30 Years of Time Magazine Covers & the Stock Market

Monday, November 17, 2008 | 10:38 AM

The market makes the news — not the other way around.

Far too many investors fail to understand that. When the news is very negative, its usually AFTER the market has been deeply whacked. They are reporting what has already occurred; That’s their jobs.

My goal here isn’t to bash the Press (that stuff is silly). Rather, it is to show you that the media is not telling you what is most probably going to happen next. To investors, news mostly old — its pretty much history as far as sock prices are concerned. What matters most to your portfolio is what the near future holds.

As an example, consider this collection of Time Magazine covers.

Click through for 30 years of Time Magazine Covers.

Monday, November 17, 2008 | 10:38 AM | Permalink
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Worthwhile Reading

Sunday, November 09, 2008 | 12:50 PM


Not quite a full linkfest, but some very intriguing articles: Sunday Linkfest


Sunday, November 09, 2008 | 12:50 PM | Permalink
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The Big Picture Café

Sunday, November 02, 2008 | 09:00 AM

If you have been reading the Big Picture for any length of time, you know I have a pretty good eye for spotting insightful writers, talented analysts, and smart commentators. Many of you have written me to say that a number of your regular blog reads you first discovered at the Big Picture.

I always wondered, wouldn't it be great if I could pull together a group of very talented people all in one place? Mind you, not 100s of random authors you don't know anything about, or 1000s of anonymous people you have to sift thru -- but simply a small, concentrated group of extreme talent. The goal was to separate the wheat from the chaff, and offer you the Crème de la Crème of financial writers and bloggers.

Hence, the Big Picture Café.

I think we've accomplished that. We've put together a fantastic list of guest writers, some of whom are going to be regular weekly contributors to the site. I am going to keep this a tight list of contributors, all of whom I have personally selected and whose work I have been fond of for a long while.

Every Saturday, John Mauldin's weekly piece will appear here. This week's Electing the Janitor-in-Chief was posted yesterday morning. And on Sunday, the terrific weekly wrap up from my South African friend, Prieur du Plessis's  Words from the (investment) Wise will show up. The week that was (Oct 27 – Nov 2, 2008) is already available for your reading pleasure.

You will also meet Chris Whalen, a former NY Federal Reserve trader, and was an investment banker (years ago) for Bear Stearns. He now runs Institutional Risk Analytics, and has been one of the few voices of sanity warning about the coming Banking crisis for the past few years. Wanna talk about inside baseball? Chris' dad was a senior policy advisor for the Nixon and Reagan adminsitrations, and was instrumental in getting Paul Volcker appointed as Fed chairman. Be sure to read his Roundtable: Fed Chairmen and Presidents.

One other regular who you will become familiar with is Marion Maneker. He is the Managing Partner at Colle, Hochberg and Grey, publishers of the Art Market Monitor. He is also a former editor at New York Magazine, and the Publisher at the HarperCollins business imprint. Marion has been observing the political and economic scene from a vantage point within the financial press for many years. Marion is going to be our Financial Media critic, covering the various print and electronic journalists that cover the market. Be sure to read his post Mayor Mike Bloomberg for Treasury Secretary, as well as the sequal, Department of Follow-Up Dept.

Lastly, I wanted to take this a step further. Not just bloggers, but several wall street pros who don't regularly publish for the public -- and who are not allowed to publish/blog by their firms. They are all well known to me, and their work product is excellent. They will be also contributing here, some in their own name, and some anonymously. Talk about the unvarnished, straight dope -- we've had to meet with attorneys to decide our response for if and when we get sued by either their firms or the companies they cover.

I want the Café to evolve into a special place. What it won't become is a Seeking Alpha or a TheStreet.com -- they are very different sites, far more comprehensive and encompassing than I want the Café to be. They have a specific purpose in the world, and I am not seeking to compete with them. Instead, I want to serve a different purpose, more like a tiny winery: Limited production, carefully grown and mixed, hand selected, delightfully refreshing.

I hope you find the writers here and their work as thoughtful and stimulating as I do.


Permanent link here

Sunday, November 02, 2008 | 09:00 AM | Permalink
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Another Bullish Bear

Saturday, November 01, 2008 | 09:30 AM

We last looked at the Bullish Bears? back on October 21. Now, we have another Ursine to add to the bull camp: Steve Leuthold, Chairman, The Leuthold Group.

He is the subject of this week's Barron's interview:

Barron's: What is your assessment of the market's big selloff this fall?
Leuthold: There were two stages, the first being what we thought was a normal cyclical bear market. We thought the economy had peaked in last year's fourth quarter. And then, about six weeks ago, after the market had come down about 25%, it looked to us as though the market had discounted a recession. By that time, the recession was eight or nine months old. So we thought that, as normally happens, the market tends to turn up in the middle of a recession.
Then came the liquidity freeze, which was the second stage, and that took us down over the past six weeks and really hurt us. We were doing pretty well up until that point because we were defensive, but we turned bullish too early.

In a recent research note, you wrote: "I remain bullish and wrong." Is that still your sentiment?
Yes, it is. I was just looking at an interview I did with Barron's in December 1980, and I was called a super bull. And then we got prematurely bearish in 1998, and people started calling me a perma-bear. Right now, though, I am not a super bull, but I am a very convinced and optimistic bull.
What underscores your case?
Certainly, the intrinsic value of stocks. In terms of our valuation model, it's the most positive we have seen since 1984. We look at 28 different factors, including price-to-earnings and price-to-sales, and they are quite decidedly positive. Because we look at normalized earnings, we smooth them out over a business cycle. We have always done it that way, and we are at about 12 times earnings now.
Is that on forward earnings?
No. What we do is we take the last 4½ years of historical earnings, and then we project forward only six months. Then we divide the whole thing by 20, or the number of quarters. We have found over the years that it is almost imperative that you do that -- that is, smoothing out the business cycle to get the underlying level of earnings.
How does that 12 times P/E ratio compare to other periods?
Looking back 55 years, we are in the 15th percentile, well into the bottom quartile, and this is where markets very often have bottomed out. So on a valuation basis, this is a really cheap market. At these levels, we are really down in bull-market territory. From here, on a one-year basis -- and this goes back to 1926 -- the market has been up about 18%, on average, in the next year.

There's more at Barron's, and their interviews often show up at Marketwatch of Yahoo finance.

(You can add comments here)


INTERVIEW:  A "Perma-Bear" Warms to Stocks Steve Leuthold, Chairman, The Leuthold Group
Barron's, NOVEMBER 3, 2008

Saturday, November 01, 2008 | 09:30 AM | Permalink | Comments (0)
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The Economist endorses . . .

Thursday, October 30, 2008 | 11:30 PM

Gee, do you think Europe is looking for a change from the States?

Comments can be found here.

Thursday, October 30, 2008 | 11:30 PM | Permalink | Comments (0)
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Blaming the Bears

Thursday, October 30, 2008 | 05:35 PM

Here’s the latest act of idiocy: Blaming the media or the Bears for the credit collapse and market crash.

This not only demonstrates a total lack of understanding as to the difference between causation and correlation, but it evinces an utter disregard for the way the economy and markets  operate. makes about

A classic example of this form of brain damage can be seen on the comments of a recent Floyd Norris blog post, Consumers Drag Economy Down.  Norris notes, (as we did earlier today) “Consumers are clearly in retreat, and the economy is suffering. The year-over-year increase in real G.D.P. is 0.8 percent, the lowest for any four-quarter period since 2001.”

It didn’t take long — the second comment actually — before the ‘tards actually started blaming Norris for the collapse. Let’s see what Mark D. had to say:

Great. You guys are posting stuff that will create a self fulfilling prophecy.

Yes, it was all Floyd Norris of the New York Times who cut rates to 1%, and then kept them there for a long time. And, it was Norris who forced the banks to lever up 40X. It was he who forced the rating agencies to slap a triple AAA on junk paper, it was Norris who mandated that hedge funds, trusts, pension funds and other buy this junk paper.And of course, it was Norris who forced all those mortgage originators to write those NINJA loans, and all those home buyers to take 2/28loans they could not afford when the reset occurred.

Why does the internet cause people to turn their brains off? Does anyone ever think for even a second before posting nonsense like this?

Self-fulfilling prophecy?  Here’s a self-fulfilling prohecy: Write thoughtful intelligent commentary on the economy, and a large swath of humanity will trip over themselves trying to demonstrate why IQ test are given on a cuvre.

A few other observations:

1) Because the NBER has not yet declared this a recession only means the official start and end dates are unknown.  A recession can occur regardless of their declaration.

2) No, Charles J. Duffy, a recession is Not defined as “two consecutive quarters of negative real growth.” The NBER definition is here: http://www.nber.org/cycles/recessions.html

3) By that definition, we have likely been in a recession since December 2007, or perhaps January 2008.


The Big Picture is moving! The new post here

Thursday, October 30, 2008 | 05:35 PM | Permalink | Comments (36) | TrackBack (0)
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Map: Newspaper Endorsements in the 2008 US Presidential Election

Wednesday, October 29, 2008 | 04:30 PM

Fascinating info porn of an election variety:

Map of Newspaper Endorsements in the 2008 US Presidential Election
There is more info here.

Note that since the map was released, Alaska's daily paper endorsed Obama, and hometown Arizona paper endorsed McCain.

via infochimps

Data Source:
Tally Of Newspaper Endorsements -- Obama Widens Lead to 222-93
Greg Mitchell and Dexter Hill
Editor & Publisher, October 28, 2008 12:25 PM

Wednesday, October 29, 2008 | 04:30 PM | Permalink | Comments (47) | TrackBack (0)
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The Great Panic of 1873

Monday, October 27, 2008 | 12:00 PM


Here's something you probably haven't yet read: The New York Times article (April 9, 1911) on The Great Panic of 1873, as written by Roger Babson.

Fascinating stuff . . .


Roger W. Babson, the Well Known Statistician, Tells of the Business Epochs That Followed That Period of Depression 
The New York Times, April 9, 1911
Download 1873Panic.pdf PDF

Monday, October 27, 2008 | 12:00 PM | Permalink | Comments (77) | TrackBack (0)
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Race to Call the Bottom

Monday, October 27, 2008 | 07:10 AM

1027bizmarketsweb My friend Peter Boockvar has a nice quote in this morning's NYT article, Forecasters Race to Call the Bottom to the Market.

The article discusses various extreme forecasts of the past: Bears like Owen Lamont (Dow 1,000), Nouriel Roubini, Peter Schiff, and Bulls such as Kevin A. Hassett and James K. Glassman (Dow 36,000), and even Elaine Garzarelli (she's now a permabull, but in 1987, forecasted a crash).

Boockvar's discussion of markets was mistook for a forecast of Dow 5,000, and caused some interesting mayhem around the office: 

"More than a few eyebrows were raised last week when news flew across trading desks that Peter Boockvar, who tracks equities at Miller Tabak, was predicting the Dow would crater to 5,000 by next year, a 40 percent decline from the current level.

Among the shocked: Mr. Boockvar himself. “It was mischaracterized!” he said in a telephone interview on Friday, adding that he had no idea if the Dow would sink to 5,000.

“Based on my calculations, I said we can go from 5,000 to 7,000,” he said. “No one’s smart enough to answer the question as to where we’ll be a year from now. I think it’s silly to pick a number, that’s why I picked a wide range.”

It had been an exasperating 24 hours for Mr. Boockvar. “I had to deal with it half my day yesterday,” he said.

Been there, done that. I understand Peter's exasperation. You get grief from people who believe that the media drives the markets (its the opposite) and from people who wont even contemplate an ordinary cyclical sell off.

The Times article adds: "Even in normal times, forecasters have a strong incentive to make extreme predictions, which is why those “Dow 1,000!” reports persist. “It’s eye-popping. It’s relevant. It seems exciting.”

Here's the funny thing: There is a degree of truth in that, but not in the way they imply in the Times article. The Cult of the Bear articles at the Street.com, with the infamous Dow 6,800 call, generated a disproportionate amount of publicity. Some people looked at it as a good career move. It probably worked out that way, but that was never the intention.

I mentioned this a long time ago, but I'll repeat it here again: I was really utterly surprised by the fierce reaction to the Dow 6,800 forecast. I have always thought of forecasts as laughable. The track record of economists and strategists is notoriously poor, no one ever consistently gets the year out forecasts correct several years in a row -- its just totally random. I had warned readers away from them many times prior (see The Folly of Forecasting). So I was genuinely shocked anyone took that call remotely seriously.

I can relate to Boockvar's agita. I had written back then: "The slow-motion slowdown. It starts with the consumer, who after years of spending, finally tires. Soon, it infects corporate revenue and profits. Slowly, it cascades its way across different sectors: housing, durable goods, discretionary spending, entertainment. Eventually, the decay spooks the markets."

That was the main point, but it was widely ignored in favor of focusing on the downside number. I can easily imagine what Peter was going thorugh. The pushback to the cult series was so bizarre to me. And the troll comments in 2007, especially at the peak of the market, are unbelievably amusing to read today. The current crop of anonymous trolls regarding the recent BUY EM call, are similarly laughable. There's an interesting discussion that looks at the anonymous troll at Wired: Twitter, Flickr, Facebook Make Blogs Look So 2004.

Hey Pete -- welcome to my world!



Forecasters Race to Call the Bottom to the Market
NYT, October 26, 2008   

Twitter, Flickr, Facebook Make Blogs Look So 2004
Paul Boutin   
Wired, 10.20.08

Apprenticed Investor: The Folly of Forecasting
The Street.com, 06/07/05 - 01:05 PM EDT

Cult of the Bear
The Street.com, Part 1 01/05/06 - 07:18 AM EST   

Monday, October 27, 2008 | 07:10 AM | Permalink | Comments (32) | TrackBack (0)
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Do It Yourself Linkfest

Sunday, October 26, 2008 | 09:30 AM

I've set this to launch about the same time I will be airborne over Georgia: A do-it-yourself weekend linkfest.

Here's how this works: In the comments, mention what recent article, blog post, research piece, whatever,  caught your eye, was important, influential, or just damned entertaining. Market/investing/economic analysis is preferred, but its Sunday morn and some latitude is given to off topic tangents.

Be sure to include the Headline, URL, and source publication. A paragraph often helps.


Soon the World Will Be Under My Dominion (Daily Hellfire)

The last stages of our fiery takeover of the earths surface is but months away, as we await the day of days. Blah blah blah good vs evil dark overlord of everything unholy Angelo Mozila blah blah blah . . .

Go to it!

Sunday, October 26, 2008 | 09:30 AM | Permalink | Comments (62) | TrackBack (0)
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