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

Greferendum Caption Contest: Two For The Price Of One

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

We were conflicted about today's choice of a caption contest to summarize what was the most surreal day in modern European history: a day in which one nation voluntarily made the choice to take steps toward a severance of its ties with some 18 other nations through what was recently seen as an "irreversible" currency.

So here are the two choices for today's caption contest: we leave it up to readers to decide which is more appropriate.

And:

...

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Phil's Favorites

Reactions To The Greek Referendum

 

[Picture Source: Drudge Report Headline]

GREECE SAYS 'NO'; THOUSANDS CELEBRATE; EMERGENCY SUMMIT CALLED

By Business Insider

Greece voters overwhelmingly rejected the latest bailout package from European creditors in Sunday's referendum. 

According to preliminary figures from the Greek government, 61% of Greeks voted "No" (Oxi) to a bailout package that would enforce greater austerity measures, while 39% voted "Yes."

The landslide victory for the "No" campaign is a major s...



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Digital Currencies

Bitcoin Surges After Initial Forecasts Show "No" Vote Ahead

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

If the early bitcoin markets are an indication of what will happen once New Zealand opens for illiquid FX trade, it will be a risk off kinda day.

And that doesn't even take into account the pandemonium that will be unleashed in China in a few hours after the PBOC just went all-in to halt the crashing stock market. What if it fails to get a green close before tomorrow's US open?

Source: ...



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Insider Scoop

Russian Inflation Expected To Continue To Fall

Courtesy of Benzinga.

Related RSX Russia's Gazprom Reportedly Shuts Off Gas Delivery To Ukraine ETF Investors Aren't Afraid Of Greek Default Snake Oil Stats (Seeking Alpha)

In a report published Friday, Barclays analyst Daniel Hewitt explained that the infl...



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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

China's slowdown is bad news for the world's big industrial exporters (Business Insider)

China's slowing economy is a serious concern for the economies of the nearly 50 nations that count China as their top export destination.

According to economists at UBS, not only will it impact the countries where the goods are coming from, but individual industries will also be hit harder than others.

Brett Arends's ROI: Why I’d vote ‘no’ ...



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Chart School

Chinese SSEC rally with Wyckoff Logic

Courtesy of Read the Ticker.

Supply and demand is the leading force within stock prices, you must know the tea leaves. Richard Wyckoff logic is the only known method of understanding supply and demand with the stock market.Readtheticker.com provides all the tools you need to be a Wyckoff master analyst.More from RTT Tv

NOTE: readtheticker.com does allow users to load objects and text on charts, however some annotations are by a free third party ima...

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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

Shanghai index creates historic reversal pattern like 2007

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

Much of the attention around the world seems to be revolving around a small country called Greece. What about the most populated country in the world (China), any key messages coming from there of late?

Well another Month, Quarter and Half a year are in the books. With this in mind I wanted to look at Monthly action of the hottest stock market in the world, the Shanghai Index. Above looks at the Shanghai index over the past 25-years. The 100%+ rally over the past year has pushed the Shanghai index up to its 23% Fibonacci ratio and a long-term resistance line, that has been in play for 25-years at (1) above.

As the Shanghai index was hitting this...



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OpTrader

Swing trading portfolio - week of June 29th., 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: Bulls under the gun to muster troops, while bears lie in wait

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

Courtesy of Sabrient Systems and Gradient Analytics

Two weeks ago, bulls seemed ready to push stocks higher as long-standing support reliably kicked in. But with just one full week to go before the Independence Day holiday week arrives, we will see if bulls can muster some reinforcements and make another run at the May highs. Small caps and NASDAQ are already there, but it is questionable whether those segments can drag along the broader market. To be sure, there is plenty of potential fuel floating around in the form of a friendly Fed and abundant global liquidity seeking the safety and strength of US stocks and bonds. While the technical picture has glimmers of strength, summer bears lie in wait.

In this weekly ...



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Pharmboy

Baxter's Spinoff

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

Baxter Int. (BAX) is splitting off its BioSciences division into a new company called Baxalta. Shares of Baxalta will be given as a tax-free dividend, in the ratio of one to one, to BAX holders on record on June 17, 2015. That means, if you want to receive the Baxalta dividend, you need to buy the stock this week (on or before June 12).

The Baxalta Spinoff

By Ilene with Trevor of Lowenthal Capital Partners and Paul Price

In its recent filing with the SEC, Baxter provides:

“This information statement is being ...



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Mapping The Market

An update on oil proxies

Courtesy of Jean-Luc Saillard

Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself. 

Since...



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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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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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