Fundamentally Speaking . . .

Friday, March 03, 2006 | 11:30 AM

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.
  • >

    A Second Shot Across the Bow?
    Doug Kass
    Street Insight,3/1/2006 8:39 AM EST

    Friday, March 03, 2006 | 11:30 AM | Permalink | Comments (11) | TrackBack (0) add to | digg digg this! | technorati add to technorati | email email this post



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    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.

    Posted by: jp | Mar 3, 2006 11:37:51 AM

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