BRAVE NEW WORLD

Gary Diehl: Wolfram Alpha that you wrote about last week has been up and down – technical issues, new launch, etc. I don’t see it as a Google killer….yet, but something you will definitely want to keep handy. A demo video can be found here.’

☞ It is currently scheduled to go live May 18. I assume it will be overwhelmed with hits – but I expect to be one of them.

BZ

Gray Chang: ‘You suggested Boise warrants last fall. I thought it was a good idea, but I bought the stock instead, feeling that it would be more conservative. It dropped from $2 to 40 cents. I bought some more of the stock – dollar-cost averaging – using money I could afford to lose. It fell as low as 25 cents in March, and I was afraid I would indeed lose it, but I held on. Now it’s $2.46. I’ve never earned 6-fold on any investment before – maybe it’s time to sell some.’

☞ I’d sell the shares you bought at $2 so you’re essentially playing with the house’s money. If we’re really, really lucky, three years from now . . . well, I don’t want to jinx it.

The big question, of course, is whether this is a bear market rally – not just in Boise Paper stock, but overall – or whether the glimmers of hope and normalcy that have reappeared are the start of a self-reinforcing virtuous cycle that will mean we’ve seen the bottom. The truth, of course: I don’t know.

In every recession but one since the Fed was created in 1913, my friend John Hook reminds me, the government increased fiscal and/or monetary stimulus and the economy recovered. (The one exception: 1930-1932.) We’re certainly doing that now – big-time, huge-time, monster-time. Based on a great many historical ratios and reference points, John, already up 32% for the year, remains strongly bullish.

But John Mauldin leads off his May 11 letter:

It has long been my contention that we are entering an extraordinary period of time in which using historical analogies to plot market behavior is going to become increasingly problematical. In short, the analogies, the past performance if you will, all break down because the underlying economic backdrop is unlike anything we have ever seen. It makes managing money and portfolio planning particularly challenging. Traditional asset management techniques just simply may not work. Buy and hope strategies may be particularly difficult to navigate.

Part of the reason we are co challenged in our outlook is that we are experiencing a deleveraging on a scale in the world that is absolutely breath-taking in its scope. And to balance that, governments are going to have to issue massive amounts of sovereign debt to deal with their deficits. But who will buy it, and at what price? And in which currency? This week’s Outside the Box gives us some very basic data points that illustrate the challenge very well. But the problem is that even though we can see the challenge, it is not clear what the final outcome will be, other than stressful volatility as the market reacts.

☞ He then hands the microphone over to Niels Jensen, whose work he respects. The essence of Jensen’s message: ‘I cannot emphasize it strongly enough: The bull market of March-April 2009 is almost certainly a bear market rally but, as one of my partners pointed out the other day, NYSE saw four 20%+ rallies between 1929 and 1932. Bear market rallies can be extremely powerful and hence deceiving. . . . The problems are not over yet. Not by a long stretch. It will take longer than 18 months to unwind the excesses of the past 25 years.’

 

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