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Posts Tagged ‘Jeremy Grantham’

Paul Farrell On The One Thing Buffett, Gross, Grantham, Faber, And Stiglitz All Agree On: “Bernanke Plan A Disaster”

Paul Farrell On The One Thing Buffett, Gross, Grantham, Faber, And Stiglitz All Agree On: "Bernanke Plan A Disaster"

Courtesy of Zero Hedge 

Bomb with Lit Fuse

By now it is more than obvious except to a few economists (yes, we realize this is a NC-17 term) that QE2 will be an absolute and unmitigated disaster, which will likely kill the dollar, send risk assets vertical (at least as a knee jerk reaction), and result in a surge in inflation even as deflation on leveraged purchases continues to ravage Bernanke’s feudal fiefdom. So all the rational, and very much powerless, observers can do is sit back and be amused as the kleptogarchy with each passing day brings this country to final economic and social ruin. Oddly enough, as Paul Farrell highlights, the list of objectors has grown from just fringe blogs (which have been on Bernanke’s case for almost two years), to such names as Buffett, Gross, Grantham, Faber and Stiglitz. And that the opinion of all these respected (for the most part) investors is broadly ignored demonstrates just how unwavering is the iron grip on America’s by its economist overlords. Which brings us back to the amusement part. Here are Farrell’s always witty views on the object which very soon 99% of American society will demand be put into exile: the genocidal Ph.D. holders of the Marriner Eccles building.

From Paul Farrell’s latest: Sell bonds now, Fed’s QE2 is doomed to fail.

Warning, Fed Chairman Ben Bernanke’s foolish gamble to stimulate the economy will backfire, triggering a new double-dip recession. Bernanke is “medding” too much in the economy, say Marc Faber, Bill Gross, Jeremy Grantham, Joseph Stiglitz and others. 

The Fed is making the same kind of mistakes Japan made that resulted in its 20-year recession. The Washington Post says Larry Mayer, a former Fed governor, estimates that to work it would take QE2 bond purchases of “more than $5 trillion …10 times what analysts are expecting.”

Bernanke’s plan is designed to fail. And, unfortunately, that will make life far more dangerous for American investors, consumers, taxpayers and voters.

“I’m ultrabearish on everything, but I believe you’ll be better off owning shares than government bonds,” said Hong Kong economist Marc Faber at a recent forum in Seoul. He sees a repeat of dot-com-bubble insanity today. Faber publishes the Gloom, Boom & Doom Report.

And Warren Buffett agrees,


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Paul Farrell Explains Why The Fed-Wall Street Complex Will Self Destruct By 2012

Paul Farrell Explains Why The Fed-Wall Street Complex Will Self Destruct By 2012

Courtesy of Zero Hedge 

Some rather scary predictions out of Paul Farrell today: "It’s inevitable: Wall Street banks control the Federal Reserve system, it’s their personal piggy bank. They’ve already done so much damage, yet have more control than ever.Warning: That’s a set-up. They will eventually destroy capitalism, democracy, and the dollar’s global reserve-currency status. They will self-destruct before 2035 … maybe as early as 2012 … most likely by 2020. Last week we cheered the Tea Party for starting the countdown to the Second American Revolution. Our timeline is crucial to understanding the historic implications of Taleb’s prediction that the Fed is dying, that it’s only a matter of time before a revolution triggers class warfare forcing America to dump capitalism, eliminate our corrupt system of lobbying, come up with a new workable form of government, and create a new economy without a banking system ruled by Wall Street." And just like in the Hangover, where the guy is funny because he’s fat, Farrell is scary cause he is spot on correct.

Handily, Farrell provides a projected timeline of events:

Stage 1: The Democrats just put the nail in their coffin confirming they’re wimps when they refused to force the GOP to filibuster Bush tax cuts for billionaires.

Stage 2: In the elections the GOP takes over the House, expanding its strategic war to destroy Obama with its policy of “complete gridlock” and “shutting down government.”

Stage 3: Post-election Obama goes lame-duck, buried in subpoenas and vetoes.

Stage 4: In 2012, the GOP wins back the White House and Senate. Health care returns to insurers. Free-market financial deregulation returns. Lobbyists intensify their anarchy.

Stage 5: Before the end of the second term of the new GOP president, Washington is totally corrupted by unlimited, anonymous donations from billionaires and lobbyists. Wall Street’s Happy Conspiracy triggers the third catastrophic meltdown of the 21st century that Robert Shiller of “Irrational Exuberance” fame predicts, resulting in defaults of dollar-denominated debt and the dollar’s demise as the world’s reserve currency.

Stage 6: The Second American Revolution explodes into a brutal full-scale class war with the middle class leading a widespread rebellion against the out-of-touch, out-of-control Happy Conspiracy sabotaging America from within.

Stage 7: The domestic class warfare is exaggerated as the Pentagon’s global warnings play out: That by 2020


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Jeremy Grantham: This Is Nothing But The Greenspan Legacy’s Latest Bubble

Jeremy Grantham: This Is Nothing But The Greenspan Legacy’s Latest Bubble, America Is Now "Thorougly Expensive"

Businessman blowing bubble while working on laptop computer

Courtesy of Tyler Durden at Zero Hedge 

 

Yesterday we first posted Jeremy Grantham’s latest letter which incidentally is a must read for everyone who still is stupid enough to think this market reflects anything remotely related to fundamentals, when instead all it is pricing in is the money printing Kommendant’s daily predisposition to continuing his dollar decimation via ZIRP and shadow QE. Just like all those who are buying Apple at these stratospheric prices are in essence selling life insurance on Steve Jobs (sorry, someone had to say it), all those buying into the market here are betting the Fed is apolitical when it comes to monetary policy decisions: a proposition so naive and ludicrous, it is not surprising that only the momos continue to buy into the rally, which is driven purely by Primary Dealers recycling money they lend to the treasury which in turn is repoed back by the Fed, so that the banks can buy 100x P/E risky stocks with the same money used to keep the treasury curve diagonal.

This is nothing but Fed-sponsored monetary pornography at its NC-17 best. Of course, those who grasp it are few and far between, while the rest of the population is ignorant in its hopes that S&P 1,500 is just over the horizon, without a resultant crash back to 0 on the other side of the bubble. So for all those who are still confused (this means you Kommendant Bernanke) here is a 6 minute clip in which Grantham tells it just the way it is: there is nothing more to this rally that free money and banks’ last ditch attempt to lock in another year of record bonuses before it all goes to shit. And the implication – play with the big boys at your own peril. "Bubbles are when you should cash in your "career risk units" and do something brave to protect the investors. There is nothing more dangerous and damaging to the economy than a great asset bubble that breaks, and this is something that the Fed never seems to get. Under Greenspan’s incredible leadership he managed to give us the tech bubble, and by keeping interest rates at negative levels for three years drove up the housing bubble, and finally…
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Jeremy Grantham: Playing with fire, but stocks could race to old highs

Jeremy Grantham: Playing with fire, but stocks could race to old highs

Boy (7-9) holding sparkler, side view, night

Courtesy of Prieur du Plessis at Investment Postcards from Cape Town 

Jeremy Grantham has become a familiar and very popular face on this site. For those treasuring his insight, wisdom and prescient calls, the co-founder and chief investment strategist of Boston-based GMO has just published the April edition of his quarterly newsletter entitled “Playing with Fire (A Possible Race to the Old Highs)”.

Here are a few excerpts from Grantham’s newsletter.

“So what do I think will happen? That’s easy: I don’t know. We have been spoiled in the last 10 years with many near certainties – mainly that real bubbles would break – but this is definitely not one of them. Not yet anyway.  (However, I am still willing to play guessing games despite the fact that “I don’t know.” So here, as Exhibit 1, is my probability tree.)

“The general conclusion is that the line of least resistance is a market move in the next 18 months or so back to the old highs, say, 1500 to 1600 on the S&P, accompanied by an equivalent gain in most risk measures, followed once again by a very dangerous break. If that happens, rates will still be low and thus difficult to use as a jump starter, the financial system will still be fragile, and the piggybank will be more or less empty. It is remarkably silly for the Fed to allow, even encourage, this flight path. It is also remarkably silly for investors to be so carefree, given their recent experiences. Fortunately, there are several less likely outcomes that collectively,…
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GRANTHAM: THE FED IS BLOWING MORE BUBBLES

GRANTHAM: THE FED IS BLOWING MORE BUBBLES

Courtesy of The Pragmatic Capitalist 

Must see interview here.  Jeremy Grantham, founder of GMO, discusses the mechanics of bubbles, where the next bubbles are forming, why equities are expensive and how Bernanke is repeating the mistakes of Greenspan:

GMO GRANTHAM: THE FED IS BLOWING MORE BUBBLES


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IS THE MARKET FAIRLY VALUED?

Pragcap shares a tool he uses to answer the question, 

IS THE MARKET FAIRLY VALUED?

Courtesy of The Pragmatic Capitalist

Maria Shriver's 2008 Women's Conference

I’ve long argued that most valuation metrics are fraught with pitfalls that the average investor too often falls for.  What is often described as “value” is too often a bloated price divided by some analyst’s guesstimate.  The myth of “value” and the dream of becoming the next Warren Buffett (see the many myths of Warren Buffett here) has resulted in untold stock market losses over the decades and/or misconceptions of adding “value” to a portfolio that most likely doesn’t outperform a correlating index fund after taxes and fees. Nonetheless, the PE ratio and other faulty valuation metrics remain one of the primary sources of investment strategists, stock pickers and market researchers.

While I am no fan of valuation metrics, I do happen to be a student and believer of mean reversion.  In an effort to attach a “value” to this market I’ve used an old Jeremy Grantham tool to see where we are today.  Grantham is a big believer in the cycle of corporate profits and specifically profit margins.  As regular readers know, one of the primary reasons why we have been bullish ahead of the past 5 earnings seasons was due to the expansion in corporate margins and very low analyst expectations.  Analysts became extremely negative in Q4 2008 and severely underestimated the pace at which companies were able to cut costs and support the bottom line.  This stabilization in corporate margins set the table for the massive rally in stocks as profits continued to expand at a far faster pace than anyone expected.

Corporate margins are extremely cyclical.  As companies expand their businesses and revenues grow they are able to better manage their costs, hire personnel, etc.  But if the economy weakens for any number of reasons revenues will contract, costs will remain high and margins will ultimately contract.  Businesses are then forced to cut costs in order to salvage profits.  In other words, margins are constantly expanding and contracting with the business cycle around the mean.

Over the last 50 years corporate profit margins (corporate profits/GDP) have averaged 9.5%.  If we multiply GDP by the average margin growth we can create a long-term trend of what corporate profits should look like.  We can then compare actual corporate profits to this result in an effort to see whether…
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THE GURU OUTLOOK: GEORGE SOROS SAYS MARKET AT RISK OF DOWNTURN

Here’s an interesting update on George Soros’s outlook on the market. – Ilene

THE GURU OUTLOOK: GEORGE SOROS SAYS MARKET AT RISK OF DOWNTURN

george sorosCourtesy of The Pragmatic Capitalist

This week’s Guru Outlook takes a look inside the mind of George Soros – one of the original masters of the global macro hedge fund universe.   Soros, of course, became famous for breaking the Bank of England.  Soros made a spectacularly leveraged bet against the British Pound which netted him over $1B in a day.

Soros rose to recent notoriety for predicting the financial crisis.  He was far more bearish than most others and appeared to have a crystal ball with a play-by-play for each step of the crisis.  Like some of the guru’s we’ve spoken of lately, he wasn’t bearish all the way up.  Soros saw the decline in markets as a buying opportunity and has taken the liberty to make billions for his investors on both the way down and the way up.

Although Soros has turned more bullish over the course of the last 6 months he has not lost sight of the forest for the trees.  Much like Jeremy Grantham, Soros believes we are confronted with massive structural long-term problems – particularly in the United States. He believes U.S. consumers are in the middle of a long-term deleveraging process and earlier this month he described the U.S. banking system as “bankrupt”.  He sees very weak consumer spending and a drag from the banking sector holding down global growth for years to come.

In a recent interview, he said the market is now very overextended and at substantial risk of another downturn.   But that doesn’t mean the market will turn down immediately.  Soros says the market is likely to remain buoyant throughout the remainder of 2009 and will likely face its reality of weak global growth in 2010.  He says the rally has been driven by the government stimulus and little else.  Soros says the recent uptick in bank earnings is essentially a fraud:

“Those earnings are not the achievement of risk-takers.  These are gifts, hidden gifts, from the government.”

Soros recently said the move down in the dollar was unsustainable (he obviously reads too much TPC) and that its link to the Renminbi would reduce the overall decline.  Despite this, Soros is betting…
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Getting bearish again

Getting bearish again

getting bearish  (or the bear, currently caged)Courtesy of  Edward Harrison at Credit Writedowns

You have probably noticed a change in tone at Credit Writedowns since about June, but a lot more in the past month or so. Once mildly bullish due to the deeply oversold levels this Spring, I have become increasingly alarmed at the unjustified strength of the recent market rally.

My most recent post explaining my concern, “Major selloff coming?” kind of gives you the timeline. I really would like to be bullish, but I have major issues with this rally on both a technical and fundamental basis:

Technicals

  1. The technicals all point to stock markets in the U.S., Europe and Emerging Markets as being overbought. This has been the case for at least two months now. As the market continues up without a pullback, you have to be concerned that any pullback will be violent.
  2. There has been an enormous multiple expansion, which is usually what occurs in the middle to latter stages of a secular bull market, not in the beginning of one. It certainly makes one think this is a bear market rally and not a secular bull move.
  3. I have said that the massive liquidity dumped into the system is not going to fuel inflation when capacity levels are at historic lows in the U.S.  There is absolutely no pricing power, either for businesses or workers. But, all that money is going somewhere eventually. Right now, it looks like it’s going into asset prices. Liquidity is seeking return.

Fundamentals

  1. If you look at the deflationary pressures, they are almost all still at work: poor employment markets, producer price inflation at record low levels (Germany down 7.8% through July y-o-y for example), overcapacity in Europe, China and Asia, back breaking debt levels, etc, etc.
  2. But, then, where is the demand?  It’s not there. The consumer is not going to be jumping in here. A lot of the uptick in the economy is inventory-related, not consumption-driven.  So either former exporters, government or business will have to pick up the slack.
  3. And let’s not forget my favourite whipping boy, the financial sector. In the U.S., there are a lot of toxic assets on balance sheets, while leverage and equity capital ratios are still


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Zero Hedge

North Carolina Man's Obituary "Respectfully Asks That You Not Vote For Hillary In 2016"

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

A Cabarrus County, North Carolina man died last week, but Larry Upright, 81, made one final request in his obituary - written by his family.

"Also, the family respectfully asks that you do not vote for Hillary Clinton in 2016. R.I.P. Grandaddy."

Judging by the condolences, he is not alone in his request. It seems "everyday Americans" does not include North Carolinans...

Via Whitley's Funeral Home...

And the condo...



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Chart School

Bulls Regain Friday's Lost Ground

Courtesy of Declan.

It was a good response from buyers to push markets higher through the day. However, the gains didn't really change the larger picture where markets remain range bound. In the case of the S&P, bulls really need a break of 2120 to bring confidence back to buyers. The S&P is also enjoying the start of a relative performance advantage against the Russell 2000.  It's early days, but today was a good start. The Nasdaq closed the 'breakdown gap,' but it hasn't yet done enough to challenge the March 'bull trap.' The Nasdaq also enjoys a relative advantage against the S&P. This might be the index to lead out tomorrow. ...

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Phil's Favorites

Greece to Seize Local Government Cash; Two Year Bond Yield Tops 28%

Courtesy of Mish.

Greece to Seize Local Government Cash

Robbing Peter to pay Paul took another leap forward in Greece today as Tsipras to Seize Public-Sector Funds to Keep Greece Afloat.
Running out of options to keep his country afloat, Greek Prime Minister Alexis Tsipras ordered local governments to move their funds to the central bank.

"Central government entities are obliged to deposit their cash reserves and transfer their term deposit funds to their accounts at the Bank of Greece,” according to the decree issued Monday on a government website. The “regulation is submitted due to extremely urgent and unforeseen needs."

Credit-default swaps suggested about an 81 percent chanc...



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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Kimble Charting Solutions

Google on 11-year support, another buying opportunity?

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

Google has had a disappointing year when comparing it to the S&P 500 and other tech stocks. As you can see above, it has under performed the Nasdaq 100 index by nearly 19% and it has lagged the broad market by more than 10% in the past year.

Did Google create a double top over the past year, prior to this under performance? The jury is out on this question at this time.

This under performance by Google now has it testing a support line that dates back to its IPO price over a decade ago.

...



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OpTrader

Swing trading portfolio - week of April 20th, 2015

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Sabrient

Sector Detector: Earnings and GDP temporarily take investor spotlight off the Fed

Reminder: Sabrient is available to chat with Members, comments are found below each post.

Courtesy of Sabrient Systems and Gradient Analytics

As we get into the heart of earnings season and anticipate the GDP report for Q1, the investor spotlight has been taken off the Federal Reserve and timing of its first interest rate hike, at least temporarily. Even though Q1 economic growth will undoubtedly look weak, the future remains bright for the U.S economy – even though many multinationals will struggle with top-line growth due to the strong dollar – and any near-term selloff resulting from weak economic or earnings news should be bought yet again in expectation of better results for the balance of the year. High sector correlations remain a concern, reflectin...



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Digital Currencies

SkyNet Is Almost Sentient: HFTs To Start Trading Bitcoin

SkyNet Is Almost Sentient: HFTs To Start Trading Bitcoin

Courtesy of ZeroHedge. View original post here.

As noted earlier, with equities now a barren wasteland of volume (and liquidity), the last remaining HFT master (of whale order frontrunning) has been forced to go to those asset classes where organic flow is still abundant such as FX, courtesy of central banks engaged in global currency wars. However, HFTs rea...



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Promotions

Watch the Phil Davis Special on Money Talk on BNN TV!

Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show live on Wednesday night (it was recorded on Monday). As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. ~ Ilene

 

The replay is now available on BNN's website. For the three part series, click on the links below. 

Part 1 is here (discussing the macro outlook for the markets) Part 2 is here. (discussing our main trading strategies) Part 3 is here. (reviewing our pick of th...

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Market Shadows

Kimble Charts: South Korea's EWY

Kimble Charts: South Korea's EWY

By Ilene 

Chris Kimble likes the iShares MSCI South Korea Capped (EWY), but only if it breaks out of a pennant pattern. This South Korean equities ETF has underperformed the S&P 500 by 60% since 2011.

You're probably familiar with its largest holding, Samsung Electronics Co Ltd, and at least several other represented companies such as Hyundai Motor Co and Kia Motors Corp.

...



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Mapping The Market

S&P 500 Leverage and Hedges Options - Part 2

Courtesy of Jean-Luc Saillard.

In my last post (Part 1 of this article), I looked at alternative ETFs that could be used as hedges against the corrections that we have seen during that long 2 year bull run. Looking at the results, it seems that for short (less than a month) corrections, a VIX ETF like VXX could actually be a viable candidate to hedge or speculate on the way down. Another alternative ETF was TMF, a long Treasuries ETF which banks on the fact that when markets go down, money tends to pack into treasuries viewed as safe instruments. In some cases, TMF even outperformed the usual hedging instruments like leveraged ETFs. There could of course be other factors at play since some of 2014 corrections were related to geopolitical events which are certain...

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Pharmboy

2015 - Biotech Fever

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

PSW Members - well, what a year for biotechs!   The Biotech Index (IBB) is up a whopping 40%, beating the S&P hands down!  The healthcare sector has had a number of high flying IPOs, and beat the Tech Sector in total nubmer of IPOs in the past 12 months.  What could go wrong?

Phil has given his Secret Santa Inflation Hedges for 2015, and since I have been trying to keep my head above water between work, PSW, and baseball with my boys...it is time that something is put together for PSW on biotechs in 2015.

Cancer and fibrosis remain two of the hottest areas for VC backed biotechs to invest their monies.  A number of companies have gone IPO which have drugs/technologies that fight cancer, includin...



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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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