Unemployment Today and In Years Gone By

This is today's unemployment numbers after a better-than-expected job loss number. I continue to tell people that 1981-82 unemployment was worse than this recession's but I get little respect for my opinion. I was there and it was. However, people always seem to be stuck in the psychological trap of extrapolating today into both the past and the future.

PE Ratio of 106?

My company is implementing a Customer Relationship Management (CRM) system from Salesforce.com. Salesforce is the leading hosted solution - maybe in the world - competing against the likes of Oracle and SAP in this space.

I like the system and investors should know what they invest in so I did a touch of research and found Salesforce.com has a PE ratio of 106. That's 1 ... 0 ... 6. Wow!

I'm going to have to do some serious research here. I haven't heard of a PE ratio like that since the early Amazon days. I wonder if it might be a candidate for short selling?

Now, to the correction?

S&P500 over 1,000. Nasdaq over 2,000. The Dow at 9286. If you listen to the financial media, they're convinced we're in the start of a boom. When everyone believes one thing then the other must be true. So, does the correction start now?

The Law Prevails - Finally

One of the aspects of recent government actions around GM and Chrysler has been the apparent trampling of established bankruptcy laws; particularly the strong-arming of bond holders into accepting less than their legally established returns. It appears that the law has poked its head back up regarding the Delphi bankruptcy. A bankruptcy judge has ruled that the government cannot force Delphi into GM's arms.

I Think She Did

My last post asked if Meredith Whitney is now assuming the Dr. Doom role and launching a fierce rally with her worst-is-over-for-Goldman comments. The answer appears to be yes. The Dow just broke 9,000 after being up eight of the last nine days. Who was it, Mark Twain, that said history doesn't repeat but it does rhyme? 1982 meet Henry Kaufman. 2009 meet Meredith Whitney.

Did She Just Call the Bottom?

Of course she's too late but Meredith Whitney yesterday put a buy recommendation on Goldman Sachs. Is this another Dr. Doom moment? For those of us old enough to remember there was another Dr. Doom before Nuriel Rabini and he was Henry Kaufman, one of the investment sages of the 70s and 80s. During the 1981-82 recession Kaufman (aka Dr. Doom) was relentlessly bearish and pessimistic and the market bobbled up and down with his every utterance. Much the way it does with the imparted wisdom of Meredith Whitney.



Until August 1982 when Kaufman finally admitted that he was wrong - only he didn't say it quite that way. Kaufman's big bugaboo was what he called government crowding out. That is that the government was borrowing so much money to finance deficits that it was crowding private borrowers out of the market. (This manifests in higher interest rates than would otherwise be seen.)

Finally, in the summer of 1982, Kaufman said that the economy was so, so, so bad that load demand was so, so, so weak that the government was no longer crowding out the private sector. And ... wait for it ... the market took off like a rocket; a rocket that went up until the 1991-92 recession.

Yesterday's rally was the Whitney rally - where she admitted she was wrong without admitting she was wrong. (She's still a bear but likes Goldman Sachs a lot.)

Was this a Dr. Doom moment like 1982? It could be. If so, it's a few weeks ahead of my prediction that the spring correction will end in September.

The World is Spinning Out of Control

It's rather long and I'm sure I disagree with some of it but still, this is a very interesting, and dire, prediction of the long-term effects of the printing of piles and piles of federal money.