Thursday, February 19, 2009
Straight Talk from Chuck... What the Experts Think...
An old mentor of mine by the name of Chuck gave me some recent advice about the state of economic affairs in the United States. "Boy, they are the problem and we are their cure." Chuck was alluding to the massive bailouts that are going on in this country. Bailouts for banks... Bailouts for car companies... Bailouts for homeowners... Chuck qualified these needy parties as part of the problem. He went further to explain how the funds that are being spent should not be called anything other than taxpayer funds... anything else is a play on words. "Nobody is at fault, nobody is going to jail... GE's CEO is made to look like a hero because he didn't take a bonus... How the hell can you take a bonus of $11.7 million for performance when your company's stock is down and earnings were off 22% in 2008, and are down another 33% in 2009." Chuck went on to say that all the crooks who socked away money over the past five years, are trying to influence law-maker's decisions, and even agreeing to more regulations. "That's o.k. Brian because those rotten son-of-a-bitches will be around the next time to figure out how to steal more money."
"Do you know that every American owes $48,000 in debt for all those greedy son-of-a-bitches?" We are their cure, make no doubt about it. They are going to tax us to high heaven or print out so much money that we'll need wheel barrels full of it to go grocery shopping. Now that being said, Chuck believes the market is starting to look cheap. This is coming from someone who put $50 grand into the market the day after the 1987 crash. I reminded Chuck that this market is a bit different in that there is a triple convergence of credit, unemployment, and foreclosures... things that are just not going away any time soon. While the 1987 Crash was based more on a panic from the S & L scandal and subsequent fallout, I believe the current situation is systemic in nature... not only limited to the United States but throughout a good portion of the developed world. "Hell no I wouldn't put a whole bunch into this market but I would start looking to enter in incrementally." Sorry Chuck, I will depart with your wisdom at this juncture. Your mentee believes this market is on its way to 5,000. Readers should know that 74 year old Chuck said that the stock market will never see another dime of his money. He has all reserves in CD's that are earning 3%. "Three percent isn't $%^& but I am a winner because I am not a loser in this market."
If the cheerleaders on CNBC were upset to see the market close at 7522... then they must be in shock with a break below the 7500 psychological mark. Click here to see the reaction of an expert panel...
1. Nouriel Roubini anticipates a more aggressive stance will be needed to cure the foreclosure crisis. He also believes in temporary nationalization of banks until they are cleaned up.
2. Fred Mishkin believes unless the banking system itself is cleaned up then any money placed into the system is nothing less that throwing good money after bad.
3. The female guest (Nina Easton, Fortune Magazine) is a Washington insider and has noted the variation in plans from a academic to a political solution, as each seems to not completely understand the other.
4. Mark Zandi suggests that the only way out of the housing crisis includes a reduction in principal...a.k.a. principal write-downs... and no one in D.C. is willing to swallow that pill yet...
Calculated Risk, Charlie Rose Interview