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CivilBear's Fundamental Market Analysis

Yes, I Know That Fundamentals Don't Matter, But...

CivilBear - Wed, Mar 31, 2004 - 01:56 AM

Seems to me there are just so freakin' many grim, dismal, rotten, outlandishly horrendous economic fundamentals that - simply by the weight of volume - they might actually attract some Wall Street attention....

But NO-O-O-O. Fundamentals don't matter.

Well, they matter to me.

And, since I'm overdue for a rant, here are 17 of those butt-ugly fundamentals just off the top of my head...

1. Record U.S. budget deficit. More than half a trillion bucks..and counting. The Iraq quagmire doesn't look like it's going to reach its exit phase any time soon. The $1.7 trillion tax cut (40 percent to the richest 1 percent of Americans) might have been a tad overdone. And government spending shows no sign of slowing. Hell, Arnold Ziffle - the pig from Green Acres - would feel right at home with all the 'pork barrel' spending by Congress...

2. Record U.S. trade deficit. Hey, it's a mere half a Trillion smackers. Guess that's what happens when the U.S. stops actually making stuff and turns into a shop-till-you-drop, deep-in-debt, paper-shuffling economy. It appears that when you don't make anything, it's tough to export stuff.

3. Record U.S. debt - $35 Trillion and counting. That's a mere 350% the size of the U.S. GDP. Hey, according to Soylent Greenspan, it's all "manageable."

4. Record Credit Card defaults. On the bright side, this must be building strong hand muscles for all those store clerks who have to cut those cards in half with dull pairs of scissors.

5. Record personal bankruptcies. Five Million Americans have declared bankruptcy in the past three years. Just wait until the housing bubble pops...then that 'five million bankruptcies' tidbit will appear like something from "the good old days."

6. Record price of gas at the pump in the U.S. Wonder how many folks are pleased that they listened to Fed governor Poole who advised that the best way to get the economy humming would be to "go out and buy a SUV."

7. Thanks to the mortgage refi mania, the U.S. "homeowner" (a misnomer, since the banks own the homes) now owns a smaller percentage of equity in his/her own home than ever before. Hmmm. Sure won't take much of a housing price dip to make the mortgages worth more than the mortgaged properties. Can you say 'Default?'

8. Real unemployment at approximately 10 percent in the US. The layoffs, furloughs, staff reductions, downsizings, outsourcings and other 'cost cutting' measures will continue until morale improves.

9. A virtually negative savings rate by the indebted U.S. consumer, who continues to live the life of a CEO while earning a McJob salary. Total US consumer debt, including mortgage debt, is about $10 Trillion. Lest we forget, the spending by these up-to-their-arse-in-debt yokels accounts for 70 percent of the US economy.

10. A shrinking Peachback. Even the whizbangs at the Bank of Japan appear to be growing tired of throwing hundreds of billions of dollars' worth of Yen into a festering sinkhole.

11. Significant inflation in the price of things that we NEED. The cost of gasoline, natural gas, heating oil, all other commodities, health care, insurance, etc. are soaring. House prices are...uh...through the roof. Property taxes are flying. And yet the Fed doesn't see any inflation and keeps interest rates at artificially low levels that haven't been seen in almost half a century. Think that the low Fed rate has anything to do with the sagging greenback? You bet it does. And that's why all the talk about a "strong dollar policy" is such a steaming crock of Kudlow.

12. There IS a housing price bubble. Templeton sees house prices declining by as much as 75 percent in the years to come. A Bank of England official warns of a 20 percent drop in housing prices in Jolly Olde England in the next year or so. The housing sector is about the only thing that has kept the US economy from a screaming swan dive into a deep recession. But given homeowners' massive debtloads, the fact that the market is at saturation levels and the realization that a shocking number of homes are mortgaged to the absolute limit (or more), this housing bubble appears on the verge of implosion. Even a hint of a rate increase by Greenspan will jack up the yield on 10-year T-Bills, an increase that will be mirrored by mortgage rates.

13. Somewhere around 40 percent of all U.S. "debt instruments" (bonds and T-bills) are owned by foreigners. With the disgustingly low yields and with the sagging greenback, even the BOJ fanatics can't keep shoveling dough into US bonds and T-bills. Hell, they'd be better off at the roulette wheel in Vegas. Methinks that some of the bigger, smarter foreign outfits will begin takin' their chips off the table and cashing out, taking their bankroll back home. That'll put more pressure on Greenie to do something, although he is currently doing a great immitation of Dr. DooNothing. He's not concerned about a sagging currency, about screwing all the senior citizens who rely on fixed income investments, about the rampant speculation in real estate or in the markets, about the undeniable inflation that he denies exists (guess it's not really "undeniable" then) or about the foolish American consumers who - attracted by 'no down payment', 'zero percent financing' pitches - are continuing to spend themselves into Debt Hell. If he's lucky, the guys in the soup line won't have any tar and feathers handy if Greenspan wanders past 'em.

14. A sickening lack of corporate governance. Earnings reports are more 'accounting fiction' than they are 'reality.' If these clowns expensed stock options, a shocking number of companies listed on the Nasdaq would cease to exist tomorrow. How many times do we have to hear bafflegab such as "Pro Forma" or "excluding some items", or "excluding 'Goodwill' expenses", or "Beat by a penny?" So what if corporate bigwigs lie, cheat and steal? The SEC is there to protect the small investors. (Laugh Track plays here).

15. Massive underfunding of corporate pension plans. Hell, even the US government agency that bails out floundering pension plans has gone to the government for a bailout, since it's about $10 billion in debt itself. I can see this turning into an absolutely incredible issue as retiring boomers suddenly learn that their pensions are reduced so greatly that they won't even be able to afford the 'premium' cat food. And that doesn't count those poor souls who are now getting zero pensions from the likes of Enron. Speaking of which, why is Ken Lay not playing tennis at some Club Fed crowbar hotel?

16. Stocks are overvalued. Depending on your source for P/E ratio commentary, the markets are either (pick one) modestly overvalued, significantly overvalued, vastly overvalued or wildly, ridiculously overvalued. Buffett, Templeton, Gross, Roach and Soros all say the markets are overvalued. Cramer says they're not. Who do you believe?

17. Market sentiment is extremely bullish. The investor newsletters are very bullish. There is no fear in the markets. The amount of money inflows into mutual funds set an all-time record during the first three months of this year. And yet...insiders have been dumping stocks like there's no tomorrow. Insiders have been selling as much as 60 times more shares than they've been buying during the past eight months or so. Either Joe Sixpack is wrong or the big-money insiders are wrong. My wager is that Mrs. Sixpack and all the little Sixpacks are gonna be telling Joe that he was out to lunch to blow the rent money on RIMM or some other such Ponzi scheme.

...Rant completed.

Now kindly return to your online shopping...

Yeah, I know that fundamentals don't matter..........until the day when they're ALL that matters,


Page last updated: 3/31/2004
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