Bearish Information

[Jim Nickerson]

Re: Bearish Information Re. Hussman

6/2/08 Wall Street Decides to Close Its Ears and Hum http://hussmanfunds.com/wmc/wmc080602.htm

..
For now, we remain tightly hedged, since the overall profile of valuations and market action remains unfavorable. As I noted a couple of weeks ago, “The reality is that as recessions develop (and I continue to believe the U.S. faces a much more significant downturn than we've observed to date), the data can take months to accumulate to a compelling verdict, and in the meantime, speculative pressures can remain alive.”

Lest investors allow the weak but benign economic reports to create an “all clear” impression for the economy, the latest FDIC Quarterly Banking Profile, released last week, should encourage them not to close their ears and hum. I have to say that having read these regularly since the early 1990's, this is easily the most dismal report I've ever seen.
..
The implications of this go far beyond whether or not the prices of financial stocks have “discounted” the lower potential earnings. See, this isn't just a problem of whether the stock prices of financial companies are right. The larger issue is what happens on the real side of the economy, in terms of spending and lending and economic activity. I can't overly stress the points made by Martin Feldstein (the head of the National Bureau of Economic Research, which officially dates U.S. recessions) just a few weeks ago:

“I'll tell you what worries me. We saw house prices overshoot by 60% relative to costs of building and relative to rents. And I worry about the possibility that they will keep falling; they will spiral downwards. In the same way that they went much too high, they could go much too low. And if that happens, then we are going to see individuals feeling a lot poorer, cutting back on their spending, defaulting on mortgages, and we're going to see the holders of those mortgages see their assets, their capital being cut and therefore their ability to make loans being cut.”

In short, investors appear to be viewing the recent period of weak but not terrible economic news as a signal that the worst is behind us and that clear conditions are ahead. That could very well provoke some self-feeding speculation, which we would observe first through an improvement in breadth and price/volume behavior. But even if we do see some fresh short-term speculation, the evidence suggests that the worst of the credit problems are still well ahead.
..
..
Here and now, we remain defensive and very skeptical of the notion that the U.S. has skirted a downturn.

With regard to the “economic stimulus,” I remain convinced that consumers are sufficiently indebted, and concerned about that debt, to use the bulk of the tax rebates in hand for debt service. In equilibrium, the U.S. government will have issued more Treasury bonds, in order to finance a similar contraction in mortgage indebtedness. The effect of the “stimulus” will simply be a modest increase in the volume of Treasury debt held by the public, foreigners and financial institutions, and a modest decrease in the volume of mortgage debt held by the public, foreigners and financial institutions.

[Jay]

Re: Bearish Information

We have created a custom avatar for you. Hope you like it. Feel free to change it if you wish.

I love it!

[Jim Nickerson]

Re: Bearish Information

Originally Posted by Snips from Hussman's weekly article
..
For now, we remain tightly hedged, since the overall profile of valuations and market action remains unfavorable. As I noted a couple of weeks ago, “The reality is that as recessions develop (and I continue to believe the U.S. faces a much more significant downturn than we've observed to date), the data can take months to accumulate to a compelling verdict, and in the meantime, speculative pressures can remain alive.”

Lest investors allow the weak but benign economic reports to create an “all clear” impression for the economy, the latest FDIC Quarterly Banking Profile, released last week, should encourage them not to close their ears and hum. I have to say that having read these regularly since the early 1990's, this is easily the most dismal report I've ever seen.
..
The implications of this go far beyond whether or not the prices of financial stocks have “discounted” the lower potential earnings. See, this isn't just a problem of whether the stock prices of financial companies are right. The larger issue is what happens on the real side of the economy, in terms of spending and lending and economic activity. I can't overly stress the points made by Martin Feldstein (the head of the National Bureau of Economic Research, which officially dates U.S. recessions) just a few weeks ago:

“I'll tell you what worries me. We saw house prices overshoot by 60% relative to costs of building and relative to rents. And I worry about the possibility that they will keep falling; they will spiral downwards. In the same way that they went much too high, they could go much too low. And if that happens, then we are going to see individuals feeling a lot poorer, cutting back on their spending, defaulting on mortgages, and we're going to see the holders of those mortgages see their assets, their capital being cut and therefore their ability to make loans being cut.”

In short, investors appear to be viewing the recent period of weak but not terrible economic news as a signal that the worst is behind us and that clear conditions are ahead. That could very well provoke some self-feeding speculation, which we would observe first through an improvement in breadth and price/volume behavior. But even if we do see some fresh short-term speculation, the evidence suggests that the worst of the credit problems are still well ahead.
..
..
Here and now, we remain defensive and very skeptical of the notion that the U.S. has skirted a downturn.

Emphasis JN

Morgan Stanley, Merrill, Lehman Ratings Cut by S&P (Update3)
By Christine Harper http://www.bloomberg.com/apps/news?p...uuc&refer=home

June 2 (Bloomberg) -- Morgan Stanley, Merrill Lynch & Co. and Lehman Brothers Holdings Inc. declined in New York trading after Standard & Poor's lowered credit ratings for the investment banks, saying they may have to book more writedowns on devalued assets.

Morgan Stanley, the second-biggest U.S. securities firm by market value, was cut one level to A+ from AA-, S&P said today in a report. Merrill Lynch, the third-biggest, was also cut one level to A from A+, as was Lehman Brothers, the fourth-biggest. Goldman Sachs Group Inc., the largest of the group, was affirmed at AA-. The outlook on all four New York-based companies remains negative, S&P said.

So I guess with today's little downgrade of some of the big players, the worst is now past, don't you agree?;)

[Jim Nickerson]

Re: Bearish Information Re. John Williams

Shadow Government Statistics June 9, 2008 from monthly newsletter

http://www.shadowstats.com/

Market Turmoil Is Not Over. Given the
inflationary recession and the ongoing banking
solvency crisis, there is no likely long-term happy
result on the horizon for the U.S. equity and
credit markets, or for the U.S. dollar. Gold and
silver, however, should continue seeing
significant long-term gains from the same factors
that will pummel the other markets.

Wall Street will unwind at some point, as
increasingly nightmarish scenarios begin to
capture market thinking. The long-term
underlying fundamentals remain miserable for
equities and bonds. A severe and protracted bear
market in equities already likely is underway.
Foreign buying of U.S. debt and sporadic flightto-
quality have depressed Treasury yields, but
inflation and developing U.S. dollar woes
eventually will push long-term Treasury yields
much higher, a process that already may have
started. Recent strength/stability in the U.S. dollar
and weakness in gold will prove as fleeting as the
related central bank jawboning and likely
intervention, covert or otherwise. Heavy dollar
selling and strong gold buying remain good bets

over the longer term.
.
.

U.S. Equities

-- A severe and protracted
inflationary recession is not good for equities,
despite any inflation play. Slowing business
activity and higher costs (particularly where a
company is slow to raise its prices) should hit
earnings. Heavy dollar selling eventually should
drain liquidity from the equity and credit markets,
hitting both stock and bond prices.

General background note:

I contend that stocks
already have turned down into what will prove to
be a particularly protracted and savage bear
market (see the Hyperinflation Special Report).
As equities catch-up with the underlying
economic, financial and systemic fundamentals,
the downside adjustments to stock prices should
be quite large over some years, eventually
rivaling the 90% decline in equities seen in the
1929 crash and ensuing four years. The decline
might have to be measured in real terms, as a
hyperinflation eventually will kick in, with the
Fed moving to liquefy the system and monetize
federal debt. Stocks do tend to follow inflation,
since revenues and earnings get denominated in
inflated dollars. Hence with a hyperinflation, a
DJIA of 100,000 or 100,000,000 could be
expected, but such still would be well below

today's levels, adjusted for inflation.

Not infrequently is Williams referenced on these fora, and recently a special report of his suggesting hyperinflation prompted a thread of discussion.

There is a ton of reports on the web, MSM and business TV that I don't come close to ever knowing about. I only recall probably Richard Russell in some of his daily reports referencing Williams and not in any manner of disagreement.

Does anyone recall a reference(s) in which some "pundit" even references Williams' works, or a reference(s) in which some "pundit" debunks or otherwise argues that Williams observations are irrelevant and/or incorrect? If so, I would appreciate it being posted in this thread.

The basis question is whether or not there are credible individuals who discredit Williams.

[bart]

Re: Bearish Information Re. John Williams

Does anyone recall a reference(s) in which some "pundit" even references Williams' works, or a reference(s) in which some "pundit" debunks or otherwise argues that Williams observations are irrelevant and/or incorrect? If so, I would appreciate it being posted in this thread.

The basis question is whether or not there are credible individuals who discredit Williams.

I'm sure there are some Jim, but I'm unaware of anyone credible as far as his actual CPI corrections or his data on unemployment. I know that Mish for example thinks that his corrections are too high, but I don't view that as a significant disagreement.

All he's doing is using "old" definitions and data direct from the various folk like the BLS, and allowing us all to see actual & real apples to apples comparisons ( and of course my M3 reconstruction is better than his ;) ) over a full multi-decade time period. I do track some of the specific CPI data that he used to make his corrections too, and I fully trust his work.

I was able in about 90 minutes just this evening to reconstruct the U-6 measure of unemployment going back to 1970 from yearly data actually on the BLS site, but just fairly well "hidden". Officially, they say that U-6 only goes back to 1994... and that's just more BS from the BLS.

And yes, its not perfect either since I had to interpolate the data but the results *very* clearly show the changes over the decades and the attempted spin. I do very intentionally call it spin too, since the BLS has not gone back and adjusted all its history to the "new & improved" unemployment rate definitions. If they really are improved and better, why don't they do that?

[Jim Nickerson]

Re: Bearish Information Re. Richard Russell

http://www.investmentpostcards.com/2...008/#more-1359

Richard Russell (Dow Theory Letters): Lowry’s Buying Power Index making new lows

“‘On June 3, June 4 and again today, Lowry’s Buying Power Index dropped to new lows, showing that the strong, persistent demand needed to push the broad list of stocks substantially higher was simply not in evidence. Nor is it likely to emerge in the near future. There is not a single case within our 75 year history in which the Buying Power Index was still making new lows eight or ten weeks after an important market bottom.’

“The implications of the Lowry’s statement is clear enough. If there is no case of Lowry’s Buying Power making new lows many weeks after an important market bottom – then the fact that Lowry’s Buying Power is now making new lows indicates that the stock market has NOT yet put in an important bottom. In other words, we have not yet seen a bottom so far in 2008. If this is true, then the major averages and many, if not most, stocks are fated to break to new lows.

“Whew! That’s a critically important observation. Let’s suppose the Lowry’s stance is correct, suppose the January-March lows were only temporary stops in a bear market that is fated to head lower. I’ve stated that this is a critically important question – are we in a bull or bear market? If Lowry’s is correct, if the bear market lives, then in due time the market will smash below its January-March lows, and in doing so we will have a forecast of worse times ahead. To put it another way, new lows will mean that the market has not yet discounted the worst that lies ahead.”

[Jim Nickerson]

Re: Bearish Information Re. Crash by September--RBS

Thanks to olivegreen for finding this one.

http://www.telegraph.co.uk/money/mai...8/cnrbs118.xml

6/17/08 RBS issues global stock and credit crash alert

A report by the bank's research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as "all the chickens come home to roost" from the excesses of the global boom, with contagion spreading across Europe and emerging markets.
.
.

"Cash is the key safe haven. This is about not losing your money, and not losing your job," said Mr Janjuah, who became a City star after his grim warnings last year about the credit crisis proved all too accurate.

RBS expects Wall Street to rally a little further into early July before short-lived momentum from America's fiscal boost begins to fizzle out, and the delayed effects of the oil spike inflict their damage.

[Jim Nickerson]

Re: Bearish Information Re. US stocks.

Hang with China, oil higher, dump $, US stocks lower.

Rogers Tells Investors Not to `Give Up' on China (Update1) http://www.bloomberg.com/apps/news?p...GSs&refer=home

By Yidi Zhao

June 28 (Bloomberg) -- Jim Rogers, who in April 2006 correctly predicted oil would reach $100 a barrel and gold $1,000 an ounce, told investors not to ``give up'' on Chinese shares after the country's stock index fell almost 50 percent this year.

``Start buying when others say `never again','' Rogers, 65, said today at an investor conference in Nanjing. There is ``much money to be made'' from investments in Chinese stocks, he said.

China's CSI 300 Index has slumped 52 percent from its Oct. 16 peak on concern government measures to curb consumer prices will hurt earnings growth. Rogers, who first started buying Chinese stocks in 1999, said he hasn't sold any of his holdings.

Investors should ``learn about commodities,'' Rogers said. Oil prices, which reached a record in New York trading yesterday, will go higher, he said.

Crude oil for August delivery rose 57 cents, or 0.4 percent, to a record close of $140.21 a barrel yesterday on the New York Mercantile Exchange, extending its gain this year to 46 percent.

Rogers told investors to ``stay away from'' the dollar. The U.S. currency is within 2 percent of a record low against the euro reached in April as the Federal Reserve has cut interest rates to stave off an economic recession.

U.S. stocks ``are going to go down,'' Rogers said. The Dow Jones Industrial Average fell 0.9 percent yesterday, extending the decline for the 30-stock measure to 10 percent this month, the worst June since 1930.

The U.S. may be in its ``worst recession since World War II,'' Rogers said, adding that the subprime mortgage crisis in the world's biggest economy ``has many years to go.''

[Shakespear]

Re: Bearish Information

Barclays warns of a financial storm as Federal Reserve's credibility crumbles



Last Updated: 12:01am BST 28/06/2008

Have your say Read comments
US central bank accused of unleashing an inflation shock that will rock financial markets, reports Ambrose Evans-Pritchard

http://www.telegraph.co.uk/money/mai...arclays127.xml

I'd say this is very bearish :-)

[Jim Nickerson]

Re: Bearish Information Re. John Williams

Shadow Government Statistics June 9, 2008 from monthly newsletter

http://www.shadowstats.com/

Not infrequently is Williams referenced on these fora, and recently a special report of his suggesting hyperinflation prompted a thread of discussion.

There is a ton of reports on the web, MSM and business TV that I don't come close to ever knowing about. I only recall probably Richard Russell in some of his daily reports referencing Williams and not in any manner of disagreement.

Does anyone recall a reference(s) in which some "pundit" even references Williams' works, or a reference(s) in which some "pundit" debunks or otherwise argues that Williams observations are irrelevant and/or incorrect? If so, I would appreciate it being posted in this thread.

The basis question is whether or not there are credible individuals who discredit Williams.

This is from John Mauldin's Weekly E-Letter (which can usually be accessed on http://www.safehaven.com/ but isn't there today as I write).

A quick sidebar. I am often asked what I think about the inflation numbers produced by John Williams of Shadow Government Statistics. His number, using the methodology to figure inflation that existed in the late 70s and early 80s suggest that inflation in the US is over 11%. That certainly corresponds to what many of us feel like as we see food and energy prices rise. If you are bearish, a high inflation number makes your case easier.

But let me make a few of you mad. I think what Williams' number actually do is show that the government did not know how to calculate inflation back then. If inflation were actually 11.8%, then that would mean that GDP was a negative 6% today, and that the US would have been in a recession for several years. That is obviously not the case. You can simply look at corporate profits and tax receipts to see the economy has been growing the past five years.

Does anyone wish to argue with Mauldin's impression of Williams' data?

[bart]

Re: Bearish Information Re. John Williams

Originally Posted by Mauldin
A quick sidebar. I am often asked what I think about the inflation numbers produced by John Williams of Shadow Government Statistics. His number, using the methodology to figure inflation that existed in the late 70s and early 80s suggest that inflation in the US is over 11%. That certainly corresponds to what many of us feel like as we see food and energy prices rise. If you are bearish, a high inflation number makes your case easier.

But let me make a few of you mad. I think what Williams' number actually do is show that the government did not know how to calculate inflation back then. If inflation were actually 11.8%, then that would mean that GDP was a negative 6% today, and that the US would have been in a recession for several years. That is obviously not the case. You can simply look at corporate profits and tax receipts to see the economy has been growing the past five years.

Does anyone wish to argue with Mauldin's impression of Williams' data?

Mauldin is welcome to be wrong in my book.

His comment about profits and tax receipts is mild sophistry and also somewhat self serving. If profits are 8% and inflation is 10%, some would call that growth... but I don't.

All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.
-- Arthur Schopenhauer (1788-1860)

[Jim Nickerson]

Re: Bearish Information Re. John Williams

Mauldin is welcome to be wrong in my book.

His comment about profits and tax receipts is mild sophistry and also somewhat self serving. If profits are 8% and inflation is 10%, some would call that growth... but I don't.

All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.
-- Arthur Schopenhauer (1788-1860)

Why did I think bart might respond to this, as generally I have little insight about the future? Thanks, bart. Does anyone else have an opinion?

My opinion is I don't know how much respect Williams get in the financial centers, as it seems to me that most everyone just plods along with acceptance of the current government numbers.

[Starving Steve]

Re: Bearish Information Re. John Williams

Why did I think bart might respond to this, as generally I have little insight about the future? Thanks, bart. Does anyone else have an opinion?

My opinion is I don't know how much respect Williams get in the financial centers, as it seems to me that most everyone just plods along with acceptance of the current government numbers.

The Federal Reserve's fudged-figures begin to make a tiny bit of sense when you realize---and I just realized this---that states like Iowa, SD, ND, and Texas are BOOOOOOOOOOOOOOOMING. Oil is booming, so is ethanol. Farm-aid (welfare-for-the-rich) cheques are going out to the farmers. Yes, indeed.

And the cheap dollar means that hi-tech can export their silly little hand-held phones and i-pods, too. So places like Silicon Valley are getting by.

Meanwhile, the depression in housing and in the auto industry, the depression in the airlines industry, the depression in the finance, insurance, and real estate economy is counter-balanced by boom-times in the farmbelt and the oil patch.

Mining is booming, but trucking is failing. Railroads ( transports ) are doing well, yet the rest of the stock market is suffering.

Retailing is suffering, but Walmart and Costco are booming. Wholesale trade is suffering, but ports are doing well, especially those ports like Long Beach, Cal. exporting raw materials to China and importing Chinese products for Walmart.

So the picture is quite mixed, and Malden's muddle-through with plenty of inflation is a good description of the economy to-day..... If you want to feel better, just move to the middle of the country. Or in Canada, move to Alberta or Saskatchewan.

[Jim Nickerson]

Re: Bearish Information Re. Soros vs. Kaletsky

http://www.investmentpostcards.com/w...roundtable.pdf

Bearish comments on the US economy right now are as frequent as fireworks exploding today.

Below is how George Soros and Anatole Kaletsky see things.

Quote:

JONATHAN FORD (CHAIR): I want to start by asking where we are in the crisis. Is it over? George Soros, you have said that this is the worst crisis we have been through for 60 years. Presumably you still believe that there is worse to come? GEORGE SOROS: There is now a widespread belief that the crisis is over. I think, on the contrary, that the effect on the real economy is yet to be felt. The measures taken by the authorities will not bring recovery. There are four reasons for this. First, the fall in house prices in the US is only halfway over and in Britain it has hardly begun. Second, consumers have been slow to adjust their spending habits, but this is about to happen. Third, the financial system is severely wounded, and even though banks have been remarkably successful at raising more equity, they will cut back on lending and this will feed through to capital spending and business activity. Finally, and most important, there is a threat of inflation at the same time as a slowdown. The rise in energy and food prices will turn the slowdown into a recession. ANATOLE KALETSKY:I agree with George that the threat of inflation is potentially the most alarming new factor in this crisis, but I would challenge the other three points. The worst is over in the real economy in the US, although not yet in Britain and Europe. US house prices do not have much further to fall, and consumer spending will hold up. While there are, indeed, several trillion dollars of consumer spending to come out of the system, the impact may be quite comfortably spread over many years. And while the financial system has been wounded, the bank writedowns—in the US at least—have already gone beyond what is plausible in terms of likely losses. There is one shoe that has yet to drop: the continental European banks, which have not recognised the losses to the same extent.

[Jim Nickerson]

Re: Bearish Information Re. Carl Swenlin

http://www.decisionpoint.com/ChartSp...03_danger.html

Very Dangerous Market
by Carl Swenlin
July 3, 2008
A bullish take on the stock market would be that (1) market indicators are very oversold, (2) there is a triple bottom setup on the S&P 100 Index, and (3) sentiment polls show a lot of bearishness. I agree that those conditions exist, but we are in a bear market and these conditions can easily see price movement transition into a crash. The reason, as I have said many times before, is that bullish setups don't always work so well in bear markets, and an oversold market can very quickly become significantly more oversold.

Let me be clear, I am not predicting a crash. If the market does crash, I will not claim to have "called" it, because that is not what I am trying to do. I want my readers to be aware of the danger and not try to pick the exact bottom of this decline. That bottom could be very far away.
..

Our final chart gives us a view of just how much complacency exists, in spite of widely negative sentiment readings. The Volatility Index (VIX) is derived from prices on near-term SPX put and call options. Higher readings reflect a high level of fear among options traders, and lower readings complacency. Note the upside spikes on the VIX at the January and March lows. Now note how the VIX is currently about mid-range, even though prices are making new lows. This shows a surprising lack of fear, considering what prices are doing.

A discussion of charts and indicators follows for those with a technical analytical bent.

In regard to Swenlin's last comment I quoted, if one looks at the $SPX and $VIX at the SPX's bottoms in July and October 2002 and the final one in March 2003, the $VIX in the last instance did not spike to the levels it had in July and October 2002. Another difference is that the peaks of the recent up-moves in the $VIX have been less than they were at the 2002 bottoms.

Wanna see how that looks? Try this link. http://stockcharts.com/h-sc/ui?s=$VI...341&a=87221711