Jerry Slusiewicz
Saturday March 28, 2009, 3:00 am EDT
http://finance.yahoo.com/news/Pullback-A-Healthy-Sign-For-indexuniverse-14784640.html
The S&P 500 pulled back a bit on Friday. But volume on major stock exchanges was relatively low, which is actually a healthy sign.
In fact, we'd like to see the blue chip index fall to around the 750-790 range in coming weeks, from the current level of 820.
The current rally, which started on March 6, has just come too far in too fast of a time frame. It has been a fairly broad rally, though. If the month ended right now, we'd be looking at the best monthly returns since 1974. In the past three weeks, the S&P 500 index has jumped 22.4%.
While that's great, it's more constructive at this point to have a moderate retracement. That doesn't mean we need to see the index retest the 666 mark, its 12-year low. But even a pullback of some 8.5% to 750 would still provide support for a longer-term rally.
If stocks continue to climb, technical factors indicate that the S&P 500 will hit considerable resistance at the 875-880 range. That would represent about another 8% rise from current levels.
Today, some 70% of stocks on the New York Stock Exchange have moved above their 50-day moving average. Again, that indicates the market has moved too far and too fast. Look at Jan. 6, when 80% of stocks were trading above their 50-day moving averages. The result was a sharp correction to multiyear lows.
So from a technical perspective, the safe move for a broad-based fund such as the SPDRs S&P 500 ETF (NYSEArca:SPY - News) would be to wait until it's trading around $75 a share. It closed on Friday at $81.59. So we're looking for about an 8% fall to signal a more reasonable entry point.
The same reasoning holds for the PowerShares QQQ (NasdaqGM:QQQQ - News). The Tech-heavy ETF closed at $30.82 per share on Friday. Technically speaking, a better entry point would be $28 per share. On Oct. 24, 2008, the ETF hit a low for this current cycle at $28.09. From early December 2008 through the end of February 2009, its low range was right around $28. And QQQ's 20-day moving average is right at that point now.
Another note of caution is that the market rose 6.2% last week—the first time we've seen three up-weeks in a row in almost a year. Although that's pretty good, it still isn't enough to guarantee that this rally is a new bull market.
Saturday, March 28, 2009
Monday, March 23, 2009
S’pore to invest up to $20b in infrastructure projects this year
Updated: 23rd March 2009, 1000 hrs / 93.8 Live
Singapore will be investing as much as $20 billion in infrastructure projects this year to prepare for recovery and growth.
Senior Minister of State for National Development, Grace Fu, said the projects include the construction of a new International Cruise Terminal at Marina South,
new roads and parks, and the upgrading of schools, sports facilities and our public housing estates throughout Singapore.
She told an industry summit that these investments are not a once-off effort.
In 2010 and 2011, the government will continue to invest another $15 to $17 billion each year in building and infrastructure projects.
The goal is to build Singapore as a distinctive global city, a key node within a network of cities around the world.
Ms Fu said Singapore will be remade within the next five to ten years.
It will be a new city thriving with new opportunities.
Singapore will be investing as much as $20 billion in infrastructure projects this year to prepare for recovery and growth.
Senior Minister of State for National Development, Grace Fu, said the projects include the construction of a new International Cruise Terminal at Marina South,
new roads and parks, and the upgrading of schools, sports facilities and our public housing estates throughout Singapore.
She told an industry summit that these investments are not a once-off effort.
In 2010 and 2011, the government will continue to invest another $15 to $17 billion each year in building and infrastructure projects.
The goal is to build Singapore as a distinctive global city, a key node within a network of cities around the world.
Ms Fu said Singapore will be remade within the next five to ten years.
It will be a new city thriving with new opportunities.
Tuesday, March 17, 2009
Trading 'expert' ordered to refund fees
Home > Prime News > Story
Trading 'expert' ordered to refund fees
Course trainees were upset that option trading instructor's doctorate came from an unaccredited university
By Sandra Davie, Senior Writer
The Straits Times, Digital HTML
March 17, 2009 Tuesday
A GROUP of 49 people scored a legal victory over a self-styled expert on option trading who turned out to have a dodgy doctorate from an unaccredited American university.
A dozen of the course participants said they had paid Mr Clemen Chiang between $3,600 and $4,000 last year for a three-day course on option trading - a complex and risky investing technique which often amounts to betting on share-price trends.
Several had also forked out another $960 for training software and a handful paid $1,600 to $12,000 more for online tutorials referred to as 'webinars'.
Mr Chiang, a 34-year-old Nanyang Technological University engineering graduate, has been running these seminars for a few years at his Freely Business School in North Bridge Road.
He would tell students his own success story of how he made millions, and he drew hundreds of participants.
He claimed to have a PhD in option trading, a rarity in the finance industry here.
But when it came to light last year that his doctorate was from the unaccredited Preston University in Alabama, the group of 49 wanted their money back.
Yesterday, the Small Claims Tribunal found that Mr Chiang had misrepresented his qualifications. It awarded all participants a refund of close to 80 per cent of their fees for the seminar and a full refund for the cost of the software and 'webinars'.
Mr Chiang, who still calls himself 'Dr', attended the hearing but did not speak to The Straits Times.
The Small Claims Tribunal is part of the Subordinate Courts and can hear claims involving the sale of goods or services not exceeding $10,000.
Outside the tribunal, several participants said they felt cheated when they read a Straits Times expose on degree mills last August. The report named Mr Chiang as having a PhD from an unaccredited university.
Sales representative Terence Tan, 41, said: 'I signed up because of his PhD. Option trading is a complicated thing. I thought this guy should know what he is talking about since he had a PhD in it.
'So imagine my shock when I found out that his degree was not from a recognised university.'
Like some others, he felt the course fell short of providing a good understanding of option trading.
Engineer William Hui, who paid $8,000 for himself and his wife to attend Mr Chiang's course, said: 'He should have called it 'Millionaire mindset', because for a whole day, it was just about how much money he made, his Sentosa Cove bungalow and his wife's Hermes Birkin handbag costing over $10,000.
'When he finally went into his so-called method of trading in options, I found it lacking. And then he tried to sell his software for another $960.'
Mr Chiang still claims to have a PhD on several of his websites, but makes no mention of Preston University, which American education authorities have called a 'degree supplier' offering 'fraudulent or substandard degrees'.
Last August, he told The Straits Times that he was also pursuing another PhD at the University of South Australia.
When asked then why he had opted for a degree from an unaccredited institution, he said he wanted to complete a PhD in double-quick time.
Because Preston University was listed as a partner of a private school registered with the Education Ministry here, he said he thought it was an accredited institution.
It was only later that he realised that Preston was not accredited in the United States, he said.
Like other business people who had bought fake degrees, Mr Chiang said then that it helped to pave the way in business.
Checks last year found more than 200 people - including prominent businessmen and financial consultants - flaunting degrees, MBAs and doctorates from degree mills and unaccredited, substandard institutions.
sandra@sph.com.sg
Trading 'expert' ordered to refund fees
Course trainees were upset that option trading instructor's doctorate came from an unaccredited university
By Sandra Davie, Senior Writer
The Straits Times, Digital HTML
March 17, 2009 Tuesday
A GROUP of 49 people scored a legal victory over a self-styled expert on option trading who turned out to have a dodgy doctorate from an unaccredited American university.
A dozen of the course participants said they had paid Mr Clemen Chiang between $3,600 and $4,000 last year for a three-day course on option trading - a complex and risky investing technique which often amounts to betting on share-price trends.
Several had also forked out another $960 for training software and a handful paid $1,600 to $12,000 more for online tutorials referred to as 'webinars'.
Mr Chiang, a 34-year-old Nanyang Technological University engineering graduate, has been running these seminars for a few years at his Freely Business School in North Bridge Road.
He would tell students his own success story of how he made millions, and he drew hundreds of participants.
He claimed to have a PhD in option trading, a rarity in the finance industry here.
But when it came to light last year that his doctorate was from the unaccredited Preston University in Alabama, the group of 49 wanted their money back.
Yesterday, the Small Claims Tribunal found that Mr Chiang had misrepresented his qualifications. It awarded all participants a refund of close to 80 per cent of their fees for the seminar and a full refund for the cost of the software and 'webinars'.
Mr Chiang, who still calls himself 'Dr', attended the hearing but did not speak to The Straits Times.
The Small Claims Tribunal is part of the Subordinate Courts and can hear claims involving the sale of goods or services not exceeding $10,000.
Outside the tribunal, several participants said they felt cheated when they read a Straits Times expose on degree mills last August. The report named Mr Chiang as having a PhD from an unaccredited university.
Sales representative Terence Tan, 41, said: 'I signed up because of his PhD. Option trading is a complicated thing. I thought this guy should know what he is talking about since he had a PhD in it.
'So imagine my shock when I found out that his degree was not from a recognised university.'
Like some others, he felt the course fell short of providing a good understanding of option trading.
Engineer William Hui, who paid $8,000 for himself and his wife to attend Mr Chiang's course, said: 'He should have called it 'Millionaire mindset', because for a whole day, it was just about how much money he made, his Sentosa Cove bungalow and his wife's Hermes Birkin handbag costing over $10,000.
'When he finally went into his so-called method of trading in options, I found it lacking. And then he tried to sell his software for another $960.'
Mr Chiang still claims to have a PhD on several of his websites, but makes no mention of Preston University, which American education authorities have called a 'degree supplier' offering 'fraudulent or substandard degrees'.
Last August, he told The Straits Times that he was also pursuing another PhD at the University of South Australia.
When asked then why he had opted for a degree from an unaccredited institution, he said he wanted to complete a PhD in double-quick time.
Because Preston University was listed as a partner of a private school registered with the Education Ministry here, he said he thought it was an accredited institution.
It was only later that he realised that Preston was not accredited in the United States, he said.
Like other business people who had bought fake degrees, Mr Chiang said then that it helped to pave the way in business.
Checks last year found more than 200 people - including prominent businessmen and financial consultants - flaunting degrees, MBAs and doctorates from degree mills and unaccredited, substandard institutions.
sandra@sph.com.sg
Wednesday, March 11, 2009
Gold Futures Rebound in N.Y. on Dollar’s Decline
By Pham-Duy Nguyen
http://www.bloomberg.com/apps/news?pid=20601081&sid=aDyZ2gge5vg0&refer=australia
March 11 (Bloomberg) -- Gold futures rose, rebounding from the lowest price in a month, as the slumping dollar enhanced the appeal of the precious metal as an alternative investment. Silver gained the most in two weeks.
The dollar fell as much as 1.2 percent against a weighted basket of six major currencies. Gold and the dollar historically have moved in the opposite direction. The correlation hasn’t held this year as investors purchased both assets as a hedge against turmoil in financial markets.
“Gold is still an exceptional buy,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “Traders will start looking at more traditional relationships like future inflation, government spending and devaluing of currencies.”
Gold futures for April delivery rose $14.80, or 1.7 percent, to $910.70 an ounce on the Comex division of the New York Mercantile Exchange. Yesterday, the price touched $891.10, the lowest since Feb. 3.
Silver futures for May delivery gained 26 cents, or 2.1 percent, to $12.80 an ounce, the biggest gain since Feb. 20. Gold has gained 3 percent in 2009, while silver is up 13 percent.
Gold reached a record $1,033.90 on March 17 as the dollar headed for an all-time low against the euro. In the second half of 2008, the dollar rallied as investors sought a haven from declining equity markets. Gold gained 5.5 percent last year, while the dollar rose 6 percent against the basket of currencies.
Gold’s gains accelerated today after U.S. equities pared gains. The Standard & Poor’s 500 Index climbed as much as 1.7 percent before dropping. Yesterday, the gauge jumped 6.4 percent, the most this year. Gold fell as low as $892.60 today.
A rebound in equities would “be a bearish development as investment transfers from gold toward riskier assets,” said Tom Pawlicki, an analyst at MF Global Ltd. in Chicago.
Since March 6, investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, has been unchanged at 1,029 metric tons, close to the all-time high.
“It’s becoming evident that the buying in ETFs may have been led by a small group of hedge funds, whose actions can be incredibly difficult to predict,” Pawlicki said. “It’s also likely that they are now under water on those positions.”
Greenlight Capital Inc., the $5.1 billion hedge fund run by David Einhorn, said last month it invested in gold for the first time in the fourth quarter, making a bullion-backed exchange- traded fund its largest holding.
http://www.bloomberg.com/apps/news?pid=20601081&sid=aDyZ2gge5vg0&refer=australia
March 11 (Bloomberg) -- Gold futures rose, rebounding from the lowest price in a month, as the slumping dollar enhanced the appeal of the precious metal as an alternative investment. Silver gained the most in two weeks.
The dollar fell as much as 1.2 percent against a weighted basket of six major currencies. Gold and the dollar historically have moved in the opposite direction. The correlation hasn’t held this year as investors purchased both assets as a hedge against turmoil in financial markets.
“Gold is still an exceptional buy,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “Traders will start looking at more traditional relationships like future inflation, government spending and devaluing of currencies.”
Gold futures for April delivery rose $14.80, or 1.7 percent, to $910.70 an ounce on the Comex division of the New York Mercantile Exchange. Yesterday, the price touched $891.10, the lowest since Feb. 3.
Silver futures for May delivery gained 26 cents, or 2.1 percent, to $12.80 an ounce, the biggest gain since Feb. 20. Gold has gained 3 percent in 2009, while silver is up 13 percent.
Gold reached a record $1,033.90 on March 17 as the dollar headed for an all-time low against the euro. In the second half of 2008, the dollar rallied as investors sought a haven from declining equity markets. Gold gained 5.5 percent last year, while the dollar rose 6 percent against the basket of currencies.
Gold’s gains accelerated today after U.S. equities pared gains. The Standard & Poor’s 500 Index climbed as much as 1.7 percent before dropping. Yesterday, the gauge jumped 6.4 percent, the most this year. Gold fell as low as $892.60 today.
A rebound in equities would “be a bearish development as investment transfers from gold toward riskier assets,” said Tom Pawlicki, an analyst at MF Global Ltd. in Chicago.
Since March 6, investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, has been unchanged at 1,029 metric tons, close to the all-time high.
“It’s becoming evident that the buying in ETFs may have been led by a small group of hedge funds, whose actions can be incredibly difficult to predict,” Pawlicki said. “It’s also likely that they are now under water on those positions.”
Greenlight Capital Inc., the $5.1 billion hedge fund run by David Einhorn, said last month it invested in gold for the first time in the fourth quarter, making a bullion-backed exchange- traded fund its largest holding.
Chartology – Is The Bottom In?
http://www.cnbc.com/id/29619793
Posted By: Lee Brodie
Topics:Stock Market | Stock Picks
Companies:Morgan Stanley | Sprint Nextel Corp
For months investors have been whispering cautiously about a market bottom. It’s certainly the trillion dollar question – and one that can only be answered with confidence in hindsight.
But you need that information now -- so for insights we turn to Jeff DeGraaf, ISI Head Of Technical Analysis Research. He’s the #1 analyst in his field as ranked by Institutional Investor magazine.
Here’s a summary of DeGraaf's analysis.
First DeGraaf explains that we need a 35% rally just to get back to the 200-day moving average. Looking at a chart of the S&P 500 from 1929-1934, he says not since 1931 has the S&P been so far from its 200-moving day average. DeGraaf interprets the pattern to mean the market is extremely oversold.
Then, he looks at the AAII bear readings from the last 20 years. The patterns reveal that 70% of investors are bearish and that the retail crowd is tuned out.
Also, he tells us the number of new lows on the S&P has been contracting over the past several months. Even though we're 140 points below where we were in October the number of stocks making those lows is about half. That's a bullish divergence.
These are good conditions but they don’t mean anything without a spark. On Tuesday we got the spark, DeGraaf says.
That spark combined with the factors mentioned above should provide a strong under-pinning for some kind of rally.
What’s the bottom line?
At a minimum, we’re in a bear market bounce. Don't be short. To see DeGraaf’s complete interview as well as this charts used in his analysis please watch the video above.
Posted By: Lee Brodie
Topics:Stock Market | Stock Picks
Companies:Morgan Stanley | Sprint Nextel Corp
For months investors have been whispering cautiously about a market bottom. It’s certainly the trillion dollar question – and one that can only be answered with confidence in hindsight.
But you need that information now -- so for insights we turn to Jeff DeGraaf, ISI Head Of Technical Analysis Research. He’s the #1 analyst in his field as ranked by Institutional Investor magazine.
Here’s a summary of DeGraaf's analysis.
First DeGraaf explains that we need a 35% rally just to get back to the 200-day moving average. Looking at a chart of the S&P 500 from 1929-1934, he says not since 1931 has the S&P been so far from its 200-moving day average. DeGraaf interprets the pattern to mean the market is extremely oversold.
Then, he looks at the AAII bear readings from the last 20 years. The patterns reveal that 70% of investors are bearish and that the retail crowd is tuned out.
Also, he tells us the number of new lows on the S&P has been contracting over the past several months. Even though we're 140 points below where we were in October the number of stocks making those lows is about half. That's a bullish divergence.
These are good conditions but they don’t mean anything without a spark. On Tuesday we got the spark, DeGraaf says.
That spark combined with the factors mentioned above should provide a strong under-pinning for some kind of rally.
What’s the bottom line?
At a minimum, we’re in a bear market bounce. Don't be short. To see DeGraaf’s complete interview as well as this charts used in his analysis please watch the video above.
New Red Flag for Markets: Credit Is Tightening Again
Tuesday March 10, 2009, 2:11 pm EDT
While Wall Street enjoys its relief rally Tuesday, stocks face looming danger from a familiar foe: tightening of credit.
Several metrics that market analysts use to gauge the availability of credit have been signaling trouble in recent days, throwing up a caution flag that tougher times could lie ahead for the availability of cash.
That's a formula that always spells trouble for investors.
"Unless we start seeing a reversal of the widening of a lot of these credit spreads, any equity rally is going to be short-lived," says David Lutz, managing director of institutional trading at Stifel Nicolaus. "Unless the credit markets are cooperating, it's going to be very hard for equities to rise."
A lack of confidence in Obama administration policies, combined with unabated declines in the economy, are fueling banks' renewed reluctance to lend. And that's being reflected in a number of key data points in the credit markets.
"The euphoria over the new administration is out the window at the moment," Lutz says. "We're seeing the fact that since they haven't been able to roll out a comprehensive housing or financial program, it's a sign they don't have the right idea yet."
Among the signs that analysts say point to credit problems are Libor, or the rate banks charge each other for overnight lending; The "Ted spread," which is the difference between 3-month Libor and the 3-month Treasury bill; two-year credit default swap rates; and the Commercial Mortgage-Backed Securities index, or CMBX.
Libor rates have swelled to prices not seen since December, with the trend indicating a June three-month rate of 1.7 percent, Lutz said in a research note. A widening in Libor emanates from lower confidence that institutions have in each other and leads to tighter lending policies. Three-month Libor gained Tuesday to about 1.33 percent.
Similarly, the CMBX and the two-year swap spread both are at four-month highs, while the Ted Spread, which indicates willingness to lend, also is moving lower, falling Tuesday to 1.09 percent.
None of it bodes well for the credit picture in 2009, and if credit tightens up, the stock market will feel the pinch regardless of what Tuesday's sharp rally indicates.
Stocks surged at the open on some encouraging words from Treasury Secretary Ben Bernanke regarding aid for banks in valuing distressed assets. The market punched up further following the government's decision to reinstitute the uptick rule, which requires a move higher in a stock before it can be short-sold.
"With those four things showing more and more strain, there's a disconnect with equities rallying the way they are," Lutz says. "If they keep trading this way it's definitely an indication that there could be another leg down in stocks."
To be sure, the credit indicators are nowhere near the depths of September 2008 or so when lending all but dried up completely.
But the inability of aggressive government action around the globe to eradicate credit issues is disturbing.
"After several months of swift declines and an environment where global central banks continue to cut short-term interest rates, any increase in Libor rates is a troubling reminder of the tension in credit markets," says Greg McBride, senior financial analyst for Bankrate.com. "The equity markets have effectively been behind the curve of what the credit markets have seen and experienced first-hand."
While analysts are quick to point out that the tightening is not at alarming levels at least in the short term, there's concern over the pressure the failing economy will put on lending practices.
Following a year of aggressive money-easing, Fed fund futures now are indicating a 30 percent chance that the central bank will tighten monetary policy by June.
"The underlying economy continues to deteriorate. The default rates on some of these underlying loans has been able to go up," says Mike Larson, an analyst with Weiss Research. "While they've been able to buy a period of calm, we have yet to see if it's a genuine turn and not just driven by Fed largesse."
Other indicators that have analysts concerned include the difference between investment grade bonds and Treasurys, as well as increasing problems in the commercial real estate business that will be reflected in the CMBS rates and other metrics.
Until the government can turn around the news cycle, credit issues likely will remain a significant concern.
"There's a lack of confidence and a tremendous amount of uncertainty over the fact that all the heavy artillery that the Fed, the Treasury and other central banks around the globe have been throwing at the problem has shown little impact thus far," McBride says. "Pessimism rules the day."
While Wall Street enjoys its relief rally Tuesday, stocks face looming danger from a familiar foe: tightening of credit.
Several metrics that market analysts use to gauge the availability of credit have been signaling trouble in recent days, throwing up a caution flag that tougher times could lie ahead for the availability of cash.
That's a formula that always spells trouble for investors.
"Unless we start seeing a reversal of the widening of a lot of these credit spreads, any equity rally is going to be short-lived," says David Lutz, managing director of institutional trading at Stifel Nicolaus. "Unless the credit markets are cooperating, it's going to be very hard for equities to rise."
A lack of confidence in Obama administration policies, combined with unabated declines in the economy, are fueling banks' renewed reluctance to lend. And that's being reflected in a number of key data points in the credit markets.
"The euphoria over the new administration is out the window at the moment," Lutz says. "We're seeing the fact that since they haven't been able to roll out a comprehensive housing or financial program, it's a sign they don't have the right idea yet."
Among the signs that analysts say point to credit problems are Libor, or the rate banks charge each other for overnight lending; The "Ted spread," which is the difference between 3-month Libor and the 3-month Treasury bill; two-year credit default swap rates; and the Commercial Mortgage-Backed Securities index, or CMBX.
Libor rates have swelled to prices not seen since December, with the trend indicating a June three-month rate of 1.7 percent, Lutz said in a research note. A widening in Libor emanates from lower confidence that institutions have in each other and leads to tighter lending policies. Three-month Libor gained Tuesday to about 1.33 percent.
Similarly, the CMBX and the two-year swap spread both are at four-month highs, while the Ted Spread, which indicates willingness to lend, also is moving lower, falling Tuesday to 1.09 percent.
None of it bodes well for the credit picture in 2009, and if credit tightens up, the stock market will feel the pinch regardless of what Tuesday's sharp rally indicates.
Stocks surged at the open on some encouraging words from Treasury Secretary Ben Bernanke regarding aid for banks in valuing distressed assets. The market punched up further following the government's decision to reinstitute the uptick rule, which requires a move higher in a stock before it can be short-sold.
"With those four things showing more and more strain, there's a disconnect with equities rallying the way they are," Lutz says. "If they keep trading this way it's definitely an indication that there could be another leg down in stocks."
To be sure, the credit indicators are nowhere near the depths of September 2008 or so when lending all but dried up completely.
But the inability of aggressive government action around the globe to eradicate credit issues is disturbing.
"After several months of swift declines and an environment where global central banks continue to cut short-term interest rates, any increase in Libor rates is a troubling reminder of the tension in credit markets," says Greg McBride, senior financial analyst for Bankrate.com. "The equity markets have effectively been behind the curve of what the credit markets have seen and experienced first-hand."
While analysts are quick to point out that the tightening is not at alarming levels at least in the short term, there's concern over the pressure the failing economy will put on lending practices.
Following a year of aggressive money-easing, Fed fund futures now are indicating a 30 percent chance that the central bank will tighten monetary policy by June.
"The underlying economy continues to deteriorate. The default rates on some of these underlying loans has been able to go up," says Mike Larson, an analyst with Weiss Research. "While they've been able to buy a period of calm, we have yet to see if it's a genuine turn and not just driven by Fed largesse."
Other indicators that have analysts concerned include the difference between investment grade bonds and Treasurys, as well as increasing problems in the commercial real estate business that will be reflected in the CMBS rates and other metrics.
Until the government can turn around the news cycle, credit issues likely will remain a significant concern.
"There's a lack of confidence and a tremendous amount of uncertainty over the fact that all the heavy artillery that the Fed, the Treasury and other central banks around the globe have been throwing at the problem has shown little impact thus far," McBride says. "Pessimism rules the day."
Monday, March 9, 2009
Buffett says economy fell off cliff
Mon Mar 9, 2009 2:50pm EDT
http://www.reuters.com/article/newsOne/idUSTRE5282J820090309
By Jonathan Stempel
NEW YORK (Reuters) - Warren Buffett said on Monday the U.S. economy had "fallen off a cliff" but would eventually recover, although a rebound could kindle inflation worse than that experienced in the late 1970s.
Buffett said Americans, including himself, did not predict the severity of home price declines, which led to problems with securitizations and other debt whose value depended on home prices continuing to rise, or at least not plummet.
He said Wells Fargo & Co and U.S. Bancorp, two large Berkshire holdings, should appear "better than ever" three years from now, while the ailing Citigroup Inc, which Berkshire does not own, would probably keep shrinking.
Bank of America Corp Chief Executive Kenneth Lewis, in a Wall Street Journal opinion piece on Monday, agreed that the vast majority of banks will survive. Berkshire has reported a small stake in Bank of America stock.
Buffett said he still expects Berkshire's derivatives contracts, whose value depends on where four stock indexes trade a decade and more from now, to be profitable. "Over 10 years", he said, "you will do considerably better owning a group of equities" than U.S. Treasuries.
Buffett also defended his imperfectly timed October opinion piece for The New York Times, where he said he was moving non-Berkshire holdings in his personal account to stocks. "I stand by the article," he said. "I just wish I had written it a few months later."
(Reporting by Jonathan Stempel; Additional reporting by Lilla Zuill; Editing by Lisa Von Ahn and John Wallace)
http://www.reuters.com/article/newsOne/idUSTRE5282J820090309
By Jonathan Stempel
NEW YORK (Reuters) - Warren Buffett said on Monday the U.S. economy had "fallen off a cliff" but would eventually recover, although a rebound could kindle inflation worse than that experienced in the late 1970s.
Buffett said Americans, including himself, did not predict the severity of home price declines, which led to problems with securitizations and other debt whose value depended on home prices continuing to rise, or at least not plummet.
He said Wells Fargo & Co and U.S. Bancorp, two large Berkshire holdings, should appear "better than ever" three years from now, while the ailing Citigroup Inc, which Berkshire does not own, would probably keep shrinking.
Bank of America Corp Chief Executive Kenneth Lewis, in a Wall Street Journal opinion piece on Monday, agreed that the vast majority of banks will survive. Berkshire has reported a small stake in Bank of America stock.
Buffett said he still expects Berkshire's derivatives contracts, whose value depends on where four stock indexes trade a decade and more from now, to be profitable. "Over 10 years", he said, "you will do considerably better owning a group of equities" than U.S. Treasuries.
Buffett also defended his imperfectly timed October opinion piece for The New York Times, where he said he was moving non-Berkshire holdings in his personal account to stocks. "I stand by the article," he said. "I just wish I had written it a few months later."
(Reporting by Jonathan Stempel; Additional reporting by Lilla Zuill; Editing by Lisa Von Ahn and John Wallace)
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