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The Market Oracle - Market & Economic Forecasts & Polls :: Stock Markets to be Hit by Sharp Fall in Corporate Earnings

Author: Shahla
Subject: Stock Markets to be Hit by Sharp Fall in Corporate Earnings
Posted: Thu Apr 17, 2008 3:45 am (GMT 0)
Topic Replies: 0

By: John_Mauldin

For the last few months in my regular letter I have been pounding the table that corporate earnings are going to decline this year, which is always a negative atmosphere for stocks. Since today is the beginning of the earnings season for the first quarter, I thought it would be helpful to look at this piece from our old friend James Montier, head of equity research at Societe Generale based in London. It seems that analysts are behind the curve when it comes to predicting future earnings. James shows us why and then goes on to demonstrate that even the meager earnings reductions that are projected are not priced into the market as many bullish commentators suggest. This should make for an interesting Outside the Box.

John Mauldin, Editor
Outside the Box

Asleep at the wheel, or, How I learned to stop worrying and love the bomb
By James Montier

About a month ago I wrote a note suggesting that analysts were like rabbits caught in the headlights (see Mind Matters, 21 January 2008). It now appears that the analysts may well have fallen asleep at the wheel!

The chart below is an updated version of the one I presented in the original note. It is constructed by taking a linear time trend out of operating earnings and the analyst forecasts of those earnings (so the chart simply plots deviations from trend in $ per share terms).

The chart makes is transparently obvious that analysts lag reality. They only change their minds when there is irrefutable proof they were wrong, and then only change their minds very slowly.

The beginning of the downturn in earnings is clearly visible from this chart. However, analysts have hardly scratched their earnings numbers at all. This view is reaffirmed by the numbers from my colleague in quant land, Andrew Lapthorne, shown in the tables below. So far the downgrading of estimates has been highly constrained to the financials (and to a lesser extent the consumer sector in the US for 2007). Roughly speaking US earnings ex financials have been revised down by 1.5% compared to nearer 4% for the market as a whole.

I've had several conversations of late with both buy and sell side firms who have been busy trying to get their analysts to bring down their estimates. The response from the analysts has been exceedingly similar across the various institutions. The analysts all acknowledge the sense of lowering forecasts in aggregate. However, when they discuss such a move with the companies they cover, the companies. response is that it won't happen to them. This creates a fallacy of composition problem in which all the analysts think 'their' stocks are immune from the influence of the cycle!

Memo to analysts: companies haven't got a clue
One our analysts (thanks Stefan) has provided me with several examples of the sort of lines that company management are spinning. For instance, the following comes from Sopra group (a specialist in "industry specific solutions (Banking, Human Resources and Real Estate"), "We have made the right choices in terms of positioning and we have implemented a successful business model fuelled not only by technological development but also by both the trend towards outsourcing and enterprise consolidation. We don't believe that our business model is subject to a cyclical downturn that is often talked about these days. "

Or this from Parametric Techology Corp, "We are mindful of current investor concerns about the economy. However, our forecast continues to support our confidence in our ability to execute our plan... These customer initiatives have been driving investment in our solutions for at least two years, and we believe customers would only accelerate them in a more difficult economic environment. " I love this latter one, effectively saying a recession is just what our business needs, we will make even more money in a downturn!

Now of course, I am a well known critic of talking to company management (see Chapter 12 in Behavioural Investing for the detail on this). In general the evidence suggests that company management doesn't know any better than we do, especially when it comes to predicting the future.

For example, the chart below shows the results from the Duke University CFO survey. In the survey, participants are asked to rate their optimism over the outlook for both the economy and their own firms. Strangely enough they are always and everywhere more optimistic about the outlook for their own firm than they are about the economy as a whole. This is yet more evidence of the bullish bias that I was describing in the last Mind Matters. The latest survey carried out in December 2007 shows CFOs are around 57% optimistic about the economy (a relatively low reading) but are 68% optimistic about the outlook for their own firms!

I must also confess that I am disappointed (although not surprised) that analysts on average appear to be incapable of forming a view without the endorsement of company management. One must wonder why we pay legions of analysts if they are simply drip fed the management views like quasi IRs!

One of the few surveys I keep an eye on is the Conference Board CEO survey. This survey has reasonable predictive power when it comes to earnings growth. It tells a very different story from the ones discussed above. These guys are most definitely not optimistic about the outlook. They are expecting growth to keep sliding away, and that isn't good news for profits!

What is in the price?
Of course, pretty much every investor I have talked to this year has told me that "No one believes the analysts." In part this may be true. However, it is clearly the case that when a stock disappoints it still gets punished severely. So whilst top-down investors may not accept the analysts. numbers, I can't help but wonder if some of the more bottom-up inclined are still shocked when something goes awry.

Others have told me that I'm worrying needlessly, as equities have already moved to discount a slowdown, so whilst the analysts may be behind the curve, markets aren't. Whilst this may be comforting, is it actually true?

I decided to check what the markets were implying for earnings contractions. Being a simple soul, I came up with easy way of doing exactly this. Now I don't hold with the use of forward P/Es as I think they are largely meaningless. However, for this exercise I put aside my personal biases against this measure. I just take the current forward P/E and compare it with the historic average of the forward P/E. The extent to which the current forward P/E is below its average is presumably a measure of the expected earnings decline. As the table below shows, on this basis the US is pricing in an 8% decline in earnings, Europe a 24% decline and the UK a 23% decline.

However, to my mind there is a problem with this process, and that is the historic forward P/E series is distorted by the experience of the bubble in the latter half of the 1990s. This was, of course, an incredibly unusual period, so one could argue that it should be excluded from the calculation of the average forward P/E. The table below shows the impact of excluding the bubble from our calculations. Now the US doesn't imply any drop in earnings, Europe implies an 11% fall in earnings, and the UK implies a 4% decline in earnings.

Now how does this implied decline in earnings stack up against the empirical evidence on the scale of earnings declines in recessions? Well, the history of 'operating earnings' only goes back as far as the analysts. forecasts (i.e. the early to mid 1980s). This only gives two recessions to examine, and both of those have been exceptionally shallow. However, even in these shallow recessions earnings fell by 20% in the US, and 40% in Europe.

If we want to broaden our sample (always a good idea) we have to turn to reported earnings (generally my preferred measure). The chart below shows the European version of a chart I have often shown for the US. It simply plots earnings (in log terms), and shows that over the course of a full cycle they have never grown by more than 7% p.a. Recently we have been at the very top edge of this band. However, more importantly once earnings have peaked they often return to the low edge of the growth bands. This represents a 45%- 50% decline in earnings. This number holds for the US, Europe and the UK. So if you want to have a worse case scenario then a figure like this should be used.

Relative to this benchmark, the implied earnings declines are paltry. So the idea that the equity markets are anticipating a recession unfortunately looks to be yet another example of the triumph of hope over reality. I guess I really haven't learnt to stop worrying and love the bomb just yet!

Your expecting a lot of negative earnings surprises in the next 6 months analyst,

By John Mauldin

John Mauldin, Best-Selling author and recognized financial expert, is also editor of the free Thoughts From the Frontline that goes to over 1 million readers each week. For more information on John or his FREE weekly economic letter go to: http://www.frontlinethoughts.com/learnmore

To subscribe to John Mauldin's E-Letter please click here:http://www.frontlinethoughts.com/subscribe.asp

Copyright 2008 John Mauldin. All Rights Reserved
John Mauldin is president of Millennium Wave Advisors, LLC, a registered investment advisor. All material presented herein is believed to be reliable but we cannot attest to its accuracy. Investment recommendations may change and readers are urged to check with their investment counselors before making any investment decisions. Opinions expressed in these reports may change without prior notice. John Mauldin and/or the staff at Millennium Wave Advisors, LLC may or may not have investments in any funds cited above. Mauldin can be reached at 800-829-7273.

Disclaimer PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.

John Mauldin Archive

The Market Oracle - Market & Economic Forecasts & Polls :: Fed Bailouts vs. the Free Markets

Author: Shahla
Subject: Fed Bailouts vs. the Free Markets
Posted: Thu Apr 17, 2008 3:42 am (GMT 0)
Topic Replies: 0

By: Money_and_Markets

Mike Larson writes: The Wall Street Journal 's website � once again � pretty much summed up the current state of the housing and mortgage markets this week.

One key headline: "Fannie Mae Tightens Rules for Mortgages"

The other: "Senate's Housing Gridlock Eases"

The first story talks about the latest goings-on at Fannie Mae, one of the two major government-sponsored enterprises that buy some loans for their portfolios and guarantee other pools of home loans known as mortgage-backed securities.

The upshot of the story:

Fannie Mae is now establishing a minimum required credit score of 580 for most loans it will buy.
It's also reducing loan-to-value ratios for some types of mortgages.
And it's extending the post-foreclosure credit rebuilding period that borrowers have to go through before their loans are eligible for Fannie Mae purchase to five years from four.
In other words, Fannie Mae is tightening lending standards � and it's not alone. Several banks have cut back on the wholesale loan programs they offer through brokers. Meanwhile, Wachovia reportedly is considering a halt on option Adjustable Rate Mortgage lending in parts of California.

As the real estate market plummets, Wachovia is moving to tighten lending standards.
The second Journal story points out that Congress is closer to passing a mortgage relief bill, despite intellectual and philosophical differences among Congressional Republicans, their Democratic counterparts, and the executive branch.

Put simply: The battle royale between free market forces and government intervention continues to rage ... and intensify ... in the housing and mortgage markets.

The Fed has torn up its playbook and intervened more aggressively on Wall Street than at any time since the Great Depression. And the nation's mortgage industry is moving farther down the path of quasi-nationalization.

Today, I want to talk in more detail about what's going on, and what it means for both the short and long-terms.

Your "CliffsNotes" Version of the Latest Mortgage and Regulatory Reforms

It's been an active few months for the mortgage market on the regulatory and policy front. I've done my best to keep you abreast of the latest proposals, and this week was a real doozy for new ideas. So here's my quick summary of the latest action:

Targeting Washington's "Alphabet Soup" � Treasury Secretary Henry Paulson introduced a mega-plan earlier this week called the "Blueprint for a Modernized Financial Regulatory Structure." Right now, different parts of the financial markets and different types of financial institutions are regulated by an alphabet soup of government agencies.

The Commodity Futures Trading Commission (CFTC). The Securities and Exchange Commission (SEC). The Office of Thrift Supervision (OTS). The Federal Reserve. The list goes on and on. And for industries like insurance, supervision and regulation is essentially in the hands of the states, with little to no federal oversight at all.

The focus of the regulatory plan is to sort this whole mess out by consolidating agencies and responsibilities. In Paulson's words:

"Intermediate-term recommendations focus on eliminating some of the duplication in our existing regulatory system, but more importantly they offer ways to modernize the regulatory structure for certain financial services sectors, within the current framework. Recommendations include eliminating the thrift charter, creating an optional federal charter for insurance and unifying oversight for futures and securities.

"The long-term recommendation is to create an entirely new regulatory structure using an objectives-based approach for optimal regulation. The structure will consist of a market stability regulator, a prudential regulator and a business conduct regulator with a focus on consumer protection."

Some credited this approach for instilling a bit of market confidence and optimism on Wall Street, helping spur this week's rally. I'm a bit more skeptical on this front as it doesn't look like many of these reforms will be instituted any time soon. But eventually, some heads will have to roll for what happened during this latest bubble � and this blueprint could provide some guidance on where the axe will fall.

Further lending market reforms � Of all the mortgage reform programs being discussed, one in particular is gathering momentum in Congress. It's a bill that would potentially:

Provide $4 billion in grants that would allow local governments to purchase foreclosed homes.

Help fund $10 billion in tax-exempt bonds that states can sell to fund mortgage refinance programs. They're designed to get people out of bad subprime loans and into more stable financing.

Fund $100 million more in counseling programs designed to help borrowers facing foreclosure.

Give home builders a tax incentive that allows them to offset past profits with current losses in order to bolster their financial state.

Offer buyers of foreclosed or vacant homes a tax credit, possibly as much as $7,000.

Moreover, a plan from House Financial Services Committee Chairman Barney Frank and Senate Banking Committee Chairman Christopher Dodd may be gaining broader acceptance. They envision a program where the outstanding loan balances of borrowers would be written down. This would ensure the existing lenders took some losses.

Powerful House Financial Services Committee Chairman Barney Frank is working on a mortgage reform plan with Senator Christopher Dodd.
Then the borrowers would be refinanced into loans insured by the Federal Housing Administration, or FHA. Those loans would have smaller monthly payments because less principal would be owed. Borrowers would also be encouraged to stay put and try to pay off their homes, rather than walk away, because they would no longer be left "upside down"� owing more than their homes are worth.

But the borrowers wouldn't get a free lunch. They would be required to offer the government "soft second" liens on their properties. What that means is the government would get a portion of its money back upon the sale of the homes down the road. The presumption is that by then, home prices will have gone back up and everyone will "win."

To make it all work, FHA would be granted the ability to fund an extra $300 billion in mortgages.

Making the Fed a "Supercop" � A more troubling move underway in Washington is to make the Fed even more of a market "Supercop" than it has been acting like already. As the Wall Street Journal noted a few days ago:

"The Fed would retain, for now, authority to write consumer-protection rules on things such as credit-card disclosures and the terms of high-cost mortgages � despite accusations from consumer groups and Democrats that its failure to do so allowed many homeowners to get subprime mortgages they couldn't afford.

"In Mr. Paulson's 'optimal' scenario, the Fed eventually would surrender its supervision of state-chartered banks and bank-holding companies to the new agency and become a 'market stability' regulator. The Fed, Mr. Paulson said in an interview Saturday, 'would have broad powers so they could go anywhere in the system they needed to go to preserve that authority.'

"In that role, it would be able to lend to any important institution while seeking information from them, which Mr. Paulson considers more reflective of a financial system spread among brokerages and other nonbanks as well as traditional, commercial banks."

What's good, What's bad, And What's Ugly in All of This ...

So what are my thoughts here? Do I think the Fed and the feds are on the right track here?

First off, the policy of the Fed over the past several years has been to take a "hands off" approach to asset bubbles and regulation during the boom times. There was no move to raise margin requirements during the stock market bubble, for instance.

And as the housing bubble expanded, Fed policymakers spent more time questioning the very existence of a bubble rather than lambasting lenders and speculators for helping inflate it. They didn't jack rates up aggressively to calm things down, either. In fact, they implemented clearly telegraphed, quarter-point hikes over a span of several quarters instead.

What about the regulatory response? Sure, there were a bunch of mealy-mouthed "guidances" on high-risk lending from the regulatory agencies, including the Fed. But they had no teeth and no on-the-ground impact.

Yet now that things have gone to hell, it's suddenly time for an "all hands on deck" approach!

The Fed is willing to slash interest rates dramatically, and throw huge helpings of money at the very same companies and individuals that helped cause the mess in the first place. And all those high-minded principles we've been hearing about � you know, like Larry Kudlow's favorite slogan: "Free market capitalism is the best path to prosperity?" They get thrown out the window in the interest of expediency.

Heaven forbid someone raises his hand in objection to some of the ideas being thrown around, either. Those folks get labeled as "Herbert Hoover" wannabes. Or worse, they're told that they sound like Hoover's Treasury Secretary Andrew Mellon.

He believed a hands-off approach to the stock market crash and the subsequent recession was appropriate, and was famously quoted as saying "Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate" in order to "purge the rottenness" in the system.

Instead, we are told to just all rally behind the Fed � let it pull every lever and bend (or break) every rule to save the world. Or in simple terms: "The ends justify the means. Stocks can't be allowed to suffer a short-term crash. Recession must be avoided at all costs. Get over it."

Look, I am NOT averse to offering targeted aid to deserving borrowers. I have talked about some of the ideas I like before.

I'm pleased to see that despite all the pressure coming from government officials, Fannie Mae and Freddie Mac actually seem to be keeping standards relatively tight ... and even tightening them ... to reflect the very real risk of further price declines.

And the Frank/Dodd proposals make sense in many ways. That's because they would require lenders to take some losses, while also making any borrower who receives help pay FHA back for that aid by surrendering a chunk of any future appreciation.

But let's stop and take a deep breath here about some of these other steps. Maybe, just maybe, Wall Street is getting its just desserts for throwing an easy money bacchanalia the past few years. Maybe, just maybe, we should allow the bad debts to be purged and yes, allow the firms that took on the most risk to suffer the worst consequences.

Would we have seen a 1,000-point down day in the Dow if the Fed hadn't arranged a shotgun wedding for Bear Stearns over that fateful weekend? Maybe. But you know what? Maybe that would have been just the cleansing we needed to flush out the last of the crud and get on with a healthy, rebuilding process.

At the very least, a good flush would have created some real bargains for investors who have acted prudently in the past several months, who didn't load themselves up with vulnerable financial stocks, and who were sitting on hefty cash levels.

Furthermore, I have real reservations about what's happening today and what it means for the longer term ...

For starters , the Fed has done a poor job of preventing and fixing bubbles over the past several years. It failed to recognize and/or tamp down the dot-com bubble in advance. Then it reacted to its bust in such an aggressive manner that it created an even bigger bubble in housing.

Yet some are considering deputizing the Fed as a financial markets Supercop? Am I the only one who thinks there's something wrong here?

Second , there's the whole moral hazard risk of this Bear Stearns transaction. The term refers to the risk that bailouts just embolden people to take even bigger risks down the road, knowing the Fed will save their bacon if they get into trouble.

Critics say there's just no time for this kind of argument. Their view: Desperate times call for desperate measures. But let me ask you a question: Has each successive crisis that the Fed has tried to paper over (Orange County, Long-Term Capital Management, the dot-com bust, and so on) been bigger or smaller than the one before it? I think the answer is clear: Bigger. And I think one � though certainly not the only � reason for that is clear: Investors know that the Fed ultimately "has their backs."

Third , we have to consider the law of unintended consequences. Did the Fed mean to create a housing bubble to replace the dot-com bubble? I doubt it. Policymakers probably thought they were doing the legitimate, proper thing.

But the reality is that while the Fed can create excess liquidity and cut interest rates, it can't channel that liquidity to specific markets. So we keep getting this "rolling bubble" scenario, where the "cure" for the popping of one asset bubble ends up creating a fresh asset bubble "disease" somewhere else.

I don't know where the next big bubble will be. But I can guarantee you this: If the Fed continues to pump like mad to "fix" the housing market, it's going to come back to haunt us. I'll have to write another column like this ... and we'll have to debate yet another bailout program ... sometime in the 2010s!

The bottom line: Policymakers need to carefully consider the details of any and all bailout plans � and the long-term consequences of their actions. It's not "Mellon-esque" to let economic nature run its course, to the furthest possible extent. That's what capitalism is supposed to be all about, right?

As for investors, the question that's on the table now is quite simple: Will all of the efforts by the Fed and the feds work? Will they be able to counteract the fundamental economic problems facing the housing and mortgage markets?

You know I've been skeptical, and I remain so. But I'll keep my eyes open, my ear to the ground, and be sure to let you know if that changes.

Until next time,

Mike

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com .

Real Estate Market (USA) :: US Housing Bust and the American Dream

Author: Shahla
Subject: US Housing Bust and the American Dream
Posted: Thu Apr 17, 2008 3:42 am (GMT 0)
Topic Replies: 0

By: Mark_B_Rasmussen

Home ownership has long been considered �The AMERICAN DREAM� and with the recent paradigms of the �WEALTH AFFECT� and the �OWNERSHIP SOCIATY��..(Really fraud and myths I have written about earlier on this site)�..See �Debunked Myths of 2007�.

It is estimated that 8 - 10 Million Americans owe more than their home is worth today, as the rate of housing price decline accelerates and the economy slows�(actually early recession).

According to Paul Kasriel and Asha Bangalore of Northern Trust, APX. 43% Of jobs created during the �Boom� were Real Estate related (Financial professionals of all stripes and huge numbers, realtors, appraisers, self employed contractors, appliance/ carpet/ window/ door/ concrete/ frame/ roofing manufacturers, sales people and installers, architects, landscape architects etc, etc.) What many of these people have in common is that they were self employed and independent contractors (Do not show up in unemployment data). Due to the job mix of the �Boom�, real unemployment is most likely understated by a record amount. Now that the housing market is declining the most since �The Great Depression�, one must wonder what is to become of all those housing related jobs. Perhaps it is not a good idea to have such an extremely unbalanced and single source economy�� (think Detroit and autos). Time will tell. Is there another bubble to replace all those jobs, income and wealth?

RICHARD'S STORY:

http://www.marketoracle.co.uk/Article4241.html

The Market Oracle - Market & Economic Forecasts & Polls :: The Federal Reserve Playing a Dangerous Game

Author: Shahla
Subject: The Federal Reserve Playing a Dangerous Game
Posted: Thu Apr 17, 2008 3:41 am (GMT 0)
Topic Replies: 0

By: Dr_Martenson

Be careful what you believe - television ad for Morgan Stanley's brokerage service flickers across the screen, showing a retired couple walking across a beach with a dog and their grandchildren. Smiles and ease and comfort drip off the screen. It is a happy, shiny future they are selling. Separately, a letter goes out from Morgan Stanley to their private clients warning of a �50% chance of a systemic crisis." Which do you believe?

Executive Summary:

Keeping a wide-angle view on this developing crisis is the only way to avoid being whipsawed, and the stakes have never been higher (at least in our lifetime).

The US financial markets, and probably the world's, peered over an abyss on the night of Sunday March 16th 2008, but were rescued by very unusual and concerted official actions.

http://www.marketoracle.co.uk/Article4240.html

The Market Oracle - Market & Economic Forecasts & Polls :: Gold Correction Targeting Move to $850-$830

Author: Shahla
Subject: Gold Correction Targeting Move to $850-$830
Posted: Thu Apr 17, 2008 3:41 am (GMT 0)
Topic Replies: 0

By: Clive_Maund

Gold's uptrend channel from its August low failed last week as predicted, leading to an immediate plunge to $875, from which point it bounced. The failure of the uptrend and the drop well below the 50-day moving average, now way above the 200-day, are events that together typically lead to a prolonged period of consolidation/reaction. This fits with the fundamentals where there is likely to be a significant easing of concerns about the potential insolvency of major banking and mortgage corporations and institutions as the US Fed and Treasury organize an effective taxpayer funded bailout to get them off the hook. Even though the implications of this are hyperinflationary, the general relief resulting from the aversion of immediate crisis is likely to fuel a strong rally in the broad stockmarket, as already set out in detail last week on www.clivemaund.com

http://www.marketoracle.co.uk/Article4238.html

The Market Oracle - Market & Economic Forecasts & Polls :: Banking Crisis- You Can Fool Some Of The People Sometimes

Author: Shahla
Subject: Banking Crisis- You Can Fool Some Of The People Sometimes
Posted: Thu Apr 17, 2008 3:40 am (GMT 0)
Topic Replies: 0

By: Captain_Hook

But you can't fool all the people all the time. This is a truism that will become increasing trite in coming years as more and more people discover the vulgarities being perpetuated on them by the banking / investment community. As an example of this, without solicitation last week Visa informed me I will soon be receiving my �First Class Travel Infinite Card', which apparently has �no credit limit'. Now for some this might be �good news' if planning to live increasingly off credit. But for me, the message I got was the credit givers want people who pay their bills on time to take on even more of the credit growth burden until they too are overextended, which is the brand of thinking that has gotten us into the precarious position we are in today. In this respect credit givers should know they are barking up the wrong tree with people like me if they expect a run-up in balances that can be taxed at exorbitant rates, as most like minded people pay their balances off each month and don't plan on altering this practice.

The following is an excerpt from commentary that originally appeared at Treasure Chests for the benefit of subscribers on Tuesday, March 25th , 2008

For some however, what happens is price increases resulting from inflation simply push the numbers higher, where extra credit provided by these same people (credit givers) is gladly used, but with no thought of repayment. (These are the people you can fool all the time because they are debt slaves for life.) And as long as there are people like this out there the inflation cycle can run unabated, but once they begin to rely on guys like me they run into trouble because an unwillingness to take up more credit will curb consumption, and that's exactly what is happening right now in the commodity complex. Higher prices set against an exhausted consumer (in terms of increasing credit capabilities) have hit the point where demand for commodities is falling, which is perhaps best measured in US crude oil inventories that are currently at multi-year highs. This, combined with other consumption related demand �side considerations is why commodity prices can be expected to fall in coming days if viewed strictly through the consumers eyes.

http://www.marketoracle.co.uk/Article4237.html

The Market Oracle - Market & Economic Forecasts & Polls :: US Presidential Investment Politics: Jobs and The Economy

Author: Shahla
Subject: US Presidential Investment Politics: Jobs and The Economy
Posted: Thu Apr 17, 2008 3:40 am (GMT 0)
Topic Replies: 0

By: Steve_Selengut

Who wants to be a president; the President of the United States? Social Security reform is the winning ticket. Research supports the thesis that Social Security reform would provide all the lubrication necessary to get our economic ball bearings rolling in the right direction. Economies do not grow, or increase employment, when job providers are taxed and regulated unmercifully, throttling their energy, creativity, and profitability. Consumer spending pushes the economy; we need to do more than hand out a few hundred bucks.

The objective of the exercise, Barack, is to permanently place more disposable income in consumers' wallets while providing incentives for employers to hire more workers. There are three areas where the impact of reforms would be beneficial to all, irrespective of political sentiment. Social Security reform would benefit the most people, most quickly. Next on the list, Hillary, would be elimination of income taxes (federal, state, and local) on: (a) all forms of retirement income, and then, (b) all forms of investment income. Third, and particularly important for job creation, John, would be the elimination of all income taxes and nuisance fees on businesses. Who wants to be President?

http://www.marketoracle.co.uk/Article4236.html

The Market Oracle - Market & Economic Forecasts & Polls :: Credit Crunch To Spill Over The World

Author: Shahla
Subject: Credit Crunch To Spill Over The World
Posted: Thu Apr 17, 2008 3:39 am (GMT 0)
Topic Replies: 0

By: Regent_Markets

Despite slew of negative headlines, stock markets around the world still managed to close the week up around 4%. The FTSE and CAC managed 4.7% and 5.4% gains while the Nasdaq 100 was the pick of the US markets, closing the week up 5.2%. The rally was sparked by Lehman Brothers announcing the sale billion of dollars worth of shares late on Monday night.

European financials, such as Deutsche Bank and Barclays led, the bullish charge from the start, ironically helped by the news that UBS would write
down CHF 19 Billion. Despite the large sums mentioned, many have interpreted the write down as a sign that the worst of the banking crisis is over. Credit
markets marked down the risk of default from UBS after being impressed with the bank's capital raising efforts. The fact that Lehman's share sale was
significantly over subscribed certainly helped push things higher

However, markets encountered stiffer headwinds for the rest of the week as more bad news continued to flow around the credit crunch. The Bank Of England
Credit Conditions Survey warned that unsecured credit availability is expected to fall somewhat further, and secured credit availability fall even
more. Central bankers may have calmed the credit crunch at its source, but the length and depth of the aftershocks are now the biggest danger to
domestic economies. With mortgage companies pulling deals almost daily, it may simply be a matter of time before consumers crack.

Ben Bernanke may have subdued the credit crisis (for now) with his dramatic interventions, but the possibility of the crunch spilling over the wider economy remains. He commented that much depends on the rate of decline in US housing values from this point onwards. It is arguable that the same could be said of the wobbling UK and European housing markets. For now though, markets are encouraged by the Feds comments that the US economy will strengthen in the second half of 2008, and grow at or above trend in 2009.

The much-anticipated US payroll report came in not only lower than last month, but even below consensus estimates. This is the third month in a row that the payroll report has not only shown a decline, but has been weaker than consensus estimates. The only other time this happened was spring 2001, which retrospectively, marked the beginning of the last brief US recession You might expect global equity markets to fall heavily on the news, but they in fact managed to hold to all or most of their gains for the week.

This could be an indicator that bad news is being priced into stock markets at the moment. Central bankers and politicians on both sides of the Atlantic
are doing their best to positive in the face of the stream of dismal economic figures, but traders don't seem fooled. It appears they may already be pricing in a recession in the US and at least a severe contraction in the UK.

This week starts off slowly but quickly builds momentum. With no top line announcements on Monday, Tuesday's release of the last FOMC meeting minutes,
will throw markets from any slumber they may be experiencing prior to this. The general consensus is that US rates have further to go, but an influential
Washington think tank has caused many to question the depth of these cuts, saying that the Fed is unlikely to cut below 2%. On Wednesday UK industrial
production figures will be released in the morning.

The week reaches a crescendo on Thursday with the release of six top tier economic announcements. First up are UK and European interest rate decisions.
A Quarter point cut is �odds on' for the MPC according to some analysts. Still, the ECB is expected to hold their �inflation fighting' stance, and
keep rates the same. The ECB president will speak following the release of their decision. At the same time, we receive US Trade balance figures, and US
unemployment claims. It will be one hectic lunchtime for European traders. To top off an already packed day, Fed chairman Bernanke is due to speak later in
the afternoon.

With a slow start to the week on the economic news front, Traders at BetOnMarkets.com foresee that there's a reasonable chance that last week's
momentum could spill over to the start of this week. A One Touch trade predicting that the Nasdaq Composite Index will touch 2395 at any time during
the next 10 days could yield 15%.

By Mike Wright
Tel: +448003762737
Email: editor@my.regentmarkets.com
Url: Betonmarkets.com & Betonmarkets.co.uk

About Regent Markets Group: Regent Markets is the world's leading fixed odds financial trading group. Through its main multi-awarding winning websites, BetOnMarkets.com and BetOnMarkets.co.uk, it has established itself as the leading global provider of a unique, powerful way to trade the world's major financial markets. The number, length and variety of trades available to our clients exists nowhere else in the world. editor@my.regentmarkets.com Tel (+44) 08000 326 279

Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Do your own due diligence.

The Market Oracle - Market & Economic Forecasts & Polls :: Gold Correction or Price Collapse?

Author: Shahla
Subject: Gold Correction or Price Collapse?
Posted: Thu Apr 17, 2008 3:39 am (GMT 0)
Topic Replies: 0

By: Darryl_R_Schoon

Conduct your victory as a funeral - Tao Te Ching , Lao-tzu

Gold's recent sell-off from a high of $1033 has sent once jubilant gold investors to the sidelines to reassess gold's present malaise. Rest assured, gold is going higher, much higher. While there will be corrections along the way, gold will someday break out and explode upwards towards yet to be reached heights.

But when gold does reach that record level, it will not be an occasion for celebration�on that day there will be no dancing in the streets, there will be misery.

$1000 gold is a milestone�on the road to hell - Professor Antal E. Fekete

In How To Survive The Crisis And Prosper In The Process , I describe the 5 stages of gold that precede and occur during what I call The Time Of The Vulture . We are currently in stage 3:

STAGE 3: THE PRICE OF GOLD BECOMES INCREASINGLY VOLATILE. The price of gold is subject to increasing highs and lows as large investment funds move in and out of gold as global economic uncertainties wax and wane, a sign that gold is increasingly a haven in uncertain times.

http://www.marketoracle.co.uk/Article4233.html

The Market Oracle - Market & Economic Forecasts & Polls :: Stock Market Presidential Cycle Calls for Strong Bull Run into US Election

Author: Shahla
Subject: Stock Market Presidential Cycle Calls for Strong Bull Run in
Posted: Thu Apr 17, 2008 3:38 am (GMT 0)
Topic Replies: 0

By: Andre_Gratian

Current Position of the Market
SPX: Long-term trend - Election years that fall in the 8th year of the Decennial pattern call for consolidation in the early part of the year followed by a strong finish. But the 6-yr cycle which is scheduled to bottom in late Summer/early Fall could also play a restraining role, followed by an eventual bull market top in 2009-2010.

SPX: Intermediate trend - an extended intermediate-term consolidation is in the process of ending and may already have ended.

Analysis of the short-term trend is done on a daily basis with the help of hourly charts. It is an important adjunct to the analysis of daily and weekly charts which determines the course of longer market trends.

Daily market analysis of the short term trend is reserved for subscribers. If you would like to sign up for a FREE 4-week trial period of daily comments, please let me know at ajg@cybertrails.com .

Overview:

http://www.marketoracle.co.uk/Article4232.html

The Market Oracle - Market & Economic Forecasts & Polls :: Will the US go Protectionist?

Author: Shahla
Subject: Will the US go Protectionist?
Posted: Thu Apr 17, 2008 3:38 am (GMT 0)
Topic Replies: 0

By: William_R_Thomson

It's a ritual that repeats every four years, first during the US Presidential primaries and then later the election itself � the candidates stomp the prairies, and industrial heartlands, with promises to better the lot of the American worker in today's global economy. Fair trade not free trade is a particularly popular slogan. Then comes the election and the installation of the new President and it is more or less business as usual: more free trade agreements, more Doha rounds and more mock battles between the Executive and Legislative branches over environmental and health and safety standards, which are the codes words official Washington uses for its fairly mildly protectionists policies. Globalisation supported by huge commercial and financial interests pushes ahead remorselessly.

http://www.marketoracle.co.uk/Article4227.html

The Market Oracle - Market & Economic Forecasts & Polls :: Contracting US Economy to Hit Corporate Earnings

Author: Shahla
Subject: Contracting US Economy to Hit Corporate Earnings
Posted: Thu Apr 17, 2008 3:37 am (GMT 0)
Topic Replies: 0

By: Prieur_du_Plessis

A sense of relative calm descended upon financial markets over the past week. Although fears about the outlook for the US economy persisted, a perception crept into markets that much of the bad news related to the credit crisis was now out in the open, with the result that the equity bulls had reason to feel rather pleased with their performance by the close of the week.

In his testimony on the economic outlook on Wednesday Fed chairman Ben Bernanke told the Joint Economic Committee he thought the US economy would not grow much, if at all, and could even contract slightly in the first half of 2008. Market participants took Bernanke's testimony in their stride, cognizant that he was not telling them anything they had not already feared.

Earlier in the week, Treasury Secretary Hank Paulson unveiled a 218-page plan to overhaul the US regulatory system and essentially to give the Fed more power to oversee the entire financial system. �Nothing I saw will help all that much in the current crisis. It's more like re-arranging the deck chairs as the ship is going down. It seems like most of it is being proposed to prevent another crisis like the one we are in from occurring in the future,� said John Mauldin ( Thoughts from the Frontline ).

Bernanke made his second appearance on Capitol Hill when he and several top officials appeared before the Senate Committee on Banking, Housing and Urban Affairs to discuss their respective organizations' roles in the sale of Bear Stearns. No real new facts were revealed beyond that Bear Stearns (BSC) had needed to be bailed out by JPMorgan Chase (JPM) and the Fed in order to prevent broader market damage and a potential collapse of the entire financial system.

http://www.marketoracle.co.uk/Article4224.html

The Market Oracle - Market & Economic Forecasts & Polls :: The Real Reasons for the Credit Crisis

Author: Shahla
Subject: The Real Reasons for the Credit Crisis
Posted: Thu Apr 17, 2008 3:37 am (GMT 0)
Topic Replies: 0

By: Clif_Droke

I've purposely kept my comments concerning the credit crisis at a minimum since it began dominating the daily news headline. My reasoning for this is because I knew the crisis was overblown and overstated in the press and that there had to be a very good reason for it. The only problem is I didn't know exactly what the reason was.

Time tells all, however, and I knew that sooner or later the truth must out!

One thing experience has taught is that every notable market crash, panic, bear market or financial crisis is the result of careful planning and forethought by the monetary authorities. With trillions of dollars at stake, nothing happens without their tacit or explicit approval and there is simply no such thing as a crisis that happens by �coincidence.� For happenstance to be allowed to run its course in with trillions in derivates out there would be certain death for the financial system. As the economist Dr. Stuart Crane was fond of saying, �Things [in the monetary world] don't just happen to happen. They happen because they were planned to happen.�

http://www.marketoracle.co.uk/Article4223.html

The Market Oracle - Market & Economic Forecasts & Polls :: Is the US Fed Inflating or Deflating?

Author: Shahla
Subject: Is the US Fed Inflating or Deflating?
Posted: Thu Apr 17, 2008 3:36 am (GMT 0)
Topic Replies: 0

By: Mick_Phoenix

Welcome to the Weekly Report. This week, I stick my nose in where it ain't wanted. (again)We get down in the dirt about deflation and we look at some stocks and wonder why and I show you my long term indicators.

Now, I'm not one to boast, really I'm not. No one enjoys the likes of me stuffing �I told you so� remarks down reader's throats. There comes a time when it does become slightly unavoidable. Is it ego, a demand of recognition? Is it a desire to be kingpin, the ultra guru? Frankly my dear, I don't give a damn, as long as my readers get something that helps make life as an investor /trader easier then my attitude is �so what?�

What a week that was, Dow up, then down, up again�..stop! Hindsight - blah! This is the Collection Agency, we pride ourselves on looking forward, not back. Where do I look, how far forward? The Occasional Letter looks 6-18 months ahead, soon it'll be looking for some buy opportunities. The Weekly Report is more short-termism, with the aim of looking for opportunities in the next few weeks.

http://www.marketoracle.co.uk/Article4222.html

The Market Oracle - Market & Economic Forecasts & Polls :: Stock Market Dow Theory Positive Developments But no Buy Signal

Author: Shahla
Subject: Stock Market Dow Theory Positive Developments But no Buy Sig
Posted: Thu Apr 17, 2008 3:36 am (GMT 0)
Topic Replies: 0

By: Tim_Wood

In today's update I want to look at the market from a couple of different perspectives. Recently, I have heard it said that the Dow Theory is now giving a �Buy Signal.� This is not exactly true. In order to explain where we are from a Dow Theory perspective, I first have to explain where we have been.

In looking at the chart below you can see that both averages last made joint highs back in July. In Dow Theory terms, this was known as a �secondary high point� in which both averages confirmed one another. From those highs, both averages moved into their August �secondary low points.� It was the rally out of that low in which things began to deteriorate. As the Industrials pressed higher into their October highs, the Transports lagged and in doing so failed to confirm the Industrials. This created a Dow Theory non-confirmation at the October secondary high points and is illustrated by the blue trend lines on the chart below. I wrote about this at the time and explained that upside non-confirmations served as warnings that something was wrong.

http://www.marketoracle.co.uk/Article4221.html