sábado, 22 de novembro de 2008

Don't Get Depressed, It's Not 1929


Don't Get Depressed, It's Not 1929

Why all those Great Depression analogies are wrong.

By Daniel Gross

It's difficult to avoid the comparisons between the current sad state of financial affairs and the Great Depression. "This is not like 1987 or 1998 or 2001," Merrill Lynch CEO John Thain said at a conference on Nov. 11. "We will in fact look back to the 1929 period to see the kind of slowdown we are seeing now."Time depicted President-elect Barack Obama on its cover as Franklin Delano Roosevelt. And in Washington, the buzz is all about what the new team will do in its first 100 days. What's next? Show trials in Moscow?

All this historically inaccurate nostalgia can occasionally make you want to clock somebody with one of the three volumes of Arthur M. Schlesinger Jr.'s history of the New Deal. The credit debacle of 2008 and the Great Depression may have similar origins: Both got going when financial crisis led to a reduction in consumer demand. But the two phenomena differ substantially. Instead of workers with 5 o'clock shadows asking, "Brother, can you spare a dime?" we have clean-shaven financial-services executives asking congressmen if they can spare $100 billion. More substantively, the economic trauma the nation suffered in the 1930s makes today's woes look like a flesh wound.

"By the afternoon of March 3, scarcely a bank in the country was open to do business," FDR said in his March 12, 1933, fireside chat (now available on a very cool podcast at the Federal Deposit Insurance Corp.'s Web site). In 1933, some 4,000 commercial banks failed, causing depositors to take huge losses. (There was no FDIC back then.) The recession that started in August 1929 lasted for a grinding 43 months, during which unemployment soared to 25 percent and national income was cut in half. By contrast, through mid-November 2008, only 19 banks had failed. The Federal Reserve last week said it expects unemployment to top out at 7.6 percent in 2009. Economists surveyed by the Philadelphia Federal Reserve Bank believe the recession, which started in April 2008, will be over by next summer. (Of course, back in January the same guys forecast that the economy would grow nicely in 2008 and 2009.) But don't take it from me. Take it from this year's Nobel laureate in economics. "The world economy is not in depression," Paul Krugman writes in his just-reissued book The Return of Depression Economics. "It probably won't fall into depression, despite the magnitude of the current crisis (although I wish I was completely sure about that)."

So what's with all the speakeasy-era speak? Financial executives invoke distant history in part to make up for their own recent shortcomings. If a force as powerful as the Great Depression has been unleashed on the global economy, how can a mere mortal like Merrill's John Thain be held responsible? The specter of the 1930s has also been deployed by political leaders to create a sense of urgency. "We saw a lot of overblown analogies in the run-up to the passage of the bailout bill," notes Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C. President Bush's Sept. 24 address to the nation warned that "the entire economy is in danger," and that "without immediate action by Congress, America could slip into a financial panic, and a distressing scenario would unfold."

It's understandable that we make comparisons to the Great Depression. Analogies help us place things in context. But very few of us actually lived through the Depression. Studs Terkel, the great chronicler of the voices of the Depression, died in October at 96. The historical distance from today to 1929 is as vast as the chasm separating 1929 from 1850. Dan Ariely, a behavioral economist at Duke University and author of Predictably Irrational, says, "The closer we are to something—an event, a person, an object—the more nuances we see." By contrast, the further away we are, the greater (and less accurate) the generalizations we make. And so when comparisons to the Great Depression are flashed on cable-news crawls, "it's all about the desire to fit everything into a snapshot," Ariely says.

Ironically, the differences between the two eras can be summed up in a few sound bites. The world of 1929-33 was one that lacked shock absorbers such as Social Security and deposit insurance to insulate people from economic disaster. In the 1930s, some of the world's largest economies—Germany, the Soviet Union, Japan, and Italy—were run by leaders hostile to the very notion of market capitalism. Today, U.S.-style market capitalism is under assault from self-inflicted wounds, and Germany, Italy, and Japan (Russia, not so much) are working with the United States to cope with a common problem. Back then, we were cursed with a feckless Federal Reserve, and a wealthy Treasury secretary, Paul Mellon, saw the downturn as a force for good. "Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate," he said. "People will work harder, live more moral lives." By contrast, today's Federal Reserve chairman, Ben Bernanke, is a student of the Great Depression, and the wealthy Treasury secretary, Henry Paulson, wants to provide liquidity to stocks, farmers, and real estate. A final difference: After the 1929 crash, the nation had to wait more than three years for a president who simply wasn't up to the job to leave the scene. This time, we've got to wait only two more months.

A version of this article also appears in this week's issue of Newsweek.

Daniel Gross is the Moneybox columnist for Slate and the business columnist for Newsweek. You can e-mail him at moneybox@slate.com. He is the author of Pop! Why Bubbles Are Great for the Economy.

Article URL: http://www.slate.com/id/2205186/

Top 10 Things You Can Do with a DVD [Lifehacker Top 10]

Top 10 Things You Can Do with a DVD [Lifehacker Top 10]

The proliferation of thumb drives and external hard drives has made optical media like DVDs seem a little less handy—but there are still plenty of ways to put DVDs to good use. These shiny, multi-gigabyte discs can run entire operating systems, put movies on your computer and vice-versa, host a robust copy of Wikipedia, and do so much more, if you know how to work them. Check out some of our favorite hacks and tips for getting the most out of DVDs, whether released by Hollywood or purchased at OfficeMax. Photo by MiNe (sfmine79).

10. Boot a custom operating system from a DVD.

It's certainly not a trick you can't pull off with a CD, but putting a live-booting operating system on a DVD gives you a lot more space to fit the apps you really want and use, along with any files you keep going back to. You can roll your own Ubuntu systemwith Reconstructor, or back up your particular Linux desktop bymaking a live DVD with remastersys. You can even make your own live-booting Windows XP CD with this guide from TackTech. And when you're tired of pretending to get things done in live operating systems, try out some racing, shooting, volleyball, and ten other free Linux games on the linuX-gamers.net Live DVD.

9. Smooth over disc scratches with household items.

From the files of the Can't Believe It Really Works Department: If you've got a DVD (or CD) that your drive skips on or refuses to play, and it doesn't look like it was dragged from the bumper on a cross-country trip, get out a little standard white, non-gel toothpaste, rub a little in the scratched portions, and buff it off. The stuff might just polish the disc enough, and smooth out its surface, to let a laser do its thing. If you're not sure that the tube in your bathroom cabinet passes muster, try reaching under the sink and polishing the disc with Pledge. The light wax can fill in the cracks and crevices and get you back to, uh, being productive, of course.

8. Mount ISO files as virtual drives.

If you've backed up a favorite game disc, flick, or other DVD to ISO, or just happened to grab one from the ether of the web, you might not always want to spend the time, or spare DVD-R, on burning that image—and, besides, it'll run a lot faster from a hard drive. Mounting an ISO image as if it were a real disc in a drive is an established hack, and one that's pretty darned handy. We like Virtual CloneDrive for Windows, the built-in Disk Utility in Mac OS X, and AcetoneISO2 for Linux. They'll all save you a disk, and lend you that clever feeling that you've pulled a fast one on your system somehow.

7. Put Wikipedia on a DVD.

To make the vast wealth of Wikipedia data available to schools without constant internet access, the SOS Children's Villages group created a 2.9GB, 5,500-article edition of the user-edited encyclopedia, Wikipedia school edition, that puts 20 million words at the fingertips of anyone who wants them. Great for on-the-go research (that you'll want to double-check and properly source, of course), actual school use, and it's one BitTorrent download you'll want to keep seeding after you're done grabbing it.

6. Create ISOs from DVDs.

Need a copy of a DVD but lack for a blank? Want to re-create that perfectly ripped DVD of Space Ghostepisodes for multiple friends? An ISO file is your best friend, because it works on any system in a ton of software apps. Windows users have, for example, theFree ISO Creator, Linux users can hack one together from the terminal, and Mac users can create disk images using the built-in Disk Utility. Grab a few DVDs you'd never want to lose to the ravages of time and create an ISO you keep backed up—one day, you'll be really glad you did.

5. Automatically catalog your DVD collection

If you're a film nut, pack rat, or some mix of both, it can be all kinds of convenient to know what you've got on the shelf to watch, trade, or rip—or just print out and brag to your friends about. We've previously highlighted two free apps that can do that—Eric's Movie Databasefor Windows and DVD Hunter for Macs—but the $40Delicious Library (Mac OS X) and DVD Profiler ($30, Windows) won out in our Battle of the Media Collection Managers for their intuitive interfaces and cataloging power.

4. Easily play ripped DVDs.

There are lots of tools to rip video files from DVDs, but most of those videos take a hit in quality for smaller file sizes. On the other hand, getting those VIDEO_TS folders to just up and play isn't half as simple. At least, until you download Lifehacker's own DVD Play tool, which thumbnails Amazon cover art for any rips you've got stashed in a folder and plays them using that multi-tool of multimedia, VLC Media Player. If you've only got a few discs ripped onto your drive, or you just like to do it yourself, you can also check out Hackszine's guide to playing ripped DVDs with VLC.

3. Get your DVDs on your iPod or iPhone for free.

The idea of watching TV episodes or entire movies from your iPod sounds like an air travel veteran's dream, until one realizes that Apple entirely expects you to pay separately for an iTunes copy of the flick. Skip that noise by using some really simple workarounds. Rick Broida explained a while back how to copy DVDs to our iPod using the freeDVD Decrypter and Videora iPod Converter for Windows, and the mighty HandBrake for Mac OS X. There's since been Windows and Linux versions of HandBrake released, but two of your current Windows-using Lifehacker editors have found the free version of the Freez iPod Video Converter to be a fast, reliable converter to iPod-friendly formats.

2. Burn any video file to a playable DVD.

In most cases, the idea of burning nearly any flick to a playable DVD is a lot easier than the implementation. Adam's run down an app and a method, however, to burning any video file to a playable video DVD, using the DVD Flick app for Windows. More than just converting data from any of 45 video file types, DVD Flick also allows for custom menu creation and subtitle insertion. If DVD Flick doesn't agree with you, there's alsoDVD Creator, also for Windows and also free.

1. Rip DVDs to video with little fuss.

Let's guess that more than 90 percent of anyone trying to back up a DVD or play its video files on another platform don't want to mess with bitrates, audio codecs, or answer any questions about "passes"—just the playable file, thank you very much. Adam Pash feels very much the same, and created a one-click tool for DVD ripping. We've run down the more involved process for DVD ripping in Linux, while any user can rip DVDs with Handbrake or MacTheRipper. If you never want to choose single bit-anything, these tools won't make you do so.

What magic can you work with a blank (or media-stuffed) DVD or an ISO file? What tricks would you like to pull off, but need explained? Post your tips, and requests, in the comments.

Economy -- Of the People, By the People

Friday, November 21st, 2008

Good morning.

The news this week has only reinforced the fact that we are facing an economic crisis of historic proportions. Financial markets faced more turmoil. New home purchases in October were the lowest in half a century. 540,000 more jobless claims were filed last week, the highest in eighteen years. And we now risk falling into a deflationary spiral that could increase our massive debt even further.

While I’m pleased that Congress passed a long-overdue extension of unemployment benefits this week, we must do more to put people back to work and get our economy moving again. We have now lost 1.2 million jobs this year, and if we don’t act swiftly and boldly, most experts now believe that we could lose millions of jobs next year.

There are no quick or easy fixes to this crisis, which has been many years in the making, and it’s likely to get worse before it gets better. But January 20th is our chance to begin anew – with a new direction, new ideas, and new reforms that will create jobs and fuel long-term economic growth.

I have already directed my economic team to come up with an Economic Recovery Plan that will mean 2.5 million more jobs by January of 2011 – a plan big enough to meet the challenges we face that I intend to sign soon after taking office. We’ll be working out the details in the weeks ahead, but it will be a two-year, nationwide effort to jumpstart job creation in America and lay the foundation for a strong and growing economy. We’ll put people back to work rebuilding our crumbling roads and bridges, modernizing schools that are failing our children, and building wind farms and solar panels; fuel-efficient cars and the alternative energy technologies that can free us from our dependence on foreign oil and keep our economy competitive in the years ahead.

These aren’t just steps to pull ourselves out of this immediate crisis; these are the long-term investments in our economic future that have been ignored for far too long. And they represent an early down payment on the type of reform my Administration will bring to Washington – a government that spends wisely, focuses on what works, and puts the public interest ahead of the same special interests that have come to dominate our politics.

I know that passing this plan won’t be easy. I will need and seek support from Republicans and Democrats, and I’ll be welcome to ideas and suggestions from both sides of the aisle.

But what is not negotiable is the need for immediate action. Right now, there are millions of mothers and fathers who are lying awake at night wondering if next week’s paycheck will cover next month’s bills. There are Americans showing up to work in the morning only to have cleared out their desks by the afternoon. Retirees are watching their life savings disappear and students are seeing their college dreams deferred. These Americans need help, and they need it now.

The survival of the American Dream for over two centuries is not only a testament to its enduring power, but to the great effort, sacrifice, and courage of the American people. It has thrived because in our darkest hours, we have risen above the smallness of our divisions to forge a path towards a new and brighter day. We have acted boldly, bravely, and above all, together. That is the chance our new beginning now offers us, and that is the challenge we must rise to in the days to come. It is time to act. As the next President of the United States, I will. Thank you.

Don't Call the Bottom

Don't Call the Bottom

Bear Market Strategy (small)The latest research report print and distributed by Birinyi Associates, Bear Market Strategy, analyzes and discusses every bear market of the last fifty years.  From this analysis we can draw several conclusions:

  1. DON'T CALL THE BOTTOM!  The idea that capitulation occurs at market bottoms is a myth.  There have been times when extreme selling or negative sentiment has occurred at a market turn, but based on a historical perspective we are not able to determine what the so called magic number is that would indicate such an extreme.  Markets are actually more apt to make a subtle or sometimes unexpected turn from red to black.
  2. Timing matters:  The majority of a bear market decline and also the majority of bull market gains occur in very specific time periods relative to the cycle.  (Subscribe to one of Birinyi's premium research products for more details on timing.) 

  3. This bear market is different than any other.  We are fond of pointing out that in fact all markets are different, but this one has thrown any kind of historical perspective or market tool out the window.  Most notably, the decline in the S&P 500 has been as severe as any of the last fifty years, but it has occurred in half of the time.  Typically declines such as the current one occur over two years, this has taken just over one.  Expecting a bottom because we have declined as much as other bear markets is simply not credible.  Many commentators have compared this decline to those of the 1930s.  While it is true that there were similar declines in the 30s, the market was very different then.  There were about 650 NYSE listed firms in 1930; today there are 1,871 with another 2,967 on the NASDAQ.  The fact is that modern market technology, transaction speed and the availability of trading stocks makes this market very different from that of the 1930s. 

What can we draw from this?  Anyone using historical perspective to forecast for this bear market should be ignored.  Birinyi Associates' analysis indicates that there are strategies to be followed, but the best advice is to remain very cautious.  The market continues into uncharted territory, and anyone commenting on its path is purely speculating.  Bear Market Strategy is a 180 page publication available to subscribers of Birinyi Associates' Mini-Institutional service.  Selected tables and charts will be presented in the monthly newsletter as necessary, but the book in its entirety will not be made available.  For the complete publication and analysis subscribe to the Mini-Institutional service today.

Geithner could slow bank-stock assault

A new Treasury secretary could help shepherd additional relief for the banks through a skeptical Congress.
By Colin Barr, senior writer

NEW YORK (Fortune) -- Betting against bank stocks may soon become much riskier.

The stock market enjoyed a massive snapback rallyfollowing reports that president-elect Barack Obama will make Timothy Geithner, the president of the Federal Reserve Bank of New York, his Treasury secretary.

The Geithner decision is potentially "very helpful" in adding stability to the financial system, said Simon Johnson, an economist at the Peterson Institute for International Economics in Washington, because it suggests the Obama administration is ready to act decisively on the financial crisis.

The U.S. finance sector has been under attack.

Citi (C, Fortune 500) lost nearly two-thirds of its value over the past week, losing 20% Friday alone even as the rest of the market bounced back following a two-day washout.

JPMorgan Chase (JPM, Fortune 500) and Bank of America (BAC, Fortune 500) each lost at least a third of their value, while Goldman Sachs (GS, Fortune 500) traded below its initial public offering price a decade ago.

At the same time, confidence in the current Treasury secretary, Henry Paulson, has been in steep decline. "The plan-a-day stuff has just not worked," said Bianco Research strategist Howard Simons. "The confusion has created paralysis - it's a failure of policy."

The past week's plunge, after all, comes less than a month after the Treasury poured $125 billion into nine big financial institutions to stabilize the banking system.

The selloff started in earnest after Paulson said the Treasury wouldn't buy troubled mortgage assets from financial institutions that are up to their eyeballs in them. In doing so, Paulson abruptly abandoned a sales pitch he made just two months ago to pry $700 billion in spending authority from a reluctant Congress.

That reversal did more than undermine shares of big holders of troubled assets such as Citi, which had been seen as a big beneficiary of the original TARP plan. It also served as perhaps the final strike against Paulson in a credibility battle he has been waging with his critics on Wall Street, in Congress and in the public.

Sen. Kent Conrad, the North Dakota Democrat who chairs the Senate Budget Committee, sent Paulson a letter Thursday in which Conrad says he found it "troubling to learn" that Treasury "may have misled members of Congress, the public, and financial market participants about its intentions with regard to the purchase of troubled assets."

The comment stems from Paulson's assertion in a Nov. 12 speech that by the time the bill enabling the TARP was signed on Oct. 3, it was clear to him that "purchasing troubled assets - our initial focus - would take time to implement and would not be sufficient given the severity of the problem."

Conrad wonders why Paulson didn't share this observation with taxpayers earlier.

"Since the current crisis is due, at least in part, to a crisis in confidence and aversion to making credit and investment decisions in the absence of full and accurate information, it is important for Treasury to signal its intentions clearly," Conrad writes. "Misleading statements and unexplained or poorly explained changes of policy are not helpful to restoring confidence in the credit and equity markets."

Geithner, at the start at least, should have a much better relationship with Congress. That's an important factor with bailouts being deeply unpopular, Johnson said - as shown in the way the executives at the Big Three auto companies were shown the door last week.

Still, the policy questions themselves remain vexing.

While Johnson said there is no easy answer to shoring up the banking sector for a second time in three months, one solution is to repeat the earlier TARP capital plan - inject massive amounts of funds into big institutions at favorable terms for the banks - as a way to show those betting against the banks that it's possible to lose money on those bets.

Big purchases of preferred stock will add to the banks' capital, offsetting the recent erosion in their financial positions as markets have soured.

And because the terms aren't tough on the recipients - banks pay just a 5% dividend on the shares, which is half the market rate in recent transactions at Goldman and GE - stock prices in the sector could actually rise.

Another capital injection alone wouldn't necessarily end the run on the banking system, of course. And it's notable that Citi sat out the rally that boosted the rest of the market late Friday following reports of Geithner's appointment.

But even analysts who have long been skeptical of Citi says its recent trading price understates the firm's true worth. "We believe that there is fundamental value at Citigroup that justifies a $9 price target," Deutsche Bank analyst Mike Mayo wrote Friday.

Trailer Park: Wrestling With The Truth About Trek

Trailer Park: Wrestling With The Truth About Trek

Trailers? Oh yeah, we got your trailers here.

Star Trek
Like a lot of people, I got my first glimpse of this one when it played with Quantam of Solace last weekend. While this will obviously play hell with Star Trek continuity, I am one Trek geek who is looking forward to the J.J. Abrams take on the franchise. It opens on May 8.

Astro Boy 
Here's a teaser for the CGI animated adaptation of the classic anime about a robot boy built by a scientist to replace the son he lost. The trailer doesn't give us much to go on, but the impressive voice cast includes Freddie HighmoreNicolas CageKristen BellDonald SutherlandEugene Levy, and Nathan Lane. Things get cosmic on October 23. 

I find it odd that Neil Gaiman's name isn't mentioned in the trailer, since the film is based on his novella. Gaiman isn't a household name but I would have figured he was well enough known to catch a few people's attention. Nevertheless, this stop-motion animated feature from Henry Selick, the director of A Nightmare Before Christmas and James and the Giant Peach, deals with a young girl who finds a pathway to a parallel world in which duplicates of her parents sport buttons for eyes. This deliciously creepy looking film will be in theaters on February 6.

Ice Age: Dawn of the Dinosaurs

All of our favorite characters return for this third installment of the series, and this time it's in 3-D. The only one we see in this new trailer is Scrat, on the trail of not just another acorn but apparently romance as well. The one hits on July 1.

Filed under: ,

Continue reading Trailer Park: Wrestling With The Truth About Trek

Buy and Hold Revisited

Around this time last year, I wrote an article in which I warned of the dangers of buy and hold investing. One critical response accused me of "shucking and jiving" and asked for academic publications supporting the value of trading options. The critic went on to write: "Our family has owned Citi-Corp [sic], yes that doggie, since $14 a share..." Back then, Citigroup (C) was trading around $33 a share. Today (Thursday, November 20, 2008) as I write, that "doggie" is trading around $5.35. I hope that fellow hasn't continued to hold. At least, I hope he became aware of the value of options in the form of protective puts that may have saved his bacon.
It seems that each time I address the frailties of buy and hold I get several emails telling me that the buy and hold strategy is the only way to success in the markets. It simply isn't. The Dow and S&P500, are back at 2003 levels and the Nasdaq Composite is about 28% of where it was at the high in 2000. Why would anyone want to hold through drops like those we have recently witnessed? The old refrain of "it'll come back" can be a cruel deceit. A year ago, who would have guessed that there would no longer be a Lehman Brothers or a Bear Stearns or a Washington Mutual? When will those once strong companies come back?

For years, I have advocated that traders and investors have an exit strategy in place before they ever enter a position. I earnestly suggest that something as simple as the break down through a moving average can serve as a way to cut losses. Looking at Citigroup, for example, back when the critic wrote last November, the stock was trading around $50 a share. This past June, it broke down through the 50 day MA around $52.50. That was at least one potential signal to exit. By July, the 50 day MA had crossed below the 200 day MA and the price had fallen to around $46.50. Here was another signal. A support formed around the $45 level in August and September and when the price dropped below the support, there was yet another signal to exit. Using any of those exit strategies -- a break below the moving average, a moving average cross down, or a break through support would be acceptable exit strategies. However, the buy and hold afficianado would have watched the stock tumble roughly 90% to its current levels. Why hold through these downdrafts? The pain has to be intense and if the stock has dropped just 50% in price, it has to go up 100% just to get back to even.

For those who just don't want to sell their stock no matter what, we addressed the subject of insuring the position by purchasing puts in last weekend's article and that strategy is another by which investors and traders can limit losses.

I do want to mention that my new book, "Smart Investors Money Machine" will be available soon! I will let you know when and where to order it when it becomes available. "Smart Investors Money Machine" is designed to have broader appeal to a wider range of investors than the first book, "Trade Your Way to Wealth" . "Smart Investors..." deals with a wide variety of ways to produce regular income and, in addition to discussing strategies such as writing covered calls and buying Real Estate Investment Trusts (REITS), the new book explores bonds, annuities, Master Limited Partnerships, dividend investing, and even reverse mortgages. I wrote the book to provide guidelines to a wide range of investors from those coming into retirement to growing families and even for new investors. You don't have to be interested in trading options to find value in this book (though it does include information on trading options for income as well), I hope you order the book and find a lot of helpful information that will add streams of income to your lives in these troubled times.

Good Trading!
Bill Kraft

Market Outlook 22/11/2008

Market Outlook

Beyoncé - At Last - Fashion Rocks

At Last Lyrics by Etta James

At last, my love has come along
My lonely days are over
And life is like a song
Oh, yeah, at last
The skies above are blue
My heart was wrapped up in clovers
The night I looked at you
I found a dream that I could speak to
A dream that I can call my own
I found a thrill to rest my cheek to
A thrill that I have never known
Oh, yeah when you smile, you smile
Oh, and then the spell was cast
And here we are in heaven
For you are mine
At last

Obama Taps Geithner for Treasury Secretary Position

NY Fed President Geithner Gets Vote of Confidence from Wall Street; Reaction with Christopher Rupkey of Bank of Tokyo-Mitsubishi; A Further In-Depth Look at Geithner's Background

Dow x Dow 200 Day Moving average

sexta-feira, 21 de novembro de 2008

Four Bad Bear Markets

Chart of the Day

The stock market continues in its highly volatile ways with the Dow trading down 5.5% on the day. For some perspective on the current correction, today's chart illustrates all major stock market corrections (15% loss or greater) of the last 108 years. Each dot represents a major correction as measured by the Dow. For example, the bear market that began in 1973 lasted 481 trading days and ended after the Dow declined 45%. Since 1900, the Dow has undergone a major correction 26 times or one major correction every 4.2 years. As it stands right now, the current stock market correction (October 2007 peak to most recent low which occurred today) would measure slightly below average in duration but above average in magnitude. In fact, of the 26 major stock market correction since 1900, the current stock market correction currently ranks as the fourth largest in magnitude (only the corrections beginning in 1906, 1929, and 1937 were greater) and is the most severe stock market correction of the post-World War II era.

Source - Dow Jones

Important Invite + Me Singing Crush!

Stock Market Video Trend Analysis 11/21/08

5-1/2 Ways to Make the Market Rally

5-1/2 Ways to Make the Market Rally

Toro submits:

I got thinking about what could cause the market to rise dramatically higher and reverse this extreme oversold condition.  These include

  • Ban on short selling.  Rumour has it that the government may ban the short selling of Citigroup (C) alone, given that broker desks and hedge funds are pounding down C on the short side with impunity.  It is highly unlikely the government will ban all short selling. 
  • Reinstating the uptick rule.  Probably will not happen given the practical difficulties of doing so.
  • Suspending mark to market.  This would probably give the most fuel to a market rise, though whether it helps over any time frame longer than the very short-term is highly debatable. 
  • The government buying stocks.  Another rumour floating around is the government using TARP money to buy $10 billion worth of Citigroup common stock.  The government of Hong Kong bought stocks near the bottom of the 1998 Asian panic.
  • A large, cash rich company making a very public buy.  Microsoft (MSFT) comes to mind.  Management has dismissed that Microsoft is still interested in buying Yahoo (YHOO), but they may just be letting Yahoo twist in the wind before buying.  Microsoft buying back its own stock in size, given that it is trading at an 11% free cash flow and less than 6x EV/EBITDA, and being very public that they think the stock is egregiously undervalued would boost the market.
  • Me capitulating and liquidating everything.  That would probably be the surest sign the bottom was in.

Wall Street’s Week of Uncertainty and Exhaustion

Wall Street’s Week of Uncertainty and Exhaustion

This is what a bottoming process in the stock market looks like. Unfathomable twists, where a market that had given up 14% of its value in four days can rebound in the span of an hour on the barest thread of clarity related to the incoming presidential administration.

By and large, those in this industry still gainfully employed are exhausted. They’ve watched the invention of a series of lending programs to restore normalcy in the financial system and seen much of it bang into the brick wall of uncertainty that drives investor thinking.
Dow, one week
The pessimism in the equity market can be forgiven — it’s a snapshot of investors’ best guess as to what the cash flow and earnings power of a company will be at some point in the future. But the eruption in credit markets, such as the secured loan markets and commercial mortgage-backed markets, carries to a dire conclusion: when entities once well-regarded are being questioned as to their ability to pay their debts, nothing can be trusted. And this manifests in the acceptance, or rather, enthusiastic embrace of getting paid a measly 0.02% to buy a government security for three months, or get back a whole dollar for $100 spent on a two-year Treasury security.

Because when the collective leadership of corporate America and Washington, D.C. seems rudderless, there’s an aversion to any asset that does not automatically guarantee the return of one’s capital. And as Treasury Secretary Hank Paulson again took the time out to assure everyone that all was being done and give kudos for all that had been done, and as Deputy Secretary Neel Kashkari proclaimed markets stabilized, the markets continued to hemorrhage, as Citigroup lostmore than half of its value (which had already contracted drastically) in four days.
Tim Geithner
But with all things, life goes on. And while New York Federal Reserve head Tim Geithner is not King Midas, the news of a transition to something other than indifference provided a jolt that took all major averages higher, even pushing the banking stocks into positive territory at the end of Friday’s trade. This is not the end of the selling, not yet, but the market at least climbed back above the 1997-era lows reached Thursday in the Standard & Poor’s 500-stock index. And some of the “Depression-lite” discussions may recede next week.

“Stock prices are saying, ‘We are sinking, and all we can see is a downslope or uncertainty — there is no sign of the turn in the economy,’” says David Kotok, chief investment advisor at Cumberland Advisors in Vineland, N.J. “Markets bottom at the very time when all you can see economically is either sinking or uncertainty.”
To be sure, certain options are nearly depleted. The federal-funds rate is at 1%, and the Federal Reserve’s reserves are mostly in securities other than Treasurys these days. The Treasury’s Garbage Barge has been set adrift, and the CEOs of the three largest U.S. automakers retreated to their private jets without the bailout they wanted. Rumors of a reinstatement of the short-selling ban abound, as if it was the federal government’s job to make large corporations feel better about their share price.

The difficulties cannot be washed away with an exuberant hour of action. But they are at least a sign that some believe value exists in the equity market. Many will remain cautious as the problems bedeviling banks continue and investors try to offset short-term risk aversion with longer-term expectations.

At least next week brings one day when the market will not trade; many will give thanks to that much.

Pretenders - Back on the Chain Gang

Back On The Chain Gang

I found a picture of you, oh oh oh oh
What hijacked my world that night
To a place in the past
Weve been cast out of? oh oh oh oh
Now were back in the fight
Were back on the train
Oh, back on the chain gang

A circumstance beyond our control, oh oh oh oh
The phone, the tv and the news of the world
Got in the house like a pigeon from hell, oh oh oh oh
Threw sand in our eyes and descended like flies
Put us back on the train
Oh, back on the chain gang

The powers that be
That force us to live like we do
Bring me to my knees
When I see what theyve done to you
But Ill die as I stand here today
Knowing that deep in my heart
Theyll fall to ruin one day
For making us part

I found a picture of you, oh oh oh oh
Those were the happiest days of my life
Like a break in the battle was your part, oh oh oh oh
In the wretched life of a lonely heart
Now were back on the train
Oh, back on the chain gang

Market Outlook 21/11/2008

Market Outlook

Para onde vai a inflação?


PREVER A inflação em 2009 é hoje um dos exercícios mais complexos que o analista econômico enfrenta. Pelo menos quatro forças dominantes estão agindo sobre o sistema de preços no Brasil. A primeira reflete a dinâmica de oferta e demanda nos segmentos "non tradables" e que abrangem serviços e produtos industriais. A segunda atinge o conjunto das commodities exportadas pelo Brasil ou importadas do exterior. Seus preços são formados a partir das cotações internacionais em mercados organizados no exterior. Mesmo essas precisam ser acompanhadas em dois grupos distintos: o que tem seus preços ajustados diariamente e o que inclui produtos que dependem de contratos de prazo mais longo ou de listas administradas pelos produtores ou importadores. Um exemplo do primeiro grupo é a nafta; o minério de ferro é um bom exemplo do segundo. Uma terceira força age sobre os preços industriais importados, como máquinas, equipamentos e veículos. Embora em queda por conta da recessão mundial, não seguem o mesmo padrão das commodities. Finalmente, temos os chamados preços administrados, vinculados ou não a um índice de preços. Eles refletem a inflação passada e são, portanto, elementos passivos na formação da inflação corrente. A dinâmica desse sistema de preços está sendo influenciada hoje por dois choques externos de grande intensidade. O primeiro é o choque negativo representado pela desvalorização do real que, dependendo de critérios analíticos, chega a 30% ou a 40%. Para dificultar ainda mais a vida do analista econômico, o real ainda não encontrou um valor estável, principalmente porque esse movimento de perda de valor ocorre com quase todas as moedas de países emergentes. Não é um fenômeno apenas nosso. Paralelamente a esse choque inflacionário, temos um movimento agressivo de queda dos preços de uma imensa gama de produtos chamados "tradables". Essa queda de preços não tem sido homogênea para todas as cadeias, com o petróleo e seus derivados liderando esse movimento. Não por outra razão, os preços desses produtos, em reais, estão caindo de forma intensa, como é o caso da nafta, ou mostrando uma estabilidade, como no caso dos produtos agrícolas. Outra dificuldade para medir o efeito líquido desses dois movimentos opostos é o fato citado de que alguns produtos têm seus preços determinados por contratos de longo prazo ou listas. Por exemplo, o preço da nafta caiu 25% nos últimos 20 dias, enquanto o dos produtos dela derivados -plásticos- subiram quase 15%. O minério de ferro é outro produto que tem seus preços internos corrigidos pela taxa de câmbio, enquanto até as pedras sabem que, na renegociação de abril do próximo ano, os preços em dólares serão reajustados em cerca de 40%, para baixo. A gasolina vendida pela Petrobras está hoje 35% mais cara do que a produzida nos Estados Unidos, mas seus preços são fixados pela Petrobras. Em outras palavras, o efeito da desvalorização aparece em primeiro lugar e pode superestimar o impacto líquido da depreciação do câmbio sobre os preços. Por isso, a decisão do Banco Central de manter inalterada a taxa básica de juros (Selic) parece ser a forma mais correta de agir nos próximos meses. Ao longo dos primeiros meses do próximo ano, a redução da atividade econômica terá cores mais claras, bem como os efeitos da desvalorização do real e da queda das commodities.

Vôo dos pássaros ilustra as sincronias do pregão brasileiro

Paulo Sternick

Freud dizia que é necessário grande soma de aprendizado intelectual como pré-requisito para acreditar no acaso. Povos primitivos e sem instrução, e certamente também as crianças, por exemplo, conseguem atribuir um motivo para tudo o que ocorre. Eu não diria que convém operar com a categoria do acaso no mercado. Mas é crucial o respeito pelo desconhecido e o obscuro.

Analistas e "players", porém, se parecem às vezes com os primitivos e as crianças, atribuindo causa para tudo o que acontece. Em dias de realização de lucro, após fortes altas, não raro se explica o fato devido a indícios de recessão, como se ela fosse novidade e já não estivesse no preço dos ativos. Em pregões onde temos tudo para esperar fortes quedas, a bolsa misteriosamente sobe e a justificativa é a de que tudo já foi colocado no preço e as ações estavam baratas demais. O mercado tem razões que nem sempre se conhece - e bons guarda-costas que o protegem da revelação de suas verdades.

O risco de se atribuir um motivo imediato às subidas e descidas das bolsas é que as correlações se convertam em uma causa encobridora - aquela que, inadvertidamente, passa a esconder a razão verdadeira. Às vezes, tudo se parece como se um pressuposto, uma mentalidade grupal, tomasse as rédeas dos pregões e ficasse avessa a indícios inversos à sua inclinação: só leva em conta o que é estímulo ou ração para sua tendência. Neste mercado, onde categorias como racionalidade ou bom senso deveriam passar ao largo, às vezes é o contrário do que parece: não são os indícios que provocam os movimentos de alta ou de baixa. Eles é que se valem daqueles para justificar sua prévia inclinação. Tudo isto esclarece por que, às vezes, há um descolamento não só entre fatos e pregões, mas entre gráficos e fundamentos ou entre o indivíduo lógico e o grupo irracional.

A formulação psicológica que leva em conta a existência de pressuposto ou mentalidade grupal nas sessões dos pregões não pode ignorar, sob pena de pecar por ingenuidade, os fortes movimentos subjacentes, e não tão visíveis, que por vezes lhe dão suporte, seja na baixa, seja na alta. Por exemplo, a desova de grande quantidade de ações por parte dos fundos hedge ou bancos de investimentos por causa de intensos resgates em situações especiais. Há ainda a compra maciça de ações por corretoras que operam a serviço de capitais chineses previamente informados do plano de investimento governamental. Porém, nem sempre há registros destas sustentações.

Não raro, motivações alegadas, como indícios de recessão ou queda de preço de commodities chegam a se converter em velha moeda surrada usada tantas vezes quanto necessária para dar suporte a angustias coletivas indistinguíveis de movimentos de realizações de lucro ou derrubada de cotações a serviço de futuras compras maciças.

Todos estes fatores - de difícil controle até para operadores profissionais diante da complexidade e diversidade do mercado globalizado e autônomo - recomendam atitude de abertura do campo de percepção para dar conta de forças que podem operar fora do espectro de visibilidade. Os gráficos sequer poderão indicar movimento instável e imprevisto sob pena de incorrer em grave mistificação: será um melancólico destino para uma disciplina que se arroga sob o título de "análise técnica". A postura que se requer para dar conta do mercado tal como se expressa no século XXI não invalida as contribuições fundamentalistas e técnicas, mas indica um passo adiante para lidar com estes instrumentos. A saber, um respeito por fatores imprevistos e desconhecidos e uma amplitude de percepção que abra espaço ao mistério e ao não saber.

A ampliação e sofisticação do campo, assim proposta, contradiz com o varejo simplista de operadores que funcionam quase exclusivamente com antolhos grafistas ou sintonizados na Bolsa de Nova York. Para entender, basta olhar a formação do bando de pássaros voando em sincronia nos céus: quem dita as cotações da bolsa brasileira com muita freqüência é a oscilação da bolsa americana. Haveria o argumento de que isto só acontece com as "blue chips", mas a verdade é que, com ou sem fundamento, as demais ações são estritamente dependentes do índice determinado pelas "blue chips".

Operar é como os pássaros. Faz sentido, então, as palavras de Jim O´Neill, chefe do departamento de pesquisas econômicas da Goldman Sachs e criador da sigla Bric: "Talvez fosse bom para o Brasil se os investidores locais participassem mais da bolsa em vez de investir tanto em títulos públicos". O fortalecimento do mercado acionário brasileiro o deixaria menos exposto a especulações estrangeiras que mal conhecem nossas empresas e seus múltiplos.

Paulo Sternick é psicanalista e estudioso de psicologia econômica

E-mail: psternick@rjnet.com.br

Juro americano cai para nível recorde

Cristiane Perini Lucchesi

Os juros dos títulos do Tesouro americano nunca estiveram tão baixos em toda a sua história. As taxas dos papéis de vencimento em dois anos foram ontem a 0,98% ao ano, de cinco anos, a 1,90%, e de 30 anos, a 3,49% ao ano. Os títulos de vencimento em dez anos também apresentaram queda forte nos rendimentos, de 9,18% só ontem, para 3,02% ao ano, seu menor nível desde que começaram a ser emitidos, segundo a "Bloomberg". A procura pelos papéis cresce de forma tão desordenada no que já pode ser identificado como a nova bolha especulativa deste momento de desalavancagem. Os investidores de todo o mundo desmontam posições de risco - ações, papéis de rendimento alto e moedas de juros altos, como o real - e correm para comprar títulos do Tesouro dos EUA. O movimento se intensificou ontem, após a ata do Fed, banco central americano, divulgada anteontem, sinalizar que os juros básicos dos EUA dos chamados fed funds terão mais cortes. Integrantes do Fed disseram que "um afrouxamento monetário mais agressivo poderia reduzir os riscos de uma deflação".

Desde meados do ano passado, o Fed cortou os juros básicos americanos em 4,25 pontos percentuais, para 1% ao ano. Isso significa taxas de juros reais (descontada a inflação) já negativas em níveis de no mínimo 3%, segundo o "Financial Times", ou de 4%, segundo a consultoria econômica Uptrend. Na Inglaterra, que vai continuar a cortar também seus juros básicos, as taxas reais estão negativas em 1,5%, de acordo com o "Financial Times", ou 0,7%, de acordo com a Uptrend. No entanto, à medida que os números sobre a atividade econômica nos EUA, Europa e Japão surpreendem mais negativamente, a aversão ao risco continua a crescer e a clássica "preferência pela liquidez" se torna mais aguda. Os investidores preferem os juros negativos a assumir risco. Ontem, os dados sobre pedidos de novos benefícios de auxílio desemprego nos Estados Unidos surpreenderam: o número da semana passada atingiu o recorde de 16 anos. O Conference Board informou que seu índice sinalizador da atividade econômica caiu 0,8% em outubro, mais do que o 0,6% esperado pelos analistas pesquisados pela "Thomson Reuters".

A recessão pior do que a esperada nos países ricos aumenta os temores da necessidade de mais baixas contábeis nos bancos e seguradoras, que já declararam como perdas US$ 1 trilhão em ativos. O Citigroup, por exemplo, que já foi o maior banco do mundo é muito exposto ao financiamento ao consumo nos Estados Unidos, tem visto suas ações despencaram. Ontem, caíram 26%, para baixo de US$ 5, o menor nível em 13 anos, segundo a "Bloomberg". As ações do JPMorgan caíram 18% e do Goldman Sachs, 5,8%. Também foram destaque de queda as ações das montadoras americanas, que ainda não conseguiram seu socorro. Os democratas decidiram adiar a votação da ajuda de US$ 25 bilhões e pediram um plano de recuperação para as empresas. O índice S&P das 500 ações mais negociadas em Nova York caiu 6,7%, para o menor nível desde 97.

Risco-Brasil explode

Nesse cenário internacional de juros reais negativos ou próximos a zero e queda forte nos preços dos commodities - o preço do petróleo para janeiro foi para baixo de US$ 50 o barril, menor nível em três anos -, o Brasil continua o líder mundial em taxas reais, que são de 7,9% ao ano, segundo levantamento da Uptrend. São justamente esses juros elevados que atraíram os investidores que montavam operações financiadas em iene e investidas em reais, ficando com o risco cambial, o chamado "carry trade". Essas transações continuam a ser desmontadas em massa, derrubando o valor do real, que está a R$ 2,39, e valorizando o iene para o maior nível em três anos. No ano, a moeda japonesa teve alta de 16,35% em relação ao dólar e de 35,65% em relação ao euro.

A decisão do Equador, de não pagar sua dívida externa após auditoria ter identificado, segundo o governo, irregularidades, ajudou a puxar para cima os prêmios de risco dos títulos da dívida dos países emergentes. Ontem, o risco-Brasil medido pelo swap de crédito (Credit Default Swap) de vencimento em cinco anos foi a 446,4 pontos básicos, uma alta de 5,53%. Desde que a Lehman Brothers entrou em concordata e a crise de crédito internacional se agravou, o risco-Brasil subiu 187%. Seu pico foi de 600,8 pontos básicos em 23 de outubro. No Brasil, os mercados no Rio e São Paulo ficaram fechados ontem com o feriado da Consciência Negra.

BB compra Nossa Caixa por R$ 5,4 bi

Altamiro Silva Júnior, de São Paulo

Após seis meses de negociação, o Banco do Brasil anunciou ontem a compra do banco paulista Nossa Caixa por R$ 5,386 bilhões, que serão pagos em 18 parcelas em dinheiro a partir de março de 2009. Com a aquisição, o BB passa a ser o banco com maior número de agências no Estado de São Paulo, recupera a liderança no país na gestão de recursos de terceiros, mas ainda perde em ativos para o banco resultante da fusão do Itaú com o Unibanco, que criou o maior banco do país.

Em 200 anos, a Nossa Caixa foi a primeira aquisição do banco (os bancos do Estado do Piauí e de Santa Catarina foram incorporados ao BB). O processo de integração vai ser uma experiência nova e desafiadora para a instituição, disse o presidente do BB Antonio Francisco de Lima Neto ao Valor. Bradesco e Itaú já passaram por inúmeras integrações do tipo, após comprarem várias outras instituições. O BB, diz ele, sai dessa operação em pé de igualdade para competir com as instituições privadas pelo cada vez mais concentrado e competitivo mercado brasileiro. Foi o próprio BB quem decidiu procurar, em maio, o governo paulista e propor a aquisição.

O BB não descarta novas aquisições para recuperar a liderança entre os bancos brasileiros, segundo Lima Neto, "mas não a qualquer preço e só o que fizer sentido estratégico". Perguntado sobre a compra do Banco Votorantim, ele afirmou ser "mera especulação".

A aquisição vai gerar ganhos de sinergia para o BB que podem chegar a R$ 4 bilhões no prazo de cinco anos. Esse dinheiro virá da receita com a venda de produtos pouco explorados no banco paulista, como cartões de crédito e mesmo operações de empréstimos. O governo paulista se comprometeu a manter o BB como agente financeiro do Estado por 5 anos. Já o BB se comprometeu a manter os depósitos judiciais nas condições atuais até 2017.

"A Nossa Caixa é um banco muito líquido e conservador", disse Aldo Mendes, vice-presidente do BB. O potencial para expansão das operações de crédito é grande, diz ele. Um dos indicadores que mostram isso é a relação dos empréstimos com os depósitos de menor custo (depósitos à vista, poupança e depósitos judiciais), de apenas 38% no banco paulista (e de 135% nos dois bancos públicos juntos). No Bradesco, esse mesmo indicador é de 254% e no Itaú com o Unibanco, de 372%.

O BB tinha presença fraca no Estado de São Paulo, considerando seu tamanho no Brasil. Ocupava a quarta posição na região. Segundo Lima Neto, uma dos motivadores da aquisição é justamente aumentar a presença na região, a mais rica do país. O BB será o líder em agências, com 1,324 mil pontos, seguido pelo Itaú com Unibanco (1,240 mil) e Santander com o Banco Real (1,204 mil). Por conta de uma presença menor no Estado, poucas agências devem ser fechadas. O BB fala em menos de 30, todas em cidades pequenas (com cerca de 10 mil habitantes) que não comportariam duas agências. Lima Neto fala que as demissões "não serão fator de estresse" nessa operação.

O BB comprou 71% do capital da Nossa Caixa e no início de 2009 fará oferta pública para comprar o restante das ações, que estão com os acionistas minoritários, e fechar o capital do banco paulista, que será incorporado ao BB. O valor será o mesmo preço pago ao governo paulista. Na aquisição, cada ação saiu a R$ 70,63. Assim, 100% do banco saem por R$ 7,56 bilhões. Nesse primeiro momento, a Nossa Caixa vira uma subsidiária integral do BB. Em 12 meses, será integrada. O nome Nossa Caixa vai desaparecer em 2010. A operação tem que ser aprovada pelo Banco Central e pela Assembléia Legislativa do Estado de São Paulo.

O valor da compra foi de 2,4 vezes o patrimônio do banco paulista, média semelhante a de outros negócios recentes no sistema financeiro. O dinheiro será pago com caixa do próprio BB em 18 parcelas de R$ 300 milhões corrigidas pela Selic. A aquisição vai gerar um crédito fiscal de R$ 1,8 bilhão, amortizado em cinco anos. Trazido a valor presente, o benefício ficaria na casa de R$ 1 bilhão (resultante do ágio pago na aquisição).

Após a aquisição, Ricardo Flores, vice-presidente do BB, disse que a próxima etapa é negociar com os sócios da Nossa Caixa nas operações de seguro e capitalização (a seguradora espanhola Mapfre e a Icatu Hartford). Segundo ele, só a partir de agora é que vai ser definido o que será feito. A Mapfre, que tem joint venture com o banco paulista para a venda de seguros de vida e previdência, voltou a afirmar ontem que tem interesse em manter a sociedade, "referência nacional como parceria público-privada". Lima Neto afirma que o BB será agora o "maior balcão" para a venda de seguros no país. "O próximo passo é renegociar com os parceiros para o redesenho dessas operações", disse ele.

A Nossa Caixa tem 5,7 milhões de clientes e é o sétimo maior banco brasileiro em depósitos e o terceiro maior banco público nacional. Com a aquisição, os depósitos do BB crescem 15% (para R$ 264 bilhões), o número de funcionários aumenta 16% (103 mil) e os ativos crescem 12% (para R$ 512,4 bilhões). Mesmo assim, o banco perde para Itaú e Unibanco, que terão R$ 575 bilhões em ativos.

Black Knight

Famous Thoughts for a Bear Market

“Unless you can watch your stock holdings decline by 50% without becoming panic-stricken, you should not be in the stock market.” - Warren Buffett 

“The United States invariably does the right thing, after having exhausted every other alternative.” - Winston Churchill 

“Stop experimenting with your savings.” - Ad on Yahoo Finance, promoting ING Direct’s high-interest savings account. 

“When there is a stock market boom, and everyone is scrambling for common stocks, take all your common stocks and sell them,” he elucidated. “Take the proceeds and buy conservative bonds. No doubt the stocks you sold will go higher. Pay no attention to this–just wait for the depression which will come sooner or later.” When this depression–or panic–becomes a national catastrophe, sell out the bonds (perhaps at a loss) and buy back the stocks. No doubt the stocks will go still lower. Again pay no attention. Wait for the next boom. Continue to repeat this operation as long as you live, and you’ll have the pleasure of dying rich.”- Fred Schwed, Where Are the Customers’ Yachts? 

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