One For The Road
Our vacation was much needed, no internet, email or phone for a week was a good thing and led to an epiphany.
We will be discontinuing our daily coverage of the markets and devoting more time to the inside details of the how and the why.
We appreciate your attention over the last three years and hope that you will continue to check in and stay tuned to our less than frequent Nattering feed.
From JPMorgans latest IN's & OUT's...
We remain cautious over this latest stock market rebound and do not see a new uptrend establishing itself in the near term.
Official support may now be in overdrive, but it remains to be seen how stocks will fare...
if sizeable further job losses and profit disappointments are announced early in the new year, as seems likely.
Meanwhile, private sector de-leveraging is still in its early stages.
The larger goal of encouraging banks to stop hoarding liquidity and start lending again remains elusive.
The Nattering One muses…
Remaining cautious would be wise as this latest rebound is a head fake. Further job losses: unemployment will go to 9% or higher.
As North American and European demand crashed, Chinese imports fell -18% in November.
Chinese steel output is expected to decline 20% in Q4 while Japanese steel mills will have the largest production cuts in five years.
Global factory activity as measured by the PMI (purchase managers price index) simultaneously fell to historic lows in Germany, Japan, China, Europe and the US.
Private sector de-leverage IS in the early stages, witness the implosion of the commodities markets and dry bulk shipping costs.
Crude is down from $148 to $35 (corn, wheat, soy beans etc.) and the Baltic Dry Index (shipping rates) is down 95%.
Why? People still need to eat and drive their cars; demand and business are slowing down, but not by 95%.
Answer: Investment Bankers (Bear Stearns, Lehman Brothers, Merrill Lynch, Goldman Sachs and Morgan Stanley) and other speculating scumbags...
can no longer speculate and artificially trade markets up with 40 to 1 leverage.
The commodities markets are back to a semblance of normalcy as demand for commodities can now be set by commercial users, not speculators.
As we reported on Nov 22nd, the IMF’s top economist Olivier Blanchard said...
the credit crisis would continue for another year and called on governments to promote spending programs and on central banks to implement ZIR (Zero Interest Rates).
The worst is yet to come. This is only the beginning. The risk exists that the data will get worse and worse...
which would then lead to more pessimistic expectations and accelerate a fall in demand. It will take a long time before we go back to normal conditions.”
Encouraging banks to stop hoarding and resume lending is elusive as the same bankers that caused the problems...
have put $1 Trillion of the bailout money into T bills & notes.
The relevance of this development is not trivial. This has helped drive the 90 day or 3 month note into a negative yield -0.02%.
In other words, fear is so high among the banks and private investors that instead of investing in plunging stocks or real estate,
or lending out the money or in the case of private investors, depositing money at the local bank…
Investors are actually paying the government 0.02% to hold their money for 90 days. There is only the cost of inflation to worry about under a mattress.
Due to the bailouts, the same incompetent bankers and automotive CEO’s who created the current crisis are being allowed to stay in charge of their companies.
These losers and their outmoded business models should have been allowed to fail or die.
They would have been replaced with companies that are structured and CEO’s that are in tune with the changing environment.
Instead we will be lassoed with the legacy of these losers and the debt service on their bailouts, for years to come.
Profit disappointments will lead to many LBO (leveraged buy out) defaults in the next two years...
as lowered cash flows will not be able to service the debt loads taken for the buy outs.
Stock prices have collapsed, but due to hedge fund CDS (credit default swap) induced panic sales...
and margin call liquidations, corporate debt yields have climbed to double digit heights.
Moving forward... investing in high yield or “junk” rated debt of companies that have ample cash on hand;
can service their interest rate payments; and have little debt coming due in the next 24 months would be a wise strategy.
We were wrong on the shippers weathering the storm, but some are rebounding NAT, VLCCF, FRO.
Although, dividends have been cut and debt servicing may become an issue with some.
People gotta eat, business has to go on, and goods have to be transported, albeit in lesser quantities or at reduced prices, so we still like the railroads.
Lower oil prices and higher fuel efficiency versus trucking (¼ the cost), should stem the reduction in rates...
and commodities & dry goods freight volumes, while high barriers of entry limit potential competition.
We will be discontinuing our daily coverage of the markets and devoting more time to the inside details of the how and the why.
We appreciate your attention over the last three years and hope that you will continue to check in and stay tuned to our less than frequent Nattering feed.
From JPMorgans latest IN's & OUT's...
We remain cautious over this latest stock market rebound and do not see a new uptrend establishing itself in the near term.
Official support may now be in overdrive, but it remains to be seen how stocks will fare...
if sizeable further job losses and profit disappointments are announced early in the new year, as seems likely.
Meanwhile, private sector de-leveraging is still in its early stages.
The larger goal of encouraging banks to stop hoarding liquidity and start lending again remains elusive.
The Nattering One muses…
Remaining cautious would be wise as this latest rebound is a head fake. Further job losses: unemployment will go to 9% or higher.
As North American and European demand crashed, Chinese imports fell -18% in November.
Chinese steel output is expected to decline 20% in Q4 while Japanese steel mills will have the largest production cuts in five years.
Global factory activity as measured by the PMI (purchase managers price index) simultaneously fell to historic lows in Germany, Japan, China, Europe and the US.
Private sector de-leverage IS in the early stages, witness the implosion of the commodities markets and dry bulk shipping costs.
Crude is down from $148 to $35 (corn, wheat, soy beans etc.) and the Baltic Dry Index (shipping rates) is down 95%.
Why? People still need to eat and drive their cars; demand and business are slowing down, but not by 95%.
Answer: Investment Bankers (Bear Stearns, Lehman Brothers, Merrill Lynch, Goldman Sachs and Morgan Stanley) and other speculating scumbags...
can no longer speculate and artificially trade markets up with 40 to 1 leverage.
The commodities markets are back to a semblance of normalcy as demand for commodities can now be set by commercial users, not speculators.
As we reported on Nov 22nd, the IMF’s top economist Olivier Blanchard said...
the credit crisis would continue for another year and called on governments to promote spending programs and on central banks to implement ZIR (Zero Interest Rates).
The worst is yet to come. This is only the beginning. The risk exists that the data will get worse and worse...
which would then lead to more pessimistic expectations and accelerate a fall in demand. It will take a long time before we go back to normal conditions.”
Encouraging banks to stop hoarding and resume lending is elusive as the same bankers that caused the problems...
have put $1 Trillion of the bailout money into T bills & notes.
The relevance of this development is not trivial. This has helped drive the 90 day or 3 month note into a negative yield -0.02%.
In other words, fear is so high among the banks and private investors that instead of investing in plunging stocks or real estate,
or lending out the money or in the case of private investors, depositing money at the local bank…
Investors are actually paying the government 0.02% to hold their money for 90 days. There is only the cost of inflation to worry about under a mattress.
Due to the bailouts, the same incompetent bankers and automotive CEO’s who created the current crisis are being allowed to stay in charge of their companies.
These losers and their outmoded business models should have been allowed to fail or die.
They would have been replaced with companies that are structured and CEO’s that are in tune with the changing environment.
Instead we will be lassoed with the legacy of these losers and the debt service on their bailouts, for years to come.
Profit disappointments will lead to many LBO (leveraged buy out) defaults in the next two years...
as lowered cash flows will not be able to service the debt loads taken for the buy outs.
Stock prices have collapsed, but due to hedge fund CDS (credit default swap) induced panic sales...
and margin call liquidations, corporate debt yields have climbed to double digit heights.
Moving forward... investing in high yield or “junk” rated debt of companies that have ample cash on hand;
can service their interest rate payments; and have little debt coming due in the next 24 months would be a wise strategy.
We were wrong on the shippers weathering the storm, but some are rebounding NAT, VLCCF, FRO.
Although, dividends have been cut and debt servicing may become an issue with some.
People gotta eat, business has to go on, and goods have to be transported, albeit in lesser quantities or at reduced prices, so we still like the railroads.
Lower oil prices and higher fuel efficiency versus trucking (¼ the cost), should stem the reduction in rates...
and commodities & dry goods freight volumes, while high barriers of entry limit potential competition.
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