Was that rally for real, or was it nonsense ?
Is the new QE any different from ZIRP ?
Anything else on your minds?
~~~
What say ye?
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
Faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof. —John Kenneth Galbraith
Knowing that the vote over the weekend in Greece was really a referendum on Euro membership, a majority of the Greek Parliament said yes to staying. European Finance Ministers meet again on Wednesday to solidify the 2nd bailout package for Greece at the same time hopefully a deal is consummated between Greece and its creditors this week. The Greek 14.5b euro bond that matures on March 20th is up by 2 pts. The optimism that all will be completed and contained AGAIN to Greece has yields lower in Portugal, Spain and Italy. The iTraxx Financial Index is also narrower by...
read more »
Tweet
Facebook
Reddit
Digg this!
December 16th, 2008 at 8:08 pm
Feel free to include any interesting links you may have come across lately . . .
December 16th, 2008 at 8:17 pm
SRS is killing me, thats what I think about this rally. Credit to Mr Barry for reassessing his l0w-$80′s re-entry point!
December 16th, 2008 at 8:18 pm
The Fed is cheered on by Wall Street crooks that got bailed out
http://www.thedeal.com/dealscape/2008/12/deal_stocks_the_fed_is_cheered.php
“However, some have argued that this quick fix does not give the Fed any more breathing room to lower rates if and when the economy worsens”.
1) Bush to Obama – Merry Xmas and BOL bagholder Pres. because you will need it going forward
2) you have 8 yrs to try and correct ‘Bailout Nation’ ( with due credit to Barry ) because othwrwise this country will be FUBAR by 2017.
December 16th, 2008 at 8:27 pm
Since 11/24, QQQQ volume has been at or well below its 100 day MA for volume. That coincides with the dead cat bounce…of course it is nonsense. NYSE Bulls is back to near yearly highs…10 day put/call is at yearly lows…Blogger poll has been very bullish for 2 months. I don’t see the recent low as holding.
As for ZIRP, guys like Wayne Angel and McTeer seem really brain dead and very quick to praise whatever the Fed does…seems they were brainwashed years ago and cannot think clearly now, Schiff made them look bad. Liesman touts the Fed’s “infinite balance sheet”…he should have his degrees revoked. That is a very slippery slope to banana republic.
December 16th, 2008 at 8:29 pm
It is nonsense but I think the nonsense will continue for a while. Reality bites in early 2009.
December 16th, 2008 at 8:30 pm
two things: The Deal is real. and, this:
http://www.youtube.com/watch?v=99Dzdc1H0wM&eurl=http://www.itulip.com/
from the archives, of the ’30s, is, truly, amazing..
as far as ‘understanding’ recent events, we’re going to have shift our POV to get a better handle on it. If we don’t, we’ll continue to mutter: “But, it just doesn’t make any sense..”
as an aside, remember, the Electric Light Bulb has been with us for over 125 years..
December 16th, 2008 at 8:36 pm
the rally will last longer, friday is triple W, should be interesting, I think the rally continues into Jan and we see SP go above 1000….. then look out when it drops again.
What else is on my mind:
If the $$ survives when does the dollar carry trade start? if at all? and where does the money go?
It seems easy to say that what bad could come out of this is the the $ doesn’t make it, what is harder is what the OTHER unintended consequences will be, and of course there will be some or many.
December 16th, 2008 at 8:38 pm
Corporate bond spreads “screamed tighter” today.
Cause of rally? Effect? Neither?
December 16th, 2008 at 8:40 pm
Steve Barry:
What is up with Leisman? Did he used to be this atagonistic towards Santelli? I thought it was Gasparino that was the jack ass. Now it seems Leisman is too.
December 16th, 2008 at 8:41 pm
There was a huge rally after the Fed signaled all out panic on March 18th also (the DJIA closed up 420 to *12,392*). The market, for some reason, still has faith that Bernanke knows what he’s doing. But look at the move in gold and the dollar. Also, the lack of move in oil.
December 16th, 2008 at 8:41 pm
@Calvin: Santelli is just about the only CNBC “pundit” that makes any sense on a daily basis, that’s why Leisman has it in for him. I saw that exchange as well earlier today. Leisman was downright disrespectful to Santelli, I thought.
December 16th, 2008 at 8:43 pm
After inauguration when reality sets in, what’s the catalyst to go higher? We still have the December jobs report to come yet and plenty more layoffs in January – for all these “heartless” companies that lay off right before the holidays, there’s the other side that wait until after.
What is going to drive retail when the holidays are over?
December 16th, 2008 at 8:44 pm
Santelli needs Madoff’s missing E, the vowel, not the variable.
Liesman should have his name pronounced as it reads, to get the gist of that cat..
Therein, lies the Friction between the two..
December 16th, 2008 at 8:45 pm
About 50 reasons why we’re headed for the Great Recession Link Here
December 16th, 2008 at 8:46 pm
@CALVIN
that’s a result of Rick being right and Steve being wrong. I think it is seriously starting to bother him, notice how most people brush off santelli on there or treat him like an idiot and the reality he might be the only person on the whole network that understands what is going on.
The exchange I saw this morning between those two was silly, it’s not funny either.
How come on Bloomberg I never hear the guests or the hosts yelling about some nonsense… oh that’s right, that channel is informative, as opposed to entertaining.
December 16th, 2008 at 8:46 pm
Liesman and Santelli have had numerous verbal sparring matches over the last two years. They do not seem to like eachother. I had a lot of respect for Santelli, but lately he has been too agreeable with Kudlow all the time.
December 16th, 2008 at 8:46 pm
December 16th, 2008 at 8:41 pm
Jeff,
w/that, I, obviously concur..
December 16th, 2008 at 8:50 pm
DP
haven’t you heard, it’s all about confidence. c’mon, get with it.
retail is going to get much worse, my hypothesis is that many, if not most, consumers still haven’t changed habits all that much. The new reality isn’t actually being lived by many of us yet.
many believe that since we are getting a “tax cut” b/c prices at the pump are lower but that 400bil savings won’t be spent and won’t be noticed because people might actually start to save again. Unless oil goes a lot lower that is not going to act as the tailwind that some people think. Given all those govt’s that need oil to average above 50 and some above 70 to have budgets work I highly doubt oil is going to go all that much lower from here. If it does, the consumer is still going to change habits.
December 16th, 2008 at 8:52 pm
and, to fill in some blanks..
remember, the U.S. Mint struck a Coin for Edison, but not Tesla..
http://www.usmint.gov/mint_programs/commemoratives/index.cfm?flash=yes&action=Edison
and, re: the spelling play, sane-tell-I
December 16th, 2008 at 8:54 pm
@SB: Agreed. Not a fan of Kudlow. Not sure why Santelli’s so agreeable with him. Kudlow’s a clown show.
@Hoffer: Starting to see things your way re: the Fed, believe it or not (although I still think they’ll never be abolished unless things truly bottom out). I don’t care what the market does, it’s hard to feel “good” about what’s happening right now. Common sense and intuition tells me this is not going to end well.
December 16th, 2008 at 8:58 pm
How low can the long bond go? One handles? And does the safest “yield” come from betting on “A Madman at the Helm” printing dollars and buying the long end getting the coupons and the capital appreciation? Anybody looked at the chart of the Nikkei during ZIRP over the past decade?
Everyone who hasn’t read Marc Faber’s “Tomorrow’s Gold” chapter on hyperinflation ought to.
December 16th, 2008 at 9:01 pm
Steve Barry,
You said:
***Liesman touts the Fed’s “infinite balance sheet”…he should have his degrees revoked. ***
What degrees? You mean his degrees in English and Journalism?
You didn’t actually think he even majored in Econ or Finance? What would have ever led you to that presumption?
http://en.wikipedia.org/wiki/Steve_Liesman
December 16th, 2008 at 9:02 pm
Jeff,
w/this: “it’s hard to feel “good” about what’s happening right now. Common sense and intuition tells me this is not going to end well.” again, I concur. It’s, really, to me, the worst of it. Many/Most are still in deep denial, still supping on their daily HeadlineNews fix. For them, and, thereby, the rest of us, it couldn’t be anymore Dangerous.
We’ve some, heretofore, un-Imaginable scenarios that need to be contemplated, and soon, before they get here..If we can’t see the seeds of Fascism/Totalitarianism starting to sprout and take root, ye Flower, we need to open some new windows..
December 16th, 2008 at 9:05 pm
This rally has legs. It’ll get to S&P 1k, at which point you want to begin to fade it. Double down short at 1100 and 1200 (if it gets there)
December 16th, 2008 at 9:08 pm
Btw Steve Leisman is CNBC’s equivalent of the Mouth of Sauron. He’s a mouthpiece for the Federal Reserve.
My master Lord Bernanke the Great bids thee welcome!
December 16th, 2008 at 9:08 pm
“I think the rally continues into Jan and we see SP go above 1000….. then look out when it drops again.”
If we had closed up ~500 DJ on solid volume, I would agree with you.
“This suckers going down”.
December 16th, 2008 at 9:12 pm
SRS took out its 52 week low today (http://finance.yahoo.com/q?s=srs)
A double short.
52 week LOW
I had no idea the real estate industry was doing so well.
Of course it’s nonsense.
December 16th, 2008 at 9:16 pm
@Texican: Tell me about it. Have been getting bludgeoned by SRS lately (no bailout for me!) but I’m willing to hang in there and be patient. Last time I didn’t trust common sense and my instincts. Am not going to make that mistake again.
December 16th, 2008 at 9:16 pm
“What is going to drive retail when the holidays are over?”
Hunger and necessities, I will wager. Not out of any dire straits necessarily, but a new found fiscal conservatism in uncertain times. ZIRP does not make banks with dubious assets solvent and a 5% MoM 35% YoY drop should not bring out the buyers in force in housing.
Cali is going to BK before it is over. Services like Police, Teachers and trash pickup will be on their own dime. Gated communities with private security and an over correction in housing prices everywhere else seems likely to me.
December 16th, 2008 at 9:22 pm
@MEH,
I watched the GD/ Inflation video you linked. What is your take on it? I have little detailed knowledge of the GD. The video is a comedy, so does that mean FDR attempted to do what Ben is attempting know and it failed, or did it succeed until the recession of ’37?
TIA
December 16th, 2008 at 9:23 pm
“Cali is going to BK before it is over. Services like Police, Teachers and trash pickup will be on their own dime. Gated communities with private security and an over correction in housing prices everywhere else seems likely to me.”
Blackhalo,
you just described Sao Paulo, and, yet, go with: “Hunger and necessities, I will wager. Not out of any dire straits necessarily, but a new found fiscal conservatism in uncertain times.”
w/this: “Not out of any dire straits necessarily”, how does that all fit together?
December 16th, 2008 at 9:29 pm
Barry R, in reference to ZIRP post many months ago…
With the dollar in decline, banks and China been buying gold and from what I’ve seen the demand for gold has been going up… you stated gold is going to $3000 but will see $300 first, is this still your belief?
December 16th, 2008 at 9:29 pm
Calculated Risk reporting that some money market funds expensese are now greater than the yield. Would do better putting money in a mattress.
December 16th, 2008 at 9:30 pm
Of cause the rally was for real after the truly historic blockbuster FOMC statement. It does not get any better than this.
The stock market will trade exponentially higher from the current extremely cheap panicky levels.
What idiot would bet against Fed’s unlimited buying power (quadrillions) and Obama’s trillion dollars stimulus package?
In addition, the treasury bubble is about to pop any day now, resulting in gigantic money flow from the treasuries into stocks.
This is huge!
December 16th, 2008 at 9:38 pm
Was it real? Yeah, as real as it gets in the market; I got the red pixels to prove it. I.e., all moves are real, it’s just that some last longer than others…
Speaking of SRS I bought it three times today and sold it once. I made money on the first in and out trade right after the open. But got burned buying it after the announcement when the rally didn’t fade, and then I bot more near the close! I made money on it four times in the last three trading days, but they took it all back in the last hour and a half.
I think this price is real good longer-term, but I don’t want to hold it through a 30 to 90 day rally. If the mood turns decidedly bullish next week, I’ll take my loss and look to reboot later. I’ll be watching for VIX < 50 and continuing the downtrend.
SKF, EEV, TWM, and SRS are hard to resist at these levels. Even DUG and SMN are catching my eye, but are further down the list for sure now with the newly declared war on deflation.
December 16th, 2008 at 9:39 pm
KJ,
“The video is a comedy”. The newsreel is some serious Keynesian-based propaganda to smooth over the Gov’t's Theft of the People’s Gold, and to convince them that they’ll be better off working for less.
If you noted, while watching, how many implied threats there were, to paraphrase: “it’s this, or back to the Soup Line”, it’s stunning. Along with: “would this nice looking chap ‘lie’ to you?”, and to intro ‘him’: “O, it’s sooo complicated, even I (from: the narrator, who is speaking to down to you) can’t answer the Q: What is Inflation?”
Just like this past October– Pass the “Banker Take-Over” Bill, or there’ll be ‘no money’, “your 401k will disappear”, et al. ..
note: “By this means government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft.”
John Maynard Keynes – “Economic Consequences of Peace”
that’s the brief take, I’ve watched it once, it was, literally, hard to sit for..
December 16th, 2008 at 9:41 pm
Jurgen…is that Jim Cramer posting above me.
December 16th, 2008 at 9:44 pm
Barry, you’ll love this story from eric Fry of Agora:
Eric Fry, reporting from Laguna Beach, California.
In a former life, your California editor called himself a hedge fund manager. The year was 1995 and he and two partners were overseeing a modest investment management business.
One fine day, one of the partners got the idea that the firm should expand its marketing efforts by hiring an expensive, New-York-based marketing firm. This partner also argued that your California editor should facilitate the marketing effort by conducting all the face-to-face meetings with prospective clients.
“Eric, you’re great with clients,” this partner explained. “And you’re the one who oversees the portfolios. So YOU are a natural to do most of the marketing.”
Your California editor did not agree with any part of the plan. He did not want to hire an expensive marketer, and he certainly did not want to travel all around the country to meet with prospective clients. But he reluctantly agreed.
A short time later, he found himself on a cross-country flight to New York to attend a variety of meetings that the expensive marketing firm had arranged. First stop: Rye, New York, to meet with Tremont Group Holdings, a firm that placed money with selected hedge funds.
“Eric, what can you tell us about your investment strategy?” the kind folks at Tremont began. “Why don’t you just give us a little background and tell us how your strategy operates.”
Your editor responded very matter-of-factly, by providing the broad outlines of his long/short global equity investment strategy. After about 30 minutes of back-and-forth, the Tremont folks said something like, “Well, this sounds very interesting, Eric. You have a very unique approach. But we’ve got a couple of concerns.”
“Okay, let’s hear ‘em,” your editor politely replied.
“Well, because your firm is relatively small, it does not possess the kind of risk control infrastructure that we would like to see. Furthermore, since you don’t really have extensive checks and balances within the portfolio management structure itself, the strategy relies too heavily upon the instincts of one individual. So we’d need to see more assets under management, a longer track record and better risk-controls in place before we’d consider an investment.”
“Okay, thanks for the advice.”
As your editor exited the meeting, he turned to the expensive, New York-based market and said, “What a bunch of BS?…What is risky about a three-man shop with completely transparent books? I told them I’d give them a direct feed from the prime broker, if they wanted it. So what’s the risk? Either we make money in the markets or we lose it?”
“Yeah, I know,” the marketing guy agreed, “But Tremont likes to see better risk controls in place.”
During the next few months, a version of this story repeated itself innumerable times. But your editor’s firm never received a cent from any of the institutional hedge fund consultants with whom he met. Mercifully, the contract with the expensive, New York marketer expired and your editor returned to the quiet serenity of his Bloomberg screen.
In fact, your editor had all but forgotten that chapter of his life until yesterday afternoon, when he happened to spot the following headline: “Tremont Invested $3.3 Billion, More than Half Its Assets, With Madoff Firm.” According to Bloomberg News, “Tremont’s Rye Investment Management unit had $3.3 billion, virtually all the money the group managed, allocated to Madoff.”
December 16th, 2008 at 9:56 pm
bradp @ 8:17
“SRS is killing me, that’s what I think about this rally”.
On “Fast Money” today, Karen Finerman recommended SRS if it drops below $60. I’m inclined to agree (I bought some SKF at the close today).
December 16th, 2008 at 9:58 pm
@DL: I’m biding my time and buying more SRS tomorrow, especially if it goes below $60. Might jump on SKF or that triple-short financial ETF as well.
December 16th, 2008 at 9:59 pm
I think I agree with Jurgen to a point: This is huge; although it really wasn’t anything we didn’t already know or expect given Ben’s well known deflation fighting strategy. http://www.federalreserve.gov/boardDocs/speeches/2002/20021121/default.htm
It’s just that now it’s here, it’s real, he has openly declared war on deflation, as Winston said earlier.
The other side of the argument is, the destruction wealth / asset values, and the decrease in aggregate demand, excess capacity, and trapped liquidity is even huger!
Will hyper-reflation work? Who knows? Will equity buyers believe it will work? Yes, probably for a while. For how long? Who knows?
December 16th, 2008 at 10:02 pm
while shopping for an LCD, deflation isn’t such a bad thing. My gold miner swing-trade-gone-bad from septebmer is getting closer to break even!
Hopefully by March Madness I can sell for enough for a $ 500 42in 1080 LCD to watch my tarheels treat the rest of the field like Madoff treats charities
December 16th, 2008 at 10:05 pm
Do people really believe there was a change in monetary policy today?
http://www.federalreserve.gov/releases/h15/data/Business_day/H15_FF_O.txt
December 16th, 2008 at 10:07 pm
going broke @ 9:29
“…gold is going to $3000 but will see $300 first…”
I don’t think it’ll get to $300. But if the SPX retests the 741 level, it is likely to pull gold back down to $700. And yes, given what the Fed and Treasury have been doing, an eventual price of $3000 seems rather likely.
December 16th, 2008 at 10:08 pm
Unfortunately, I’m in the camp that we’re becoming like Japan. Incentives for individuals and corporations are okay, and it has been working for 200 plus years, but people abuse alcohol instead of drinking for moderation just like we abuse leverage. It’s a reverse psychology. We’re bailing out those aren’t responsible the Wall Street rich guys (I’m not saying all rich people are like that but since this leverage is created partyly by Wall Street lobbying for 10x to 40x, and it exasperated everything (magnitude) and some main street folks who don’t just abuse but over abuse leverage. It’s okay to help a young start up companies by loaning and give sufficient capital just like helping a family when they’re in trouble. My family had to get help from Uncle Sam when we first came to America, but we were out of after my parents were able to find jobs, and my siblings and I excel in school and out of college now because we don’t abuse the incentive programs; we believe that America provides opportunities for those who need help but has the will to be financially independent and work and pay taxes back to Uncle Sam. I am young, but I always pay my credit card on time and concern about my credit and still do. Incentives are like welfare for corporations and individuals, but as long as it’s doing it right and no abuse, it’ll work well. It’s okay for a capitalist society to have a mix of socialism but not going toward socialism like we do now because business and individuals need capital from Uncle Sam since the gov’t is the only entity that can do this; however, the conduct during the last decade has been anything over abusive.
I do think that the bottom probably has set in, and since the Fed allows people no incentives to buy U. S. Treasuries, a stable company yielding 3% is better than those 10 year U. S. Treasuries.
The Market won’t go up as much as before because it’s justified that banks cut back on consumers who have debt and weren’t qualified in the first place. There’s probably reverse psychology here too because it’s also fact that people are fearful (right to be) due to losing jobs, too much debt, etc… One big pot pouri with this credit mess. Student loans won’t help young people who are facing with unemployment rate of 10% (I believe this number more) because discouraged workers drop out, therefore, the pool of unemployment is less. Others who have part-time jobs, temp jobs, etc… are probably not really factor into the economy. These stats have been change by the gov’t over years that it looks like it’s more rosy than one thinks. I still believe in American capitalist spirit! When will that come back???
December 16th, 2008 at 10:09 pm
MEH,
So the video was intended to sell the idea of fiat currency, but the carrot was inflation and a return to prosperity. I’m assuming it was part of an attempt to reflate to defeat deflation and restart the economy, just as Ben is doing now, so how did it work out then? Things did improve from ’33 thru 36, I believe, so maybe Ben’s war on deflation will be won, and fairly soon. ???
December 16th, 2008 at 10:11 pm
For the last countless years people have not saved in banks as they did historically. This somewhat forced banks into accepting greater leverage to increase profits (with smaller deposit bases). This is something I hadn’t considered before tonight. Of course it wasn’t the only reason they levered but it’s got to be part of it.
Banks have no money to lend because the deposit base is missing. It doesn’t matter how low the interest rate is. The people buying into the stock market today looking forward for only gains are gravely mistaken.
How many countless people have lost 40-50% in funds this year. After all this is what the redemptions are about. Do you think overnight these people who pulled out with 50% losses are going to dump all in back to the stock market? No way. Especially since there have been two major bubbles within the last 10 years. This is why the money is sitting in treasuries and it ain’t going to move for quite some time.
Lowering the interest rate more just collapses the banks profit margin and makes them even more unwilling to lend. People with higher rate loans will want to refinance at lower rates causing even less profits.
December 16th, 2008 at 10:12 pm
ZIRP still doesn’t make Level 3 assets disappear. Now the Fed has run out of tricks. Quantitative easing is just another phrase for print more money.
The trend is still down based on my three line break charts. The S&P needs to break 968.75 daily and 1099.23 weekly to indicate a change in the trend. Until then I view the rallies as dead cat bounces. My $.02
December 16th, 2008 at 10:18 pm
We have become “Japanzilla”.
(term coined by Steve Barry @ 5:11 on 12/16/08)
December 16th, 2008 at 10:23 pm
@Steve Barry: You really should trademark that term “Japanzilla” or someone else will.
December 16th, 2008 at 10:32 pm
1) UP Volume was 17x greater than DOWN Volume today.
2) Thrust / Trend Model signalled a BUY today on the SPX.
3) Volatility (VIX + PCR) been decreasing for a couple of weeks.
The points indicate a strong probability that this is a tradeable rally, several weeks duration.
StrategicGrowthModel.blogspot.com
December 16th, 2008 at 10:35 pm
A relevant link — Roubini article on deflation.
http://www.taipeitimes.com/News/editorials/archives/2008/12/17/2003431295
December 16th, 2008 at 10:40 pm
WHILE driving to work the other morning, I caught a propaganda blurb from NPR about “quantitative easing”. They made a big deal about “decoding” the concept and had some nice beeping sound effects to cue the listener into a codebreaking mood. I can’t remember exactly what they claimed, but I am pretty sure it was bullshit. As any hillbilly can tell you, big words are the first step to achieving obfuscatory obsequiousness.
A lot of people have been harping on the ‘Debt as a % of GDP’ chart, and I agree that this number cannot be maintained in a declining economy. That’s the macro theme. Combine that with the way credit actually works as opposed to govt/academia wishful thinking and you have a guaranteed continuing collapse for at least the next year. Liquidation, not liquidity, is the only way out of the mythical “trap”. And, of course, time.
So, a continued Xmas rally? It could happen. Doesn’t matter to me as long as I am correctly positioned when the Miracle on Wall Street meets The Ghosts of Depressions Past II.
December 16th, 2008 at 10:41 pm
@ bradp at 8:17 pm
“SRS is killing me, thats what I think about this rally. Credit to Mr Barry for reassessing his l0w-$80’s re-entry point”
I’m with in there with Jeff @ 9:16 “willing to hang in there and be patient”
Only because I’ve edged into SRS on the way down am I not killed (yet).
I missed BR’s reassessment of a low 80′s re-entry point. When/where did he post this? Provide a link?
My gut says to follow SRS as far down as it will go, as there ain’t no other way but further down and out for RE in ’09 and SRS the scythe to reap the whirlwind, UNLESS…. can anybody provide a contrary RE story that eludes Jeff, me and…, who else is on the SRS ‘coaster?
December 16th, 2008 at 10:42 pm
@Mannwich: Japanzilla.com is already registered but has no site. The dot net is a live website.
December 16th, 2008 at 10:48 pm
KJ,
here’s EJ’s take on it, the YouTube, from above, is imbedded in the art.
http://itulip.com/forums/showthread.php?p=66592#post66592
December 16th, 2008 at 10:51 pm
Barry wants links…here is Total Credit, released this week
http://www.federalreserve.gov/releases/z1/Current/accessible/l1.htm
Credit growth slowed to 6% y/y…it was doing over 10% a year…only 1.3& q/q, so definitely slowing. Total credit is 51.8 Trillion…GDP at 14.42 T, so a new record is set…359% of GDP. Getting back to a sustainable 170% will be so painful that I cannot even let myself speculate on it. A drop like that has never been seen in this country. The Fed must engineer a “soft crash” (now that I should trademark).
December 16th, 2008 at 10:54 pm
that should have read 1.3% q/q
December 16th, 2008 at 10:58 pm
Every week is sort of wonder to me. Weeks ago the technical picture suggested an intermediate term bottom in the market and the start of a major degree fourth wave (bear market rally/chopfest). At the time, things are always so terrible….
The optimum target for this bear rally on my charts was either 915 or 1008. How the heck are we going to get to 1008 I thought? I wonder what’s going to happen?
And then it’s just a matter of watching the Mr. Market’s movie play out…..
-Bailout Citibank for 300+bn. Check.
-Force 30 yr. mortgage rates to artificially low levels which ignites a short-lived refi boom and a few new purchases to put a dent in the existing inventory. Check.
-Issue the most bullish FOMC statement possible in front of options expiration to ensure nobody’s Puts get paid off. Check.
And now, sit back and observe all the discretionary money parked in T-Bills and out of the “risky” markets get increasingly agitated as the market rallies 20-30% from the lows….they are all champing at the bit to get into this market as soon as the New Year rolls in.
As the market trades to 1000, we all need to be selling this thing. 1008 is my target for now. I reserve the right to change my mind with new info. But, 1008 was my target last week and it remains a viable technical objective on this wave.
- AT
December 16th, 2008 at 11:10 pm
I don’t think the SPX can make it all the way to 1000 without a correction of at least 8% along the way.
December 16th, 2008 at 11:13 pm
NIKKEI fading after initial rally. Now red. U.S. futures starting to sink. I know that doesn’t mean all that much (in this market, 30 minutes is an eternity) but just thought I’d point that out……..
December 16th, 2008 at 11:14 pm
batmando @ 10:41
Just hope that Bernanke (or Obama) doesn’t start buying up trillions of dollars worth of commercial real estate
December 16th, 2008 at 11:29 pm
@Mark E Hoffer
“how does that all fit together?”
No breadlines but a Fed/Gov backstopped bailout is what I foresee for California in my view. I do not see the Cali congress getting beyond the impasse until things get hard enough that the “read my lips…” Republicans relent.
The Govenator seems to trying to do the best with the hand he has been dealt, but California does not seem to have an executive with a lot of real power. Prop X that limits taxes is going the kick their ass pretty quick. I do not know what Arnold could have done to limit the excess in housing without getting recalled.
In my view California benefited inordinately on the way up… Who were the main buyers of second homes in NV and AZ?
December 16th, 2008 at 11:43 pm
my predictions:
us becomes banana republic
dollar is down, buy euro
don’t short, it is hurting, f%%$*$*ck Fed
buy commodities ng, maybe oil,
not sure about gold since everybody is talking about it, may be real estate :),
buy nasdaq for short term
very soon we’ll find out banks are not lending because of short term memory effect
market crashes in 2010 october big way
most importantly stay in cash, like 50%
December 16th, 2008 at 11:51 pm
@Jurgen
Banks still broke. ZIRP does not clear Level3 nor incentivize investment into banks, so these over leveraged zombies rattle on, but do not loan. Until the broken institutions that Hank and Ben have put on live support go away, the healthy institutions that are not over leveraged can not take their place.
We need capitulation even more in the financial institutions more that in autos. Finance is broken.
December 16th, 2008 at 11:53 pm
@AT, it’d be very nice to short at 1000+ but wouldn’t every professional be shorting it? I’m expecting the turn at 963-968.
December 17th, 2008 at 12:04 am
Blackhalo,
I hear ya, though, especially, this:
http://www.icerocket.com/search?tab=web&fr=h&q=tent+cities+in+california
and, the perennial:
http://www.icerocket.com/search?tab=web&fr=h&q=food+banks+in+california
is starting give “Californication” a whole new twang..
December 17th, 2008 at 12:06 am
Two stories on the Madoff case with big implications:
You [might have] thought you got out but now you could be pulled right back into the middle!
http://www.informationarbitrage.com/2008/12/the-madoff-saga-perils-of-fraudulent-conveyance.html
http://tbm.thebigmoney.com/articles/news/2008/12/16/madoff-madness
December 17th, 2008 at 12:16 am
@mlomker:
good point. levels that often seem obvious very rarely get hit. I’ve got a model that suggests maybe 985? another one that says maybe 930-940 only. I’m going with 1008 because it’s a level that pops out. At this point I must admit I am not long or short the stock market. I’ve sent a note out tonight to clients and friends suggesting taking profits into the 950 area because the risk/reward starts to really change as we move closer to 1000, fwiw. I’m also keeping in mind duration of the move…I think this whole consolidation/chopfest needs to last until at least mid-Jan, so I’m not excited about shorting it at this point.
Mostly just really confused about the interaction between forex/10yr/stocks/oil/gold today….one of the more confusing days I’ve had in a long, long time.
December 17th, 2008 at 12:25 am
Here’s the nutshell transcript of today’s Fed statement: “We’re going to f__k with the markets until they become normally operating.”
Second thing that’s on my mind (and perhaps a few of you can throw a cent or two in on this): With respect to the land of unforeseen consequences, I am scratching my head as to why ANYONE in the country would buy a house right now KNOWING that the rate will very likely be pounded down. I surely must be missing something but I fail to see how home sales won’t dry up significantly (who’s buying?!) while substantially lower rates are dangled out in the future like a carrot on a stick.
OK, one final thought/opinion: Unfortunately, there is only one solution to solving the woes of the economy. That solution is massive amounts of pain and sacrifice. The “Detroit Three” can be handed $100 trillion each from our government. I’m still pretty sure that they will (for the most part) build cars people neither want, nor can afford to finance. I’d rather see them fail now so we can just get it over with. It will happen. It’s simply a matter of how many tax dollars are flushed away before hand.
December 17th, 2008 at 12:28 am
The market can stay irrational longer than you can stay solvent. Could go up to DJ 9500 – 10000 even though future sucks.
December 17th, 2008 at 12:33 am
Same BS.
Different Day.
Only difference is we’re closer to the bottom than we were at the top.
December 17th, 2008 at 12:53 am
The credit kraken has receded for now. We bounce around for a bit and then onto the 200 (~120 $spx) in January, but post-inauguration brings the cold bitch slap of reality – the kraken reemerges. Either that or this is going to be one helluva whipsaw. Long the leveraged etfs if we hold the 50 tmw. Keeping an eye on Israel’s intentions FWIW
December 17th, 2008 at 1:10 am
Everything i learned about financials i got from “Trading Places”…..
We’re STILL in “TURN THOSE MACHINES BACK ON!!” mode unbelievably…..
The powers that be LOVED them some debt Ponzi. That’s all we had–this is all we get–that’s all we got….
Barry, do you still think we’re just gonna have a “recession” here?
Our ships are on the east of the Suez. The Empire’s breaking down and all the warnings, all the counsel of the founders couldn’t keep us from what is to come…..
December 17th, 2008 at 1:27 am
Despite being a big proponent of free markets and elimination of the FED the reality is that the FED has finally done what it should have done a year and a half ago, that is lower the rate to zero. What this does is that it will now force the banks to lend money and encourage risk because they are no longer receiving any interest upon their excess reserves (banks). The FED with all of their shortcomings did not have any other choice, effective Fed Funds have already been below .25% for a week and they will print as much money as necessary, they will target all sorts of collateral and you will see an orderly decline in the dollar in the short run, but in the long run, do not forget that the dollar is the reserve currency of the world, this is what allows us the ability to run deficits and issue bonds at 2%.
The worst has already been accounted for here in the U.S. Trichet is going to have to be carted away and Europe is going to suffer way worse than we will, this is why you have seen the dollar run up recently, but the big money knew what was coming and slammed the dollar over the last week because someone knew that the FED was going to lay the hammer. This dollar decline will not continue. There is so much capital out there that time will slowly encourage confidence, monetary and fiscal policy combined will thwart the death spiral and you will witness savings and our economy rebound, not in a V shape but rather a nice half pipe variety.
Human psychology has forever been changed and risk appetites will not be so voracious, but there will be risk takers willing to step into the water and in times like these where nobody else wants to risk those that do will be heavily rewarded.
Markets overshoot both up and down and traders are all too keen on getting in too early and getting out too late, to be shorting America at this stage is far too late in the game to be rewarded.
Those of you who still live by economics of old better get with modern economics, that which by money is no longer slow in transfer but rather moves at lightning speeds in search of the best performing vehicle to drive. Rules have been rewritten and this is why most academics failed to have seen this coming, failed to figure out the remedy and failed to enact appropriate measures. Their is a reason why there is a 35yr old rocket scientist running the TARP, because the old academics need bifocals.
December 17th, 2008 at 1:35 am
” but there will be risk takers willing to step into the water and in times like these where nobody else wants to risk those that do will be heavily rewarded.”
…Brody, who fears the ocean, heads out to close the beaches, but is intercepted and overruled by the town mayor Larry Vaughn (Murray Hamilton), who fears that reports of a shark attack will ruin the summer tourist season which is the town’s major source of income. The medical examiner says he was wrong about a shark attack and tells Brody that it was a boating accident. Brody reluctantly goes along with this.
Everything i learned about Human psychology i learned from “Jaws” ;)
“Rules have been rewritten and this is why most academics failed to have seen this coming, failed to figure out the remedy and failed to enact appropriate measures. Their is a reason why there is a 35yr old rocket scientist running the TARP, because the old academics need bifocals.”
Jesus keerist MAgne13 did they pull you out of Treasury to post here?
December 17th, 2008 at 3:00 am
and the most disconcerting irony of it all – the REAL MINDS around here (sincere compliment) sense some inevitable disaster as a consequence of the Feds fly-by-night policymaking, yet these Fed chums… through some pounding of a square peg into a round hole, are conceived as the best and the brightest by the enablers of this entire fiasco… the interplay between politico/Fed/power wallstreet is so reminiscent of the vicious circle one observes after a toilet is flushed… so the next question is: How can a plethora of “bright” guys act so foolishly and recklessly in concert (past and present tense); and finally, where will the path of least resistance-policymaking eventually lead us? (back to the flushed toilet metaphor)
December 17th, 2008 at 3:21 am
I posted on SeekingAlpha earlier that I think we’re actually witnessing the bankrupting of the United States. Plain and simple. From the Federal government all the way down to the little guy who’s underwater on his refi. Two years ago (when the campaigning started) I said that it didn’t really matter who won the Presidential election because we’d be broke by then and that with the reckless fiscal policies of the Bush WH/Republican Congress, the next President would be hamstrung by the debt load and future obligations. I had no idea we’d be so far down the rabbit hole this soon.
The market is in denial. The GS move this morning was my confirming indicator. Is it the Santa Claus rally? I don’t know, but consider this: It’s the holiday season next week. Everyone on Wall St has had a front-row seat for the carnage. At this point everyone just wants to be able to buy their kids the GI Joe with the Kung Fu grip. Denial gets them there until ’09.
To wit, I’m more convinced than ever that 99.99% of the people out there still don’t understand what’s going on. Sure, they can parrot what they read in the newspaper or hear on the news, but they’re not capable of the level of comprehension that leads to the creation of derivative ideas that further the discussion. Even 50% of the people that have studied finance and economics don’t get it. They’re all just hoping that sometime after January 20th, they’re going to wake up and see it was all a bad dream. Talk about a rude awakening.
On the other hand Paulson just yesterday said on CNBC:
BARTIROMO: WE HAVE SEEN AT LEAST 20 BANKS CERTAINLY IN THE UNITED STATES FAIL IN 2008. HOW MANY MORE BANKS DO YOU EXPECT TO FAIL?
PAULSON: I’M EXPECTING NO OTHER MAJOR FINANCIAL INSTITUTIONS TO FAIL.
Interesting declarative… although I guess Mr. “Sub-prime appears to be contained” has no qualms about saying one thing one week and something else a month later.
As an aside -
I’m sure Neel is a smart guy, but I’m not sure that his past really qualifies him to be running the TARP. Guys like this are a dime a dozen. I’d be more inclined to propose someone with a little more experience where the rubber hits the road… even for the temporary appointment. This guy is the best Paulson could find? Really?? Paulson picking someone from GS… kind of like using your daughter as your compliance officer… we know where that leads.
Engineer … went to Wharton for an MBA… then to Goldman Sachs and finally Treasury. Pretty standard stuff really.
http://en.wikipedia.org/wiki/Neel_Kashkari
December 17th, 2008 at 3:36 am
December 16, 2008, 2:47 PM
ZIRP!
That’s zero interest rate policy. And it has arrived. America has turned Japanese.
This is the thing I’ve been afraid of ever since I realized that Japan really was in the dreaded, possibly mythical liquidity trap. You can read my 1998 Brookings Paper on the issue here.
Incidentally, there were a bunch of us at Princeton worrying about the Japan problem in the early years of this decade. I was one; Lars Svensson, currently at Sweden’s Riksbank, was another; a third was a guy named Ben Bernanke. I wonder whatever happened to him?
Seriously, we are in very deep trouble. Getting out of this will require a lot of creativity, and maybe some luck too.
http://krugman.blogs.nytimes.com/
Hello. One guy got the Nobel Prize-the other got to destroy the united states…..
Krugman won, i believe, for his seminal work “The Mechanism Of Luck, In a Post Keynesian Economy” pfffft
December 17th, 2008 at 9:31 am
If the year does not end with SP > 950 we will have another “October dive” in January. People get their quarterly 401K statements in the first week of January (just as they got them in the first week of October). If they see another big drop in their balance and hear all that “end of the year Armageddon talk” on the TV, those who didn’t panik in the first two weeks of October will panik in January. If we end with SP > 1050 they will all believe that the worst is behind us and we may even get a solid rally in January.
December 17th, 2008 at 10:04 am
jojo, thanks for those!
December 17th, 2008 at 10:15 am
Bernanke is pumping the bicycle tire pump for all its worth, but that tire with the huge blowout still refuses to be reinflated.
The rally is WS’ way of throwing confetti in the air for a couple of hours.
December 17th, 2008 at 10:19 am
All the major indexes moved above the 50 dma yesterday and are holding above even with today’s move down. Don’t count this rally out.
December 17th, 2008 at 11:43 am
@ Hoffer
Thanks for pointing out Janszen’s blog posting. I wonder if he still feels that this is FIRE’s first near death experience (ie another bubble gets things righted before the big one) vs its only.
ps – Janszen’s Harpers piece in March rocked my world – unfortunately i thought a %25 decline WAS a near death experience…
December 17th, 2008 at 4:39 pm
This rally looks horrible. It looks exactly like the one that ended in May and the one that ended in August.
The out look for future earnings is awful. Who are going to be the buyers this time round? The Government?
The Government debt is horrible too and promised to get much worse. The smart money people are the people who still have money. The people who have it are getting fewer and fewer and smarter and smarter. They long since gave up listening to the FED or any other marketing agency.
As for currency there is so much uncertainty about how that is going to pan out. I propose a very large wide range trade as opinion ebbs and flows in the gigantic international Bath with liberal quantities splashing out at each end. THose left with money when the spashing stops will be the lucky ones.
Hey I like that analogy. Think of Trichet and Bernanki as two infants in a Bath playing with the resonant frequency of sloshing water and seeing how much they can empty out each end.