For the past couple of years I have been saying that America would have to rebound first and firm up some demand before the world economy can climb out of this downturn. More bullish commentators have assured that Asia could rebound without the West.

Stephen Roach of Morgan Stanley explained (again) on CNBC yesterday, why hopes for the East to rebound before the West are unfounded in reality.

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Whether markets are green or red at the end of the day often masks their internal health. Bear markets can maul prices down on any volume, but bull markets need buying pressure to keep them going. Think of shooting water from your garden hose up into the sky, it can only stay up as long as the pressure compels it. After that the water necessarily must fall back to earth. One of the more enlightening indicators of market health is the Lowry's index of buying versus selling pressure. Paul Desmond, President of Lowry Research, was recently featured on CNBC's "Fast Money Final Call," discussing why the data is suggesting a more substantial correction may be still to come.
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Ms. Park was a guest Wed morning on BNN at 8:50 am EST. She also appeared on CNBC's Fast Money on Thursday June 26 at 5pm EST, live from NY. Clips of the interviews are available on the BNN and CNBC web sites. In the CNBC video you need to scroll though to 17:44 for the start of Ms. Park's appearance in the show.   more »

There are many areas of concern and conflict between the banking business and government these days. Debtor nations have fallen into bed with their bankers and now find themselves perilously tied in co-dependent positions they would not otherwise have chosen.

A large number of bank/brokerage bosses have gone into government after they have cashed out on Wall Street. The nepotism is blinding. But just as this sorted tale seems most insipid the Obama administration tossed in a hand grenade last week with a proposal for financial regularoty reform that includes an elevation of bank owned brokers to the standard of fiduciary duty when advising clients.

I write about the importance of legislating a fiduciary duty for financial advisory firms in Juggling Dynamite.

Up until now most investment sales people in the world have only answered to a “suitability” standard meaning they need only show that they had reasonable grounds for thinking that an investment product may meet a client’s needs. In other words if a product increases in value, the broker/dealer/advisors will take credit for the brilliance of the increase, but if a product loses value, they are in no way responsible for the losses. But fiduciary duty goes a whole lot further than this...   more »

Just finished reading Barry Ritholtz's new book Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook The World Economy:



Barry is one of the rare, refreshingly candid, financial commentators. He also has a law degree which helps him to easily recognize the glaring conflicts of interest in the finance world. Barry calls 'bullshit' with clarity, humour and style. While entertaining, the book delivers detailed perspective on past financial crisis, bailouts, and classically human mistakes, aided and abetted by government through the past 100 years.

Ritholtz uses his education and real life experience as a stool to stand on in order to see over the clouds of minutiae to big picture clarity. Available in fine stores everywhere or on line here. You can also read his daily blog here: The Big Picture.   more »

Over the past couple of years I have noted a lot of people espousing hope that Canada will be able to avoid much of the global downturn and/or rebound faster than other western countries from the global recession. This weekend John Mauldin (a commentator who I respect and often agree with) reminded me of this theme when he wrote:

"...this is a global problem and primarily one in the "developed world". I think we will find that much of Europe will be in a worse state of affairs than the U.S. If there are bright spots in the developed world, I tend to think they will be Canada and Australia/New Zealand." See This Time It's Different.

Most often this type of optimism rests on a few key ideas such as Canada has a resource-based economy, Canada has a sound banking system, and Canada has been more fiscally conservative. While I generally agree with these ideas in the abstract, in reality I am concerned that decoupling hopes are still as wishful now as they were last Spring, when many were opining that the Canadian stock market would be able to hold up in the midst of a global bear market. As the past 12 months wore on, investors learned the hard way again that Canada lags; we don't decouple. Our stock market peaked (a year ago) in May 2008, 7 months after the US markets, but then fell a similar 50% to March 2009...   more »

Today the risk trade continues to be under attack with the US dollar strengthening against other more emerging economies. As I have pointed out a few times in the past couple of months, the over-exuberance in emerging markets, commodities and their currencies, has been primarily speculation against the US dollar and not in response to increasing global demand or economic expansion. These sentiment driven speculations can be wild and reckless; capital protective strategies are needed.

A few key themes are slowly seeping into the collective consciousness at this point...   more »

It was with much sadness that I heard this weekend of the passing of Peter L. Bernstein at age 90. Peter was a rare voice of wisdom in the often misguided world of finance.

His perspective was rare and valuable because it was anchored in real world experience spanning 9 decades, conveyed through a remarkable intellect and gift for teaching. In a world too often led astray by confident formulas and theory, Peter was an academic and a pragmatist. He spent years as a front-line practitioner managing money for clients at the investment counsel firm his father had founded in the 30's. After serving in the War, Peter joined his dad's firm in 1951 just in time for the big secular bull of the 50's and 60's when stock market gains were above average and concern about risk faded into a phase of systemic complacency...
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From a low in the $30's just a few months ago, oil has now surged back above $68 a barrel. Most of this double has been in response to the falling US dollar; certainly not a renewed wave of world consumption.

Recently we hear rumblings of the familiar old "decoupling" chant. Oil Bulls are opining that recent price strength is spurred by rebounding commodity demand in Chindia notwithstanding the ongoing plummet in western consumption. So far the evidence is unconvincing...   more »

Ms. Park will be speaking at the World Resource Investment Conference in Vancouver this weekend, organized by Cambridge House International. Each year this June showcase of leading Canadian resource companies and speakers is highly attended and acclaimed.   more »

I spent some time chatting with Aaron Task and Henry Blodget at the NASDAQ studios June 4; very lively discussion over three different segments.

The first video clip is available on the Yahoo.com site here:    more »

Here is the third of the three Teck Ticker segments, which was actually taped first in our conversation...

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Second Tech Ticker clip with Henry Blodget and Aaron Task is now on line here:


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I will be in NY this week for some meetings and to attend The Big Picture conference on Wednesday.   more »

Ms. Park was a guest on BNN with Micheal Kane, Wednesday at 8:35am est. A clip of the interview is available on the BNN web site here.   more »

Ms Park was a guest on The Agenda with Steve Paikin, at 8pm est Monday May 25th on TVO (channel 2 on Rogers).
The panel discussion was on "Emotion and the economy".

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Green, domestic energy solutions can employ generations in productive, smart, efficient industry. This must be the focus of our economic recovery. Those hoping we can just go back to selling financial services and shopping as our main focus are missing the significance of the revolution now underway. This is our generation's equivalent of the industrial revolution. Those still arguing about whether or not they agree with climate change have missed the boat. This revolution is about domestic energy and foreign oil independence first. And one other key factor in its favour; this revolution is common sense based, a thirst for healthy growth not just any growth. It’s hard to mount credible arguments against these goals, especially given the experience of recent years. One of the gifts of vast destruction (like we have seen the past few years) is that it frees people up to start fresh. Necessity truly is the mother of invention. This clip from economist James Galbraith this week is on point:

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Market participants tend to talk about the stock market as "always" bottoming before the economy. Such bullish arguments presently forecast the economic bottom to trough this fall and therefore argue that March 2009 was "the" stock market bottom this cycle, neatly 6 months in advance of the economy. This theory may prove correct in the end. Only the clarity of retrospect will tell us for sure a few years down the road.

But a risk now is that the "rule of thumb" about markets bottoming before the economy may not hold true this time. The most recent exception was the last downturn where the economic trough was November 2001 (now clearly defined in retrospect) and yet the stock market did not make a lasting bottom until February 2003 (15 months later). Part of the reason for this lag of the market bottom after the economy last time, was that the jobless, anaemic economic recovery disappointed those conditioned to expect a vigorous "V". Far from a robust bounce, in 2001-2004 we saw a timid, tepid start. It took a few years before over-juiced credit finally ignited mass speculation and the appearance of stronger growth.

The probability of a sluggish recovery this time is surely higher than after the tech wreck in 2000...   more »

Day three is now underway in this correction. Corrections are important to reign in animal spirits. Some faulty logic has been widely espoused along the following themes:

-a hope that less bad economic data means "green shoots" as in the economy will be back to healthy growth rates soon. Not quite.

-a hope that rising commodity and oil prices means manufacturing and industrial demand is on the rebound. Not yet. China and other countries with cash have been stock piling for anticipated demand later. See World Bank says China recovery hopes premature.

The world has also been showing an aversion to the US dollar again the past couple of months. This aversion has pumped up the value of U$ priced commodities like oil, gold and copper. But these price hikes don’t signify a rebound in demand or organic growth, just the same old hedging and speculative investment that we saw spike and then crash markets in 2008. Remember that commodities and energy are late cycle leaders. Price spikes there do not lead a sustained economic expansion—just the opposite. Price spikes in these sectors serve to thwart the new economic expansion everyone so desperately wants. The unfortunate consequence is then increased costs (inflation) with stagnant consumption demand...   more »

It is a common human story; when cash flow is strong and leverage is expanding, most people spend lots on stuff. Then when a downturn hits, few are ready with sufficient liquidity to weather the storm. This clip reminds us that no matter how wealthy people may appear, the same rules apply for them as for others of more humble means. The lesson at all income levels is the same: spend less, save more.

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This slide show on the math and true cost of bottled water is worth viewing. Hat tip: Maureen.

For those that have not yet seen it, rent Flow for more big picture perspective on "the" issue of our generation. You can get it at Blockbuster. Great long weekend viewing.   more »

This 10 minute animated video is a good little summary of the human constructs and greed that bred our credit crisis.

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Hat tip: Garry   more »

Crude oil has bounced since February to almost $60 a barrel despite worsening fundamental data:

"Commercial inventories are overflowing, having risen in the first quarter, a period when they usually drop. Moreover, as oil prices have risen, OPEC's discipline has started cracking, with the cartel increasing output last month for the first time since August.

Bulls point to resilient demand in China. Yet, as Lombard Street Research and the IEA point out, China's rosy official economic-growth data doesn't square with falling trade volumes and oil consumption, or even inflation numbers.

Oil is really floating on cheap money. Quantitative easing is, as intended, pushing investors towards riskier asset classes such as equities, high-yield debt -- and crude. Investors in oil funds push up futures prices, making it profitable for others to store crude and sell it forward; another reason inventories are high.

When these are liquidated, crude prices will likely fall fast, absent a "V"-shaped economic recovery, which looks unlikely. Indeed, in supporting commodities prices at the expense of consumers, central-bank policy risks unleashing stagflation, not reflation." See WSJ: Crude floating on cheap money...   more »

Today world markets are so far continuing the pull-back that began yesterday. As I have written a couple of times in the past couple of weeks, technically a pullback has been overdue for some time now given the incredible rally since March 9. Incredible is probably the most appropriate word for the past 9 weeks; incredible as in unbelievable. Too far, too fast? Likely. This price action seems over-exuberant in its 90 degree spike; not typical of the early stages of recovery from a bear market bottom.

I would like to get back to longer term optomistic, but in the short term we must remain leary. A regular healthy, mild, correction here could be up to 10%. Beyond that a retest of the November lows is also within the realm of possibilities over the next few weeks or months. Last case scenario remains a revisit of the March lows. This too is within the realm of possibility although we suspect that because this bear is getting longer in the tooth (2 years in October), buying pressure may well kick in on a further plunge to prevent the ultimate lows from coming back. This should all make for a very interesting summer...   more »

I have written for several years that we are presently in the midst of a secular bear market for stocks that is likely to last for another 7 to 10 years. At this point, it is likely that we are at or nearing the end of this cyclical bear (that started November 2007) within the ongoing secular bear. And it is increasingly probable that we are now (or soon) on the verge of the next cyclical bull within this secular bear period.

But understanding the significance of the overarching secular bear is crucial to surviving and thriving over each business cycle. Key factors that must be understood are that cyclical recoveries within secular bears tend to be shorter and more muted than during secular bull periods; 2-3 year expansions are more common than the 3-5 year expansions of secular bulls. And cyclical bears during secular bears tend to be much deeper and last about twice as long as during secular bull periods.

Bottom line: buy and hold is reckless lunacy in these conditions. Efficient market theory will continue to be a nightmare for its disciples.

To understand more on the climate we are living through, watch this recent John Authers interview of bear market historian and author Russell Napier here.

Notice how he underlines that you don't need forecasting or perfect timing to prosper in these markets. You do need understanding with disciplined thought and method.   more »

This hour long interview of Tim Geithner with Charlie Rose, is the first time I have seen him come across well on TV so far. Maybe he is on the ball after all...

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Over-supply is a harsh condition. Demand destruction is part of the self-correcting mechanism, but sometimes over-supply is so extreme, once-hot commodities become a burden to store and are literally sent to the scrap pile.

Given that most of the people in the world live in sub-par housing, this film footage is hard to watch:



The point is vividly made though. Remember all those commodities that the world was gobbling up a couple of years back? The best we can hope for is that the debris is now recycled and not just sent to the landfill. Sadly, given that bulldozers are the tool of choice here, I doubt recycling is a priority.   more »

This month, Time magazine published its 5th annual list of the leaders, thinkers, heroes, artists and scientists who were most influential in 2008.

You can scroll through one page articles on each nominee on the web site. I find it fascinating to learn updates on some of the inspirational doers in the world today, but an added interest is that other leaders and celebrities have written the article on each person: Oprah writes on Michelle Obama, Bono on George Clooney's work in Darfur, etc. This way we can learn about two interesting people in each article.   more »

Fellow portfolio manager, John Hussman of Hussman funds is one of my favourite market commentators. His weekly market comment is especially on point this week: "Comfortable with uncertainty."

Although Hussman's methodology is different than my firms, our stated investment objectives are the same: to outperform market returns over the complete market cycle, with less down market losses than a passive strategy. (As modest as this goal may sound, these are fighting words for the long-always crowd.)

Frequently as market analysts we are asked to forecast what market prices will do next. At my firm, we continually try to point out that forecasting is narrative fallacy of the first order. We can't possibly predict what markets will do. In fact as I frequently tell people, any time you hear a pundit seriously proclaiming what comes next—Run away!

Prudent risk management is all about assessing probabilities and implementing rules that will respond in a disciplined way to whatever market conditions present. Hussman and (F. Scott Fitzgerald) explain it this way...   more »

After a strong bear market rally since March 9, world markets are looking pretty overbought. Not that they cannot continue overbought a while longer, but the probability of the next downside test is growing daily. Much of the recent fervour has been optimism about carefully dressed bank earnings which seem better than had been expected for Q1. But credit issues still loom and lasting health has not yet been restored to our financial institutions.

Lest anyone forget, so far we are still in a cyclical bear market, within a long secular bear market, and so defensive action is still key. Peeling off profits from big rallies is always prudent action in this type of market cycle. When markets are able to punch through the overhead of their 200 day moving averages with sufficient force, it will be a bullish sign for the next leg up. But in the meantime, we can't go broke taking profits and after an incredibly volatile first quarter 2009, we are grateful to take them...   more »

This winter I was trying to convince my kids to sign up for the local softball league this spring. No way; weren’t interested. This morning as my son and I were playing catch I pointed out that he had a great arm. Actually he’s a natural athlete at most sports; yet time and again I find he is reluctant to try new things. When I asked why he had rejected baseball this spring, he uttered a reply I have heard often lately, “I was afraid I wouldn’t be good,” he explained.

This thought connected with a book I finished yesterday called “How Starbuck’s saved my life.” Great little book. Not only did it give me a fresh respect for Starbucks as a company but the author’s inspiring true story reminded me of this recurring life theme: we have to take personal risks to grow, and some times the very best thing that can happen to any of us is outright failure.

Recently it seems reverberations on this topic have come to me through many different people...   more »

Ms. Park was interviewed by Metal News on April 6. You can read the article here.   more »

Ms. Park will be a guest on BNN with Micheal Kane at 835am EST on Wednesday April 22. The clip can be viewed here on BNN.   more »

This morning I saw a story on how Goldman Sachs had hired a legal team to fight the author of goldmansachs666.com and I wanted to provide the link for my readers.

In 2004 as CEO of Goldman Sachs Hank Paulson lobbied the SEC to release the major investment houses from the net capital rule, the requirement that their brokerages hold reserve capital that limited their leverage and risk exposure. The complaint put forth by the investment banks was of increasingly onerous regulatory requirements. After the SEC agreed to set aside this rule, Paulson and his contemporaries levered up their institutions 40 to 1 with Mortgage-backed paper and derivatives. The rest, as we say, is history...   more »

"Everyone stumbles over the truth from time to time, but most people just pick themselves up and hurry off as though nothing ever happened."
-Winston Churchill

Over the years, I have come to note a couple of truths about human behaviour. One is that once we are adults, none of us can be rescued by anyone else. Only we can rescue ourselves. We may not end up with the life we expected, but generally we end up with the life that we make through our daily choices. I realize there are catastrophic accidents and illness that can impact our journey, but even then the way in which we respond to our circumstances has a huge impact on final outcomes.

The financial harm that has befallen people over the past couple of years was no random accident. It was both foreseeable and avoidable. The test now is to see who can acknowledge this truth and use the experience as a source of wisdom to change and inform better choices going forward...   more »

"On Thursday, Sept. 18, 2008, the astonished leadership of the U.S. Congress was told in a private session by the chairman of the Federal Reserve that the American economy was in grave danger of a complete meltdown within a matter of days. "There was literally a pause in that room where the oxygen left," says Sen. Christopher Dodd (D-Conn.). "

This 1 hour special report is worth watching.

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We seem to be at an interesting juncture in market psychology.

The long always cheerleaders are still out in full force, urging everyone to buy, buy, buy. But they always say that, so we have learned to filter out the noise of perpetual optimism.

At the other end of the spectrum there is now a famous club of “bear” commentators who called the downturn a couple of years ago and are now continuing to receive significant media attention with dire predictions of untold doom yet to come.

Yes, my firm called the downturn as well, and yes the PR for getting that right and protecting our clients has been very positive. But before I become intoxicated with the views or prophetic abilities of myself or anyone else, I am insistent on keeping affixed to practical plans and sober thoughts...   more »

Bill Moyers sits down with William K. Black, the former senior regulator who cracked down on banks during the savings and loan crisis of the 1980s. Black offers his analysis of what went wrong and his critique of the bailout. He spares no one — not even the Obama administration. But his main targets are the Wall Street barons, heirs of an earlier generation whose scandalous rip-offs of wealth back in the 1930s earned them comparison to Al Capone and the mob, and the nickname "banksters."

This is video clip is 28 minutes worth watching.

In order for us to learn from our generation's modern day version of the "savings and loan debacle" (same behaviours different decade) we need to expose and fully admit what happened this time around. We need to remove and replace the participants with those who can lead us forward by ethical example. The degree to which these issues are vetted and corrected will prove one of the first major tests of integrity for the Obama government.   more »

Tom Bradley has an excellent article in the Globe this morning: " 'It will sell': a tipoff for bad investment products."
Send it along to your friends and family.

Now that markets have already declined by 50% this bear market, the sales departments of broker-dealers have been feverishly rolling out "guaranteed" hybrid products for the fear-filled masses. Their timing is impeccable as always; the broker-dealer timing that is. Once again, they are making big fees selling the wrong things and at the wrong time in big volume--to the clients who trust them. On top of fat fees and commissions up front, product architects stand to make high probability gains off the top of this client capital over the coming market recovery. Buyers beware. If you are worried about capital preservation but also want a little exposure to the stock market over the next couple of years, you are likely to fare much better putting a large amount of your capital in GIC's and buying a small exposure to a low fee equity index from here, rather than signing up for convoluted products.   more »

Ms. Park will be a keynote speaker at the Calgary Resource and Clean Energy Investment Conference on Saturday and Sunday this weekend April 4th and 5th. You can learn more or sign up to attend the event on the Cambrige House web site.   more »

The correction Friday through Monday ran just over 5% for both the TSX and the S&P. Today we had a “fugly” US ADP employment survey showing a big 742K decline in March and markets are rallying. But then we knew job losses were bad and will get worse still.

Clearly the primary trend of the stock market is still a bear, but we are presently in the midst of a significant rally which to month end managed to take the main indices up more than 13% from the March 9 low. Other US data this morning: planned lay offs, new home sales and the ISM Manufacturing Index, all timidly came in a little better than feared, with 3 month trends now slightly improving.

There have been a lot of developments in the first 60 days of Obama. Despite great challenges he is undoubtedly inspiring hope. The camel drivers in Giza were chanting “O-b-a-m-a” with a fist pump and a smile when we walked by a couple of weeks ago. Hope can be a powerful thing to lift human sentiment. And it is infectious. Right now hope and despair are wrestling it out every day all around the world...   more »