scuttlebutt at the nail salon. end must be close

[mathjak107]

well one of the greatest predictors of market performance is what the women are yapping about at the nail salon my wife goes to. when they used to yap about how much they were making in .com stocks i knew it was time to bail.

well yesterday quite a few were talking about the fear they had in their investments. soooooooooo there it is, the bell has rung and we can all come out now.

[2B]

Here's my real test of whether I can stay an "index only investor." MBI (MBIA Corp) has been so beaten down by rating agency bullying that it could operate for decades and pay its current dividend (over 14%) without any new business. Its exposure is limited to the ugly CDOs. My value investor genes are screaming buy, buy, buy.....

I'm fighting the urge. I felt the same way about Enron and I did buy. That was the famous "last straw" that put me into the "indexer" camp.

I do agree that the market has gone nuts. It seems to only be focusing on the write downs of some financial company assets and is totally ignoring generally strong earnings from everyone else. I also think that the financial companies are overly aggressive in write downs because "everyone is doing it" so the CEO (especially if new) can get away with it now and make the next few quarters look much better.

[mathjak107]

i too am hoping these are the last writeoffs for the majors, but we still have credit card defaults to start. every recession ends with a huge surge of credit card defaults as no one defaults on a mortgage but pays their credit cards usually. we still havent seen the credit card thing become huge

[2B]

I'm not convinced we're heading into a recession. The stock market frequently discounts recessions that never happen. If we have one now, it's because we talked ourselves into it.

[mathjak107]

thats the way it looks. like telling a kid hes bad long enough he will become bad. markets are acting like recession is a given

[Lazarus]

During the dot com boom the security guards at work were giving stock tips. After the bubble burst I never heard them mention stocks again.

[Bestwifeever]

At least people are still paying someone else to do manicures--when that stops you'll know we're all in trouble (a la the latte slowdown in Starbucks).

[al_bundy]

Quote:

Originally Posted by 2B Here's my real test of whether I can stay an "index only investor." MBI (MBIA Corp) has been so beaten down by rating agency bullying that it could operate for decades and pay its current dividend (over 14%) without any new business. Its exposure is limited to the ugly CDOs. My value investor genes are screaming buy, buy, buy..... I'm fighting the urge. I felt the same way about Enron and I did buy. That was the famous "last straw" that put me into the "indexer" camp. I do agree that the market has gone nuts. It seems to only be focusing on the write downs of some financial company assets and is totally ignoring generally strong earnings from everyone else. I also think that the financial companies are overly aggressive in write downs because "everyone is doing it" so the CEO (especially if new) can get away with it now and make the next few quarters look much better.

the reason for this is that bad financial company earnings can mean higher rates or harder to get loans. most companies borrow for everyday cash or for things like stocking shelves at holiday time. higher rates means less profits.

less credit to consumers means less consumer spending and losses for everyone else

[CyclingInvestor]

Quote:

Originally Posted by 2B Here's my real test of whether I can stay an "index only investor." MBI (MBIA Corp) has been so beaten down by rating agency bullying that it could operate for decades and pay its current dividend (over 14%) without any new business. Its exposure is limited to the ugly CDOs. My value investor genes are screaming buy, buy, buy..... I'm fighting the urge. I felt the same way about Enron and I did buy. That was the famous "last straw" that put me into the "indexer" camp.

Not that I am a fan of investing in MBI, but Enron was a much different case. After
many years as a solid, growing pipeline company, they sold the pipelines and became
some kind of weird energy future trading, fiber-optic route holding beast that none of
the management had any experience in - no surprise they crashed and burned. MBI
has stuck to their knitting (which I have always been a bit dubious of) and been hit
by a situation not of their own making.

[danm]

The writeoffs have really only started. The bond insurers are next, and will probably exceed what we've seen so far.

The problem is that the writing on the wall is bad, even if you're an optimist. The gains in 2006-2007 were mostly built on the credit bubble, not earnings I believe (remember the LBO mania?) So at least the last two years of gains will disappear off the top probably.

Lurking in the wings is an overspent consumer and increasing unemployment. And Goldilocks and the decoupling theories are dead.

[al_bundy]

MBIA will deserver anything that happens them. just like everyone else, management got into these crazy loans because they made a killing on the fees and took home nice bonuses. no really cares how the money is going to be paid back.

with MBIA it was free money to take in buying derivatives. if things get bad just declare BK and be done with all of your liabilities

[FANOFJESUS]

I am a security guard and I find that funny. You are right do the opposite of what they do and you will be just fine.

Quote:

Originally Posted by Lazarus During the dot com boom the security guards at work were giving stock tips. After the bubble burst I never heard them mention stocks again.

[nun]

Quote:

Originally Posted by mathjak107 i too am hoping these are the last writeoffs for the majors, but we still have credit card defaults to start. every recession ends with a huge surge of credit card defaults as no one defaults on a mortgage but pays their credit cards usually. we still havent seen the credit card thing become huge

I think we've been living a bit of a fantasy for the last 20 years. Both housing and the stock market got way out of whack and we all thought that we were richer than we actually are. A 25% pull back is going to happen, the level of both consumer and government debt that has fueled this stock and housing bubble will come back to haunt us. So ER will have to be pushed back for some of us unless we want to really change our expectations.

Now everyone smile-----its only money and the sun is shining.

[REWahoo]

If I had only listened to my BIL a couple of years ago and agreed to invest in a black paint franchise, I'd be getting rich right now.

[FANOFJESUS]

I was a security guard for 14 years but had to leave it because the people I worked with drove me crazy.

Quote:

Originally Posted by rec7 I am a security guard and I find that funny. You are right do the opposite of what they do and you will be just fine.

[Achiever51]

When I worked at MegaCorp, we found the security staff and the cafeteria workers had some of the best advance info about the status of the company. The security people knew where additional security was going to be needed often in advance of a cutback announcement at a plant...and the cafeteria people knew when staffing at h'qtrs was about to change up or down by how much food they were told to order for the next month.

[Brat]

Quote:

Originally Posted by Achiever51 When I worked at MegaCorp, we found the security staff and the cafeteria workers had some of the best advance info about the status of the company. The security people knew where additional security was going to be needed often in advance of a cutback announcement at a plant...and the cafeteria people knew when staffing at h'qtrs was about to change up or down by how much food they were told to order for the next month.

The other indicator I use is the UPS indicator. At MegaCorp get to know the receiving folks, in the community get to know a long time driver who serves a commercial and residential route.

When my brother worked for a RR I would ask him about late pays and cargo. However, they have been operating at capacity for quite a while so they are more a lagging indicator than predictive. Same with container shipments as the products have a long order cycle.