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« Intermediate Outlook Moves Negative | Main | Panic, Housing, and the Economy: Ritholtz versus Malpass »

August 05, 2007



Well, a year later, it seems Cramer is right and the Fed is DEAD WRONG. They waited 7 months until they had no choice but to do what Cramer implored them to do-- Open the fed window to the investment banks and cut rates. But by then, it's too late and Bear collapsed. And now we have armageddon.

It is true. Bernanke and Poole-- THEY KNOW NOTHING!


OK, now we've got the FED decision today which is exactly as expected by DoI. Good job, also in general with this blog!


Bill aka NO DooDahs!

I agree. But tell that to the Joe who jumps in on a 5% decline that continues to 10% ... and then sells.

Or the guy who is too scared to buy at 5% down, waits for 10% down, too scared, and then buys on the way up ... at 5% down.

Without large huevos of steel and a method that works (statistically speaking), the dip waiter is better off being 100% in the market 100% of the time. IMHO.


True, Bill. But usually anything over 5-7% on a dip is a decent play to ratchet up the beta and/or put cash to work (IMHO)...

Bill aka NO DooDahs!

There are two assumptions with the dip waiters: First, they assume they'll be able to tell when the dip has bottomed, and Second, they assume they'll have the balls to buy at that point.

Those assumptions are somewhat "less than robust" (scientific jargon there). Hard for retail joe to buy when Barry and the other fear-mongerers have turned up the volume on their screed.


Dr. Jeff, I think from a retail investor POV, every pullback in a bull market provides an opportunity to get long.

It's interesting that the under invested folks on the sidelines always say that they're waiting for the dip to get in. Then, when the dip happens, these folks say that they are now waiting for a bounce so that they can go short. Meanwhile, they underperform the SP500 year after year.

I think the Fed does have room to cut rates. Inflation is really small at the core (year over year). Even with employment tight and wages growing, the economy is growing at a moderate and sustainable pace around 3%. Plus productivity is growing.


RB - Thanks for (yet another) interesting pointer. I respect the approach taken, but I have reasons for preferring the method I selected.

When one compares any two assets, the risk-adjusted return should be the same. There is a reason that GNMA's have a higher yield. (David Merkel had a recent piece using other bond yields and making additional adjustments in the Fed Model).

Second, as Sedacca notes in the article you cite, it is useful to have a history of meaningful length to do your analysis.

Finally, I am very uncomfortable with the "average" or "median" stock analyses that are making the rounds. In each one I have reviewed, the measures are very loosely defined and lack historical comparisons. I have looked at a basket of stocks from the median range. They have a higher P/E but also a higher growth rate.


James Tellier

Cramer's video almost captures the hilarity of his Microsoft recommendations in summer 06 -


Although the Fed doesn't consider headline inflation, it is unlikely they will lower rates given their preference for core falling under 2% and with a headline inflation number poised to hit 4% in a few months. I know the long-term bullish posture advocated here is based on the Fed model -- on the basis of a track record and justified by managers deciding to allocate between stocks and bonds. In that regard, here is a perspective of a portfolio manager describing his asset allocation in real time.

He is not impressed by the argument of stocks being cheap in comparison with Treasuries because for him Ginnie Mae's at 6% are the appropriate comparison.

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