Turnaround Lesson
By Barry Ritholtz - April 20th, 2009, 5:16PM
"The safe way to double your money is to fold it over once and put it in your pocket. " —Frank Hubbard
Macro Notes
Net shorts again a record in the euroPeter Boockvar
According to the CFTC data for the week ended Tuesday, net shorts again went to a record high in the euro after last week's modest drop. Net shorts in the pound fell a touch from last week's record high. In contrast, net longs in the Canadian $ rose by 60% to the most since Nov '07 and net longs in the Australian $ rose 26% to a 7 week high. Net longs in gold rose for a 4th week, up slightly. Net longs in crude rose to a 7 week high....
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April 20th, 2009 at 5:25 pm
Who’s that, Ken Lay, or the former CEO of AIG…?
April 20th, 2009 at 5:29 pm
The cartoonist is 6 months too late. There was real fear in September and October, and it takes dramatic fear to have dramatic changes. Think about it: Do people stop at stop signs because they want to obey the law, or because they’re afraid of getting a ticket? I submit that most people respond to negative stimuli more readily than positive.
The kind of fear that could produce radical and rapid economic change has passed, and now we have to settle for a gradualist approach.
April 20th, 2009 at 5:50 pm
well franklin- using your gradulist approach- maybe the market will go down gradually- week after week, month after month until all the bullshit artists shut the f*ck up- regardless of your pre-dispostion to forgive the banks so everyone on “main street” is saved from armegeddon *supposedly*- doesn’t it in any way burn your ass that the banks are the beneificairies of the largest government giveaway in the history of mankind? I mean really franklin- where is your “sense of outrage”- remember- the USA was founded on rebellion.
April 20th, 2009 at 5:59 pm
I submit that most people respond to negative stimuli more readily than positive.
———————
Actually, I stop at stop signs not because I’m afraid of getting tickets but because I don’t believe in anarchy.
I’ve noticed that my kids respond better to positive than negative reinforcement. The more wrong they are, the more victimized they feel when I punish them. So the trick key is prevention and this is all about positive reinforcement.
If people reacted so well to negative stimuli, there would be much less crime in states where you have capital punishment.
My 2 cents worth.
April 20th, 2009 at 6:09 pm
toles rocks.
April 20th, 2009 at 6:49 pm
The lesson here is the bankers and CEOs are walking out the back door and will not turn around.
@franklin: I think it is rash to assume that because the VIX declined to 37 or so that you have seen the last of real fear in this market. How about two more 4-5% down days this week and then we’ll measure the fear gauge?
There is going to be a whole lot more fear, revulsion and disgust before this thing is over.
April 20th, 2009 at 7:11 pm
could we be on the cusp of the 2nd plunge just like after the great depression started? the one that was the really big drop compared to the previous one? The one that was the ‘come to Jesus’ one that caused the really big changes that kept the market from self destructing for about 50 years? before we deluded our selves into thinking we had this problem fixed and didn’t need the rules and regulations that kept us from falling off a cliff…like this one? to use the stop sign analogy. we used to have a stop sign (that was regulations and regulators) but we removed it (weakening or removing the regulations and installing non regulators) ao s now we have gone past where that sign used to be and were run over by that truck.
April 20th, 2009 at 7:16 pm
@Ahab,
I’m outraged, but I’m no fool. Anyone who says that the TBTF institutions can be allowed to go belly up without causing ripples through the economy is a liar. Anyone who says these ripples will only affect the guilty is naive. And anyone who says that the suffering of these innocents will be insignificant is a fool.
@Leftback,
I’m not talking about fear in the market. I’m talking about fear in government–like the fear in 1933 that essentially allowed FDR to dictate legislation to Congress. We never got to that point, and we never will. There will be no quick, radical change, and I’m fine with that. We have long term problems and we require long term solutions.
April 20th, 2009 at 7:28 pm
@franklin: You are correct about the long-term nature of the problem. Anyone who studied Japan agrees.
I wish I could be as optimistic as you are. The size and scale of the problem is so much bigger than Japan and this is not a country of disciplined self-denying savers. I’m just not sure what the US looks like when people start to realize that they have been lied to and swindled on a grand scale, when unemployment stubbornly refuses to decline, and when the price of basic things we all need starts to take off. You may not be afraid, but I’m afraid – not so much of crime but of all the gun nuts out there, arming themselves to the teeth.
April 20th, 2009 at 7:41 pm
I follow the rules mostly to prevent an accident. If nobody but a cop around I do a rolling stop.
What do Goldman and Morgan Stanley and Chase fear? Losing offices and perks, having to go home to the wife. Invitations dwindle. Blackberry idle. Golf with fellow retirees.
So there is no time for change as negatives = fear = run and hide ( In da office ). Therefore the guillotine
April 20th, 2009 at 7:45 pm
wow leftback- sounds pretty grim- that’s why I suggest lots of guns to protect yourself (from people with lots of guns)- like that “all in the Family” episode where Archie says the way to stop hijacking is to arm the passengers
April 20th, 2009 at 7:46 pm
you’re right about the US being in a far worse position than Japan in terms of social cohesion. Investor concerns and arguments about which institution is TBTF are, at this point, the least of our worries. The shit will hit the fan when the cupboards are bare and the Chinese no longer agree to fund the military. When local governments start releasing prison inmates for lack of funds to house them. A few companies will do well but they cannot carry the US economy by themselves. Genuine improvements in efficiency and productivity were replaced by tax avoidance schemes and speculation — guess you reap what you sow.
hey Franklin, the TBTF have failed – we have embalmed the corpse but it’s not going to do a damn thing for us.
April 20th, 2009 at 7:59 pm
franklin411 Says:
“The kind of fear that could produce radical and rapid economic change has passed, and now we have to settle for a gradualist approach.”
_______
The eye of a hurricane comes to mind. “Nothing to fear, here – let’s go out and clean up the yard.”
April 20th, 2009 at 7:59 pm
@ franklin411,
>> The kind of fear that could produce radical and rapid economic change has passed,
Don’t mean to “gang up on you”. But, I think it all depends on U-6 unemployment. And I don’t have a good feeling about it. Until we have an honest-to-god currency collapse, then (a) jobs are going to keep leaving the country, (b) asset prices (including housing) will keep collapsing, and (c) debts at all levels will be unserviceable.
Anything good for our foreign creditors is no longer good for us. We must print like there’s no tomorrow, to fill the giant hole of counterfeit credit originally created by Wall Street (in the form of bad loans) but now being written off.
What should we tell our creditors? I think Nixon and Flounder had the correct phrase: “you f’d up, you trusted us.”
April 20th, 2009 at 8:09 pm
Man, this blog is even starting to depress me. Not good.
April 20th, 2009 at 8:13 pm
Lefty:
Quite a day. How’d you do? Still in FAZ?
April 20th, 2009 at 8:17 pm
@franklin: Agree totally with the concept of fear as a motivator. It’s our genetic programming. Eat or be eaten.
This roller coaster ride is not over yet. There may be a few more opportunities. It’s not too late for radical change. Hello. GD.
You obviously have a lot more confidence you have a perfect understanding of what’s going on than I do.
My experience has been that those who project themselves as having a perfect optimistic understanding of the situation, and get some others to listen, are going to motivate very predictable outcomes:
Some are going to throw themselves under the bus thinking that’s the right thing to do. (Tienanmen Square)
Some are going to get thrown under the bus because they were too vocally in disagreement.
Mostly, innocent bystanders (taxpayers) are going to suffer the consequences. You are right about that.
TBTF failing will not make a single iota of difference to the innocents’ outcome. That’s a fact. Pay me now pay me later. Except not failing prolongs the eventual outcome.
April 20th, 2009 at 8:18 pm
@Wuns
>>And I don’t have a good feeling about it. Until we have an honest-to-god currency collapse, then (a) jobs are going to keep leaving the country, (b) asset prices (including housing) will keep collapsing, and (c) debts at all levels will be unserviceable.
I don’t know about that anymore not that I know anything ,…but I think it’s a giant game of chicken right now. Everyone’s got something to lose. What we got here is a Mexican stand off of sorts. The fact that we hold the dominant currency and are the biggest consumer does hold a little water. I’m not saying it’s going to be great,…my male dog still has his balls,..thank god. My best friends won’t go in the back yard. I would still have a gun handy too. I still have hope.
Time will tell….
April 20th, 2009 at 8:25 pm
Bruce: Cut my FAZ and SRS in half, still in QID. A good day for me, except for my commodity positions.
As Mish put it, the deflation trades are back on. Expecting a weak bounce and will then reload the shorts.
Gold and silver are going to have a little run here as safety trades.
LB thinks the spring rally is over and Mr Market sees a GM BK and a lot more stress in the credit markets ahead.
We had played the rally in junk bonds and exited Thursday. Timing is everything. JNK off 5% in a day.
April 20th, 2009 at 8:32 pm
Well, Manny and Lefty:
My birthday tomorrow and my wonderful wife went to the used bookstore in town and bought all the Ed McBains that I didn’t already have…probably 8 or 9.
Even though Franklin hurt my feelings today in that I thought he was merely a misdirected socialist/liberal/ pinko/nutjob but basically ok…and then I find out he’s a video gamer! Oh, the ignominy!
Anyway, the salt mine was swamped today…and time to relax…agree with US Phoenix, all we are doing is drawing this thing out…Black Jack and I are going to go read Mischief…see you guys in the am….
April 20th, 2009 at 8:34 pm
And then, too, there are the Swedish twins which you may no longer mention….my birthday tomorrow and my wife bought me all the Ed McBains that I didn’t already own…goodnight…see you guys tomorrow.
April 20th, 2009 at 8:53 pm
wunsacon Says:
“until we have an honest-to-god currency collapse, then (a) jobs are going to keep leaving the country, (b) asset prices (including housing) will keep collapsing, and (c) debts at all levels will be unserviceable.”
definitely some truth to that- if we are in a true global economy- it all comes down to parity
usphoenix Says:
“TBTF failing will not make a single iota of difference to the innocents’ outcome. That’s a fact. Pay me now pay me later. Except not failing prolongs the eventual outcome.”
sad truth
April 20th, 2009 at 9:00 pm
@wunsacon:
We still have one more bite at the TBTF apple imo. The world cannot allow the US government to fail, and IMO it’s smart to max out the credit card to fundamentally re-center America’s economy on production rather than consumption. It’s a gamble, sure…but it’s our last shot. This is a project that will take 25 years to accomplish, btw.
@usphoenix:
This is simply nothing like the Depression. From 1929-1931, Hoover cut government spending and increased taxes. There was virtually no social safety net, and the Fed was vigilant against inflation, not deflation. Hoover does get a bit of a bum rap on this: he was only doing what most Americans would have said was the thing to do.
@wisedup
The admin has said time and again that recovery is a lot more complicated, and a lot more of a process, than simply restoring growth.
April 20th, 2009 at 9:30 pm
>> he was merely a misdirected socialist/liberal/ pinko/nutjob but basically ok…and then I find out he’s a video gamer!
Hey Brucey, my ears are burning!
(Well, I’ve been too busy to play much the past year. Bought Team Fortress 2 a year ago and still haven’t installed it.)
April 20th, 2009 at 9:42 pm
“the world cannot allow the US government to fail” — they can do nothing to prevent it.
“simply nothing like the Depression” — got that right — care to estimate how much of the current stimulus goes to consumption and how much goes to effective “new production”? Unless the top investors/owners decide to change the ways things are structured, the needed change will not occur. The Depression really only ended with WWII — Roosevelt was able to pick some extremely low hanging juicy fruit such as the Interstate but fundamental change only came with the war.
“a lot more complicated” means don’t bet on it.
April 20th, 2009 at 10:00 pm
The rally may FINALLY be over…I believe it will be the biggest sucker’s rally ever. Put/calls still near decade lows…II Bulls near 2 year highs…USD near 3 year highs (and killing foreign earnings)…Carl Weinberg calling for “historic market drop”…Reggie Middleton naming the riskiest bank…Insider selling goes vertical last week. Am I forgetting anything?
April 20th, 2009 at 10:11 pm
This is a project that will take 25 years to accomplish, btw.
Cool. That neatly breaks out into a series of five ever-more-successful five-year plans.
And anyone who says that the suffering of these innocents will be insignificant is a fool.
Something vaguely jihadist about the tone and style of that utterance. I like it. I think it works for you.
April 20th, 2009 at 10:43 pm
Here’s a novel thought – - might we all suffer even worse as a result of these neverending bailouts of the incompetents and fraudsters who got us into this mess? I know that thought is incomprehensible to those like franklin411 who have their minds set and are so sure they’re right, but please do give it at least a little thought from time to time. I’m getting that sinking feeling again that I got last fall and again in Jan/Feb.
April 20th, 2009 at 11:49 pm
@Mannwich:
How could that be a novel thought? 9 out of every 10 comments on this blog are from the Tinfoil Hat/End-of-Days crowd.
April 21st, 2009 at 12:13 am
dead man talking
Mannwich, there does appear to be a significant lack of top dogs being culled. It is amazing how much political cover you can buy in Congress for a measly mil’.
April 21st, 2009 at 3:21 am
Really good one over on The Market Ticker…lmao
Treasury: Caught Lying Again
http://market-ticker.denninger.net/archives/972-Treasury-Caught-Lying-Again.html
April 21st, 2009 at 6:55 am
This cartoon is so on the money… but we’re being softened up to believe in a fairy godmother who’ll sprinkle magic eco dust on the economy, and the ‘brill bailout’ will solve everything. Of course the banks are laughing all the way to their own private stashes, paid for by again… you and I the taxpayer.
It’ll all end in tears that’s for certain – unless we change our hearts n’ minds regarding the root cause of this mess, pretty much our own consumer greed and a penchant to being up as sitting ducks to be manipulated – same thing here in UK of course.
Ollie