Bill Gross: Lies, Damn Lies and Government Inflation Data
see complete article below.
Here is what i think is going to work eventhough i am not a big fan of
commodities.
1. Commodities (DBC, DBA, POT ...
2. Cash or Good short term debt
3. Preferreds or bank loans. if economy sours then the bank loans can go south.
4. Equity ( MSFT, ORCL, GE(??))
banks/retail/consumer discretion would be duds till the commodities cool
and consumer spending picks up.
Bill Gross: Lies, Damn Lies and Government Inflation Data
Posted Jun 02, 2008 12:26pm EDT by Aaron Task in Investing, Newsmakers, Recession
Related: PTTAX, ING, ^SPX, SPY, TLT
Pimco's Bill Gross provides detailed analysis on what most Americans already know: The government's "official" data understates inflation.
Gross' treatise focuses on how CPI is compiled -- with hedonic adjustments and "owners' equivalent rents" -- in a way that's unique in the industrialized world. Such adjustments and a focus on "core" inflation -- or "inflation excluding inflation" as Barry Ritholtz calls it -- help explain why the Fed is far less concerned about inflation than central bankers in other parts of the world.
If the financial markets were to "readjust" to actual inflation, the stock market would lose 10% of its value and the bond market 5%, Gross says.
Gross, whose firm manages more than $800 billion in mostly fixed-income assets, fails to explain why stocks (and real estate, for that matter) will suffer more than bonds in this hypothetical "readjustment of investor mentality."
Monday, June 2, 2008
Tuesday, May 27, 2008
OIL up up and away...$4/gl
Last post was on May 9th and i stated that
DOW is not going anywhere past 12500.
Before the memorial day weekend, DOW closed at 12487.
OIL $4 and grains/gold are still high.
Dick Bove states there is lot of capital but it is sitting on
the sidelines. Also he predicts the inflation calculated by
Reagan methods is 11% and not the 4% the govt claims.
He states that the capital is sitting on the sidelines with the soverign
funds and the money supply in the first quarter (M3) is explosive growing
at 16%.
9 may dow 12700
15 may dow 12992
19 may dow 13028
21 may dow 12601
23 may dow 12479.
from 19 thru 23 a fall of 4.3% 12479/13028
DOW is not going anywhere past 12500.
Before the memorial day weekend, DOW closed at 12487.
OIL $4 and grains/gold are still high.
Dick Bove states there is lot of capital but it is sitting on
the sidelines. Also he predicts the inflation calculated by
Reagan methods is 11% and not the 4% the govt claims.
He states that the capital is sitting on the sidelines with the soverign
funds and the money supply in the first quarter (M3) is explosive growing
at 16%.
9 may dow 12700
15 may dow 12992
19 may dow 13028
21 may dow 12601
23 may dow 12479.
from 19 thru 23 a fall of 4.3% 12479/13028
Friday, May 9, 2008
"Looks like a good runup and time market took a breather."
Is what i wrote last on April 25 Looks - Apri; 25 12891 DOW
May 09 - AIG screws up - Wants to raise 12 billion expected loss 0.76/sh cents
posts $3.09/sh loss. Down 8% in pre-market. OIL up $125.
I think the market is not going to go up beyond 12500 for sometime till OIL
subsides and the the credit crunch settles down.
Is what i wrote last on April 25 Looks - Apri; 25 12891 DOW
May 09 - AIG screws up - Wants to raise 12 billion expected loss 0.76/sh cents
posts $3.09/sh loss. Down 8% in pre-market. OIL up $125.
I think the market is not going to go up beyond 12500 for sometime till OIL
subsides and the the credit crunch settles down.
Friday, April 25, 2008
April 25th
From GE results (april 11) till today (April 25), S&P is up 4.2%, NASDAQ is
up 5.7%. What happened in between. GE bad, GOOG, CAT good, MSFT ok.
Looks like a good runup and time market took a breather.
Nobel Winner Stiglitz: US Facing Long Recession
Friday April 25, 12:16 pm ET
The U.S. economy is already in recession -- and may echo the 1930s, Nobel Laureate Joseph Stiglitz said Friday.
"The big question is: how will the government respond?" said Stiglitz, in an interview with CNBC. Stiglitz, a Columbia University professor and 2001 winner of the Nobel prize, detailed his bleak outlook for the American economy.
ADVERTISEMENT
"This is going to be one of the worst economic downturns since the Great Depression," said Stiglitz.
He explained that main cause of the current situation is historically unique -- and thus is befuddling those charged with creating solutions.
Other downturns were primarily caused by excesses in inventories or inflation; but this slowdown is due to the condition of "badly impaired" banks and financial entities, which are unwilling and/or unable to lend capital -- stymieing the very borrowers who usually drive the country back to vitality, Stiglitz said. And the Federal Reserve may have used up its ammunition -- and the faith investors and planners have put in it.
"[The Fed] will be between a rock and hard place. And we're not over-worrying about credit. But [simultaneously], we need to start worrying about the real sector," he said.
And if inflation wasn't the prime recession cause, it's still a menace. The professor points to the two-pronged danger of high oil prices joined by climbing food prices, harming businesses and scaring consumers.
"Oil is particularly bad," as it means that more U.S. dollars "will be going abroad," he said.
The housing downturn is an even worse economic factor than casual observers realized, Stiglitz said. He explained that during the real estate boom, Americans were able to withdraw billions of dollars from their home equity.
"[But] with housing prices coming down, it's going to be difficult to do that anymore," he said -- drying up a spending source. And within that problem, still another complication: people typically spent the money they drew off their home equity on consumption, rather than investment -- garnering no return on the spending.
"The savings rate as we go into the recession is zero. Which means [savings] will go up, " he said -- decreasing consumer spending and weakening retail further.
What about the government stimulus package?
"The Bush Administration's response is too little, too late -- and very badly designed," he declared. The amount ostensibly being infused into the economy by tax rebate checks will be a "drop in the bucket" compared to the money being held back and siphoned out by the factors he mentioned.
"If you really wanted to stimulate the economy, increase unemployment insurance," he suggested.
"The president is telling people to go out and get jobs -- and there are no jobs for them," he said.
up 5.7%. What happened in between. GE bad, GOOG, CAT good, MSFT ok.
Looks like a good runup and time market took a breather.
Nobel Winner Stiglitz: US Facing Long Recession
Friday April 25, 12:16 pm ET
The U.S. economy is already in recession -- and may echo the 1930s, Nobel Laureate Joseph Stiglitz said Friday.
"The big question is: how will the government respond?" said Stiglitz, in an interview with CNBC. Stiglitz, a Columbia University professor and 2001 winner of the Nobel prize, detailed his bleak outlook for the American economy.
ADVERTISEMENT
"This is going to be one of the worst economic downturns since the Great Depression," said Stiglitz.
He explained that main cause of the current situation is historically unique -- and thus is befuddling those charged with creating solutions.
Other downturns were primarily caused by excesses in inventories or inflation; but this slowdown is due to the condition of "badly impaired" banks and financial entities, which are unwilling and/or unable to lend capital -- stymieing the very borrowers who usually drive the country back to vitality, Stiglitz said. And the Federal Reserve may have used up its ammunition -- and the faith investors and planners have put in it.
"[The Fed] will be between a rock and hard place. And we're not over-worrying about credit. But [simultaneously], we need to start worrying about the real sector," he said.
And if inflation wasn't the prime recession cause, it's still a menace. The professor points to the two-pronged danger of high oil prices joined by climbing food prices, harming businesses and scaring consumers.
"Oil is particularly bad," as it means that more U.S. dollars "will be going abroad," he said.
The housing downturn is an even worse economic factor than casual observers realized, Stiglitz said. He explained that during the real estate boom, Americans were able to withdraw billions of dollars from their home equity.
"[But] with housing prices coming down, it's going to be difficult to do that anymore," he said -- drying up a spending source. And within that problem, still another complication: people typically spent the money they drew off their home equity on consumption, rather than investment -- garnering no return on the spending.
"The savings rate as we go into the recession is zero. Which means [savings] will go up, " he said -- decreasing consumer spending and weakening retail further.
What about the government stimulus package?
"The Bush Administration's response is too little, too late -- and very badly designed," he declared. The amount ostensibly being infused into the economy by tax rebate checks will be a "drop in the bucket" compared to the money being held back and siphoned out by the factors he mentioned.
"If you really wanted to stimulate the economy, increase unemployment insurance," he suggested.
"The president is telling people to go out and get jobs -- and there are no jobs for them," he said.
Sunday, April 13, 2008
GE saga
After the BSC saga, C got some funding from private equity,
Wamu got some and the stock market went up from the low of
1270 to 1370.
Most magazines were blaring that we had seen the bottom.
Then comes GE with a warning and the stock tanking 20%.
In a way, that is good for me since i am short GE.
Inflation, 80000 jobs lost in march (3rd month down in a row)
and what is going to cause this market to stablize of go up?
There seems to be enough cash in the sidelines, but a good chunk of
this may be smart cash.
Wamu got some and the stock market went up from the low of
1270 to 1370.
Most magazines were blaring that we had seen the bottom.
Then comes GE with a warning and the stock tanking 20%.
In a way, that is good for me since i am short GE.
Inflation, 80000 jobs lost in march (3rd month down in a row)
and what is going to cause this market to stablize of go up?
There seems to be enough cash in the sidelines, but a good chunk of
this may be smart cash.
Tuesday, April 1, 2008
April 01 2008
Just yesterday,i was feeling that i should pare down
the debt for vehicle. With DOW up 400 today, it appears natural to feel
that i should jump headlong into stks.
UP's make you feel regret for not getting earlier, DOWN makes
you feel that it is still not down to cover your shorts.
Volatility causes so much vacillation that it makes sense to
have a PP slide that clearly spells what one needs to do.
the debt for vehicle. With DOW up 400 today, it appears natural to feel
that i should jump headlong into stks.
UP's make you feel regret for not getting earlier, DOWN makes
you feel that it is still not down to cover your shorts.
Volatility causes so much vacillation that it makes sense to
have a PP slide that clearly spells what one needs to do.
Tue April 01 2008 DOW UP 400
Up's are getting bigger. Downs are getting smaller.
Short term market seems to be going up.
Next leg down, cover ge, close sds and start going long slowly.
Short term market seems to be going up.
Next leg down, cover ge, close sds and start going long slowly.
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