Comments on: Valuation still matters

By: Pej

Pej — Mon, 21 Sep 2009 13:22:23 +0000

The problem with Grant is that from what I’ve read of his writings, he’s clueless about the meaning of “money” and hence his causality is wrong…

… but I can’t think of Panzner as a credible economist/trader neither.

By: GolfBoy

GolfBoy — Mon, 21 Sep 2009 12:36:47 +0000

Michael Panzner has a reply to James Grant here:

http://www.financialarmageddon.com/2009/09/jim-grant-ringing-the-bell-at-the-top.html

I’m leaning toward Panzner. Also an October crash.

By: Pej

Pej — Mon, 21 Sep 2009 10:34:37 +0000

Mike,
it looks like James Grant (which I think you said you follow and agree with?) has turn to a bull?
http://online.wsj.com/article/SB10001424052970204518504574420811475582956.html

By: Pej

Pej — Mon, 21 Sep 2009 10:33:52 +0000

GolfBoy, my concern about that report was that they believe the market will rally until the end of the year.
I was kind of betting on an October crash…

but for sure, the worst is yet to come

By: GolfBoy

GolfBoy — Mon, 21 Sep 2009 01:10:00 +0000

The P/E ratio of 184.2 is scary enough. But consider also that a lot of those “earnings” consist of tax dollars plundered by banks with the help of the Big Brother, and disregard losses currently being masked by mark-to-fantasy accounting. Eventually reality will catch up. Thus I’m with Pej: the worst is yet to come.

I agree with Mike on the USD. Germany has begun issuing dollar denominated bonds, expanding the short position against the buck. Like those gold vending machines in German airports — an incredible red flag to the contrarian thinker!

By: Pej

Pej — Fri, 18 Sep 2009 21:35:43 +0000

mike, what do you think about this analysis:
There were only two significant fourth quarter losses following a positive September: in 1973 & 2007. Using the logic that “if the market can buck the seasonal trend, go with the trend”, since most November-Decembers are up, the losses in 2007 and 1973 were a very timely harbinger of worse things to come.

By: Mike

Mike — Fri, 18 Sep 2009 20:44:05 +0000

I’ve only been reading Rosenberg regularly for a few weeks, but I like what I’ve seen so far. He’s smart, honest, and gives you a lot of good data. I don’t get the impression that he’s ok with the debt situation, and he seems to be consistently saying that the stimulus is a waste.

The long case for the dollar is that there is an enormous short position against it, having been built up over the credit bubble as people borrowed dollars to buy everything else. For the time being, this overwhelms the public debt issue. I think the turning point for the dollar is imminent for technical and sentiment reasons, and because the dollar still acts as senior currency and goes up when fear strikes.

By: jason bourne

jason bourne — Fri, 18 Sep 2009 20:32:52 +0000

Mike,

I think what you need to be careful w/ Rosenberg’s assumption is he seemingly overlooked the influence of massive debt overhang. This debt is going to have to be paid and/or defaulted… at near 400% GDP, it is the highest in history. Overlooking debt is one crucial point that will lead to vastly different conclusions on the dollar. Many of his economic assessments are spot on & terrific, but I think not on this debt issue.

Rosenberg is seemingly also of the view that government stimulus are of positive impact to the markets, however little it is… while in truth it’s a large negative. It’s basically issuing more debt, to be paid in the future through higher tax, in the meanwhile there’s no value added to the economy. Arguably, it’s destroying some value, e.g. the cash for clunkers program: destroying usable cars to produce needless cars.

Debt cannot be rolled over forever. You can’t keep kicking the can farther & farther down the road.

Social mood is also related to debt. Positive social mood -> more risk taking -> more issuance of debt — and the reverse. Negative social mood will be major tailwind for USD strength.

Furthermore, if you look further on Rosenberg’s articles, you’ll see that he seems to be taking the Chinese & Asian growth story for real — and that Asia will lead global growth.

By: Daedal

Daedal — Fri, 18 Sep 2009 19:09:02 +0000

Yes, but Ben Bernanke said we’re emerging from the recession. If Ben Bernanke say something, it must be true. On top of that, Jim Cramer holds the same convictions. Forget your fancy shmancy P/E ratios — if history has taught us anything, it’s that these two know what they’re talking about.