Who Should You Believe About This Market
I am smart enough to realize I am not as smart as many others who follow the market from a wide variety of perspectives - from that of a value investor such as Warren Buffet, a technician such as Louise Yamada, a market historian such as Peter Bernstein and so on. And those three, I like. But most - and occasionally dear Warren - are still falling prey to the belief we are in a very deep recession - but a sort of typical recession nonetheless. In fairness to the Sage of Omaha, you can see he is changing his mind every few months about this issue.
The problem is, we are not in that kind of recession - we are somewhere between a Great Recession and a modern, Low-Pain Depression.
• Housing prices have fallen 27%, will probably fall more than 40% peak to trough.
• The market is down just less than 50% -- and will probably fall another 20% or so.
• The world, last year, lost $50 trillion in wealth - the equivalent of one year of GDP for the entire planet.
• The US last year, lost 18% of its wealth.
• We are losing more than 600,000 jobs per month. Add the unemployment rate to the number of workers who have stopped looking and the number who are working part time and want to work full time and we are near an eye popping 20%. Add the number of people in our prison population - compared to the Depression and add the number of people in our military, again compared to the Depression and we are near 25% part of full time unemployment - what it was at the height of the Depression.
What the experts - and I do not say that pejoratively, many of these people have been more than right more than most - are missing is the change in attitudes, among individuals and businesses, this kind of recession or depression or downturn brings with it and the consequences for economic growth. And for this reason many are prognosticating about an economic rebound that will not occur with any vigor, Curiously, many of the same people are talking about a flat market for five years or more - as if they have more confidence in their market forecasting than their economic crystal ball.
My point? When doing any analysis using others' analyses, check out their complete point of view. Try to see what they see. And besides turning back here - of course - check out four analysts I have written about in other places, notably optionszone.com.
Meredith Whitney - the diva of banking stocks, I had the good fortune to meet Ms. Whitney the day the bank stocks broke - because of her, actually. She is calling for another downturn in bank stocks, the eventual restructuring of the big banks, more write downs this year and a lack of a return to normalcy in credit markets for a while. Check her out in the recent Fortune cover story or the December Portfolio article - "The End", by Michael Lewis. http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom
Ivy Zelman - the diva of the housing and related stocks, she called the downturn in housing long before others and sees a larger mortgage mess looming from Alt-A mortgages, option ARMS and the good and prime borrowers now hit by the recession and upside down mortgages. My favorite piece on her can be found at http://www.housingchronicles.com/2008/05/poison-ivy-zelman-on-false-hope-for.html. She is also on CNBC< you can find it at http://www.youtube.com/results?search_type=&search_query=Ivy+Zelman&aq=f
Stephanie Pomboy - the diva of macro credit markets and in part economies, she called the credit bubble long ago. Ms. Pomboy believes the consumer in the US is permanently de-leveraging, which has massive consequences not just for the US but for the world, and sees average GDP growth of 1% or so for "five to ten years." The last major interview I found was in Barrons - it was great. http://online.barrons.com/article/SB122912505428802977.html?mod=googlenews_barrons
Louise Yamada - the diva of technicians, arguably the best technician on the planet, she also looks at fundamentals and sees the bricks of the S+P 500 earnings - the earnings of each company - falling out of place and an S+P between 400 and 600 sometime in the future. She is on CNBC Fast Money now and again. A video on YouTube you should check out is http://www.youtube.com/watch?v=M2HIM3HFXXI
Forget the others - these four - all agnostic, no perma-bears or perma-bulls, all four independent analysts not driven by the needs of an investment bank - are the best.
