With the market holiday tomorrow, I will be back with a post on Monday morning. In the meantime, I will be catching up on my book reading, or maybe I will start watching one of the soaps which may be more entertaining than the water torture being inflicted by this market.
I am also going to experiment with my links, by just placing them as part of the text, which is how I see some other people doing it. That would make the links less disruptive. For example, the first link below is to the CNBC website. If the reader saves this blog to a PDF format, which is called Preview for the Imac users, then the link information is revealed by simply moving your cursor over it. Although I have been using computers since the early 1990s on the web, I did not realize until recently that I could navigate to the web from a link stored in this format.
1. Bill Gross Interview on CNBC: In an interview on CNBC this morning, Bill Gross provided a very sober assessment of the economy, not only for the next few months, but for years to come. He was saying expect 1 to 2 % real GDP growth for years to come. When asked about the possibility of stagflation he replied that we will get the "stag" for years, and it remains to be seen whether inflation becomes a problem during that low growth period. I enjoy reading his market commentary available at the PIMCO website. He referred to a column by Bob Herbert in the NYT who said how do you "put together a consumer economy that works when the consumers are out of work". When you add to the unemployed workers the numbers who have given up looking for work or who are underutilized (a euphemism for working part time when that is all that you can get), then the total number is just staggering. Unemployed persons stood at 14.7 million people. The number of persons working part time involuntarily is estimated to be 9 million. The Labor Department reported that 2.2 million were marginally attached to the workforce since they wanted work and were looking for a job. They are not counted as unemployed since they had not looked for work in four weeks. When you include the people who have given up or underutilized, the unemployment rate becomes 16.8%, (not seasonally adjusted, seasonally adjusted 16.5), or what the Labor Department calls the U-6 classification
Personally, I think Gross is being too pessimistic, but that is just a personal opinion. I am more inclined to go with the more optimistic forecasts of GDP growth, which would trend above 2% starting in 2010. But, as I have said many times, the future is unknowable in the final analysis. Decisions have to be made nonetheless based on inadequate, incomplete and sometimes erroneous information. And that is what makes it interesting for an old codger.
If Gross is right, however, then there will be a prolonged period of subpar returns for stocks, as it would be reasonable to expect a compression in stock multiples in the economic scenario that he forecasts.
2. SEC Staff Lawyer Warned About Madoff in 2004: I do not have any confidence in the SEC except possibly in cases where a broker embezzles client's money and receives a sanction. Some may say that is being harsh but I would never rely on the SEC to protect an investor from a fraud like Madoff. There was a story in the Washington Post this morning about a staff lawyer who raised red flags about Bernie in 2004 . It would be charitable to characterize the SEC's past efforts to protect investors to be a miserable failure.
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