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  • The Economy & the Commercial Real Estate Bust

    This week, we take a fresh look at the latest economic reports, most of which have been positive and suggest that the recession is over and the economy is rebounding. Still, I expect that economic growth will only be mild in 2010, as I discuss in this week's letter.

    Our larger topic this week is the huge problem with commercial real estate debt, which could be the next shoe to drop in the credit crisis. Commercial real estate values have plunged apprx. 39% nationwide since the recession began, and some sources believe prices could fall another 20% or so before stabilizing. This is huge, but we don't hear a lot about it, even though banks are failing at an alarming rate as a result. This is a major problem you need to be aware of, so let's get right to it.

    ...

  • On the Economy & Obama's Trillions

    Most (but not all) of the economic reports over the last month or so have been positive, and more and more forecasters now believe that GDP growth will be slightly positive in the 3Q. Unfortunately, we don't get our first 3Q GDP estimate until the end of October. The latest GDP estimate for the 2Q was unchanged at -1.0%, which was better than expected. I will cover the latest encouraging (and not so encouraging) economic news just below.

    Next, on Friday, August 21, the Obama administration quietly announced that the White House Office of Management & Budget revised upward its long-term federal deficit projections to fall in line with those of the Congressional Budget Office. The White House finally admitted that its economic assumptions were too optimistic - to the tune of $2 trillion over the next 10 years. So now it's official - even President Obama admits he will more than double the national debt in the next 10 years, which will likely lead to another financial crisis.

    ...

  • Is The Recession Over? Don't Bet On It

    Over the last month, we have seen several encouraging economic reports: 2Q GDP was down considerably less than expected (-1.0%); the unemployment rate officially fell slightly in July to 9.4%; and the ISM manufacturing index posted a nice improvement last month. As a result, many forecasters have declared that the recession is over. This week, we will look at the latest economic reports which suggest that we've seen the worst of the recession, but do NOT mean the recession is over. I will also reprint excerpts from a recent economic and market analysis from Dr. John P. Hussman, of the Hussman fund family, which I think you will find interesting.

    ...

  • Recession May End But Growth Prospects Low

    Last Friday's better than expected GDP report has caused many forecasters to declare that the recession is ending. While I would say that it is still too early to declare that the recession is ending, the latest data strongly suggests that we've seen the worst of this recession and the credit crisis. Even if the recession is ending, economic growth going forward is likely to remain disappointing since the unemployment rate will continue higher for some time to come. We will look at the latest economic numbers and draw some conclusions as we go along. We will also look at the latest survey of over 100 large hedge fund managers and what they predict for the economy, stocks, interest rates, etc. It all should make for interesting reading.

    ...

  • Is America On The Road To Financial Ruin?

    Last Wednesday, President Obama announced the most sweeping financial industry reforms since the Securities and Exchange Commission was created in 1934. Obama unveiled new proposals that would refashion the federal rules governing almost every corner of finance, and will push the government and the Federal Reserve much more deeply into banks and the private markets. I will discuss these massive changes and tell you why I do not believe they will be good for the markets or investors, for the most part. We will also look at some new polls which indicate that more Americans are worried about President Obama's trillion dollar deficits than they are about the recession. Lastly, we will look at the latest economic numbers and what they mean. Let's jump right in....

  • Signs of the End of the Recession - Maybe

    While most of the latest economic reports remain quite bleak, we have seen a few modestly positive indicators over the last few weeks. In addition, the latest Wall Street Journal survey of 53 economists concludes - on average - that the recession will end by the 3Q of this year. If correct, that would be very good news. Yet the leading economic indicators (LEI) and the unemployment rate continue to worsen month after month. Thus, I continue to believe that we will be in this recession for the rest of this year. The Federal Reserve's latest Beige Book assessment agrees, unfortunately. This week, we will take an in-depth look at the latest on the economy, the credit crisis and when we might see an end to this recession. Finally, I will discuss the recent rally in the stock markets, and whether this is a new trend or simply a bear market rally. Let's jump in....

  • When Will The Bull Market Return?

    I'm going to be out of the office most of this week spending time with my son who is home from college on Spring Break. Since we live on Lake Travis near Austin, I'm sure he'll have me driving the boat while he and his buddies ski and wakeboard. That being the case, I'm going to reprint an excellent article by David Henry entitled "When Will the Bull Return?" David brings some good insights in to how stock market cycles work, and just how long it might be before the current bear market comes to an end.

    Unfortunately, Mr. Henry's note of caution is not being heeded by Wall Street. The Dow Jones Industrial Average (DJIA) climbed just over 9% last week, prompting many bull market cheerleaders to proclaim that the stock market has hit the bottom and its now on the way back up. While this may be true, it is also a fact that there have been many "market bottom" calls over the course of this bear market and, so far, they have all been wrong. After the article reprint, I'll briefly discuss why I think Wall Street so desperately needs a new bull market.

    Then, I'm going to share with you a way to begin introducing active management strategies into your own portfolio. By making "half a decision," you can test the waters of active management without totally abandoning other strategies that you may now employ. Buy-and-hold strategies are fatally flawed, so maybe its time you tried something else....

  • Why The Stock Markets Are Collapsing

    The US economy is in the worst recession since the Great Depression, and the latest economic reports have been even worse than expected. The US stock markets continue to collapse, with the Dow and the S&P 500 down well over 50% since the peak in October 2007. It is estimated that $10 trillion in wealth has disappeared in the US alone as a result of the stock market bust. Investors around the world are asking WHY? In my opinion, a big reason why the markets are collapsing is the trillions of dollars in new federal spending that President Obama has enacted. Plus, his record $3.55 trillion federal budget for 2010 will likely result in a deficit of over $2 trillion for fiscal 2010. I believe that this enormous spending, plus his other liberal plans that he intends to put in place this year, are serving to drive stock prices much lower than what should be happening. This is a lot to cover in one letter, so let's get started....

  • Obama Seeks Multi-Trillion Dollar Bailouts

    This week we start with a review of the latest economic data which indicate that the recession is still deepening. Following that, we will examine the $800+ billion stimulus plan that President Obama requested and the House passed last week. Unfortunately, apprx. two-thirds of that massive plan is pork-barrel spending that will not help the economy anytime soon or at all. Next, we will look at Obama's request for $1-$2 trillion to help the banking system. And finally, we will address the fact that the Fed is gearing up to directly purchase hundreds of billions of long-term Treasury bonds in case the massive bailouts don't work. It should be a lively letter!...

  • Economic & Investment Outlook For 2009

    As we kick off the New Year, let's review the latest dismal economic and financial data and the consensus views of what lies ahead in 2009 for the economy, the credit crisis and the markets. As you might expect, most of my trusted sources believe that the recession will be with us for a while, but there is hope that the economy will begin to bottom out sometime late this year - aided by more huge government bailouts that President-elect Obama has in store for us....

  • "Buy-And-Hold" Bites The Dust - Now What?

    While there has always been debate about the value of buy-and-hold investing, the last decade or so has really dealt a blow to this passive investment strategy. I have always said that the long-term statistics (some spanning 75 years or more) used by passive investing proponents to "prove" their point are totally unrealistic in relation to the actual time horizons of many investors. Over shorter periods of time, a buy-and-hold portfolio can suffer major losses, possibly right at the time investors need their money the most. Now is just such a time. After suffering through two major bear markets since 2000, individual investors and even many professionals are seeking out the kind of actively managed investment alternatives that I have recommended since 1995. This week, I'll revisit the perils of index investing, as well as provide a brief economic overview....

  • On The Economy And Active Management

    Recent economic reports continue to signal an economy that is spiraling into a recession. How deep and how long that recession may be is anyone's guess, but I think it's beyond question that a major slowdown is in our future. Of course, this also means sluggish corporate earnings, a depressed stock market and a lower demand for goods and services. With trillions of dollars of wealth now devoured by the subprime monster, the natural question is how to invest in an uncertain market. Fortunately, we have the answer for you as I will explain this week after reviewing some economic data. This is not an E-Letter that you'll want to miss....

  • Mortgage Bailout Passes, Finally - Now What?

    This week we take an inside look at the massive government bailout bill that was hastily signed into law by President Bush late last Friday. As taxpayers who are ultimately on the hook for the now $850 billion bailout package, we need to understand how this program is expected to work (or not work). So I will give you the latest details as we understand them. I also ponder whether the bailout is, or is not, the right thing to do. Following that, we will take a look at the latest Electoral Map which has shifted significantly in Barack Obama's favor, unfortunately. Finally, we will revisit Scotia Partners and update you on their performance in the latest stock market meltdown....

  • Might Uncle Sam Make Money On The Bailout?

    The entire country is in a tizzy over the massive government bailout plan. The credit markets have seized up even further, risking a real credit crisis or worse. Banks are dropping like flies. Yet the $700+ billion bailout was voted down yesterday in the House of Representatives. But it is far from dead. This week, I will summarize the latest bailout plan, both the good and the bad and the risks. Actually, there are some smart people who believe the government will make money on the bailout plan, maybe a lot of money. I'll explain that as well, although I don't necessarily agree. Hopefully, this week's discussion will be helpful. Let's jump in....

  • Uncle Sam's $700+ Billion Toxic Securities Fund

    The credit crisis has led to gridlock in the financial markets, and the stock markets have dropped like a stone. On Saturday, the Treasury Dept. and the Federal Reserve requested a massive $700+ billion bailout package that would allow the government to buy up troubled mortgage-related assets from banks and financial firms that are in trouble. Congress is reluctant to go along, but I expect they will provided they also get some money to help struggling homeowners and more oversight than the government offered initially. This week, we take a look at the latest enormous bailout plan and the latest government guarantee of money market funds. I also tell you why I believe we are now headed for a recession, and why I believe this huge financial mess will likely make Barack Obama our next president....
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