Pretzel Logic

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  • Gaza War: Expect a Spike in Oil, Gold
    Regarding "Higher oil prices will be the death knell for the recent modest rally in global stock markets and the impact of higher energy costs " -- if you overlay a chart of oil and the SPX, you will see that the two have been moving in tandem for several months. Modestly higher oil prices would be bullish for equities, not bearish. I expect oil to rally to $65-85 before crashing to new lows on its next downleg.

    Gold lost its luster as a war safe-haven when Russia invaded Georgia (look at a GC chart if you missed it). I doubt most investors have forgotten that lesson this soon. I expect gold to see the $600's before it sees the $1000's again.
    Jan 04 08:50 am |Rating: +4 -9 |Link to Comment |View article
  • The One-Word Topic of the Day, and Week: Obama
    Hmm. Obama will save us all, right? Wake up. We just hired a guy with absolutely no relevant work experience to do the toughest job in the country at the moment.

    It's like having an inoperable cancer, and then hiring a "surgeon" who never went to medical school, and actually spent his entire life working at 7/11, to remove it -- solely because this 7/11 Guy had "hope" for "change" when all the real surgeons said it was inoperable. Good luck with that. In reality, 7/11 Guy (Obama) will just kill the patient faster.

    Wise move, America. "Hope" springs eternal!

    What this country needs for REAL change is Ron Paul, or someone like him. Sigh. Maybe 4 years from now, we'll be ready. No? Maybe 8..? We can only "hope." ;)
    Nov 09 05:34 am |Rating: +1 -1 |Link to Comment |View article
  • Investors Face the Psychological Pressure
    This is one time when the media is UNDERreporting the collapse (partially because they don't understand it). We're locked in a self-perpetuating loop:

    a) Foreclosures come onto the market and lower comps (real estate values) for the whole neighborhood, so...
    b) John and Mary ARM can't refinance now, because their house has become worth less than they owe, so...
    c) John and Mary ARM get foreclosed
    d) Go back to a)

    a) Jack and Jill Consumer can't get HELOC loans anymore, because of everything outlined above, and because of the credit crunch, so...
    b) J/J Consumer tighten their budgets, so...
    c) Businesses have to lay off workers, because sales are down and...
    d) People without jobs spend less
    e) go back to b)

    The last lynchpin is the government. How much of this bad debt do you think Uncle Sam can backstop in an environment of falling GDP/falling tax revenue before THEY become insolvent? If the foreign central banks decide one day to stop showing up to buy treasuries, we'll have our answer.

    And on. There's a lot more, but I have limited time. Suffice to say: we're not even close to bottoming on a long-term basis. We might get a short-term rally... but long-term "investors" here will get creamed. It only SEEMS gloomy now -- it can get MUCH worse. One day we will look back fondly on this time as "the good old days."

    Dow 3600 will be a buying opportunity for long-term investors who can see past the seemingly impenatrable doom and gloom that will be all-pervasive when we get there.

    I sincerely hope I'm wrong, and by correlation, I hope you're right. But unfortunately, I don't think that's the case.
    Nov 09 03:58 am |Rating: +3 0 |Link to Comment |View article
  • Bailout, Schmailout
    Does it scare anyone else to hear everyone and their brother screaming that we should nationalize everything? WTF is wrong with people? The further we get from Constitutional government, the more trouble we get in. IS THIS NOT GLARINGLY OBVIOUS TO EVERYONE YET???

    Getting even further away by nationalizing private business will ultimately make things worse, not better. We need to be stripping away all these never-intended functions of government, not adding to them. I can't believe all these cries I keep hearing, from both sides, of "give the government more power!"

    Where is the outrage the left showed over the increased power of the government through the Patriot Act? You ain't seen nothing yet. Giving over our businesses and our banks and our health care, now THAT's giving the gov't real power -- because money is power in today's world. We are creating a monster that will devour our every last freedom.

    We need a real revolution. Not an Obama or McCain "business as usual" revolution. Vote all the bums out.
    Oct 29 20:03 pm |Rating: 0 0 |Link to Comment |View article
  • Happy-Sad News: Foreclosure Sales Climb
    Biased Realtors??? Never! My favorite is their ad which says, "Now is a great time to buy or sell a home!" WHAT? Either it's a great time to buy an asset (the asset will appreciate) OR it's a great time to sell an asset (the asset will depreciate) -- but it can't be BOTH.

    At least the stock brokers keep their message logically consistent (even if it's historically misleading): "Buy buy buy, stocks always go up long term."

    Anyway, the other issue with home prices stabilizing is the overhead supply. How many people are waiting for prices to go up so they can sell? Quite a few. Which means, prices won't go up again for a while. And all those sitting on a 33% loss now need a 50% gain just to get even.


    Oct 25 04:46 am |Rating: 0 0 |Link to Comment |View article
  • Should You Go Long at Volatility Extremes? Nikkei As Example
    Who on earth told you we are at historic low valuations? Not even CLOSE.

    Using earnings per share over the trailing 12 months, the current PE ratio for the S&P 500 index is 18:1. Only 21% of the months since 1871 have had higher PE ratios than this.

    We're closer to historic high valuations than we are to historic low valuations.
    Oct 25 02:34 am |Rating: 0 0 |Link to Comment |View article
  • This Recession Will Be Anything but Deep
    There are a few things missing here in the inflation/deflation argument:

    1) We are destroying credit, which is deflationary. Much of the money supply is credit and/or leverage. It is imaginary, not "real" money supply. As a result, money is being destroyed faster than it is being created.

    2) We already HAD the rabid inflation people were predicting years ago. In case you missed it: oil was trading around $150 bbl, gold was north of $1000/oz., etc., ad infinitum.

    3) We have never had inflation during a falling housing market.

    4) We have passed a psychological threshold where banks, people, and businesses no longer view "easy credit" as desirable. Gov't can't reinflate that balloon right now, there are too many holes in it.

    My personal opinion is that we get strong deflation for a while as the deleveraging and credit destruction continues. Once that unwinds fully, we will finally see inflation again.

    Oct 17 02:42 am |Rating: 0 0 |Link to Comment |View article
  • Chasing Unicorns: The Cycle Gods Are Still Playing with Us Mere Mortals
    Monday was also a bank holiday. No Treasury auctions or settlements.
    Oct 15 02:37 am |Rating: 0 0 |Link to Comment |View article
  • Has the Energy 'Tsunami' Been Aborted?
    "My sister the real estate maven tells me there are a lot of home buyers “on the sidelines” waiting for the deals to get better and prices to stabilize. She thinks we could be six months or so away from a bottom in housing prices."

    I know I'm not a family member, but I hear from a great many homeowners who are waiting for the market to go up so they can SELL. There is a huge overhead supply in housing, so I think the "technical damage" in the housing market will make it hard for prices to rise in the near future.

    And we are still completely overbuilt. For years, the realtors told us, "They aren't making any more land!" Well, according to demographics, the problem is: they aren't making any more people, either. And the days of average Joe Speculators owning 27 houses are gone. There are tons of new developments that have huge vacancies. So demand will have to rise again to meet supply before houses can stabilize.
    Oct 12 16:35 pm |Rating: 0 0 |Link to Comment |View article
  • What a Look Back at the Japanese Market Tells Us
    I keep hearing that "the American consumer is tapped out." I have to say that this may be true for many, there are also many savers in this country. I sell large ticket remodeling (35K-100K typical) and you would be surprised how many middle-class Americans pay cash for these purchases. My experience in the real world tells me the statistics may seem more dire than the reality.
    Oct 12 15:36 pm |Rating: 0 0 |Link to Comment |View article
  • Reaching for the Bottom in the Markets
    If this is a "generational crash" as some are saying, you might do better to compare what happenned after 1929.
    Oct 12 06:54 am |Rating: 0 0 |Link to Comment |View article
  • Friday Outlook: Commodities, Emerging Markets
    "Technical analysis at these levels is not as helpful as one would like as markets are blowing through support levels quicker than we can identify them."

    Lee Adler, who runs Captialstool.com, has a saying: "There's no such thing as support in a bear market."
    Oct 10 06:44 am |Rating: 0 0 |Link to Comment |View article
  • Global Coordinated Rate Cut: Nice Try, but the Party Is Over
    quote: "Everyone knows the stock market does better under democrats. And that these insane right-wing ideologues caused this disaster."

    I'm no fan of Bush, but if we don't know how we got here, we don't know how to avoid repeating our mistakes.

    Apparently, few seem to know about Robert Rubin (Clinton's Secretary of Treasury) and the *hugely* instrumental role he played in getting us here. Here's a quick education on the matter:

    Rubin discovered a great accounting trick. He discovered that you could take the Social Security "surplus" and add it to the Treasury's balance sheet, and in its place you could write IOU's to Social Security. (Remember Al Gore's SS "lockbox"? This is what he was referring to.) So Rubin, through this accounting trick, created tons of extra liquidity out of thin air. (Rubin himself has written about this) This huge liquidity in turn led to the NASDAQ bubble.

    When that bubble crashed, we should have paid the piper.

    But instead of paying our dues, Greenspan dropped interest rates to artificially low levels and we traded the stock bubble for the housing bubble. Now that's collapsing, and it seems our due can be delayed no longer. But make no mistake about where this all started: it started in the 90's, long before Bush took office.
    Oct 09 06:00 am |Rating: 0 0 |Link to Comment |View article
  • Bank of America's Acquisitions: What Was Ken Lewis Thinking?
    What was Ken Lewis thinking? My personal opinion is that these acquisitions are being done as a defensive measure. Making your bank bigger increases your chances of becoming "too big to fail." The acquistions (obviously) aren't to improve the balance sheet; they are desperate acts of self-preservation.

    Love your blog, btw. Great work.
    Oct 08 06:39 am |Rating: 0 0 |Link to Comment |View article
  • Our Coming Depression
    I have this vague glimmer of hope that the coming collapse will make people so disgusted by the ruling parties that we may finally trend back towards a Constitutional government, and leaders like Ron Paul. It's a slim hope, but I'm trying to look for the positives.
    Oct 07 05:21 am |Rating: +1 0 |Link to Comment |View article

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