The Deipnosophist

Where the science of investing becomes an art of living

My Photo
Location: Summerlin, Nevada, United States

A private investor for 20+ years, I manage private portfolios and write about investing. You can read my market musings on three different sites: 1) The Deipnosophist, dedicated to teaching the market's processes and mechanics; 2) Investment Poetry, a subscription site dedicated to real time investment recommendations; and 3) Seeking Alpha, a combination of the other two sites with a mix of reprints from this site and all-original content. See you here, there, or the other site!

31 July 2009

Rising prices equals... a bear market?

No, that is not my analysis, but the bears' constant growls.

C'mon, we all know the refrain by now: for the past 5 months, with each new up tick, the bears stated flatly that the market was one step closer to resuming its plummet; with each new down tick, the bears stated flatly and gleefully that disaster was upon us. All their failed chart and technical analysis: the trend line breaks that spelled disaster but did not follow through; the negative channels, the waves, the failure patterns (my favorite was the recent head and shoulders top that everyone saw), etc, etc, ad infinitum.

And yet the market's rise has been resolute and enduring; 5 months now and 40+% from the lows. Now the bears tell us they told readers in March 2009 of the bull signal, even though their every subsequent utterance was "SELL!" Richard Russell, never a perma-anything but always late to a price move, finally threw in the towel last week, and declared a bull market... before the bear market re-asserts itself.

I believe everyone is entitled to their opinion, so long as it is informed. And the bears are no dummies. They saw correctly the hellacious decline that began last September (2008). They miss, though, that the terrible decline of 2008 was the ending of a cyclical bear market within a secular range-trading market in existence since April 1998 -- not the beginning of a secular bear market. But that analysis happens to be my opinion -- informed or otherwise -- and my thesis since mid-1999, when I suggested to investors to, "Shatter your assumptions." (Give up their bullish mindset.)

I have no idea why the bears miss the obvious, but they do. Of course, different opinions make markets (clearing prices). God love 'em. But for the bears to become revisionist, now, as though they saw this rising market all along...

I mean not to toot my own horn because neither you nor I care about what was, but what shall be. As a statement of historical perspective, though, I have shown repeatedly why the plummet of September / October 2008 qualifies as a panic (The Great Panic of 2008, I call it), and ended in October 2008 precisely where and when it should. I showed repeatedly during q4 2008 and Q1 2009 how the market was bottoming; one post even detailed each step of the process. I mentioned in November 2008 that the market would begin to melt up after 1 Jan 2009, and provided reasons why. All my comments prove presciently correct -- but due only to the facts of how markets trade. And so it goes.

Yeah, and so it goes. I hope rising markets convince you to focus more on investment opportunities, and less on the analysis of market trends. Fact is, most investors simply know not how to identify and delineate correctly trend (lines) and execute flawless pattern recognition and analysis; recent history points out that reality. Sure, timing is a crucial component of consistent portfolio success, but nowhere near as critical as finding the best companies in (market) leading groups and sectors, which stocks themselves act as engines to the markets' caboose.

I know, I know, I begin to sound like a broken record. (btw, great band; Broken Records, that is!)

Full Disclosure: Long the market via several market leading investments.
-- David M Gordon / The Deipnosophist


Pyramid of Success

I meant to post Coach John Wooden's Pyramid of Success earlier this week on the occasion of his birthday. I forgot; mea culpa.

[click on image to enlarge]

John Wooden, for those of you who do not know, was coach of the UCLA Bruins basketball team, and perhaps the greatest and best coach ever, in any sport.

Now I normally detest superlatives like I just uttered, but Coach Wooden was not only a phenomenal coach but also a phenomenal human being. And I say that, even though my 'storied' high school basketball career met the buzz saw of Coach Wooden's exacting standards. (And, anyway, Sidney Wilkes and Marques Johnson were better players than I ever could even dream of becoming.)

Coach Wooden's Pyramid of Success? It has provided unfailing guidance to me, and to other people, over the decades -- and not just in sport. Check it out for yourself to see why I say that...
-- David M Gordon / The Deipnosophist

Labels: ,

Why cry, when you need only laugh...?

Let's get our laughs where, when, (and at whose expense) we find them; such as this ~5 minute moment from The Daily Show with Jon Stewart...

The Daily Show With Jon StewartMon - Thurs 11p / 10c
Home Crisis Investigation
Daily Show
Full Episodes
Political HumorJoke of the Day

-- David M Gordon / The Deipnosophist

Labels: , , ,

30 July 2009

Take Back the Beep

The excellent commentary and call to action below is by David Pogue, who explains his message better than I could. Please share David's call to action with everyone you know...
-- David M Gordon / The Deipnosophist

The Mandatory 15-Second Voicemail Instructions

Last week, in The NY Times and on my blog, I've been ranting about one particularly blatant money-grab by U.S. cellphone carriers: the mandatory 15-second voicemail instructions.

Suppose you call my cell to leave me a message. First you hear my own voice: "Hi, it's David Pogue. Leave a message, and I'll get back to you"--and THEN you hear a 15-second canned carrier message.

* Sprint: "[Phone number] is not available right now. Please leave a detailed message after the tone. When you have finished recording, you may hang up, or press pound for more options."
* Verizon: "At the tone, please record your message. When you have finished recording, you may hang up, or press 1 for more options. To leave a callback number, press 5. (Beep)"
* AT&T: "To page this person, press five now. At the tone, please record your message. When you are finished, you may hang up, or press one for more options."
* T-Mobile: "Record your message after the tone. To send a numeric page, press five. When you are finished recording, hang up, or for delivery options, press pound."

(You hear a similar message when you call in to hear your own messages. "You. Have. 15. Messages. To listen to your messages, press 1." WHY ELSE WOULD I BE CALLING?)

I, the voicemailbox owner, cannot turn off this additional greeting message. You, the caller, can bypass it, but only if you know the secret keypress--and it's different for each carrier. So you'd have to know which cellphone carrier I use, and that of every person you'll ever call; in other words, this trick is no solution.

These messages are outrageous for two reasons. First, they waste your time. Good heavens: it's 2009. WE KNOW WHAT TO DO AT THE BEEP.

Do we really need to be told to hang up when we're finished!? Would anyone, ever, want to "send a numeric page?" Who still carries a pager, for heaven's sake? Or what about "leave a callback number?" We can SEE the callback number right on our phones!

Second, we're PAYING for these messages. These little 15-second waits add up--bigtime. If Verizon's 70 million customers leave or check messages twice a weekday, Verizon rakes in about $620 million a year. That's your money. And your time: three hours of your time a year, just sitting there listening to the same message over and over again every year.

In 2007, I spoke at an international cellular conference in Italy. The big buzzword was ARPU--Average Revenue Per User. The seminars all had titles like, "Maximizing ARPU In a Digital Age." And yes, several attendees (cell executives) admitted to me, point-blank, that the voicemail instructions exist primarily to make you use up airtime, thereby maximizing ARPU.

Right now, the carriers continue to enjoy their billion-dollar scam only because we're not organized enough to do anything about it. But it doesn't have to be this way. You don't have to sit there, waiting to leave your message, listening to a speech recorded by a third-grade teacher on Ambien.

Let's push back, and hard. We want those time-wasting, money-leaking messages eliminated, or at least made optional.

I asked my Twitter followers for help coming up with a war cry, a slogan, to identify this campaign. They came up with some good ones:
"Where's the Beep?"
"Let it Beep"
"We Know. Let's Go."
"Lose the Wait"
"My Voicemail, My Recording"
"Hell, no, we won't hold!"
My favorite, though, is the one that sounds like a call to action:
"Take Back the Beep."

And here's how we're going to do it.

We're going to descend, en masse, on our carriers. Send them a complaint, politely but firmly. Together, we'll send them a LOT of complaints.

If enough of us make our unhappiness known, I'll bet they'll change.

I've told each of the four major carriers that they'll be hearing from us. They've told us where to send the messages:
* Verizon: Post a complaint here:
* AT&T: Send e-mail to Mark Siegel, executive director of media relations:
* Sprint: Post a complaint here:
* T-Mobile: Post a complaint here:

Three of the four carriers are just directing us to their general Web forums. Smells like a cop-out, I know. (As for AT&T: Props to the guy for letting me publish his e-mail address! Hope he knows what he's in for!)

Yet all four carriers promise that they'll read and consider our posts. And we have two things going for us.

First, I have a feeling that the volume of complaints will be too big for them to ignore. To that end, I hope you'll pass these instructions along, blog them, Twitter them, and spread the word. (Gizmodo, Consumerist and others have agreed to help out.) And I hope you'll take the time to complain yourself. Do it now, before you forget.

Second, we'll all be watching. I'll be reporting on the carriers' responses. If they ignore us, we'll shame them. If they respond, we'll celebrate them.

Either way, it's time to rise up. It's time for this crass, time-wasting money-grab to end for good.


27 July 2009

Dead wood?

A very intersting, but too brief, interview with anthropologist, Karen Ho, who comments that...
"The kind of worker they imagine is a worker like themselves. A worker who is constantly retraining, a worker who is constantly networked, a worker whose skill set is very interchangeable, a worker who thinks of downsizing as a challenge — a worker who thrives on this. This becomes the prototype, but in many ways that's quite removed from the daily lives of most American workers."
I sure would like to read more of her thoughts, but what there is you can read here.
-- David M Gordon / The Deipnosophist

Labels: ,

SDCC 2009

SDCC is San Diego Comic Con. A friend created the slideshow below to showcase his photos from the opening two days of the Con...

-- David M Gordon / The Deipnosophist


24 July 2009

Some laughs for the weekend

Clean jokes for slightly twisted minds...

Labels: ,

21 July 2009

A (winning) position is a good thing to manage

So you have an investment that defies the so-called experts, and just keeps rising in a profoundly powerful up trend. What do you do?

Well, first pat yourself on the back: your initial step -- to buy and hold proves correct. Now you wonder, whence the ideal moment to sell? When does a trend of extreme strength become the moment of obscene strength? Consider the various constituencies:
1) Short-sellers must cover in a capitulative, melt-up run;
2) Short term longs (such as Louis Navallier) who buy and sell, buy and sell, buy and sell, now finally buy and hold, which also gooses the stock short term;
3) Long term longs (such as me) begin to sell their holdings, phasing out quietly.

I have shown (on this blog) the methods to identify these first 3 steps, so I doubt the necessity to reiterate them now.

Because I am the happy holder of Green Mountain Coffee Roasters/GMCR (long, now, for a whopping $40/share profit, ~125%, in a mere 4 months), I thought I would share several possible scenarios and my potential actions...

[click on all charts to enlarge]

First things first. I know, I know, the GMCR chart (above) finally looks especially auspicious to you, but please note intermediate term price resistance occurs at ~$75. (Please use the methods and tools shared previously to identify that price resistance.) Let's examine my time frame...

The salient fact re GMCR's chart is that its price rise begins to wax parabolic. All chart action reveals subtle clues as to when a trend or pattern will exhaust itself; again, because I have shared previously many excellent methods to age trends, I will not repeat those lessons.

When presented with, as I term it, a trend of extreme price strength, I seek the moment of obscene strength -- typically, a large upside gap that reverses itself that same day or week, and causes a key reversal day. Or, even worse, a key reversal week. I do not wait for the reversal, because the upside price action is prefatory to the reversal. So...
Scenario 1): GMCR breaches above intermediate term price resistance with an opening gap, and rises quickly to my long term price and value objective ($80-$100) before a key reversal. Sell (or lighten your holding) on the gap.
Scenario 2): GMCR floats higher to intermediate term resistance, and declines gently into a new intermediate or long term base, to allow the outlier PE multiple to contract to a more normal relationship. Hold.

One great item about investing is that a price objective thought to require years sometimes needs only a handful of months. Interestingly, as Green Mountain/GMCR possibly accelerates its share price rise, the company reports its quarterly earnings after the close on Friday, 31 July -- which means the next ~2 weeks could be even more profitable, and more rapidly so, for those lucky investors long Green Mountain Coffee Roasters/GMCR.

Full Disclosure
: (Still) long Green Mountain Coffee Roasters/GMCR.
-- David M Gordon / The Deipnosophist

Labels: ,

19 July 2009

Champollion clues and secrets for transliterating micropsia

The micropsia sequence of posts were not really fair, mostly because I revealed few items, if any. But now has come the moment to reveal several items. First, the companies (in order of presentation)...
1) BioDelivery Sciences/BDSI
2) Spectrum Pharmaceuticals/SPPI
3) OncoGenex Pharmaceuticals/OGXI
4) Vion Pharmaceuticals/VION
5) Isis Pharmaceuticals/ISIS
6) Johnson & Johnson/JNJ
7) Volcano/VOLC
8) Thoratec/THOR

You will discern rather quickly my second 'revelation' -- the obvious fact that all eight companies derive from one key market sector, health care. I selected eight companies from various groups from that leading sector, but with different chart patterns.

Perhaps surprisingly, each of the eight charts is bullish -- in some time frame; profoundly so for charts 5 through 8. To discern true direction, expand and contract periodicities. For example...


[click on all charts to enlarge]

NB: (chart above)
● The massive ascending triangle (not identified) and 13 year base since Thoratec's ultra-hot IPO;
The Panic of 2008 (my term) did not harm THOR one whit, as the shares raced to $33 from $13;
● The recent high ($33.43) found initial resistance at the high from 13 years ago, as it should;
● The past 6 months, and then some, trade as a symmetrical triangle (pattern identified), which, typically, is a continuation pattern of the prior move.


NB: (chart above)
Volcano/VOLC was another hot IPO, although the shares hesitated for ~4 weeks (the markets declined in June/July 2006), before rising explosively to $23 from $8 in a mere 8 months.
● The entire pattern, since IPO, forms as one large symmetrical triangle (identified)
The past two years build as a massive W bottom (identified)
● Crucial upside breakout occurs at ~$17.

Now is as good a time as any to repeat myself:
● Focus on the leading stocks, groups, and sectors;
● New market leaders become obvious during general market declines;
● Leaders might correct but only to a new intermediate term base, not degrade into a trend of lower lows.

Of course, I could continue to delineate patterns and trend lines on chart after chart -- not solely the micropsia group -- but I suspect you get the idea, so will stop here. I welcome your comments and insights about these eight stocks, or any other investment opportunities of interest to you.

The very nature of the discounting mechanism means that today's news was factored in months ago... and acted upon then. Investors buy today in the attempt to sell dear(er) tomorrow.

"Simple questions have simple answers,
difficult questions have difficult answers,
and the supremely difficult questions have only faith as their answer."

I am not the type of investor to make needless predictions, as you know, but current market action sure looks to me like it climbs its proverbial Wall of Worry, the right side of its chart. So have faith; the cream always rises to the top.

Full Disclosure: Long most of the stocks mentioned in this post.
-- David M Gordon / The Deipnosophist

Labels: , ,

17 July 2009

Playbooks and Checkbooks - a review

With ~275,000 books published last year (~20,000+ books / month), you would think a few duds would slip through the cracks. Add the topic of economics, refined by the inclusion of sport, and you can rest assured the book to be a real snoozer.

Surprisingly, author Stefan Szymanski's new book, Playbooks and Checkbooks, An Introduction to the Economics of Modern Sports, is not a snoozer but a sleeper; equal parts eminently readable and wholly fascinating.

In medieval Europe, sport meant either hunting or jousting -- a private affair for the privileged. The state offered little in the way of public entertainment and severely restricted the ability of individuals to congregate. Public assembly without the permission of the ruler or the state could mean only one thing: rebellion...

Less august clubs soon flourished in the developing coffeehouse societies of London, where traders and lawyers might meet to do business, and journalists might meet to discuss the latest tittle-tattle. Journalism itself was a consequence of the withdrawal of the state, the abolition of censorship in 1695 creating an essentially free press. Freedom of the press went hand in hand with formation of clubs, since people needed to know where to find like-minded individuals with whom they could associate. In the early years of the eighteenth century, there was an astonishing explosion of clubs in England and Scotland, catering to every kind of pursuit, from science to the arts, to innocent pleasures such as music and the study of history, to serious moral reform and religious revival, and more profanely, to eating, drinking, and most of the remaining deadly sins. None of the activities were new, but their organization within the framework of a club certainly was. Thus clubs also emerged for the pursuit of pastimes such as horseracing, cricket, and golf... sporting clubs were established as much for the opportunity to mix socially with like-minded people as to play the game itself -- a function that golf, probably more than any other sport, fulfills even today.

In English law, clubs and associations have no particular status. Anyone can form a club, for any legal purpose, without needing to obey any special rules... The absence of any legal status reflects the independence of such organizations from the control of the state. The fact that English law never interfered in the formation of associations by private citizens indicates how much freedom was left to individual initiative. By the end of the eighteenth century visitors to England became quite bored with the tendency of the English to proclaim their liberties and to declare that other nations lived in servitude. Contemporary Germans and Frenchmen often found this national pride quite puzzling, because they did not see what the English were free to do that they were not. But freedom of association did mean something. It was certainly not permitted elsewhere in Europe...

And with that last quotation, you have the first glimmerings of what elevates this book above others -- the economics of sport (and, I dare add, all economics) does not rise from a vacuum, but is of a piece with the prevailing social, spiritual, financial, and moral zeitgeist. Szymanski's non-elaborated notion places his book with the best art history, for art also is a creature of its time.

Szymanski does not elaborate the notion directly because it is tangential to his narrative; he does elaborate it indirectly, though, in chapter 4 ("Sports and Incentives"). In that chapter, Szymanski discusses how the leagues, the clubs, and the athletes deal with the issue and phenomenon of doping, and what the fans should do about it.

My favorite chapter, though, is the final one, "Sports and the Public Purse." It is here that Szymanski ties all his seemingly loose threads into one gorgeous tapestry via an all-encompassing dissection of the Olympics Games as (crooked) business. The chapter also reveals Szymanski to have knowledge of the Austrian school of economics, if not a full-fledged member. The reader can almost see Szymanski's sly smiles and hear his quiet chuckles, when he tells of Olympics organizing committees that regale their audiences with the riches to come. Even Schéhérazade did not beguile her audience so completely.

Full Disclosure: Playbooks and Checkbooks is a beguilingly edifying book.
-- David M Gordon / The Deipnosophist


16 July 2009


How can a movie tell a story, if the characters do not move and there is no dialogue...? One method would be for the camera to move.

Carousel, directed by Adam Berg, introduces a brilliant new talent...

W a y cool!
-- David M Gordon / The Deipnosophist


15 July 2009

Bears: Exit Stage Left

It goes without saying... but Peter Tasker does a fine job of saying anyway. See article below.
-- David M Gordon / The Deipnosophist

Bears: Exit Stage Left
Time for rock-star pessimists to wise up.
Peter Tasker Jul 20, 2009

A notable phenomenon of this past year of living dangerously in financial markets has been the triumph of the ultrabears: deeply pessimistic commentators and economists, such as Nouriel Roubini, who previously had only niche followings and have been propelled to rock-star status.

Million-dollar book deals, speeches at Davos, celebrities and statesmen lapping up your predictions of woe, gorgeous babes clustering around you—it's nice work if you can get it.

Am I jealous? Absolutely. More important, what does this runaway bull market in doom-mongering tell us about current investment prospects? To any contrarians worth their salt, it suggests that sentiment has reached extremes, as it did in the dotcom mania of the '90s. Back then, the talk was of "Dow 30,000" and the coming digital paradise. Now we hear confident forecasts of gold at $3,000, the collapse of the dollar, and the end of capitalism itself.

Is it fair to pair today's gloomsters with the wild-eyed dotcomers? The bears have much greater intellectual depth, they are more analytical, and they were correctly bearish ahead of the most serious financial crisis in decades. But remember that the dotcom gurus once had credibility too, having been bullish during an epochal market ascent. Being right gets you listened to, until you get it wrong; then people stop listening. And nobody, but nobody, is right all the time.

Furthermore, investment success has little relation to high IQ, doctorates, and Nobel Prizes. As Warren Buffett put it, ordinary intelligence is enough when combined with "the temperament to control the urges that get other people into trouble."

In fact, the dotcom gurus turned out to be right about a lot of things. The Internet transformed the way we work and play, devastating whole industries and turning geeky startups into gigantic global corporations. What they overlooked was the iron law of investment: the price paid is crucial to the returns generated. Pay a ridiculously high price and you'll get a ridiculously lousy return. Being right about everything else won't matter.

Today's über-bears are making the same mistake in reverse. They may be right about the challenges the world economy is facing—shaky banks, weak consumption, deleveraging, the flu pandemic, etc.—but they are paying insufficient attention to the prices that companies are trading at in the stock market. That is why they missed the sharp recovery of the past few months and are now desperate to label it a bear-market rally.

Since March, when the growling of the bears was loudest, the S&P index of Asia's 50 largest stocks has risen by 45 percent, and the Dow Jones Asian small-cap index by 57 percent. The move is much more intense than in the spring of 2003, when the last bear market bottomed.

Another bubble? Hardly. In the first quarter of this year, the entire Japanese stock market was trading below its book value, and the Korean, Taiwanese, and Thai markets were not far behind. In all four countries, the market index expressed in dollars was back at 1980s levels.

Even at the peak in 2007, global stock markets were not in bubble territory, meaning at absurdly high valuations, with the exception of China and a handful of emerging markets. There was indeed a financial bubble, but it was restricted to credit and the areas that feed off it, such as real estate and private equity. By contrast, stock markets had already been in a bear phase—if we define a bear phase as a period when stock prices fall relative to earnings—since the turn of the century. The credit crisis, in particular the astonishing policy blunders surrounding the unmanaged collapse of Lehman Brothers, accelerated the process dramatically.

At the start of this year in many countries, stock markets were trading at the lowest levels in a generation. In several European and Asian markets, stock dividend yields had fallen well below government bond yields; effectively, investors were pricing in a long deflationary slump. Common sense suggests that such an outcome would be tremendously destabilizing to our societies. Political leaders everywhere, once aware of the risks, will stop at nothing to avert it. In an era when central banks are using every trick in the book to get money flowing again, deficits are ballooning, and bailouts have become routine, it is government bonds, not corporate stocks, that seem out of kilter with reality.

So what next? According to another great investor, Sir John Templeton, bull markets are born in despair, grow amid skepticism, mature in optimism, and die amid euphoria. Nobody can blame the über-bears for enjoying their moment in the sun; they've earned it fair and square. And if in doing so they set the stage for the birth of the next bull market, we'll have something else to thank them for.

Tasker is an analyst at Arcus Research in Tokyo.

Labels: , ,

10 July 2009

Why I climb

People often ask why I climb (mountains), but my answers always lacked a certain... something. I struggled to make concrete an intangible -- a feeling (to be atop the world), a perspective (what I see from that vantage), and how the preparation and actuality trains me physically, emotionally, psychically, and spiritually for other endeavours.

And then, as it happened, I caught this brief interview with Ed Viesturs...

The Colbert ReportMon - Thurs 11:30pm / 10:30c
Ed Viesturs
Colbert Report Full EpisodesPolitical HumorJeff Goldblum

Ed nails the climber's imperative in a few broad brushstrokes. The bit about testing his limitations is spot-on: whatever your (my) limitations, the objective is not to ignore them but to keep pushing them farther away so they no longer act as limitations. Now, I do not know Ed Viesturs, although I wish I did. Ed seems a genuinely nice guy, based solely on this brief interview, which also happens to be funny, thanks to Stephen Colbert's goofy manner.

Oh, btw, I will be in London on my return (early-October) from a climbing expedition of my own, so please message me if you would like to get together and share a pint or two, and good conversation.
-- David M Gordon / The Deipnosophist


One commercial...

... that I would enjoy if it continued for a while more:

Such a joy, such a rarity!
-- David M Gordon / The Deipnosophist


09 July 2009

District 9

"Thirty years ago, aliens made first contact with Earth. Humans waited for the hostile attack, or the giant advances in technology. Neither came. Instead, the aliens were refugees, the last survivors of their home world. The creatures were set up in a makeshift home in South Africa's District 9 as the world's nations argued over what to do with them. Now, patience over the alien situation has run out. Control over the aliens has been contracted out to Multi-National United, a private company uninterested in the aliens welfare they will receive tremendous profits if they can make the aliens awesome weaponry work.

"So far, they have failed..."

District 9
, produced by Peter Jackson (Lord of the Rings) and directed by Neill Blomkamp, opens Friday, 14 August 2009.
-- David M Gordon / The Deipnosophist

Labels: ,

Next Shock Coming: Commercial Real Estate

Include me as a big fan of Simon Johnson's analyses. The Op/Ed essay below is from today's edition of the Washington Post.
-- David M Gordon / The Deipnosophist
Next Shock Coming: Commercial Real Estate

The Joint Economic Committee holds a hearing this morning on worsening conditions in commercial real estate – falling rents, fewer tenants, and defaults on debt down the road. This seems to be the first hearing on Capitol Hill to focus on these issues and what can be done. “Not much” seems to be the reasonable answer.

The written testimony from Jon Greenlee, of the Federal Reserve, is particularly disheartening. There is currently about $3.5 trillion of debt associated with commercial real estate, about half of which is on the books of banks. He suggests that the Fed has been following this situation closely and has stayed on top of banks’ exposures to the sector. He also has some rhetoric about the recent stress tests. Why do I
not find this reassuring?

James Helsel, on behalf of the National Association of Realtors, is even more negative. He argues that this sector supports 9 million jobs and many of these are now in jeopardy. Of course, he is looking for a bailout of some kind (who isn’t?) but still he is right about emerging problems in and around the retail sector.

Jeffrey DeBoer, of the Real Estate Roundtable, has a similar line – as he sees the numbers, commercial real estate is 13 percent of the economy and it’s in trouble because there is not enough credit to go around. He wants – of course – more cheap government credit for this sector; and he has an extensive blueprint/Christmas list of items.

I’m not convinced by the economic merits of their bailout cases, but it’s good to have these lobbyists making their case out in the open – this is a refreshing change from the banking sector, which prefers to work behind closed doors.

Across all these sectors, it’s amazing to see such free market (and even some libertarian) interests come together and – with one voice – clamor for government subsidies.

The Federal Reserve, of course, is already supporting a large part of the credit market. It would not be a surprise if it moves more of this support toward commercial real estate over time, but it’s hard to see how we can afford to risk the kinds of measures Mr. DeBoer proposes at this stage.

The underlying problem here is that consumers and businesses are spending less – mostly because they feel the need to be more careful and to increase their savings. Until private-sector spending finds a sustainable level, measures to directly support commercial real estate are likely to have little impact.

There will be defaults and debt restructurings. This is an unavoidable part of our current slowdown, but watch out for the further damage to banks’ balance sheets that lies ahead.
-- Simon Johnson

NOTE: Testimony can be found on
the committee's Web site.

Labels: , ,

Micropsia, part 8

Today's chart (updated through yesterday's close)...

[click on chart to enlarge]

... is the final chart in this sequence.

My next post on this topic will reveal the companies, and add a few comments. Thank you for your participation, past and present!
-- David M Gordon / The Deipnosophist


07 July 2009

The New Wikinvest Data Platform

An overview of the new Wikinvest data platform.

New functionality, new charts, industry metrics, and as always, intuitive and easy to use.

-- David M Gordon / The Deipnosophist

Labels: , ,

Peter Schiff says, "Of course, we're not gonna pay back the Chinese"

"An excerpt of the Peter Schiff speech at the 2009 Henry Hazlitt Memorial Lecture. Recorded at the annual Austrian Scholars Conference, Ludwig von Mises Institute."

-- David M Gordon / The Deipnosophist

Labels: , , , ,

who's online