FDIC: The Lady Doth Protest Too Much

Investment rule: The more they tell us not to worry, the more there is to worry about.





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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Quote Of The Day: Qin Xiao and Chinese Bubbles

This quote comes from a Financial Times story entitled, "Top China banker warns on asset bubbles." What I most appreciate is that I can't imagine a top U.S. banker saying this. From the article:

China needs an “urgent” tightening of monetary policy to prevent the huge stimulus measures introduced this year from inflating stock and property bubbles, one of the country’s leading bankers has warned.

Qin Xiao – chairman of China Merchants Bank, the country’s sixth-biggest – says in Thursday’s Financial Times that the government should not be afraid of a “moderate slowdown” in the economy.

“Monetary policy must not neglect asset-price movements,” he writes. “Therefore it is urgent that China shifts from a loose monetary policy stance to a neutral one.”

Of course, this doesn't mean that the authorities will be immediately changing policy (though they should). However, if they continue their loose monetary policy, their stock and real estate bubbles will get out of hand. The higher they run, the harder they'll fall. It'll be interesting to see how the authorities walk the fine line between encouraging employment growth and asset bubbles and intentionally (and responsibly) slowing economic activity. Regardless, the fact that a private sector leader can so freely, frankly, and intelligently speak his mind is refreshing, even if it's coming from half-way around the world.


Disclosure: We recently sold our China equity exposure.

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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Video: The Button

I like to think of the cast as follows:

• Mr. Mathison is Goldman Sachs
• "Someone somewhere in the world..." is the American taxpayer
• The button is Congress
• The million dollars is the bailout

The Button - watch more funny videos

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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Chart Of The Day: Dow Breaks Through...7500?

My clients often hear me harp about inflation and the importance of looking at returns and performance on a real basis (taking out the impact of inflation). Today's Chart Of The Day comes compliments of the folks at Zero Hedge. While everyone was celebrating yesterday's close above 10,000 for the 12th time (by my rough count) in the last decade, let's not lose sight of the fact that the Dow is down 25% over the last 10 years when adjusted for the value of the dollar.

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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

A Saudi Oil Subsidy?

Saudi Arabia is proposing that the developed world compensate the kingdom for any global warming-related decline in the demand for crude oil. You have to love the thinking: We expect to be paid a lot of money for our oil one way or another. Either demand outstrips supply and prices stay high, or demand falls short and you make up the difference. Heads I win. I said heads I win.

Maybe we should just subsidize everyone anytime demand for their product falls. Perhaps we should have been paying off the buggy whip manufacturers these past 100 years since they were unfairly disadvantaged by the automobile firms. Should we all compensate Canada if we ever stop building houses out of lumber? Or bail out the French if people stop drinking wine? Or compensate the U.S. if... Bad example. The only thing we're good at manufacturing these days are loans and dollar bills.

Of course, the Saudis can't really be serious. They'd still be a fourth world backwater sand lot if it weren't for oil. They've had decades to put that wealth to work in diversifying their economy rather than paying off all of their princes. I think their latest census showed one out of every three people was a prince. The other two either worked for a prince or were a king.

The Saudis know that this proposal will never fly, but this is how you negotiate. You never come to the table with what you reasonably expect. If I want a new set of golf clubs, I don't ask my wife for a new set of golf clubs. I tell my wife that we should sell the house and buy a newer more expensive home right on the golf course. Voila. I get a new set of golf clubs.

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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Quote Of The Day: Elephant Cheeks

This speaks for itself.

Many people attempt to be analysts or economists, yet they speak without having real experience, and they fail to see that they are really nothing more than a fly on the ass of a big elephant. They do not realize they are even sitting on an elephant and worse still, they do not understand what is an elephant.

Martin Armstrong

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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Quote Of The Day: Frankly Stupid

Courtesy of Calculated Risk:


“I don’t think it’s a bad thing that the bad loans occurred. It was an effort to keep prices from falling too fast. That’s a policy.”

Barney Frank, chairman of the House Financial Services Committee on recent FHA lending.


I wonder if, as the words came out of his mouth, Mr. Frank thought, "I can't believe I'm saying this." So, bad loans are fine so long as they're made in an attempt to manipulate the market for the benefit of the U.S. taxpayer...who will be saddled with repaying those debts once they blow up. Apparently, we shouldn't concern ourselves with the wisdom of government action so long as they mean well.

Here are some other policies.

• Barney Frank, Congress, and the FHA do not know the "right" level for home prices, so they should stop trying to manipulate the housing market.
  
• Do unto others before they wise up and vote you out of office.
• Don't rob Peter to loan the money to Paul for a new home. Paul is broke. He needs to move back in with Mom and rebuild his savings.
• Speak softly and...actually just stop speaking.

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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Who Is Worse? Cramer or a $500 Per Hour Psychic?

I seldom struggle for words. Fortunately, this video clip from Jim Cramer's TheStreet.con (not a typo) speaks for itself. At least we now have a better idea where Jim's investment ideas come from.

There are many potential anecdotal signals of an impending secular bull market. One would be for CNBC to be taken off the air. Another would be for Cramer and TheStreet.con to simply disappear. My crystal ball tells me this will eventually happen. That prediction was free.

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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Dilbert: Plunge Protection Team

Clear signs of a manufactured rally:

• stocks rise on low volume
  
• the market is dependent on a global liquidity bubble
  
• the private sector is flat-lining
  
• cartoon dogs have a better grasp of reality than most portfolio managers

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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Today Only! New-Car Sales Report Out! Hurry! Don't Miss It!

I wrote a brief piece a few days ago about the cash-for-clunkers program and how it would simply pull sales forward rather than stimulating any sustained demand. The first piece of evidence came out today with the release of new-car sales.

From the New York Times:

After two frenzied months during the government’s cash-for-clunkers program, new-vehicle sales in the United States fell in September back to the levels seen earlier this year, automakers said Thursday.

General Motors said it sales declined 45 percent, and Chrysler reported a 42 percent drop from September a year ago.

Sales were down 20 percent at Honda, 13 percent at Toyota and 7 percent at Nissan.

Total industry sales are expected to be 23 percent less than a year ago, according to a forecast by the Web site Edmunds.com.

Those are big declines, but they shouldn't have surprised anyone. Free money is a powerful incentive, even if you had to go further into debt for that new car.

The clunkers program also cleared out inventories at many dealerships, leading G.M., Ford, and other automakers to increase production at some plants and call back thousands of laid-off workers to their assembly lines. Without a large selection for customers to choose from, many dealerships had more difficulty making sales in September than they would have otherwise.

Right. Sales were weak because there just wasn't enough inventory on hand. Ok. Sure. They can float that excuse for a month or two as they're busy ramping production to replenish inventory to meet this supposed burgeoning unmet demand. However, I suspect they'll soon be sitting on too much inventory, offering the latest excuse for weak car sales while aggressively lobbying Congress for Revenge of Cash-for-Clunkers. Here are a few potential excuses for next month's new-car sales report:

• Customers are eager to buy but are just dazed and confused by our huge inventory selection.
• Consumers were too busy cashing out their 401Ks to buy food, but they'll be back soon.
• With more people losing their homes we expect car sales to rocket any day now as folks are forced to live out of their cars.
• We just didn't have the right mix of inventory to meet the huge demand.
• We think we just didn't have enough balloons in the showroom to spur sales.
• It would have been a great month if our commission-based salesmen could have made more money selling cars than collecting unemployment insurance. But just wait til their insurance runs out!
  
• Coming soon! Zero down, $10,000 cash back, 1 year no-risk trial period, we'll babysit your kids every other weekend!
  
• Americans were too distracted trying to find American Samoa on a map.

We are very unlikely to see a sustained and strong improvement in new car sales, absent continuous government incentive welfare programs. Consumer debt is too high, unemployment is too high and rising, and job loss fears remain elevated. More and more people are discovering that you really don't need a new car every few years.

If only the car manufacturers had stuck to their earlier strategy of manufacturing a bad product that didn't last very long...

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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.