Microsoft, American Express and Amazon Gonna Hurt

Let me start by disclosing that I have put options on Microsoft and American Express. Not a big deal as I bought them a while ago and they are nearly worthless. They will improve tomorrow, but I ain't retiring on them any time soon. Still, I feel a bit justified in my picks given that they are all showing poorer quarterly profits than most anticipated and are down around 5-6%.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aPlycL0a_BH4

And You Know We are Out of the Woods When . . .

When Swiss banks run out of room for gold bullion we know everyone thinks equities are the right place for their money, that inflation is not a risk and that everything is honky dory. Need I say more . . .

http://www.mineweb.co.za/mineweb/view/mineweb/en/page34?oid=86392&sn=Detail

Bad News - Banks May Need to Come Clean (Probably NOT!!)

As this link explains the FASB is considering rules to make banks record financial assets at fair value. Now this would be disastrous for many banks recording assets at fantasy values (a reason PIPP is not working) and the last thing the banks (or Administration) wants is them being transparent (at least at the moment). FASB has already delayed some transparency plans for these very reasons and expect them to do so again. Seriously folks, the last thing this economy needs is financial institutions telling the truth. We would rather, much rather, invest based upon make believe. My daughter likes ferry tales too.

http://www.mineweb.co.za/mineweb/view/mineweb/en/page34?oid=86392&sn=Detail

CREmated Update

I posted yesterday briefly on commercial real estate (CRE) going down the tubes. Just providing a couple of links on the same subject:

http://www.calculatedriskblog.com/2009/07/real-estate-commercial-and-residential.html

http://www.calculatedriskblog.com/2009/07/hotel-revpar-off-175-yoy.html

Did I mention that Calculated Risk is my favorite site on real estate?

Disclosures - See above at the beginning of this post. Otherwise, none.

(CRE)amated!

CREamated!

I have spoken here often on how commercial real estate ("CRE") follows residential in falling off the cliff and how lately it has really, really been taking a dive. I thank Calculated Risk for educating me in this respect. We have way, way too much CRE, including hotels, retail space, office space and the like. AND I MEAN WAY TOO MUCH!! We have twice the retail space per person as any other country and most have a fraction - a small fraction - of what we have. And for the government to now be acknowledging that CRE may be a problem is, well, a vast understatement. We will see.

http://www.calculatedriskblog.com/2009/07/bernanke-cre-may-pose-risk.html

Pinching the Pensioners

I have read a good bit on pension problems, and I mean major problems. I am part of the 401(k) crowd, so pension talk does not normally peak my interest, but it has so infected what I am reading that you cannot ignore it. There are still a lot of people near or in retirement these days dependent on pensions to retire that it is a major issue, especially for baby Boomers. A lot of these are government workers and, seemingly, a lot live in California - an area particularly hard hit this time around. It would appear that the California Public Employees Retirement System (Calpers) is in need of an infusion, which means current employees will undoubtedly need to increase contributions and reduce eventual benefits. In short, they have both short and long term pain ahead.

http://pensionpulse.blogspot.com/2009/07/californias-100-billion-whooping.html

This is one of many reasons why I think - while we may be reaching a bottom - we will be bottom feeding for years to come. I do not see a bounce, just stabilization, in our future for years to come.

By the way, pension pulse has a lot of good pieces on our pension problems. The are many and far spread.

Real Estate Stabilizing but Foreclosures - Not Yet

Apparently foreclosure activity, at least in CA, is not at peak yet and may pick up in the third quarter. Prices seem near a bottom but loan defaults, especially on higher priced real estate, seem to still be on the increase and banks are finally taking action on these homes. There was some talk that banks were holding foreclosed homes off the market because conditions were so horrendous. We will see where this leads.

http://www.calculatedriskblog.com/2009/07/dataquick-california-mortgage-defaults.html


Disclosures: None.

On The Fence

I sincerely apologize that I have been radio silent for the past week. In part it has been due to dealing with a new child but frankly it is mostly due to me not having any conviction on where we are economically. I have been seriously negative on our economic prospects this year, but lately there are signs of this recession (depression) reaching a bottom, so I have been sitting a bit on the sidelines. I still have extreme reservations on many fronts like unemployment, ARMs resetting, commercial real estate, consumer spending and the like, but certain economic signals are saying we are reaching or have reached a bottom.

I am not saying we are at bottom, but even if we are, the real question now (and for the next five to ten years) is, where do we go from here? People assume after a bottom that you resume you climb and go right back to where you were. Well, tell that to folks owning real estate in southern California or Las Vegas. Getting to the bottom is one thing and moving up from it is entirely different. I am sorry that I have to go and tend to family but I will be back and add more substance.