Tuesday, January 5, 2010
Some more missives of misdirection from the ursine camp
Yesterday, we heard about the 50% chance of Armageddon from the MadHedgeFund Trader that has ZERO chance of happening, and now John Hussman is at again, who only last month, told us there was an 80% chance of a second market plunge. In John's November missive he said this:
In my estimation, there is still close to an 80% probability (Bayes' Rule) that a second market plunge and economic downturn will unfold during the coming year.
Now where did he get these bearish balls? From none other, than those whose crystal balls are broken--David Rosenberg.
As Gluskin Sheff chief economist David Rosenberg noted last week, “Even if the recession is over, the historical record shows that downturns induced by asset deflation and credit contraction are different than a garden-variety recession induced by Fed tightening and excessive manufacturing inventories since the former typically induce a secular shift in behavior and attitudes towards debt, asset allocation, savings, discretionary spending and homeownership.
But now Johnnie come lately has set his sights on Fannie and Freddie--and this time he needs to quote Lenin to get his point across in January's letter:
“The best way to destroy the capitalist system is to debauch the currency.”
Vladimir Lenin, leader of the 1917 Russian Revolution
His revolutionary point is that the cap on Fannie and Freddie for mortgages is $300 billion
"LIMITATION ON AGGREGATE INSURANCE AUTHORITY.—The aggregate original principal obligation of all mortgages insured under this section may not exceed $300,000,000,000."
But now Treasury has given Fannie and Freddie unlimited financial support for the next three years in their Christmas Eve directive--oh excuse me--the Holiday Eve directive--I'd hate to offend anyone.
Treasury is now amending the PSPAs to allow the cap on Treasury's funding commitment under these agreements to increase as necessary to accommodate any cumulative reduction in net worth over the next three years.
Thusly, he concludes that Lenin reigns, and if you are holding stocks, he recomends that you jump out of the nearest window, providing its not on the ground floor:
What we do know is that stocks are overvalued even on the basis of normalized earnings, to an extent that exceeds nearly every pre-1995 level except 1929. Intermediate term conditions are strenuously overbought, investors (with advisory sentiment now down to 15.6% bearishness) are clearly overbullish, and interest rate trends are pushing higher...But the statistical regularity from overvalued, overbought, overbullish, rising yield environments is one of steep, abrupt market losses generally within a period of about 10-12 weeks.
Another shill seeing tracks on his back. Now he desperately hypes up the folly of his bearish case. And just to prove that Wall Street allows those wrong to pipe their opinions, David "forever bearish" Rosenberg, has a new shill piece, echoing the same.
Tax revenues are declining--let's forget about capital gains in the pipeline, the next great deluge for those stuck in their own great delusion because only the Government owns stocks! And he backs that up with this little graph--forget the prices on the board, what did the horse run in training?
And then Rosenberg comes up with this pithy diddy.
"Talk about a behavioural shift in approach. American investors pulled $2.8 billion out of equity funds in November, the third outflow in a row. Year-to-date, stock funds saw net redemptions of $4.1 billion despite a 20% up-year in the market, and this followed a $213.5 billion outflow in 2008. It may be safe to say that the equity cult is dead. When it makes it to the front pages of the tabloids, as it did in August 1979 with the now-famous BusinessWeek cover at that time, then maybe it will be safe to call for the true bottom three years down the road."
Did he ever think what would happen if money shifted into stocks? And why doesn't he count the short base? Who laid out their shorts, and are getting massacred each and every day? Oh that's right. Short covering isn't in these statistics, but why let the rel facts get in the way of a good story?
Even if it's in the pretend land of a couple shills?
Because that is all they are.
Just shills for the bears, pimping a story that won't come true, all dressed up in graphs and quotes, that will cost you money!!
Back in March of last year, I said it was open season for the bears. Back when people bought into their nonsense.
And that's still the only target worthwhile from these pundits and seers.
The target is on them!
Even if its Goldilocks that has to take them away!
Posted by Palmoni at 8:35 AM