Barron's Effect

sharon sanders · Nov 23, 2008

It is hypothesized that Barron's affects the markets on Mondays.

SATURDAY, NOVEMBER 22, 2008

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<script language="JavaScript"> window.onerror=function(){clickURL=document.location.href;return true;} if(!self.clickURL) clickURL=parent.location.href; </script>  </td></tr></tbody></table> A Value Investor Finds Hope Amid the Angst

AMID ALL THE MARKET CARNAGE, ROBERT FETCH, a veteran value investor at Lord Abbett, senses the makings of some big investment opportunities. "I am seeing valuations I haven't seen in decades, across the capitalization spectrum," says Fetch, 55, who runs $7.8 billion of assets. His responsibilities include helming the Lord Abbett Small Cap Value Fund (ticker: LRSCX), which is closed to new investors but which has bested 98% of its peers in its Morningstar category, based on 10-year returns. So we turned to him last week for his views on small-cap stocks, among many other topics.

subscription to read rest......

http://online.barrons.com/article/S...b_hpp_9_0002_b_this_weeks_magazine_home_left#

sharon sanders · Nov 23, 2008

Re: Barron's Effect

SATURDAY, NOVEMBER 22, 2008

<table border="0" cellpadding="0" cellspacing="0" width="100%"> <tbody><tr> <td colspan="3" class="graytimes18" align="left" valign="center"> <table align="left" background="/img/w.gif" border="0" cellpadding="0" cellspacing="0"><tbody><tr><td class="graytimes18" align="left"> FEATURES MAIN </td></tr> </tbody></table> </td> </tr> <tr><td height="14">

</td></tr> </tbody></table> <script type="text/javascript" language="javascript1.2">  </script>         Does Extreme Stress Signal an Economic Snapback? <dateandtimestampwithbr></dateandtimestampwithbr>

By ANDREW BARY<dateandtimestampwithbr></dateandtimestampwithbr> | MORE ARTICLES BY AUTHOR

More than a decade's worth of equity gains has evaporated. But history suggests that stocks won't fall much further.

NOT MANY PEOPLE ARE JUMPING OUT OF WINDOWS on Wall Street or selling apples on corners, but investors are getting a bitter taste of what happened in the aftermath of the 1929 market crash.

The brutal 2008 bear market deepened last week as the Dow industrials fell 451 points, or 5.3%, to 8,046, despite a sharp rally Friday that lifted the benchmark average 494 points. The S&P 500 slid 8.4%, to 800, amid deepening fear about the global economy and financial system. Citigroup tottered at week's end after it plunged 60% in the five sessions to just $3.77 a share.

snip

It's tough to say when the markets will bottom, but unless the world is entering an economic depression, history suggests that stocks don't have much further to fall. Save for the 1929-1932 crash, no downturn in the 20th century exceeded 50%. One of the many ironies about this year's setback was that it was largely unanticipated because major averages began 2008 selling for a seemingly modest 16 to 17 times projected earnings, versus a peak of 25 in 2000. It turned out that profit estimates for this year were way too high.

Bear markets since 1929 usually have been followed by fairly quick recoveries. The average time to recoup a bear-market loss has been 22 months, excluding the 1929-1932 collapse, according to AllianceBernstein, which examined the S&P 500's total returns (stock-price gain or loss, plus dividends). Based on prices alone, the Dow didn't recover to its 1929 peak until the early 1950s.

"Large market dislocations usually have been resolved pretty quickly," says Lewis Sanders, the chief executive of AllianceBernstein, the New York asset manager. "The only time that you had an extreme dislocation was the Depression itself." He notes that the average post-World War II recession has lasted less than a year. The markets often anticipate the end of a recession before it officially concludes. As Buffett wrote recently, "If you wait for the robins, spring will already be over."

Another encouraging sign is the shrinking value of U.S. stocks relative to nominal U.S. gross domestic product. At the market peak in 2000, stocks were valued at twice the size of the economy, but the relationship has adjusted this year to an estimated 59%, well below the long-term average of 79%. To get back to 79%, the S&P 500 would have to rise 36%, to 1,090. The relationship got as low as 40% in the late 1940s, when investors feared another depression, and in the inflationary 1970s.

more......

http://online.barrons.com/article/S...=b_hpp_9_0002_b_this_weeks_magazine_home_left

kent nickell · Nov 23, 2008

Re: Barron's Effect

People that know me often consider me an optimist although I prefer to think of myself as a realist trying to learn skeptical empiricism. Just to add some counterpoint to be careful when trying to do bottom fishing. Sometimes we don't learn well from our mistakes. And I've never talked to a stockbroker who tried to talk me into money funds...

I was somewhat struck by our apparent failure to learn from the recent collapse of Long Term Capital Management. This fund had Nobel prize winning economists and talented mathematicians coming up with complex mathematical models to try and predict the economy. I think models are good for approximations but when used as objective science to invest billions of dollars in highly leveraged ways it can be lead to huge problems then and now... now is the complex formulas behind the credit debt swaps... http://en.wikipedia.org/wiki/Credit_default_swap

Apparently not learning well from the below.... ""Merrill Lynch observed in its annual reports that mathematical risk models, "may provide a greater sense of security than warranted; therefore, reliance on these models should be limited.""

Also very interesting from below... ""Some industry officials said that Federal Reserve Bank of New York involvement in the rescue, however benign, would encourage large financial institutions to assume more risk, in the belief that the Federal Reserve would intervene on their behalf in the event of trouble. Federal Reserve Bank of New York actions raised concerns among some market observers that it could create moral hazard."""

http://en.wikipedia.org/wiki/Long-Term_Capital_Management

Long-Term Capital Management (LTCM) was a U.S. hedge fund which used trading strategies such as fixed income arbitrage, statistical arbitrage, and pairs trading, combined with high leverage. It failed spectacularly in the late 1990s, leading to a massive bailout by other major banks and investment houses. which was supervised by the Federal Reserve.

LTCM was founded in 1994 by John Meriwether, the former vice-chairman and head of bond trading at Salomon Brothers. Board of directors members included Myron Scholes and Robert C. Merton, who shared the 1997 Nobel Memorial Prize in Economic Sciences.

in 1998 it lost $4.6 billion in less than four months following the Russian financial crisis and became a prominent example of the risk potential in the hedge fund industry. The fund folded in early 2000.

Meriwether chose to start a hedge fund to avoid the financial regulation imposed on more traditional investment vehicles, such as mutual funds,

In late 1993, Meriwether approached several "high net-worth individuals" in an effort to secure start-up capital for Long Term Capital Management. With the help of Merrill Lynch, LTCM secured hundreds of millions of dollars from business owners, celebrities and even private university endowments. The bulk of the money, however, came from companies and individuals connected to the financial industry. By 24 February 1994, the day LTCM began trading, the company had amassed $1,011,060,243 in capital.

The company used complex mathematical models to take advantage of fixed income arbitrage deals (termed convergence trades) usually with U.S., Japanese, and European government bonds.

As LTCM's capital base grew, they felt pressed to invest that capital and had run out of good bond-arbitrage bets. This led LTCM to undertake more aggressive trading strategies.

LTCM had become a major supplier of S&P 500 vega, which had been in demand by companies seeking to essentially insure equities against future declines.

Because these differences in value were minute?especially for the convergence trades?the fund needed to take highly-leveraged positions to make a significant profit.

At the beginning of 1998, the firm had equity of $4.72 billion and had borrowed over $124.5 billion with assets of around $129 billion, for a debt to equity ratio of about 25 to 1.

It had off-balance sheet derivative positions with a notional value of approximately $1.25 trillion, most of which were in interest rate derivatives such as interest rate swaps.

Goldman Sachs, AIG and Berkshire Hathaway offered then to buy out the fund's partners for $250 million, to inject $3.75 billion and to operate LTCM within Goldman's own trading division. The offer was rejected and the same day the Federal Reserve Bank of New York organized a bailout of $3.625 billion by the major creditors to avoid a wider collapse in the financial markets.

The fear was that there would be a chain reaction as the company liquidated its securities to cover its debt, leading to a drop in prices, which would force other companies to liquidate their own debt creating a vicious cycle. The total losses were found to be $4.6 billion.

Some industry officials said that Federal Reserve Bank of New York involvement in the rescue, however benign, would encourage large financial institutions to assume more risk, in the belief that the Federal Reserve would intervene on their behalf in the event of trouble. Federal Reserve Bank of New York actions raised concerns among some market observers that it could create moral hazard.

Merrill Lynch observed in its annual reports that mathematical risk models, "may provide a greater sense of security than warranted; therefore, reliance on these models should be limited

sharon sanders · Nov 23, 2008

Is the market "capitulation" that everyone is waiting for?

Is the market "capitulation" that everyone is waiting for?

<small>NOVEMBER 21, 2008, 8:55 P.M. ET</small>

More Hedge Funds Expected to Succumb

This has been the toughest year on record for hedge funds. Several factors suggest it could get even worse.

In recent weeks, many hedge funds have been stockpiling cash in the hopes of stanching losses and having the wherewithal to satisfy investor redemptions.

Some hedge-fund managers had hoped investors might reverse their withdrawal requests if the market improved. But amid the past week's rout (even with Friday's gain), and a steady redemptions drumbeat from pension funds, endowments and others, there is a sense that more hedge funds will have to close.

more....

http://online.wsj.com/article/SB122730681869649181.html?mod=testMod

sharon sanders · Nov 30, 2008

Re: Barron's Effect

SATURDAY, NOVEMBER 29, 2008

<table border="0" cellpadding="0" cellspacing="0" width="100%"> <tbody><tr> <td colspan="3" class="graytimes18" align="left" valign="center"> <table align="left" background="/img/w.gif" border="0" cellpadding="0" cellspacing="0"><tbody><tr><td class="graytimes18" align="left"> FEATURES MAIN </td></tr> </tbody></table> </td> </tr> <tr><td height="14">

</td></tr> </tbody></table> <script type="text/javascript" language="javascript1.2">  </script>          A Real Bailout for Auto Makers <dateandtimestampwithbr></dateandtimestampwithbr>

By JAY PALMER<dateandtimestampwithbr></dateandtimestampwithbr>

Detroit's only hope may be to let ailing auto makers file for prepackaged bankruptcy. And, a blast from the Motor City's past.

snip

BUT WHAT FORM WOULD A BANKRUPTCY TAKE? The one most talked about is Chapter 11, used by many ailing airlines to get protection from creditors while reorganizing.

The problem: A bankrupt company typically borrows the operational funds it needs to keep going. But in the current credit crunch, getting loans might be impossible -- unless Uncle Sam guarantees them or actually makes them, in return for stakes in the companies. The guarantees, which probably would have to be at least as big as the $25 billion the car makers have sought as outright aid, would have to extend to dealers and perhaps suppliers, too, because many would swiftly fold without the credit lines needed to run their operations.

Absent operational funds, GM, the company that seems most in need of aid, would quickly slide from Chapter 11 into Chapter 7 bankruptcy -- liquidation -- which Casesa rates as a 30% probability. The repercussions would be global, affecting GM's huge operations in Canada and Mexico, Europe, South America, Asia, Australia and Africa. Ultimately, the most attractive bits would be bought by other vehicle makers, but some operations would be closed, eliminating many thousands of jobs abroad, too.

To avoid the risk of liquidation, a third option -- a pre-packaged bankruptcy -- has been mooted. Mark Bane, co-head of bankruptcy operations at the law firm of Ropes & Gray, says that, under such an arrangement, a company goes into bankruptcy with all or most of its survival financing in place. "In GM's case, the government would agree to provide specific aid for a limited period, say, a year," he says. "In that time, and under the protection of the court, GM could begin to restructure its business with a much higher probability of long-term survival." This would go a long way toward reassuring car buyers who might otherwise not want to purchase a vehicle from a bankrupt firm, for fear of not having warranties honored or parts being available -- one of Detroit's arguments against Chapter 11.

The plan needn't even be called a bankruptcy. Term it a financed reorganization, or whatever else might make it sound more palatable to GM's board.

As GM goes, so go Ford and Chrysler. "There is a near-certainty," declares Casesa, "that if GM goes bankrupt, Ford and Chrysler would have to follow suit. Neither could hope to function normally if GM suddenly managed to cut its cost base dramatically. A GM failure, and subsequent cutbacks, would also savage the entire network of auto suppliers -- makers of everything from rear-view mirrors to seats. Many wouldn't survive, and those that did would have to raise prices to make up for lost business. Neither Ford nor Chrysler could survive that."

more....

http://online.barrons.com/article/S..._0002_b_this_weeks_magazine_home_left&page=sp

sharon sanders · Nov 30, 2008

Re: Barron's Effect

SATURDAY, NOVEMBER 29, 2008

<table border="0" cellpadding="0" cellspacing="0" width="100%"> <tbody><tr> <td colspan="3" class="graytimes18" align="left" valign="center"> <table align="left" background="/img/w.gif" border="0" cellpadding="0" cellspacing="0"><tbody><tr><td class="graytimes18" align="left"> INTERVIEW </td></tr> </tbody></table> </td> </tr> <tr><td height="14">

</td></tr> </tbody></table> <script type="text/javascript" language="javascript1.2">  </script>         Why This Famous Raider Is Scooping Up Debt <dateandtimestampwithbr></dateandtimestampwithbr>

Carl Icahn, Chairman, Icahn Associates
By LAWRENCE C. STRAUSS<dateandtimestampwithbr></dateandtimestampwithbr> | MORE ARTICLES BY AUTHOR

AN INTERVIEW WITH CARL ICAHN: Senior bonds have rarely looked this good.

snip

Barron's: Is this the worst market you have seen in your years as an investor?
Icahn: It is probably the worst as far as the debt market is concerned. We've done a lot of investing in the debt market in past recessions, notably in 1990 and 2000, but I have never seen the senior bonds as cheap as they are today. Even since the 1930s, I don't think the value of the senior debt relative to equities was as bad as it is today.
Do you see any silver linings?
One of the great opportunities I have seen in a great many decades is senior debt. I'm not saying that it won't get battered even more. So I want to make it clear that because of various external pressures like margin calls, which trigger forced selling, you can't pick the bottom, and the senior debt could go lower. But it is a great opportunity, as are certain stocks. The prices of these securities are out of whack with the reality of their value.

more.....

http://online.barrons.com/article/SB122790834180565221.html?mod=ba_mp_view

sharon sanders · Nov 30, 2008

Re: Barron's Effect

SATURDAY, NOVEMBER 29, 2008

<table border="0" cellpadding="0" cellspacing="0" width="100%"> <tbody><tr> <td colspan="3" class="graytimes18" align="left" valign="center"> <table align="left" background="/img/w.gif" border="0" cellpadding="0" cellspacing="0"><tbody><tr><td class="graytimes18" align="left"> TECHNOLOGY TRADER </td></tr> </tbody></table> </td> </tr> <tr><td height="14">

</td></tr> </tbody></table> <script type="text/javascript" language="javascript1.2">  </script>  Layoffs Are High and Headed Higher in Silicon Valley

snip

BY THE TIME THE ECONOMY HAD WRUNG OUT the excesses of the Internet bubble, Silicon Valley-or more precisely, California's Santa Clara County-had lost 200,000 jobs, or more than 20% of its total job base. At one point in 2002, its unemployment rate hit 8.4%. This time, I fear, could be even worse.

Certainly, the trend is heading in the wrong direction. California's unemployment rate hit 8.2% in October, up from 7.7% in September, reaching the highest level since September 1994. Keep in mind that this time it isn't just the tech industry that's hurting. The state's construction industry has lost 69,500 jobs this year. In Santa Clara County, home to Apple , Hewlett-Packard , Google , Yahoo! and a host of other industry icons, the jobless rate already stands at 6.9%, worse than the national 6.5% rate.

snip

However, the U.S. remains a relatively small factor in the global solar market. More than 75% of the current market is in Europe, where demand is crumbling as new projects find difficulty getting financing. And it seems unlikely U.S. demand in 2009, no matter how hard the new president tries to push for solar, can fully overcome weaker European demand. For one thing, Spain, which has been the world's second-biggest solar market after Germany, has set a 500-megawatt cap on its solar-subsidiary program for next year; the total this year will be substantially higher.

Gordon Johnson, analyst with Hapoalim Securities, asserted in a research note last week that 2008 solar installations in Spain will reach 2.1 gigawatts, nearly twice his previous estimate and much higher than others expect. That would make Spain a larger market than Germany this year. While that sounds bullish, it's not. If he's right, the fall-off in Spain next year will be far worse than most analysts are expecting. Johnson thinks there is no way the world can absorb the 1.6 GW drop he sees coming in Spain. Johnson forecasts that, as a result, growth in global solar installations will drop from 61% this year to a minus 2.5% next year. His conclusion: The entire solar food chain will be hurt by "the pending massive decline" in the world's largest solar market.

more....

http://online.barrons.com/article/SB122790845583965243.html?mod=ba_mp_view

tropical · Dec 1, 2008

Re: Barron's Effect

#7:
"Johnson forecasts that, as a result, growth in global solar installations will drop from 61% this year to a minus 2.5% next year. His conclusion: The entire solar food chain will be hurt by "the pending massive decline" in the world's largest solar market."

How amazing, between the various costly prime energy sources as oil, gas, coal, nuclear, etc., where it must be payed to the provider, or water, where it must be invested in rivers dam buildups, or at lest in small built turbosets/etc., here we have an primary energy source absolutely FREE (sunbeams from the open sky), with relatively easy to install el.current panel-acc. sections, but the solar installations demand will drop (as stated in the above post text).

Obviously exists other reasons for such a small demand.

How many private houses are able switch to solar, instead of paying energy bills to the companies? Many.

If not enaugh many (money problems), are the initial investing so much costly?
If yes, than it can be lowered enaugh to see a growth if not in big installations, than in the small ones in sunny landscapes.

sharon sanders · Dec 7, 2008

Re: Barron's Effect

SATURDAY, DECEMBER 6, 2008

<table border="0" cellpadding="0" cellspacing="0" width="100%"> <tbody><tr> <td colspan="3" class="graytimes18" align="left" valign="center"> <table align="left" background="/img/w.gif" border="0" cellpadding="0" cellspacing="0"><tbody><tr><td class="graytimes18" align="left"> INTERVIEW </td></tr> </tbody></table> </td> </tr> <tr><td height="14">

</td></tr> </tbody></table> <script type="text/javascript" language="javascript1.2">  </script>         A Leading Bear Turns Bullish, Sort of <dateandtimestampwithbr></dateandtimestampwithbr>

Barry Ritholtz, CEO and Director of Equity Research, FusionIQ
By ROBIN GOLDWYN BLUMENTHAL<dateandtimestampwithbr></dateandtimestampwithbr> | MORE ARTICLES BY AUTHOR

AN INTERVIEW WITH BARRY RITHOLTZ: Getting ready for a "significant" rally.

FOR THE PAST FIVE YEARS, BARRY RITHOLTZ HAS BEEN entertaining, educating and elucidating readers of his blog, The Big Picture (http://bigpicture.typepad.com/). Among the noteworthy calls that the savvy lawyer and sometime-trader has made: identifying a credit bubble a few years ago, and a recommendation to short AIG back in February, when the share price was flirting with $80; it's now about $1.80.

<table style="" origdisplay="" class="imglftbdy" align="left" border="0" cellpadding="0" cellspacing="0" width="250"> <tbody><tr><td>

</td></tr><tr><td class="medcrd">Chris Casaburi for Barron's </td></tr><tr><td class="medcptcrd">"There's upside here for a trade. Over the past 100 years, we've only seen the relative strength of the S&P 500 drop to this level five times…Each time, it has been a major buying opportunity, although not necessarily a major bottom." –Barry Rithotlz </td></tr></tbody></table>Lately, the 47-year-old Ritholtz, with his business partner, Kevin Lane, has had a chance to put some of those ideas to work at FusionIQ, a firm that manages nearly $100 million in separate accounts. Amid the wholesale destruction on Wall Street, Fusion has produced single-digit gains on its long-short portfolios, and has kept the average losses on its long-only accounts to single digits. Ritholtz, whose book Bailout Nation is due early next year from McGraw-Hill, can be trusted to call 'em as he sees 'em. To find out what the contrarian is now warming up to, read on.

Barron's: What's your global outlook?

Ritholtz: In 2006, I was probably the most bearish guy on the Street; now at a table of industry people, I'm the bullish guy. We've cut this market in half; that doesn't mean it can't go lower. We're in a medium recession. If this turns into a deeper, more prolonged recession, all bets are off.

Are we are testing a real low here?

There's no doubt we're looking at an extremely oversold market. But by the end of the week, that oversold condition could be worked off. There's upside here for a trade. Over the past 100 years, we've only seen the relative strength of the S&P 500 drop to this level five times, and each time, it has been a major buying opportunity, although not necessarily a major bottom. If you look at 1929, it was a low but it wasn't the low, and there was a bounce. It was the same thing after Sept. 11 -- from Sept. 21, you had a 40% bounce in the Nasdaq before you went down to make all-time lows.

Will the market drift?

It's flapping up and down. There is a significant rally, 20% or 30%, waiting to happen. But there's also the possibility of a lower low, as we get deeper into the recession, if things take a terrible turn for the worse.

Whenever you're fragile, you don't have the ability to absorb that next blow. My fear is that some economic issue arises and you don't have the resiliency to deal with it. We're economically stretched very, very thin. Things seem to be getting healthier at an ungodly cost, one which we will be dealing with the unintended consequences of for decades. We're really at the fork in the road. Everybody on Wall Street is wondering if we're going to see a year-end rally of any substance, or, if we're heading down to 7100 on the Dow, or 850 on the Nasdaq. [On Friday, those indexes were at about 8200 and about 1430, respectively.]

What say you?

We're waiting for a couple more things to line up: Some clarity on earnings, which we won't have for a while, some sort of resolution on these bailouts, and some sign from the new administration that, unlike the outgoing group, we have a plan -- "Here's what we're going to do about credit, banks, the economy, GM." We wouldn't be surprised to see earnings seriously damaged.

Wall Street is still way too high. They started out the year at earnings of $103 a share on the S&P 500 for 2008, which got them to 1600 on the index. We came in at $65 a share, and that may have been too bullish. The good news is that most of corporate America outside of the financial sector has healthy balance sheets, lots of cash, and is running very lean.

Except for the auto industry.

The auto industry is a whole other story. The auto industry is a story of terrible management, misguided unions, and government intervention.

What's your impression of the bank bailout?

[Treasury Secretary] Hank Paulson is really the imperfect messenger for this bailout. Remember that Paulson is one of the five executives who went to the SEC in 2004 to beg, 'Please, let us lever up more. Please let us go to [a leverage ratio of] 30 or 40.' It is bad enough that he helped create the crisis. It appears that this whole response is completely ad hoc.

http://online.barrons.com/article/S...b_hpp_9_0002_b_this_weeks_magazine_home_right

sharon sanders · Dec 14, 2008

Re: Barron's Effect

SATURDAY, DECEMBER 13, 2008

<table border="0" cellpadding="0" cellspacing="0" width="100%"> <tbody><tr> <td colspan="3" class="graytimes18" align="left" valign="center"> <table align="left" background="/img/w.gif" border="0" cellpadding="0" cellspacing="0"><tbody><tr><td class="graytimes18" align="left"> INTERVIEW </td></tr> </tbody></table> </td> </tr> <tr><td height="14">

</td></tr> </tbody></table> <script type="text/javascript" language="javascript1.2">  </script>         Forecast: A Long, Cold Winter <dateandtimestampwithbr></dateandtimestampwithbr>

Stephanie Pomboy, Founder and President, MacroMavens
By LAWRENCE C. STRAUSS<dateandtimestampwithbr></dateandtimestampwithbr>

AN INTERVIEW WITH STEPHANIE POMBOY: It will take consumers at least five years -- and probably more -- to recover from this crisis.

"LIKE THE BUBBLE IN FINANCIAL ASSETS, THE NEW REAL-ESTATE bubble has its own distinctly disturbing characteristics," Stephanie Pomboy wrote in an April 2002 note titled "The Great Bubble Transfer." The founder and president of MacroMavens was on to something, even if she was early, and she worried about the big buildup of consumer debt fueled by rising home prices. Pomboy, whose Manhattan firm analyzes macroeconomic themes and their investment implications, remains bearish, convinced that a long period of paltry U.S. economic growth is in store -- akin to what happened in Japan in the 1990s. For more of her views and forecasts, read on.
<table style="" origdisplay="" class="imglftbdy" align="left" border="0" cellpadding="0" cellspacing="0" width="250"> <tbody><tr><td>

</td></tr><tr><td class="medcrd">Brad Trent for Barron's </td></tr><tr><td class="medcptcrd">"If you want to get long socialism, one of the next market segments that will be given a guarantee will be municipal bonds." ?Stephanie Pomboy </td></tr></tbody></table>Barron's: How bad has the macro economy gotten?

Pomboy: It is certainly the toughest one any of us has lived through. My fear is that it's actually just in the early stages and that it is going to get substantially worse on the economic side, although all the government measures that have taken place so far might help to insulate some of the damage on the financial side.

What about the short-term outlook?
Having been bearish, for me the real challenge is to identify the turn. One thing at work right now is what I call the cattle prod -- essentially the Fed poking people to take risk. They are taxing cash by having negative real returns on cash. At the same time, yields on investment-grade and junk bonds are incredibly alluring. You can pick up 15 percentage points over cash buying junk bonds. Or you can pick up 8.5 percentage points on investment-grade paper. At some point, the cattle prod will get people moving, as it did in March of '03 when the market turned.

What else do you see happening in the near term?

With the government guaranteeing all manner of private-credit claims, many investors may decide to get long "socialism," for lack of a better term. Or, as some euphemistically put it, this is partnering with the government. So in the short run, we could see a rally in risky assets and a selloff in Treasuries. But the economic deleveraging has barely begun, and that's my longer-term thesis. It all revolves around the idea that U.S. consumers are actually going to do the unthinkable -- they are going to save -- and that we will be more like Japan than anyone believes is possible.

Hence, consumption declines.

Right. Wages have been silently crowded out by benefits as a share of total compensation, as companies look to offset rising health-care costs. The result is that the share of income that consumers can actually spend is at its lowest in the post-war period. It had not been a problem, because consumers would just borrow to fill that gap. But now, they don't have appreciating assets against which to borrow. So while we could get a rally in risk assets -- including high-yield debt -- it's likely to be a short-term rally within a context of a secular bear market.

more,,,,,,

http://online.barrons.com/article/S..._0002_b_this_weeks_magazine_home_left&page=sp

sharon sanders · Dec 14, 2008

Re: Barron's Effect

SATURDAY, DECEMBER 13, 2008

<table border="0" cellpadding="0" cellspacing="0" width="100%"> <tbody><tr> <td colspan="3" class="graytimes18" align="left" valign="center"> <table align="left" background="/img/w.gif" border="0" cellpadding="0" cellspacing="0"><tbody><tr><td class="graytimes18" align="left"> FEATURES MAIN </td></tr> </tbody></table> </td> </tr> <tr><td height="14">

</td></tr> </tbody></table> <table border="0" cellpadding="0" cellspacing="0"> <tbody><tr><td colspan="3" align="center"> <script type="text/javascript">  </script><script type="text/javascript" src="http://online.barrons.com/b2-button.js"></script><script language="JavaScript"> window.onerror=function(){clickURL=document.location.href;return true;} if(!self.clickURL) clickURL=parent.location.href; </script>  </td></tr></tbody></table> Delaying the Day of Reckoning

By Jim McTague and Jay Palmer

TREASURY TO THE RESCUE! THE BUSH ADMINISTRATION indicated first thing Friday morning that it would use some TARP funds to keep cash-starved U.S. auto makers General Motors, Chrysler, and Ford afloat until the next Congress, come late January or February, can agree on a longer-term aid package. The exact amount of TARP money to be applied was uncertain at press time, but a funding mechanism could be in place in a few days. President Bush originally opposed a Democratic proposal to use TARP for the auto makers. But he changed his mind after the Senate shot down an alternative plan ...

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sharon sanders · Dec 14, 2008

Re: Barron's Effect

Stocks Withstand Madoff and More

By Kopin Tan

Vital Signs

STOCKS FINISHED LAST WEEK ESSENTIALLY FLAT, but on Wall Street these days, flat is the new up.

The lack of losses by the market was a marvel. The market didn't come unglued despite Senate opposition to a $14 billion plan to bail out automakers. Jobless claims climbed to a 26-year high; companies from Federal Express (ticker: FDX) to Texas Instruments (TXN) cut their forecasts; and financial stocks swooned after J.P. Morgan (JPM) and U.S. Bancorp (USB) warned of a rocky quarter. Yet the Standard & Poor's 500 index eked out its second gain in three weeks. Even the ...

http://online.barrons.com/article/S...b_hpp_9_0002_b_this_weeks_magazine_home_right

sharon sanders · Dec 22, 2008

Re: Barron's Effect

How to Play a 'Take-No-Prisoners' Market <dateandtimestampwithbr></dateandtimestampwithbr>

Rob Arnott, Founder and Chairman, Research Affiliates
By LAWRENCE C. STRAUSS

AN INTERVIEW WITH ROB ARNOTT: Given the abundance of low-hanging fruit, it's a mistake to stick with things that will soon go out of style, such as Treasuries. Promising areas: emerging-markets and convertible debt.

ROB ARNOTT, FOUNDER AND CHAIRMAN OF ASSET MANAGER Research Affiliates in Newport Beach, Calif., is one of the big thinkers in finance today.

A former editor of the prestigious Financial Analysts Journal, Arnott, 54, has developed expertise in asset allocation, indexing, and pension funds, among other topics. He's a fierce proponent of fundamental indexing -- in which metrics such as aggregate sales and cash flow are used to weight companies in an index, as opposed to market capitalization.

With the markets in tatters, Barron's turned last week to Arnott, who in a wide-ranging conversation had plenty to say about fundamental indexing and many other subjects. "This is not a time to shy away from taking risks," says Arnott, who maintains that the market's upheaval has created great investment opportunities, including value stocks and convertible bonds. "The markets are priced right now to reward risk-bearing more than any time in many, many years," he says. Hence, he sees Treasuries, which had a relatively strong '08, as the worst place to put money next year.

more...

http://online.barrons.com/article/S...b_hpp_9_0002_b_this_weeks_magazine_home_right

sharon sanders · Dec 22, 2008

Re: Barron's Effect

<table border="0" cellpadding="0" cellspacing="0" width="100%"><tbody><tr><td colspan="3" class="graytimes18" align="left" valign="center"> <table align="left" background="/img/w.gif" border="0" cellpadding="0" cellspacing="0"><tbody><tr><td class="graytimes18" align="left"> THE STRIKING PRICE </td></tr> </tbody></table> </td> </tr> <tr><td height="14">

</td></tr> </tbody></table> <script type="text/javascript" language="javascript1.2">  </script>          Cashing In on the Cash Bubble <dateandtimestampwithbr></dateandtimestampwithbr>

By STEVEN M. SEARS<dateandtimestampwithbr></dateandtimestampwithbr> | MORE ARTICLES BY AUTHOR

Options traders prepare for the new year.

IS CASH A BUBBLE? Are investors too risk-averse?

Options traders are now debating these controversial questions as they prepare for a 2009 that they hope will be more sanguine than 2008, which challenged long-held assumptions about options pricing and the fundamental nature of volatility.

Traders say the "cash is king" mentality is so pervasive in the financial community that it may be primed to join the list of bubbles that have burst over Wall Street, including stocks, oil, agricultural commodities and subprime mortgages.

Of course, a bursting cash-bubble would help, not hurt, investors, as stock prices would advance.

A lot of traders are buying -- or debating doing so -- bullish calls on stocks and sectors. The more battered the security, the better. They see options as a cost-effective way to balance the risk that the market could worsen in 2009, rather than improve, while ensuring they do not miss any rallies.

Investors, especially many mutual-fund managers with investment charters, are taking a more muted approach. They are selling richly priced calls, and using the proceeds to lower the costs of buying stock. The trade permutations are almost endless.

"Cash is the elephant in the room," says a strategist at a top investment bank who spends his days dealing with portfolio managers. "Everyone has lots of it, and I don't know when they are going to start taking risk, but I want to be in right before it happens."

The recent clamor to buy four-week Treasury bills with a zero-percent yield perfectly expresses the market's mania for absolute safety, while the Federal Reserve's decision to lower the federal-funds rate to a range between zero to a quarter of a point suggests Federal Reserve Chairman Ben Bernanke is waging war on cash to force money back into the financial system.

"Bernanke is trying to break the bubble in cash," says Steve Sosnick, risk-manager for Interactive Brokers' Timber Hill market-making unit.
If the cash bubble bursts, the record amounts of cash held by investors and corporations would flow back into the financial markets, benefiting stock prices and other assets, including fixed income, emerging markets, commodities and currencies. Even moribund investment bankers might get some action if corporations resort to mergers and acquisitions to increase depressed earnings, or diversify product suites.

more...

http://online.barrons.com/article/S...?mod=b_hpp_9_0002_b_online_exclusives_weekend

sharon sanders · Jan 4, 2009

Re: Barron's Effect

<table border="0" cellpadding="0" cellspacing="0" width="100%"><tbody><tr><td colspan="3" class="graytimes18" align="left" valign="center"><table align="left" background="/img/w.gif" border="0" cellpadding="0" cellspacing="0"><tbody><tr><td class="graytimes18" align="left">INTERVIEW </td></tr> </tbody></table> </td> </tr> <tr><td height="14">

</td></tr> </tbody></table> <script type="text/javascript" language="javascript1.2">  </script>         For a New Year, Signs of a Bottom <dateandtimestampwithbr></dateandtimestampwithbr>

Laszlo Birinyi, Founder and President, Birinyi Associates
By LAWRENCE C. STRAUSS<dateandtimestampwithbr></dateandtimestampwithbr>

AN INTERVIEW WITH LASZLO BIRINYI: This longtime observer of the market is cautiously optimistic. How to avoid getting caught in bear-market traps.

<form action="/public/search/results.html?mod=ba_authorsearch" name="byAuthorForm" method="post"> <input name="KEYWORDS" type="hidden"> <input name="QUERY_PARSER" value="byline" type="hidden"> </form> LASZLO BIRINYI, 65, HAS SPENT MORE THAN 30 YEARS studying the stock market, analyzing everything from daily closing prices to advance-decline lines. He and his colleagues at Birinyi Associates, which he founded in 1989, try to get an edge by turning the data into investment ideas.

For Birinyi, whose Westport, Conn., firm also manages about $250 million in assets, 2008 was a tough year in terms of performance, as it was for most money managers. The firm's managed accounts were down last year, though typically ahead of the S&P 500's 40% loss by five to eight percentage points, he says. However, Birinyi is approaching the new year with cautious optimism, having published a note last month titled "S&P 750: The Bottom."

more....

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Barron's Effect

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sharon sanders

Editor-in-Chief & President