Five Things: The Worst Is Behind Us
By Kevin Depew Nov 03, 2009 3:20 pm
Wait, actually, it's the best of the worst that's behind us.
In the 1974 film Dirty Mary, Crazy Larry, the title characters spend an hour and a half eluding a small-town country sheriff in a helicopter with a 1968 Dodge Charger before clasping hands, laughing, and shouting, "Looks like we made it!" seconds before a train plows into the car, killing them just ahead of the closing credits.
It was a shocking ending for a 1974 audience. In those days, no one in their right mind would knowingly pay $1.50 a person to go to a drive-in theater and see a couple of kids get mowed down by a speeding locomotive. Which explains why no one except Nascar geeks and grindhouse cinema freaks (and me) has ever seen the movie.
I was thinking about this movie this morning while listening to MasterCard (MA) CEO Robert W. Selander discuss the company's earnings. Clearly, Selander must hate both Nascar and grindhouse cinema flicks.
"In summary, I believe the worst is behind us," he stated unequivocally this morning on the company's earnings conference call. Then the train hit. Relax, I'm speaking metaphorically.
While MasterCard's tracked retail sales (excluding autos) declined 2.1% versus September last year, if you factor out both autos and gas, retail sales actually rebounded, growing 2.1%.
Clearly, while we're not driving anywhere, we're still using our MasterCards to make some purchases.
And therein lies the kernel of a critical mistake. Why, exactly, is debit card spending rebounding? Because credit card spending is being attacked by companies such as Bank of America (BAC) and American Express (AXP), both of which have taken down credit lines, or pulled them altogether, in the wake of increasing defaults.
2. Wait, Actually, It's the Best of the Worst That's Behind Us
So does that mean the worst of the worst is still ahead? It's too confusing. Anyway, while we're celebrating with MasterCard -- the worst being behind us, even though it isn't, and even though we're celebrating for the wrong reasons -- something interesting is happening in credit markets.
Take a look at the chart below showing the recent widening of Goldman Sachs (GS) credit default swaps spreads (orange) with the stock price overlaid (white).
Meanwhile, similar widening moves are happening with Citigroup (C) and other financials. The bullish spin is that these moves are minute compared to how far they've declined; just take a look at the GS CDS above and note the massive narrowing that's occurred since a year ago.
No positions in stocks mentioned.
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2009-11-03 15:38:43
I pity the fool
I pity the fool on the wrong side of that metals trade. Gulps not gaps. And I don't care which side that is.
I think I smell opportunity in the Ethiopian Birr carry trade.
Oh, and bite me.
PS You singing at Festivus this year?
I think I smell opportunity in the Ethiopian Birr carry trade.
Oh, and bite me.
PS You singing at Festivus this year?
2009-11-03 15:41:50
It will all be okay..
Pat pat pat, there there child, it will be all okay.
That's what they want you to think... treat people like children and not tell them the truth.. like the infamous "sub-prime is well contained" or the pathetically fiddled jobs numbers that always seem to be revised in a much worse direction again and again much later after the fact and the sheeple only take the headline numbers that they are fed and told to believe. And they fall for it every time because the high frequency computers kick the dominoes of short stops over and trigger a momentum buying frenzy
That's what they want you to think... treat people like children and not tell them the truth.. like the infamous "sub-prime is well contained" or the pathetically fiddled jobs numbers that always seem to be revised in a much worse direction again and again much later after the fact and the sheeple only take the headline numbers that they are fed and told to believe. And they fall for it every time because the high frequency computers kick the dominoes of short stops over and trigger a momentum buying frenzy
2009-11-03 16:28:24
The Kid
Peter Fonda appeared in this movie five years after he made Easy Rider. I'm not sure if he was a kid anymore.
Are you mixing up this up with that Ron Howard movie?
Are you mixing up this up with that Ron Howard movie?
2009-11-03 16:58:15
The Kid
Ok, kids, was being loose with it. I think they were under 30 anyway.
2009-11-03 17:08:02
Too Easy To Be Over So Quickly
Pepe,
Seems too easy to me. Let's hope we don't have any more major dislocations, just "muddle-through".
I think this debt crisis is going to be like the neighbors pit bull on the loose. This year he jumped the fence, ran towards you and scared the cr*p out of you. Now he is staring at you, and barking.
You can walk around him, but you had better not run. He may also jump on your leg, or bite you when you are not looking. Until you either slowly walk away from him, or call the neighbor to deal with him, there he will be.
I think it's time to adjust to the new normal. Finding ways to enjoy life, on the cheap. For example, did you see last weeks Southwest $200+fees round-trip across the US airfare? Given the price of oil, it was remarkable.
Sounds like the new normal, and "muddle-through".
Seems too easy to me. Let's hope we don't have any more major dislocations, just "muddle-through".
I think this debt crisis is going to be like the neighbors pit bull on the loose. This year he jumped the fence, ran towards you and scared the cr*p out of you. Now he is staring at you, and barking.
You can walk around him, but you had better not run. He may also jump on your leg, or bite you when you are not looking. Until you either slowly walk away from him, or call the neighbor to deal with him, there he will be.
I think it's time to adjust to the new normal. Finding ways to enjoy life, on the cheap. For example, did you see last weeks Southwest $200+fees round-trip across the US airfare? Given the price of oil, it was remarkable.
Sounds like the new normal, and "muddle-through".
2009-11-03 17:58:30
The Kid
I'm afraid not.
Peter Fonda was 33-34. The girl may have under 30 but the guy in the back seat was older too.
Ron Howard, however, was 21-22 when he starred in Eat My Dust!
Too much time.
Peter Fonda was 33-34. The girl may have under 30 but the guy in the back seat was older too.
Ron Howard, however, was 21-22 when he starred in Eat My Dust!
Too much time.
2009-11-03 18:04:27
Too Easy To Be Over So Quickly
Yeah, it's a bit depressing. It's like watching a train wreck that takes years. What's worse, is very twist and bend in the metal is carefully documented for minute by minute consumption, if you wish.
2009-11-03 19:02:14
Kevin
I do so love reading your articles and not just for the expanded honed memory brought on by anger or Kentucky sarcasm.The gold plated steel bars caught my attention---had just set down to read minyanville with my November copy of Coinage magazine.The Cover titled--Selling the Saints.Now that would be true blasphemy selling gold plated st gaudens 20 dollar gold pieces.The Bug always brings out the bandits in some form or another.Appreciate your articles as you know.Minyan,JT
2009-11-03 20:07:53
Once again you are right Kevin.
The worst IS behind us
...and its gaining ground!
The 'masters of the universe' have the solution to all our problems. They are going to increase debt and decrease employment until, through the magic of Keynesian economics, we will have prosperity!
When the majority of people in this country no longer produce anything and when the majority can no longer afford anything the economy will be in balance and we all live off government handouts as God intended.
All of these optimized, optimistic and sanitized for our protection reports and projections of CEOs and media pundits remind me of a review I read recently about the website swoopo.com...
"These guys are selling pure unadulterated hope. Hope of getting a deal, and then hope of losing less money, and then hope of getting the money back, and then hope of digging less of a new hole. Every 15 seconds you can get another shot of hope!"
Check out http://www.swoopo.com --- it is the perfect website for our times. It is such pure, unadultereated, evil genius that Goldman Sachs HAS to be behind it!
2009-11-04 01:00:33
Grindhouse freaks
Actually Kev, it wasn't all that obscure. I remember seeing that flick on TV as a kid in the mide 70s. that and Thunderbolt and Lightfoot.
2009-11-04 19:55:41
Too Easy To Be Over So Quickly
True, true. But as Kevin likes to say - things happen quickly at the point of recognition. Like when one realizes the train is 50 feet away and your car is on the track.
Of course some folks figure that a train would eventually come along and being on the tracks is never a good thing but the herd waits till cows are flying like ten pins to react.
Slow motion trains don't stop after hitting the first cow. Like the bug hitting a windshield.. . the last thing that goes though their mind is their rect_um.
Of course some folks figure that a train would eventually come along and being on the tracks is never a good thing but the herd waits till cows are flying like ten pins to react.
Slow motion trains don't stop after hitting the first cow. Like the bug hitting a windshield.. . the last thing that goes though their mind is their rect_um.
2009-11-05 10:38:09
Thanks Kevin
I genuinely appreciate your frankness combined with sarcasm. Virtually all the financial talking heads on the msm are cheerleaders for Wall St. now. I used to watch the Nightly Business News on PBS, but it has become a complete joke. Keep up the good work.
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