-
Zandi: $34 Billion Is Not Enough for Automakers
Tweet Share on Facebook December 4, 2008 Comment (8)Just so you know, the Big 3 can't get out of bankruptcy for $34 billion.
Mark Zandi, chief economist at Moody's Economy.com says it'll cost $75 billion to $125 billion to keep the staggering auto industry out of bankruptcy. He's still for it.
Video of his testimony is here (sorry, no embed link).
-
Stocks: Your New Favorite Investment?
Tweet Share on Facebook December 4, 2008 CommentAnother interesting point made today by Goldman’s Abby Joseph Cohen (see previous post): Public equity markets may be returning to favor among investors who got burned badly in riskier corners of the market.
The thinking goes that one of the lessons from this crisis is that liquid, transparent assets are worth a premium. Stocks, unlike, say, mortgage securities, private equity, corporate bonds, commercial paper, or real estate, have always been right there to buy and sell (if not short, thanks to the SEC). That alone could make them more attractive once this crisis cools.
A shift back to stocks would be a real reversal by pension funds, college endowments and other big investors who were willing to pay up to move into more exotic corners of the market in search of outsized returns during the boom and are now paying the price as a lot of bad bets in those highly illiquid areas unwind.
Some examples below from the AP:
-
Bullish Rumblings
Tweet Share on Facebook December 4, 2008 CommentAt the CFA Institute’s Global Financial Crisis Roundtable this morning, some prominent Wall Streeters got together to parse all that’s gone wrong over the last four months, and what it means for 2009.
Their verdict was broadly bearish on the economy, but surprisingly upbeat for stocks.
In a conversation with the WSJ’s Jason Zweig, institutional guru Theodore Aronson, Goldman’s Abby Joseph Cohen, bond expert Martin Fridson, and economist Jason Trennert talked about the economy, the consumer, and investing.
Audio of the discussion isn’t up yet, but should be here eventually.
Highlights from Cohen and Trennert below:
-
Roubini: Worst Recession in 50 Years
Tweet Share on Facebook December 4, 2008 Comment (5) -
Picking Up Pennies In Front of a Steamroller
Tweet Share on Facebook December 3, 2008 CommentWatson Wyatt, a big consulting firm, publishes occasional roundtables with some of its analysts (this time Carl Hess, Graeme Miller and Paul Trickett). This bit, about what pension funds should be doing, contains some good advice for individual investors (bold is mine):
Q: What should pension funds’ attitude to risk be in the current environment? What should they be doing, if anything?
Miller: Watson Wyatt’s research suggests that the investment environment is likely to remain volatile for quite some time and that a number of downside risks are still present. So we believe pension funds should think carefully before increasing their exposure to risky assets right now. We are generally encouraging our clients to stick to their long-term strategies and avoid the temptation to sell assets into a weak market at distressed prices
Trickett: The dislocation in financial markets is acute and uncertainty is high over how well the world economy will cope. As Graeme [Miller] says, we believe pension funds should be cautious and stay at the lower level of their risk ranges, as the risk/reward trade-off remains unfavorable. As mentioned earlier, funds should bear in mind that the best buying opportunities typically arise before economic stabilization and recovery are clear. Pension funds should not react to short-term poor relative performance from high-quality managers. Historically, it’s often after such performances that these managers produce stronger returns. We would also caution against reactionary like-for-like manager changes, because of recent significant increases in transition costs.
Hess: I agree – funds should recognize that the cost of movement is high right now. That’s not to say they shouldn’t act if necessary, but change for the sake of change is very expensive. We are not advocating inaction, but rather planning for a world of increased investment opportunity. With fear dominating greed in investor psychology, normal risk/reward trade-offs may not apply. The pursuit of small, incremental returns while taking improbable but large-if-they-happen risks — like picking up pennies in front of a steamroller — just isn’t really attractive. To align all parties, it’s critical that funds have discussions with their investment managers to make sure they fully appreciate the risks in the current environment.
-
Big Stocks Under A Buck
Tweet Share on Facebook December 3, 2008 CommentDouglas A. McIntyre at 24/7 Wall Street rounds up a sobering list of big-name stocks that have fallen below $1 a share, plus a few that could be headed that way. His list, their recent prices, and their 52-week highs below.
-
Smick: Markets Still Scared of Bubbles
Tweet Share on Facebook December 3, 2008 Comment (1)David Smick, author of "The World Is Curved: Hidden Dangers to the Global Economy" and recent Bill Clinton fave takes a look at the economic damage so far and sees more to come.
He says markets aren’t responding to billions in global stimulus simply because of the sheer magnitude of what could still go wrong.
The problem, he writes, is that we’re still at risk from (count ‘em) eight financial bubbles of varying sizes. His rough breakdown looks like this:
-
Stocks, Recession and Rate Cuts: This Time is Different
Tweet Share on Facebook December 1, 2008 Comment (2)On a day when the National Bureau of Economic Research says the current recession is both official and a full year old and the Federal Reserve Chairman says he's willing to cut interest rates from an already rock-bottom 1 percent, the contrarian in me expected to see at least a few folks start shouting "Buy!"
That's because during most downturns by the time a recession is officially announced, the damage has already been done in stocks. That, mixed with possible rate cuts that are "certainly feasible" according to Ben Bernanke should theoretically be good news for battered shares. Not this time. Here's why:
