THE SHORT THAT GOT AWAY….
In January of 2009 I wrote the following:
“I haven’t seen expectations like this since the mighty U.S. military rolled into lowly Iraq with the expectation to conquer a nation in a month. The public is infatuated with Obama. Lovefest might be an understatement. At this point, you have to wonder if expectations are getting a little blown out of proportion. Obama is facing the most problematic economic crisis in over 70 years.
On the bright side, he’s entering office when things are downright awful, which likely means we’re closer to the bottom than the top. But you still have to wonder, with such an enormous global economic mess, are expectations too high for President Obama? Let’s just say, if I could short approval numbers, I’d be calling an Obama top….”
The attached chart (Via Real Clear Politics) shows just how far we’ve come since the euphoric lovefest of 2008 – and to think that this collapse has occurred during a simply staggering rally in the equity markets! A pairs trade on the Obama approval rating would have made for a pretty nice trade. Where was my Goldman Sachs banker when I needed him to put that deal together and find some buyers and sellers? Oh right, he was convincing Congress to bail them out….
We’re now at an even more interesting juncture, however. In my opinion, President Obama is in a tough spot. I said it long before anyone was elected and I’ll stick to my guns – the person who was to be elected in 2008 was a sitting duck in 2012 because no matter who you put in office the odds of them being able to overcome this severe balance sheet recession were mighty low. The numbers look increasingly grim for the President.
At the end of the day if the populace doesn’t have jobs and can’t feed their families the buck is going to stop with the President. I have a hard time imagining a scenario in which the unemployment rate drops below 8% by 2012 (others are far more pessimistic). According to recent data from the CBO and BLS the United States will have to create 225,000 jobs per month just to get the unemployment rate down to 8% by summer of 2012. That’s a fairly optimistic figure considering the current predicament. When President Obama entered office the unemployment rate was 7.7%. If I am a Republican strategist I am licking my chops waiting to run ad campaigns showing jobless Americans with these figures in the background. Sure, it might not be his fault, but at the end of the day it will be difficult to overcome the fact that the unemployment rate rose throughout your 4 years in office.
It’s unfortunate because I think Mr. Obama is a fine man. I really think he means well and he wants the best for the country. And let’s not forget who our alternative was – not exactly an expert on Wall Street (not my words). You may not agree with President Obama’s politics (I’ve certainly disagreed with much of it), but I think it’s unfair to say that he doesn’t mean well or want the best for the country. Unfortunately, he doesn’t know a lick about economics and the team he put in place to run the economy didn’t know much more than he did. As we slowly see the Obama economic team fall on their swords it’s certain that they’ll leave a lasting mark.
Thus far President Obama has spoken loudly and wielded a mighty small stick. He’d do himself and his re-election hopes a great service by using that small stick to beat Mr. Geithner out of Treasury and start with a new slate in 2011. The numbers are grim and the odds look unfavorable, but that doesn’t mean it’s too late to do the right thing and install an economic team that isn’t bought out by Wall Street’s best lobbyists and genuinely wants to help this country and its citizenry in the long-run. I’d love to be a buyer of President Obama’s stock. Unfortunately, I can’t think of a good reason to do so at this time.
Mr. Prag Cap,
The markets are going up; with or without you!
Stop being a perma bear and get on with the program
You and all other bears have been wrong since March 2009, so stop preaching your pseudo intellectual craptalk and admit you guys are wrong.
You know what is worse than a foolish investor? A stubborn, foolish investor!
Permabear? I was busy buying leveraged ETF’s on March 8th. I’m sure you were too. The difference is, my purchases were documented in real-time
http://pragcap.com/coming-this-week-the-m2m-rally
Just curious… When did you sell those ETFs? Did you reenter the trade after selling them?
I’m curious because it does seem like you are generally pretty negative (very understandable, given the grim long-term macro picture). Does the negativity lead you to stay away from market rallies and embrace its declines?
I’ve detailed many of my calls from that period. They were all real-time. I sold into the March rally. It was just too much too fast, but I also didn’t move to a net short until June (my only net short position until before the flash crash). http://pragcap.com/how-are-we-doing-2
I’m not big into beating my chest about this stuff and honestly it doesn’t come close to accounting for my multiple strategy approach, but when someone claims I’m a permabear I have no problem pointing to bullish calls (of which there have been many over the last few years). I’ve explained in great detail that I have a macro bearish outlook and how that works around micro strategies….
I typically read these articles/discussions and don’t post, but in this industry calling someone a perma bear whom isn’t is borderline insulting. I figured I’d write my two cents.
Before you call someone a perma bear, know what you’re saying. The greatest ability in this industry is to be able to be bullish or bearish. You need to have an opinion, be willing to bet on your opinion, and be willing to hedge/accept when that opinion is wrong.
The greatest investors I’ve ever met (or read about) were long-term bulls that were able to see short term opportunities. I think this website illustrates a brilliant ability to accomplish that.
Also, below is an excerpt from an e-mail exchange I had on May 11th with the so called “perma bear”. Sure doesn’t sound like a perma bear reply to me.
“We have huge hurdles to overcome in the states, but in the end it all comes down to the fact that the USA still has the biggest and best corporations on the planet. I think it’s very foolish to be bearish on America in the long-term. With that said, I think the risks are enormous in the near-term with the sovereign debt crisis, but if we can work thru the next two years my outlook will change from cautiously optimistic to very optimistic.
I read everything from xxxx with a hefty grain of salt. They’ve not only been horribly wrong over the last year, but post 99% bearish articles. Their agenda is clear in my opinion. Not that that is bad (I actually know xxxx and he’s a great guy), but it can be detrimental to your portfolio to be a permabear. Being scared is often the #1 thing that keeps people from ever becoming wealthy.
Hope that helps.
Best,
Cullen “
in the 10th year of a secular bear market(a fact not an opinion) how can anyone not be a bear.
cullen has deftly rode up with the bounces and called the shorts like he had a white-telephone-to-the-sky.
84% up since MAR’09 and he’s wrong?…..huh?
you listening to bob doll too much?
Frankly who care if PTC was in the markets or not..
Compare to so much bull crap pseudo analyst in this industry TPC runs a very informative blog. I actually think he is very patient with several skeptical readers including my self at times. If you are looking for the perfect guru the net is full of them until they get it wrong and you are wiped out.
Perma bulls fell of the cliff in 2000 and did it again two years ago.
An investor looks for valuation or overvaluation and timing and could not care less if he is called a bear or a bull. This is not a football game with shear leaders.
We are not exactly in normal times and TPC provides a interesting perspective he does not claim to be writing the bible. Except on monetary policy (joke)
TPC is not a perm bear. He has numerous posts early this year stating that the top has not formed until March. Even after the 10 percent drop in January, he was still a market bull.
But, I am not surprised to see people keep bashing TPC for being a permbear. Many people never do their research. They never dig for facts before they make a decision to do something. They just do it because they feel like it. They never bother to think, where is the evidence? Can I be wrong?
Thanks to these people. The world is a lot less competitive
“It’s unfortunate because I think Mr. Obama is a fine man. I really think he means well and he wants the best for the country.”
Do you understand the definition of the word fine? Are well-meanings and wanting the best for the country sufficient qualifications to be the most powerful man in the world? Do good intentions make you “fine”?
America can ill afford leadership based on good intentions. She needs leaders who can actually achieve “the best for the country.” She needs more Chris Christie’s refusing to sugar-coat reality, and making the cold, hard decisions to stop funding our collective boondoggle.
Never forget: the road to hell is paved with good intentions. Obama is a Neville Chamberlain when we need a Winston Churchill. We need someone who can lead us to victory in this economic war. We the people need to restore this, the finest nation ever to grace the face of the Earth.
The problem is, where are all these leaders? Our alternatives in 2008 would not have resulted in anything different. Let’s be honest here….
For starters, stop voting for people based upon their intentions. Didn’t you know? Politicians tend to lie.
I’m surprised. Twice in 12 months I will suggest a website to the all knowing PragCap
intrade.com
you can bet on political outcomes and the best proxy for Obama would have been the midterm elections.
The markets are thin and I think illegal for a us citizen to trade but I have read articles on how betting sites are more accurate then polling data. . .
Yes, illegal in the USA. But thanks Greg.
At the end of the day if the populace doesn’t have jobs and can’t feed their families the buck is going to stop with the President. [...] Sure, it might not be his fault, but at the end of the day it will be difficult to overcome the fact that the unemployment rate rose throughout your 4 years in office.
Agreed, but I don’t know that his situation is hopeless. He is a good orator, and if he can come up with a plan that is credible and is understandable by most Americans, can communicate it with a sense of purpose, and set it in motion soon enough that it conveys the impression (or illusion) of getting things moving, his situation might be salvageable. But what are the chances of THAT happening?
Yes, I agree that he was definitely the lesser of two evils. And now that Larry has moved on to destroy some other old institution, perhaps we can get the US economy back in line a little. I agree that getting rid of the rest of the Rubinites is the next step towards regaining my belief in his good intentions. Shunting Elizabeth Warren off to the side likewise didn’t help.
What is interesting to me is how the Dems have ceded the high ground in everything that they have tried to do since Obama took office. Why NOT put Warren up to a vote in the Senate, and force the Rs to trash her when the actual people believe she has their back? Why NOT say “You know what? If we cut the budget now what you have left for jobs and customers for your convenience store dry up – because we’re the only game left in town about now. OH – and good luck getting a mortgage from a private lender. Are you mental?” Why not point out that the Rs STILL want to privatize social security so that GS can destroy it? Honestly, the Dems refuse to meet the Rs on the field of battle, and it is not doing any of them any good.
I agree with you that a strong, definite plan would help the situation. Otherwise, the extreme right can characterize his intentions however they want without any push back. And I agree – the expectations that he would piss unicorn blood were ridiculous and counterproductive. But I must say, he’s been a huge disappointment even to me- and I was just hoping for some competence.
Couldnt agree more.
Obama should go on the attack. They didnt filibustered stopping subsidies to firms that offshore jobs, they want to cut social security during a recession. He should have put a bill through that only had middle-class tax cuts, and let the top tax bracket cuts expire – if republicans didnt vote for it – democrats attack them, if republicans do, democrats say look we’re bipartisan!
Progressive Pragmatic Capitalist
I have a different take on the situation. And my take begins with Obama’s opposition. Who can the Republicans nominate that will be a creditable alternative? Let’s face it – both parties are intellectually bankrupt. And the Tea Party – love it or hate it – is a marginal third party. Given the sundry election laws, any third party has a huge challenge simply to be seen on the national stage with the Dems and the Reps. Perhaps in 2016 we will have a viable third party, but that certainly won’t be the case in 2012.
So what are we left with? Two very weak candidates offering the same tried and untrue solutions. What’s the major difference between the two? One has the power of the incumbency behind him, the other doesn’t.
Bottom line: Obama wins by default
Michael Bloomber would be a viable threat seen from the context the us is not run like a business. He is also pragmatic. The downfall is he is ultra rich and based on how poor the economy will be in 2011 for the average man he might suffer from growing backlash against the ‘elite’.
THe main GOP arm has nothing other than christie who is only 8 months into job. Everyone else is blah except palin who has charisma and little chops.
I’d like to defend the President, since I voted for him. But, I can’t. I now realize that there is not one bit of difference between the republicans and the democrats. The whole U.S. Government has been completely corrupted by the money flowing into the pockets of corrupt politicians, and that includes Obama. I do believe that if Obama had followed correct deficit spending policies, and acted quickly to re-regulate the financial industry, we could be well on our way out of this quagmire by now. I may be wrong. But, although I realize this financial mess was brought about by thirty years of voo-doo economics, I believe our present condition is the result of Obama continuing the policies of past administrations. He and democrats-I just can’t make myself capitalize that-deserve to loose the next couple of elections. The only sad part is that this country dose not deserve the pitiful republican opposition.
GLH,
I think this is where most young people fall right now. I’m not sure that is the belief of traditional folks in this country. I think that goes hand in hand with people voting for Obama based on change (Which is why I voted for him).
I’m still amazed talking to older folks how partisan they still are. When I pose questions on the economy or other social issues, they immediately turn partisan.
There will be a Ross Perot type that comes out of the woodworks for the next election and wins. I really do believe that. I just see so many people becoming more fed up with modern day politics and they want to vote in change that they can really believe in. Obama has just dug a deeper hole for politicians as he was seen as different. Now we know they are pretty much all the same.
Obama will have ended the wars in Iraq and Afghanistan by the 2012 election. That will make it very hard for him to lose even if the economy is not improved.
Two years, or thereabouts, is a very long time in politics. Remember, Obama came out of nowhere to win, and someone else could do the same. Right now I wouldn’t bet on anyone, the odds are too uncertain. Although it may not matter– there doesn’t seem to be anyone out there with a good grasp of economics.
vegas was giving 30-1 that tiger wouldn’t make the cut on his first tournament back. i was busy out of town n missed that one.
Obama is an idiot. During the election, I thought, Obama’s going to come hard, bring real change, he’s going to be smart. How wrong was I?
But Republicans are about a million times worse. These guys are wholly owned subsidiaries of corporate america, and to a far lesser extent, the democrats too.
Have you see what his team has been doing recently? Blaming the progressives for “whining”, genius politics – blame your base, blame the people who will almost certainly vote for you. This is just another symptom of the nonsense brought by idiots like Larry Summer, Timothy Geithner and above all Rahm Emanuel (how incredibly wrong was he, re: white house strategy!). Obama should have been stronger on HC, stronger on financial reform, and stronger in attacking republicans. They attacked and attacked and the democrats just bowed their heads like the complete cowards they are.
But at the end of the day, I’d rather have cowards than corrupt morons. The US is going to be in serious trouble if the republican have big victories.
Progressive Pragmatic Capitalist
I’m a liberal Democrat and an early Obama supporter. But in March 2009, when he insisted that prosperity was right around the corner (remember FDR said that: must have been a very big corner), Obama was asked about rising unemployment. He replied that unemployment is a trailing indicator. That’s when I knew we were in trouble, that he was listening to people who were treating this as just another recession brought on by excess inventory. They have been absolutely clueless about a balance sheet depression. All of them. Shame on them. Bernanke threatens QE2 while other Fed presidents publish papers showing it won’t work. There is now solid research that federal stimulus temporarily stimulates but long term crowds out private investment. It’s like the Afghanistan war: did anyone besides a few generals looking for another star actually believe we could do anything there? Obama has been snowed by the bankers and the generals. (Republicans, by the way, are worse: they ARE the bankers and the generals.)
As an independent (I hate party-think), I studied Obama during 2008 – read his “Audacity” book and explored his legislative history in Illinois and the Senate. It was evident that he had excellent oratorical skills, but was otherwise all hat and no saddle. Now, almost two years later, his on-the-job performance has proven that assessment.
I agree with the post above commenting on “good intentions”; that plus a buck and a half will get you a decent cup of coffee.
Over the years, legislators have proven to be weak presidents; not always, but it’s generally true.
Conversely, former governors have been more effective as occupants of the WH; not always, but generally. Successful executive experience, regardless of the field, is a good indicator of future performance.
So who are the governors with potential. My list (alpha order) includes Jindal, Manchin, and Pawlenty, every one of whom has faced economic realities in their states and made tough decisions that involved political risk. There are probably others who have performed effectively as governors.
But the problem with getting good people to go to Washington is … who in their right mind wants to put themselves into the cess pool of Washington and subject themselves to the mind-bending childishness and stupidity of the media?
Obama promised too much on the eve of a depression.
Being charismatic and talking day a night about change made him win the election but when the time came to deliver it fired back and made him more vulnerable.
People soon realize that in a storm charisma is not enough.
The problem continued in the overstated expectations of the stimulus package that was sold has a solution that would prevent unemployment to reach 8%.
This was not realistic and the election after all was over.
It was more like a mismanaged temporary workfare program.In a bad recession it could be argued that a temporary workfare program is better that high unemployment and can be used to improve the country’s infrastructure.
If done responsibly and not in a rush it could have been perceived as a companionate way to temporarily reduce unemployment.
But a miracle it was not and real jobs if any will be very costly.
Let’s hope he does start with a new slate in 2011.Hopefully less ideological and more pragmatic.
“It’s unfortunate because I think Mr. Obama is a fine man. I really think he means well and he wants the best for the country.”
That’s the key: best.
A word like ‘best’ can mean many things to many people. Personally, I would rather see more of a Howard Roark inspired America, but I don’t think Obama agrees with me there at all. Does that mean I want another Bush? No. Smaller government is my preference. We don’t have that under Obama and we didn’t get that under Bush.
Politician will come and go but governments always grows and grows………..
I wonder what “change”, Obama had in mind? Anyone see any change?
The secular bear-market which started in 2000, ended in March 2009 (that was the nominal low). Now, if the Fed continues to create money out of thin air, then stock prices will rise in nominal terms BUT they may make a new low in real terms. This is what happened in the 1968-1982 bear-market. Stocks made a nominal low in 1974 and the real low was put in place in 1982. So, the best time to buy stocks (probably in our generation) came in March 2009 and over the next few years, US stocks will probably drift higher in nominal terms. We could hit 1,550-1,600 on the S&P500 before the next big correction.
If the above comes to pass due to QE 2, then gold will rocket higher and before the precious metals boom is over, the Dow to gold ratio will decline to below 2. So, two ounces of gold or less will buy the level of the Dow.
In a fiat-money system where central bankers are creating money like there is no tomorrow, it is silly to be bearish on asset prices. If QE 2 unfolds, everything will rise in nominal terms, some assets more than others and the US$ will decline.
The Fed;s game is simple – inflate and reduce the debt overhang by paying back the foreigners in a significantly depreciated/diminished currency.
Everything else is pseudo economic nonsense, asset booms happen due to monetary conditions. When money is tight, asset prices collapse AND when money is plentiful and cheap, asset prices inflate. It is simple economics 101.
Good luck to you all.
I hate politics as I see no real difference between the two major parties, but I think whomever wins next needs to do an executive order to stop the investment bank to washington carousel that is beyond conflict of interest. First candidate to propose it gets my vote even if it is Obama.
Agreed, no tangible difference between the major parties; just different shades of corruption.
The conflicts of interest involved in politics goes way beyond investment banks. Anyone that stands up to this conflict would likely get my vote as well.
TPC,
You are excellent in your skills and knowledge as a trader, but imo that’s where it stops. Anybody but Obama would have been better in this economy. As I have said before, you obviously did not perform even the tiniest amount of due diligence in vetting Obama as your choice for President. If you did , then let me know you read his autobiography, that you knew all about Rev.Wright, Bill Ayres, etc. And if you say you did all of those things, then where was your usually acute sense of logic? His father was a communist, his mentor growing up ( the man he called Frank) was a communist, and one of his brothers in Kenya is the leader of their communist party. There has been no lacking in clues as to how he would react politically.