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December 22, 2006 ( Forbes.com) Since midyear of 2006 the S&P 500 index and the per share price of SPY have increased by about 12%, or at a rate of over 27% per year. That is generally regarded as an unusually high, unsustainable rate. It makes professional investors concerned about losses from a possible market decline.
MSNBC.com Factory activity in the Mid-Atlantic region fell in December after a modest gain the previous month, raising concerns about a slowing economy partly due to weakness in the manufacturing sector.
The Philadelphia Federal Reserve Bank said its business activity index fell to -4.3 in December from 5.1 in November. Wall Street analysts had forecast a gain of 4.0.
The index was negative for a third time in the past four months. A reading below zero indicates contraction in the region’s manufacturing sector.
M2 and M3 grew rapidly in November. For the year through November, M2 expanded at a rate slightly above the upper bound of its range for the year and M3 at a rate substantially above the upper bound of its range. Total domestic nonfinancial debt has expanded in recent months at a pace somewhat below the middle of its range.
(Yahoo! Finance) Mortgage delinquency and foreclosure rates are on the rise, and the impact could be greatest on low-income families that took out higher-interest loans for risky borrowers, some experts said Monday.
... There have started to be "early signs of credit distress" in financial institutions' holdings of so-called "subprime" mortgages, especially in California, Richard Brown, chief economist for the Federal Deposit Insurance Corp., said at the conference.
William Longbrake, a senior policy adviser to the Financial Services Roundtable, an industry group, said he is among a minority of experts "who believe the worst is still ahead in the housing market" for home prices to continue to fall. "There is worse to come. ... The bottom is probably still many months ahead," Longbrake said. He noted that the rise in delinquencies and foreclosures in subprime mortgages particularly affects low-income families. Mortgage defaults could snowball in the coming months, a situation that bears close watching, he said....The percentage of mortgages that went into the first stages of the foreclosure process in the April-to-June quarter rose to 0.43 percent, up from 0.41 percent in the first quarter and the highest level in just over a year. Foreclosure rates were highest for subprime borrowers.
(MSNBC.com) The Federal Reserve reported Thursday that borrowing declined at an annual rate of 0.6 percent in October following a revised 2 percent increase in September. It was the biggest drop since a 1 percent plunge in October 1992.
As The International Monetary Fund lowered its growth estimate for next year from its current prediction of 4.9 percent, its chief economist John Lipsky said that he sees “no obvious reason to be concerned.”
(MSNBC.com) Planned U.S. layoffs rose 11 percent in November from the previous month, led by a heavy round of job cuts in the automotive industry
Despite some degree of posturing by both the triumphant Democrats and defeated Republicans, we do not expect any major changes in US economic policies after the November 7 mid-term elections.
The Democrats' victory in the US mid-term elections could lead to policy changes resulting in a weaker dollar, intensifying trade disputes and lower US consumer demand, a combination that could produce a sharp slowdown in Asia's export and economic growth next year
Six of the 10 indicators that make up the index rose in October — led by an increase in real money supply and improved consumer expectations — but a sharp decline in housing permits and weaker vendor performance partially offset those gains.
With the Dow at the then-elevated level of 6,400, Fed Chairman Alan Greenspan warns of 'irrational exuberance.
The 529 management-led buyouts announced globally so far in 2006 are worth a combined $133.1 billion, according to deal tracker Dealogic. Under the deals, management and a group of outside investors pool their money and usually take on debt to buy the shares of a public company, taking it private.
Private equity funds have become increasingly popular as a way for wealthy investors to get higher returns than the stock market offers. Leon Cooperman, who runs the $4 billion-plus Omega Fund has estimated that private equity funds have about $300 billion under management. [Wave of buyouts draws criticism - U.S. Business - MSNBC.com]
Nov 16, 2006. (Economist) Is that an asset-price bubble or just the fizz of Dom Pérignon?
AN AUCTION on November 8th of impressionist and modern art in New York brings in a record $491m. A yet-to-be-completed Manhattan apartment block nets $1.4 billion in unit sales. The finest Bordeaux wines from 2005 sell for prices that are four to five times higher than those of the previous vintage.
Those stories look like the ingredients for a boom as heady as the roaring 1920s or the “greed is good” era of the 1980s. And where there is a boom, there is usually a bubble about to pop.
Construction of new homes and apartments has declined, with construction activity in October down 27.4 percent from a year ago.
Most of the people who were responsible for one of the biggest market crashes in history are still in the system today, doing many of the same things today that they were doing then.
So, as the Dow continues its upward march past 12,000, remember... the other characters who actually did run off with the money and never served a day or jail time.
Your mind is still your most important asset, so be careful who you take your advice from and what you believe is true. Remember that all financial markets are filled with good but not necessarily innocent people looking after their own self-interests before they look after yours.
All That Glitters Is Not Gold, October 24, 2006
This could have been a really good book. The intelligent authors, the compelling subject matter, and the respected publisher which put out this book--apparently didn't give it their best. The editing is haphazard and uneven. Why? Maybe this book should be placed on the Mystery shelves at your local bookseller. Gold (the commodity) may shine in the future, but the presentation and editorial acumen on display here surely do not.
Reviewer: Dante "Dante" (Coral Gables, FL) - See all my reviews
The authors blandly assert their operative assumptions without any footnote or appendix. The ostensible reason is not to overburden the easily distracted reader. But for the serious reader who makes decisions based on evidence, this book asks you to take it on faith--and that's a fatal flaw. The authors indulge in repetitive shilling for their own consulting services throughout the book, and ask you to visit their website.At the very least, you don't want to shell out $20.00 to be told there are bubbles (but we could be wrong), go buy gold and Euros, and by the way, we do consulting! For a more credible treatment of bubbles that respects your intelligence, check out Rober Shiller's book, Irrational Exuberance, which has been newly revised to include analysis of the housing bubble.
P.S. Festina Lente. Make haste slowly.
As the bubble unwinds, housing related employment will fall and foreclosures will rise providing additional supply of homes in distressed market. Will that be enough to take the economy into recession? I don't know - we will see.
"Florida's foreclosure rate was four times the national average with one new foreclosure filing for every 254 households. Foreclosures in the Sunshine State totaled 28,000, accounting for 27 percent of the overall nationwide foreclosure activity."
Recession fears are being reported as affecting the oil markets. Oil prices tumble over fears of US recession is typical.
Think of the national debt as the policy equivalent of steroids. It has so far managed to create a reasonably flattering picture of economic prosperity, much as steroid use in baseball has flattered the batting averages of some of game's stars during the past decade.
China has a clear plan to diversify its $1 trillion foreign exchange reserves and is considering various options to do so, central bank governor Zhou Xiaochuan said on Thursday. A shift away from dollar assets by China could put upward pressure on interest rates in the United States which has relied heavily on Asian purchases of its debt to finance its huge current account deficit. AsiaTimes, November 9, 2006
A: We were unable to find specific statistics on income gains or losses for workers over 50 who were laid off. (If you know of any, please let us know and we’ll follow up next week.) But older workers are clearly making up a bigger share of the so-called “mass layoffs” tracked by the U.S. Bureau of Labor Statistics. In the second quarter of this year, workers 55 and older made up 22.5 percent of the large-scale layoffs tracked by the BLS — nearly double the first quarter of 2001
[Oct 25, 2006] "We're
beginning to see some move from the dollar to the euro, both
from the private sector ... but also from monetary authorities and central banks,"
Greenspan told a conference sponsored by the Commercial Finance Association.
Greenspan says dollar now sharing stage with euro - Yahoo! News
How marketers and politicians try to manipulate our brains. A
Web-exclusive
column. By Wray Herbert
[Sep 28, 2006] Is this a
good time or not yet ?
Now could be good time to recycle your junk bonds into quality funds
Posted by John Waggoner
"It's really turning out that there is no middle class. There's a poor class and there's a rich class, but there's very little middle class." Donald Trump [Feature- An Interview With Robert Kiyosaki and Donald Trump]
Do you think the government is accurately measuring inflation? What a naive question :-)
[Oct 19, 2006] The
Conference Board said its Index of Leading Economic Indicators edged up 0.1
percent to 137.7 last month. The index had slipped 0.3 percent in July and
0.2 percent in August. The index is designed to predict economic activity
three to six months in the future but is overloaded with junk like Consumer
sentiment index. Economic predictor
rises in September - Stocks & Economy - MSNBC.com
Stagflation? "The data continue to bear out the
conflict between Fed's dual mandates," writes T.J. Marta, a fixed-income
strategist at RBC Capital Markets in New York. "Inflation is at risk because
core is not only above the Fed's comfort level but is also headed higher, while
growth appears to be easing."
Street.com/Gold Slumps as Dollar Rallies
Earnings will likely offer more fodder for the bulls this week, as many of the more volatile earnings reports appear to be out of the way. All in all, the bulls should enjoy a continuation of the uptrend.
The War
Against Wages, by Paul Krugman, NY Times: The Dow is doing well largely
because American employers are waging a successful war against wages ...
Economist's View Is the Housing Market Leveling Off Former Federal Reserve
Chairman Alan Greenspan said the ''worst may well be over'' for the U.S. housing
industry that's suffering its worst downturn in more than a decade.
"Don't short Feds inflation expectation" I listened Blumberg radio and learned that one Fed official at the meeting in NY said something like "Don't short Feds inflation expectation".
Earlier this year, an analysis by First American Real Estate Solutions in Santa Ana, Calif., estimated that $368 billion in adjustable-rate mortgages originated in 2004 and 2005 are at risk of default because of this pattern. Many more borrowers with traditional ARM loans also face the prospect of rising interest rates, but of a more manageable magnitude.Risky mortgages threaten a squeeze csmonitor.com
"In 2005, real disposable incomes of private households in the United States increased $93.8 billion, or 1.2%, while their debts grew $1,208.6 billion, or 11.7%. Total consumer spending on goods, services and new housing accounted for 92% of real GDP growth." Asia Times Online Asian news and current affairs - US housing bubble Economy in denial
September 26, (IPS) "With a low savings rate, record-high current account deficits and a worsening of the U.S.'s net debtor position, there is a non-negligible risk to both the country's overall competitiveness and, given the relative size of the U.S. economy, the future of the global economy," said Augusto Lopez-Claros, chief economist of the World Economic Forum's Global Competitiveness Network.
The report says that the United States faces major institutional challenges because the quality of the country's public institutions fares worse than those of other rich nations in terms of transparency and efficiency, especially after the devastation wrought by Hurricane Katrina last year.
The report did praise the U.S. higher education system and said that the country remains the world leader in innovation.
... economy slumps, slows, dips, weakens. Why are consumers so confident, why are investors eagerly buying up stocks, while the rest of the indicators seem to warn them away? I've searched my brain for a creative answer, and can't discover one. What do you think? Dow, S&P near all-time highs while economy slumps. Why - Blogging Stocks
Comment:
It does not take a wizard to see the way the current administration can manipulate fuel and stock prices just before an election, we've seen it in the past and some people must believe in the tooth fairy if they think what you are seeing is real. Yes there are caps on Contributions to Candidates, but you can buy in on all the stocks and bonds you want or if you are in control of oil and gas set prices as you see fit, there by, changing the appearance of the economy. Wake up, cause you sure will after the elections.
Since gasoline prices began their sharp decline in mid-August, many pundits have tried to account for the drop, but none have offered a completely convincing explanation, lending some plausibility to claims that the Bush administration and its long-term allies in the oil industry are manipulating prices behind the scenes.
We may never know exactly what led the White House to shift course on Lebanon, but high oil prices - and expectations of worse to come - were surely a factor in administration calculations. When it became clear that the Israelis were facing far stiffer resistance than expected, and that the Iranians were capable of fomenting all manner of mischief (including, potentially, total havoc in the global oil market), wiser heads in the corporate wing of the Republican Party undoubtedly concluded that any further escalation or regionalization of the war would immediately push crude-oil prices over $100 per barrel. Asia Times Online - Cashing in on the fear factor
That threshold was crossed within the past two years, according to Nielsen Media Research. There are 2.73 TV sets in the typical home and 2.55 people, the researchers said. CNN.com - Researchers: Homes have more TVs than people - Sep 22, 2006
In 2005, the richest 5 percent of households (average pretax income: $281,155) had 22.2 percent of total income, reports Census. In 1990, the share was 18.5 percent; in 1980, 16.5 percent. These figures exclude capital gains—profits on stocks and other assets—that have most benefited the richest 1 percent. With capital gains, their pretax income averaged about $1 million in 2003. That was about 20 times the average income of households in the middle of the economic distribution. In 1979, the ratio was 10 to 1. Samuelson Growing Economic Inequality Threatens U.S. Values - Newsweek Robert Samuelson - MSNBC.com
Report from the Federal Reserve Bank of Philadelphia ... showed regional manufacturing activity fell to a negative reading for the first time since April 2003. Pessimism about economy dents stocks - Stocks & Economy - MSNBC.com
The decline matched analysts’ expectations. The index also fell 0.2 percent in July after edging up 0.1 percent in June. The index is designed to predict economic activity three to six months in the future. Leading indicators suggest economy is cooling - Stocks & Economy - MSNBC.com
The New York Times this morning in a CBS/New York Times poll stated that Congress has a 25% approval rating, worse than Bush's 36%. That's significant if you read further.
Dallas Mavericks owner Mark Cuban ... launched a Web site, Sharesleuth.com, and hired a financial journalist with the goal of rooting out unsavory business practices and misleading accounting by public companies.
..."All Mark Cuban has done is figure out a way to screw people legally, and that is what Wall Street is all about," says Gary Weiss, author of "Wall Street Versus America: The Rampant Greed and Dishonesty That Imperil Your Investments."
Courts now see an average of 2,000 new filings a day -- four times the number that were filed in November 2005 after the bankruptcy law went into effect, according to Chris Lundquist, founder of Lundquist Consulting, which tracks bankruptcy trends.
If filings continue to rise at anything like this rate -- which is not a given, but certainly a possibility -- we could see close to 1 million filings by the end of the year.
The Census Bureau counts 45 million uninsured, and a recent Commonwealth Fund study found 41% of
moderate- to middle-income adults did not have health insurance for at least part of 2005, up from 28% in 2001. A Harvard University study found medical bills were a factor in half of consumer bankruptcies.[Bankruptcy filings soaring again - MSN Money]
Sept. 15 (Bloomberg) -- U.S. policy makers have long defended the practice of using a core inflation measure as a check on how they're doing. The public, of course, sees this as just another gimmick the government uses to pull the wool over its eyes.
Markets appear to be assuming that--with
the Fed approaching the end of its rate tightening cycle--the worst is already
over. In reality, Fed might need to go to 6% or higher. After Greenspan bloodbath
did not even begin.
More then 30% of Americans think
that we are already in recession.
Macjob proliferation under Bush
administration. The nation’s unemployment rate had edged down to
4.7 percent in August. A 4.7% unemployment rate
lloks pretty good. The scary stuff is what the politicians don’t tell you, or
deliberately obscure – that these “subpar” new jobs are mostly low-wage
and temporary, and that wages overall are falling in "after inflation" terms.
Workers’ average hourly earnings edged up to $16.79 in
August, a tiny 0.1 percent increase from July.
The average time that the 7.1 million unemployed spent searching for
work in August was 17.4 weeks. That was the longest duration since February’s
17.6 weeks. Jobless rate dips;
economic fears ease - Stocks & Economy - MSNBC.com
S&P500 is actually actively managed
fund and it is a badly managed fund. Standard and Poor has stable tendency
to include fashionable high fliers with exorbitant P/E ratio into it and then
discard them when they became toasts (Yahoo is one well known example). For
this reason and due to simulation, the replacement of S&P500 with Vanguard Total
Market index might have more sense for 401K accounts.
The second Greenspan bubble might be larger then the first: "...the total amount of residential housing wealth [read debt] in the US just about doubled between 1999 and 2006 up from $10.4 trillion to $20.4 trillion". Times Online. How it will play in the next five years remains to be seen. there is no shortage of doom and gloom scenarios, but that does not mean that we should believe them. Some precautions still might make sense.
|
Asset Class
|
Expected Long-Term Real Return |
Estimated
7-Year Real Return Sept. 2002 |
Estimated
7-Year Real Return May 2006 |
| Large-Cap US Stocks | 5.7% | 1.9% | -0.6% |
| Small-Cap US Stocks | 6.2% | 4.8% | -2.0% |
| International Large-Cap Stocks | 5.7% | 7.5% | 2.1% |
| International Small-Cap Stocks | 6.2% | 8.6% | 0.9% |
| Emerging Market Stocks | 6.7% | 9.9% | 3.2% |
| US Bonds | 6.7% | 9.4% | -0.6% |
| Money Market | 2.9% | 1.9% | 2.3% |
"Consumers are reluctant to spend and businesses are reluctant
to invest," said Charles Lieberman, chief investment officer at stockbrokers
AG Edwards and Sons
Christian E. Weller, the author of a recent Center for American
Progress (CAP) report, 'Drowning in Debt,' says the middle class, specifically,
is struggling. Wages have been stagnant and
they're losing the battle to keep up with the cost of living.
[Aug 6, 2006] SAP500 return for the period using dollar-cost averaging and starting from zero from 1996 to 2006 is less then stable bond return.
[Aug 4, 2006] If the economy is slowing only modestly, as his words suggested, his relaxed attitude to inflation seems odd, especially after recent months' inflation figures. One possibility is that Mr Bernanke is less bullish than he lets on. The Fed has lowered its expectations for GDP growth in 2006 to 3.25-3.5%. That implies a sharp slowdown in the second half of the year, to a rate well below 3%. American monetary policy Making sense of Bernanke Economist.com
[Aug 1, 2006] Dollar-cost averaging isn't the panacea it's made out to be. For example, if you had invested $100 a month in the Vanguard 500 Index fund for the past decade, you'd have had $15,437 in your account at the end of June, according to Lipper. You'd have invested $12,000 in the fund, so your total profit would be $3,761, or 31.3%. Any gain is good, but 31.3% is a far smaller gain than 122% — the S&P index's return in the past decade. What happened? In a word, bad timing. A variant of dollar-cost averaging, called value averaging, has shown some usefulness in improving returns. With value averaging, you set a dollar target for your investments — for example, that you want your account to rise by $1,000 a month. Let's say you invest $1,000, and the next month the account has fallen to $950. You contribute $1,000, plus another $50 to make up for the previous month's shortfall. [USATODAY.com - Dollar-cost averaging's not all it's cracked up to be]
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Last modified: February 28, 2008