Malkiel

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    • Wed Mar 19th 12:45 PM
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      Buying in the Crisis
      While buying now would not be a wrong idea for the very long term, there's a lot of risk on account of situations like Bear where the writing wasn't on the wall of publicly available information, or of long-term risk imposed by dollar devaluation (even companies that make corn flakes can't prosper when corn prices are skyrocketing).

      I'm of the firm conviction that the only catalysts for improvement out there are good April real estate sales, or, if that fails, then the November election. If real estate sales disappoint then I firmly believe we'll see a downleg that offers even better "discounts" this Summer. Until then, cash is trash, so your best investment is probably in material goods you were going to buy anyway, like a new car or an lcd tv...
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    • Wed Mar 19th 12:33 PM
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      Dispelling the Financial Myths Behind the Credit Crunch
      I agree with the Soprano. Dr. Freud can see that Mr. Lee's own insights are based so largely on the simple myths that are close to his own heart that he lashes out at all competing facts as myth, a classic reversal. It would take more of my bosses' time to contest his facts than I dare take, so let's just point out that the non-subprime borrowers who took out ARM's for equity or HELOC holders who are losing their credit lines because their equity declined don't exactly fit the pristine notion of people who bought a house they couldn't afford. And the pullback in consumer spending starting in the fall looks more like mass behavior based on a type of fear we call caution rather than specific financial calculations...
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    • Wed Mar 19th 12:20 PM
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      An Abundance of Bottom Calling
      I see no catalyst for believing the conditions that are upsetting the market--tight credit, consumer pullbacks, borrower collapse, lender collapse--are mitigating. Our next chance at a catalyst will be real estate numbers reported in May for April (unless you're savvy enough to sound out real estate professionals in the trenches as the season begins). If we're having a "silent Spring" for sales then the next catalyst would be the November election. A failure of Spring home sales would guarantee another downleg before the election...
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    • Wed Mar 19th 12:00 PM
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      Analyzing Fed Critic Paul Kedrosky
      Many commentators from the financial industries are clueless about the nature of the FED and Treasury as political entities because they are trained and educated in an environment where simple-minded anti-government rhetoric reigns supreme. Everyone around them will toss off pejorative phrases like "government regulation" and "government gone wild" as unexamined truths, so everyone is excused from having to put any serious thought into what is more rightly called the "public sector" and is an integral and indelible part of the economy, even a capitalist economy.

      Though the FED is quasi-independent of the Executive branch it must unfailingly consider the sentiments of Congress and the Executive when deliberating its moves. Treasury is not independent of the Executive Branch, and we saw how quickly Paulson had to snap his "no bailout" rhetoric to line up with Bushes' 180-degree turn on that subject a couple of weeks ago. Understanding the deference the FED feels it must pay to Congresses' preferences would go a long way toward understanding what priorities they will mark off in the future. This is why the commentators who talked in the Fall about holding the line with no interest rate drops were doomed to be wrong; Congress and the President were under pressure to act, so inaction was not an option, regardless of objective discussion of the effect of the action. Bernanke got it about the political nature of the FED long before any of you guys did, academic though he may be...
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    • Fri Mar 14th 16:11 PM
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      Bearish Bloggers Too Optimistic!
      Unlike past recessions, monetary policy doesn't seem like it's going to work here, because there's no field of safety in the bond arena. Parties holding cash need to put it to work somewhere since inflation is making it a wasting asset, but there isn't a good place to go. The only catalyst for change anywhere on the horizon is the November election, which is a long way away. I think we'll have at least one day with an intraday Dow low below 10k before November...
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    • Thu Mar 13th 12:48 PM
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      Why Bonds Are Unloved by the Media
      It's never helpful when an obscure field obscures itself even more by using its own lingo in public, regardless of how simple the concept may be. Why use "basis points" instead of "percent" in public reporting? It just adds another layer of misunderstanding on an unschooled public. I notice that even NASA has given up describing its shuttle launch progress in nautical miles, which are technically correct (a unit of measure taken from the division of the earth as a circle) and resorted to simply using the term "miles" (the statute mile based on the distance a Roman soldier in Britain could cover in 1000 paces) because it created more confusion than it was worth for public broadcast...
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    • Tue Mar 11th 12:36 PM
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      Markets Look Set Up for an Ugly Fall
      The last time we had a president as do-nothing as Bush it was Hoover, who allowed the market to crash. The market and Main Street have already concluded that Bush and the Republican-obstructed Democratic Congress is incapable of putting together a focused effort to save the economy, so the only identifiable change in news could come in November, when the election changes the tone. Until then, we are psychologically set up for an overcorrection,--my guess would be at least one inter-day collapse below 10,000...
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    • Tue Mar 11th 12:27 PM
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      Household Struggles Trump Macroeconomic Indicators
      I'm in a position in life to understand the economy better now than in my youth, and the lesson I'm taking away from this one so far is that the keepers of the economy--government entities like the Fed and Treasury, and the big Wall Street banks or funds--are content to rely on trailing indicators to decide how the economy is trending, and are thus unable to tell us where we're headed until we already know we're there. I knew we were in economic trouble in September because I was caught up as a consumer in the house buying/selling horror and could see how it was gripping the imagination of everyone at street level around me. I could also see evidence of small businesses paring back purchasing and hiring, or stocking less goods, as a prudent measure. And of course we've all been abusing credit for so long that we must have seemed bulletproof to the pro's, but at ground level we all knew that refinancing mortgages kept the credit card balloon from blowing up in our faces.

      So in line with Lee's thinking I suggest the pro's need some better ground-level indicators if they hope to be proactive before the next recession. Ground-level indicators will also help us know when we can invest again to dig out of the present downturn...
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    • Tue Mar 11th 12:12 PM
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      The Real Issues Behind Declining Home Equity Levels
      The important detail that keeps getting lost in these discussions is order of magnitude. People who have suffered a 20% decline on a "normal" (i.e., priced with range of median income) home aren't going to panic and default, while a person who can keep up with the monthly payments on a bubble-priced home may be right to cut their losses if the price of the home was so inflated as to be almost unreachable again in the future. A modest starter home with no advantages (space, location, amenities) which was bought for $800,000 in a Los Angeles neighborhood may be on its way to returning to a $200,000 pumpkin, and the homeowner has no prospect of pulling out hundreds of thousands of dollars in equity again in 10, 20, or even 50 years. Walking away is the only preservation tactic to save that future income in some other retirement nestegg...
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    • Fri Mar 7th 18:07 PM
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      Gold Pulls Back - Is There a Deeper Correction Ahead?
      "All the fundamental reasons to hold gold are still in place"??

      You mean all those instances in the last 12 months when gold was supposed to go up but went down instead? Like last April's big market swoon, or the inflation of commodities over the last half of the year, or the collapse of the dollar? Gold doesn't have any valid fundamentals any more because it's always held in leveraged form now and ends up being dumped at discount to meet margin whenever there's a crisis. By the time you get to $2100, which is what some of the other gold bugs were predicting for LAST YEAR, inflation will have dropped your investment back to current value. Even Indian weddings aren't reliable for raising the value of this most worthless of commodities any more...
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    • Fri Mar 7th 11:26 AM
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      Federal Reserve: Household Equity at All Time Lows
      With all of the new lending options that came onto the market in the last 10 years--easy refinancing for home equity withdrawal and reverse mortgages for the aging populalation--we would have been creeping toward this anyway, even if housing prices had just hit a ceiling rather than collapsed. This decline is also related to the decline in American savings, reported last year as having fallen below 0% for the first time last year (though those figures exclude investments, making them less dire, but the trend is still there)...
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    • Fri Mar 7th 11:16 AM
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      In Defense of Peter Lynch: Government Barking Up the Wrong Tree
      The usual apologies for corruption from the usual sources. If a Magellan shareholder who makes a working wage can't walk into the brokerage to get concert tickets, then the big guy can't. Judgement is what we're paying for here--for every Peter Lynch the rules also apply to an Andrew Fastow, for obvious good reasons...
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    • Fri Mar 7th 11:12 AM
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      8 Reasons To Buy Apple Stock Now
      While it wouldn't be a mistake in the long run to buy shares now, no company, not even Apple, is going to be able to swim against the next downleg of the market which we know is coming between now and November. Why not wait a few weeks or a month or two for an even bigger discount?
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    • Fri Mar 7th 11:08 AM
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      Banks Using Leverage to Force Home Equity Repayments
      If "borrowers with strong credit" are the ones doing the refinancing then they are not "subprime" borrowers, are not the intended targets of bailout, and probably only took on an ARM in order to milk equity. They should be forced to clean up their second liens and outstanding balances in exchange for the consideration they're getting. At the end of it all they're getting to continue living in some of America's most exclusive or even luxurious housing in some of the most desirable locations. Privilege has its price...
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    • Fri Mar 7th 11:01 AM
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      Here's Why the Fed Has No Credibility
      You're point was a little too subtle (or perhaps obviously invalid). Exactly how is the information you presented evidence of a Fed credibility problem?
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