Tick Talk

Here is an excerpt from an e-mail conversation between Ren and I.  Sorry so text heavy!

Van Tharpe beat me to the punch on P/E valuation argument. It occurred to me in the stairwell that P/E’s don’t move the market, buying and selling does; and if nobody wants to buy stocks in the USA, they can take their money and go home - the stock prices will be crushed and we will all sit around and say “I remember when a P/E of 6 was a screaming deal, and now not even the market maker will buy it from me.” It’s like when old people say that they remember when a dollar was worth a dollar - it’s all relative. On the other hand, with U.S. Dollars deluging every continent, perhaps it is best to get those dollars translated into shares or ownership of something tangible/useful before hyperinflation hits us.  

About the meeting: I think Senior Economist of the Federal Reserve Bank of San Fransisco, Mr. Gary Zimmerman gave an accurate depiction of the state of domestic economic trends (with the exception of CPI numbers which are so contrived to mute reality that they read like a fiction novel written by statisticians [sans any entertainment value]). I also believe that he avoided using the “D” word in order to avoid a panic (book title idea: None Dare Call It Depression). That fact was most obvious when he blatantly stated that he removed the VIX slide because it was at a level unseen since ”the event that won’t be mentioned.” 

In addition, I was a little puzzled when slide after slide, all of his comparisons were to the 2000 tech bubble recession.  He admitted that the Federal Reserve is injecting dollars at an unprecedented rate (1.37 Trillion in less than 2 months) but turns around and has the audacity to restrict 90% of his comparisons to the tech hiccup? I hope he didn’t try to pitch that line to the regional bankers later that day, because they’re apt to run him out of town on a rail. As you rightly mentioned, the Fed response/intervention only delayed the inevitable while increasing the future negative consequences exponentially. The best was when you asked him about the general plan or model to retrieve those dollars and he said, “we don’t have one yet.” WTH??? (what the heck???)