Slow down, Ax! No way.
Dow 5K is where Eric Janszen of Itulip said he thinks the market should be right now based on actual earnings relative to inflation. So wake up those of you who have been chomping at the bit all week to dive into "once in a lifetime" opportunities, because this dude has been right about everything from the gold to the housing bubble to the market peak last year. Be careful. Take Corning for example. I tried to find the number of buy recos on this stock over the past year, but after the number godzillion came up, I stopped. Now trading below a 3-year low of $12, glad we didn't listen. You need to look no further than the NASDAQ as well, which peaked at 5K 8 years ago. How are we doing now?
Patrick McGurn, special counsel at corporate governance specialist RiskMetrics Group, referring to the actual bailout provisions this week said, ""Under the rules, you can still pay out up to three times annual salary and bonus. The legislation looked like it had real teeth, but the interim final rule is just a gap-toothed smile." Are any of us surprised that, not unlike the possibility that banks will simply avoid governance by using lower level tranches, that nationalized bank CEOs will still earn their bonuses and parachutes? C'mon, look at the leader....
Paulson. A fascinating interactive wheel linking Paulson to the major Wall St. Cretans/Titans was published in MSN Money yesterday: http://articles.moneycentral.msn.com/Investing/StockInvestingTrading/four-degrees-of-hank-paulson.aspx
Notice the outer layer with players like Countrywide and IndyMac didn't seem to fare as well as the inner circle with people like Franklin Raines, Dick Fuld, and John Thain. Also little surprise there. Fuld has been subpoenaed; I wonder when Paulson's is coming?
Despite this week's mild resurgence after the worst week in market history, real economy data was even worse than expected. Home sales were a meager 817,000, the Philly and Michigan surveys were both abysmal, and monthly jobless claims continue to rise. Retail continued to get hammered this week, as inventories actually rose despite a larger than expected 1.2% decline in sales. And it's not just Wall St. that's suffering. Even Best Buy is planning to reduce it's holiday staff by 10K employees. Add this to major layoffs at Pepsi, GM, Danaher, and Borg Warner, and these numbers will only continue to compound, creating a vicious cycle. "Wages grow more slowly when there's higher unemployment, so the downturn will be affecting most working families through reduced hours of work," said Lawrence Mishel, president of the partly labor-funded Economic Policy Institute think tank.
So hang onto your shorts, as retail will continue to fail and we are still awaiting a massive hedge fund redemption. And speaking of hedge funds, thanks to Alexandra at Greenlight Capital, Einhorn's company. It appears as if I'm not an SEC accredited investor (http://www.sec.gov/answers/accred.htm), and therefore, do not qualify to contribute to Mr. Einhorn's funds. I stated my case that I've actually outperformed Mr. Einhorn this year, but still have full faith in his abilities to manage money. Alexandra thanked me for my interest and support, and noted that most of the people working for him also do not qualify to invest in his company. Oh well. We wish you luck anyway.
Saturday, October 18, 2008
Slow down, Ax! No way.
Posted by AX at 6:48 AM