• Morgan Says Sell Into Bear Market Rally
    Posted by on March 30th, 2009 at 11:49 am

    I’m not selling, but I think Morgan may be right. Stocks have climbed so much so quickly.

    Investors should sell into the recent stock market rally, Morgan Stanley’s strategist said Monday, arguing that it can’t last as corporate earnings deteriorate further.
    “We simply do not believe that the market has completely priced in the prospect of further earnings weakness or that it will, without interruption, look through this weakness to recovery,” Morgan Stanley strategist Jason Todd wrote.
    On March 18 the S&P 500 rallied 25% to above 800 points since its low of 666 on March 6 – a technical bull market – spurred by positive comments by bank chief executives about improving business conditions as well as a favorable market reaction to the government’s efforts to support the financial system.

    That’s right. The S&P 500 bottomed at 666.

  • The Golden State Fizzles
    Posted by on March 29th, 2009 at 7:18 pm

    California is not in good shape:

    California’s unemployment rate will soar to between 12 percent and 15 percent by next spring and remain in the double digits until at least the beginning of 2012, according to forecasts released by two teams of University of California economists.
    The state’s unemployment rate has not reached those heights since the Great Depression.
    The projections – one released today by UCLA’s Anderson Forecast, the other last week by UC Santa Barbara’s Economic Forecast – paint a grim picture of declining economic growth, lower retail sales, a troubled housing market and falling office prices lasting through much of 2010.
    “It looks like it will be a nasty recession, but not a depression, although the possibility that we could get to a depression has increased,” said Dan Hamilton, director of the UCSB forecast. “Every month and every quarter that goes by is noticeably worse than the month or quarter that went before.”

  • Weekend Reading
    Posted by on March 29th, 2009 at 3:12 pm

    There are many good articles this weekend. Here are a few:
    “The Quiet Coup” by Simon Johnson
    “Now the Long Run Looks Riskier, Too” by Mark Hulbert
    “It Pays to Understand the Mind-Set” by Robert Shiller
    “America’s liberals lay into Obama” by Edward Luce
    “Stocks Through a Wide-Angle Lens” by Lawrence C. Strauss
    Money quote from the last article:

    Now, while corporate-credit markets remain firmer than they were at their 2008 worst levels, debt values have backed up a bit without the close attention of equity markets. Bank-issued debt, in particular, has eroded in value without gaining much attention.
    As a result, once again (nominally) high-grade corporate bonds are looking rather attractive by several measures.
    J.P. Morgan Chase credit analyst Eric Beinstein last week noted that the high-grade bond benchmark is pricing in “a default rate of about 45%” over the next 10 years — and 10 years is the average life of the bonds in the index. He says this means a hypothetical investor could buy the components of the index, funding the purchase at the London Interbank Offered Rate, watch 45% of the bonds go bust, then recover only 20% of face value, and still break even for the decade.
    The worst 10-year default rate for high-grade debt since 1980, he says, was 5%, implying the market is building in truly cataclysmic credit losses, in part because liquidity in this market remains so scarce.
    This is an extended way of illustrating that — outside the ultra-high-quality slice of the market — corporate debt now should reward prudent risk-taking.

  • WaMu: Not Stodgy Old Banking
    Posted by on March 29th, 2009 at 2:59 pm

    I bashed this WaMu commercial a few years ago. Who really thinks a banker looks like Mr. Monopoly?
    In retrospect, perhaps WaMu should have paid attention to those stodgy guys.

  • Laid Off Wall Streeters Turning to Stripping
    Posted by on March 29th, 2009 at 2:53 pm

    From The New York Post (of course):

    Randi Newton, 28, who lives in Midtown, was a financial analyst at Morgan Stanley before the crash but was fired.
    “A few nights after I got laid off, I went with friends to a strip club to get drunk and forget my unemployment troubles,” Newton said. “The manager offered me a job as a dancer. I thought it was different. And fun.”
    Today, Newton, who calls herself an “independent contractor,” pole dances at Rick’s Cabaret in Murray Hill three or four nights a week and says she makes “$160,000 a year on tips alone.”

    You can read more about Ms. Newman as her blog, Wall Street Stripper.
    (HT: WSF).

  • Weekend Poll
    Posted by on March 27th, 2009 at 6:33 pm

  • Freeman Dyson: A Civil Heretic
    Posted by on March 27th, 2009 at 4:48 pm

    The New York Times profiles Freeman Dyson:

    Dyson is well aware that “most consider me wrong about global warming.” That educated Americans tend to agree with the conclusion about global warming reached earlier this month at the International Scientific Conference on Climate Change in Copenhagen (“inaction is inexcusable”) only increases Dyson’s resistance. Dyson may be an Obama-loving, Bush-loathing liberal who has spent his life opposing American wars and fighting for the protection of natural resources, but he brooks no ideology and has a withering aversion to scientific consensus. The Nobel physics laureate Steven Weinberg admires Dyson’s physics — he says he thinks the Nobel committee fleeced him by not awarding his work on quantum electrodynamics with the prize — but Weinberg parts ways with his sensibility: “I have the sense that when consensus is forming like ice hardening on a lake, Dyson will do his best to chip at the ice.”

  • Corporate Bonds Don’t Believe the Rally
    Posted by on March 27th, 2009 at 1:34 pm

    David Merkel makes a good point: The spread between corporate bond and stocks is getting pretty big. In fact, way too big. Corporates seem to be sitting out this rally. Bottomline: Anything that’s not a Treasury is looking pretty good here.

  • Banks and Toasters
    Posted by on March 27th, 2009 at 9:18 am

    Paul Krugman has a good op-ed today on the problems facing the financial industry. This one paragraph caught my attention:

    The market mystique didn’t always rule financial policy. America emerged from the Great Depression with a tightly regulated banking system, which made finance a staid, even boring business. Banks attracted depositors by providing convenient branch locations and maybe a free toaster or two; they used the money thus attracted to make loans, and that was that.

    He’s right. Banking has changed dramatically over the last 30 years. But that Golden Age wasn’t so golden. The reason banks offered toasters to new accounts wasn’t due to bad marketing, but due to outdated regulations. That’s the only way they could pass cost savings on to depositors.
    Free toasters from banks weren’t some happy relic of a bygone era, they were the one of reasons why the modern financial world came about. Interest rates were regulated and you couldn’t even pay interest on a checking account. Also, bank locations were far less convenient to today’s world with ubiquitous ATMs.
    Let’s not fool ourselves into thinking the past was better than it was. I think it’s much better for banks to be in the banking industry rather than the household appliance industry.

  • Did New Homes Sales Improve?
    Posted by on March 26th, 2009 at 9:02 am

    Barry Ritholtz has a great post on the supposed improvement in new homes sales.
    The media reported that sales grew up 4.7% in February, but that’s not what the government report said. The report said that sales grew by 4.7% plus or minus 18.3%. Um…that’s a pretty big plus or minus you got there.
    Barry quotes the Commerce Department, “the change is not statistically significant; that is, it is uncertain whether there was an increase or decrease.”
    Kind of a different story now.