Just returned to the blog

Market is a mess.  Deflation scare coming.  More pain before the Central Banks turn on the money spigot.  Will it be enough?  Time will tell

David Walker

David Walker is on CNBC today and he is telling it like it is-the government is broken. Financial commitments are big and getting bigger. In fact, the commitments are massive-unfunded liabilities are 50 trillion at the low side of estimates and growing

More bottom callers

Bill Miller of Legg Mason fame is calling the bottom is in. This is the same fund manager who owns a whack of financials. Probably bot more in the last few days. On the other side-Dupont comes out today and says the economy stinks and will remain that way well into 2009. Dupont is in autos, construction and manufacturing . Freeport McMoran said the same thing yesterday. I knowinvestors have to look across the valley, unfortunately that valley is wide
The bottom will be in when Bill Miller and the rest of the long funds either lose their jobs, or they go bearish on the mkt. On top of that-Bill Miller suggests the US Federal Government should buy stocks to help the US consumer-or help out Wall Street and the Den of Thieves. Having the US Gov't (or PPT) buy equities is a plan fraught with disaster-but they are already doing it under the table. Bill Miller and his frat pack are so disconnected from Main Street that it is laughable.

As a prediction for tomorrows employment report-expectations are for 350-400k-I suspect the report will show that, BUT there will be a revision in January to a much larger job loss. The central planners are out in full force.

Debt Markets remain the key

The debt market remains the key to the markets. The spreads between mortgages, corps, junk and municipals to Treasuries are at extreme wides. RISK is a four letter word. With hedge funds seeing massive redemption requests and mutual funds seeing sales requests, selling pressure remains intense. What do hedge funds own-spread product. The carry trade overheated and is still unwinding. This is the Tech Wreck 2000 Redux. No traditional asset manager wants this rocket science product. They are protecting their job, their assets, and their scarce capital. The unwind will take months if not years.
Banks are not lending as their balance sheets are a disaster. Who knows what they own off balance sheet. There will be short covering rallies as the calendar moves through year end, but the business model for the financials needs to be revised. Gone are the days of the wealthy and not so wealthy paying up for a piece of the action. Slow growth is the norm.

The list of Problems Grows

Where to start. Since my last post, the global economy has tanked. No bounce-straight down. Announced job cuts are growing day by day. Today we have AT&T 12k, Dupont 2.5 K, plus several other smaller ones. It is getting nasty.
Today, the big 3 go back to congress with tin cup in hand. The US gov't is becoming the owner of more companies-can you spell socialism. This is getting ridiculous. The financial sector is getting massive amounts of capital to stay alive. The big 3 are next. Soon the airlines and homebuilders will be lining up for gov't money. The only problem I can see is where is all this money going to come from. I am not even including the unfunded liabilities regarding social security and medicare. The states are now following-California is struggling with a 10+ billion deficit. Of course the typical response from the political circles is borrow more money, and kick the can down the road. How many times do we have to do that to realize the next generation is not going to enjoy the current standard of living. Planet ME and I want it now generation is driving the economy over the cliff.
Financial Reckoning Day is rapidly approaching.
Despite this, US Treasuries are yielding absurd levels on the pretense of the gov't buying FNM and FRE bonds, plus US Treasuries. This known as monetizing the debt. This could turn out like Iceland-the bonds stay the same price, but the currency becomes virtually worthless. In fact all fiat currencies are in a sad state of affairs.

Solving the US crisis

In the immortal words of Walter Ruether-'That's great Henry (Ford), now who are you going to sell your cars to'

Executives better realign their moral compasses and realize that shipping jobs off shore to low wage countries is killing their consumer base. Low wage countries buy basic necessities, not luxury items. In addition, CEO compensation of 500X the average employee pay is ridiculous, as it was at 300X and 400X. Maybe the top brass should take a pay cut and come down from their exalted ivory tower.

Going forward, I suspect the democrats to implement policies that are going to be hard on the wealthy. Whether or not some 'income redistribution' takes place via gov't actions remains to be seen. But given the fat cat pay packages on Wall Street being slashed, expect to see all sorts of layoffs in the staf of these people. No more trickle down economics.

Hedge Fund Implosion

Hedge funds remain in liquidation mode: Important dates going forward

Nov. 15: Last day to announce the intention to redeem for Nov. 30.

Nov. 30: Yr end for Goldman and Morgan Stanley, plus hedge fund liquidation

Dec. 31: YR end-tax loss selling, capital gain crystalization.