Comments on Fund My Mutual Fund: WSJ: Buyers' Revenge: Trash the House After Forecl...

gecko, if you noticed I mentioned CA, FL, and OHMI...

2008-03-28T15:24:00.000-04:00

gecko, if you noticed I mentioned CA, FL, and OH

MI is so far gone it might as well be in another country ;)
Plus our foreclosures started 2-3 years ago. We are where the rest of the country will be (in much lighter form) in 2009. I am a bit surprised how bad OH is, frankly I didn't realize how tied they are to the auto industry.

GM and Ford are still banking on 2nd half recovery - the Cerebus guys at Chrysler seem to realize 2nd half recovery is a hoax. So when the cuts begin to realign production in 2nd half 2008 to a record low car sales year (worst since early 80s in my opinion), its going to cause a lot more pain in 2nd half, especially among supplier. I've given up on MI. It's another animal. Trying to focus on the other 49 states... and Guam.

TM: I don't think my information is actionable but...

2008-03-28T15:03:00.000-04:00

TM: I don't think my information is actionable but like yourself, I was just trying to explain, where some of this second half recovery nonsense comes from. While the present is not the past, it does rhyme. And I would agree that the time frame for most on Wall Street is from the 1980's onward (Cramer is #1 example); I have written about this from a sentiment standpoint; sentiment worked great in the 1980's and 1990's but not so well in the 1970's. In any case, I like this comment you made in a response: "But the system (all systems?) inherently benefit from keeping things "as is" ". I am a systems "guy" and quantitative in approach, and I would agree that "they" don't ring a bell when your model changes. Therefore, it is important to distill your information down to the easiest replicable most common denominator and that is price. Then throw in a very good dose of money management (because that is the only thing you can control) and hope someone can find your talent.

Michigan has a unique problem with foreclosures as...

2008-03-28T14:50:00.000-04:00

Michigan has a unique problem with foreclosures as I hear it many foreclosures now have black mold problem. Foreclosure = owner leaves = utilities shut off = sump pump in basement backs up = black mold = house can't sell.

mark, good point - if we can trash enough houses m...

2008-03-28T14:39:00.000-04:00

mark, good point - if we can trash enough houses maybe we can start a new bull for those 2 :)

I've noticed marks always come up with great points, not that I am biased....

guy, I never look at that stuff. History is history. If you did that analysis in 1929 you'd be wrong. If you did it in 1963 (20 years of flat stock returns) it would be useless. Every situation is different.

I don't recall have a worldwide global credit contagion anywhere in our past? If not for the central banks coordinated global injections (at the cost of inflation) this thing would blow up. Do you know how many bank runs we would of had and would have weekly? Thats the only thing (confidence) holding this together.

You just can't model that - and we don't have precedent. We are not even officially IN recession yet - thats the beauty of this one... usually recession is due to job losses, business pullback and the like. This is started by something totally unrelated to anything in the past. So hence it cannot be modeled.

The 6 month thing is because thats the playbook. A whole generation of people (who came to the market after the early 80s) are trained that recessions are short, sweet, and led by business, not consumer. That is their playbook. That is all most know. So they go off the playbook.

This recession will be led by the consumer in an inflationary environment. So I'd pull out the mid 70s to early 80s playbook with 2 recessions. With the socialist actions we will be "saved" from it lasting as long but I expect some serious dislocations.

I just did some work on stock prices and recession...

2008-03-28T14:27:00.000-04:00

I just did some work on stock prices and recessions and this may help to explain the second half recovery theory. I used data on recessions from the NBER.

Since 1923, there have been 15 recessions; the average length of time the recession lasted was 14 months. So let's say the recession started October, 2007 that would put the recovery starting in early 2009. Of course, there is nothing like Wall Street trying to get a jump on things. And although I haven't worked this up, I believe that post WWII recessions are shorter than the average so this would speak to a "real" second half recovery.

Other points are worth mentioning. If you bought the Dow Jones Industrials at the beginning of an official NBER recession and sold your position when the recession ended you would have actually made money in 60% of the cases (since 1923). However, there is a big problem with this logic and that is draw down. In 8/15 instances, the drawdown was over 15% and in 4 instances losses exceeded 20%. So with the Dow currently off its October, 2007 high by about 18%, some investors must be thinking: how bad can it get? Bingo! Second half recovery.

To read more about recessions and stock prices check out this link: http://www.thetechnicaltake.com/commentary/?CID=312

All these trashed houses could equal $$$$ for HD o...

2008-03-28T13:55:00.000-04:00

All these trashed houses could equal $$$$ for HD or LOW. :-D