We’re not trying to put you on HindenburgOmenoverload here at Market Talk, but just wanted to share one more link about the indicator. Last night I did a radio gig on The John Batchelor Show with John and CNBC host Larry Kudlow and we talked about the Omen’s implications. During the 10-minute discussion, Larry brought up an interesting point: why freak out about the Hindenburg Omen now when some other crazy-named indicator will generate headlines next week?
It’s a good point, to which I responded that all different forms of technical analysis and other indicators should be taken with a grain of salt. Sure, they are important to understand and consider when analyzing a portfolio strategy. And investors should file it in the back of their brains for future reference. But no one should overreact and go 100% cash just because a particular metric is signaling gloom and doom ahead.
For more of the discussion, hit this link to get to the podcast. (Skip ahead to about the middle of the podcast and you’ll find the Hindenburg segment.)
Also, WSJ News Hub host Simon Constable and his panel discussed the Omen at the end of yesterday’s Hub. Check it here:
For the past year, the pundits, the cheerleaders, the bulls and partisans have all been pushing the recovery theme. It started last March, it started when the White House and Congress blew out the debt with a $787 billion stimulus plan, it started when the Fed pledged to buy more than a trillion worth of Treasurys and mortgage-backed securities. But the government juicebox is empty, it isn’t clear what they’ll unveil next, or how effective it’ll be. Or if they’ll do anything.
So you can say we’re in a new phase now. The slog, or the plod, or the galumph. It should be clear to everybody that the economy, which White House snake economic guru Lawrence Summers claimed back in April had reached “escape velocity,” has stalled.
What happens next is “unusually uncertain,” in the word of Fed shaman Ben Bernanke. But I’ll tell you what is certain: everybody’s thinking, from the White House to Congress to the Fed to the corporate boardroom to the family dinner table, is going to shift. You thought people were being tight-fisted before? If the Fed chairman doesn’t know what’s going on, why should anybody feel confident about spending money?
I’ll tell you, you can already see the change among the bulls. Don’t get me wrong. They’re not throwing in the towel. That’s not in their DNA. But they’re not quite as excited as they were six months ago, or a year ago. It’s obvious to everybody, even Christina Romer apparently, that the recovery is turning into a big dud. This morning’s jobs report was just another dollop of sour cream on your recovery sundae.
Way back when, as a sixth grader at Mt. Hebron in Montclair, N.J., we had these elective classes, you know, like something you took beyond math and English and social studies to round you out, or just keep you out of trouble. Book nerd that I was, I signed up for the quiz team, thinking I’d be a good little quizzer.
I was, as it turned out, the worst member of the quiz team.
I never hit the buzzer in time. I’d just sit there. Once, I hit the buzzer first. “The Central Intelligence Association,” I blurted out, just a jangle of nerves and anxiety. Wrong answer. My teacher, I can’t remember her name but she was a very nice woman, soon after politely suggested I transfer into another elective. It wasn’t that I wasn’t smart enough, she said, I just wasn’t fast enough (this was back when you could actually tell students things like, you know, the truth.)
I ended up in the public-speaking class, where the teacher made us debate the upcoming presidential election. This was 1980. I argued in favor of incumbent Jimmy Carter (my main point, as I recall, was that any man who could bring Egypt and Israel together deserved another chance.) Wrong answer, again.
I bring this up because for some odd reason all that was in my mind last night after my appearance on the John Batchelor Show (click on the link for the 10 p.m. hour) lined up against none other than…Larry Kudlow. Now, I’ve taken some potshots at Kudlow in this space before, but I’ve never had a chance to go mano-a-mano with one of the biggest bulls out there.
- Distressed home sales accounted for 29% of all homes sold in January, the highest level since April 2009. “This is not a good sign,” Barbara Kiviat says. “There’s long been a worry that after last year’s various foreclosure moratoria lifted, we’d see a fresh surge of trouble in the housing market. The latest figures on distressed sales…lend some weight to that argument.”
- Looks like the music industry’s digital sales boom may be over, Peter Kafka notes. Last quarter marked first-time ever that the number of digital songs sold in US decline.
- CNBC commentator Larry Kudlow argues a 5%-10% pay cut for federal employees could have a major impact on the federal budget deficit. But the Times’ Paul Krugman says those pay cuts would be “trivial” at best, and Kudlow’s picture is a fiscal fantasy.
- Spiking Greek bond spreads aren’t affecting over debt-ridden European nations. “That would appear to indicate that markets are not too concerned with the prospects of the Greek end-game leading to some sort of European contagion, which is the most dangerous risk of the Greek crisis,” Economist’s Free Exchange blog writes.
- February wholesale inventories rise for second consecutive month. If next week’s report on business inventories also rises, “it will confirm that we may be seeing the beginning of some inventory stocking after the slowing rate of destocking over the past six months,” notes Miller Tabak’s Peter Boockvar.
- Goldman Sachs (GS) has hired ex-New York Timesman Stephen
Labaton, who until December covered business from Washington, Politico.com reports, suggesting the bank’s aiming to counter its dreadful PR and help navigate the DC regulatory sphere.
- The war between Apple (AAPL) and Adobe (ADBE) is heating up.
- The American economy appears to be in a cyclical recovery that is gaining strength. Firms have begun to hire and consumer spending seems to be accelerating,” Floyd Norris writes. “That is what usually happens after particularly sharp recessions, so it is surprising that many commentators, whether economists or politicians, seem to doubt that such a thing could possibly be happening.”
- But it’s tough to cheer the economy when 15 million people are unemployed, Free Exchange says. “The state of the labor market is a real worry, and the effect of the drag from high levels of long-term unemployment is difficult to predict. Now is no time to declare victory and take a vacation.”
- FusionIQ CEO Barry Ritholtz toes the line between optimistic and pessimistic. Employment and consumer spending still have a long way to go before each returns to pre-recession levels. But as data continues to “impress,” investors would be wise not to fight the tape, he argues.
So Larry Kudlow was on the radio this morning, the CNBC commentator prattling on about the resilience of the free markets despite what he calls “socialism lite” and the ascendancy of a new conservatism driven by the tea partiers that’s going to lead to a Republican takeover of Congress in November. It’s essentially the same shtick he usually delivers. What’s amazing about listening to him now, though (as with so many partisan pundits) is that even after two of the most tumultuous years of our lives, he hasn’t changed his tune, not by even one note.
Kudlow’s performance requires some amount of self-delusion. He’s optimistic, and that’s fine. He expects a “mini-boom” in 2010. But in his world, it’s like the last two years never happened.
Despite the historic expansion of the federal government’s involvement in, intervention in, and control of the economy — including Bailout Nation; takeovers of banks, car companies, insurance firms, Fannie, Freddie, AIG, GM, Chrysler, and GMAC; large-scale tax threats; overregulation; an attempted takeover of the health-care sector; ultra-easy money; a declining dollar; and unprecedented spending and debt creation — despite all the things that would be expected to destroy the economy — all this socialism lite and the degrading of incentives and rewards for success — despite all this, the U.S. economy has not been destroyed.
You don’t have to like $700 billion stimulus packages, and trillion dollar banking bailouts, but it is intellectually dishonest to say the economy is getting better despite them. The economy is alive and breathing only because of them. The government didn’t just sweep in and take over anything. Private companies, including banks, insurance companies and car companies, all of which were about to go bust (and some of which did,) pleaded for government aid. And they petitioned both Democrats and Republicans.
J.P. Morgan reported some strong earnings today. But what this bloggers eye were some of the sub-numbers in the earnings report. The bank booked $1.8 billion in investment banking fees. But don’t be fooled – that wasn’t from big M&A advising. But $429 million was in advisory fees. Instead, that $1.3 billion + remaining fees […]
David Oreck, founder of a well-known maker of vacuums and air purifiers, says he’s upset his namesake company is in bankruptcy. He says Nashville, Tenn.-based Oreck Corp. was a perfectly profitable company when he sold his stake in it to a private equity firm in 2004. He blames the firm, New York-based American Securities Capital […]
Oh, the humanity.
