CFAH

While unemployment in San Francisco crossed the ten mark in August (10.1%), today the Dow crossed its ten mark (10,000) for the first time in a year. And which it first did in 1999.
San Francisco County Unemployment Up To 10.1 Percent In August [SocketSite]

Comments from Plugged-In Readers

  1. Posted by anon

    Your stimulus dollars at work.
    In other news, spot gold touched $1070/oz, the dollar fell to a 14 mo. low (duh), and GLD is at a 52-week high.

  2. Posted by Trip

    Yes! We’ve made it back to the level of 10 1/2 years ago! Dust off and cue that old Prince LP (I guess I first have to find a turntable that still works).
    Seriously, I’m quite happy to have now made up just about everything I lost in the crash (and I didn’t do as badly as most, thanks in no small part to some prodding from Satchel, ex SF-er and others here to cash out). But I also sense a peak, so where to put it now?
    [Editor’s Note: We’ve appropriated your Prince reference for the headline (we shouldn’t have missed that one) and noted the 1999 milestone above. Cheers. And as always, thank you for plugging in.]

  3. Posted by anon

    “…so where to put it now?”
    Well, they’re not making any more land.

  4. Posted by Outsider

    Buy a few Berkshire A or B shares…

  5. Posted by Mutie

    I hear that you can get some bargain basement CDO’s and MBS’s on sale..

  6. Posted by Trip

    Mutie, our finance guys are actually doing a lot of work for clients seeking to get in on PPIP to take over these toxic assets. I am seriously considering jumping in to some degree if I can figure out a way to do so. The hurdles that you need to surmount even to qualify to be considered are quite high. This seems to be turning into yet another way for the select few to play a game with the rules heavily skewed in their favor. At least I’m indirectly benefiting from all the legal work it entails — I feel a bit like a remora that sucks on the gills of the big sharks. Beats being krill, I guess.

  7. Posted by crispy

    “…where to put it now?”
    Enjoy the inflationary bubble in China while it lasts, just be sure to get the timing right this time, too…

  8. Posted by b

    on a real basis (not nominal) the Dow at 10,000 ten years ago is equivalent to 7,537 today

  9. Posted by NoeValleyJim

    Our liquid net worth is at an all time high, but I did not engage in any market timing like Trip and Satchel, I just rode it all out. This is true even though my wife took the year off to have a baby, so the investments have done well, albeit with an extremely bumpy ride. I have an age appropriate amount of bonds (40%, the average of my wife and my age) and I *do* re-balance every year. Jan 1 was a pretty good time to be selling bonds and buying stocks.
    I mostly bought emerging markets, because I figured they were “decoupled” and that turned out to be correct. I got a lot of pooh-poohing from LMRiM and the other “experts” for this opinion, but it has worked out quite well. The ODMAX I bought at the beginning of the year is up almost 100%. I also picked up some BFZ when it was trading at a 35% discount to value. Anytime you can pick up a closed end Muni fund at that discount, you know you have a steal.
    I am glad I am not sitting in all cash right now, having missed out on the big rally and wondering nervously if I should step back in. Odds are the market will correct a bit from here, and then go back up, but trying to time the market is best left to the pros. ECRI, who has accurately predicted the last three recessions with amazing timing, says we are in for a strong V-shaped recovery and it increasingly looks like this is the case.
    The cheap dollar is great for the economy as it is the only way we are going to be able to grow exports and pay back the debt. It sucks for people just sitting on cash and getting 0.5% in their savings accounts.

  10. Posted by chuckie
  11. Posted by anon

    Ah, these great armchair George Soros stories….

  12. Posted by NoeValleyJim

    You don’t have to be George Soros to make money, just have a disciplined investing strategy and stick to it. I have posted numerous times in the past what my model allocation is. Imagine you had $400k invested in the market in this fashion way back in August 2007 (the peak for the S&P 500):
    100k DIA
    100k EEM
    100k VCTIX
    100k Cash
    Adding in dividends and interest payments you would have the following today:
    79k DIA
    107k EEM
    107k VCTIX
    111k Cash
    This very simple portfolio is up modestly through the worst market meltdown in modern history. Now it is true that you would have done slightly better to have stayed in cash the whole time, but you would have done even better with the model portfolio if you had re-balanced at the end of December, which I did.
    I would like Mish to do a critique of his own track record. Hasn’t he called 7 of the last 2 recessions? Calling the recession in March of 2008 is hardly blowing it, since it was not officially declared until many months later. If you had used it to try and time the market, you also would have missed the big September meltdown. They also said in March 2009 that the recession would be over by the end of Q3, which turned out to be right on.
    Their leading indicators don’t look out more than six months, so we could still have a double dipper, but it would not start until at least Q2 of 2010. It all depends on what the Fed decides to do when interest rates start to go up.
    Right now someone is buying all the bonds the Treasury is printing and it doesn’t take a rocket scientist to figure out who. China still has the Yuan pegged to the dollar, even though the buck is falling against all other currencies. This is actually kind of nuts, since China is booming again and the last thing they need is an extremely loose monetary policy.

  13. Posted by Shza

    Precious metals mining stocks have been an all-out bonanza for us since putting in heavy in March. A big leveraged play on the weak dollar — and I don’ think the end’s in sight for that yet. I have one position that’s up 436% since my buy-in.

  14. Posted by ex SF-er

    Right now someone is buying all the bonds the Treasury is printing and it doesn’t take a rocket scientist to figure out who.
    The Fed? (we know they’re buying Treasuries, they told us)
    American bank’s Fixed Income departments? (you know, borrow at zero% and buy Treasuries?)
    or did you mean the Chinese and Japanese?
    I haven’t checked for a while, but the last time I did the Chinese were focusing their buying on the short end of the curve, not the longer durations. this may have changed the last month or so.
    This is actually kind of nuts
    on this, we definitely agree.
    I also agree that Mish has called 10 of the last 2 recessions, although he has also made some very very good calls in his day (I don’t read him and haven’t for maybe a year or two). nobody is 100% that I know of.
    and I especially agree with you when you say that it all depends on what interest rates do. (I said so recently on another thread: I’m watching Treasury rates like a hawk).
    but I think the actions of our foreign creditors are more important than our Fed. For now, until we make some massive structural economic changes, the game will only work as long as they continue to provide us with cheap debt.
    The Fed has signalled what it is going to do. It is going to hold interest rates to effective negative real rates for well into any recovery, likely not until we have another massive bubble to contend with.
    They will continue to bail out the banks in any and every way possible
    and they will continue to try to goose asset values as much as possible to keep them above their “market” clearing rate.
    they won’t stop until they are forced to. and our govt leaders WANT them to do all this, so the only force would come from the other FCB’s, if even then.
    as an example: the govt will certainly not be happy if the Fed tries to raise interest rates while unemployment is still high. and yet, we all know that unemployment continues to rise for several quarters after the end of recession. Thus, to be effective the Fed needs to raise rates in anticipation of this, BEFORE unemployment peaks.
    think that Obama/Pelosi/Dodd/etc will let Ben B raise when we have 10-11% unemployment? of course not.
    thus, rates will only rise when we’re in bubble land, or WELL into recovery, or when the FCB’s stop buying our debt. Then the Fed will be pressured to buy Treasuries. (which could cause a currency crisis)
    may we live in interesting times!

  15. Posted by NoeValleyJim

    Yeah, I meant the Chinese. They have to be hovering up all the dollars in the world to keep the peg like that.
    “China Can’t Buy Enough Bonds as Dollar No Deterrent”
    http://www.bloomberg.com/apps/news?pid=20601087&sid=aKvtw723S1c0
    I think that most of the quotes from economists and Fed officials in this article are bunk though. The Chinese aren’t buying Treasuries because they think inflation will be subdued, they are doing it to keep the Yuan pegged to the dollar. Eventually they will give up and then things will get interesting.

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