…yesterday was Bern day…to day is a(n)ke day. A cheap pun true and not a very good one but that is the way it goes sometimes when one is trying to write and be creative. Now for some housekeeping, a few things TB has been meaning to comment on but his addled brain could not compute after staying up late to watch the PBS documentary “Carrier“.
First, over the weekend we saw reports of rising foreclosures, that nearly 20% of home sales are upside down or ’short sales’ where the home is worth less than the mortgage…not only are foreclosures and delinquencies rising but at an accelerating rate.
On Monday, the Chairman of OPEC said that if the dollar rebounds crude will drop to $60? See, it is all our fault…well it is starting at the Administration level…Clinton’s too…for a flawed energy policy…if there ever was one and now we are exporting food inflation to the rest of the world…including emerging markets…have you seen what is happening to rice prices lately? This could be a major cause of political upheaval and perhaps worse…and converting corn to ethanol will go down as the major factor which is raising prices of substitutes like wheat, and soybeans…now being substituted for rice in emerging economies especially China…chicken prices are up, and now hogs and cattle are being slaughtered early since the added value is not worth the cost of feeding them…wait till next year! Yet, nary a word from any of the three candidates…and that should scare you…again TB asks: where are the leaders?
On Tuesday, Maria Barteromo interviewed Eli Broad, founder of Kaufman and Broad Homes…now KB Homes, who said that this is the worst real estate market since the Depression and we are no where near out of it yet…who are you to believe? The Chairman Emeritus of the home building industry who has forgotten more about homebuilding than most of these morons will ever know or some overpaid Wall Street analyst or worse the National Association of Homebuilders? (Overnight, Bloomberg is reporting that home values in the Hamptons are declining – median sales price down 7.1% and sales off 29% in Q1` vs Q4 2007 - on slowing economy and Wall Street job cuts – 31,500 jobs and counting)
Yesterday and this morning, CEO’s of companies in several industries, especially autos…Chrysler’s Nardelli this morning on CNBC…expressed concern over declining consumer interest in autos. Yet we continue to be told…notably by Goldman Sachs…that consumers will spend at least half of those rebates. After all they did in 2001…don’t they get it? This is not a puny recession that most people never felt, and we have had virtually no income gains since…except at the top! TB will acknowledge that IF food and gasoline count as consumption…they do, in a broad and a narrow sense!
Also on Bloomberg this morning rising losses on CDO’s causing Fitch to overhaul ratings…in other words more downgrades ahead. The US economy probably grew at slowest pace since 2002. Not only is US Consumer Confidence at lowest level in decades, Europe has declined to lowest level since 2005 and inflation slowed to 3.3%…thought the rest of the world was supposed to carry the US? Not!
Now keep all that in mind as the FOMC meeting goes on and we wait with baited breath (originally ‘bated’ short for ‘abated’ or holding ones breath)…afterall, we only care about what the Fed does to rates don’t we? Who cares about them committing more than half their assets already to the credit crisis…and for what? …to rescue the 6th largest brokerage? True, it had to be stopped from collapsing and in turn causing the global financial system to implode but that was temporary. Besides, where was the Fed when the crisis was developing? Had Greenspan spent as much time ‘jawboning’ (the number one tool of the Fed), and stepping up surveillance of banks and their mortgage subsidiaries, we would not be in the mess we are today. Have we completely lost the ability to look beyond headlines? We already lost our ability to focus on one breaking news story at a time decades ago…logical progression?
So you can jump on the bandwagon with the stock market bulls if you like, but if it is as positive as they are telling us, then the basic rules of finance and investing are all in the trash can and revised. You know, like we financially engineered basic mortgagees until they had a mind of it’s own. Feed me, Seymour!
Now recall, as we are reminded everyday by CNBC’s Mark Haines that New York is the financial capital of the world but like with CNBC, it is by no means the intellectual capital of anything.
Last night, Carriers was much more positive…we got to see them in action but more stories on the background of the crew. TB checked with a Viet Nam era Navy F-4 pilot friend who said that even then ‘pilots’ referred to carriers as ‘boats’…a slap at the black shoe (surface navy) by the brown shoe (Airedales). TB would not trade the experience he had on an old WWII era 2100 ton destroyer (USS INGERSOLL DD-652), for the air-conditioned bunks with privacy curtains on carriers and even destroyers. The experience of controlling the guns on a warship…actually pulling the trigger that could release a salvo from four 5″ guns…of being in a typhoon for three days while the ship was rolling 45 degrees and more (although he would trade the two times he came close to being ‘man overboard’). His ship, which was proudly sunk by gunfire rather than be scrapped or sold to some Latin American country, was one of the last of the true ships: from the wooden ships of the turn of the 20th century to the four stacker destroyers to his, an Improved Fletcher Class built in 1942 where the only way fore and aft was outside, one deck above the main deck, which at times was a harrowing experience. That is why TB felt that women had no place on ships…they are no place to be politically correct…by the way he received five emails on that subject, all supporting his position…morale. On the Nimitz, fights were breaking out after just five days at sea…we would be out 30-45 days and your best friend might just belt you under those conditions…you didn’t need shipboard romances to interfere…at least TB doesn’t think there were any but these days one cannot be sure, can one? While the flying looks like fun, remember it is hot as hell in a cockpit loaded with electronics gear…and incredibly demanding…not to mention those pilot relief tubes…which had to be reengineered for today’s Navy…’nuf said.
TB was fortunate enough to see the best days in the Navy and the best in finance…no more fun.
Have a terrific day!
TB
Trader Bill thinks it is clear to anyone reading these missives that they are merely commentaries…as he sees it…and do not necessarily reflect the views of anyone other than his own. Information is gathered from sources he has found reliable, but no guarantees of accuracy are implied. These are merely observations of events in the marketplace offering in an attempt to offer a non-mainstream viewpoint. Hope you find it useful.
Copyright TBD Capital LLC April 30, 2008
