ZEEV, MARKET/ECONOMY - up to ZEEV:354953, 02/06/05
01/29: (351256) (*COMMENT*)
(Part 1)
Zeev with that much higher inflatio 2010 or whenever do you think that would preceed a drop in real estate. I guess the question is do you see a drop or crash in real estate or futher highs over the next few years?
(Part 2)
Real estate is probably one of your best defense against inflation, as long as you do not pay outrageous rates, getting fixed 30 years rates now is a gift.
(Part 3)
Zeev I hear you and my question more to the point is do you expect a 10 20 or even 30 percent drop as you forcast your panic selling this spring? Certainly it wouldnt happen as fast as the overall stock market but if invetors are hurt wouldnt it be expected that real estate would feel it too?
(*END*)
Real estate ias a local thing, I doubt you get a crash nationally in that sector. If rates climbs slowly, I doubt there will be any impact, maybe a slow down in price appreciation overall, and only for a short period. The crash of 87 had no RE repercussions, though the tax change (the "at risk" introduction into deductibility) caused a major problem (that was 82, however) including the S&L collapse, of course, the very high rates then just exacerbated the problem.
02/05: (354814) (*COMMENT*)
Zeev,
With the Nassacre scenario in play, what stocks and entry points do you like for like a 2-3 year hold?
I noticed you have $25-30 for QCOM, which I like and just sold my holdings.
Do you have entry points for these:
1. EBAY 2. RMBS 3. ARMHY 4. MRK 5. PFE
What do you think about big Pharma? I think the valuations are attractive and are overstating the risks.
(*END*)
Two three years? That is a long time horizon and may include another cyclical bull move before the killer last bear move in the secular bear market.
If you look at investing in the July-November time period for a run into early 2006, and I have no visibility post that time period (my map actually has, for now, a double bottom in October, and repeat in December like in 1987).
Some ideas might be waiting for QCOM to drop to the $25 range might be a good target, but mind you, if $23 fails on a closing basis, the coming bear may be worse than expect and QCOM could drop back to the $12.5 to $13 area.
The same applies to IGT, I expect a low in the $24/$25 area, but if $23 "gives", then IGT could easily become a middle teenager.
As for big pharma, though to say, typically they are heaven during bear markets and their current valuations are attractive, but on the other hand, in the health care sector, you really want to look at companies that are reducing the cost of health care delivery. We already are spending 15% of GDP on healthcare and we cannot spend much more, so something has to give, and excessive drugging of America is one thing that could give. I would not be surprised to see congress to move to ban again drug ads from TV, a major source of over subscription. That will be an additional shoe dropping on the sector, on top of the Vioxx/Celebrex controversy.
02/06: (354915) (*COMMENT*)
>> it was the investing public and Wall Street that created it through greed.<<
Precisely what and who the Chairman of the Federal Reserve and the Secretary of the Treasury should be protecting us from. Greenspan and Rubin just added 'fuel to the fire' by adding additional liquidity whenever Wallsteet called for it. Both cared more about pleasing Wallstreet the controlling the bubble mentality.
Greenspan recognized "irrational Exuberance" in 1996. I think it was because of Rubin and his ties to WallStreet and the political machine that he did nothing about it. The bastard was afriad that he would not get reappointed.
Strong policy of strong dollar and low inflation? Was there ever a Secreatary of the Treasury who favored a weak dollar and high inflation?
(*END*)
Greenspan may have added liquidity, Rubin acted against the wind and soaked liquidity, look at the rate of federal debt rise during his stewardship and compare to the rate of growth in either the 8 years of "trickle down" economics, or the four years of either Bushes.
When Reagan took over, the debt stood at (12/31/80) at $ 931 B, when he left 8 years later (9/30/88) the debt stood at $2.6 T a factor of 2.79 in 8 years. When Bush I left, the debt stood at 4T, another factor of 1.54 in just four years. When Clinton left (09/30/2000, Rubin) the debt stood at $5.7 , or a factor of 1.42 in eight years. The last year of their reign, debt barely rose, and the fiscal surpluses actually caused the recession, due to soaking money from the economy (I commented on that early in 2000 as one of many reasons a bear market is coming). The last Bush, in four years managed to get the debt to $7.4 T (09/30/04) or a factor of 1.3 in just 3 years, despite the residual impact of Rubin policy on 201 which had a minimal rise in debt of $130 B. In the next three years, 1.6 Trillions was added to the debt.
Rubin actually did a great job, together with Greenspan in avoiding a number of possible collapse in the market (Mexico, the Asian flu, the Russian melt down, Long term Cap's Merriwether folly were just four potential causes of a 1987 like crash, all adroitly avoided by smart management of both monetary and fiscal policies, creating in the process untold fortunes, 22 MM new jobs, and a long stretch of prosperity. The market bubble is simply a reflection of the cyclical nature of capitalism, money seeks the highest possible returns, until too many are crowding these "high returns" and a good chunk of money is sent to "money heavens".
And yes, Snow favors a weak dollar (though he speaks with a forked tongue), and a somewhat higher level of inflation (to deflate our debt, of course).
02/06: (254917) (*COMMENT*)
gt, Rubin bailed out banks that made bad loans.. yum
(*END*)
Are you people completely ignorant of what would have happened if Citi and Morgan were allowed to fail? You think that we would be better off? We would have sunk into a depression of the like of 1929 where one out of every three people is unemployed. You think that to avoid such a scenario, it is worth twisting the arms of congress to advance a loan to Mexico, which was, by the way, quite profitable to the US treasury.
02/06: (354938) (*COMMENT*)
>>Are you people completely ignorant of what would have happened if Citi and Morgan were allowed to fail?<<<
I would question more about how they were encouraged by Federal regulators to get so big that we can now not afford to let them fail. How stable is our economy if we can't let one of these PUBLIC companies fail?
(*END*)
There is really not much of a choice, with the like of HSBC, Deutche and Credit Swisse, gobbling every thing in sight, they got to grow and be "big" as well. Eventually, one of them will run into big troubles, but it will be so engineered (if the Fed and treasury are smart) that only the stockholders suffer rather than the whole economy.
02/06: (354949) (*COMMENT*)
>> look at the rate of federal debt rise during his stewardship<<
The limited rise in Federal debt during Rubin's years was more related to the increase in capital gains taxes from the run up in stock prices. I don't know if you can call that "soaking up liquidity".
Greenspan's avoidance of several possible "collaspe" scenario's became called the 'Greenspan put'. Maybe if he would have let "cyclical nature of capitalism" take it's natural course instead of kissing ass on Wallstreet we could have avoided the equity bubble, the credit bubble, and the real estate bubble that we now find ourselves in. Greenspan has done an excellent job of keeping these bubbles nflated until another Chairman's watch begins.
(*END*)
Joe, I don't think we are going to agree on that issue. The deep "natural" cyclical ups and down of capitalism have created massive devastations and misery, the harnessing of the cycle (or the elusive "soft landings"), create problems of their own, they lengthen the period of reequilibration. However, because such soft landing involve relatively mild slow downs (since the 1970, we have not had a massive recession in which GDP drop more than 3% for three consecutive quarters), the damage to the economy is much smaller than what would be inflicted under "Austrian Discipline". I'll take soft landing anytime over deep lengthy "reequilibrating" recessions.
As for reduction in debt growth during the Rubin era, the increase in capital gain tax receipt had nothing to do with it, it was the reigning in of expenditures. I don't have numbers, and hopefully someone may come to the fore with such numbers, but I doubt the cap gain tax receipts in 98, 99 and 2000 exceeded $100 B per year, a very small portion of what the 'target" 13 Trillion debt the nay sayers were forecasting for 2005 in 1995...
