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Another View of the Economy from Abroad

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  • Another View of the Economy from Abroad

    Another View of the Economy from Abroad

    by Ben Stooge, Corporate Press Weasel

    I've been in a hotel in Germany for a few days smoking dope. Now you know why I sound the way I do when you see me on TV. I feel compelled by generous impulses to offer investment advice to readers based on the vast experience I have acquired these past few days from my perch at the hotel window and downstairs at the bar.

    I'm pecking away at my HP (HP) laptop here in Berlin. The view out the window of the run-down Berlin Plaza Hotel is of the bear cages at the zoo. That's where bears belong! Doesn't smell as bad as you'd expect, as long as you keep the window closed. Then the problem is the bathroom. The toilet is the old "toilet shelf" version unique to Germany and familiar to old timers or anyone who stays in a brothel like this one.

    After smoking a fat one, a few thoughts on sex and kangaroos occurred to me. I can't remember what they were. So I'll talk about the economy instead.

    Subprime Sublime

    You've been reading about the subprime mortgage meltdown and a few lenders balking at the latest ridiculously overpriced private equity deals, and the slathering of corporate balance sheets with gazillions in debt so that they can't even make the first payment, like some crank junky in North Carolina who bought a zero down, interest only, stated income, adjustable rate mortgage. Don't panic! Not yet. Wait until everyone else does, then try to sell! The other writers on iTulip say panic now and avoid the rush. That's irresponsible.

    If I've told you once I've told you a million times, subprime is an itty, bitty slice of the mortgage market pizza pie. Maybe it's one slice of an eight slice large pizza. What's that? Maybe 15 percent? (Pizza's sounding really good right about now.) Maybe 15 percent of these crank heads don't pay up, so what's 15 percent of 15 percent? I don't know, but it's not much. Even if they all burn their houses down they'll still sell for half what they're worth. Maybe that's 1 percent of the $13 trillion US economy. Who'd notice? Not me.

    The Economy is Kicking Ass!

    Thank God some of the LBO deals are coming apart. Just shows that the banks have finally sucked all the money they're going to get out of the retail market for now. Did I say that? What I meant was that lenders are clearly using their heads for a change, instead of making decisions using other parts of their bodies. And that's good and healthy. Do you think banks are stupid enough to fund a private equity deal for $39 billion for a commercial real estate company at the tippy top of a commercial real estate bubble? Of course not. I rest my case.

    And these deals are nothing, irrelevant in the context of the mega huge US economy. Why worry about private equity players having to shell out more for loans at the same time mortgage rates are rising, credit spreads are widening, the CDO market is melting down, the rating agencies are lowering ratings on ASBs, housing prices are falling, retails sales are dropping, and firms are slowing their hiring? Why worry that these things might signal the top of the credit bubble and maybe a recession? Waste of time. Go back to sleep!

    Actually, I take it back. If interest rates keep rising, we got problems. Say they go up two percentage points higher. That will put a sledge hammer to the net present value of stock market earnings and dividends. But the market doesn't think that is going to happen or it would have crashed already. But don't rule it out. It takes a lot of euros to buy a beer or ten here, so I can say with authority that the dollar is not doing so well, especially considering the euro is a joke. U.S. Treasury rates are feeling their way through a post "we don't want any" auction last week. Meanwhile, the US aircraft carrier Enterprise joins the fleet in the Persian Gulf, where Iran awaits them with Russian SS-N-22 Moskit and SS-NX-26 Yakhont torpedos designed to defeat the defenses of a carrier battle group, militants almost succeeded in assassinating Pakistani President Pervez Musharraf, and then Iran doesn't need to build its own nukes. But I'm rambling.

    Selling is for Morons and Traders

    Fact is the economy is kicking ass big time. Profits have reached a permanently high plateau. I'll say it again. Don't panic yet!

    You see, you just don't matter. This is a traders' market. They sell with the press of a button on the keyboard. Bang! Your money's in their account. Your job is to stay on the other side of that trade, the wrong side. My job is to help you stay there.

    Not convinced? Ok, so we have all these problems now. But I'm loving the long term prospects for the U.S. economy. Sure you got your nuclear terrorism, your potential sinking of the US carrier fleet and the closing off of 30% of the world's oil supplies, and that might happen tomorrow. But if you live for another 20 or 30 years, these problems will have either blown up or been resolved, and if they do you'll look back and say, "I sure wish I'd listened to Ben Stooge and bought stocks July 2007!"

    International Conspiracy

    I can see Europe booming out my window. These Germans sure live well, considering you can't fire them and their taxes are sky high. Their health care is better than in the US. It's weird. And they haven't invaded anyone for decades. Same with the rest of Europe, except maybe France, where they have all the riots and problems with mooslins.

    You'd all love watching TV here. No, I don't mean the bondage channel. I mean the investing. You can invest in Africa! Can you believe that? Europeans haven't abandoned Africa to China the way the US has. They also encourage investment in Russia. You can buy your own gas and oil contracts so you don't freeze your ass off like a Ukrainian. The world economy sure is on fire, or will be soon enough.

    What's this to you? Buy Templeton Emerging Markets Fund (EMF). It operates as a diversified, closed-end investment company. It primarily invests in equity securities. The fund's investment portfolio comprises investments in semiconductors and semiconductor equipment, wireless telecommunication services, metals and mining, diversified financial services, industrial conglomerates, household products, commercial banks, and machinery sectors. It's only up 300% since 2002. What could possibly go wrong?

    Keep buying Emerging Markets Telecommunications Fund Inc. (ETF). Sure, it's up more than 400% since 2003, as telecommunications takes off everywhere. What's going to stop it? Not me.

    You Dress Like a Child so Knock it Off

    Americans dress for work like slobs and children, even when doing LBOs. How are you supposed to feel good about paying $39 billion to kids in t-shirts and blue jeans? Me, I'd rather get ripped off by a guy in a $6,000 Brioni.

    Pulling it all together, life is better for these German Socialists that I expected. They dress well, but the toilet stinks. You should dress better, but stick to American toilets and buy stocks now.

    Ben Stooge is a corporate press guy who writes for iTulip. He does not own any of the stocks, ETFs, or other crap he shills and rarely knows what he's talking about, but that doesn't keep him from expressing his opinions.

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    Last edited by FRED; 07-12-07, 04:36 PM.

  • #2
    Re: Another View of the Economy from Abroad

    yep. i saw that one earlier. let me see... hmmmm... there it is...

    A View of the Economy from Abroad
    by Ben Stein
    http://finance.yahoo.com/expert/article/yourlife/38424

    Comment


    • #3
      Re: Another View of the Economy from Abroad

      Looking at the "real" Ben's piece...

      Subprime is a small sector of the mortgage market, as I've said before. It might be 15 percent at most. The defaults and delinquencies in this sector might be roughly 15 percent, which makes for a total problem rate of about 2.25 percent of the whole mortgage market.

      If all this goes into foreclosure (which is unlikely), it will realize about 60 percent upon liquidation at the very least. That means the real loss might be about .9 percent, or less than 1 percent. That's a large number, but tiny in the context of the economy.
      Two responses: (1) Prices are set at the margins, and further, house values have been equated with "savings"---a setup for serious disappointment (or disaster); (2) The trouble exists in far more sectors of the market than "subprime"; as the jobs/income picture weakens, it will spread without obeying artificial market categorizations.

      Let's look at a particularly puzzling Ben Stein Trope (TM):

      The fact is that the economy is booming on a record scale, and profits are superb. There's no reason to panic.
      Talking of "panic" is a red herring. Of course, you should never "panic". Who is arguing that someone should panic? I've personally been an advocate of acknowledging reality, avoiding malinvestment, booking one's losses if necessary, and moving on.

      That aside, where exactly is he getting this "economy is booming" data? Is that the government's "blockbuster" (and surely upward-biased) .6% Q1 GDP number? I'd hate to see what a "soft" economy looks like...

      He talks about Europe booming. That's great. But what exactly does that have to do with the US? The whole premise of the article is bizarre... it shouldn't be taken too seriously.

      And finally:

      I was at the US Airways Club at LaGuardia airport a few days ago, and almost all the men there were in suits and ties. Almost all the women were in suits or dresses. They projected a sense of confidence and capability. You can have the same thing after just one visit to Brooks Brothers or J.Press. Don't let the opportunity pass you by -- human beings make decisions with their eyes. Be on the right side of it.
      Hmmm... maybe Americans are just reacting to the fact that they can't afford nice threads.

      Comment


      • #4
        Re: Another View of the Economy from Abroad

        I fell for it. I went over there. But I have to tell you, I was very worried when I saw the word "expert" in the url. Ugh!
        It's all fun and games until someone loses an eye!

        Comment


        • #5
          Re: Another View of the Economy from Abroad

          Originally posted by Uncle Jack View Post
          I fell for it. I went over there. But I have to tell you, I was very worried when I saw the word "expert" in the url. Ugh!
          naw, ya gotta read the original! it's almost as funny as the parody. the comments of the yahoo readers are pretty darn smart. here's a few.

          sky2evan - Monday, July 9, 2007, 10:35PM ET

          * Overall: 1/5

          Obviously has no understanding of the fact that infinite economic growth is not possible with finite and rapidly depleting energy resources. Oil is at $70/barrel for a reason, and it's not because the oil majors are price gouging, since they produce less than 3% of world oil production. It's called market demand (increasing) supply (decreasing) = higher prices. Prepare for inflation, higher interest rates, and recession - all coinciding with previous oil shocks, but with the present situation being a more permanent one.

          --

          seeknsumsunshine - Monday, July 9, 2007, 8:35PM ET

          * Overall: 2/5

          The topics were catchy and the opinion was interesting but there was very little substance or figures to support his points. Who's to say that the U.S. economy is going to be so great in 20 years? I'd like to believe it myself but Europe, Russia and China and beginning to hit their stride. If we're going to pre-suppose things about the future, I'm guessing that we're all going to be speaking Chinese or Russian in the U.S. because of bone head writers leaders that throw stuff out there like, everything is going to be great in 20 years! Don't worry about anything

          --

          Sandeep M - Monday, July 9, 2007, 7:07PM ET

          * Overall: 1/5

          Ben, want to bet that we are heading for recession? I guess either you are paid to write this garbage or old age is catching on your sight and thoughts. Have you checked the price of milk in your local shop? $ 4 for a gallon! Check the price of other groceries. Gas prices are going up everyday. Where is the money to save and invest for future?

          --

          Bahrfeldt - Monday, July 9, 2007, 6:05PM ET

          * Overall: 1/5

          Of course the foreign markets are booming in terms of the dollar. 300 Euros could not buy $250 when the present administration took office, today that will buy over $400. And his tossing around unsubstantiated numbers and guesses as facts merely reinforces that old bromides "Lies, damn lies and statistics."

          --

          Yahoo! Finance User - Monday, July 9, 2007, 4:06PM ET

          * Overall: 1/5

          Ben should keep doing the Clear Eyes commercials and leave finacial advise to the real pros. What we should really worry about is the falling dollar against Euros, continued regional instabilties around the word, pending terrorist attacks, US foreign debt, low US savings rate, and global competition. Americans dress less fancy b/c: 1. We prove our weath with cars and homes, no need to impress with clothes like some 3rd world countries. 2. European are snobs and like to be fashion models. 3. Not everybody can afford several suits with $20/hr job. 4. Americans care more about productivity and innovations than looking good. 5. Americans are so fat, we don't look good in suits.

          --

          Mike C - Monday, July 9, 2007, 3:29PM ET

          * Overall: 1/5

          Ben must be in the business of helping the Wall St. firms unload their stocks at a profit to Mr. Bagholder (aka, the retail investor). Like so many other talking heads on CNBC, Ben really works for the these firms. The independence of these 'experts' must be severely questioned especially in light of what is happening in the CDO markets. The government and the large banks are trying to keep the lid on it but they wont be able to. In the end, the margin calls for hedge funds will force selling of Tresuries and spike the yield up to 6-6.5%. Where will the market be theb Ben?

          Comment


          • #6
            Re: Another View of the Economy from Abroad

            LOL! I was laughing at the original this morning. The Brooks Brothers comments at the end were like icing on the cake. I wonder if they sponsor him?

            Bueller...Bueller...

            Comment


            • #7
              Re: Another View of the Economy from Abroad

              Ben Stein appearing regularly in the Sunday Business Section for the
              New York Times signaled that I could now save the $3.50 I was spending on the New York Times.
              Ben does have a knack for telling the Public what it wants to hear/buy! He's in the business of personal appearances and writing - all that matters is that there is a ready and interested in paying audience!

              Comment

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