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 »