Monday, July 19, 2010

Do Not Unbuckle Your Seat Belts

If you heard the government say, "The captain has turned on your fasten seat belt sign and you need to remain in your seats." would you believe them? The truth is something you will rarely never hear out of Washington. They can not disclose the truth cause the sheeple would all freak out if they knew the truth. If we knew as a mass just how bad we're getting ripped off to support the kleptocracy's addiction to profit and bonuses we might actually get upset. We can't handle the truth, so they lie and move along pulling demand forward and kicking cans of nitro-debt down the road extending and pretending that this will all blow over.

Jesse's Cafe American has Nothing Was Sacred: The Theft of the American Dream where he shares comments and It’s the End of the World As We Know It from Phil's Stock World (I love Phil and do not cover him enough). Jesse says, "Economics will not provide any answers in and of itself. Economics without an a priori policy and morality, without a guiding principle like the Constitution, is a heartless monster easily manipulated to say whatever one wishes it to say, if they are willing to pay enough economists to say it. Its reputation as a science is greatly exaggerated." Phil's post is excellent as he summarizes, "It’s a new world, America, and you’d better get used to it – we were sold down the river on a slow boat to China long ago and we’re only just beginning to feel the first effects of waves that wash back to our own shores. The people who own the media don’t want CHANGE. That’s why you never hear this stuff in the MSM – things are going exactly according to plan and the old money crowd is playing a long, patient game and they already have most of the chips – the last thing they want is people questioning the system…" Ahhh, fraud and greed, two of my favorite subjects here on Shanky's blog.

Fraud and greed? Shanky, you are always so harsh ;-). There have to be examples of integrity in the system. Is it really all that bad? Well, the pump does not end in DC. It spreads to Wall St (another favorite whipping boy here). When someone like Hussman says, "I can’t emphasize enough that when you hear an analyst say "stocks are cheap based on forward operating earnings" it would be best to replace that phrase in your head with "stocks are cheap based on Wall Street’s extrapolative estimates of a misleading number." you have to perk up your ears. Credit Writedowns has John Hussman on Taxes and Tobin’s Q-Ratio a lovely piece on another way of valuating the overbought market!?

Sticking with the earnings manipulation fraud over-pump theme Mish has Five Reasons for Nonsensical Forward Earnings Estimates. Included in that post is

Reasons for Nonsensical Earnings Estimates
  • Analysts do not do their homework on what is really happening and why. Instead they see rising earnings and take them at face value, nearly always figuring following quarters will be better yet.
  • Analysts do not understand the dynamics of debt deflation, peak credit, the baby boomer retirement dynamics, etc. In short, Analysts do not understand the global macro picture is bleak.
  • Analysts look at a steep yield curve and think the Fed can lift the economy.
  • Analysts have not yet caught on to the fact that consumer spending and bank lending attitudes have changed for good.
  • Analysts in general have a vested interest in getting the public to buy stocks, annuities, etc. because that is how they make money.
Any of that sound familiar, especially the last point? Reality is that they are fraudsters that depend on selling you crap so they can afford the third house in the Hamptons and keep the mistress in her BMW. It is all a fraud designed to make money no matter what eventually happens to your retirement assets. You know what happens when they screw up? We the taxpayer will bail them out and no one will prosecute them for doing anything wrong, so why should they give a shit what they do or say?. Who cares if some "material" facts are left out of a marketing brochure? Immaterial if you ask me, slap on the wrist type stuff you know.

To throw the cherry on top of the analysts are ignorant fraudsters crooks on the take real bastards. Zero Hedge delivers McKinsey Study Confirms Sellside Analysts Are Conflicted, Slow, Biased And Generally Stupid. "In what will come as a surprise to precisely nobody, a new study by McKinsey has confirmed that sellside analysts were "typically overoptimistic, slow to revise their forecasts to reflect new economic conditions, and prone to making increasingly inaccurate forecasts when economic growth declined."" This is PRICELESS, "Moreover, analysts have been persistently overoptimistic for the past 25 years, with estimates ranging from 10 to 12 percent a year,4 compared with actual earnings growth of 6 percent.5 Over this time frame, actual earnings growth surpassed forecasts in only two instances, both during the earnings recovery following a recession (Exhibit 2). On average, analysts’ forecasts have been almost 100 percent too high.6"A great report that is a must read. I love the consistent 'Overoptimistic" charts presented in this post. Those do not lie (unless Liesman on CNBS were refuting them of course).

What have we learned from this post? Well, for a majority of my readers, nothing. I have only confirmed that the perpetuation of misleading information is in tact and still on steroids. Those that watch and listen to CNBS know this all to well as we listen to the 'analysts' and 'experts' pump their wares and do all they can to keep you in the market so they can get out at better prices while they stuff their bonuses to the gills. And you thought used car salesmen were seedy? I have to lump this group with congress and current and past administrations, but not as low as the Fed Chairman and his legions of bought and paid for "economists" that can't seem to forecast their ass from a hole in the ground.

I took the time to watch Fast Money tonight ( I was so inspired by MB's earnings pump of IBM after the close I had to hear what the traders had to say). Surprisingly is was not good at all to somewhat confusing. They were all decidedly bearish on 'technical' grounds (actually mentioning things such as a 50ma!) but still had their bullish sentiment. One guest (or something) actually said the words "lower lows", but as to which context that was in can be debated. Bottom line, I now know why I never waste my time listening to this crap (or to MB at 4:00).Maybe I'll watch Cramer pump the GS crowd before tomorrow.....naaaah, can't stoop that low. That would be like watching Sir Teleprompter deliver another quality speech written by who knows who.

Uh, earnings were miserable tonight. What was it the analysts were looking for?  Oh, don't forget about those lowered estimates!