NEW YORK, NY
Right now, the market is on autopilot, just waiting until Friday morning for the ultimate "green shoot" in the form of a sharp decline in the number of job losses during the month of July. The problem with autopilot is that one can become too comfortable or take their eye off the ball, but that's not likely to happen over the next two days. The biggest risk is to ignore negative signs, though there really hasn't been many with respect to year-long trends. Numbers in and of themselves have been just plain old ugly, but compared with results from earlier in the year it's like it is beauty and the beast. Still, it's safe to be skeptical because there is the legitimate question of sustainability and quality. Just as a blow-up doll could only fly an airplane so far, earnings beats predicated on massive job cuts and gutting important costs can't be expected to hold up a rally indefinitely. But, for now, it has been a pretty smooth ride. I took off my seatbelt and moved about the cabin.Shame Shame Shame
"We now turn away from the checkered spectacle of so much glory and so much shame."
-Lord Macaulay
I don't think that it worked with bond investors like those retirees called "greedy" for putting their nest eggs in U.S. companies they thought were good investments. It worked with Wall Street, which is a four-lettered word among the general public. So, will it work on banks and mortgage servicers that have been reluctant to modify mortgages? The government is going to embark on a program of shaming mortgage servicers to modify more mortgages. (It's a tactic that will hit health insurers like the blitzkrieg.) It's amazing that the government has no shame of its own as it continues to play a heavy hand to force through its objectives (I haven't even touched on the verbal blitz Geithner hit Shelia Bair, Ben Bernanke, and Mary Shapiro with.) Both Presidents Bush and Obama let the banks get away with a fast one, and now to save face the only recourse is to shame these banks into doing things they obviously don't want to do.
I wish aide for taxpayers would have gone directly to them instead of being flushed down a toilet and then asking everyone to wait by the septic tank to see what happens. In this case, nothing is happening. Will bankers repeat that old mantra their mothers taught them when back in school they were picked on for getting straight "A" grades and being wisenheimers about it all?
"Sticks and stones may break my bones, but names will never hurt me."
The fact of the matter is that under normal circumstances the government has zero rights to force banks to do things they don't want to do, especially a government that pledges to eliminate risky behavior. Considering how many modified mortgages are falling back into trouble this year I understand why banks are hoarding money. If the government is going to shame these entities they should at least shame themselves in the process and toss in house flippers and people that fibbed on their mortgage applications. When the administration unveiled its plan, it said that millions would reap the benefits...how about a quarter of a million. Only 15.0% of eligible loans have been offered a plan and only 9.0% have been given trial modifications. The government is once again going on the offensive, and now will try to shame an industry that has no shame to begin with.
Don't look now but stocks are expensive! At the rate earnings are coming in stocks are creeping higher and higher on the price to earnings metric. It could be another reason for those that missed the entire move to explain why they are still on the outside looking in, or it could be a sign that smart investors want to be in the game. Let's face it, everyone knows where PE ratios are and yet they continue to buy.
Our auto sector analyst, David Silver, has completed an update on "cash for clunkers." Many of his views on the program differ from mine; if you want a copy of his report send him an email at david.silver@wstreet.com.
Economic Data
The ADP and Challenger, Gray & Christmas reports were slightly disappointing this morning. According to ADP, 370,000 private non-farm jobs were shed (consensus: 350,000), with declines across all major buckets of the measurement pool. Manufacturing, however, did eke out a slower pace of job loss than evidenced in prior months. Somewhat offering a conflicting view on the possibility of overall jobs market improvement as 2009 moves along, Challenger, Gray & Christmas said that job layoff announcements spiked in July from a very low level in June. Although a month to month rebound was assumed, commentary by John Challenger that job layoff announcements will continue to increase tosses cold water on the recovery thesis.
No comments:
Post a Comment