Monday, 11/4, Market WrapUp (Layoffs Soar in October)

"If I had a dollar for everytime I heard this pundit or that mutual fund salesman say, 'all the bad news is already priced in'."

All such statements are like driving by looking through the rear-view mirror.

If past performance is not necessarily an indicator of future performance, why should past news necessarily be one?

Properly worded, the statement is obviously useless as a guide to investing: "all the bad news that we know of, and its presumed future effects are priced in."

Saying merely "all the bad news is already priced in" is a verbal slight-of-hand for two assumptions: (1) there will be no more bad news unexpected by the speaker/market (2) all of the future effects of currently known bad news are known by the speaker/market.

To put it another way: All of the good news is also already discounted.

Conservatives" are going to regret the day Gore didn't become president ... since the coming economic crash will be blamed on Bush Jr. instead.

I posted the same right after the election. It was obvious even then what the future holds.

You and I think alike. Most people ignore balance sheet issues and focus exclusively on the income statement. It's all about the DEBT. The debt, the dollar, and valuations.

But most people involved with capitalism do a great service for our country.

The real crooks -- Clinton, Rubin, and Greenspan will never be held accountable.

I disagree with you on the direction of the economy, but I agree completely with the above statements.

OOPS! My bad.

I meant #12. Anyone who thinks people desire a terrorist attack is sick.

If anything, the terrorist attacks gave the overvalued market a scapegoat for going down. The terrorist attacks had the whole "patriot rally" as its offspring. Another terror attack would likely cause all the permabulls to break out their playbooks from the Autumn of '01 and BUY, BUY, BUY!!!

101 Reasons to Stay out of the Market
by: georgewbear November 4, 2002

(Information gathered from various bear reports)

1 - The number of people looking for work but unable to find it rose by more than 100,000 last week to 8.2 million.

2 - U.S. unemployment rate rose to 5.7 percent in October, evidence the weak recovery is stalling.

3 - The jobless rate is predicted to jump to 6.2 percent, a half-percentage point higher than last month.

4 - Consumer spending fell 0.6 percent in Sept.(largest decline in 10 months) despite a 0.4 percent rise in personal income.

5 - Weekly bankruptcy filings were reported at 31,718 -- up 12% year-over-year.

6 - US poor rose last year to 32.9 million, an increase of 1.3 million or 11.7 percent.

7 - Defaults, bankruptcies, and delinquencies in sharp uptrend as a result of an over leveraged corporate and consumer sector.

8 - Credit expansion in the U.S. is now running at an annual rate of $2 trillion or 20 percent of GDP.

9 - Savings rates have plummeted from 8% at the beginning of the Greenspan Chairmanship to almost zero today.

10 - Personal savings are at 0.2% of GDP.

11 - Total consumer debt in August was $1.73 trillion.

12 - Tax burden is over 40% for most Americans, not including state, property and sales taxes.

13 - Health-insurance premiums have jumped 30% -- largest in decade.

14 - Dollar-denominated debt is three times the value of annual GDP.

15 - A trillion dollar government surplus has turned into a trillion dollar deficit within 18 months.

16 - The SEC proposed that U.S. companies be required to disclose an estimated $3 trillion in off-balance sheet debt. The U.S. corporate bond market is about $2.3 trillion.

17 - The US needs to import $500 billion a year to finance its trade and current account deficit.

18 - Foreign investors own about 43% of U.S. treasury market, and about 25% of all agency and corporate bonds.

19 - Congressional approval raised debt ceiling from $5.95 trillion to $6.4 trillion, with the intention to borrow $84 billion in the first three months of 2003.

20- Federal spending exceeded revenue by $159 billion for fiscal 2002 and expect a shortfall of $145 billion for next year.

21 - Since 1996 -- total Credit market debt has increased $12 trillion, or 65%.

22 - From this total, financial sector debt has jumped 130% to $9.8 trillion.

23 - Non-financial Credit market borrowings are up 46%.

24 - Debt service payments, including mortgages and all consumer debt now are at record levels.

25 - Household combined debt (Mortgage, Credit Card, Car, Student, etc.) consists of 107% of household income.

26 - Average home prices are now 2.8 times average annual disposable income.

27 - Current FHA delinquencies are now over 12%.

28 - Delinquencies for all mortgages are at 4.77 percent.

29 - More homeowners are having trouble meeting monthly mortgage payments.

30 - Home equity lending rose from $461 billion in 1990 to $1 trillion in 2001.

31 - 1995-2000 household debts grew by $2,164 billion -- household income grew by only $1,675 billion.

32 - Foreclosures have reached the highest level in over 30 years.

33 - Bankruptcies keep hitting record highs, with 1.5 million filings in the last 12 months ending in March, and still climbing.

34 - Credit card delinquencies have risen 30% in the last year, with close to 4% of all credit cards past due.

35- Homeowner equity has fallen from 67% to 55% -- extracted more equity out of their homes to keep up consumption.

36 - Executives in the housing industry have been big sellers of their stock recently.

37 - Wall Street still recommends them as a strong buys.

38 - Fannie Mae's Q3 earnings fell 19% as they had an unrealizable loss in the value of its derivative portfolio.

39 - Bankers are tightening underwriting standards and building loan-loss reserves against increases in real estate loan delinquencies and defaults.

40 - Overheated markets include the San Francisco area and Silicon Valley, Las Vegas, Denver, Phoenix, Dallas, Atlanta, Washington, D.C, Boston and some parts of New York City.

41 - Japanese equity market peaked in 1989; while the Japanese housing market peaked over 2 years later. US following same pattern since Q1, 2000 peak.

42 - The Conference Board's index of consumer confidence fell to 79.4 from 93.7, its lowest reading in nine years, and fifth straight decline.

43 - Ford October vehicles sales sank 31% year-over-year -- GM sales sank 32%, with Chrysler down 31%.

44 - Ford, GM, and DaimlerChrysler AG bonds fell, raising concern the companies will have a harder time reducing debt.

45 - GM's tab for future health-care expenses over the next 13 years is $38 billion in today's dollars.

46 - GM has $187 billion of total debt. Ford's debt: $162 billion -- $23 billion of which must be renewed in 2002 alone.

47 - GM's pension shortfall is $28 billion, nearly double that of last year.

48 - GM's pension plan obligations are now $76 billion.

49 - IBM will need to contribute $1.5 billion to keep its pension plan fully funded by 2005.

50 - Industrial capacity fell to 76% in August, indicating that one of four factories are now idle.

51 - Additional pension plan contributions are going to zap earnings next year for the majority of S&P 500 companies that have defined benefit pension plans.

52 - October was first time in 14 years that stock funds experienced outflows at a time markets were rising.

53 - Large cap funds have seen money outflows for their 20th consecutive month.

54 - In Q3 only 62 funds out of a total of 8,400 had positive returns.

55 - Most of these were hedge funds, natural resource or precious metals funds.

56 - Trim Tabs reported that $9.7 billion flew out the door of mutual funds week ending on October 16th. The previous week's outflows were $4.2 billion.

57 - Analysts are forecasting pro forma Q4 profits of 17.1%. This estimate has come down from 22.9% in September.

58 - Q4 pro forma earnings will come in at about 6.5% versus the original estimates of 30% in January, and 17% in July.

59 - There were 280 downgrades of US asset-backed securities in the third quarter more than double the 132 of the second quarter. In all of 2001, there were only 245.

60 - S&P estimates that reported earnings are 30% below actual earnings when ordinary expenses from restructuring, stock options and pension losses are added back in.

61 - IPO business is dead.

62 - Profits in the non-financial sector peaked at $504.5 billion in 1997, and have now fallen to $291.1 billion.

63 - A further Fed rate cut would make dollar-denominated assets less attractive relative to those in countries with higher rates.

64 - Dec. Dollar Index broke to it lowest level since July.

65 - GDP weaker than expected at an annual growth rate of 3.1%.

66 - U.S. trade deficit widened to $491 billion.

67 - The GDP price index recorded only a 1 % annualized increase in Q2 of 2002 -- the lowest inflation rate in 48 years.

68 - U.S. trade gap jumped nearly 10 percent in August to a record $38.46 billion.

69 - The trade gap with Mexico increased to $3.48 billion, from $3.37 billion in July.

70 - American economy now has a record exposure to global competition.

71 - US consumer was responsible for 64% of the growth in the world's economy from 1995 -2001.

72 - America is now buying more and more from China, Japan and other countries that are already in deflation.

73- Nikkei at 19-year low.

74 - Japanese stocks fell, for a fifth month, after the government backed away from bank industry changes, which are needed to end a 12-year economic slump.

75 - Bad loans in Japanese financial system have reached $355 billion or 8 % of GDP.

76 - Analysts (including Goldman Sachs) estimate Japanese non-performing loans to reach (50% of GDP) ¥237,000 billion.

77 - The Japanese economy has turned for the worse, as evidenced by recent disappointing trends in industrial production, inventories, employment, and personal consumption.

78 - Japan's jobless rate in August remained at 5.4% for the fourth month in a row -- the 14th- straight month that the rate has been 5% or higher.

79 - Latent losses on shares held by 12 major Japanese banks totaled some Y5.1 trillion. The losses have grown nearly four times in size from the end of March.

80 - The Canadian economy grew 0.1% in August. Bank of Canada's predictions of 4% growth in the third quarter look overly ambitious.

81 - In Europe -- manufacturing shrank for a second month in October as optimism waned about prospects for economic growth.

82 - The European Central Bank probably won't cut interest rates next week to boost growth, according to Bloomberg survey.

83 - Germany's banking system is facing a crisis. Profits are evaporating and share prices crumbling, prompting uncomfortable comparisons with Japan's troubled finance houses.

84 - German Corporate insolvency's are expected to reach 35,000 this year and could approach 45,000 next year.

85 - Brazil has refinanced only about 20% of its loans in October.

86 - Plunging currency and stock market lost over 63% this year.

87 - Brazil must refinance another $20.8 billion by the end of the year.

88 - Brazil's $335 billion debt, may trigger the biggest-ever emerging market default.

89 - Emerging market bond sales are headed for their worst slump since 1995.

90 - Sovereign defaults nearly double in first 9 months of 02, as 6 governments failed to honour dues on bonds to nearly $133 billion.

91 - The U.S. deficit with China rose to $10.86 billion, from $9.34 billion.

92 - China's Industrial output, exports, infrastructure spending, and foreign direct investment are all rising.

93 - Acceleration in GDP growth to an 8.1% year-over-year rate in Q3 2002.

94 - China continues to be the fastest-growing economy the world, irrespective of the slowdown in the broader global economy.

95 - Chinese competition has served to deflate the price of many goods in the U.S.

96 - China's merchandise exports last year came to $266 billion, with 41% of those exports going to the US.

97 - China passed Japan last year as the nation with the largest trade surplus.

98 - The average worker in China makes 40 cents an hour -- one sixth of what a Mexican worker receives and one-fortieth of what a US worker earns.

99 - China launched the Shanghai Gold Exchange on Oct.30th. Some Hong Kong traders project that gold demand in China could rise to 500 tons per annum from 200 tons due to these changes.

100 - NYSE margins dropped from (March 2000) $278 billion to $132.8 billion in August. or 51.8%. Richard Russell expects them to drop another 100 billion to around 30 billion (10%) before bear market is over.

101- Bear market in stocks longest in 60 years and credit cleansing (US $32 trillion in debt) could continue through 2007 to 2010 according to Kondratieff winter (33rd month so far) projections.

Oops