Chris Lau - Seeking Alpha

Monday, November 03, 2008

Summary Notes on TSG Stock Market Letter for the week ending Oct 31 2008
  • Emerging Markets ETF was the surprise star performer rising more than 28%. That being said, Zanger recommended that it is best to avoid the market until the wild swings slow down which “could take months.”
  • If the rally is to have any staying power we will need to see volume rise substantially in the next few days
  • Read full article for some good charts on the US Real estate @
  • It came as no surprise that GDP fell 0.3% in Q3-08 but the one standout in the numbers was the significant 3.1% drop in personal consumption expenditures or consumer spending. It was the biggest PCE drop since February 1991. It should also surprise no one that this number will get worse in the coming quarters
  • First American CoreLogic report recently revealed that nearly 20% of mortgage borrowers (on more than 7.5 million properties) owed more on their loans that their homes were worth. Another 2.1 million properties will enter negative equity territory if property prices decline another 5%, according to the report. As of the latest data, 266,000 mortgages are now defaulting every month in the U.S
  • To sum up, the underlying premise of these bailouts is to stimulate a rapid reversal and return to the days of high prices and bloated valuations. But this will come at a cost – a fiat currency that has no real relationship to true value and rapidly rising inflation. As a best-case scenario, we risk years of anemic economic performance, a rapidly declining dollar combined with stagflation and eventual spike in interest rates as foreigners avoid dollar-denominated assets like the plague in search of those assets that are realistically priced. If it fails, we can expect a continuation of extreme levels of volatility as markets swing between periods of euphoria as new stimulative plans are announced and then depression as prices plummet and the realization hits home that the latest plan has failed.