The (False) Glimmer of Hope
Nice cover image from the Economist on the brown shoots.
Excerpt:
“But, welcome as it is, optimism contains two traps, one obvious, the other more subtle. The obvious trap is that confidence proves misplaced—that the glimmers of hope are misinterpreted as the beginnings of a strong recovery when all they really show is that the rate of decline is slowing. The subtler trap, particularly for politicians, is that confidence and better news create ruinous complacency. Optimism is one thing, but hubris that the world economy is returning to normal could hinder recovery and block policies to protect against a further plunge into the depths.”
Here’s the cover image:
Hat tip Gary
>
Source:
A glimmer of hope?
The worst thing for the world economy would be to assume the worst is over
Economist, April 23rd 2009
http://www.economist.com/opinion/displayStory.cfm?story_id=13527685&
April 23rd, 2009 at 3:12 pm
In the words of that economic philosopher, “dead hobo” (4/22/09 @ 5:05 p.m.),
“screw the second derivative”.
April 23rd, 2009 at 3:12 pm
The light at the end of the tunnel is an oncoming train.
Oy.
April 23rd, 2009 at 3:32 pm
“Optimism is one thing, but hubris that the world economy is returning to normal could … block policies to protect against a further plunge into the depths.”
Not clear what “policies” the author is advocating.
April 23rd, 2009 at 3:36 pm
First, my toddler will confirm that they stole the cover idea from “Finding Nemo.”
Second, the quote is thought-provoking but there’s another angle to the part about the “subtler trap” — and that’s the smokescreen of government paternalism.
Like an old-fashioned doctor, Treasury and Fed officials have argued that the patient is better off not knowing the real diagnosis so he’ll keep his spirits up and not get bogged down in worry or panic. IOW, consumers will not be afraid to spend if they think things are better than they really are.
Suffice to say, if the US government is paternalistic, it’s safe to say it’s a world-class deadbeat dad. It’s also extremely bad at keeping things under wraps.
So try to tell the truth already.
April 23rd, 2009 at 3:39 pm
Beautiful cover.
April 23rd, 2009 at 3:45 pm
Tranzor,
My biggest worry is that they somehow calm the waters, get the rubes back in the game and then yank the rug again.
The rubes will be pizzed
April 23rd, 2009 at 3:47 pm
Chrysler BK imminent, GM shutting plants? Wait until the bondholder haircuts and cramdowns start. Holders of relatively large and illiquid debt positions (pension funds, hedgies) will be looking for things to sell. Guess what?
That’s right. I knew this was a smart group. Where’s Franklin? He only shows up for short squeezes….
April 23rd, 2009 at 3:49 pm
@leftback: Those things are all priced in. All are bullish, right? I mean, who needs to actual jobs and income when one can just put your money into the market and watch it go, up, up, up and away?
April 23rd, 2009 at 3:51 pm
The predator on the cover is Goldman. The little fishies are the rest of us waiting to be eaten by them.
April 23rd, 2009 at 3:51 pm
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aTXb4zX3×59A
BOJ’s Shirakawa Says U.S. Faces ‘Painful’ Adjustment
April 23 (Bloomberg) — Japan’s struggle to rebuild growth during the 1990s suggests American consumers and companies face a “painful” period of retrenchment as the economy works out excesses created by a bubble, Bank of Japan Governor Masaaki Shirakawa said.
Japan didn’t resume sustainable recovery until it brought down excessive levels of debt and productive capacity, and the same will be true in the U.S., Shirakawa told the Japan Society in New York today.
“This will be painful, but inescapable,” he said in the text of his remarks. “In view of Japan’s decade-long experience, there are no palatable alternatives.”
…apparently there are some grown-ups in Japan…
April 23rd, 2009 at 3:52 pm
Wow, nice final 15 minute pump. Impressive…….the beat goes on.
April 23rd, 2009 at 4:03 pm
Sometimes that light at the end of the tunnel is really a freight train headed straight for you.
The other 99.99% of the time, it’s just the end of the tunnel.
I just wrote that.
April 23rd, 2009 at 4:04 pm
Nice chart about half way through this article that illustrates the lack of volume during this rally. Also a pretty good article.
http://www.hussmanfunds.com/rsi/rallyvolume.htm
April 23rd, 2009 at 4:04 pm
Lots of really dire economic data coming up next week. Weak rallies on low volume. Friday tomorrow.
I’d say this is as good a time as any to be massively short. Added to shorts into the close. Again.
We’ve seen your pump. Now show us the dump.
April 23rd, 2009 at 4:05 pm
leftback @ 3:47
I have a hard time believing that Obama is going to let the UAW twist in the wind.
April 23rd, 2009 at 4:06 pm
Picked up more SRS at the close. Might snag some QID tomorrow. Tempted to grab the FAZ but I just can’t right now. I’m short enough at this point.
April 23rd, 2009 at 4:07 pm
leftback @ 4:04
I actually wouldn’t mind seeing a big rally in the last hour tomorrow. THAT would be a good time to get short.
April 23rd, 2009 at 4:10 pm
I keep asking myself, “What has fundamentally changed, structurally speaking, about our economy?” The answer is NOTHING. It’s the ultimate pump job, hoping that optimism alone will get us out of this mess. Once we see real change in how business is conducted, then maybe, there would be something truly to be optimistic about…
HCF
April 23rd, 2009 at 4:10 pm
I could see a Chrysler BK for sure- I think the decision has been made that there is too much capacity and Chrysler has to go- Jeep can be sold to another automaker- remember AMC/Jeep?
April 23rd, 2009 at 4:10 pm
DL,
see: http://www.seiu.org/splash/
there’s a new sheriff in town.
you’ll have to remember that the UAW was useful in building ‘a productive AMC’, and ‘fighting the Russkies’..
both, of which, are anathema to the SEIU..
April 23rd, 2009 at 4:12 pm
@HCF: Things have gotten worse at a slower rate. That’s the good news we’re hanging on. That’s all that’s changed. That’s it, really.
April 23rd, 2009 at 4:12 pm
@ben22: Great post by Hussman, thanks. That’s a very cerebral discussion of bear market rallies.
(Although where was the Leftback Bottom™ citation?).
@DL: Someone is going to get hosed in the Chrysler and GM reorganizations. The bondholders have escaped to this point, but for how much longer? At the moment there is serious bailout fatigue – it’s Haircut Time.
@Bruce: The Japanese must be laughing all the way to the sake bar after the lectures they received in the 90s.
April 23rd, 2009 at 4:13 pm
Terrible numbers by Microsoft just now. S&P will probably hit 900 tomorrow.
April 23rd, 2009 at 4:14 pm
@call me ahab:
I remember AMC…my mother bought a Gremlin, thought it was the neatest car she’d ever seen…
100 miles later, we had our first rattle….
April 23rd, 2009 at 4:14 pm
how about Hyundai/Jeep- that might work
April 23rd, 2009 at 4:14 pm
ben22 @ 4:04
Nothing earth-shattering in the article, but well worth reading anyway.
April 23rd, 2009 at 4:15 pm
the Gremlin- LMAO- what about the Pacer?- I liked the Javelin though
April 23rd, 2009 at 4:15 pm
as opposed to: http://www.uaw.org/
the UAW, for all their other faults, understood what built America–and it wasn’t the National Service Corps.
By ANN SANNER, Associated Press Writer Ann Sanner, Associated Press Writer – Wed Apr 22, 12:13 am ET
WASHINGTON – Calling on Americans to volunteer, President Barack Obama signed a $5.7 billion national service bill Tuesday that triples the size of the AmeriCorps service program over the next eight years and expands ways for students to earn money for college. “What this legislation does, then, is to help harness this patriotism and connect deeds to needs,” said Obama, a former community organizer in Chicago.
“It creates opportunities to serve for students, seniors and everyone in between,” he said. “And it is just the beginning of a sustained, collaborative and focused effort to involve our greatest resource — our citizens — in the work of remaking this nation.”
http://news.yahoo.com/s/ap/20090422/ap_on_go_pr_wh/us_obama_national_service
April 23rd, 2009 at 4:17 pm
Mark E Hoffer @ 4:10
O.K., “Change that works”.
But I’m not clear on what your prediction is for UAW employees of GM.
April 23rd, 2009 at 4:19 pm
DL,
That’s why I liked it, simple. I like visuals as well thus my mention of the chart.
HCF,
You haven’t been watching enough CNBC. The market always goes up 6 months before the recovery so since we are going to have a second half recovery that’s what’s going on.
LOL.
April 23rd, 2009 at 4:20 pm
i suspect the reason the bond holders and debt holders actually haven’t cared much is they have CDS on their holdings. so they in the end don’t care if the companies crash or not (actually they might make more money if they do. odd how that works out). course the judges could take that into account when working their payouts. they could actually end up with nothing but what their CDS contract is suppose to pay. and maybe they end up with nothing at all if the company who sold it goes under also>?
April 23rd, 2009 at 4:20 pm
@Mark
Uh…America wouldn’t exist were it not for the National Service Corps of the US Army.
April 23rd, 2009 at 4:20 pm
Lefty:
This was my birthday week, been great…wore a French cuff to the salt mine today…(wife’s idea)…very interesting response throughout the mine…
Had one guy come by the mine asking me to play in a golf tournament…told him I don’t play golf…he said, “Yes, you do.”…..Very odd…must have been the way I was dressed…
April 23rd, 2009 at 4:21 pm
@ben22: How many times has CNBC made that claim in the past year? How many more times will they make it before this is truly over?
April 23rd, 2009 at 4:21 pm
I put this on another thread for Mark but I thought others would also enjoy.
“Did Goldman, Sachs and Company organize the Goldman, Sachs Trading Corporation?” Senator Couzens asked.
“Yes, sir,” Mr. Sachs replied.
“And it sold its stock to the public?”
“A portion of it. The firm invested originally in 10 percent of the entire issue for the sum of $10 million.”
“And the other 90 percent was sold to the public?”
“Yes, sir.”
“At what price?”
“At 104. That is the old stock … the stock was split two for one.”
“And what is the price of the stock now?”
“Approximately 1 ¾.”
GS is selling stock again. Beware!!!
April 23rd, 2009 at 4:21 pm
Truly horrible earnings after hours, especially technology.
All the way through this earnings season revenue has been below expectations.
Everyone missed by miles – Mr Softy, Juniper, Amgen, retailers – all except Netflix.
The writing is on the wall now. Let the bears out of the cage again.
April 23rd, 2009 at 4:21 pm
peep love to laugh at AMC, they forget that the Eagle pioneered the ‘Crossover’-craze, 30 years ago
http://amceagle0.tripod.com/page2.html
link, w/pop-ups
April 23rd, 2009 at 4:22 pm
AMEX beat big-time. Hhhhm, didn’t they get TARP funds as well?
April 23rd, 2009 at 4:23 pm
@Mannwich,
Way too many to count. I guess you weren’t watching this morning. Around 8:30 EST some guy gave loud mouth Joe Kernen a lecture on it. He was so arrogant about it using phrases like
“don’t be confused about what is going on here”
and of course for him
it was a great time to be buying. Clark Capital management I think it was. I can’t remember, after hearing this guy I immediately tried to erase his memory from my mind.
April 23rd, 2009 at 4:24 pm
Hoffer @ 4:15
National Service Corp- what a joke- next thing we’ll have is a “cultural revolution” – best start looking for a “Moa suit”
April 23rd, 2009 at 4:24 pm
oh man, I can’t wait to pull apart this AXP report, that has to be total BS.
After the Capital ONe news the other day you are telling me AXP is o.k.
Sorry, not buying that.
April 23rd, 2009 at 4:24 pm
that’s Mao- Duh!
April 23rd, 2009 at 4:25 pm
@ben22: I don’t watch CNBC anymore. I swore them off a couple of months ago and haven’t gone back once since. I watch Bloomberg now. They’re not perfect (for example: placing much emphasis on the companies beating the numbers but not much on the ones who didn’t…..shocking) but far better than the CNBC cast of thousands clown show.
April 23rd, 2009 at 4:26 pm
@ben22: Capital One was somehow up around 20% today, I believe. Strange days indeed.
April 23rd, 2009 at 4:30 pm
@Mannwich,
That’s probably really smart. I’m sure CNBC doesn’t add any value to my life other than I laugh at them a lot. Each 30 minute session of CNBC watching is like a mini ab work-out.
I think M will soon crash and burn!
April 23rd, 2009 at 4:30 pm
Mannwich @ 4:25
I think CNBC Europe (in the evening) is O.K. They’re willing to admit that stocks can go down, and that the economy can get worse. Big contrast with CNBC/NY
April 23rd, 2009 at 4:31 pm
ben22,
compare that dialog to the blizzards of bull**** we are entreated to, today.
you’d have visit Mr. Serling to imagine TTTim answering in such a straigh-fwd: way..
~~
franklin,
which time-frame are you referencing?
April 23rd, 2009 at 4:31 pm
@ Hoffer-
I remember the AMC Eagle- had to be one of their last cars- 4X right?
April 23rd, 2009 at 4:33 pm
So far during earnings season, the thing I found most interesting, which I heard basically no mention of, was that graph JPM used during the call that showed the rising of PRIME defaults.
Speaking of charts, not sure if anyone here reads John Mauldin but in a recent Outside the Box he had a chart with what GDP would have been if it weren’t for home equity withdrawals. It was pretty wild.
The data point I recall was something like:
Q2 2006 home equity withdrawals totaled $232 billion
Q2 2008 home equity withdrawals totaled $9.5 billion
April 23rd, 2009 at 4:33 pm
@ben22 / Mannwich:
Gotta love the whole idea of “market bottoms leading economic recovery by 6 months.” Apparently all the bad news is priced in, the market is efficient, and always ahead of the curve. Well, except when it isn’t…
I think equity markets in 2007 basically predicted no recession and Dow 30,000 right around the corner! Optimism is dead, long live optimism!
The only green shoots worth talking about are one that can be dried and smoked =)
HCF
April 23rd, 2009 at 4:34 pm
@Mannwich: and they have Betty! So cool, sitting at the Bloomberg terminal, and yet….
Durables tomorrow? GDP, Case-Shiller and factory orders next week?
An orgy of Bearishness, one hopes.
April 23rd, 2009 at 4:36 pm
HCF @ 4:33
I remember the logic of the “Kudlowites” during 2007:
a ) if there were going to be a recession, the stock market would be declining
b ) the stock market isn’t declining, therefore there’s not going to be a recession.
c ) since there’s not going to be a recession, stocks should do well.
d ) buy, buy, buy !!
April 23rd, 2009 at 4:36 pm
MSFT up over 3% A/H. Go figure.
April 23rd, 2009 at 4:37 pm
ben22,
see: http://finance.yahoo.com/q/op?s=M
look at the OI in the Puts
lots of incentive to keep M right where it is..
April 23rd, 2009 at 4:39 pm
@ben22, I did read that John Mauldin piece, and it was wild. Didn’t he say something along the lines of “Bush wouldn’t have been re-elected in 2004 without MEW”?
April 23rd, 2009 at 4:41 pm
Whammer,
Yeah, MEW and “sub-slime”.
April 23rd, 2009 at 4:43 pm
@ DL:
I love watching Kudlow, mainly because he often has good guests and he has a comically optimistic outlook. It’s a great sentiment indicator….
I believe one key indicator that we are NOT at a real bottom is that two types of stocks have done well in this recent rally have been
1) low quality shit (financials, real estate, and other beat up names)
2) same old shit (AAPL, RIMM, emerging markets, and everything that led the previous bull market of 2003-2007)
In other words, no NEW leadership… Until new ideas and new companies drag us out, we’re just doing the same thing and hoping it’ll get us to the promised land… So much for change I can believe in!
HCF
April 23rd, 2009 at 4:44 pm
Whammer,
Yes I remember him saying that. It’s probably true. I look at those figures above and take away that spending and the ever rising unemployment add that together with our 70-75% consumer economy and you’ve got to wonder about all the optimism.
Oh wait nevermind, people are getting that tax cut b/c gas ins’t $4 anymore.
Mark,
M reports on May 13 I think. We’ll see what happens.
April 23rd, 2009 at 4:45 pm
ahab,
see: 2004: Last year for the last AMC engine – the 4.0 liter six – still used as the Grand Cherokee’s base engine and the Wrangler’s optional powerplant.
http://www.allpar.com/amc/index.html
Renault Premier was introduced in late ‘87. It too, fit a hungry market niche of larger, well-appointed FWD cars. They, and ‘88 Medallions were rebadged “Eagle,” as Chrysler agreed to build the new Premiers in AMC’s new high-tech Bramalea, Ont. plant for five years. AMC Eagle was trimmed to the wagon bodystyle only. Less than 2500 were built. Jeep J-series pickup production was halted; and the Kenosha, Wisconsin assembly plant, which had been manufacturing cars since the first Rambler in 1897, was torn down. The spirit of AMC lives on, though, as many AMC employees were absorbed by Chrysler. Former-AMC engineers, stylists, and other personnel are helping to create the incredible MoPar machines of today. Indeed, some would say that the AMC engineers and managers rescued Chrysler from an egocentric, bureaucratic culture.
April 23rd, 2009 at 4:48 pm
http://www.marketwatch.com/news/story/Looking-green-shoots-desert/story.aspx?guid=%7B6D3E8F8C%2DE879%2D43A0%2DA4D2%2D327FE39544FD%7D
Looking for green shoots in the desert
“Given that by our estimate the economy needs to create more than 100,000 jobs per month on a sustained basis to move the unemployment rate lower, we expect the unemployment rate will remain at a very deflationary double-digit level through to the end of 2010,” Bank of America-Merrill Lynch economist Sheryl King said in a note to clients.
Franklin, this is why you should be glad you have the blonde and my extra 40 bucks a month…
The size of the American economy will contract over the next at least 18 months…hopefully we can keep Franklin employed..did some nitwit say deflation again??
April 23rd, 2009 at 4:49 pm
Chrysler BK, as early as next week. I’d like to commend the dudes at Zero Hedge.
Their stories are timely and much more insightful than the MSM.
http://zerohedge.blogspot.com/2009/04/tim-geithner-to-put-chrysler-in.html
I am sure this will be a “surgical” bankruptcy. But maybe without anesthesia?
Swaps or no swaps, someone will be hurting before long.
The credit markets are continuing to show signs of stress.
http://zerohedge.blogspot.com/2009/04/collapse-of-high-yield-market-and-why.html
Yields are high but they will have to go higher for lower quality credit to re-emerge from the deep freeze.
High yield interest rates were about 25% in the Great Depression.
April 23rd, 2009 at 4:53 pm
GREEN SHOOTS ARE FOR PANDAS…wake me up when things ACTUALLY improve…
April 23rd, 2009 at 4:54 pm
Mark-
I had a 1992 Cherokee w/ a 4.0 litre straight six- that thing lasted forever- one of the best cars I ever owned. Was never a fan of the Grand Cherokee- like my cars as simple as stripped and as simple as possible- roll up windows/ lock out hubs/ manual transmission- just can’t find a car like that anymore.
April 23rd, 2009 at 4:58 pm
Leftback @ 4:49
From the “zero hedge” article:
“Treasury has an agreement in principle with the United Automobile Workers union, whose members’ pensions and retiree health care benefits would be protected as a condition of the bankruptcy filing…”
Yeah, this is more along the lines that I would expect from Obama. Take money from the taxpayers, and give it to the UAW so that the UAW members can get a better retirement package than the average taxpayer gets (relative to his average income).
Only minimal pain for the UAW.
April 23rd, 2009 at 5:03 pm
ahab,
only in the classifieds! ol’ H. Ford taught us that Simple=Reliable=Wealth Creation..
can’t have that when your ‘economic’ Game Plan is based on Debt-fueled Consumption Velocity..
what happens when Citizens get turned into ‘Conned-Moo-ers’
April 23rd, 2009 at 5:06 pm
So I’m wondering what happens at the dealer level if Chrysler and/or GM file for BK? Must be some issues with manufacturers honoring cash-back incentives, obtaining financing, warranties — no?
April 23rd, 2009 at 5:09 pm
Tranzor Z
Obama said that the USG would back the warranties.
But the dealers themselves may get screwed… they don’t have the political power of the UAW.
April 23rd, 2009 at 5:09 pm
aren’t pensions insured to some degree so that if the company fails the pension is then administered by the Pension Benefit Guarantee Corporation?
April 23rd, 2009 at 5:09 pm
The old “market leads the recovery” bit is so easy to dismiss it’s not funny. It has predicted 5 (or 6, depending on how you look at it) of the last zero recoveries in the last 18 months or so. And how many times did it predict a recovery in ‘29-’32?
People are funny. We run through periods of elation and depression. That’s what the market reflects. Right now it’s downright delusional and deeply in denial.
April 23rd, 2009 at 5:10 pm
Lefty:
You are right. Earnings after hours stink.
April 23rd, 2009 at 5:11 pm
Leftback, if I may query:
what exactly would you be considering getting short with?
been watching faz dwindle…. I think the fix is in on the financials. suspect the hand of gov’t will interfere.
It was bring your daughter to work day. 1/2 a day anyway.
after that, no time left for blogs….
April 23rd, 2009 at 5:12 pm
“Given that by our estimate the economy needs to create more than 100,000 jobs per month on a sustained basis to move the unemployment rate lower, we expect the unemployment rate will remain at a very deflationary double-digit level through to the end of 2010,” Bank of America-Merrill Lynch economist Sheryl King said in a note to clients.
Is there anyone in the universe that gets the reality that high unemployment does not cause deflation or vice versa? That the one COULDN’T cause the other, because they’re not even correlated? Correlation is not causation, but a lack of correlation surely means there can’t be causation.
Have we all forgotten 1979/82?
Double-digit unemployment; double-digit inflation.
Or 1993-1998?
single-digit unemployment; single-digit inflation.
Ms. King is just where (Bank of America) she ought be: A firm clinging to a life-raft of delusion for its continued existence.
Inflation is everywhere and always a monetary phenomenon.
April 23rd, 2009 at 5:15 pm
@ DL: Dealers screwed in what way? By the manufacturers getting out from under non-warranty incentives/obligations in Chapter 11? Or did you mean something else?
April 23rd, 2009 at 5:16 pm
cjcpa @ 5:11
I find it hard to believe that XLF isn’t going to drop at least 30% from here. Maybe not in a straight line, but sooner or later.
(That information is free, and worth every penny).
April 23rd, 2009 at 5:18 pm
Transor,
I just mean that we’re likely to have a lot fewer of them when all is said and done.
Right now, they’re protected by various state laws, which I don’t fully understand. If Obama won’t protect them, no one will.
April 23rd, 2009 at 5:19 pm
Curmudgeon:
I imagine you and I have much the same experiences in our respective businesses. I very much agree with nearly all your posts. However, if you are saying that inflation will occur by 2010…I think this time I will take the other side…I think the massive size of the global deleveraging will delay things longer than most think…but I agree, eventually there will be an economic distortion, and maybe even a bigger mess because of the global printing of money..
April 23rd, 2009 at 5:26 pm
5:19
Yes, CPI will be tame in 2010.
April 23rd, 2009 at 5:26 pm
“What happens to the dealers?”
F***ing BK baby !! More McMansions and vacation homes are going to be flooding the market.
Donny Dealership always has a McMansion, right?
Debbie Dealership is not going to get that diamond bracelet this year.
cjcpa: “what exactly would you be considering getting short with?”
More or less anything, I am in with both arms and legs and the rest of my anatomy.
This feels like the best shorting opportunity since last September.
A mini-crash is so close I can almost smell it.
Steve Barry did great with QID in the fall, more than doubled at one point.
If you don’t enjoy the thrill of FAZ/SRS, then QID or SDS are much less volatile.
Just calibrate your risk tolerance before you get in. I usually use a 20% stop for FAZ.
Hint: those little end of day rallies are people dumping shorts. That’s a good time to buy.
I bought FAZ and SRS about 3.58pm, just like I added longs at 3.58 in early March.
April 23rd, 2009 at 5:26 pm
cjc-
if you are looking to short with an ETF- here is a list of all the ETF’s- short and long offered by Proshares and Direxion- includes most of the obvious ones and some others you may be interested in.
http://www.proshares.com/funds
http://www.direxionshares.com/etfs
April 23rd, 2009 at 5:27 pm
Does anyone know what has happened to asset prices in Japan over the past 18 or so years? What about the monetary base?
April 23rd, 2009 at 5:31 pm
@Bruce in Tn:
I don’t know when or if inflation will take hold. I suspect, unless by some miracle all those $1 trillion pixels being planted in the bank accounts of the GSE’s disappear, that we’re apt to get a massive inflation, my guess, by 2012. And of course, the whole point behind the exercise is to do just that–artificially inflate the housing prices to save the economy. It will be hard to inflate housing without inflating a few other things along with it. I own some gold and oil as an insurance policy against it.
But my point is that the premise underlying the statement “we expect the unemployment rate will remain at a very deflationary double-digit level” is wrong. High unemployment rates are not necessarily deflationary, (nor inflationary, for that matter), as the fabulous seventies in the US, the 20’s in Weimar Germany, and present-day Zimbabwe attest. All three were/are periods of high unemployment rates and high inflation rates. Of course, in the US Great Depression, you had deflation and high unemployment, but correlation is not causation.
April 23rd, 2009 at 5:35 pm
I’m about 3% 3x short with faz and 3% 2x short with srs.
All underwater. my wet shorts comment from last friday.
Not a trader, not real confident about things. Pretty sure the economy is in dire straights. Also pretty certain that the market does not follow EPS, but some fantasy land. Karen keeps reminding that the market can remain irrational longer than you can remain solvent. Making sure that doesn’t happen to me.
Been reading The Black Swan when I can.. about 2 weeks per chapter. I know I live in mundanistan, or something like that. market is extremistan, and I’m not real comfortable with it.
If I can get this to work out, maybe I’d take a bigger stake.
…. built into the calculus is explaining it to my wife. keeping a small stake until I can get comfortable.
Not arms legs and appendages. that’s for sure.
waiting for that cascade — I can’t smell it yet.
April 23rd, 2009 at 5:35 pm
Irritating day. Bulls negated yday’s potentially ugly doji star looking candlestick. I was expecting a little overnight bounce and then a strong dump. The end of day rally was surprising….
Most bearish short term case I have is that we finished another wave 2 today or will finish early tomorrow morning…this sets up a ‘third of Third” wave tomorrow, which means we should see a collapse shortly. For this uber-bearish case to be valid we need to reverse very hard tomorrow morning and should not be able to get above 857. If we do break above 858 tomorrow then it will negate the most immediate horrific bearish case. However, the market would then face another area resistance just overhead between 865 and 871 which represent the 78.6% retracement (865) and the a=c (871) for a B wave conclusion.
Market confused me a bit today, so losing some confidence in these most bearish short term models. It seems like the dollar weakness was the big factor that saved the day for stock market bulls. However, as I look around at some of the currencies like Loonie and Pound they’re only retracing 50-61.8% of the drubbing they took earlier this week. Also, on the daily chart of the Dollar Index, it looked like it was merely filling a gap that was left over from the 4/17 jump. Also, on Bloomberg TV, there were more than a few mentions about how great the loonie was…thus, I want to sell it.
So, these are interesting moments in time. I still favor the bear case shorter term, but feeling a little less confident after today.
April 23rd, 2009 at 5:36 pm
Good, because you are WAY smarter than the attorneys I know..
April 23rd, 2009 at 5:39 pm
cjcpa @ 5:35
You might sleep better at night just being short XLF… or just short SPY.
April 23rd, 2009 at 5:49 pm
MRegan @ 5:27
“Does anyone know what has happened to asset prices in Japan over the past 18 or so years?”
Real estate has declined steadily (although the rate of decline is probably pretty minimal at this point).
April 23rd, 2009 at 5:51 pm
DL,
thanks. I view it as a gamble. which is not right. But I’m okay with losing half and being wrong.
Point I posted earlier is that CPFXX is returning .01%.
Just trying to goose the return to a few percent.
I cannot do my job and be a full time student of the market. I cannot be me and be Barry. In a 5k, I cannot compete with a full time athlete, b/c I am not. I can guarantee that a day spent working on what I do will create a positive return. The market, not so much. I love the concept of passive income, but the tragedy for me of the last 1.5 years is that it is not available. “A trader’s market” they say. Great. I’m not a trader.
Kiyosaki had a parable about amateur golfers and pro golfers and the difference between amateurs playing golf, and doing it well enough to earn a living. and the kicker was that most of Americans are going to turn pro — as in professional investor– the day they retire whether they are ready or not.
I have decades to go, but it is clear to me that I will need to know how to make money off of investments if I aim to retire.
Many Americans are not ready to go pro.
many will need to, or suffer……
I could go on, but he already wrote the whole book.
April 23rd, 2009 at 5:55 pm
IMO, all of you are too anxious to be short. Just look at 2007 if you think the market can’t do the seemingly impossible. That whole year was irritating… take a look at $tran, very positive action; i wouldn’t fight that chart. $copper is at an interesting juncture, as well. The only thing i’d want to be short right now is the USD, and i guess i am with my gold position. Earlier today I pointed out the potential reverse h & s in that… April 08-Oct 08-April 08. My thinking is it’s now or never on gold… Okay, I’m done ranting.
April 23rd, 2009 at 5:56 pm
Cj: With 3% FAZ and 3% SRS, you are not putting much on the line.
You could also buy May or June SPY or XLF puts. One of the things in your favor with options is that you have a defined risk and the short-term volatility is then irrelevant. You have to wonder how many times the banks and Treasury are going to be able to con the retail investor into buying C. At some point this con game is over.
In the meantime, keep on reading AT. He is rarely wrong, and never wrong for long. I am encouraged by the relative up-down volume trends more than anything else. Last Monday was high volume, the rallies were weak. As the Hussman piece ben22 posted shows, that’s bearish.
April 23rd, 2009 at 6:01 pm
[...] market economic recovery Jump to Comments Despite whatever Cramer claims: The obvious trap is that confidence proves misplaced—that the glimmers of hope are [...]
April 23rd, 2009 at 6:02 pm
cjcpa @ 5:51
I work at a full time job (unrelated to finance or economics). But I also spend a substantial portion of my free time (and not an insignificant amount of work time) following the economy and markets.
One of these days I just might quit and become a day trader, however.
April 23rd, 2009 at 6:06 pm
DL
Will you call it retirement?
April 23rd, 2009 at 6:08 pm
Karen is on the money with her 2007 comment- that was ridiculous- but the market continued up, up, up when all indications showed it should have gone down, down, down
April 23rd, 2009 at 6:09 pm
karen @ 5:55
I’m sure that there are many who yearn to “hear” your rants.
At least we know where everyone stands.
April 23rd, 2009 at 6:09 pm
As far as the $spx candles go, you might consider yesterday’s and today’s to be high wave* candlesticks… if we get another one of those tomorrow, a short body with a long upper or lower shadow, then a definite turn of the market could be in… meaning monday could be ugly.
*the last spx doji star was friday, march 6th… leftback’s bottom… dare i bring that up.
April 23rd, 2009 at 6:09 pm
cjcpa @ 6:06
It’s a possibility that I think about from time to time.
April 23rd, 2009 at 6:11 pm
karen @ 6:09
Won’t you at least allow the bears a 10% pullback?
April 23rd, 2009 at 6:12 pm
Thank you, DL, because obviously I wasn’t finished ranting, whatever you meant : )
April 23rd, 2009 at 6:15 pm
karen. agreed that markets can stay weird for awhile. That’s why I like to have fairly tight stops on what I do. I’ve been dragged out of plenty of markets and held plenty of losers before learning my lessons.
in re: gold and US dollar. Last several months those market have not behaved the way one might thing. I don’t see any rhyme or reason between $ and gold….they went up together…they went down together…it’s a crap shoot. If you’re bearish the US dollar, I would short the dollar directly. However, as I pointed out above some of the currencies like loonie and sterling have some things to prove imo. I’m actually a little bullish the dollar v. those currencies….fwiw.
gold (june futures)….i think 920 is going to be your hurdle there. There’s still a downtrend channel in place from the 1000’s on 2/20. 920 would break that down trend channel and would clear the 38.2% retrace of the entire decline….would be doubling down if i were you above 920. I don’t really have much opinion about gold otherwise….just pointing out that level to you…
April 23rd, 2009 at 6:16 pm
“I also spend a substantial portion of my free time following the economy and markets”
I refer to this as making use of a small amount of excess mental capacity. A lot of TBP people appear to have technical or engineering backgrounds, and I think Barry was a Physics major. This presumably helps with the limited math required and the Newtonian concept that what goes up, must come down. Mustard seeds, indeed.
Win or lose, for my money it sure beats “trusting your broker”. I am sure almost everyone here escaped the Crash simply by virtue of having their own hands on the controls in October.
@Karen: I don’t think it will be a reflationary summer, but I like gold too. How’s the weather?
April 23rd, 2009 at 6:19 pm
leftback @ 6:16
I think I was an undergrad at the same place Ritholtz went (Stony Brook).
I took a year and a half of physics there (among other things).
April 23rd, 2009 at 6:21 pm
Re the Chrysler BK news on zerohedge.
Below the article, which was posted at 3:27PM, there was this:
“Update: Dow Jones up 90 points on the news in 5 minutes.”
Was this really what triggered that late day move? How is it good news? Because it is C-11 and not C-13? Or What?
http://zerohedge.blogspot.com/2009/04/tim-geithner-to-put-chrysler-in.html
April 23rd, 2009 at 6:24 pm
Andy, agree with you that gold is in a downtrend, and 920 is the number to break (i’m not as dumb as you think and you know how i like a straight edge!)… anyway, i posted that in the BP Cafe yesterday… but now i’m waiting for it to do it’s thing.
Here’s a trick, so yesterday’s 60 minute, 10 day H&S on the $spx started to play out at the close yesterday, and looks to be completely negated today.. and on a 30 minute chart, 5 day, chart there’s even a ‘glimmer of hope’ for a cup and handle.. ha ha ha.
April 23rd, 2009 at 6:26 pm
@DL: I did a year of Physics at Cambridge. I was appallingly mediocre, but it is a fine discipline.
@Karen: Did you mention my bottom? I didn’t know you cared, Golden Girl….
@KJ: Mucho controversy about the veritas of the Chrysler BK story. Of course it is inevitable…
April 23rd, 2009 at 6:32 pm
the ol cup and handle pattern….ha.
my concern about the sp500, as a bear, is that it’s going to lapse into a pennant/triangle type formation on the 60 min charts….maybe go to 870 then fall back to 835 then back to 860’s….just sort of congest before we get one more little move to 900 ish…really test the shorts out. That’s not what I’m positioned before, but that’s my alternate case if we don’t collapse in the next 24 hours….
April 23rd, 2009 at 6:35 pm
AT: If SPX 875 DOES give way to the upside – doesn’t 875 then constitute a significant support for a more prolonged upward move to the 950 range? I don’t buy this rally continuing but it’s good to have a Plan B. Does your model predict a drop right here, on Friday or Monday?
April 23rd, 2009 at 6:36 pm
@The Curmudgeon:
“Is there anyone in the universe that gets the reality that high unemployment does not cause deflation or vice versa? That the one COULDN’T cause the other, because they’re not even correlated? Correlation is not causation, but a lack of correlation surely means there can’t be causation.
Have we all forgotten 1979/82?
Double-digit unemployment; double-digit inflation.”
I think it has to do with the law of supply and demand.
Also, the high unemployment in ‘82 was not the cause of the inflation, which had been building since the early ‘70s. The high unemployment was a result of Volcker’s attempts to break the back of inflation, via even higher interest rates, which worked. Inflation had been building from the early ‘70s.
April 23rd, 2009 at 6:38 pm
I like this blog, but I have to agree that the posters and comments are way too bearish way too early. I don’t know squadoosh, but one thing I’ve learned over the years is that as a retail trader you have got to be flexible enough to survive long enough to learn how to make money.
The markets can ignore fundamentals for very long periods – they can rally on mechanics. Eventually fundamentals matter of course, but the markets just went down for 18 months without any decent rally – even the Nov., Dec. pump after the panic was weak.
My point is that this is the first strong upside market action we have seen. At least consider that it might not implode after only six weeks.
April 23rd, 2009 at 6:40 pm
I just want to see what happens near 875… push thru and uh-oh. otherwise, back to the 830s or worse… so tomorrow it is… but it wouldn’t surprise me if we get strung along a bit longer.. this market wants to try everyone’s patience. : )
April 23rd, 2009 at 6:41 pm
Leftback at 6:26
Just about the only thing I remember from physics is:
Bad boys rape our young girls but Violet gives willingly
http://en.wikipedia.org/wiki/Electronic_color_code
April 23rd, 2009 at 6:45 pm
@insane: Anything is possible, obviously, but if you read the various pieces on bear market rallies, even the big ones are usually 20-25%. The recent rally of 30% is right at the top end of the range of amplitudes, with the single sole exception of the 50% rally in the 1930s. Take a look at the Hussman piece posted by ben22 above.
The bears here don’t usually pull stuff out of their arse for no reason, and several of us (including Barry) were extremely bullish on March 6th. I bought at SPX 670 and sold at SPX 845, as an example.
April 23rd, 2009 at 6:46 pm
@ clownposse-
otoh- why would it continue to go up? Where is the good news? Not saying it can’t, just saying that it doesn’t make much sense- especially if a person is even somehwhat observant that the bank numbers were delusional
April 23rd, 2009 at 6:54 pm
insaneclownposse @ 6:38
Momentum is certainly waning.
At least, one shouldn’t be long at this point.
April 23rd, 2009 at 6:55 pm
@insaneclownposse
The biggest concern right now should be the level of negativity which is now very uniform. When everyone writes off the rally as a sucker’s rally how can you not step back, be objective and say maybe we’re missing something? Maybe instead of trying to focus on what’s wrong you have to switch and say what could actually go right that no one is thinking (aka positive black swan events)? When the smart folks got negative a year or two ago, they were lone voices in the crowd, that’s where the play is.. when everyone joins the same side do you stay there or move over?
This rally is very similar in percentage terms to the November rally but the breadth/vol looked better. We had a similar rally in October but it was super quick!
The question shouldn’t be where is the good news? The question should be where is the bad news that is not already in the market? Banks are clearly working some serious magic on the numbers and that has been well documented.
The market is stretched, the only real debate is do you expect a pullback or new lows? Big difference, and that is the only question to answer right now…
http://moneyneversleepsblog.blogspot.com/
April 23rd, 2009 at 6:59 pm
leftback.
Not sure about that 875 becoming big support or a push to 950. If we do take out 875 I think it might become a bull trap. I get the feeling lots of technical traders short in the 870s, so it would be a classic trap to take out the 870’s….get a rush to 900..then a big failure. I have decent sized zone between 870 – 906 (cited a few weeks ago) that is my bigger resistance area.
My trading focus is very, very short term right now. I’m looking for a strong dump tomorrow before 857….if I don’t see that…then i’m expecting a grind into 865-871 and then we have a decent pullback next week, but nothing terribly powerful. If we take out 875 next few days, color me wrong and surprised. Would have to clean the slate and reassess the action…
April 23rd, 2009 at 7:00 pm
why did the crapdaq go to 5000? If you went short at 4000, you got your ass handed to you. Sometimes the markets don’t make any sense and that’s why I think it’s best to be patient and wait to go short right now. The one thing you can be sure of in trading is that senseless action will definitely go one much longer than you ever thought possible.
April 23rd, 2009 at 7:01 pm
“The biggest concern right now should be the level of negativity which is now very uniform”
Very very good point about pullback or new lows, and that is well taken. A pullback to SPX 805 could bring in new volume on the long side for sure. I am completely agnostic about this and would play what I see.
Maybe sentiment is negative here, but probably not at some of the other sites. Good point but you should look at some of the “stupid trader” sites and let us know what you see. You know, the ones with the very poor spelling and punctuation and other diagnostic indicators….
April 23rd, 2009 at 7:02 pm
Plenty of bad spelling and punctuation here. (including some of my posts).
April 23rd, 2009 at 7:06 pm
insaneclownposse @ 7:00
“why did the crapdaq go to 5000?”
Yeah, it happened. But it was a highly improbable event. I prefer to place bets on what’s likely.
But no one’s arguing against flexibility, either.
April 23rd, 2009 at 7:08 pm
Everyone’s looking for the pullback. If there was going to be one, I think we would have seen it. There are a pile of shorts and a tremendous amount of potential performance chasers out there sitting on a large amount of cash. I totally disagree that the market is somehow stretched to the upside after the epic wave of deleveraging that just crashed through it before this latest rally. There could easily be an explosion to new highs.
What happens is anyone’s guess. We shall see.
April 23rd, 2009 at 7:11 pm
clownposse-
but that’s always the dilemma- entry- when?
April 23rd, 2009 at 7:13 pm
@AT: Thanks for the “bull trap” theory. Another thing to keep in mind when everyone is looking at 875.
Tomorrow, is another day.
April 23rd, 2009 at 7:29 pm
” Because it is C-11 and not C-13?”
KJ,
when I first read that, I was wondering: “Why is he talking about Carbon isotopes?”
@AT, as w/lb, that sketch you drew out re: 870-906, sounds like a good one..
April 23rd, 2009 at 7:53 pm
MEH,
Actually it should have been C-7, not 11. C-7 would be a radioactive isotope (like C14?), whereas, C-11 apparently is a stable isotope of the green shoot element.
April 23rd, 2009 at 7:54 pm
IMHO, day traders are playing against some very smart supercomputers at Shaw and GS and probably ….
That could easily be the source of the PPT. Perhaps also with some political bias, knowing how to hedge better than we do.
April 23rd, 2009 at 8:15 pm
Renault bought AMC, it was a match made in hell, sold AMC to Chrysler. Daimler bought Chrysler, it was a match made in hell. Now Fiat is buying Chrysler in BK court, talk about a match made in hell’s sub basement. The Chrysler creditors are claiming they have first choice of the assets, their choice(s) will be Jeep and/or Chrysler after market parts business, everything else has negative value.
AMC brought out those jacked up 4WD wagons years after Subaru had pioneered reliable, fuel efficient 4WD wagons and other passenger vehicles. You still have to be a masochist to buy Chrysler/Jeep products – and if you buy a Fiat designed, Chrysler assembled vehicle then you’re really a Village People type.
April 23rd, 2009 at 8:19 pm
BTW, when I got home I asked my toddler what the cover picture was from: “Nemo!” QED
April 23rd, 2009 at 8:27 pm
Remember the old International Harvester Scout? They gave up on them before SUVs started becoming popular. Maybe after this depression ends we’ll remember how to manufacture profitably again – assuming we wake up before Geithner signs over the whole country to GS of A
April 23rd, 2009 at 9:01 pm
I do remember the IH Scout- made in my hometown- Ft Wayne IN- still like them to this day- don’t see many around- discontinued on 1980- but it’s right up there with the original Ford Bronco as a cool retro vehicle
April 23rd, 2009 at 9:04 pm
In the midst of the recent rally, I told a wise man how odd I thought it was that the market was up in such a horrible economic environment. He said “What choice does it have?”
April 23rd, 2009 at 9:42 pm
@insaneclownposse
It’s one thing for the market to keep going up like the Naz to 5000 when things really do appear to be good inm the economy or for 2007 for that matter. But in the face of the absolutely atrocious debt deflationary slide the world is in right now it’s hard to see it being in denial for more than a quarter or so.
Time will tell.
@moneyneversleeps
Don’t confuse smart money sentiment with dumb money sent. If you’re judging the sentiment from this blog and others where skeptical people who aren’t swallowing the green shoots line and who are way ahead of the mainstream press, then I think you’re reaching the wrong conclusion. That’s the smart money, IMO. Combine that with the insider selling and lack of buying, the rush to issue stock by the banks and REITs before the opportunity passes, Dr. Hussman’s (Hussman funds; look at his record) refusal to buy the rally, Richard Russell, etc.
I think you’ll find that the contrarian view of sentiment that you’re looking for should be based on the average mutual fund investor who’s always late to the show and is probably excited by this rally and the media’s spin (CNBC) and is getting back in to catch the “new bull.”
April 23rd, 2009 at 10:46 pm
@ Onlooker from Troy
I expect a skeptical take from this group, tends to attract that kind of crowd. I think the avg Joe is not buying in to this and the reason is their view on the economy. That’s a problem because the economy and the market can diverge at times. The “smart” money, which is a stretch, got short term excited (looking at AAII) but consumer sentiment sucks and the dumb money is afraid to jump back in the pool. It is highly unlikely that the mutual fund investor is all in after getting burned.. they will be very slow to get back in and by the time they do.. most people don’t even realize the rally we have had since the March 6th low.
No one can really see any potential or faint “glimmer of hope” for this economy.. and from a contrarian point of view, that is actually slightly comforting… kind of like October 2007 when you just couldn’t figure out how the economy could possibly continue to grow…
perhaps this magazine cover will end up being a contrarian indicator… now that would be some black swan stuff right there…
http://moneyneversleepsblog.blogspot.com/
April 23rd, 2009 at 10:58 pm
The main point to remember in this fiasco, is that it is a marathon not a sprint.
To liken it to a baseball game, we are in the top of the 2nd inning.
Long time till we bring in the closer.
April 24th, 2009 at 12:02 am
Forget the glimmer of hope, at least for now as we seem to be looking at the next leg down for the DJIA as the bullish index ($BPINDU) has hit an inflection point; it hit a high on april 19th of 63, we are now at 47 but the DJIA is still trading just shy of 8,000. The only question is how big of a let this will be. Time to pick up some DXD & make some $$$
April 24th, 2009 at 12:04 am
Rather, “The only question is how big of a “leg” down this will be”.
April 24th, 2009 at 12:16 am
I did read in WSJ today that Mutual funds had net out flows from their money market funds. Retail is starting to get back into the market.
I do think that the Chrysler event next week, no matter how well it’s being telegraphed will still be taken as a surprise. Why? Joe retail still holds out hope that the govt wouldn’t just let it happen.
Your average 401k retail investor is not even looking at their statements right now. They know it’s bad, they don’t want to know how bad. All they know is that if they are going to have a chance to retire is to keep working and keep putting money into their 401k.
I’m usually very optimistic, usually you can gain something positive out of every event. I’m also a realist. Conditions may be better right now, but they are not great. Credit has only loosened for the Fortune 100 type companies. The smaller you go the tighter it gets. We are just lucky that usually the smaller a company is the less leverage it usually carries. So these companies can continue going longer, it is just long term if credit stays this way more and more companies will start running into problems.
For a positive. I do think information tech can shorten some of the pain that was experienced in the past. Supply chains are a lot tighter now than they were, so over and under corrections will not be as extreme as the 30’s.
April 24th, 2009 at 12:25 am
Obama administration is all smoke and mirrors and still hides real situation from the world. Banks forced to take TARP funds then objection raised by government when they try to pay back. Government is not good in business as they can never stay within thier budget. Hands off and let people pay for their mistakes is better approach. Convict and harshly punish white collar criminals so they will police themselves rather than face the consequences of being criminally misleading. As for bonuses tax the incentive out of them.
April 24th, 2009 at 1:57 am
it’s official: cramer told his viewers to “sell sell sell”. “people tell you it’s not ok to sell, and they’re wrong.” i laughed out loud. he must have his shorts all in a row.
i keep hearing about this leg down, this big leg down … and now that cramer says it, i’m starting to wonder. this is the oxycontin market. see no pain, feel no pain. whatever happened to that rising wedge formation? any chartists still feeling that wedge?
zerohedge is interesting, and i like the trader screen shots and deep dish info, but tyler reads too much paranoia into the data. you can tell he’s young. it’s a market, in the middle of an economic catastrophe. it’s not supposed to make sense. it has no future plans. set your stops and go for a walk.
April 24th, 2009 at 8:39 am
What prompted Cramer to launch into sellsellsell? I know he’s just an entertainer. Right now I’m on a CNBC moritorium.
April 24th, 2009 at 9:53 am
cramer comes after the money honey and the same time as pbs news hour in my market. i sometimes see him when i turn on the set to switch over to pbs. so i didn’t hear his rationale. he was waving little black bears around i think, if that means anything.
i think buffett has great sense to talk only to becky, she’s very cool and high class. maria is still a classic performer but she’s been long on the job and can be a little carnival with her barking. erin is totally hot and tight but a little too nervous. they are all whip smart imo.
and then there’s cramer and the oversexed bachelors on fast money, saliva on their lips and eyes bulging … it’s like the gals broadcast out of new york and the guys out of las vegas.
i’d guess ratigan will go to atlanta, where he can resume the beck franchise and go after the beck audience. angry populism! it sells sells sells!
April 26th, 2009 at 2:33 pm
[...] Barry Ritholtz, The Big Picture, April 23, [...]