Anyone who reads the business section is probably sick of the terms "subprime" and "credit crunch." Google "credit crunch" and you'll get 4.2M results. The repricing of risk, the bursting of the housing bubble, the health of companies' balance sheets, inflation, and the impact on the consumer's ability to keep buying stuff, however, keep both politicians and breadwinners up at night.
We should be worried. But we should also ignore most of what we hear. In the stock market--especially stock picking--whose opinion matters? Jim Cramer is good at generating hype; though he is very bright, the Mad Money Jim Cramer persona annoys me. Most news exists not to report accurate and meaningful news, but to report what sells. Panic, greed, and Britney sell. The best source for news is rational economists, reputable business leaders, and other smart independent minds. This site tries to be relevant.
Fortunately, many intelligent independent leaders, et al., have recently made headline comments and observations on the current economic environment.
On U.S. shipping
Scott Davis (CEO, UPS)
UPS's first quarter results illustrate the dramatic slowing in the U.S. economy. At our investor conference on March 12th, we told you that volume growth in January had been up 3%. But in the six weeks prior to the conference, it had been negative. We also said if these trends persisted through March, we would not achieve the earnings guidance we had provided for the quarter. [The] trends did continue. Many have become sharply more negative in the last two months. ... The great unknowns are the severity and the duration of the current economic slowdown. Many of our customers have tightened their belts resulting in a shift away from our premium air products to ground shipments. [Emphasis added]
Yale University economist Robert Shiller, pioneer of Standard & Poor's/Case-Shiller home-price index, said there's a good chance housing prices will fall further than the 30% drop in the historic depression of the 1930s. Home prices nationwide already have dropped 15% since their peak in 2006, he said.
"I think there is a scenario that they could be down substantially more," Mr. Shiller said during a speech at the New Haven Lawn Club. [Emphasis added]
Slowdown filters through to Starbucks
Starbucks (NASDAQ:SBUX) , the coffee house chain, on Wednesday blamed a "sharp weakening" in the consumer economy for an unexpected decline in its US sales, sending its shares plunging more than 10 per cent in after-hours trading.
Howard Schultz, who returned to the role of chief executive in January, said "the current economic environment is the weakest in our company's history", citing the housing slump and rising energy and food costs.
The company said conditions were particularly bad in California and Florida, which account for 32 per cent of its retail revenues and have been hard hit by the slump in the US housing market. [Emphasis added]
What does Greenspan think?
NEW YORK (CNNMoney.com) -- Today's economic condition could likely be seen as "the most wrenching since the end of the second world war," wrote former Federal Reserve chairman Alan Greenspan in the Financial Times on Monday.
And Buffett?
FORTUNE 4/14/2008
Q: The scenario you're describing suggests we're a long way from turning a corner.
A: "I think so. I mean, it seems everybody says it'll be short and shallow, but it looks like it's just the opposite. You know, deleveraging by its nature takes a lot of time, a lot of pain. And the consequences kind of roll through in different ways. Now, I don't invest a dime based on macro forecasts, so I don't think people should sell stocks because of that. I also don't think they should buy stocks because of that."
In the end...
Only in hindsight does "buy low, sell high" mean anything. To actually do that presupposes a contrarian strategy. So when the press talks about the death of equities and new strategies for winning big, ignore most of it. Or even better, short it.
Image: http://conductr.com/assets/2007/8/14/refi-ad.png
Disclosure: none
No comments:
Post a Comment