If you read Grantham this quarter, you’ll want to kill yourself.

Worth a read:

http://www.gmo.com/websitecontent/JGLetter_ALL_4Q09.pdf

Shania, sometimes it’s worth reading the views of someone with a 180 degree view of your own.  Particularly someone as smart as Grantham.  You don’t have to agree with him, but it’s useful to understand what the bears are thinking.  That way you can either dismiss it or realize that there may be something to it.  I love reading what the other side is thinking (regardless whether I’m bullish or bearish).  It helps keep me sharp and challenges my thesis.  By only exposing yourself to opinions that reinforce your views, you’re entering into an echo chamber and that can be dangerous.

[quote=NYCTrader] Shania, sometimes it’s worth reading the views of someone with a 180 degree view of your own. Particularly someone as smart as Grantham. You don’t have to agree with him, but it’s useful to understand what the bears are thinking. That way you can either dismiss it or realize that there may be something to it. I love reading what the other side is thinking (regardless whether I’m bullish or bearish). It helps keep me sharp and challenges my thesis. By only exposing yourself to opinions that reinforce your views, you’re entering into an echo chamber and that can be dangerous.

[/quote]



echo chamber?      My wife calls it something else.   



Grantham is a brilliant man.   I have a great deal of respect for him.   His bubble call in 1999 was spot on and he had the stones to stay bearish on his bubble everywhere call all through rally from spx 700ish in 2002 to 2007 highs. I really made fun of him then.   I wish i would have listened to him (both) times.



stocks go up over time



cover and reverse long now



i do have a hero named jeremy. It’s jeremy Siegal

1070.    all you bears get.

new highs

Volume sucked yesterday and today, Shania.  This rally is done.  I’m with El Erian.  Without jobs, everything else is moot.

Watch China closely.  Like '07, things will likely get ugly there first. 

On a side note, PIMCO manages $1 trillion.  Wow.

the world’s biggest mutual fund, said the largest stock market
decline in 11 months may worsen amid persistent U.S. joblessness
and economic growth that trails analysts’ forecasts.

Investors have wrongly priced in an “orderly” withdrawal of
stimulus measures, a rebound in bank lending and coordinated
government policy to restore growth, the chief executive officer
of Pacific Investment Management Co. wrote in a Bloomberg News
column. That means Wall Street projections for gains in 2010 may
prove incorrect and prices will slump, he said.

“Investors may well find that January’s global equity
sell-off was just a precursor to a disappointing year for
several asset classes,” El-Erian, 51, wrote. “The global
financial crisis has undermined growth and job creation; it has
clogged many of the pipes that allocate funds to productive
uses; and it has rapidly taken public debt and the budget
deficit to worrisome levels.”

The Standard & Poor’s 500 Index fell 3.7 percent in
January, more than any month since February 2009, after China
set higher reserves for lenders and U.S. President Barack Obama
proposed curbs on risk taking at banks. The retreat pared the
S&P 500’s gain since sinking to a 12-year low in March to 59
percent. The MSCI Emerging Markets Index lost 5.7 percent last
month, also the biggest decrease since February.

‘Sugar High’

The benchmark index for U.S. equities traded for more than
24 times annual income at the end of 2009, the most since 2002,
according to data compiled by Bloomberg. The ratio slipped to
19 times profits as 77 percent of S&P 500 companies earned more
in the fourth quarter than analysts predicted.

“Judging from market valuations, I sense quite a gap
between consensus market expectations and key political and
economic realities, especially in the U.S.,” he wrote.

El-Erian, whose firm manages $1 trillion from Newport
Beach, California, said in a July 29 interview on CNBC that the
rally in U.S. equities was a “sugar high” that wouldn’t be
sustained by economic growth. The S&P 500 has climbed 13 percent
since then. On Oct. 10, 2008, he said the “point of exhaustion”
for the credit crisis was “far away.” The S&P 500 decreased 25
percent through March 9, falling in four of five months.

The 13 Wall Street strategists tracked by Bloomberg News
project that the S&P 500 will rise 10 percent in 2010, according
to the average estimate. The average year-end forecast of 1,232
represents an advance of 12 percent from yesterday’s close of
1,103.32.

New Normal

Pimco’s Bill Gross and El-Erian say investors should expect
returns that trail the historical average because of more
government regulation, lower consumption and a smaller role for
the U.S. in the global economy. American gross domestic product
may expand 2.7 percent in 2010 and 2.9 percent in 2011 as demand
recovers from the first global recession since World War II,
based on the median economist forecast from a Bloomberg survey.

U.S. equities returned 6 percent a year on average since
1900, according to inflation-adjusted data compiled by the
London Business School and Zurich-based Credit Suisse Group AG
in a February 2009 report.

The U.S. government’s budget deficit in the fiscal year
that ended Sept. 30 was a record $1.42 trillion. El-Erian wrote
that too many market participants assume the U.S. will pass
“pro-growth medium-term fiscal adjustment programs” and that the
integrity of public institutions will be maintained.

“A more realistic assessment of these factors would caution
against an excessive focus on changes in growth rates at a time
when absolute levels are horribly out of whack,” he wrote. “The
longer this is delayed, the greater the scope for policy mishaps
and market disappointments.”

NEW YORK (Reuters) - Mohamed El-Erian, the chief executive of top bond fund manager PIMCO, on Tuesday said the rally in U.S. stocks had topped out because valuations have shot up too quickly.

Hot Stocks  |  China

Asked if U.S. stocks have hit a wall, El-Erian told Reuters Television: "I think we have, and I think what you are seeing is a massive tug of war going on."

World stock markets fell Monday, with the Dow Jones industrial average .DJI declining 2 percent and China's Shanghai Composite Index .SSEC falling 5.8 percent, shaking off recent optimism amid doubts about the sustainability of a solid economic recovery.

"On the one hand, pushing stocks higher are powerful technicals, the fact that very low yields on the front end have pushed cash out of the money market segment and into the risk assets," El-Erian said. "But on the other hand, the fundamentals are such that valuations are ahead of fundamentals. What you have seen over the last couple of days is a recognition that fundamentals matter."

The global equities rally has been tempered by surprisingly weak economic data. On Tuesday, data showed U.S. housing starts unexpectedly fell in July, while the inventory of total houses under construction fell to a record low. Last week the Reuters/University of Michigan consumer sentiment survey showed a growing number of Americans were increasingly worried over jobs and wages.

El-Erian, who oversees $850 billion in assets for Pacific Investment Management Co, including equities, said U.S. stock markets have been on a "sugar high" as recent corporate earnings have surpassed expectations. But for the most part profitability has been driven by cutbacks in layoffs and capital spending, he said.

Moreover, the nascent economic recovery in the United States faces massive headwinds, including high unemployment, which translates into a vulnerable consumer, and weak private demand.

PIMCO has reduced risk in its portfolio as the rally has "gone too far," El-Erian said, adding the firm has been a net seller of mortgage debt over the past few weeks.

El-Erian said PIMCO participated in last week's 30-year Treasury bond auction.

It’s all about jobs, Shania.  That’s what the market needs to see in order for the rally to continue.  The jobs aren’t there.  This correction is for real. 

blah blah blah

The famed short-seller Jim Chanos has been making waves lately by saying he thinks China is in a bubble and ready to collapse in 2010. He argues that easy credit has let real estate and stock market prices shoot upward. He also says the Chinese government is cooking the numbers to show 8% growth in gross domestic products, when actually China can't keep growing when the rest of the world has been hit so hard by the financial crisis.

Chanos called it right on Enron and Tyco ( TYC - news - people ) before they collapsed. He is no lightweight observer of the economic scene. However, he is wrong about China. For once I agree with the famed investor Jim Rogers, who cofounded the Quantum Fund with George Soros. He says China is not in a bubble and adds that he finds "it interesting that people who couldn't spell China 10 years ago are now experts on China."

Betting against China in 2010 is a bad mistake for investors and companies alike. Here are three reasons why Chanos is wrong and Rogers is right about the strength of China's economy:

Chanos' first error is his belief that China's real estate sector soared in 2009 because of speculation triggered by a loosening of credit by China's banks. Lending in China doubled to $1.35 trillion in the first 11 months of 2009. Real estate prices rose sharply throughout the country and almost doubled in cities like Shenzhen. Chanos calls that a bubble--"Dubai times 1,000--or worse"--that could lead to fallout like the subprime mortgage mess in the U.S.

There are, however, fundamental differences between China's real estate and consumer finance markets and those of the U.S. and Dubai, which Chanos compares them to. First, when buying residential properties, consumers in China have to put down 30% before taking out a mortgage. For a second home, they have to put down 50%, no matter what their net worth. Therefore, China doesn't have the reckless consumer behavior that occurred in the U.S., where people with bad credit were taking out huge loans from Countrywide with no money down, or were buying 10 homes without deposits in the hope of flipping them in a few months. People who buy homes can afford it.

Also, mortgages are not being spliced up and packaged and securitized by the likes of Citigroup ( C - news - people ) and Bank of America ( BAC - news - people ). Instead mortgages are held by the original lenders, the way they were in the U.S. before financial innovation and lack of regulation broke down the old rules.

China-Jun 09’ levels. nuff said

Once again, I will state that people are taking unemployment that DON’T need it!

I have clients who are business owners in Florida.  They have been on unemployment for over a year (husband and wife team) pulled in $150k+ working out of their house.

There are people in my neighborhood that are on unemployment.  They figure the recession is a great opportunity to spend time with their kids. 

[quote=mlgone]That number is 6 months old.  Real Estate bottoms (credit flows again), jobs number will be there and then hold on for the ride[/quote]

Wishful thinking.  Sorry man, but I’m not putting investment capital on that bet.  I’m waiting for stocks to get cheap again, like they were this time last year, before I go long.

Once again, I will state that people are taking unemployment that DON’T need it!

I have clients who are business owners in Florida.  They have been on unemployment for over a year (husband and wife team) pulled in $150k+ working out of their house.

There are people in my neighborhood that are on unemployment.  They figure the recession is a great opportunity to spend time with their kids. 

  need to hold 1071.    

[quote=Shania Twain]  need to hold 1071.    

buy buy buy

[quote=NYCTrader] [quote=Shania Twain]  need to hold 1071.