Hey kids, its time for a Thursday nite open thread.

Anything goes, no subject off limits — the only requirements being that comments are intelligent or informative or amusing.


What say ye?

Category: Weblogs

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

174 Responses to “Dow Closes Under 7500”

  1. The savage losses of individual investors at the hands of Wall Street reiterate this is a game of fools. When will America learn? you got screwed just like the Gipsy pickpocket did you at the fair.
    Florida Real Estate Blog

  2. Bob_in_MA says:

    “….you got screwed just like the Gipsy pickpocket did you at the fair.”

    Not if you’re short equities and long gold… ;-)

    Barry, Is this a classic Dow Theory confirmation episode? The transportations are also at new lows…

    ~~~

    BR: I was never a huge Dow Theory adherent.

    Michael Kahn at Barron’s writes tonite: Be Leery of Dow Theory

    DESPITE THE ARGUMENT THAT THE Dow Jones Industrial Average represents a huge percentage of the entire stock market’s capitalization, it has become nearly irrelevant as a benchmark. Bring on the hate mail. With five of its 30 members trading at 10 dollars per share or less and two teetering on the brink of bankruptcy, a blue-chip index this is not.

    Because of this, I contend that followers of Dow Theory, the century-old methodology that charts the relationship between the Dow Industrials and Dow Transports, should not panic at the new sell signal that was flashed Thursday

    The theory says that an important new low in one index, when confirmed with an important new low in the other, indicates that the primary trend has changed to bearish.

    I will let others argue when the sell signal to kick off the current bear market was first given. Since the Transports have already moved below their November low, what is on the table now, should the Industrials close below 7552.29 (at 7535 at time of writing), is a continuation signal of the current bear market. In other words, a new closing low in the Industrials suggests much lower prices are coming.

    While I cannot argue with a time-tested method such as this, I can argue with its inputs. And I am not alone in questioning the economic underpinnings of both indexes. Are the Industrials truly industrial when their ranks are filled with retail, financial and technology stocks? And in the current information age, should not Internet infrastructure and telecom companies be represented in the Transports? After all, they deliver products such as the Website [Dow Jones] you are reading right now.

  3. rktbrkr says:

    We broke the 2002 low, it feels like the 1932 low

  4. Steve Barry says:

    Kudlow should re-invent himself as a populist watchdog who pushes to get guys like Madoff or allegedly Stanford thrown in jail. I actually like that Larry.

    This Stanford guy was very brazen if he is indeed a fraud…very out in the open. All predictable, after Bernie started this off. This all will put the final nail in the coffin of the hedge fund industry and they will sell equities at firesale prices…it will be as if the stock market is foreclosed on. There is no bottom for the market…and I mean NONE. Given the coming depression, housing debacle, record corporate spreads, plummeting earnings, retiring boomers, frauds, etc., we must see all-time low valuations. Slap a P/E of 7 on $35 earnings and the S&P trades at 245.

  5. auden5 says:

    Seeing GE and Wells Fargo at such low levels should make younger investors salivate. Unfortunately, the people who have the money to invest are spooked and waiting on the sidelines. No amount of prodding or stimulus seems to convince them to get back in the pool.

    The recession started in Dec 2007. By June 2008, the stock market will probably increase. For now, volatility is the name of the game. It’s unfortunate, because the blue chips are out there at rock bottom prices. It’s almost like being the prettiest woman at a gay bar–sure, you know you look good, but your target audience doesn’t care. Am I right, Barry?

    Disclosure: long WFC and GE.

  6. longshort says:

    Seems like we (US, Europe) are heading into a Japan like multi year slowdown. The US consumer is dead and has no option but to SAVE.

  7. Bob_in_MA says:

    auden5, might be time to dump the WFC. You have conservative republicans calling for the nationalization of the banks…

  8. Strassertalk says:

    According to the DOW theory, today’s DJIA close has now confirmed the low in the Transportation average; thus, out of all equities.

  9. trackerman says:

    While consumers are fighting their way out of mortgage loan difficultiess, it seems that the next big problem area will be credit cards. It seems that both Capital One Bank and Discover Card are making HUGE interest rate hikes to their customers irregardless of credit history. Capital One (who received our TARP money) is now hiking rates on good customers from 9% to 15.9% and 11% to 17.9% wth no recourse except payoff or cancel the card. Discover is similarly raising their rates from 7% to 11% with similar recourse. I have never experienced this kind of rate hikes for good customers. For customers with large balances, this creates substantial increases in the finance charges. Previously, all one had to do was change cards. But with the probability that all banks will be upping rates, this may not ba a viable option. So, as the banks cave in to Washington about aiding mortgagees, they at the same time will try to gouge their credit card customers.

    A lot of good the congress is. They pass a credit card bill and give the banks 18 months to gouge everyone before the law takes effect. We need more bankers to run the country!!

  10. Paul Jones says:

    Rick Santelli is the man; it’s good that people are finally giving him his props.

    Obama’s “plans” are absolute trash.

  11. Gavshire Hathaway says:

    Barry,
    A while back I believe you posted some charts of all of the level three assets across the financial and insurance industries. But I haven’t seen those updated in a long time. One of these days could you post a refresh?

    I know I’d really appreciate it!!

  12. HCF says:

    Triage has to happen in the financial sector, lest the market kills everything first. Right now, many but not all banks are infected with a terminal disease. Let’s stop pretending and euthanize them now before they really do infect everything else… Not EVERYTHING is sick….. at least not yet.

    HCF

  13. JustinTheSkeptic says:

    BR, save the last shot for me!

  14. JohnDoe says:

    Stop calling us kids! I’m the only kid in here.

    P.S. How do I change my ridiculous password on this thing?

  15. Clem Stone says:

    Dow Theory triggers at -50%….that’s what you call a lagging indicator.

  16. Consider for example, the price of an F1 Ferrari Coupe – MSRP $312k. However, if Countrywide Ferrari Finance suddenly says they will finance up to 120% of the value with an interest only loan over 15 years with neg amortization and a monthly payment of just $365 through 2014, guess what happens?

    DEMAND SOARS and people that used to buy Hyundai’s are lining up to buy Ferrari’s. The going price jumps from $312k to $1.1 million because of demand and cheap financing. If demand suddenly slips because of the stock market, job market or because we got 1.3 cm of snow in NYC — the price suddenly falls to $850k. Should we intervene to prevent millions of Americans from losing their Ferrari’s? Of course not. They made a flawed financial decision based on poor judgement and loose lending terms.

    Now insert a 4 bdrm, 1,500 sq ft ranch in Phoenix for Ferrari’s in the paragraph above. Happy days!

    Separately, I always find this period of the year very interesting. It’s too early to hear warning about Q1, but companies will start doing stealth warnings (stop returning calls, the words remain the same from the CEO but the tone changes, etc).

  17. Chief Tomahawk says:

    Paul Jones, yes, Santelli was the man today. But it’s short-sighted to say it’s only Obama, or that it was only Bush. The banking oligarchs took us down this road and they’re still calling the shots.

  18. larster says:

    Looks like a fair amount of panic in the air. Everyone griping about this plan and that plan, but offering no solutions. That is fear. Also a lot of Santelli like wack outs on the blogs, etc. This tells me that they ae experiencing bad trading days and are firing at all targets. Couldn’t be them. When there are no clear solutions, what can hold the markets up?

  19. Mike C says:

    Regarding Dow Theory sell signal:

    http://online.barrons.com/article/SB123507151266125321.html

    “Be Leery of Dow Theory “

  20. mlomker says:

    “Dow Theory triggers at -50%….that’s what you call a lagging indicator”

    lol. No, it was reconfirmed. At least I don’t have to listen to any more bullish bull from Richard Russell’s newsletter. :D

  21. Clem Stone says:

    How about crash the Ferrari (i.e. burn the house) and collect the insurance proceeds. Maybe that will be the next new wave. Which gets me to thinking about the insurance value of my house. Is it dropping? If so, why aren’t my rates dropping?

  22. spudvol says:

    Just saw this posted in the comments over at CR.

    Ten years ago this week…

    http://11.media.tumblr.com/2m8BXUfrik3y5ec8y8MX8Z7uo1_500.jpg

  23. chapter13 says:

    I don’t think the extent that rising real estate prices backstopped the collectibility of credit card debt has been fully appreciated. I think the major credit card banks will be utterly destroyed. The poor just default on debt, it’s the middle class who files bankruptcy and it was thought that the 2005 reforms had them trapped. But guess what? With no equity in your house and an inability to move, and an inability to borrow on the home to pay the debt, and 401k money shielded from creditors, what leverage do creditors really have? Wage garnishment? OK, then I’ll file bankruptcy if you make me, then I’ll be able to lien strip the mortgage (ch13,soon) or wipe out the debt (ch7) anyway. This has a long ways to play out.

  24. brentg1117 says:

    how long’s it been since dow jones made a change to the djia composition?…..at least a year ago, no? geez you’ve got 4 stocks that need to be tossed NOW and another 4 or 5 that look ripe in the next month or so. how distorted are they going to let this thing get and does anyone know if its been allowed to get this bad anytime in history?

  25. @ Clem Stone – I hear you on homeowner’s insurance. The replacement cost per square foot is down substantially from last year when copper, plywood, and sheetrock were soaring. Combine that with falling labor costs and I argued with my agent that my replacement cost could be down as much at 20% from last year and thus, I should lower my insured value.

    He hurried off to another client before I could get a straight answer on what it would do to my premiums if I lowered my coverage (all other things equal).

  26. Mannwich says:

    Picked up some MON and PBR (and more MOS) over the past couple of days preparing for re-flation if/when it happens. Still sticking with my QID, SRS, EEV, and FAZ, although I lightened up a bit on the last one yesterday.

    I realized something about myself today. Since I finally switched from CNBC to Bloomberg last week, I no longer find myself muttering obsenities at the TV. It’s like I’ve been cured of CNBC turret’s syndrome. Bloomie isn’t perfect but the difference is pretty striking. Far less bombast, circus atomosphere, and no idiotic cast of thousands on the set. I feel like a healthier person as a result. Why didn’t I switch sooner?

  27. AGG says:

    THIS is the greatest problem. Every other facet of the present world economy pales in significance. Even wars, entitlement programs, pension funds and stock markets don’t add up to a hill of beans in comparison.

    By Matthew Leising

    Feb. 19 (Bloomberg) — U.S., U.K., and European regulators are in talks to jointly regulate the $28 trillion credit-default swap market, the Federal Reserve said today.

    Time for some sunshine, folks.

  28. deanscamaro says:

    Does anybody remember the Market as it used to be? It seems like ages ago when I actually felt good about trying to pick a possible winner. Now it is just look, get slapped in the face and go home in shame. WHEW!

  29. Ben says:

    I’d be more worried if the S&P broke its low. I think that is the more relevant index one should focus on. Seems likely we actually have a major reversal tomorrow if we can succesfully test that low. This retest, if it is that, has been on relatively low volume. I still would contend that like in the Great Depression, we are likely to have a big sucker’s rally before we head lower. I don’t think there’s a precedent in market history for a 50% crash and then immediately lower a few months later without at least a big bear market rally. I don’t think the dead cat bounce in December really counts.

  30. globaleyes says:

    Deficit Spending is front-loaded joy and back-loaded pain. What we’re seeing is the downside of the most leveraged society in America’s history. Here’s the good news: failure precedes success – ask any winner.

  31. Sam-I-am says:

    It is the travesty that the retail investor has gotten and will continue to get killed in the shenanigans of Wall Street. Wall Street and its participants will survive to bring us another debacle down the line but I wonder the fate of the investor. As someone who has been directly affected by this meltdown, I have taken it upon myself to read between the lines and I sit back in amazement at the so called market “gurus” on the networks calling a buying opportunity of a lifetime since the fall. I wonder which crystal ball they use. I can only feel sorry for their clients. Last time I checked, housing is still a mess, no one has a clue as to how to tackle the CDS market both here and in Europe, Consumer spending has fallen off the cliff, savings are going up, manufacturing is down, the dollar is on its last legs, eastern europe and the PIGS are near collapsing. Where does one see the silver lining? Perhaps, all of this can be explained by “the market is forward looking”. Do I really believe that in this environment I can see the turn in earnings on the horizon? Don’t get me wrong, I am still a bull at heart but for now I have to turn in my horns for some long claws!!Can we not have a few Rick Santelli’s for the equity investor?

  32. Marcus Aurelius says:

    karlhausrealty Says (at 7:14 pm)

    “you got screwed just like the Gipsy pickpocket did you at the fair.
    Florida Real Estate Blog”

    I’m sure we’d have done better investing in FL real estate, where the web site says: “Your gateway to a new life,” and which features loads of REO properties. I shit you not – click the link. What a hoot.

  33. Broken says:

    Santelli is an idiot.

    There he is ranting about stimulus from a trading floor that would be SHUT DOWN but for TARP. How many hours a day do traders work? Maybe they should try 60+ hour weeks and then get laid of.

    I look forward to the day all traders are replaced with software. No value-added whatsoever.

  34. theherd says:

    Shopping Malls and 401Ks/IRAs going the way of the dodo birds. Who will drive the markets in the future as Mom and Pop flee the markets. The younger generation will certainly shy away.

  35. Lunch Meat says:

    Bad $ news today, but here’s some broke-ness related humor that might help, or not.

  36. Graphite says:

    Seeing GE and Wells Fargo at such low levels should make younger investors salivate.

    Yeah, I’m salivating over the huge gains my puts will yield when Jack Welch’s Great Earnings Manipulation Machine (GE Capital) finally blows up the whole company. The stock is trading like AIG in early September, personally that does not make me “salivate” except perhaps in preparation to retch.

    There he is ranting about stimulus from a trading floor that would be SHUT DOWN but for TARP. How many hours a day do traders work? Maybe they should try 60+ hour weeks and then get laid of.

    Your entire post betrays how utterly without a clue you are, from your take on the financial strength of the futures markets to your absurd opinion on the working hours of traders. And I’m looking forward to when we invent AI too, but until that happens human traders are here to stay.

  37. bcasey says:

    I say we stop sending dollars and instead bring pitchforks.

  38. cewing says:

    To all the posters who are calling for Obama to be impeached and declaring his actions stink, I want to ask…you got a better idea?

    Seriously. I’ve been thinking a lot about what I would do if I was the Commander in Chief and had to deal with this. When I read the message boards I see a lot of pissing and moaning but no one’s offering up any REAL, VIABLE suggestions as to what the President should do differently.

    I’d like to hear from these brilliant minds who are so sure of Obama’s ineptitude.

  39. Graphite says:

    I don’t think there’s a precedent in market history for a 50% crash and then immediately lower a few months later without at least a big bear market rally.

    Check out tulip mania or the South Sea bubble. I think we will see a big bear market rally some time these year, but the market appears to need to go lower to compress the spring for that launch.

  40. Strassertalk says:

    Any gunowners beware, especially in Illinois as before the Illinois House of Rep is HB0687, a Firearm Owners ID-Insurance bill, which states “that any person who owns a firearm in this State shall maintain a policy of liability insurance in the amount of at least $1,000,000 specifically covering any damages resulting from negligent or willful acts involving the use of such firearm while it is owned by such person.”

    Should you not comply, “the Department of State Police shall revoke and seize a Firearm Owner’s Identification Card,” thus making the the firearm illegal and the owner a criminal.

    http://illinoiscarry.com/forum/index.php?s=6f8dd911dbf6f2465c7049f40091c461&showtopic=14542&st=0&p=140681&#entry140681

    So the fear that Obama would ban handguns, likely not, but this is another way of going after the second amendment.

  41. Bud Fox says:

    Broken
    The CME did not get tarp and most of the traders on that floor don’t work for tarped firms…good grief

  42. DC says:

    Santelli’s the new Joe the Plumber. Maybe Santelli actually knows plumbing, which could be helpful if his dreams come true and the “free market” gets to run its course.

    My belief is that Santelli’s rant masks his underlying panic. He’s a smart guy (and a smartass and frequently a douchebag) so he knows that Citi and others are insolvent. Whether some joker gets help with his mortgage is as relevant to the big picture as whether Erin Burnett wears flats or heels.

    The basic question is how to euthanize the big banks. Do you want medical intervention (e.g. the government excises the toxic assets) or do you simply let nature take its course (the banks eat the assets and they die).

    In the grand scheme, Rick can throw all the tea parties he wants but by the time he assembles his rabble the S&P could be at 500. His 15 minutes of fame may mark the pinnacle of the CNBC circus and the beginning of the next leg down.

  43. Broken says:

    Bud Fox:

    What would the CME be trading if all the banks were smoking holes in the ground? Beaver-skins? Rocks?

  44. ironman says:

    “Anything goes, no subject off limits — the only requirements being that comments are intelligent or informative or amusing.”

    How do you feel about provocative? ;-)

    Dow Closes Under 7500

    Predictable.

  45. johnbougearel says:

    “Thank God Equity Investors Can Put Obama’s 1st 30 days Behind Us”

    A client wrote this morning “In everything I read there is definite sentiment of a tech[nical] rally of 25-30% for the Spring….” and then went on to draw parallels between the 1930’s, Amity Schlaes The Forgotten Man, and today, or simply Obama and FDR. I noted that the US today should mirror the Great Depression of Great Britain in the 1930’s and not the Great Depression in the US, simply because the US role in the global markets has changed to be like that of Great Britain in the 1930’s.

    My reply was that we were inside the 1st 100 days and I am stunned how badly Obama has botched things up inside the only first 30 days. The political and credibility capital that Obama has squandered astounds me. I then went on to discuss market sentiment and 78% retracements (what has been most on my mind in the latter half of this week), or what can be considered a snapshot of behavioral finance modeling at work.

    “By the time a market makes a 78% retracement and down – 18% like we have in the SP500 from the Jan 6 year high, it literally puts our backs up to the wall as far as testing our optimism for the new administration. Psychology, when it reaches the 78% retracement is near its breaking point. We either get a shift back towards optimism reflected by a move back to the upside in the stock market and away from the pessimism that has gripped equity investors since Jan 6, or, if there is no considerable shift in sentiment, we head for the crapper.

    The line in the sand is being drawn at not only the 78% retrace at 778 in the SP500, but the 2002 year low at 767. It makes punting and going long down here about as low risk as you can get, with absolute clarity as to the exit strategy. These patterns can make for great trades and sometimes great investments (if talking about stocks you are looking to hold a yr or more). In short, this real live example of using pattern recognition as a risk management tool is worth remembering if technical analysis is not your forte.

    There are several other technical factors bolstering the 78% triangle pattern that suggests the stock market is setting a secondary low at the moment. The more factors that support a pattern recognition such as a secondary low consideration, the stronger the probability that an actual secondary low is being set as I write.

    First, note the 32 day 27% rally into Jan 6. Not also the 32 day 18% decline into Feb 19. This is a 100% time retracement. Time vibrations are often found around 100% time retracements. Then note how both the 27% rally and 18% decline are both multiples of 9. This is mathematically in accordance with natural harmonics ~ a two-thirds price retracement at the 100% time retracement.

    So, these are a few reasons to suspect a secondary low is forming and that a significant vibration to the upside may occur from here. This will require a move towards a more positive shift in market sentiment on behalf of market participants. If there is no positive shift in sentiment here, the market vibration off this 100% time retracement will prove lackluster and ultimately yield to lower prices. For this reason, I must reiterate once again the market is still aggressively bearish below the swing hi at 876, and the quarterly moving average now at 860.

  46. Graphite says:

    I would actually bet that Santelli realizes CNBC is probably on its way out and that the financial markets are in serious trouble, and wants to say his piece and try to influence the debate in a positive direction before we finally center all decision-making in Washington, DC. Funny how having things like principles and an ideology can help you see the bigger picture like that.

    Where does this idea come from that the free market, if allowed to run its course, would spiral down to zero? Has that ever happened? Is there any historical evidence to suggest it’s the case? It’s like Jim Rogers says, banking sectors have been going bankrupt for hundreds of years, it was only in the last century or the last few decades that we lost the intestinal fortitude to let capitalism weed out the failures.

  47. TG Randini says:

    (Been gone from here since November… wordpress didn’t like me for some reason… but…)

    I’m back.

    So what’s new? Obama’s in… Palin’s not. The Fed/Treasury seems like the old times, though. Clueless.

    I had predicted at SPX 1100 that 900 was the optimistic high and 350 was the pessissmistic low.

    Hope the longs who were moaning about SPX at 1100 and waiting for a bounce to get out… took my advice… “get out while the gettin’s good”.

    My strategy in Oct/Nov/Dec was to buy and write deep in-the-money calls. It worked out well and the VIX paid off for me. I would have gone short but I am absolutely clueless as to how the average investor thinks.

    Made some money in the short 30yr ETF but chickened out when it broke above 3.something.

    12 Month Predictions?

    The 10′s/30′s rates will go up… but it will be a wild ride… deflation fears vs. the printing press.

    The $? The thing about printing presses is this: if everyone has one… then no currency is devalued against any other currency if they’re all running the presses full tilt boogie.

    Au and Oil will rise.

    The SPX will rally when they nationalize/pre-privatize the sink-hole banks. And then flounder. The year will end at 762.

    So…. long Au… long Oil… short 10/30′s… deep in the money calls on new SPX’s.

    But beware… (embarassing disclosure)… I LOST MONEY LAST YEAR. My portfolio was down 3.2%… so what do I know?

    Always,
    TG Randini

  48. Graphite says:

    What would the CME be trading if all the banks were smoking holes in the ground? Beaver-skins? Rocks?

    Yeah, I’m sure everyone would stop using oil and food and lumber and stop buying government bonds instantly.

    Yes, trading volumes and the variety of contracts on the futures exchanges are probably headed for a nosedive, but that’s a function of the ongoing de-financialization of the economy and has nothing to do with whether particular bailouts pass or don’t pass.

    If the FDIC can’t shepherd our banking sector through bankruptcies then why does it even exist in the first place?

  49. Mannwich says:

    Nobody answered my inquiry in the last thread (not that I asked you too), but what about Santelli’s thoughts about GE’s recent/ongoing bailout and its situation? How does he square that circle? Is he one of those that thinks it’s somehow different with GE because that’s his employer? I would love for someone to ask him that question. Without gov’t assistance for his company, he may not have a job but when disaster hits others he’s squarely against it? Of course he is…..

  50. Moneymaven says:

    Here is a question for ye mavens: UYG is the ETF that tracks the Dow US Financial Index. Suppose the companies that presently comprise the US Financial Index all decline to zero – UYG goes to zero too. It doesn’t have far to go now, having closed today at $2.23. Once the losers are nationalized, or go bankrupt, however, they exit the Index. As their stock falls, their impact on the Index decreases in any event. But so long as the US financial system doesn’t disappear – there will be new banks, and probably survivors among the existing companies. Even if every existing financial institution in America were to be wiped out – provided we continue to have a financial system, and a US Financial Index, the proportionate impact on the Index of any winners will increase as the value of the losers declines. In other words, at this point, UYG is less an investment in the existing financial institutions represented by the Index, and more a long-term option on the survival of a financial system. Am I missing something?

  51. johnbougearel says:

    What Does a Close at 778 Mean? (charts not included here)

    This is the question that has been put to me to answer as the market came to a close at 779 this afternoon. This is another way of asking if a close at or below the 78% retracement is signaling further weakness. The answer is that a one day close at or below the 78% retrace is signaling weakness. But, this can be a false signal, for that reason, technicians filter that rule of weakness by looking for confirmation, which in this case would be two consecutive daily lower closes below the 78% retracement. However, I should like to point out that I do not favor such rules as anything more than guidelines. And initiating a trade on such a signal in the direction of an already extended trend could be suicide for a trader or investor. One day, one week or one month’s events can create incredible momentum either to the upside or to the downside, and then suddenly we see the whole trend reverse, with or without any warning and much of a shift in sentiment at the time it happens.

    We are on thin ice to be sure (a reason to have some hedge on), but a close back inside yd’s range, above yd’s lows at 776 is a net positive. A close near unchanged is also a net positive. Over the years, the big boys have hammered out huge intermediate highs and lows at or near the 75 handle (in this case the 775 handle). The fact that the SP500 has been hovering around here for three solid days straight suggests no one wants to be the one to push this below the 2002 bear market lows at 767-778.

    The big boys tend to carve out multi-day intermediate highs or lows this very way. Meanwhile, some downside mo has been burnt off this week while hammering away at 767-778, this is another possible net positive. To push the market below 767, (which could happen) we’d probably have to have another f-up at the Barnum and Bailey circus on Capitol Hill or some epiphany on the major problems surrounding the trajectory of actual SP500 earnings in Q4 08 and where it is headed in Q1 09.

    Also note the horizontals on chart above at 775, 1175 and 1575. These numbers carry numerological significance. It is a long story that starts with Dow 1929 high at 386 (a multiple of 39). 390 x 2 = 780, 390 x 3 = 1170, and 390 x 4 = 1156….There is more numerology than that but, not now….The important thing to note right now is how the big boys play the game at these big levels. It sometimes takes the big boys 3 to 4 months to hammer out a high or low at these levels. Note the 4 month top at 1175 between Dec 01 and March 02, and then the three month bottom at 775 between July to Oct 02.

    If we fast forward to 2007 and 2009 (next chart), we see the same behavior playing out. It took 64 days high to high to hammer out the high at roughly 1575 between July and Oct 2007. Roughly that was a three month double top. Then note that how the July 07 high spent 5 days churning near 1575, and how the Oct 07 high spent 7 days churning at 1575 before letting go at the onset of the Q3 07 earnings season, when financials first stumbled badly. Guess what is happening now? Now the SP500 is potentially churning out a 64 day low to low cycle between Nov 2008 and Feb 2009. Yep, today was the 64th td from the November low. 32 tds up, and 32 tds down into Thursday Feb 19. Note the narrow range churning that has taken place over the past three trading days—very much like the narrow range churn when the SP500 was on its highs in July and Oct 2007. This is what we call a potential “tell” or signature high or low.

    Now, though I did not mention this before, I should like to point out that the Oct 2002 low and the October 2007 high both occurred on a Thursday. Incidental perhaps that today happens to also be a Thursday? Could be, but it is very much worth paying attention to as sentiment is extremely bearish among market participants—including yours truly. We are all leaning pretty heavily towards the SP500 just capitulating towards 300-450 from today’s 775. Incidentally, the next harmonic below 775 is 390, which doevetails with the 1992 low. So, am I particularly anxious to piss on the market at 775 today? Not so much so. I’d much prefer pissing on it from 1175-ish in 2009, which seems a pipedream at the moment to be sure. If we could only be so lucky!

  52. johnbougearel says:

    I will send the charts referenced above to Barry if he wishes to post them in its entirety.

  53. Graphite says:

    Nobody answered my inquiry in the last thread (not that I asked you too), but what about Santelli’s thoughts about GE’s recent/ongoing bailout and its situation? How does he square that circle? Is he one of those that thinks it’s somehow different with GE because that’s his employer? I would love for someone to ask him that question.

    Is there any reason whatsoever to presume Santelli is dishonest or a hypocrite, or is that just a reason not to listen to what he’s saying? Why insinuate something for which you apparently have no evidence? What if he actually said, “sure, I might be out of a job without government bailouts, but so be it.” Would you give his ideas a hearing then or just go grasping for new ad hominems with which to dismiss him?

  54. johnbougearel says:

    Mannwich,

    LOL at curing your CNBC Turret’s Syndrome. You are one step removed from shutting down daytime TV altogether, spinning some classical jazz standards and reaching Nirvana during the day…

  55. Mannwich says:

    @Graphite: I actually like Santelli. He’s the only one on CNBC that I think is regularly honest, so I respect and appreciate his views. However, I do think he’s stoking the flames here in a very dangerous, divisive and irresponsible way, and if he’s going to do that he should address the conflict in his views against bailouts for homowners when compared to bailouts for GE, the entity that writes his checks. That’s all I’m saying. His company, and therefore by extension his job, is theoretically still alive due to taxpayer bailout. What are his views on that?

  56. Broken says:

    @Graphite:

    “Where does this idea come from that the free market, if allowed to run its course, would spiral down to zero? Has that ever happened? Is there any historical evidence to suggest it’s the case?”

    No, the historical evidence shows the free market won’t go to zero. Just -85%.

    “Yeah, I’m sure everyone would stop using oil and food and lumber and stop buying government bonds instantly.”

    With what money would they be buying? CME trading volume is down 40% YoY even with TARP.

  57. Mannwich says:

    @johnb: I’ve also taken to listening to Pandora and my old music from my single days on I-Tunes. I tell you, it’s done wonders for my psyche.

  58. greg says:

    Mannwich, GE is not Rick Santellis’ employer, and I would guess that it wouldn’t matter to him either way. Smart guys like him usually call all the shots, either for whomever they work for at the moment, or for someone else.

  59. Broken says:

    Tomorrow is option expire day. Any bets the close is slightly up?

  60. pmorrisonfl says:

    I read an interesting Kevin Kelly article on ‘Amish Hackers’

    http://www.kk.org/thetechnium/archives/2009/02/amish_hackers_a.php

    There’s more to them than a stereotype, and it might be worth keeping an eye on how they live now, as they may have more company in the medium to longer term :)

  61. Mannwich says:

    @greg: GE owns NBC, and by extension, CNBC, no?

  62. Graphite says:

    No, the historical evidence shows the free market won’t go to zero. Just -85%.

    That’s where the stock market could go, not economic activity. History is also apparently devoid of evidence of government efficacy in propping up the stock market. They’re great at picking winners and losers, though.

  63. Mannwich says:

    Let the festivities begin…..

    NEWS ALERTfrom The Wall Street Journal Feb. 19, 2009 Bank of America Chairman and Chief Executive Kenneth Lewis was issued a subpoena by New York State Attorney General Andrew Cuomo, who is investigating whether the bank withheld information from investors in violation of state law. Mr. Lewis is the highest-profile subject of Mr. Cuomo’s investigation into the Charlotte, N.C., bank’s purchase of Merrill Lynch. Mr. Cuomo’s office is trying to determine if investors were misled about the depth of Merrill’s losses in late 2008 and whether details of the bonuses to Merrill employees, contained in a nonpublic document, should have been disclosed to investors. Investigators also took testimony from former Merrill CEO John Thain on Thursday.

  64. Graphite says:

    @Mannwich,

    Fair point, I reacted too hastily. Forgive me, but it seems like every time someone comes out and says “let the free market work” there’s a whole army of naysayers looking for some way that they’re just being a hypocrite and don’t really believe what they’re saying. Granted, a lot of the people who _called_ themselves free marketeers really weren’t (Greenspan’s at the top of that list), but it’s no reason to assume the entire cohort is corrupt.

  65. shawtlow says:

    My alternative to Obama’s plan:

    President Obama, instead of rewarding the speculative risk taking homebuyers that purchased homes they could not afford, let the free market work and let housing prices correct to their natural level so that people like myself that didn’t speculate on real estate and didn’t chase absurd prices can buy a reasonably priced home. Sure, home prices are much lower than 2006, but they are still only down to 2005 prices here in Chicago and the median home price to median income is still above average. The problem with assisting homeowners that cannot afford their mortage is that the redefault rate is 40% when you help these people out and helping them out only delays the inevitable correction in real estate prices. Look at California, which has experienced one of the largest declines in home prices, and home sales are BOOMING! Duuuhh, there’s the solution, let prices drop and the buyers will come. Let’s face it, if you have a mortgage equal to more than 40% of your income, you shouldn’t own that house in the first place.
    So my suggestion to Obama is to let the foreclosures happen but provide incentives and relief to the lenders if they agree to rent the home back to the resident at a rate equal to the lower of (1) the current market rate for rent or (2) 31% of the mortgage. If the resident cannot afford the amount, then provide the resident with assistance (including financial) finding a new house to rent. In addition, the government should create a website that lists all houses owned by the banks that are for rent or for sale. And if the banks sell a foreclosed home that they now own, they will be required to give the resident two months notice and 100% asssistance in finding a new place to live. I think this is an excellent solution because it also makes residents more flexible to job opportunities outside of their immediate region and it creates an open and visible market for foreclosures.

    Also, let’s not forget that many of the people having trouble with mortgage payments are the ones that took several hundred thousand dollars of equity out of their house to buy bling and live above their means. For example, I know a family that purchased a meager home in a rapidly appreciating neighborhood in 2004 for $300k and they refinanced their entire mortgage and received $200k in cash which was spent on a Range Rover and lots of other bling. Now that family has a $500k mortgage that they cannot afford and will probably receive assistance from the government. Bailing this family out sounds like rewarding spending, speculation and over indulgence and living beyond one’s means. Also, this family’s combined income is $70k!

  66. SFClaws says:

    Hello all, hold you in high regard. Been lurking a while. Currently 90% cash (“stable funds” in 401k’s) and 10% long trading accounts. This has become 1 of 4 regular sites: TBP, Minyanville, StockMarketMentor & Realmoney. Been 10 years of reading & learning that helped me avoid last years crash. This market is just brutal; sucking the energy out with the high volatility and constant news gaps. Wish I could fast forward ’09 and get to 2010 already. This is going to be a long year. Just wanted to say thanks for taking the edge off of this mess.

  67. greg says:

    Mannwich, yes, which means he works for CNBC. I really don’t understand how people couldn’t like the guy? He’s wicked smart, articulate, and can’t stand bullshit. What more could you want.

  68. Moneymaven says:

    This crisis has been brewing for years, if not a decade. The bear market (and recession) started some 15 months ago. Virtually every stock market in the world experienced 40% declines last year; every economy in the world is suffering record declines. The idea that any President can walk in, wave a magic wand and solve all our problems in less than 30 days is, frankly, infantile.
    Grow up, America! Instant gratification got us into this mess. It isn’t going to get us out of it. Daddy isn’t going to swoop in on a white horse and lift us out of the mire.
    This is going to take a long time – a lot of work – and a lot of sacrifice to rectify our mistakes. And yes, we all made mistakes. Even Rick Santelli. He may not have over-borrowed to buy a house he could not afford – but he benefited from a stock market that was goosed by irresponsible leverage. Why wasn’t he rousing the rabble to demand that the US stop running a budget deficit, a trade deficit, a system that sucked in the world’s savings so we could consume more than we earned? Or demand that our President pay for the war in Iraq, instead of urging the country to go out to the malls and shop. I don’t remember him complaining that house prices were rising to unsustainable heights, or that the banks were taking on too much leverage, or that GE was taking on too much risk in order to boost their stock price. Would CNBC even exist if it wasn’t for the stock market bubble? And if you don’t want the government to interfere in the housing market, how about insisting that Congress eliminate the mortgage deduction? I am sure if Santelli and his gang in Chicago took an honest look at themselves, they would see how they benefited from the housing and stock market manias. If you went along with the upside, you can’t whine about the downside now.

  69. had a long talk with the wife about post-apocalyptic living this evening…we rented Mad Max beyond Thunderdome and The Road Warrior for decorating ideas/ inspiration

    my biggest apprehension is that I dont think there is a canned version of Del Frisco’s Bone-in Ribeye

    TRB

  70. Mannwich says:

    I agree, Graphite. Maybe I’m being too cynical in questioning his thoughts on GE but it’s hard not to be cynical these days. I have no reason to question his integrity, and like I said, I like Santelli but I think we all need to take a deep breath and calm down a little (myself included….not watching CNBC has helped me quite a bit!). I was just throwing it out there for critical analysis because Santelli has to realize there are a lot of people on Main Street who are just as angry about the bailouts for his compadres on Wall Street. That’s the problem with these bailouts. The moral hazard is endless. When does it end? The folks on Wall Street think that the autos should be forced to fail and vice versa, Jamie Dimon lectures people today to “fulfill their obligations” on paying back their loans, while those on Main Street think they shouldn’t be bailing out Dimon and JPM Chase so that they can then turn the screws on credit terms, etc. etc. etc. I think it’s human nature to think that somehow our own situation is “different” when we are or others we know are adversely affected but the faceless, nameless guy down the street should take his lumps.

  71. SFClaws says:

    TRB I have the contractors coming out to give me a quote on solar panels. That will be my trading goal for the year. With well and septic, just need the power and I am good to go. My wife is excited about starting a garden. The deer in the back yard may be more than just scenery soon.

  72. Graphite says:

    I like Santelli but I think we all need to take a deep breath and calm down a little (myself included….not watching CNBC has helped me quite a bit!)

    Heh, I will heartily second this sentiment! But for me, CNBC is on all day at the office regardless of my wishes, and Rick Santelli is the only thing keeping me from chucking my TV out the window!

  73. franklin411 says:

    Personally, I hope Santelli gets what he wants. Let the free market reign. Let’s have a Depression II. Then we an army of starving people finally realize there’s more of them then there are of us, we can see Santelli hanging from a meat hook a la Mussolini.

    Be careful what you wish for, Santelli…I hope you get it.

  74. SFClaws says:

    Would you rather be stuck having QVC on all day???

  75. g’luck Claws…read The Road by Cormac McCarthy…I’ve been passing it around here since October or so

    on second thought, we may be living it soon enough, so maybe skip the book

  76. Graphite says:

    franklin411:

    What you need to try and grasp is that if we have a depression coming, it was baked into the cake when we overleveraged the entire country in an orgy of debt-financed speculation and capital consumption. And if that’s the case, whether you “let the free market reign” or not is immaterial to whether we have “Depression II.”

    And the problem with the “swinging from a meat hook” thesis is that it’s mostly the free market guys like Santelli who own all the guns.

  77. greg says:

    franklin411….someone needs a big hug.

  78. SFClaws says:

    Thanks TRB; Just finished a GANN trilogy; I will look into it.

  79. franklin411 says:

    Graphite,
    Maybe, but the problem with the Santelli thesis, which holds that poor people aren’t really people at all, is that when you take everything away from a man, he has nothing to lose. There’s nothing more dangerous than a man with nothing left to lose.

  80. Broken says:

    Graphite:

    “That’s where the stock market could go, not economic activity. History is also apparently devoid of evidence of government efficacy in propping up the stock market. They’re great at picking winners and losers, though.”

    Economic activity dropped 50%, maybe less in constant dollars, from 1929-1933. The banking system had collapsed. Some states had reverted to the barter system. Foreclosure agents in the farm belt were met with firearms. Unemployment 25%. Underemployment 50%. The trend was toward complete collapse without government intervention.

    Depressions are a demand problem. Money is hoarded. Government spending is a way to create demand. From 1933 to 1936, GDP recovered to 1929 levels. If it’s wasn’t government intervention which caused this, what did?

  81. Mike in Nola says:

    Obama is really screwing up not taking the W post 9/11 approach: Anyone who opposed the stimulus bill or forced changes will be held responsible for the continuning slide. This would set up the next congressional campaign where the can morph Steny Hoyer’s face into Angelo’s and say that he is responsible for the second great depression.

  82. greg says:

    franklin411, I don’t think that’s an accurate description of Santellis’ thesis.

  83. Broken says:

    Don’t watch CNBC while trading unless you like giving money away.

  84. DC says:

    @TRB

    Living large you are. Stop dreaming of canned ribeye and start stocking up on the Dinki-Di dog food for when it really gets grim.

    Watch out for feral kids with boomerangs.

    (How long do you figure a dandy like Kudlow would last in the wild?)

  85. SINGER says:

    long dxo @1.77, very nice….

  86. Graphite says:

    If it’s wasn’t government intervention which caused this, what did?

    The depression had run its course, the bubble had been completely flattened, and the recovery got underway. That’s how business cycles work and have always worked, whether there was a large amount of government spending and intervention or not. On occasion, politicians manage to get themselves elected just as the recovery gets underway, and then their policies are credited for turning the economy around. For some reason, people always assume that without those policies, a Mad Max fate surely would have followed.

    In 1920-1921, the economy dipped into a severe recession. Government cut taxes and spending. The economy recovered in 1923. Post hoc, ergo propter hoc?

    What made the 1929-1933 depression particularly devastating was a combination of a lot of goosing of the bubble on the upside from the Fed and catastrophic interventions by Hoover, especially in propping up wages, during the crash.

  87. Mannwich Says:

    February 19th, 2009 at 9:25 pm
    @johnb: I’ve also taken to listening to Pandora and my old music from my single days on I-Tunes. I tell you, it’s done wonders for my psyche.

    Jeff,

    remember, “Music is the Doctor..”..

    and, as you’re figuring out, yon’ chattering box is meant to shatter your cognitive abilities..

    though, re: iPod, be careful with the earbuds/headphones, tinnitus is something noone needs..
    http://www.icerocket.com/search?tab=web&lng=&q=tinnitus

  88. SFClaws says:

    @Singer Do you think it fills the gap and rolls over or heads to the upper bollinger? Planning on taking partial profits on the fill.

  89. franklin411 says:

    Looks to me like government spending worked very well. The reason the New Deal lasted so long was because FDR didn’t spend enough. He actually cut spending and balanced the budget in 1937, prompting a recession that put the economy in a tailspin. We went on a spending bender during WWII and the economy soared:

    http://img154.imageshack.us/img154/4465/newdealij5.jpg

  90. Ventura2012 says:

    Where and when has Santelli applauded the Wall St bailouts, Santelli has been warning of the loose credit standards for years. I am sure Santelli could care less whether GE survives, Santelli is his own man, he took on the face of CNBC Cramer and called him out for his BS.

    If I hear one more person say how by preventing your neighbor from foreclosure it improves your home price I am going to puke, this is the most flawed argument I have ever heard and cannot believe how many clueless people like Barney Frank continue to say this.

    As a 31 year old renter who makes around 100k and has over 250k in liquidity with no debt as a result of living BELOW MY MEANS since graduating from college in 2000, it was nice to hear Santelli speak out for savers and people like myself who knew better than to chase this real estate market. As someone who works for a large tarp recipient I am amazed at all the fellow coworkers making 6 figures whom are scared to death that they will have to file bankruptcy if they lose their job and the rug gets pulled out from us. Whatever happened to having 6-12 months in savings to get someone through tough times.

    As for the market all of my shorts were covered today and I will be net long going into tommorow for the first time in 15 months. I would be utterly shocked if the PPT does not manipulate the market up into expiration tommorow. If they are not able to take the market up tommorow I sure as hell do not want to be long going into Monday. As much as I dislike the stock I think XOM is the play going into tommorow, for the market to be manipulated up with XOM’s weighting in the dow there will need to be heavy buying in it, without xom going up the market cant go up. The 10% collapse this week in xom has put heavy pressure on the dow.

    I think people are realizing that this administration is just as clueless as the last administration…the only good I see out of this is the potential to get an Austrian Economist in the white house in 2012, such as Ron Paul, whom has constantly warned of the crisis, spoke out against the bailouts and the fed, and encouraged savings and production unlike the constant borrow and spend we saw under Bush and are now seeing under Obama.

  91. Graphite says:

    He actually cut spending and balanced the budget in 1937, prompting a recession that put the economy in a tailspin.

    So, it *is* post hoc ergo propter hoc? Then how is it possible that *cutting* government spending worked in 1922-1923 and *increasing* government spending worked in 1933-1937?

  92. franklin411 says:

    Ventura,
    I was listening till you said “Ron Paul.” Admiral Goofball can go hang himself.

  93. Broken says:

    “As a 31 year old renter who makes around 100k and has over 250k in liquidity with no debt as a result of living BELOW MY MEANS since graduating from college in 2000.”

    Sounds like me at 31 in the 1992 recession. I took my savings and started a business. Recessions are a great time to start a company, I kid you not. Low rent and it is easy to hire good people. If you’ve got something cool to sell, people will buy it whatever the economy.

  94. Ventura2012 says:

    Franklin,

    He was the only one warning about this crisis in politics for YEARS.

  95. kelly p says:

    Is Kevin Lane descended from the Perry, Lane & Co Lane’s?

  96. Bigchipzzzz says:

    What do you guys think of this authors thoughts?? I have mixed feelings about the subject.

    http://www.themarketguardian.com/2009/02/monetary-inflation-has-arrived-front-and-center/

  97. SFClaws says:

    I have been doing a lot of reading about gold,oil the dollar and euro and still haven’t scratched the surface. Inflation is here in the raw materials (just look at you grocery bill vs. what it used to be). Gold is currently an overcrowded trade; and the divergence between it and oil will normalize. So either Gold drops, oil rises or both. I believe the dollar is strong due to the euro confidence crisis; which is suppose to hinder oil and gold. With all that in mind, the charts show oil bottoming, gold topping; so I am long oil via the DXO and RIG.

  98. gloppie says:

    How many times do I have to say this?

    Dow 3000 before 2010.