Phoney Rally Continues
Posted by Eddy Elfenbein on June 11th, 2009 at 3:25 pm

The fraudulent short-term bear market rally that’s being propped up by the New World Order is now three months old.

There’s still 30 minutes to go before the bell but the market made another post-March high today. The high point was 43% above the March 6 intra-day low of 666.79.

Barney Frank Runs Away from Tough Questioning
Posted by Eddy Elfenbein on June 11th, 2009 at 10:02 am

Barney Frank was just on CNBC. I’ve started a game of watching at what point Frank goes into his overly dramatic routine that he’s being interrupted and not allowed to answer the question. He does this all the time.
Fortunately, this time he was up against Mark Haines who doesn’t put up with his nonsense. I don’t think Congressman Frank understands that he’s not the chairman everywhere in the world. It’s pretty sad: You put a gavel in some people’s hands and it goes to their heads.

The fun begins at 4:50. Haines asked a perfectly reasonable question. In Frank’s response, he asks Haines a question (two actually) to which the anchor responded. This set Frank off.
Frank has perfected this gimmick. He’s given a question that he doesn’t want to answer so he goes off on a tangent and simply filibusters. When the interviewer tries to get him back on topic, he acts outraged.
I think a reasonable person could call this interrupting. Personally, I wouldn’t. It’s simply part of the give-and-take of any conversation. Still, if Frank were truly interested in addressing the question he could respond with a firm “I’m getting to that,” or about a hundred other ways. Instead, he erupts and brings the conversation even further from an answer — and gets to play the victim to boot.
Congressman Frank is a bully pure and simple and today he was put in his place.
I’ll see if I can find clips of his previous antics. Here’s one from yesterday: 6:22 on June 10

S&P 500 Inches Away from Passing Gold
Posted by Eddy Elfenbein on June 11th, 2009 at 9:55 am

The S&P 500 is currently just shy of the price of the gold. If they cross, I believe this will be the first time since April 17 that the S&P was higher than gold.
You can score one for the technical analysts because the two lines seem to be eying each other. April 17 was the only day since the inauguration that gold closed below stocks.

Something to Think About
Posted by Eddy Elfenbein on June 10th, 2009 at 7:55 pm

The suitor forced on Chrysler is named after a word meaning “authoritative and arbitrary command.” The term comes from the Latin fiat meaning “let it be done.”
(HT: Gary Alexander)

Taleb Watch
Posted by Eddy Elfenbein on June 10th, 2009 at 11:48 am

I think folks are beginning to catch on to what I and others have been saying for a long time—Nassim Taleb is fantastically overrated. He was on CNBC this morning:

The Obama administration’s attempts to fight the financial crisis with more cash is like treating a bad tooth with Novocain instead of a root canal, Nassim Taleb, author of “The Black Swan,” told CNBC Wednesday.
The main problem is the level of debt, and Taleb compared the authorities’ efforts with those of a not very skilled pilot who is trying to land a Concorde on a narrow strip, between an ocean of deflation and a mountain of hyperinflation.
“These people failed us, they’re going to fail us again,” Taleb told “Squawk Box.”
“They tell the banks to lend more but have less leverage,” and expect people to go out and consume while unemployment is rising, he added.
“The way to restart everything is restructuring, conversion of debt into equity, convince people that debt is not good,” Taleb said.
“Do not delay a root canal,” he added. “Don’t do piecemeal solutions to a problem that is fundamental.”
“The solution is there, convert debt to equity. Usually it happens with Chapter 11, let’s do it faster, and across the board,” Taleb said.

So China is to take an equity stake in the U.S. government?

Peter Schiff on Jon Stewart
Posted by Eddy Elfenbein on June 10th, 2009 at 8:27 am

Peter Schiff appeared on Jon Stewart’s show last. Unfortunately, it was a softball interview and Stewart bought the now-disproven line that Schiff was right. Dan Gross recently referred to Stewart as the most relevant financial reporter on television. He wasn’t last night.

Home Depot Raises Guidance
Posted by Eddy Elfenbein on June 10th, 2009 at 8:13 am

Interesting news out of Home Depot (HD) today. The company raised FY 2009 earnings guidance. Or more accurately, they said the earnings decline won’t be as bad as they originally thought.
Last year, HD earned $1.78 a share. In May, the company said that it expects to see EPS fall by 26% and sales to fall by 9%. That translates to full-year earnings of $1.32. Today they said to expect EPS to fall by 20% to 26%. A 20% drop works out to $1.42 which is slightly above Wall Street’s consensus of $1.40.
Make no mistake, this isn’t great news but it’s not awful and all the news until now has been awful. HD’s earnings peaked in 2007 at $2.83 a share so we’re going to see earnings fall in half—so has the stock price.
At its current price, I wouldn’t say Home Depot is a good buy, but it’s not unreasonable to see year-over-year earnings increases within a few quarters. If there’s more good news from HD, it could be a good buy before the end of the year.

The Market’s P/E Ratio Surges
Posted by Eddy Elfenbein on June 9th, 2009 at 12:21 pm

Here’s a look at the S&P 500 (black line, left scale) and its earnings (gold line, right scale).

The two axes are scaled at 16-to-1 so when the lines cross, the market’s P/E Ratio is 16. I think we’re at an interesting point where the stock market’s P/E Ratio doesn’t tell us much. The market has clearly sensed signs of recovery even though earnings are still plunging. As a result, the market’s P/E Ratio has jumped about 50% since March.
Does this mean that stocks are valued 50% more favorably? Not at all. I think the market is getting a better sense of where earnings will bottom. Analysts currently see earnings reaching a trough of about $38 for the third quarter. I can’t say if that’s right but it does seem reasonable.
The fourth quarter of 2008 was awful so once we get that behind us, the trailing earnings picture will look much better. According to S&P, AIG took out over $5 all by itself. The current outlook is that the S&P 500 will earn $54 for 2009. That strikes me as high but not out of reach.
For 2010, Wall Street sees earnings of $73.56. At 16 times earnings, that means an S&P 500 at 1177 which is about 25% higher than we are now.
One other point to note: Analysts have not been very good at getting earnings right. In a few weeks we’ll close the books on Q2. One year ago, Wall Street was expecting Q2 earnings of $26.73. Now they’re expecting just $13.49.

Treasury OKs TARP Repayment
Posted by Eddy Elfenbein on June 9th, 2009 at 10:36 am

The Treasury Department has announced that it will let 10 banks repay their TARP money. This is, of course, the money generously provided to banks that didn’t want it in the first place.
The entire stress test and TARP money was simply to prop up two banks, Citigroup and Bank of America. Perhaps others, but those were the two main suspects. The government couldn’t say that outright so they needed to play as if they were going to help out all of the largest banks. So all the big boys got dragged into this mess.
The Treasury hasn’t said what the ten banks are but we can assume it will include the healthy guys like GS, AXP, STT and JPM. Personally, I’m more concerned with who won’t be on the list. For the banks left taking government money, they’ll now have to be under the Treasury’s compensation guidelines.
I’ll also be curious as to what the non-TARPers will do with their dividends.

Fruit of the Doom
Posted by Eddy Elfenbein on June 9th, 2009 at 10:17 am

This just in:

Alan Greenspan is a fan of men’s underwear sales as an important economic indicator.

(HT: Mankiw)