Bullish Bears?
My pal Paul Kedrosky over at Infectious Greed discusses “notable market bears recently turned bullish. Granted, not all the
bears are of the perma- variant, and their bullishness is considerably more
nuanced than the fevered pom-pom shaking you hear from the perma-bull side.”
Paul includes:
Jeremy Grantham (Quarterly letter)
Doug Kass (Real Money)
Barry Ritholtz (October 10)
To that I would add:
Warren Buffett (you don’t amass $46 billion in cash if you are bullish)
Ned Davis (Barron’s)
John Hussman (commentary)
Bill Fleckenstein
Mike Panzner (over dinner last week, and just for a trade)
Todd Harrison, Minyanville.com
No sign of Peter Schiff, David Tice, Michael Panzner, etc., but that admittedly may require considerably more than a mere 40+% year-over-year decline, a few major banks and brokers going down, etc.
Feel free to add to the list in comments — Bears who flipped bullish over the past few weeks . . .
~~~
UPDATE: November 1, 2008
Add Steve Leuthold, Chairman, The Leuthold Group, to the group of Bears who flipped bullish in this week’s Barron’s interview — INTERVIEW: A “Perma-Bear” Warms to Stocks Steve Leuthold, Chairman, The Leuthold Group
October 21st, 2008 at 12:03 pm
Fleckenstein is bullish? Could someone put up a link?
October 21st, 2008 at 12:11 pm
i thot i could attribute my headache to last night’s wine; but now i think it’s the market. below 960, it’s ugly for the longs… above 970 and it’s a good bet for 1000+. Anything in between is headache material.
October 21st, 2008 at 12:13 pm
yours truly
October 21st, 2008 at 12:13 pm
I’d like to be bullish, but I don’t think the whole problem is close to being outed yet. We may have a slightly better picture when CDSs are dealt with comprehensively one way or the other (and with the FedGov on the hook for AIG’s bad bets, methinks the other (nullification) is becoming more and more likely…) .
(ps: Fun with CDS)
October 21st, 2008 at 12:16 pm
Like I said yesterday. To many and too many willing to use credit to bet the market again.
Next crash leg underway right now.
October 21st, 2008 at 12:17 pm
i would say harrison is far from bullish and his reasons seem based on hope than anything else.harrison was bullish for a short term trade and i believe he liquidated that trade today. he quotes the s=p is already up 150 handles and 1400 points in a matter of days. i would say fleck is becoming less bearish but certainly not bullish. most bulls cite the decrease in overnight libor however corporate spreads are blown out. what i find humorous is the call that bargains are everywhere. based on what? past earnings? those companies will not look cheap as the up and coming deflation and severe recession pummel earnings. i will give the bears turned bulls a rally to 1100 or slighhtly above but that again is based on hope not reality. rmember bears are generally early to begin with so what makes them prescient that they can pick bottoms. they certainly were way early in understanding the braindead herd psychology of the upside including myself. in my opinion the majority of the buyers will come from the braindead mutual funds chasing performance anxiety. much lower lows in 2009
October 21st, 2008 at 12:18 pm
Bet against Bershire.
They sold millions of BNI puts at $75.
What a mistake that will turn into!
October 21st, 2008 at 12:20 pm
Go for it; see you at 6000
October 21st, 2008 at 12:25 pm
jamman @ 12:03:18 PM
Agree… I don’t think Fleckenstein is all that bullish.
Latest commentary:
http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/is-credit-crisis-over-not-so-fast.aspx
October 21st, 2008 at 12:32 pm
Has anyone seen or read anything by Jim Rogers since his interview on Oct. 10th? He said at that time he was buying commodities, Swiss Francs, & Yen. Really was concerned about future inflation due to the growth in the money supply. I wonder if he would ever be bullish on equities?
October 21st, 2008 at 12:39 pm
Grantham was a great read. I agree with that dude. Stocks are reasonably priced at these valuations. I’m a steady buyer, fully recognizing that we may overrun what we consider reasonable levels by some measure and for some time.
October 21st, 2008 at 12:48 pm
Todd Harrison bullish… well kinda sorta..
didn’t sound like his Wednesday column is gonna be entirely bullish to me though
Mark Faber today worth noting.. not at all bullish.
Joe Sixpack.. bullish.. lotta taxi drivers talking about buying GM and Ford out there
Bennett Sedacca at Minyanville.. not at all
Me.. I don’t have a clue
October 21st, 2008 at 12:50 pm
There’s a long video of Marc Farber on Bloomberg from yesterday. He’s overall very bearish, but does say that he wouldn’t be surprised at a bear market rally. You can search on his name there.
I’ve been expecting a bear market rally, but wondering if I was way too soon. Once again, to refer to 1929, there was a short spike up on the way down to the intermediate low in November. That spike only lasted a short time and it then went down again to the intermediate low at 45-50% off the peaks where it then staged a 50% rally starting in mid-November 1929.
I thought we were at about the intermediate low and ready for a good rally. Think I was in good company. Maybe had just hit the spike on the way down to the area where there will be a rally.
October 21st, 2008 at 12:51 pm
Mish (Mike Shedlock) has become somewhat bullish. Maybe neutral is more accurate.
October 21st, 2008 at 12:56 pm
quite frankly i believe most of the new founded bears turned bull are becoming media pieces talking their books which are swamped with losses. good ole warre nhas some long dated short puts that i’ll bet are down 10 billion. i believe iread article a month or so ago saying jeremy felt stocks were a fair value and he was starting to buy well that was 350 spu points ago. when will bill groos from pmpco start promoting stocks as well. new lows are inevitable
October 21st, 2008 at 12:58 pm
@ John Borchers:
“They sold millions of BNI puts at $75.
What a mistake that will turn into!”
You have a source for that JB?
October 21st, 2008 at 1:00 pm
Wesbury is still peddling his nonsense. He’s arguing for a “V-shaped” recovery:
http://www.forbes.com/opinions/2008/10/20/money-recession-recovery-oped-cx_bw_rs_1021wesburystein.html
October 21st, 2008 at 1:03 pm
Barry, will the s&p 500 2009 earnings be significantly lowered in the next 2-3 weeks? what is a typical p/e for a recession? do you use reported earnings or operating earnings? when is the birth/death adjustments in labor stats happening? has the market discounted?
October 21st, 2008 at 1:04 pm
This is an important part of the process; it assures that more money will be lost on bear market rallies than on the initial market drop.
It is necessary that all optimism, even late-found optimism, be extinguished.
October 21st, 2008 at 1:05 pm
I’d be bullish too if not for that overhanging wave of option ARMs that are recasting in 2009-2010. Because house buying is seasonal, happening mainly in the spring, our credit crises have become seasonal too. People buy houses in May/June, their mortgages reset in the same months, and they default about three months later, in August/September. So I’m expecting yet another credit crisis in August/September of 2009. I expected this year’s crisis, just not one of this magnitude. Could next year’s possibly be bigger? Will we elect someone to office who will be able to successfully prop up the credit markets before next summer’s wave of defaults hits? I don’t have a clue. But I’m going to trade my cash for stocks at a very slow rate until the next two summers have done their damage.
October 21st, 2008 at 1:06 pm
Dow Jones at 18:21 last night:
Warren Buffett’s Berkshire Hathaway Inc. (BRKA, BRKB) on Monday reported selling put options on one million Burlington Northern Santa Fe Corp. (BNI) shares.
The options were sold on Thursday for $6.201 each, have an exercise price of $76 and are set to become exercisable – and expire – on Dec. 19, according to a filing with the Securities and Exchange Commission.
The sale of put options is the latest in a series of such transactions by Berkshire Hathaway. In addition to the transaction reported Monday, Buffett’s investment vehicle has reported selling put options on about 4.48 million Burlington Northern Santa Fe shares in the last two weeks.
Shares of the Fort Worth-based railroad company closed Monday at $83.67, up 4.46%.
-Brian Kalish; Dow Jones Newswires; 202-862-1350; brian.kalish@dowjones.com
October 21st, 2008 at 1:08 pm
Has ANYONE hear anything about the CDS settlement process today?
Are we supposed to hear that ABC Bank is short $xxxx because XYZ hedge fund was never able to post sufficient additional collateral to back Lehman CDS contracts? Because XYZ hedge fund doesn’t have the capital?
October 21st, 2008 at 1:09 pm
Well, I find what has happened the last couple of weeks to be interesting.
Still not in the market, but would be happily bullish if I could see more bullish signs…but what I THINK I see here is the recession train pulling out of the station, and I certainly wouldn’t buy until I see next week’s Chicago PMI, personal spending, durable orders and initial claims.
The fed is, granted, throwing massive amounts of money on the deflating economy. But the people who have turned bullish seem to be equating this to previous recessions. But when I see that even China and India are frightened for their economies and have started stimulating, then I have been,lets say, reluctant longer than usual…
Put me down for undecided, and if I miss the early turn, no great shakes…
October 21st, 2008 at 1:09 pm
This is more evidence that a real bottom is not in. People are still LOOKING for that real bottom. This is a once in a century credit bust. Do you really think it’s going to end without everyone left weeping over the carnage on the street. 40% is not befitting of such a credit bust
October 21st, 2008 at 1:10 pm
John Lekas, manager of LCCMX, was calling for DOW 8000 when it was at 14000. He now thinks we could rally to 11000 by year end. Optimists may be early as it would not be a surprise to have more bad news push stocks down below the lows in the short run, but I think they will prove right over the next 2-3 years.
October 21st, 2008 at 1:11 pm
Thank You John Borchers for providing that.
Best,
I-Man
October 21st, 2008 at 1:12 pm
Short-term market timers can be bullish and it would make sense, provided you get in and out properly; for long-term traders, I think it would be fairly insane to be bullish now.
October 21st, 2008 at 1:14 pm
a little perspective here… they are bullish for a bounce not a cyclical turn. Mr Buffet’s legacy may get a little tarnished on this though.
October 21st, 2008 at 1:16 pm
Did they flip bullish? Or merely state the obvious – that prices are much lower now, than they were 6 months ago?
October 21st, 2008 at 1:22 pm
I agree that the bears converting to bulls seem to be everywhere, but for the most part they seem to be those obsessed with technicals and charts. Very few fundamental bears view this as anything other than a short-term trade.
Good point by Harold above – many of these guys are clearly talking their book.
October 21st, 2008 at 1:29 pm
I sensed that about Panzner before you told us. It fits with everything he said months ago.
That is one smart dude, Barringo.
I would not debate him.
I wouldn’t debate Cramer either, but only because you can’t win the g-a-m-e with Cramer.
With Panzner, you can’t win the l-o-g-i-c. He’s just perfectly in sync with macro-psychology.
October 21st, 2008 at 1:31 pm
why would selling BNI puts be a mistake?
with high implied volatility and willingness to hold long-term, seems like a great strategy.
if the stock hits 70 he’s happy to own it at a cost of $64 (like 13 P/E and 6x cash flow), if it doesn’t it’s $6 free and clear.
October 21st, 2008 at 1:32 pm
Ok. if this were a ball game, the guy on the mound just threw a fast ball. First pitch. WOW that was good but now I know what to expect.
Wrong, maybe he is not even warmed up yet and he still has a curve ball you have not seen yet, and a slider etc etc. Oh yah and they still get to bat.
This game has long way to go and one must be diligent to all the possibilities however remote.
It is big stretch to predict the outcome on the first pitch, lots of folks will get the outcome right but we still have to sit out the game to find out who wins.
October 21st, 2008 at 1:36 pm
fleck is not bullish, but he may be setting the stage to get bullish sometime soon.
October 21st, 2008 at 1:37 pm
Paulson brushing off Bob P of CNBC.
That wasn’t smart.
October 21st, 2008 at 1:41 pm
I would be bullish if CBNC would get a new crew. That includes dropping Mad Money and Fast Money.
October 21st, 2008 at 1:46 pm
Peter Schiff may not have turned bull yet, but the fact that CNBC is inviting him back on has got to be a good sign for the market.
October 21st, 2008 at 1:46 pm
I saw where Richard Russell his successor in Dow Theory land have flipped bullish.
Here’s the real question, though: What does Robert Prechter think (kidding, sarcasm alert, etc)?
October 21st, 2008 at 1:48 pm
http://www.nasdaq.com/asp/EconodayFrame.asp
State Street Investor Confidence Index.
Nutshell:
September 75.7…October plunged 20 points to 58.2. “The report, which goes back 14 years, said selling of risk is dwarfing that of the 1997 Asian crisis or the 1998 Long Term Credit Management Crisis..”
October 21st, 2008 at 1:50 pm
I heard David Faber mention this morning that he has heard rumors of some type of merger between some of the regional banks that reported earnings today, like Key, Fifth Third, and National City.
Does anyone have a view as to how likely a merger of some of these banks may be, as it appears that these rumors are propping up their stocks today?
October 21st, 2008 at 1:51 pm
Marc Faber on Bloomberg (http://tinyurl.com/6fwkbp):
“We’re extremely oversold at the present time,” Faber said in an interview with Bloomberg Television. “The market is in a position to rebound.”
October 21st, 2008 at 1:51 pm
I take it not one of you people were around during the late 1920’s, early 30’s????? It gets worse before it gets better!
October 21st, 2008 at 2:03 pm
Fleckenstein is not bullish, unless reducing your short exposure now constitutes being bullish. He has repeatedly said he is not ready to go long at these valuations.
October 21st, 2008 at 2:06 pm
@ConcernedCitizen: The U.S. market was **UP** in 1932, 1933, 1934, 1935 and 1936.
October 21st, 2008 at 2:21 pm
BR: You have consistently FAILED to point out / remember that Buffett’s “bullishness” is not arbitrary – if the S&P falls any farther, over $25B of that fortune in cash he holds is at risk. He took in over $5B in up-front premiums betting that the S&P would not fall very far.
He violated his own so-called “rule of thumb” against derivatives.
He’s throwing good money after bad – and hoping feverishly that his previous bets will escape the payoff dates.
Summary: Buffett does not belong on anyone’s list of bulls, because his public words are simply talking his book.
October 21st, 2008 at 2:37 pm
Let’s see … we have the engine of destruction (ARMs ratcheting up, busting mortgages that turn into foreclosures and further depress the housing industry, the failed mortgages that have been dispersed into CDOs, that are “insured” by inadequately-backed CDS’s) continuing to operate at full tilt, the economy contracting vigorously, and the Fed+Treasury pumping borrowed money (that the taxpayer will ultimately have to cover, either by higher taxes or inflation) into every nook and cranny of the economy — at least for larger companies, smaller firms now must compete against dinosaurs backed by Uncle Sam — and the markets have cratered, basically due to fear that the credit markets would fail.
So yeah, stock prices are lower. but business is contracting at a fearsome rate, and valuations will likely follow.
So when people say that the bears are turning bullish, I’ve got to believe it is only for short-term trades, that they will snap back as soon as there is a whiff of further calamity in the air.
If anyone knows of a reason to expect a constructive exit from this mess, please illuminate me — otherwise I will continue to interpret this new-found bullishness as nothing more than bears taking advantage of a dead-cat bounce.
We have a long way to go before the kind of pervasive gloom and despair that permeates a true bottom exists.
Believe me, I would love to read a reasonable scenario that leads to a stronger economy sometime in 2009, but I have yet to see it.
More enlightened souls are invited to point me at this hypothetical rosy half-full view of the world.
October 21st, 2008 at 2:39 pm
Eric, were in the 29 – 31 period.
October 21st, 2008 at 2:42 pm
Concerned Citizen:
If you read my post and look back at the 1929 charts, you will see that things, in the market at least, got substantially better after mid-Nov. 1929 before getting a lot worse: 50% better.
No market goes straight up or down to where it “should” be. It’s a matter of where the short-intermediate corrections are.
October 21st, 2008 at 2:45 pm
if the stock hits 70 he’s happy to own it at a cost of $64 (like 13 P/E and 6x cash flow), if it doesn’t it’s $6 free and clear.
Posted by: curmudgeonly troll | Oct 21, 2008 1:31:02 PM
c t,
minor point, the strike, reported above, was $76, BRK was paid $6.201/sh, net on exercise would be $69.799/sh..
past that, getting paid to go Long(synthetically) is, usually, a pretty good idea..why most people don’t Bull Spread-short Put/long Call, at the minimum, into their Longs, confounds me..
To the Bull/Bear idea..
BR, as I said before, that was an Insane(-ly) good call, even better, you time-stamped it in near real-time–that really is one, of many, thing(s) that separates you from the plethora of pretenders..
Personally, trades aside, I think there is, yet, much to unfold, going forward, that will be less than Bullish.
Tangentially, I’m still wondering who thinks the U$D will make it to 2011 (?)
October 21st, 2008 at 2:47 pm
Big contrary bullish indicator. CNBC Website headline:
Four Reasons Stock Market Hasn’t Reached Bottom Yet
October 21st, 2008 at 2:50 pm
I like MacroMan’s take (probably because it is consistent with my own, admittedly): short term bullish, long term bullish, it’s the medium that could kill you.
If you have the inclination, you could make a lot on the upcoming rally. Too much stress for me. I’ll wait for fourth-quarter earnings and GDP (or maybe longer if the gov’t injects more money into the veins of the consumer) and then I’ll get back in.
Oh, Jubak has been kind of bullish recently. Weird.
October 21st, 2008 at 2:57 pm
way too many people trained to buy the dips. after 40% drop even the bears want to buy a dip (also innoculate themselves from the dreaded designation: “permabear”). but there will be many such opportunities over the next 2-3 years. if by “steady buying” Grantham means 5% commitment per quarter then he’s probably right. but i’d like to hear his definition. he left that part out.
October 21st, 2008 at 2:57 pm
Bullish?
We are about to elect a Marxist to the presidency, possibly with a filibuster-proof Senate. Among the things promised: “card check” replacing the secret ballot; a ban on state right-to-work laws; expiration of the Bush tax cuts; tax increases (forget the >$250K limit, won’t survive the transition); bailouts for industry (only beginning with cars), states and municipalities; new spending; cap and trade; reinstatement of the off-shore oil ban; judges bent on empowering the trial lawyers. All that, plus an expansion of the current administration’s nationalization of every bad debt in the country.
Trading opportunities? Yes. Bull market? No.
October 21st, 2008 at 2:59 pm
All we really need is a $100B bailout once a week, and the market should do pretty well for a while.
October 21st, 2008 at 3:01 pm
Hey, Richard:
Sounds good to me
October 21st, 2008 at 3:09 pm
WE can go up from here…there is so much good news out there – Bulgaria, Lithuania, Latavia, Poland, etc…are the next Icelands…
My take is that everyone wants this thing to go up for technical reasons, but they will/are so fast to cut-and-run… I’m not getting in on the long side. Good luck.
October 21st, 2008 at 3:10 pm
@Richard: Your post is demonstrably false and uninformed. The problem is that I have no doubt you will maintain your “Fox” attitude regardless of the facts, so there’s no point in trying to clue you in. –Eric (p.s. people like you have ruined the country.)
October 21st, 2008 at 3:10 pm
BR, dealing with some cognitive dissonance? It’s tough going against the herd. I respect for you for that.
October 21st, 2008 at 3:10 pm
Still waiting on Lehman CDS settlement information. What counterparty will still be around tomorrow?
October 21st, 2008 at 3:11 pm
Richard,
Is that better or worst than a total collapse of the financial system and being hated by every country in the world?
My point is the only choice you have is to vote something other than Republcrat or Demoplican.
Vote NEITHER in November!!
October 21st, 2008 at 3:17 pm
Warren Buffet’s Berkshire has also sold billions in long term puts on four global equity indexes and high yield debt protection.
http://www.berkshirehathaway.com/letters/2007ltr.pdf
http://www.cnbc.com/id/23535282
October 21st, 2008 at 3:25 pm
the leh settlement was a non-event.
SAN FRANCISCO (MarketWatch) — The dollar was down from its Tuesday session highs as risk aversion faded following news of the settlement of Lehman Brothers credit default swaps “with no loss allocations imposed,” according to the Depository Trust & Clearing Corp. The dollar index , which tracks the U.S. unit against a basket of six major currrencies, was at 83.995, down from a high of 84.263 reached earlier. The euro was buying $1.3127, up from $1.3077 earlier.
http://www.aleablog.com/ wrote about this a few days ago but they have more good stuff up today…
October 21st, 2008 at 3:29 pm
@Richard. Marxist? LOL By the time Obama takes office there will be nothing left to nationalize or socialize… where do you get your ideas, anyway? From that fat retard Rush? Best of luck to you…
October 21st, 2008 at 3:29 pm
Buffett laid his case out pretty well: He is looking for the winners 10 years down the line.
In my opinion, as opposed to the traders watching squigglies on their screens, he is picking off the future winners in the scenario where bankruptcies ultimately create improved margins for the survivors.
Given that the 1930s are so much in fashion these days, somebody should look at the profits raked in by the auto companies during the second wave of automobile penetration that commenced in the latter half of the 30s. The smart money would have bought auto stocks when the panicked street was wringing its hands over the high default rates from bad auto loans made in the 1920s.
October 21st, 2008 at 3:32 pm
Recently, according to the Los Angeles Times, Rich Paul, a vice president at ValueOptions Inc., which handles mental health referrals, said that over the last year stress-related calls arising from foreclosures or financial hardship had gone up 200% in California. Similarly, Dr. Mason Turner, chief of psychiatry at Kaiser Permanente’s San Francisco Medical Center, reported “a fourfold increase in psychiatric admissions at his hospital during August, with roughly 60% of patients saying financial stress contributed to their problems.”
Of course, many victims of the linked economic crises never receive treatment. In July, Sacramento County Sheriff’s Deputy Mark Habecker told the Sacramento Bee that twice this year “homeowners about to be evicted have committed suicide as he approached to do a lockout.” In another case, he said, “a fellow Sacramento deputy found a note in the home that told him where to find the foreclosed homeowner’s body.” The Bee reported that such cases “received no publicity when they happened,” which raises the question of just how many similar suicides have gone unreported nationwide.
Cooncerned Citizen is right. Sure, you can still make money in this market. Sure. Everything is going to be just fine…
October 21st, 2008 at 3:35 pm
Fleck is indeed not bullish. He, like others that saw this coming, are weighing the risk/rewards of still being short. Most are of the belief that while there is still more downside, the level of risk in being short right now, with additional gov’t interventions, and how far we’ve fallen, it makes sense to lighten up on the short side, await a bounce, and get short again at an appropriate time for the next (final?) leg down. It’s more of a timing issue than a general change in point of view.
October 21st, 2008 at 3:36 pm
Eric @ 3:10:03 PM.
I’m going to express my agreement with Richard’s concerns (Richard @ 2:57:38 PM).
I hate trial lawyers, I like oil drillers, and I dislike trade protectionists.
As for the “Fox attitude”, I think that Bill O’Reilly is clueless on many economic matters.
(However, I’m certainly not going to defend those who helped create the real estate bubble).
October 21st, 2008 at 3:38 pm
I don’t know if I’d describe them all as bulls. Fleck is certainly not bullish, Hussman still has full hedges on, Kass says “sustained market advance appears unlikely” (though short term bottom is in – said the same thing in July), Buffett is always a long-term bull, and Harrison is not long-term bullish.
Everyone on CNBC lately is certainly bullish, however!
October 21st, 2008 at 3:42 pm
I can only speak for myself and I am tentatively in agreement. My only cautions deal with commodities and I think this will turn out to not be a problem.
If I were young and laden with cash, I would buy a basketful of companies that have had the crap kicked out of them and set it aside for several years. Unless the world explodes, that basket would grow by at least 500% before the next financial collapse in a few years. Plus, it would be cool to say I own 1000 shares or more each of a bunch of well known companies.
Being old and laden with cash, I will be a little more conservative and invest a few percent a week into sectors that have fallen 50%, more or less, and have been excessively slapped down in recent months. I will also try do a little timing to maximize my anticipated gains. Basically, I plan to combine dollar cost averaging with ‘buy at the bottom’ timing. Some areas are ripe now, others still have a little to go. Plus, I will only buy on days where the market dips a good bit.
See you at the top.
October 21st, 2008 at 3:48 pm
don’t blink! yesterday, wasn’t the DOW already 20% above it’s intraday low of 7800. technically, we are in a bull market now! was that the technically required oversold bounce? are we now headed back down to “retest” the lows. any thoughts?
October 21st, 2008 at 3:51 pm
I think Buffett and Berkshire might just get wiped out before this is all over.
I choose to short BNI today betting against Buffett.
There’s no reason BNI should be at this level. They report Thurs I think.
October 21st, 2008 at 3:55 pm
Does the Washington Mutual CDS auction on Thursday present any market-moving outcome?
October 21st, 2008 at 4:11 pm
Nothing falls in a straight line.
The only single reason why it would go up over the next little while is because everybody is being shown how markets recover after going dowen so fast.
If you like to spend your day in front of your monitor, there will be lots of trading opportunities.
But in my experience, it’s very hard to flick a switch when speaking of investing. If you’re spending all your time trading and checking your stocks, you’re not doing research as well as you should, you’re not looking at the long term or seeing the Big Picture.
October 21st, 2008 at 4:22 pm
John Borchers @ 3:51:07 PM
I find it quite amazing that Buffet would make such a short term bet (options expiring on 12/19/08). That tends to undermine his whole message of “long term investing”.
[I hope Buffet loses his bet on this one].
October 21st, 2008 at 4:34 pm
Turning bullish…well, why do the esteemed bulls think that we won’t test the lows of 2002…or fall beneath them?
It’s one thing to say you are turning bullish in a time frame…but what about price? Very quickly we could see the qqqq drop below 20, where it was in 2002.
In fact, it wouldn’t suprise me if it happened this week.
October 21st, 2008 at 4:37 pm
DL and John Borchers – if you can get $6 by selling a short-dated put and are happy to own the stock at $64, it’s a win/win bet.
I fail to see how selling volatility when it’s at panic levels is inconsistent with what Buffett has always done. The stock could fall $20 and it would still be positive P&L.
October 21st, 2008 at 4:50 pm
While I agree we have placed a tight bandage around the wound, imho, we still have more to the downside.
Not to sound like a Tin Foil Hat Wearing yutz, but I have a slight feeling (i.e. pure speculation) Buffet came out with his announcement of being bullish to help quell the markets and main street. The gov. is pulling out all stops and I wouldn’t put it past them recruiting whomever they can. Clearly the situation is dire enough that even Buffet may felt it is his patriotic duty to help up-hold this thing.
Kind of like Elvis going to the army.
October 21st, 2008 at 4:50 pm
Barry, it sounds like you went too heavy on the long side. just hang tight for awhile. maybe…
~~~
BR: We are +29% on the Oct 10 call, via QLDs.
October 21st, 2008 at 4:57 pm
thanks mh – your math is right, breakeven is around $70, ie only 17% lower from here.
October 21st, 2008 at 5:00 pm
Troll if things get really bad and BNI goes to 50% of here or $40 then you aren’t happy to pay $64 for those shares.
There is no reason the rail roads won’t slow.
Autos has to be at least 10% of what RR’s transport.
October 21st, 2008 at 5:03 pm
Tim Knight is a bullish bear
October 21st, 2008 at 5:07 pm
It’s an impressive list Barry, very impressive, I can’t dispute that. I hold the opinions of everyone on that list in very high regard. However, I’m not convinced. I think that you’re really sticking your necks out there.
You just let me know when Larry Kudlow turns bearish and I’ll let you know when it’s time to buy.
Best regards,
Econolicious
October 21st, 2008 at 5:09 pm
Far be it from me to be considered with those titans mentioned…I’m just a working stiff with an MBA that recklessly put all my savings in QID at average cost of 40. I am not even close to turning bullish. I’ll make a few pennies tomorrow after AAPL’s humongous warning tonight.
Take all foreign revenue now and if the dollar just stays where it is, slash it by 10% in the all important 4Q. There is virtually no short interest on QQQQ or any of its top names…and the put/call of the market is now actually closer to overbought then oversold. I have yet to hear ONE bullish argument that makes any sense at all given where this economy is heading. And anecdotally, all I hear from neighbors is that they went to this show or that restaurant and it was EMPTY. Oh and housing will drop another 40% average nationwide.
October 21st, 2008 at 5:14 pm
Apple up now AH. They guided $1.05-1.35 for 1Q with the street expecting $1.60’s.
Unbelievable. Still people building castles in the clouds. Can only mean bottom not in.
October 21st, 2008 at 5:21 pm
JB:
I can’t believe AAPL in after hours…short ratio is one half, so there are no shorts to fry…if this stock somehow opens up tomorrow, that will be the high of the day…the guidance is brutal.
October 21st, 2008 at 5:23 pm
The VIX barely budged today. Not a good sign for the bulls.
October 21st, 2008 at 5:27 pm
Whats that quote?
Something about “The market can stay irrational longer than you can remain solvent?”
The tape is up gents.
Anyone else sitting here with a big shit eating grin watching the shorts get some “comeuppance” in AAPL?
If not, I’ll party alone.
October 21st, 2008 at 5:27 pm
MARX: “From each according to his ability, to each according to his need”
OBAMA: “if I am sitting pretty, and you’ve got a waitress who is making minimum wage plus tips, and I can afford it if she can’t, what’s the big deal for me to say I’m going to pay a little bit more? That is neighborliness.”
Can someone explain to me how Obama isn’t a Marxist.
October 21st, 2008 at 5:30 pm
Apple is about $20 above where it should be based on guidance…nice short AH.
October 21st, 2008 at 5:34 pm
Barry,
I’d add Bill Cara to the list as well.
http://www.billcara.com
Jay
October 21st, 2008 at 5:37 pm
@Steve Barry
Doesn’t Apple usually guide low and then beat its own guidance?
October 21st, 2008 at 5:41 pm
Doesn’t Apple usually guide low and then beat its own guidance?
Didn’t Cisco always beat estimates by exactly .01 back in the day? Until they didn’t. Street is looking for 10.57 B in the 4th quarter and AAPL says 9-10 B. A big reason, as I have said over and over, is that the boost the dollar has given them for years has, ALMOST OVERNIGHT, turned into a massive cut. Nothing they can do…NOTHING.
October 21st, 2008 at 5:42 pm
I read Fleck every day … I can say all he has done is reduce his shorts – he has not went long … I do not read the other guys daily (just fleck & barry
) I think we need to be careful saying what other people postions are and not misrepresent them.
October 21st, 2008 at 5:44 pm
@Steve Barry
How are capital gains on double short ETFs taxed? This article:
http://seekingalpha.com/article/31112-leveraged-market-cap-etfs
says you get taxed at a hybrid rate of 60% long-term, 40% short-term each year on all gains, even if you don’t sell the fund. Is this true? Do you know which IRS publication deals with this?
(Sorry about the off-topic, missed the boat on the taxation thread…)
October 21st, 2008 at 5:51 pm
Pete,
I don’t think QID is futures based…sounds implausable, but I will look into it. Doesn’t matter in an IRA anyway.
Apple at 102, the short of the year.
October 21st, 2008 at 6:03 pm
Pete,
Some of the ProShares Funds did take ST gains, but QID did not. Maybe they don’t use futures or swaps as much or maybe they had no gains last year…but when you sell the fund, I believe those gains are taxed like any other equity ETF.
October 21st, 2008 at 6:09 pm
@ Steve Barry:
I have a great deal of respect for your analysis, we just happen to be on opposite sides of this trade, me long QLD, and you long QID.
Also, (and I dont want to speak for Steve,spo please correct me if I’m wrong) You seem to trade off fundamentals, I trade strictly off technicals.
That said:
The fundamentals with AAPL dont seem to matter. People want to own the stock. They “perceive” it to be a value…
So, if more people want to buy the stock than sell it right now, it doesnt make sense to short it.
Especially not here, as this move is a confirmation of a trend change in my opinion. As we’ve successfully backtested the breakout from the sharp downtrend that began at the end of August.
Whether or not this new minor uptrend (as the stock is definitely still in a major downtrend) will be sustained remains to be seen.
Shorting AAPL here based on fundamentals is folly. Its obvious that in AAPL as well as in the overall tape itself that fundamentals arent driving the move off of the lows. Fundamentals didnt drive the panic selling from two weeks ago either.
Maintaining a bias either way, bull or bear, is not the way to make money. Never has been. For me, the trick is reading the tape, and the battle is not succumbing to my innate urge to try to outsmart the market. I just try to do what it says.
To me, it says: the tide is changing. Buy stocks until we stall out on the recovery. Short them again when the recovery stalls.
October 21st, 2008 at 6:18 pm
Something to consider regarding that list of “bears-turned-bulls” — how many of these folks run money professionally? My guess is, pretty much all of them.
The only way this matters is in the fact that the rules are different for professional money managers, they operate under different tax considerations, and are (usually) subject to having their (the customers’) money pulled away from them, even if they are ready and willing to stay the course.
I mention this only to help the non-pro sheeple (like myself) avoid the trap of comparing your own decision-making processes too closely to those of the pros. They live and operate in a different world than the rest of us. Not necessarily better/worse, just different.
For the non-pro money managers, being a bull (IMHO) means that at least in some of their investments they are made with the intent of receiving long-term capital gains tax treatment.
With the exception of Warren Buffett, who says he buys stocks/companies with the intent of never selling them, the “normal” pro money manager (if there is such a thing) has a decidedly sorter time horizon, and is much more likely to flip in & out of positions.
So for a bunch of bearish pro money managers to have found some opportunities in the jumbled-up mess that is the current equity markets, that neither makes them “bulls” nor makes this market a “bull market”.
Everyone has different risk tolerance and time horizons. When the preponderance of the boats are tacking in the same direction on the same breezes, then things will have changed. But for my money, that time has not yet arrived.
Wake me up when the domestic auto industry is clearly going to either survive or die. Based on the deep and wide tendrils they cast through our national economy, it will be a defining moment when their fate is clear, one way or the other.
At least in this instance, Charlie Wilson is right — as goes General Motors, so goes the nation.
October 21st, 2008 at 6:19 pm
LOL well there is the confirmation that lows are NOWHERE in sight. just look at the after hours market reaction to aaple. downright comical. still playing the beat the lowered numbers game. the game that has gone on through out the braindead bull market of the past 6 years. it’s after hours nirvana. the manuscript the japanese have written is playing out page by page by the great USA. welcome to deflation japanese style s+p 650 and below. i feel confident on this target
October 21st, 2008 at 6:33 pm
Warren Buffet is not bullish. He finds selective value in the market and his time horizon is well beyond that which can be afforded by the majority of Americans. He ain’t that bullish when the market rallied to 9000 and he said he was no longer buying. I’ll tell you something else. I think Buffet has misread this environment from some angles. We shall see.
This market is still one of the most overvalued markets in history. That’s because there is data the dirty little demons on Wall Street don’t either consider or are too myopic to understand.
The premise for being bullish as laid out for most of the people above is based on the concept of the Gambler’s Fallacy. And, how appropriate because gamblers indeed rule this market.
October 21st, 2008 at 6:35 pm
Anyone notice that when the Intrade odds for McCain were 50% the S&P 500 was at 1,250 and now with the odds at 10% the the S&P 500 is down 300 pts or 24%? Maybe just a conincidence. Paul Volker will fix all of that. Hah!!
October 21st, 2008 at 6:41 pm
Apple up after hours looks like Lehman exec callan marking up Lehman’s books.
BTW have you seen all the damaging LEH articles today?
Selling stock that was borrowed from another company, LOL.
All sorts of illegit stuff.
October 21st, 2008 at 6:46 pm
I do not allow myself any comfort in trading “with someone” no matter how respected. I am only interested in knowing the facts so I am condemned only to repeat the good parts of history. ~m
October 21st, 2008 at 6:46 pm
Speculation and investment are two totally different things.
October 21st, 2008 at 7:47 pm
@ Unsympathetic
From Berkshire’s 2007 annual report:
“The second category of contracts involves various put options we have sold on four stock indices (the S&P 500 plus three foreign indices). These puts had original terms of either 15 or 20 years and were struck at the market. We have received premiums of $4.5 billion, and we recorded a liability at yearend of $4.6 billion. The puts in these contracts are exercisable only at their expiration dates, which occur between 2019 and 2027, and Berkshire will then need to make a payment only if the index in question is quoted at a level below that existing on the day that the put was written. Again, I believe these contracts, in aggregate, will be profitable and that we will, in addition, receive substantial income from our investment of the premiums we hold during the 15- or 20-year period.”
Highly unlikely that Buffet is “talking his book” over concern about where the S&P is going to be 11 to 19 years from now.
Hussman summed it up appropriately in his commentary “Why Warren Buffett is Right (and Why Nobody Cares)”:
“The most interesting thing about that op-ed piece wasn’t Buffett’s opinion about stock valuations. He’s absolutely right, in my view. Rather, it was fascinating how quick many investors were to dismiss Buffett’s advice, saying either that he didn’t understand how bad the economy was going to get, that he preferred to “get in early,” or that he was “talking his book” and trying to bid up the value of his own investments.
“Look. Buffett doesn’t need the money. Virtually everything he has is now or will ultimately be committed to philanthropy. My impression is that Buffett honestly doesn’t like to see investors making decisions that will damage their financial security over time. Also, a good part of his own self-concept centers on being a good allocator of capital. If he didn’t like his investment positions, he wouldn’t try to talk them up. He would liquidate them. If he thought he could postpone his purchases without a high probability of missed returns from waiting, he would have waited. My guess is that Buffett is very excited about the values he has been buying up, but doesn’t get wrapped up in the day-to-day fluctuations that weaken the judgment of less disciplined investors.”
http://www.hussmanfunds.com/wmc/wmc081020.htm
Whatever might happen to the market over the short to medium term, it’s difficult to ignore good companies selling for less cash.
October 21st, 2008 at 7:52 pm
Oops — of course, it should be “less than cash”.
October 21st, 2008 at 8:06 pm
Steve Barry:
Also, (and I dont want to speak for Steve,spo please correct me if I’m wrong) You seem to trade off fundamentals, I trade strictly off technicals.
Well, I don’t even trade probably by your definition…been holding and accumulating since 5/07, through thick and thin. Since you are a technical guy, know that you are betting against a two-year long perfect rounded bottom on QID that broke out to the upside and already successfully re-tested! (I used to trade also). And you are fighting a fierce dollar headwind and non-existent short interest.
October 21st, 2008 at 8:20 pm
Paul Kedrosky’s comments tonight on the president of Wal-Mart’s speech in California today.
1. Double digit declines in the use of credit.
2. Spending spikes around pay periods, implying that more customers are living paycheck to paycheck.
3. For the first time, spikes in the purchase of baby food around paychecks. Possibly ominous…
Barry has the web site noted in his preamble…
October 21st, 2008 at 8:24 pm
The Dude has also turned somewhat bullish–buying quality, dividend paying stocks.
October 21st, 2008 at 8:56 pm
isn’t the bottom supposed to be in when
Bulls and Bears are all bearish ??
A PAPA bear market needs to punish the bears
that falter.
October 21st, 2008 at 9:08 pm
Mythiot @ 7:47:16 PM
I’m suspicious of ALL “long-only” money managers. And Warren Buffet can’t be trusted to be unbiased, as he is closely allied with certain politicians, and with CNBC as well.
John Hussman may not be “long-only” (he apparently uses options from time to time), but he is “mostly long”.
Nevertheless, I do think it’s likely that four years from now, the SPX will be above the current 955 level. But I’d rather wait another 8-12 months before going 100% long for anything but a trade.
October 21st, 2008 at 9:25 pm
Keep in mind J Grantham’s “bullish” call is that the market has pulled back to long time trend and by strict definition is not overpriced.
He self-admits that as a value investor he is notoriously early and will willingly subject himself to that pain to avoid “career risk”. He also points out three notable markets that reverted to the trend and overshot by 50% or more. As each time/instance had unique situations, he said he was buying with knowledge that the market would likely overshoot, but hoped that b/c of the proactive govt actions the overshoot would be more like 20%…
I do have to admit that as perverse as this all sounds, it is probably as close to bullish as I’ve ever heard Jeremy Grantham be, save for Emerging markets over the last 5 years… He claims he sounded like a raging bull in the 70’s. Hard to imagine.
Doug Kass has been bullish for a few weeks now. I’ve never placed Todd Harrison in a bull or bear camp b/c when I started following him at RealMoney long long ago, he was alway some ratio of bull or bear with something working on both sides… I would say he has been more constructive than some of his fellow Minyans at the ‘ville.
Gave up on Fleck long ago as a perma bear, and then got tire of reading his stuff ’cause he was shillin’ his book so hard…
Let’s not forget Helen Meisler!!! She’s the mother many of us never had as she’s able to find fault in virtually all markets–yet today she seemed pretty darned bullish on her outlook. Maybe there was something in her coffee this morning…
October 21st, 2008 at 9:33 pm
From a chart perspective, I am having trouble getting on the bull wagon… My PnF charting has triangle patterns on the DJIA 200pt chart and the S&P500 20pt charts. Dorsey’s book says triangles tend to resolve themselves in the direction of the overall trend (which is down on both of these charts). Triangles also tend to resolve in powerful moves. It hasn’t resolved itself yet, but with volatility where it is, I can’t imagine making through October without it doing so.
I find point n figure charting to be very helpful b/c it clears out most of the noise that regular charting requires one to wade through. I’ve be using it for 12 years, and while I use it less on individual stocks than I have in the past, I use it much more on macro and sector study.
October 21st, 2008 at 9:35 pm
see:
Interviewee: David M. Rubenstein, founder and managing director, Carlyle Group
Interviewer: Lee Hudson Teslik, Associate Editor, CFR.org
October 10, 2008
After eight consecutive days of stock market declines in the United States, and cascading losses in other major markets around the world, many analysts said the financial crisis of 2008 had devolved into a full-fledged panic. David M. Rubenstein, the cofounder and managing director of the Carlyle Group, a leading private equity firm, discusses what must be done to mitigate the fear he says has “overtaken everything.” Rubenstein, who sits on CFR’s board of directors, says the present stock declines and credit crunch “are just the tip of the iceberg.” He envisions a broad overhaul of the financial economic motors that had driven the global economy in recent decades and says major coordination between business and government leaders in the United States-and between the United States and other countries-will be necessary to prevent further pain. Rubenstein also discusses how the current turmoil will affect the private equity business. He says new limits on leverage could pose significant challenges for private equity firms, and goes on to discuss how these firms-many of which are flush with cash but cannot get loans and thus cannot pursue their former strategy of buying companies through leveraged buyouts-can alter their business model to keep afloat. Eventually, Rubenstein says, he suspects “once in a lifetime” buying opportunities will come of this crisis.
President Bush just spoke on the economic crisis. He didn’t introduce any new policy and basically said that the U.S. government would continue with the steps it has already taken to counter the crisis. Are those steps enough?
Clearly more needs to be done if the market is going to have enough confidence to find a bottom. The leaders in our government today, and the leaders of the business world
http://www.cfr.org/publication/17508/grasping_radical_economic_change.html?breadcrumb=%2F
To Note: I’ll say this again: Anyone not paying attention to cfr.org/foreignaffairs.org is walking around ‘Blind w/o a Cane’.
Note, As Well: our FedRes Chief, ol’ Benber, in support of, yet, another ‘Stimulus’ package..these guyz will not quit until the, fictive, U$D, is ground to Dust..Remember, or learn, of the Fortunes amassed during the ’30’s, we’re in for 2.0..
October 21st, 2008 at 9:35 pm
It’s very hard to be bullish about playing a crooked card game. Secret meetings, unprecedented issuance of government debt and a complete lack of culpability on any of the participants. Yeah, maybe we will get a bounce, but my confidence in catching it is eroding fast.
We don’t have markets anymore, just manipulations and interventions.
October 21st, 2008 at 9:40 pm
@ SB:
When I look at QID: I see the rounded bottom on the 2 yr… I also see the impressive rally that QID just had, and I can see why someone would be long it. I even owned it for awhile, although I sold too early. I also see serious signs of it rolling over and I expect it to sell down a little further and eventually trade in the 50-60 range for awhile. Whether or not it breaks out or down from there remains to be seen.
I would expect it to sell off rather sharply should the Naz put together a couple up days in a row on stronger volume.
I personally have anticipated that it will, and there’s a good chance I’m wrong, but I havent been proven so just yet.
My earlier post wasnt an attack on your QID trade per se, (and most certainly not anything personal) but on your short AAPL @ 102 call. Which I think is a bad trade.
October 21st, 2008 at 9:42 pm
Barry,
The records show you were bullish throughout most of this recent sell-off. You kept getting stopped out, but you were bullish ever since the VIX hit about 40. Not trying to be a troll, but claiming that you became bullish on the day the market bottomed is VERY misleading.
~~~
BR: Dan, Dave, Cullen,
On 9/18, I wrote about the VIX spike on 9/18, saying: “The only question for traders is whether or not this sell off is closer to the ones seen over the past 2 years (in which case you can buy ‘em here) or more like the 2000- 03 period (in which case we have more selling to go).”
This, however, is the 3rd comment you’ve made from the IP address 75.85.166.6 under three different names, saying the same thing.
I stand by my public calls — and I have zero patience for those people who write misleading comments using different names — and then claim not to be a troll? Your behavior speaks for itself…
October 22nd, 2008 at 12:17 am
Next shoe to drop:
Layoffs. The massive public and private sector kind of layoffs. Watch for it post election, but starting just in time for Christmas.
October 22nd, 2008 at 1:17 am
@I-Man:
I did not take your earlier post as an attck at all…I like an intelligent debate. A rounded bottom is a strong log-term reversal pattern…I doubt it ran its full breakout in 2 weeks.
@jasras: Market has pulled to long-term trend? Some have argued that the Dow is still within its 100 year inflation adjusted trend to trade to 3500.
geocities.com/WallStreet/Exchange/9807/Charts/SP500/Dji200_0710.gif
October 22nd, 2008 at 1:21 am
BR,
I dont think it is quite accurate to say Fleck is bullish, maybe less bearish. At least that is my impression from his service.
October 22nd, 2008 at 2:07 am
>> Fundamentals didnt drive the panic selling from two weeks ago either.
Yes, it did. Everyone not sound asleep knew the economy was in trouble. But, many took their sweet time acting on that knowledge. And then Bush’s speech woke up the rest of the crowd, ushering massive selling.
That selling wasn’t based on technicals. It was based on a sudden cascade of information about fundamentals.
>> Maintaining a bias either way, bull or bear, is not the way to make money.
Steve Barry is up 70% this year based on his fundamental analysis. If that’s not the way to make money, what is?
October 22nd, 2008 at 6:42 am
@Steve B
I know there are many opinions, and what I wrote isn’t even mine to claim. Read Jeremy Grantham’s quarterly missive b/c that is where I got that the market has pulled back to trend. It is a long-term trend of 1.8% real on the S&P. Long term isn’t specified, but I am trusting that with Mr Grantham, it is absurdly long as with most of his stats.
October 22nd, 2008 at 9:20 am
It is way to early. S&P will go to 740.
October 22nd, 2008 at 11:54 am
Steve Hochberg, a Robert Prechter (famous “permabear”) associate, is looking for a tradeable bottom in late October from lower levels. The Elliot Wave folks have called for trading rallies several times in the past 10 years, although they have been steadfast in their long-term view that gold will outperform until a major bottom is achieved.
October 22nd, 2008 at 4:39 pm
Fresno dan predicted DOW 6000 is September ‘08. Fresno dan is sticking with it.
October 22nd, 2008 at 5:49 pm
fresno dan’s guess heap good. Eventually.