Monday, November 3, 2008

Jim Rogers: The Zombie Banks Must Fail

Good Evening Folks!

Here is the latest from Jim Rogers today on Bloomberg. He has some great investing ideas. Rogers is basically long commodities, short long term treasuries and neutral on the stock market. I like a lot of his investment ideas here. I plan on picking up some TBT after the next drop in the stock market which will take treasuries higher.

I have a couple of thoughts after the videos.


Part 2

Market Update:

It was a very quiet day in the stock market as the world awaits the election results tomorrow. The global recession is taking a serious toll on manufacturing. Manufacturing in the US contracted at the fastest pace in Octomber in 26 years:

"Nov. 3 (Bloomberg) -- Manufacturing in the U.S. contracted in October at the fastest pace in 26 years as a record share of banks made it tougher to get loans and faltering economies abroad eroded prospects for American exports.

The Institute for Supply Management's factory index fell to 38.9 from 43.5 in September; 50 is the dividing line between expansion and contraction. The Commerce Department said separately that construction spending fell for the eighth time in 10 months in September.
Today's report may add to pressure for further interest-rate cuts and an additional federal package of tax and spending measures. The figures also showed the weakest level for U.S. export orders in the two decades the ISM has kept the data, a sign of slowdowns in Europe and Asia.

``Manufacturing is definitely in a deep recession right now,'' John Lonski, chief economist at the Moody's Capital Markets Group in New York, said in an interview with Bloomberg Television. ``We're definitely going to have more rate cuts'' and possibly ``more in terms of fiscal stimulus"

Quick Take:

Manufacturing essentially fell off a cliff in October as the consumer continues dramatically pull back. I love the solution offered by economist John Lonski from Moody's. We need more rate cuts: Yeah! Like that's going going to help. When are these economists going to realize that the Greenspan easy money approach is no longer the answer. We are now at 1% and things continue to deteriorate. He also wants a stimulus. Great idea John! The last one worked so well!

This mentality among economists has to stop. What we need is a serious recession that wrings out the excesses of the economy. The cheap money "Greenspan approach" created the debt bubble that we now find ourselves in today. More liquidity is not the answer when consumers don't want to borrow and banks have no desire to lend!

Another stimulus will do nothing but dig us even deeper into debt and give us one quarter of growth like the last one did. Then it will be right back to our regularly scheduled recession/depression. It makes no sense to piss away another $150 billion when it does nothing to fix the problems in the economy.

Take that money and throw it into a infrastructure investment that creates jobs. Don't give it to J6P! He will just waste it paying down debt or buying another flat screen TV.

Lets take a look at the car biz:

"Nov. 3 (Bloomberg) -- U.S. auto sales plummeted 32 percent in October to the lowest monthly total since January 1991, led by General Motors Corp.'s 45 percent slide, as reduced access to loans and a weaker economy kept consumers off dealer lots.

Ford Motor Co. reported a 30 percent drop in car and light- truck sales from a year earlier and Toyota Motor Corp.'s declined 23 percent. Honda Motor Co.'s slid 25 percent, Nissan Motor Co.'s were down 33 percent and Chrysler LLC's fell 35 percent.

``If you adjust for population growth, it's the worst sales month in the post-World War II era'' for the industry, said Mike DiGiovanni, GM's chief sales analyst, on a conference call. ``Clearly we're in a dire situation.''

Final Take:

The last time car sales were this bad we had just defeated the Germans in WWII. Yikes! The more data I see, the more scared I get folks.

What frightens me the most is I don't see how we dig ourselves out of this. Could we have another lost decade similiar to Japan that Jim Rogers warns of above? The answer to this is looking more and more to be yes.

Bottom Line:

Well its election day tomorrow! It looks like Obama has it in the bag. In my opinion neither candidate has the goods to get us out of this mess. The next president is almost assuredly a one termer as our economy heads into the abyss. There will be little that either candidate can do in reaction to this mess. The war chest is empty and the economic hand has already been dealt.

It will be interesting how the markets respond tomorrow. I think the next trade is shorting treasuries. Its becoming pretty clear that the government is hell bent on attempting to bailout the economy no matter what the price. An Obama presidency will most assuredly take this government spending to an even higher level.

As a result, its highly likely that investors will start backing away from buying treasuries until we either learn to control our spending or we default on ourselves.

Make sure you get out and vote tomorrow. Every vote counts!


ZMonet said...

I like some of Jim Rogers ideas to date too. I think shorting government bonds is my next play. I sold out of QID today -- basically break even, a bit better -- because I saw all the bad news (auto, etc.) and saw that the market was barely phased. I think the market wants another rally or, worse, it is going to trade sideways. For the time being, it seems like a lot of the downward pressure has eased off.

I actually think we'll go below where we are at, but the pulse of the public seems to be a sigh of relief that "the crisis is over" and are now looking for "bargains." That (over)confidence will lead to the next push downward. Just my thought...

Jeff said...

Zmon I agree

You don't have a V sahped bottom. I think we retest the lows at least one more time.

It will then be time to look elsewhere from an investment perspective. I still like SRS on the downside. THat moved nicely for me today.

I am going to start looking at DIG if oil gets into the 50's. I am going to wait on shorting treasuries until we retest the lows.

Jeff said...

Maybe I need to be shorting them rigth now! Check out this from Bloomberg tonight

How pathetic. We are now begging third world countries to buy our debt"

"Nov. 3 (Bloomberg) -- Even as Ben S. Bernanke cuts borrowing costs to 50-year lows, taxpayers will likely be paying ever increasing interest rates on U.S. debt.

The next president may find foreign investors, the biggest creditors to the U.S., unable to absorb a growing supply of Treasury bonds as the financial crisis prompts nations to invest in their own banks and currencies. That would drive up yields just as a widening budget deficit pushes borrowing needs to a record $2 trillion, according to estimates by Goldman Sachs Group Inc. and Wrightson ICAP LLC.

``It's hard to see how demand for Treasuries is going to keep up with supply once the risk aversion trade subsides,'' said Tony Norris, who oversees $10 billion in international strategies as chief investment officer and senior portfolio manager at Evergreen International Advisers in London. ``There's going to be pressure on yields to rise.''

U.S. `Needs Help'

``The U.S. Treasury Secretary is trying to convince other countries, including China and Japan, to buy its government bonds,'' said Shen Jianguang, a Hong Kong-based economist at China International Capital Corp., the nation's biggest stock underwriter. ``This is the first time a developed country needs help from developing countries to ride out its crisis.''

Avl Guy said...

The GM guys now remind me of NBA stars who give an Oscar-calibre performance after a non-foul in hopes their theatrics generate a free throw call from the ref. Here, the GM guys want fed funding for their mergers.

So from today forward, a lot of us will have to tune out the theatrical CEO commentary and just process their industry data for analytical use. The theatrics will still make for gr8 email subject lines though ..LOL

Avl Guy said...

FYI...while jogging, i ran across yet another fresh crop of McCain Palin yard signs, they've sprouted like mushrooms this week in NC.
No result tomorrow night would surprise me: the polls may be right...or they may have missed beaucoup silent McCain voters.
Either way, the Debt Unwind and Recession plod merrily along and we'll have one less distraction from the dark road ahead.

Jeff said...


Interesting. THe same thing is happening up in PA. Especially in the western part of the state.

People got real offended after Obama said people in Western PA cling to guns and religion.

McCain and Palin have spent a ton of time up there. I can't wait to watch the results tomorrow.

You are right though AVL, we will be right back to gloom and doom in a matter of days.

ZMonet said...

Anyone ever see anything like this? I suppose the guy has a tenant problem that he/she wants the buyer to take over. Still, very strange seeing as the house sold for $650K in December of 2006.

"DO NOT DISTURB OCCUPANTS. This is a cash deal only. Buyer is aware that the subject property maybe currently occupied and seller cannot convey possession at the time of closing. Buyer is aware that eviction proceedings may have begun and buyer is solely responsible for any eviction proceedings, costs and liabilities after closing and funding. Seller has had no access to the interior of subject"

Jeff said...


God that is very bizarre. YOu buy the huse and then have to take out the trash?

YOu better sell me that house for 280k if you want me to put up with that nightmare.

Sounds like a very bitter seller thats about to take a huge loss on a property he paid 650k for at the peak.

I can only imagine what the MLS will look like as this housing crisis deepens!

Avl Guy said...

I wonder if some local 'housing law' or 'renters right' ordinance is reflected there.
I would need more detail.