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Financial Skeptic Bulletin, 2006

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2006

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December

[Dec 24, 2006] Equity ETFs Look Dangerous

It is easy to predict market decline two or even three year early then it actually happened (many predicted it for 1998), but it does not mean that there will be no market decline.

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.

[Dec 21, 2006] Mid-Atlantic factory activity slumps in Dec.

Mid-Atlantic manufacturing is already in recession. Parts of the North-East might follow. South is still OK.

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.

[Dec 16, 2006] FRB FOMC Minutes - December 16, 1997 (retrospective post)

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.

[Dec 11, 2006] Mortgage Delinquencies -- a Rising Threat

New loan crisis ? Probably not until Iraq troupes withdrawal...

(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.

[Dec 7, 2007] If you can't predict the trends for 2007, it's really hard to pick the non-broad index funds that will make money because of those trends.

[Dec 7, 2007] Consumer borrowing plunged in October

(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.

[Dec 7, 2007] World economy on track for another year of strong growth in 2007 - Turkish Daily News Dec 07, 2006

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."

[Dec 5, 2007] November layoffs rose 11%

(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

November

A testing time for Democrats by By Scott B MacDonald

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.

[Nov 25, 2006] Democrats to tackle the dollar

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

[Nov 22, 2006] Index of Leading Economic Indicators rose 0.2 percent last month. The increase came in shy of analysts' consensus forecast for a rise of 0.3 percent. The index stood at 138.3 versus 139.1 in January - its peak so far this year. Index of leading economic indicators rises - Stocks & Economy - MSNBC.com

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.

[Nov 22, 2006] US growth in 2007 is projected 2.9% [IMF] to 3.1% [White House] Economic growth forecast lowered - Stocks & Economy - MSNBC.com

[Nov 22, 2006] Blast from the past: if (date_reached(Google,$500) = date_reached(Yahoo= $100)) then forecast(2007) = forecast(2000).

Actually if you re-read Business Week December 1999 issue the natural reaction on forecast published would be: "What ? "

[Nov 20, 2006] Blast from the past: Dec. 5, 1996 Alan Greenspan muttered famous words about "irrational exuberance" that he helped to create and sustain until 2000.

With the Dow at the then-elevated level of 6,400, Fed Chairman Alan Greenspan warns of 'irrational exuberance.

[Nov 20, 2006] Keep you powder dry: Leveraged buyouts return

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 19, 2006] Buttonwood The rich are different

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.

Recession in Housing.

Construction of new homes and apartments has declined, with construction activity in October down 27.4 percent from a year ago.

[Nov 14, 2006] Staying Safe from Financial Predators

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.

America's Bubble Economy Profit When It Pops by Robert Wiedemer, Cindy Spitzer, Eric Janszen

Amazon.com

All That Glitters Is Not Gold, October 24, 2006

Reviewer: Dante "Dante" (Coral Gables, FL) - See all my reviews
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.

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.

Bargain Network

"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."

On Wednesday, Merrill Lynch warned clients that its "recession-risk indicator" is now pointing to a 51 percent chance of a recession in the next year, the highest such odds since the last recession in 2001.

RGE - The Coming 2007 Recession Has Already Started in Many Sectors of the Economy...

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

Q: ...What percentage of laid-off, unemployed 50- to 65-year-olds are able to increase their incomes when they do land a job? The years before retirement should be the highest earnings for Social Security benefits and retirement investment.-- Michael K. Long Beach, Calif.

How are older, laid-off workers faring - Answer Desk - MSNBC.com

October

[Oct 30, 2006] The pay packages of U.S. chief executives are outpacing investor returns...

The survey conducted and reported by the Financial Times, which looked at compensation of chief execs of companies in the S&P 500 index, revealed that the median compensation for a CEO rose 20% to $5 million during the last fiscal year. ... compensation packages are increasing at a much faster pace than the pay of the average worker [probably providing statistical illusion of rising labor costs -- NNB] . CEO pay outpacing investor returns, paper reports Financial News - Yahoo! Finance[Oct 27, 2006] Mixed signals for October minibubble -- keep your powder dry -- stock growth at such pace as last two months might be unsustainable. U.S. economic growth slowed in 3rd quarter - Stocks & Economy - MSNBC.com:

[Oct 25, 2006] Greenspan says dollar now sharing stage with euro - Yahoo! News

"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.

[Sep 28, 2006] Now could be good time to recycle your junk bonds into quality funds by John Waggoner

Is this a good time or not yet ?

"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]

[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

[Oct 23, 2006] Greed Trumps Fear Nice headline :-)

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".

September

August

July

June

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Etc

Society

Groupthink : Two Party System as Polyarchy : Corruption of Regulators : Bureaucracies : Understanding Micromanagers and Control Freaks : Toxic Managers :   Harvard Mafia : Diplomatic Communication : Surviving a Bad Performance Review : Insufficient Retirement Funds as Immanent Problem of Neoliberal Regime : PseudoScience : Who Rules America : Neoliberalism  : The Iron Law of Oligarchy : Libertarian Philosophy

Quotes

War and Peace : Skeptical Finance : John Kenneth Galbraith :Talleyrand : Oscar Wilde : Otto Von Bismarck : Keynes : George Carlin : Skeptics : Propaganda  : SE quotes : Language Design and Programming Quotes : Random IT-related quotesSomerset Maugham : Marcus Aurelius : Kurt Vonnegut : Eric Hoffer : Winston Churchill : Napoleon Bonaparte : Ambrose BierceBernard Shaw : Mark Twain Quotes

Bulletin:

Vol 25, No.12 (December, 2013) Rational Fools vs. Efficient Crooks The efficient markets hypothesis : Political Skeptic Bulletin, 2013 : Unemployment Bulletin, 2010 :  Vol 23, No.10 (October, 2011) An observation about corporate security departments : Slightly Skeptical Euromaydan Chronicles, June 2014 : Greenspan legacy bulletin, 2008 : Vol 25, No.10 (October, 2013) Cryptolocker Trojan (Win32/Crilock.A) : Vol 25, No.08 (August, 2013) Cloud providers as intelligence collection hubs : Financial Humor Bulletin, 2010 : Inequality Bulletin, 2009 : Financial Humor Bulletin, 2008 : Copyleft Problems Bulletin, 2004 : Financial Humor Bulletin, 2011 : Energy Bulletin, 2010 : Malware Protection Bulletin, 2010 : Vol 26, No.1 (January, 2013) Object-Oriented Cult : Political Skeptic Bulletin, 2011 : Vol 23, No.11 (November, 2011) Softpanorama classification of sysadmin horror stories : Vol 25, No.05 (May, 2013) Corporate bullshit as a communication method  : Vol 25, No.06 (June, 2013) A Note on the Relationship of Brooks Law and Conway Law

History:

Fifty glorious years (1950-2000): the triumph of the US computer engineering : Donald Knuth : TAoCP and its Influence of Computer Science : Richard Stallman : Linus Torvalds  : Larry Wall  : John K. Ousterhout : CTSS : Multix OS Unix History : Unix shell history : VI editor : History of pipes concept : Solaris : MS DOSProgramming Languages History : PL/1 : Simula 67 : C : History of GCC developmentScripting Languages : Perl history   : OS History : Mail : DNS : SSH : CPU Instruction Sets : SPARC systems 1987-2006 : Norton Commander : Norton Utilities : Norton Ghost : Frontpage history : Malware Defense History : GNU Screen : OSS early history

Classic books:

The Peter Principle : Parkinson Law : 1984 : The Mythical Man-MonthHow to Solve It by George Polya : The Art of Computer Programming : The Elements of Programming Style : The Unix Hater’s Handbook : The Jargon file : The True Believer : Programming Pearls : The Good Soldier Svejk : The Power Elite

Most popular humor pages:

Manifest of the Softpanorama IT Slacker Society : Ten Commandments of the IT Slackers Society : Computer Humor Collection : BSD Logo Story : The Cuckoo's Egg : IT Slang : C++ Humor : ARE YOU A BBS ADDICT? : The Perl Purity Test : Object oriented programmers of all nations : Financial Humor : Financial Humor Bulletin, 2008 : Financial Humor Bulletin, 2010 : The Most Comprehensive Collection of Editor-related Humor : Programming Language Humor : Goldman Sachs related humor : Greenspan humor : C Humor : Scripting Humor : Real Programmers Humor : Web Humor : GPL-related Humor : OFM Humor : Politically Incorrect Humor : IDS Humor : "Linux Sucks" Humor : Russian Musical Humor : Best Russian Programmer Humor : Microsoft plans to buy Catholic Church : Richard Stallman Related Humor : Admin Humor : Perl-related Humor : Linus Torvalds Related humor : PseudoScience Related Humor : Networking Humor : Shell Humor : Financial Humor Bulletin, 2011 : Financial Humor Bulletin, 2012 : Financial Humor Bulletin, 2013 : Java Humor : Software Engineering Humor : Sun Solaris Related Humor : Education Humor : IBM Humor : Assembler-related Humor : VIM Humor : Computer Viruses Humor : Bright tomorrow is rescheduled to a day after tomorrow : Classic Computer Humor

The Last but not Least Technology is dominated by two types of people: those who understand what they do not manage and those who manage what they do not understand ~Archibald Putt. Ph.D


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