Fundamentally Speaking . . .
On Wednesday morn, Doug Kass opined:
Fundamentally Speaking
The fundamental problems with the market run deep.
We live in a world in which the consumer is spent-up, not pent-up. If you don't believe me, the Federal Reserve expanded on this subject last week. It is inevitable that the American consumer will cease its consumption binge of the last decade and begin to retrench and save as the one-time benefit of refinancing cash-outs slows to a trickle. A parabolic boom in housing prices in certain "hot" regions of the U.S. -- and abroad -- has stretched the relationship between household incomes to housing prices to levels never, ever seen in the last century. Spring 2006 will mark a substantive resetting of rates on adjustable-rate and teaser mortgage loans, pressing the consumer ever more. Our economy's foundation is based on an asset-appreciation dependency, compared to past cycles which relied on income and wage growth. I continue to reject the government's notion that inflation is in retreat. Inflation statistics delivered by the BLS are works of fiction, as stubbornly high energy prices, tuition, food, housing, commodities, insurance and other costs are serving to pressure the consumers' real disposable incomes. The 28-year high in corporate profit margins is unsustainable and likely to revert closer to the mean as (1) the benefits of four years of cost cutting subside, and (2) cost pressures overcome pricing power. A more hawkish Federal Reserve will raise federal funds to higher levels than the consensus expected. (Notwithstanding the results from various investor surveys) the body of investors to be overly complacent (with a high measure of bullish conceit) as fear and doubt had been driven from Wall Street.
>
Source:
A Second Shot Across the Bow?
Doug Kass
Street Insight,3/1/2006 8:39 AM EST
http://www.thestreet.com/i/dps/te/theedge1.html#entryId10271033
Friday, March 03, 2006 | 11:30 AM | Permalink
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Comments
It's not just adjustable rate moretages that are expiring.
Zero interest credit card balance transfers are pretty much all expired by January as well.
jp
Posted by: jp | Mar 3, 2006 11:37:51 AM
I agree with everything, but mostly with the "bullish conceit" remark :)
Posted by: Idaho_Spud | Mar 3, 2006 12:16:46 PM
Yep! That about sums it up. Someone please pass me the apple cart.
"Apples!!! Get your fresh apples here!"
will accept VISA MASTERCARD DISCOVER CASH JEWELS but keep you stock shares to yourself.
Posted by: David Silb | Mar 3, 2006 12:40:29 PM
"We live in a world in which the consumer is spent-up, not pent-up. If you don't believe me, the Federal Reserve expanded on this subject last week. It is inevitable that the American consumer will cease its consumption binge of the last decade and begin to retrench "
Doug Kass has been harping this for years. It is "inevitable." As in next quarter? As in before we die?
He needs to address his time table and have a target (as Barry does calling for H1 top). Until he does he will continue to be known as Doug "the twice right clock" Kass.
Besides, data points like Best Buy (the consumer binge store) has been showing that he has been wrong for years. Yet he never addresses this.
Posted by: Michael | Mar 3, 2006 12:51:48 PM
>>>Zero interest credit card balance transfers are pretty much all expired by January as well.
<<<
I applied for one earlier this year, and the page with 0% BTs still remains. Looks like there are still plenty of CCs with 0% BT introductory offers.
http://www.creditcards.com/low-interest.php
Posted by: Michael | Mar 3, 2006 12:54:16 PM
CHICAGO (Reuters) - Auto and truck parts maker Dana Corp. (NYSE:DCN - News) said on Friday that its U.S. operations have filed for bankruptcy protection, succumbing to declining production at large U.S. customers and high materials costs.
Another big supplier cratering. This just makes my stomach churn. So many people's livelihoods are permanently or temporarily destroyed. Got a buddy who works at this demoralizing heap.
Regional banks, especially midwestern banks, are cratering today. Double whammy of long rates and plenty of good news out of the automotive sector they rely on for customers. Now, maybe we can hear the experts squawk about how higher long rates may alleviate the yield curve inversion and how that will be good for stocks.
Posted by: B | Mar 3, 2006 1:09:01 PM
Apple!!! Get your Apples Here. Nice Fresh Apples!!!
Posted by: David Silb | Mar 3, 2006 1:22:58 PM
But B.
According to Wall St. this should be *good* news! The Dana company will get out from under any legacy costs, rehire the same workers for a fraction of the wages and benefits they were paying, and be ready to compete at the global (read Chinese) level.
You can either embrace change like David, or fight it. I'm selling pencils for one cent ;)
Posted by: Idaho_Spud | Mar 3, 2006 2:11:10 PM
Ok Mr. Simplot,
I'm not so sure we are going to have to compete with the Chinese. I think our politicians are going to try to do the world economy a big favor: Stamp it out.
The political tones of protectionism are really heating up. Sounds like the calls to stop the Japanese in the 70s. India, China, Dubai, it's bloody everywhere. You know, if this gets out of control, we could have bigger problems. I don't think it will but now we've got Republicans controlled by the military industrial complex spewing gibberish and even Pat "I hate all foreigners" Buchanan getting prime TV spots.
I'll take a box of those pencils. My buddy will likely need a job. Maybe he can resell them.............
Posted by: B | Mar 3, 2006 2:37:37 PM
If consumers retrench then government has to take over and find me a better excuse than to start a few conflicts... war has always been good for the US. Plus ça change, plus c'est pareil.
Posted by: D. | Mar 3, 2006 10:42:20 PM
want to live like a Republican? Then vote........(you know the rest)
Posted by: doug hammond | Mar 3, 2006 10:57:20 PM
