees are called back to work. But right now, there are no sales, no production, and unemployment continues to rise. The President himself has called for higher unemployment, and the Federal Reserve has stated unemployment may not start to improve until 2011. Keep in mind, a slow down in unemployment is not employment.
4) Personal Income: One of the most significant statistics to be put forth by the government is the number of hours worked per week. Once at forty hours, it has now declined to thirty-three hours. This 15% decrease means less employees, less income, less purchasing power, fewer sales, less production, and the vicious cycle continues.
I’ll close with this example. In November 2001, the National Bureau of Economic Research declared the recession was over, much as most pundits are doing right now. Unfortunately, employment and income had not turned higher. In fact, not until 16 months and 21 months later, respectively, did all four components (sales, production, employment, and personal income) improve. The Bureau missed the call, and look what happened to the stock market from November 2001 until October 2002. A major disaster.
Currently, not one of the economic pillars is moving higher, let alone four.
Is the market flirting with disaster like 2001? You be the judge.
Please, Uncle Ben, are we there yet?
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
The National Bureau of Economic Research declares when recessions officially begin, and when recessions officially end. Since 1967, recession ending declarations have dovetailed with four economic factors. Some would call it coincidence. I call it the necessary building blocks for long-term recovery, and the foundation for a strong stock market.
1) Sales: Nothing happens until you sell something. Currently, about 80% of corporate earnings reports are positive because of cost cutting, not revenue growth. Savings rates, a much misused term, have been climbing over the past six months and are currently approaching 7%. This means that the consumer is shopping for needs over wants, and thus sales have diminished.
2) Production: Currently, industrial capacity utilization is at a four-decade low of 68.3%. Manufacturing capacity is at a six-decade low of 65%. If you’re not selling, then you don’t need production. Of course, there will be the occasional inventory restocking, which will create the sense of increased production. However, when the items, once produced, sit on the shelf collecting dust and are not sold, then the quick euphoric spurt will evaporate in despair. Currently, we are experiencing that spurt.
3) Employment: Once sales take off and production is ramped up, employees are called back to work. But right now, there are no sales, no production, and unemployment continues to rise. The President himself has called for higher unemployment, and the Federal Reserve has stated unemployment may not start to improve until 2011. Keep in mind, a slow down in unemployment is not employment.
4) Personal Income: One of the most significant statistics to be put forth by the government is the number of hours worked per week. Once at forty hours, it has now declined to thirty-three hours. This 15% decrease means less employees, less income, less purchasing power, fewer sales, less production, and the vicious cycle continues.
I’ll close with this example. In November 2001, the National Bureau of Economic Research declared the recession was over, much as most pundits are doing right now. Unfortunately, employment and income had not turned higher. In fact, not until 16 months and 21 months later, respectively, did all four components (sales, production, employment, and personal income) improve. The Bureau missed the call, and look what happened to the stock market from November 2001 until October 2002. A major disaster.
Currently, not one of the economic pillars is moving higher, let alone four.
Is the market flirting with disaster like 2001? You be the judge.
Please, Uncle Ben, are we there yet?
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Tuesday, July 14, 2009
Big Bank Earnings?
So, let me get this straight. In the land of fantasy, a big bank has blockbuster earnings, everyone cheers, and the media labels the big bank as being the smartest guys in the room.
Keep in mind; the big bank’s two chief competitors are gone, and that means they have the playing field to themselves. Their VAR (Value at Risk – how much they are willing to lose in trading everyday, therefore high leverage), is 20%. Their cost of capital is zero because it’s fronted by the U.S. government (meaning you and me, the taxpayers - money they should have never received in the first place.) In addition, the big bank has added no new jobs, and the average annual compensation per employee is $772,925.
Smartest guys in the room? I know who’s standing and cheering, and it’s not you and me.
Don’t you just love the land of fantasy?
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Keep in mind; the big bank’s two chief competitors are gone, and that means they have the playing field to themselves. Their VAR (Value at Risk – how much they are willing to lose in trading everyday, therefore high leverage), is 20%. Their cost of capital is zero because it’s fronted by the U.S. government (meaning you and me, the taxpayers - money they should have never received in the first place.) In addition, the big bank has added no new jobs, and the average annual compensation per employee is $772,925.
Smartest guys in the room? I know who’s standing and cheering, and it’s not you and me.
Don’t you just love the land of fantasy?
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Monday, July 6, 2009
The White Paper - Emerging Markets and China
Popular opinion suggests that China is on the verge of replacing the U.S. as the engine of growth for the world’s economy. After all, doesn’t China have such a large population that everyone wants their first car, their second plasma T.V., and their third cell phone. (iPhone, of course.) With India, Brazil, and Russia, charging right behind, it would seem obvious why all the pundits believe that an investment in emerging markets is a play on the future. Who am I to take an opposing position? But I have. So here goes.
I could discuss China’s communist government, but the reality is the Chinese were merchants and capitalists long before the U.S. and Karl Marx showed their faces on this earth. Therefore, it is the capitalistic arena that the discussion must be focused. China’s latest stimulus package was applauded as being directed and efficient. It sparked immediate growth (maybe), in the economy, and a dramatic surge in their stock market. However, on closer examination, the stimulus money had two recipients. The first was businessmen, who started building additional capacity for manufacturing. Unfortunately, weak global demand, and even weaker domestic consumption, has called into question the statement “If you build it, they will buy”…..who will buy? The second recipients of the stimulus, and maybe the largest recipients, were those who used it for investment in the stock market. Much like our banks using our TARP funds, and a majority of other government sources to bolster and manipulate our markets, so too, I believe have the Chinese. Rising Chinese stock and property values are simply creating a bubble that ultimately will hurt their economy when it bursts. This type of artificial growth is exactly what we, in the U.S., have experienced for the last nine years, and are now feeling the consequences. India, Brazil, Russia, and the rest of the emerging markets are basing their futures on the same foundation of sand we did, with more than likely the same results.
The continual printing of money by the U.S. Treasury has created the thinking that hyper-inflation is just around the corner. While I do share that opinion, I believe the corner may be a few blocks down. Short-term, deflation is the biggest problem, and therefore the trade of commodities, including oil, is in my opinion, pre-mature. Emerging markets live and die on the commodity trade, so draw your own conclusion.
Whether it’s the U.S., or an emerging market, real domestic consumption, not artificially induced by printing money, real successful business, not zombies propped up by governments, and real stable currencies, not funny money printed at every politicians whim, is the only true path to growth.
The death knell for emerging markets is sounding in the short-term, and one could be foolish not to heed its sound.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
I could discuss China’s communist government, but the reality is the Chinese were merchants and capitalists long before the U.S. and Karl Marx showed their faces on this earth. Therefore, it is the capitalistic arena that the discussion must be focused. China’s latest stimulus package was applauded as being directed and efficient. It sparked immediate growth (maybe), in the economy, and a dramatic surge in their stock market. However, on closer examination, the stimulus money had two recipients. The first was businessmen, who started building additional capacity for manufacturing. Unfortunately, weak global demand, and even weaker domestic consumption, has called into question the statement “If you build it, they will buy”…..who will buy? The second recipients of the stimulus, and maybe the largest recipients, were those who used it for investment in the stock market. Much like our banks using our TARP funds, and a majority of other government sources to bolster and manipulate our markets, so too, I believe have the Chinese. Rising Chinese stock and property values are simply creating a bubble that ultimately will hurt their economy when it bursts. This type of artificial growth is exactly what we, in the U.S., have experienced for the last nine years, and are now feeling the consequences. India, Brazil, Russia, and the rest of the emerging markets are basing their futures on the same foundation of sand we did, with more than likely the same results.
The continual printing of money by the U.S. Treasury has created the thinking that hyper-inflation is just around the corner. While I do share that opinion, I believe the corner may be a few blocks down. Short-term, deflation is the biggest problem, and therefore the trade of commodities, including oil, is in my opinion, pre-mature. Emerging markets live and die on the commodity trade, so draw your own conclusion.
Whether it’s the U.S., or an emerging market, real domestic consumption, not artificially induced by printing money, real successful business, not zombies propped up by governments, and real stable currencies, not funny money printed at every politicians whim, is the only true path to growth.
The death knell for emerging markets is sounding in the short-term, and one could be foolish not to heed its sound.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Wednesday, July 1, 2009
Market Manipulation?
Mortgage applications decline, unemployment continues to rise, consumer confidence comes back to reality, and yet the pundits point to the success of the stock market in the second quarter. There must be green shoots in the air.
Or, perhaps something else is going on. For the past several months, “high frequency” trading has been occurring. According to Bloomberg, machines have been trading with machines at a fever pitch in order to create the illusion of high volume, and drive market prices higher. Unfortunately, volume is not liquidity. Keep in mind that when the stock market collapsed in 2008 and early 2009, 40% of the natural “investors” went to the sidelines. Yet, the machines kept cranking out trades, giving the illusion that there were better things to come.
Where did the money come from? Consider this possible theory: The government bails out an insurance company, then the insurance company pays off the CDS (insurance) to a bank. The bank, which also accepted TARP funds (which it didn’t need), uses both the insurance money and the TARP funds in order to drive the stock market higher. Thus, sharp upward spikes in the major stock market indexes at the end of the trading day have become the norm. Factor in three or four more banks, (all funded by Uncle Sam), and you have a great recipe for manipulation. Of course, all of that is theoretical.
But what is not theory is that “high frequency” trading appears to be great on the upside. However, when the stock market goes down, and everyone heads for the exits at the same time, that’s when the folks at CNBC will say “What’s going on, how could the Dow Jones be down 1,000 points in one day?”
Just more conjecture.
Till next time,
Bill
P.S. – Next, the White Paper continues.
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Or, perhaps something else is going on. For the past several months, “high frequency” trading has been occurring. According to Bloomberg, machines have been trading with machines at a fever pitch in order to create the illusion of high volume, and drive market prices higher. Unfortunately, volume is not liquidity. Keep in mind that when the stock market collapsed in 2008 and early 2009, 40% of the natural “investors” went to the sidelines. Yet, the machines kept cranking out trades, giving the illusion that there were better things to come.
Where did the money come from? Consider this possible theory: The government bails out an insurance company, then the insurance company pays off the CDS (insurance) to a bank. The bank, which also accepted TARP funds (which it didn’t need), uses both the insurance money and the TARP funds in order to drive the stock market higher. Thus, sharp upward spikes in the major stock market indexes at the end of the trading day have become the norm. Factor in three or four more banks, (all funded by Uncle Sam), and you have a great recipe for manipulation. Of course, all of that is theoretical.
But what is not theory is that “high frequency” trading appears to be great on the upside. However, when the stock market goes down, and everyone heads for the exits at the same time, that’s when the folks at CNBC will say “What’s going on, how could the Dow Jones be down 1,000 points in one day?”
Just more conjecture.
Till next time,
Bill
P.S. – Next, the White Paper continues.
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Wednesday, June 24, 2009
The White Paper - Commercial Real Estate Update – (It Never Ends)
First, Extended Stay Hotels filed for bankruptcy, now its Red Roof Inn that defaulted on their mortgage debt last night. In addition, if you look at hotel occupancies in Asia, they’re at 35%. Can their defaults be far behind? Oh, by the way, the brains behind the Red Roof Inn deal, of course, was the same financial group that’s trying to justify a 50% increase in salary for top executives. In my opinion, another green shoot that has become a weed.
Some media “experts” are advising that the recently bailed out financial groups are now “the buys of the century.” Didn’t they say that before?
Caveat emptor – buyer beware!
Till next time,
Bill
P.S. – Here comes the oversold bounce in the market, and end-of-quarter window dressing. Let’s all put a smile on our face.
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Some media “experts” are advising that the recently bailed out financial groups are now “the buys of the century.” Didn’t they say that before?
Caveat emptor – buyer beware!
Till next time,
Bill
P.S. – Here comes the oversold bounce in the market, and end-of-quarter window dressing. Let’s all put a smile on our face.
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Tuesday, June 23, 2009
The White Paper - Housing
A few years ago, when I first started writing about housing and the problems that were developing, most people thought the word subprime meant a prehistoric species from some long ago period. But quickly, it was learned that subprime meant a mortgage loan given to someone with questionable credentials, and an even more questionable ability to pay the loan back. We also learned that if you could breath, you qualified, and the bankers, mortgage brokers, and any one else associated with housing, including politicians, were more than happy to help you get into the house of your dreams. Unfortunately, you know how the story played out. The Bible says a house built on a foundation of sand (debt)…well, you get the idea.
Now the pundits tell us we are at the bottom. Housing, both pricing and sales, are smoothing out, and in the not too distant future, the real estate asset class will once again be the catalyst for great wealth. Many of you believe this story. DON’T!
Subprime was just the first shot in the salvo of creative mortgage financing. In fact, the Federal Reserve and the U.S. Treasury may have expended all their tools on the mortgage industry’s opening act. Consider this scenario. Imagine if you sat down to a five course dinner, thinking all that was being served was the first course. You gorged yourself, feeling satisfied, and actually contented. So what happens when course two, three, four, and five, are served? Uh oh! For the mortgage markets, the next course is the option adjustable rate mortgage. (ARM) The problem is not interest rates or “resets.” The problem is “recasts,” which usually happens when you either reach 125% of the original loan balance on a negative amortization basis, or 5 years pass, whichever comes first. These loans were pushed (I mean sold), as “affordability” products to people who could not afford to buy the house they wanted. The lender expected the borrower would either re-finance with a new ARM, or sell the house before the recast. Worst case, the house would appreciate faster than the indebtedness, allowing them to pay it off. It didn’t happen. Appreciation occurred, but the borrower with the encouragement of the lender, refinanced again and again, pulling money out to buy SUVs, kitchen make-overs, or once-in-a-lifetime vacations. All things that gave a false sense of growth to our economy.
The pundits, including our political administration, are saying that if they can just keep interest rates low, all will be well. Au contraire. Here’s an example: For a $750,000 house purchased five years ago, even if you get a 4% interest rate based on current “adjustable rates,” you must amortize the 4% over the remaining 25 years. (average) The house is only worth $400,000 in today’s market, and could go lower. So the possibility to refinance into a conventional loan is zero, unless you have the $350,000 difference just “lying around.” Also, your payment goes from $1,000 per month, to $3,945.62, a near quadrupling overnight. Can you say…walk away.
Here’s more bad news. Most of these billions of dollars of mortgage recasts have not happened yet. They are scheduled for the latter part of 2009, 2010, and 2011. Keep in mind, the financial institutions almost blew up when a small portion came due. What happens when the majority shows up on the doorstep? Couple this with alt-a, prime, and agency paper, and you have the makings of one good brouhaha, making the zombie banks of Japan seem like the life of the party. Factor in the inevitable collapse of highly-leveraged traded real estate investment trusts, and you have a story line that could only be scripted in the mind of Steven King.
The collapse of real estate is not near the end. In fact, in the parlance of musical theater “the overture has just concluded, and the curtain is about to go up.”
Till next time,
Bill
P.S. - Next: Emerging markets and China.
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Now the pundits tell us we are at the bottom. Housing, both pricing and sales, are smoothing out, and in the not too distant future, the real estate asset class will once again be the catalyst for great wealth. Many of you believe this story. DON’T!
Subprime was just the first shot in the salvo of creative mortgage financing. In fact, the Federal Reserve and the U.S. Treasury may have expended all their tools on the mortgage industry’s opening act. Consider this scenario. Imagine if you sat down to a five course dinner, thinking all that was being served was the first course. You gorged yourself, feeling satisfied, and actually contented. So what happens when course two, three, four, and five, are served? Uh oh! For the mortgage markets, the next course is the option adjustable rate mortgage. (ARM) The problem is not interest rates or “resets.” The problem is “recasts,” which usually happens when you either reach 125% of the original loan balance on a negative amortization basis, or 5 years pass, whichever comes first. These loans were pushed (I mean sold), as “affordability” products to people who could not afford to buy the house they wanted. The lender expected the borrower would either re-finance with a new ARM, or sell the house before the recast. Worst case, the house would appreciate faster than the indebtedness, allowing them to pay it off. It didn’t happen. Appreciation occurred, but the borrower with the encouragement of the lender, refinanced again and again, pulling money out to buy SUVs, kitchen make-overs, or once-in-a-lifetime vacations. All things that gave a false sense of growth to our economy.
The pundits, including our political administration, are saying that if they can just keep interest rates low, all will be well. Au contraire. Here’s an example: For a $750,000 house purchased five years ago, even if you get a 4% interest rate based on current “adjustable rates,” you must amortize the 4% over the remaining 25 years. (average) The house is only worth $400,000 in today’s market, and could go lower. So the possibility to refinance into a conventional loan is zero, unless you have the $350,000 difference just “lying around.” Also, your payment goes from $1,000 per month, to $3,945.62, a near quadrupling overnight. Can you say…walk away.
Here’s more bad news. Most of these billions of dollars of mortgage recasts have not happened yet. They are scheduled for the latter part of 2009, 2010, and 2011. Keep in mind, the financial institutions almost blew up when a small portion came due. What happens when the majority shows up on the doorstep? Couple this with alt-a, prime, and agency paper, and you have the makings of one good brouhaha, making the zombie banks of Japan seem like the life of the party. Factor in the inevitable collapse of highly-leveraged traded real estate investment trusts, and you have a story line that could only be scripted in the mind of Steven King.
The collapse of real estate is not near the end. In fact, in the parlance of musical theater “the overture has just concluded, and the curtain is about to go up.”
Till next time,
Bill
P.S. - Next: Emerging markets and China.
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Monday, June 22, 2009
The White Paper
Two years ago, I wrote a lengthy white paper (one man’s personal opinion and exposé) on the significant topics confronting all investors. Given both the economic and political crossroads that we find ourselves at today, it would seem that now is the perfect time for another WHITE PAPER. Topics to be discussed will include housing, (un)employment, healthcare, emerging markets (and China), taxes, and the stock market, among others.
Stay tuned, and be ready to take notes. Class will be in session shortly.
Till next time,
Bill
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Stay tuned, and be ready to take notes. Class will be in session shortly.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Thursday, June 11, 2009
Headlines as We Approach the Second-Half Recovery
“The Federal Reserve lost $5.25 billion in the first quarter on the securities they acquired with last year’s bailouts of Bear Stearns and insurer AIG, according to a report issued Wednesday.”
- Reuters
“More than 600,000 seniors are delinquent in their mortgage payments, or already in foreclosure.” - USA Today
"The National Delinquency Survey from the Mortgage Bankers Association found foreclosure activity was at an all-time high in the first quarter of 2009, when the delinquency rate, which excludes homes already in the foreclosure process, hit 9.12%.”
- Newsmax.com
“The number of first-time claims for state unemployment benefits fell 24,000 to 601,000 in the week ending June 6th, the Labor Department reported Thursday.”
- MarkewWatch.com (Stated another way: “601,000 new people filed for unemployment, bringing the four-week average of continuing claims to a record 6.75 million people”)
- Bill Tatro
“U.S. sales of retail stores increased 0.5 % in May, but much of the seasonally adjusted increase reflected higher gasoline prices.” - U.S. Commerce Department
“Watches synchronized? Good. Because three weeks from today, the second-half of the year starts. That’s when the economic recovery is supposed to get underway, according to Bernanke, Geithner, Obama, Cramer, Kass, Kudlow, economists, money managers, and other associated pundits.” – MarketWatch.com
Once again, it’s lonely being on the other side of the argument.
Have a nice day.
Till next time,
Bill
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
- Reuters
“More than 600,000 seniors are delinquent in their mortgage payments, or already in foreclosure.” - USA Today
"The National Delinquency Survey from the Mortgage Bankers Association found foreclosure activity was at an all-time high in the first quarter of 2009, when the delinquency rate, which excludes homes already in the foreclosure process, hit 9.12%.”
- Newsmax.com
“The number of first-time claims for state unemployment benefits fell 24,000 to 601,000 in the week ending June 6th, the Labor Department reported Thursday.”
- MarkewWatch.com (Stated another way: “601,000 new people filed for unemployment, bringing the four-week average of continuing claims to a record 6.75 million people”)
- Bill Tatro
“U.S. sales of retail stores increased 0.5 % in May, but much of the seasonally adjusted increase reflected higher gasoline prices.” - U.S. Commerce Department
“Watches synchronized? Good. Because three weeks from today, the second-half of the year starts. That’s when the economic recovery is supposed to get underway, according to Bernanke, Geithner, Obama, Cramer, Kass, Kudlow, economists, money managers, and other associated pundits.” – MarketWatch.com
Once again, it’s lonely being on the other side of the argument.
Have a nice day.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Thursday, June 4, 2009
Same Old, Same Old
Who am I to disagree with National Association of Realtors chief economist Lawrence Yun, who said: “We expect greater activity in the months ahead.” This quote came this week after it was announced that the number of U.S. homebuyers who agreed to purchase a previously occupied home in April posted the largest monthly jump in nearly eight years. The news immediately made the talk-show circuit. It was declared the housing market bottom was in, and that price appreciation could be following right behind. Unfortunately, having observed this declaration many times in the past, I viewed this commentary with strong doubt.
Housing in many parts of the country is bottoming for three reasons. First, it’s the normal Spring-early-Summer selling season. Second, median prices are down in excess of 40% over the past two years from the peak, thereby making the LOW-END affordable. Third, and perhaps most important, foreclosures have been cut dramatically through moratoriums, thereby reducing supply.
However, the moratoriums have ended, short-sales are in disaster, and the number of pending foreclosures is massive. The backlog is gaining ground everyday, and could eventually become overwhelming. Notice of Defaults are at record highs (sorry, green shoot enthusiasts), and Notice of Trustee sales are back to nine-month highs. These escalating foreclosures are not only from the LOW-END (sub-prime alt-a), but also up to several million dollars in present value (prime.)
The latest housing numbers are showing strength in the ultra-low to mid-low range. As the foreclosures escalate in the upper range, the imbalance should crash the mid-to-upper priced properties. Early season hard data has already proven this. However, false bottoms with cash bonuses, and have-to sales, could prove illusory.
How will this play out? The red-hot LOW-END housing market will ultimately cool, as participants cannot, or will not, step up to the next level. For years, move-up buyers have been the life-blood of home sales, but now they are becoming extinct. That leaves the first time buyers to carry the bulk of the sales. Good luck on that one since all the incentives are being used up now. The mid-to-upper bands could experience additional declines of 40%. Investors who have been buying all the way down could get hurt on two fronts. First, falling rent rates, making their properties less attractive, and second, greater risk of default as supply enters the market.
It could get worse. A few years down the road all the loan adjustments and modifications which have been used to postpone the inevitable will start coming to fruition. These include teaser-rates, leverage, 1.5 times LTV, and balloon adjustments. You might call it Mortgage Implosion Armageddon Part II.
Remember, the demise of the LOWER-END of the housing market created ALL the economic havoc that we are currently experiencing. What happens when the MID-TO-UPPER housing market experiences the same precipice fall that happened in 2007?
You ain’t seen nothin’ yet.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Housing in many parts of the country is bottoming for three reasons. First, it’s the normal Spring-early-Summer selling season. Second, median prices are down in excess of 40% over the past two years from the peak, thereby making the LOW-END affordable. Third, and perhaps most important, foreclosures have been cut dramatically through moratoriums, thereby reducing supply.
However, the moratoriums have ended, short-sales are in disaster, and the number of pending foreclosures is massive. The backlog is gaining ground everyday, and could eventually become overwhelming. Notice of Defaults are at record highs (sorry, green shoot enthusiasts), and Notice of Trustee sales are back to nine-month highs. These escalating foreclosures are not only from the LOW-END (sub-prime alt-a), but also up to several million dollars in present value (prime.)
The latest housing numbers are showing strength in the ultra-low to mid-low range. As the foreclosures escalate in the upper range, the imbalance should crash the mid-to-upper priced properties. Early season hard data has already proven this. However, false bottoms with cash bonuses, and have-to sales, could prove illusory.
How will this play out? The red-hot LOW-END housing market will ultimately cool, as participants cannot, or will not, step up to the next level. For years, move-up buyers have been the life-blood of home sales, but now they are becoming extinct. That leaves the first time buyers to carry the bulk of the sales. Good luck on that one since all the incentives are being used up now. The mid-to-upper bands could experience additional declines of 40%. Investors who have been buying all the way down could get hurt on two fronts. First, falling rent rates, making their properties less attractive, and second, greater risk of default as supply enters the market.
It could get worse. A few years down the road all the loan adjustments and modifications which have been used to postpone the inevitable will start coming to fruition. These include teaser-rates, leverage, 1.5 times LTV, and balloon adjustments. You might call it Mortgage Implosion Armageddon Part II.
Remember, the demise of the LOWER-END of the housing market created ALL the economic havoc that we are currently experiencing. What happens when the MID-TO-UPPER housing market experiences the same precipice fall that happened in 2007?
You ain’t seen nothin’ yet.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Thursday, May 28, 2009
Oh Ben! Oh Ben! Where For Art Thou?
As the Japanese discovered, once you’ve taken interest rates to zero, and your economic success is questionable, then you must try another tact. Step two for the Japanese was a tactic called quantitative easing, something the United States Federal Reserve is instituting today. Simply put, this policy can be defined as throwing as much money at the problem as needed. Millions? No. Billions? Not even close. Let’s try trillions.
Several weeks ago, the Fed announced they would be the purchaser of treasuries issued by the Treasury Department at the periodic auctions. In other words, if the world doesn’t buy our long-term paper, we’ll buy it ourselves. Historically speaking, from Rome to Britain, (and that includes us), that type of action has been tried and results in two unintended consequences. The first is total devaluation of one’s currency, and second, an inflationary spiral that is almost impossible to control. (Think of the Nixon and Carter years.)
At an alarming rate, the bond market has recently seen a selling of treasury bonds, including both the ten-year and thirty-year duration. People, institutions, and countries, do not want to hold paper of a country that’s headed toward currency devaluation and hyper-inflation. Unfortunately, as treasuries are being sold, interest rates are rising (remember the see-saw example.) This throws a monkey wrench into the Obama administration’s recovery plans for housing. Long-term treasuries have a direct influence on mortgage rates. Rising mortgage rates are the last thing Obama needs to make his housing plan (also questionable) work.
This is where Ben Bernanke comes in. In order to keep interest rates low, there has to be an overly large buyer of treasuries to drive prices up, and interest rates down. The only player in that game is not China, not some quant or hedge fund, and not the general public. The only player is the U.S. government. Ben knows he has to step up, but he also knows this vicious cycle we’ve embarked upon, has only one ending. Can you say Zimbabwe? *(Zimbabwe’s inflation rate has entered a zone where it is simply impossible to calculate the price of goods hour to hour.)
However, buy he will, and buy he must. The rational will be that they can fix it later. Unfortunately, history has proven that later never comes.
Till next time,
Bill
* The Times (South Africa) February 4, 2009
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Several weeks ago, the Fed announced they would be the purchaser of treasuries issued by the Treasury Department at the periodic auctions. In other words, if the world doesn’t buy our long-term paper, we’ll buy it ourselves. Historically speaking, from Rome to Britain, (and that includes us), that type of action has been tried and results in two unintended consequences. The first is total devaluation of one’s currency, and second, an inflationary spiral that is almost impossible to control. (Think of the Nixon and Carter years.)
At an alarming rate, the bond market has recently seen a selling of treasury bonds, including both the ten-year and thirty-year duration. People, institutions, and countries, do not want to hold paper of a country that’s headed toward currency devaluation and hyper-inflation. Unfortunately, as treasuries are being sold, interest rates are rising (remember the see-saw example.) This throws a monkey wrench into the Obama administration’s recovery plans for housing. Long-term treasuries have a direct influence on mortgage rates. Rising mortgage rates are the last thing Obama needs to make his housing plan (also questionable) work.
This is where Ben Bernanke comes in. In order to keep interest rates low, there has to be an overly large buyer of treasuries to drive prices up, and interest rates down. The only player in that game is not China, not some quant or hedge fund, and not the general public. The only player is the U.S. government. Ben knows he has to step up, but he also knows this vicious cycle we’ve embarked upon, has only one ending. Can you say Zimbabwe? *(Zimbabwe’s inflation rate has entered a zone where it is simply impossible to calculate the price of goods hour to hour.)
However, buy he will, and buy he must. The rational will be that they can fix it later. Unfortunately, history has proven that later never comes.
Till next time,
Bill
* The Times (South Africa) February 4, 2009
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Wednesday, May 13, 2009
Pump and Dump
The robber barons of the late 1800’s, names such as Fisk, Gould, Carnegie, and Rockefeller, to name a few, were famous for touting the merits of the companies they owned. Their proclamations sent their stocks to stratospheric heights. However, what happened behind the scenes was a well orchestrated effort to sell their existing shares into the strength of the market, a strength created by their own publicity department. To add insult to injury, they would not only garner profits on the upside, but also short their own companies when the inevitable fall would come. This strategy, totally legal until securities laws were enacted in the 1930’s, was called pump-and-dump.
Unfortunately, the same scenario is happening today. For the past several weeks, the stock market has been led by companies that are fighting for their existence. These companies include banks, homebuilders, and highly leveraged real estate investment trusts. Their PR departments, their accounting departments, and even the Federal government, have been working overtime to paint a rosy picture of the “green chutes.” Sure, first quarter earnings results were positive. Never mind that accounting rules were changed, certain months were excluded, and losses simply ignored. The bank stress test resulted in passing grades for all, but never mind that government criteria was altered after objections from the participants.
With truth in knowledge comes understanding. Unfortunately, it’s too late for those suckered into the infamous pump. For the past eight weeks, insiders have been selling their shares. Most recently, several auto executives sold their last remaining shares of an American icon, GM ($1.15 – 5/12/09)
For those of you who walked into the classic pump, here comes what might be a classic dump. Look out below.
Fisk and the boys would have been proud.
Till next time,
Bill
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Unfortunately, the same scenario is happening today. For the past several weeks, the stock market has been led by companies that are fighting for their existence. These companies include banks, homebuilders, and highly leveraged real estate investment trusts. Their PR departments, their accounting departments, and even the Federal government, have been working overtime to paint a rosy picture of the “green chutes.” Sure, first quarter earnings results were positive. Never mind that accounting rules were changed, certain months were excluded, and losses simply ignored. The bank stress test resulted in passing grades for all, but never mind that government criteria was altered after objections from the participants.
With truth in knowledge comes understanding. Unfortunately, it’s too late for those suckered into the infamous pump. For the past eight weeks, insiders have been selling their shares. Most recently, several auto executives sold their last remaining shares of an American icon, GM ($1.15 – 5/12/09)
For those of you who walked into the classic pump, here comes what might be a classic dump. Look out below.
Fisk and the boys would have been proud.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Friday, May 8, 2009
Fact vs. Fiction
Within the past twenty-four hours, we have been treated to two remarkable fairy tales. Unfortunately, I don’t foresee a happy ending to either situation.
First, the bank stress tests. In order to determine how they would fair, nineteen banks tested under the new (old) mark-to-model rules by factoring in continued unemployment and housing problems. In essence, the banks were asked if they have enough capital to ride out the storm. Absolutely, the banks replied. Maybe you need a little bit more capital, the government said. So, to meet the need, stock will be sold to the public. Everyone breathed a sigh of relief, CNBC started cheerleading, and the stock market was off to the races.
I could dispute, and be challenged, on many of the assumptions and the results and opinions. Fair enough. However, indisputable, is that every bank has made no adjustments for the impairment of good-will on their balance sheets. For example, Bank of America ($13.51 - 5/7/09) is still carrying good-will as though Merrill Lynch, Countrywide, and Bank of America had a value at the peak of the stock market in 2006-2007. Since good-will makes up the lions share of assets, what happens when the crunch comes again? Cash, stocks, bonds, etc., are real. Good-will, however, is an accounting creation with no tangible value. It is supposed to be tested annually, to see if good-will (carrying value), is less than fair value. If it is, then impairments are required to be taken (charged off.) Done correctly, we would get a true picture of a company’s value. But since accounting rules allow a great deal of discretion and judgment, we can expect a great deal of liberty to be taken by the banks.
Does anyone really believe the valuations of good-will? Well, some people must. These banks will more than likely write-off a series of impairment charges which will create a slow bleeding death, thereby manipulating reality. This doesn’t even take into consideration the dilution of capital raises, sales of some of their most profitable enterprises, the impending tsunami of commercial real estate foreclosures, and credit card write-offs.
The second fairy tale is unemployment. Hooray, hooray. Only 539,000 people lost their jobs in April, a slowing in downsizing. Jubilation. We’ve turned the corner. Not so fast. First, the seasonal adjustments somehow created 65,000 new jobs. Where? Next, the announced 60,000 people hired by the census bureau, which by definition, is part-time work. No problem, we need the employment numbers, just create it by calling the part-timers full-timers! So, 539,000 + 65,000 + 60,000 = 664,000 of potential unemployed people. Also, keep in mind, previous months figures have been adjusted. 30,000 more unemployed in February and 30,000 in March, bringing their totals to 681,000 and 699,000, respectively. Somehow, they came in just under that 700,000 magic number that spells crisis. Oh, to have a pencil with an eraser!
One other point, the Birth/Death Model. This model is making an assumption that businesses too new, or too small, to participate in the employment measure have created a certain number of new jobs. It is not researched, it is not fact, it is only a guess. Where are these jobs? By the way, in the numbers reported today, 226,000 jobs were supposedly created under the Birth/Death Model. Give me a break!
Wishing and hoping doesn’t change the truth. When it comes to banks and jobs, it’s just pure fiction.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
First, the bank stress tests. In order to determine how they would fair, nineteen banks tested under the new (old) mark-to-model rules by factoring in continued unemployment and housing problems. In essence, the banks were asked if they have enough capital to ride out the storm. Absolutely, the banks replied. Maybe you need a little bit more capital, the government said. So, to meet the need, stock will be sold to the public. Everyone breathed a sigh of relief, CNBC started cheerleading, and the stock market was off to the races.
I could dispute, and be challenged, on many of the assumptions and the results and opinions. Fair enough. However, indisputable, is that every bank has made no adjustments for the impairment of good-will on their balance sheets. For example, Bank of America ($13.51 - 5/7/09) is still carrying good-will as though Merrill Lynch, Countrywide, and Bank of America had a value at the peak of the stock market in 2006-2007. Since good-will makes up the lions share of assets, what happens when the crunch comes again? Cash, stocks, bonds, etc., are real. Good-will, however, is an accounting creation with no tangible value. It is supposed to be tested annually, to see if good-will (carrying value), is less than fair value. If it is, then impairments are required to be taken (charged off.) Done correctly, we would get a true picture of a company’s value. But since accounting rules allow a great deal of discretion and judgment, we can expect a great deal of liberty to be taken by the banks.
Does anyone really believe the valuations of good-will? Well, some people must. These banks will more than likely write-off a series of impairment charges which will create a slow bleeding death, thereby manipulating reality. This doesn’t even take into consideration the dilution of capital raises, sales of some of their most profitable enterprises, the impending tsunami of commercial real estate foreclosures, and credit card write-offs.
The second fairy tale is unemployment. Hooray, hooray. Only 539,000 people lost their jobs in April, a slowing in downsizing. Jubilation. We’ve turned the corner. Not so fast. First, the seasonal adjustments somehow created 65,000 new jobs. Where? Next, the announced 60,000 people hired by the census bureau, which by definition, is part-time work. No problem, we need the employment numbers, just create it by calling the part-timers full-timers! So, 539,000 + 65,000 + 60,000 = 664,000 of potential unemployed people. Also, keep in mind, previous months figures have been adjusted. 30,000 more unemployed in February and 30,000 in March, bringing their totals to 681,000 and 699,000, respectively. Somehow, they came in just under that 700,000 magic number that spells crisis. Oh, to have a pencil with an eraser!
One other point, the Birth/Death Model. This model is making an assumption that businesses too new, or too small, to participate in the employment measure have created a certain number of new jobs. It is not researched, it is not fact, it is only a guess. Where are these jobs? By the way, in the numbers reported today, 226,000 jobs were supposedly created under the Birth/Death Model. Give me a break!
Wishing and hoping doesn’t change the truth. When it comes to banks and jobs, it’s just pure fiction.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Thursday, April 30, 2009
Barack In Wonderland
It would appear my imagination was pretty accurate. President Obama announced today the bankruptcy of Chrysler. However, I’m a little sketchy on what the President said. No, not on his belittling of the bond holders, who thought they were investing in an asset, that, by law, comes ahead of stock holders (spelled UAW), that’s just political.
What’s confusing me is that the President said this bankruptcy would take only thirty to sixty days. I understand that Chrysler will file a reorganization plan by August 28th. Let’s see, I know the President is good, and he guarantees things, but April 30th to August 28th.....sixty days? My math says 121 days, but who am I to disagree with the President.
To quote Alice in Wonderland, things are getting “curiouser and curiouser.”
Till next time,
Bill
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
What’s confusing me is that the President said this bankruptcy would take only thirty to sixty days. I understand that Chrysler will file a reorganization plan by August 28th. Let’s see, I know the President is good, and he guarantees things, but April 30th to August 28th.....sixty days? My math says 121 days, but who am I to disagree with the President.
To quote Alice in Wonderland, things are getting “curiouser and curiouser.”
Till next time,
Bill
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Wednesday, April 29, 2009
Time Flies When You're Having Fun
Happy 100th day to President Obama! Will he announce the bankruptcy of Chrysler at his press conference tonight, or will he wait until tomorrow?
Or, maybe I’m just imagining it.
Till next time,
Bill
P.S. 3.10% yield on the ten-year treasury after today’s Fed announcement. Could 4% be in its future?
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Or, maybe I’m just imagining it.
Till next time,
Bill
P.S. 3.10% yield on the ten-year treasury after today’s Fed announcement. Could 4% be in its future?
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Monday, April 27, 2009
Play It Again, Sam
Lawrence Welk used to say: “Once again, with feeling.”
Commercial real estate is a $3.4 trillion problem that’s just beginning. One example, on April 23, Fontainebleau Resorts, which owns the Las Vegas project Fontainebleau Las Vegas, filed a $3 billion lawsuit against several large banks, Merrill Lynch Capital Corp., and other lenders. The lawsuit claims the banks reneged on their commitments to provide pre-arranged funding to complete the Fontainebleau Las Vegas project.
Haven’t we seen this story before? I think it was called “housing.”
Till next time,
Bill
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Commercial real estate is a $3.4 trillion problem that’s just beginning. One example, on April 23, Fontainebleau Resorts, which owns the Las Vegas project Fontainebleau Las Vegas, filed a $3 billion lawsuit against several large banks, Merrill Lynch Capital Corp., and other lenders. The lawsuit claims the banks reneged on their commitments to provide pre-arranged funding to complete the Fontainebleau Las Vegas project.
Haven’t we seen this story before? I think it was called “housing.”
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Wednesday, April 22, 2009
All Clear?
Over the past few years, we have enjoyed the experience of first watching Ben Bernanke, then Hank Paulson, (or was it first Hank Paulson, and then Ben Bernanke, I sometimes got that confused), appearing in front of the television camera on a daily basis telling us the subprime mortgage problem had been contained without threat to the economy, there would be no recession, and finally, our banking system was strong, viable, and the envy of the world. You know those results. Now it appears that we are to be treated to a daily lecturing by Treasury Secretary “Little Timmy Geithner” (my quotes), on how the proper corrective measures have been, and are being taken, to put the global crisis in the past.
Geithner worked at the IMF (International Monetary Fund) for two years, and as much as I dislike the some of the IMF’s policies, I think it’s noteworthy to see if they concur with their former employee. The G20 Financial Ministers, while meeting in London last month, directed the IMF to find out precisely how the balance sheets of the world’s major banks would look if they got back to lending at the approximate same level as before the crisis began. In a sense, an unbiased stress test. Yesterday, they published the “Global Financial Stability Report.” Page thirty-three says it all. “If banks were to bring forward, to today, loss provisions for the next two years, before expected earnings, U.S and European banks, in aggregate, would have tangible equity close to zero.” In layman’s terms, the entire global banking system would be bankrupt if they wrote off all the toxic assets that had been discussed ad nauseam, and that’s after all the money that has already been thrown at the problem. The IMF calculated that not enough money has been thrown at the problem, yet. More will definitely be needed.
Little Timmy should have read the IMF report, especially page thirty-three, before he declared all is well. I guess he figured if Ben and Hank could declare an all clear signal, and the stock market would buy it, why couldn’t he?
Till next time,
Bill
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Geithner worked at the IMF (International Monetary Fund) for two years, and as much as I dislike the some of the IMF’s policies, I think it’s noteworthy to see if they concur with their former employee. The G20 Financial Ministers, while meeting in London last month, directed the IMF to find out precisely how the balance sheets of the world’s major banks would look if they got back to lending at the approximate same level as before the crisis began. In a sense, an unbiased stress test. Yesterday, they published the “Global Financial Stability Report.” Page thirty-three says it all. “If banks were to bring forward, to today, loss provisions for the next two years, before expected earnings, U.S and European banks, in aggregate, would have tangible equity close to zero.” In layman’s terms, the entire global banking system would be bankrupt if they wrote off all the toxic assets that had been discussed ad nauseam, and that’s after all the money that has already been thrown at the problem. The IMF calculated that not enough money has been thrown at the problem, yet. More will definitely be needed.
Little Timmy should have read the IMF report, especially page thirty-three, before he declared all is well. I guess he figured if Ben and Hank could declare an all clear signal, and the stock market would buy it, why couldn’t he?
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Thursday, April 16, 2009
In Goldman, Sachs We Trust
It was recently announced that Goldman Sachs ($121.19 - 4/15/09) initiated a $5 billion public offering of common stock in order to pay back the money borrowed in the TARP program. Once again, the pundits declare Goldman Sachs: “Brilliant, Wonderful, Masterful, The Best of Wall Street, Geniuses, Perfect Timing.” Wait a minute. When the same adjectives were used to describe Goldman Sachs on July 26th 1929, they were issuing a trust called the Shenandoah Group, for over $102 million. Then on August 20th of that same year, they issued a trust called The Blue Ridge Corporation for $142 million. On both issues, insiders were given a substantial discount to what the American public would ultimately pay for the stock. Slick trick.
If you could have looked inside the Shenandoah Group, you would have found the same board of directors as the Blue Ridge Corporation. Also, inside that same trust, the Shenandoah holdings were primarily Blue Ridge stock. Inside the Blue Ridge Corporation, the holdings were, you guessed it, the Shenandoah Group stock. In addition, it was all wrapped up in a third trust called the Goldman Sachs Trading Corporation. In hearings of April to June of 1932, the following occurred:
Senator Couzens: Did Goldman Sachs and Company organize the Goldman Sachs Trading Corporation?
Mr. Sachs: Yes, sir.
Senator Couzens: And it sold its stock to the public?
Mr. Sachs: A portion of it. The firms invested originally in 10% of the entire issue for the sum of $10 million.
Senator Couzens: And the other 90% was sold to the public?
Mr. Sachs: Yes, sir.
Senator Couzens: At what price?
Mr. Sachs: At $104. That was the old stock. The stock was split two-for-one. (Meaning $208.)
Senator Couzens: And what is the price of the stock now?
Mr. Sachs: Approximately $1.75.
Brilliant. Wonderful. Masterful. The best of Wall Street. Geniuses. Perfect timing.
Buyer beware. I’ve said it before, and I’ll say it again. Those who don’t learn from history are doomed to repeat it.
Till next time,
Bill
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
If you could have looked inside the Shenandoah Group, you would have found the same board of directors as the Blue Ridge Corporation. Also, inside that same trust, the Shenandoah holdings were primarily Blue Ridge stock. Inside the Blue Ridge Corporation, the holdings were, you guessed it, the Shenandoah Group stock. In addition, it was all wrapped up in a third trust called the Goldman Sachs Trading Corporation. In hearings of April to June of 1932, the following occurred:
Senator Couzens: Did Goldman Sachs and Company organize the Goldman Sachs Trading Corporation?
Mr. Sachs: Yes, sir.
Senator Couzens: And it sold its stock to the public?
Mr. Sachs: A portion of it. The firms invested originally in 10% of the entire issue for the sum of $10 million.
Senator Couzens: And the other 90% was sold to the public?
Mr. Sachs: Yes, sir.
Senator Couzens: At what price?
Mr. Sachs: At $104. That was the old stock. The stock was split two-for-one. (Meaning $208.)
Senator Couzens: And what is the price of the stock now?
Mr. Sachs: Approximately $1.75.
Brilliant. Wonderful. Masterful. The best of Wall Street. Geniuses. Perfect timing.
Buyer beware. I’ve said it before, and I’ll say it again. Those who don’t learn from history are doomed to repeat it.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Tuesday, April 14, 2009
Magic Erasers
Many years ago, I was caddying for old Judge Sypes, a crusty octogenarian who walked and talked as slow as his age would indicate. But make no mistake, he was a man whose mind was as clear and concise as any twenty-five year old, and who would spend another six years on both the bench, and the golf course. For one of the holes, I marked his scorecard incorrectly, having given him a five, instead of a six. The Judge quickly pointed out my error; he played and scored the game of golf with the same honesty he took to the bench. As I was crossing out my mistake, I said: “Why don’t they have erasers on these pencils?” “Well,” the Judge said, “If they gave erasers to those who don’t respect the game, when the scorecard is handed in, the truth and the scorecard may be at odds.” I didn’t quite understand because I always thought that in golf, whether high or low, the score was just the basic honest truth, like Judge Sypes said.
Recently, by changing back to the mark-to-model method, the Financial Accounting Standards Board (FASB) gave the banking community erasers for their pencils. Keep in mind that mark-to-model is a system of reporting what you think assets are worth, versus mark-to-market, which gives a current unbiased value of your assets. By succumbing to the pressures of politicians, TV pundits, Wall Street, and the bankers themselves, we have reverted back to the days of what started our current economic fiasco. Leverage based upon fictitious assumptions, was, is, and always will be, the death knell of a financial system.
As the earnings and guidance are reported this week, the stock market may move higher, in anticipation that the worst is over. Never mind that the banks are sitting on trillions of dollars of worthless assets. Never mind that unemployment may not be a lagging indicator, but a leading indicator, and never mind that house foreclosures, credit cards, and leveraged commercial real estate may experience a tsunami of destruction.
Not to fear, the bankers have their erasers, and all’s right with the world! Judge Sypes would probably agree that using the eraser to your best advantage may be legal. But he, I’m sure, would be as disgusted as I am.
Till next time,
Bill
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Recently, by changing back to the mark-to-model method, the Financial Accounting Standards Board (FASB) gave the banking community erasers for their pencils. Keep in mind that mark-to-model is a system of reporting what you think assets are worth, versus mark-to-market, which gives a current unbiased value of your assets. By succumbing to the pressures of politicians, TV pundits, Wall Street, and the bankers themselves, we have reverted back to the days of what started our current economic fiasco. Leverage based upon fictitious assumptions, was, is, and always will be, the death knell of a financial system.
As the earnings and guidance are reported this week, the stock market may move higher, in anticipation that the worst is over. Never mind that the banks are sitting on trillions of dollars of worthless assets. Never mind that unemployment may not be a lagging indicator, but a leading indicator, and never mind that house foreclosures, credit cards, and leveraged commercial real estate may experience a tsunami of destruction.
Not to fear, the bankers have their erasers, and all’s right with the world! Judge Sypes would probably agree that using the eraser to your best advantage may be legal. But he, I’m sure, would be as disgusted as I am.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Monday, March 30, 2009
History Lesson
The Obama/Geithner solution to high unemployment is to not only print money (de-value currency), but also to raise taxes, a solution that has never worked in the past. I thought it would be interesting to take a look at the opinion of another when it comes to trying to solve the economic crisis that we are currently experiencing.
“It is a paradoxical truth that tax rates are too high today, and tax revenues are too low. And the soundest way to raise the revenue in the long run is to cut the rates now. The experience of a number of European countries in Japan has borne this out. This country’s own experience with tax reduction in 1954 has borne this out also. And the reason is that only full employment can balance the budget. The tax reduction can pave the way to that employment. The purpose of cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous expanding economy which can bring about budget surplus.”
-President John F. Kennedy (1962)
Unfortunately, President Kennedy was assassinated in November of that year. His successor, Lyndon Johnson, pushed the tax bill through in Kennedy’s name, and signed it into law in February 1964. In 1965, as Kennedy predicted, revenues were flooding into the Treasury. That year, the government was on track to run a $3 billion surplus. Employment rose as the tax cuts led to increased demand for dollars (which supported the dollar’s value), and the recession ended.
Maybe history can teach us something.
Till next time,
Bill
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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person
“It is a paradoxical truth that tax rates are too high today, and tax revenues are too low. And the soundest way to raise the revenue in the long run is to cut the rates now. The experience of a number of European countries in Japan has borne this out. This country’s own experience with tax reduction in 1954 has borne this out also. And the reason is that only full employment can balance the budget. The tax reduction can pave the way to that employment. The purpose of cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous expanding economy which can bring about budget surplus.”
-President John F. Kennedy (1962)
Unfortunately, President Kennedy was assassinated in November of that year. His successor, Lyndon Johnson, pushed the tax bill through in Kennedy’s name, and signed it into law in February 1964. In 1965, as Kennedy predicted, revenues were flooding into the Treasury. That year, the government was on track to run a $3 billion surplus. Employment rose as the tax cuts led to increased demand for dollars (which supported the dollar’s value), and the recession ended.
Maybe history can teach us something.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person
Thursday, March 19, 2009
March Madness
For the past month, I have been observing the action of not only the Treasury, Federal Reserve, President of the United Sates, and U.S. Congress, but also our trading partners like China, Japan, and Canada, and their response to said actions. It would appear that all the principle players on the U.S. side have somehow decided to disregard the lessons of history in order to promote an agenda that screams loudly: “Nothing is working. Things are terrible and are getting worse.” The stock market loves short-term fixes. But when viewed in the context of the grander, longer-term scheme, second thoughts could abound.
Last Friday, prior to the G20 meeting, the highest ranking Chinese government official announced his concern for the U.S. dollar, treasuries, and our government’s overall financial policies. This was significant since China now holds more of our treasury paper than any other country in the world. Can you blame them for being concerned? After all, they’ve had significant investments in Fannie Mae, Freddie Mac, Reserve money market fund, and selected bank stocks. I guess $1 trillion dollars in U.S. treasuries is something to be concerned about.
Yesterday, the Fed announced it would buy $300 billion in longer-term treasuries over the next six months. The last ten-year treasury auction went off at 3.04 %. After yesterday’s announcement, they traded down to 2.5%. That sends the following message: If the world will not support our treasuries, we will. Nice shell game. Unfortunately, the reaction to that announcement was swift and decisive. The stock market rose, but more important, gold flew higher, as did oil. Keep in mind, most commodities are purchased in dollars, and since the Fed announcement was an action of de-valuing our currency, both gold and oil just got a lot more expensive. The dollar plummeted and continues to drop. Now we must wait and see how the world will try to de-value their own currencies just to stay even with us. Can you say protectionism?
What is wrong with these people? Historically, de-valuing currencies and raising taxes has been the death knell for every country which has been in trouble. From the U.S. in the 1930’s, to the Asian crisis in the late 1990’s, Russia, China, Mexico, Yugoslavia, and to the Latin American countries, all experienced failures when de-valuing currencies and raising taxes. So what do we do? We go down the same road. Brilliant. Maybe it will be different this time. Don’t bet on it.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person
Last Friday, prior to the G20 meeting, the highest ranking Chinese government official announced his concern for the U.S. dollar, treasuries, and our government’s overall financial policies. This was significant since China now holds more of our treasury paper than any other country in the world. Can you blame them for being concerned? After all, they’ve had significant investments in Fannie Mae, Freddie Mac, Reserve money market fund, and selected bank stocks. I guess $1 trillion dollars in U.S. treasuries is something to be concerned about.
Yesterday, the Fed announced it would buy $300 billion in longer-term treasuries over the next six months. The last ten-year treasury auction went off at 3.04 %. After yesterday’s announcement, they traded down to 2.5%. That sends the following message: If the world will not support our treasuries, we will. Nice shell game. Unfortunately, the reaction to that announcement was swift and decisive. The stock market rose, but more important, gold flew higher, as did oil. Keep in mind, most commodities are purchased in dollars, and since the Fed announcement was an action of de-valuing our currency, both gold and oil just got a lot more expensive. The dollar plummeted and continues to drop. Now we must wait and see how the world will try to de-value their own currencies just to stay even with us. Can you say protectionism?
What is wrong with these people? Historically, de-valuing currencies and raising taxes has been the death knell for every country which has been in trouble. From the U.S. in the 1930’s, to the Asian crisis in the late 1990’s, Russia, China, Mexico, Yugoslavia, and to the Latin American countries, all experienced failures when de-valuing currencies and raising taxes. So what do we do? We go down the same road. Brilliant. Maybe it will be different this time. Don’t bet on it.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person
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