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<!--Mon Sep 10 09:03:22 EDT 2007-->
Investing
Curb Your Enthusiasm, Ben Stein
By Doug Kass
Street.com Contributor
9/10/2007 9:03 AM EDT
What follows is an email I sent to Ben Stein yesterday after reading his column in Sunday's New York Times Business section, "It's Time to Take a Deep Breath."
Dear Ben,
Well, the first days are the hardest days,
don't you worry anymore
When life looks like Easy Street
there is danger at your door.
Think this through with me
Let me know your mind
Wo-oah, what I want to know
is are you kind?
--The Grateful Dead, "Uncle John's Band"
I read with interest your New York Times column in the Sunday Business section.
It might be time to take a deep breath. But for another reason, to recognize the dramatic and the cumulative impact of excessive debt/leverage creation on our citizenry (especially the consumer-kind) and to consider the ramifications of the Black Swan of Credit event that awaits the unwind.
In your article, you have basically recounted the same argument that you have used in prior columns. You write that "the percentage of those who have defaulted is still fairly small." In other words, all will be well, as market participants are overreacting to an isolated credit situation and the Fed will pull us out of this limited mess.
Disappointingly you added Cramer to your criticism, using him as a symptom of the overzealous media. Jim is an easy target, too easy, and you take advantage of it in a derisive comment. I, too, have been at odds with Jim but, quite frankly, have defended him over the last few years because he is generally well-informed; he educates the individual investor (who believes too much of what he hears in the media), and has actually walked the walk (not just talked the talk) in running a successful hedge fund.
Not lost is the irony that you are critical of Jim Cramer for making a negative market comment, whereas most in the press have derided him for being too bullish. (I guess you can't win, Jimmy!)
Quite frankly Ben, the media is imbalanced almost universally on the side of optimism. They, to quote Cramer, generally (like Administration cheerleaders who "know nothing") are "talking" from their platforms in the press box; they are not on the field. And the "field players", like the CEOs at YRC Worldwide (YRCW) , AutoNation (AN) , and many others know the real truth. Economic conditions are a lot worse than you suggest as even our mutual friend, Larry Kudlow, had reduced the usage of his "greatest story never told" line because he, too, recognizes the direction the economy is taking.
You have consistently dismissed the notion that the subslime credit event would morph into an economic event. And, based on Sunday's column, you continue to hold to this view. Quite frankly, I am surprised that the recent signs of broader economic weakness (like Friday's job number) are so readily dismissed by you.
If you don't believe this ursine [bärisch - A.L.] greybeard, I would suggest that you sit down with Howard Marks, the head of OakTree Management (a $30 billion hedge fund). He is out on the West Coast with you and has written some succinct pieces on the pendulum shift of credit, the lemming-like search for yield, and he has chronicled a number of other financial abuses of the New Millennium. His firm's telephone number is in the Los Angeles yellow pages, and I am sure he will take your call.
Some say the world will end in fire,
Some say in ice.
From what I've tasted of desire
I hold with those who favor fire.
But if it had to perish twice,
I think I know enough of hate
To say that for destruction ice
Is also great
And would suffice.
--Robert Frost, "Fire and Ice"
Finally, you also appear too quick to dismiss the alternative of "Ice" in your column, claiming "Some strict disciplinarians want to let the markets go through hell and let borrowers and investors suffer," which suggests that the Fed can reignite the economic "Fire." And, with the exception of your reference to a dollar crisis, you don't seem to think that too much can go wrong in our overlevered and unregulated (derivatives) financial world.
Apparently, you have missed some news out of Barclays (BCS) , Deutsche Bank (DB) , Citigroup (C) , all of the leading U.S. investment bankers and others who are up to their eyeballs in structured investment vehicles, bridge loans to private equity deals and unsold "junk bonds."
I could not disagree more with your conclusion that "If I were the editor of the business section for just one day, I would run one immense headline: 'Everything Is Going to Be Fine. Go Back to Work.'"
Ben, the world has changed -- and not for the better. Arguably, the Fed might be pushing on a string.
Curb your enthusiasm, Ben, because many of our friends in the financial and banking communities will not have a job when they return to work in the months ahead.
With Respect,
Doug Kass
Seabreeze Partners
The MSCI World Index shed 11.0% between its high on July 19, 2007 and August 16, with the S&P 500 Index declining in similar fashion by 9.4%. At that stage high-yield debt markets had completely stalled, investment funds had blocked redemptions and the VIX had reached a high not seen since October 1987.
However, rescue was at hand as the world’s central banks – the Fed, the ECB, the Bank of Canada, the Bank of Japan and others – let it be known that they were dumping money into the system. The Fed went one step further and announced a discount rate cut of 0.5% on August 17.
Calmed by the central banks’ actions, stock markets around the globe staged a rebound. By Friday last week (September 7) the MSCI World Index and the S&P 500 Index were respectively -6.8% and -6.4% below their July highs.
Although investors are relieved by the recovery, they are wondering what to do next. Before debating this critical issue, let’s focus for a moment on the graph of the broadest US stock index, namely the Wilshire 5 000 Index.
Source: StockCharts.com
The most notable observation is the fact that Friday’s sell-off resulted in the index again closing below its 200-day moving average, although this primary trend indicator was still rising. But perhaps more important is the volume chart showing that the rally since mid-August has been characterized by rather poor volume. This lack of breadth is worrying and casts doubt on the sustainability of the bounce.
This viewpoint is augmented by Dr John Hussman’s remark in his commentary of September 3: “… the market climate for stocks remained characterized by unfavorable valuations and unfavorable market action. The market has now cleared the oversold condition that we observed several weeks ago, yet breadth and trading volume have not evidenced the strength and persistence that we typically associate with more sustained recoveries from oversold conditions. That’s not to say that we can’t observe further market strength, but at present we have no evidence either from valuations or from market action to reliably speculate on such strength.”
At this juncture it is perhaps sensible to reflect on the fundamental picture. A very apt assessment comes from friend Kevin Wilson’s Market Perspectives. Kevin said: “I don’t believe in hedged answers, so that forces me to make the call in a clear fashion, at least as a mental exercise. I think that the chances are 65% in favor of recession, for the following reasons:
1) | almost all of the good data about the economy we’re seeing are backward looking; |
| 2) | almost all of the bad data we’re seeing are forward looking, in terms of lagged effects not yet felt; |
| 3) | the housing crisis is nowhere near bottom and its impact on PCE is far larger than its 9% share of the economy (on a GDP basis); |
| 4) | the consumer is about to abandon ship (even though July PCE is fine), primarily due to the credit squeeze and household deficit spending; |
| 5) | the “wealth effect” (if it is real) must be very strongly negative going forward, so it should reduce PCE as well; and |
| 6) | many recession indicators have been aligned for two quarters, and even more will align in the third quarter.” |
This brings us to the question of whether the market correction will transform itself into a full-fledged bear market. “I think the answer is scary,” said Kevin. “I would guess the chances of descending into a bear market are 80% within three months. Here’s why:
1) | earnings have nothing whatsoever to do with short-term market moves; it’s overall valuations that count, and they are really not good; |
| 2) | however, the market thinks earnings matter, so when the financials’ earnings drop over the next few months, it will have a profound effect on sentiment; |
| 3) | a general re-pricing of risk is going on, and that is prima facie evidence for the beginning of a secular bear market; |
| 4) | correlations and betas are high for many stocks and their sectors, and were especially so during the sell-off, leaving no place to hide; |
| 5) | the Fed valuation model is hokum and events will soon prove it to the satisfaction of all concerned; |
| 6) | the credit squeeze is shutting down both buybacks and M & A, which together were the drivers of at least 50% of market gains in the run-up; and |
| 7) | the retail customer has been a net seller all along and this is accelerating to fund household deficit spending.” |
Against this background should investors increase or curtail risk in their investment portfolios? As I see it, factoring in a prudent analysis of the possible unfolding of events, it might be sensible to adopt a more defensive approach to risk and err on the side of caution. As a parting comment, somebody famous pointed out that “wishful thinking” (especially of the CNBC variety) is an oxymoron. It’s wishful, but it’s not thinking.
http://investmentpostcards.wordpress.com/2007/09/10/whiplashing-of-wall-street-%e2%80%93-where-to-now/
Berlin (dpa) - Biertrinker in Deutschland müssen sich auf steigende Bierpreise einstellen. Nach Angaben des Deutschen Brauer- Bundes vom Montag werde es im neuen Jahr auf breiter Front zu Preisanhebungen in einer Größenordnung von fünf bis zehn Prozent kommen.
Die Branche reagiere damit auf die gestiegenen Kosten für Energie, Glas und Rohstoffe. Der Hopfenpreis habe sich verdoppelt. Braumalz sei heute 84 Prozent teurer als noch vor zwölf Monaten und der Glaspreis sei um 30 Prozent gestiegen, teilte der Verband in Berlin mit. Der Preis für Strom sei um 23 Prozent gestiegen.
«Solche Kostensteigerungen können nicht mehr durch Einsparungen in den Brauereien aufgefangen werden», sagte der Hauptgeschäftsführer des Deutschen Brauer-Bundes, Peter Hahn. Ein weiteres Sinken der Erlöse gefährde Betriebe und Arbeitsplätze. Bei den Brauereien stünden Investitionen an, um sich am Markt behaupten zu können. Bereits im Juni hatten die deutschen Brauer prognostiziert, in den kommenden fünf Jahren seien Bierpreissteigerungen um bis zu 40 Prozent zu erwarten.
Jetzt wird sich der deutsche Michel langsam zur Wehr setzen. Was zu weit geht, geht zu weit. Bei Grundnahrungsmitteln hört der Spaß schließlich auf...
Andererseits sind jetzt auch die Statistiker gefragt. Vielleicht berechnen die, das der Kasten Bier eigentlich im Preis gesunken ist. Als "Kerninflation" wird dann der leere Kasten und der Verschluss definiert. Und der Rest nicht erwähnt. Wie jetzt bei Energie und Lebensmittel....
Außerdem finde ich es sowieso eine große Sauerei, das der Deutsche Brauer Bund den Statistikern so in den Rücken fällt. Überall wird verkündet, die Inflation beträgt 2 %. Na gut, ich fahre immer einkaufen und wundere mich seit längerem, wie viel doch 2 % sind....
....und nun kommt der Brauer Bund daher und schmeisst Zahlen wie 100% Erhöhung beim Hopfenpreis oder 84% beim Braumalz in den Raum. Das geht doch nicht! Leute, selbst in der Ostzone hat die Statistik gestimmt. Bis zum letzten Tag. Da ist keiner aus der Reihe getanzt. Und hier wird die Illusion von der 2 % Inflation so mit den Füssen getreten.
Also ehrlich...
Wertzuwachs
Alter Zustand:
Erdbeerpflücker geht zur Bank - bekommt Kredit - kauft sich 720.000$ Villa - Kredite aller Erdbeerpflücker werden gebündelt und verkauft
Gewinner: Dutzende Firmen ( nicht nur aus dem Bau ) ; Bank; Erdbeerpflücker (kann sein Domizil unter der Brücke verlassen)
Verlierer: Idiot, der die Kredite gekauft hat
Neuer Zustand:
Erdbeerpflücker geht zur Bank - Banker lacht kurz und laut - Erdbeerpflücker geht wieder nach Hause
Gewinner: keine, es gab kein Geschäft
Verlierer: Dutzende Firmen haben keine Aufträge, Bank hat kein Geschäft, Erdbeerpflücker friert weiterhin unter der Brücke
Fazit: Die gar wundersame Geldvermehrung hat ein Ende gefunden. Wer die Rechnung bezahlt, wird sich noch zeigen. In Zukunft halte ich solche Geschäfte für nicht wiederholbar, da erst eine neue Generation von Idioten für solche Spielchen heran wachsen muss. Und das kann dauern....
Wertzuwachs
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| Strategie | Hebel | |||
| Steigender BioNTech SE ADR-Kurs | 5,07 | 10,20 | 10,51 | |
| Fallender BioNTech SE ADR-Kurs | 3,20 | |||
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