Resilient !
By Barry Ritholtz - May 6th, 2009, 4:30PM
>
This is a tough market to keep down! Glad we are not short!
An Indian-born economist once explained his personal theory of reincarnation to his graduate economics class. "If you are a good economist, a virtuous economist," he said, "you are reborn as a physicist. But if you are an evil, wicked economist, you are reborn as a sociologist." —Paul Krugman, "Peddling Prosperity: Economic Sense and Nonsense in the Age of Diminished Expectations" (1994, page xi):
Macro Notes
FED/stocks/What’s next?Peter Boockvar
With the key FOMC meeting over, key b/c it was their last official comment before QE ends at month end, what do we now have to look forward to in terms of their exit? IF the economy continues to show signs of improvement, the next move won't be an actual policy change, it will be wording, the telegraph by Fed members in speeches topped off by the April FOMC statement that will tell us that rates won't be "exceptionally low" anymore for an "extended period." That's step 1. While the FOMC won't be raising the fed funds rate anytime soon,...
read more »
The Big Picture is proudly powered by
WordPress
Entries (RSS) and Comments (RSS).
© Copyright Ginormous Content Limited 2010. All Rights Reserved.
Entries (RSS) and Comments (RSS).
© Copyright Ginormous Content Limited 2010. All Rights Reserved.
May 6th, 2009 at 4:35 pm
It sure is. What are your personal thoughts on the issue Barry? Most people on here see this as a bear market rally, and you have stated that it is also (something along the lines of guilty until proven innocent). But there has been little ‘true’ good news to get bullish about and yet it keeps going up. Is this a result of such pessimistic scenarios being priced in that the slowdown in decline is now having such an amazing impact? What do you say BR?
May 6th, 2009 at 4:35 pm
Don’t be surprised to see it come down hard. Technically, it is on thin ice.
http://www.bushongbusiness.com/opinion.html
May 6th, 2009 at 4:44 pm
“This is a tough market to keep down!”
906, we hardly knew thee..
Calls are still fat..
I like AT’s call(paraphrasing): fade this thing til’ ~937, after that, stand back for the Run to a 1000 /
May 6th, 2009 at 4:44 pm
I’ve been surprised by this run up as well. Not only have the major indices been rallying but the shorts are hiding out somewhere. I don’t see any of their activity. This leads me to believe sentiment is long, but I don’t fully understand why given the data. You could argue that the market is overbought but the lack of short activity seems to refute that. What a pickle. I’m curious to know what Barry’s cash position is as well.
May 6th, 2009 at 4:46 pm
Believers in the goosed market hypothesis know that the DOW has yet to turn positive for the year. That will be at about 8800. As the DOW is a more important sentiment index than the S&P, this is a pretty sure bet. A corresponding move in the S&P should bring us to about 950. I really can’t complain, the taxpayer is finally getting their bailout.
May 6th, 2009 at 4:47 pm
The biggest thing leading the rally is the calendar. Average duration of a post WW2 recession is 16 months. 16 months from Decemeber 2007 is now. Rally time!!
And with the stress tests leaked, it’s all clear that we were worried about nothing!!
Let’s get the TARP money back and return in the way-back machine to 2006!
Or so it would seem.
Green shoots?
What about the angry panda that eats shoots and leaves?
May 6th, 2009 at 4:54 pm
So far the news has been better than Armagedon and, therefore, better than expected.
The question is whether this is the revenge of the angry bulls or just angry BS.
May 6th, 2009 at 5:05 pm
SPX 950 (200 DMA area) and SPX 1000 are certainly possible. But we all know where this is headed.
The more recent arrivals on the long side may prove somewhat less resilient after, say, a 5% down day.
May 6th, 2009 at 5:06 pm
Prescient the relevance of Donchian’s Guide #1 to where we are here…
1. Beware of acting immediately on a widespread public opinion. Even if correct, it will usually delay the move.
In other words… fading this rally is so obviously the right thing to do that it has delayed the move. The consternation of shorts getting stopped out of shorts just piles on to the upward thrust, which if not backed by strong volume (ahem, institutional buying) will ultimately run out of steam. Does any of the recent move strike any of you as being of strong volume?
From:
http://www.ritholtz.com/blog/2006/08/donchians-20-trading-guides/
May 6th, 2009 at 5:12 pm
I have a wind baggy friend who has never had a losing trade. You know the type, reports the gains after the fact with some really breathtaking amounts involved. He had been very quiet the past few months and then today I got a couple emails from him titled STOCK MARKET – and of course he modestly reports great gains now. That is my confirmation that we’re headed for a big move down.
Last fall I got an email from him telling me that he had moved his entire 401K balance to cash, PAST tense and that he was taking the afternoon off. It was one of those super volatile days and the market reversed and finished up 900 or so. Our next discussion he told me that he got off the train and went home and cancelled the transaction and he was still fully invested. Our 401K plan is not designed for daytrading and when you hit that confirm button – it’s a done deal! Funny. Anyway Franks my counter indicator.
May 6th, 2009 at 5:14 pm
[...] reading here: Resilient~! Leave a comment | [...]
May 6th, 2009 at 5:15 pm
I got an email about my employers 401K plan eliminating a bunch of investment options, all Vanguard and Fidelity funds including F Megellan & Worldwide and Vanguard MM funds.It’s small potatoes compared to employers cancelling 401K matches and plans entirely but interesting
May 6th, 2009 at 5:18 pm
It just look spooky to me. I especially like the well formed Elliot wave. It looks like it could have come from a textbook. High five to somebody.
May 6th, 2009 at 5:21 pm
Fidelity & Vanguard are going to bear the brunt of kneecapping so many of their 401(k) ‘investors’..
If there only was a FusionIQ “Buy’em by the Box” Fund…
http://www.thefreedictionary.com/brunt
May 6th, 2009 at 5:24 pm
BR wrote:
Why not? It’s pretty much doing what we should expect it to be doing given the underlying fundamentals.
It’s not all rosy on the horizon, however. There’s still a steady erosion of the expected future growth rate of dividends per share that’s going on, which suggests that the rate of growth of stock prices will slow and possibly stall out in the near future. It’s not yet enough for me to lower my forecast range for the month, but it’s something I watch closely.
May 6th, 2009 at 5:24 pm
The action this morning was interesting – it felt like a really weak market until later in the day like somebody had to come in and help it out.
Looking forward it should be obvious that since this rally started at 666 it must necessarily terminate at 999 – not a moment sooner, not a moment later.
I trust the infallability of reasoning here is self-evident so that no other viewpoint or conclusion need be discussed.
May 6th, 2009 at 5:37 pm
Wouldn’t shock me if the stress test leakages are overreporting the capital requirements so we can have another upside surprise to keep the magic unicorn rally going.
May 6th, 2009 at 5:38 pm
Pulled the trigger a little early on my FAZ buy – oh well, hopefully at some point the market starts to get real. BTW, has anyone heard from Steve Barry in a while? I know he has gotten killed holding his large QID position over the last couple of months, I wonder how he is doing. He was pretty impressive with his calls last year, but as I had mentioned, if you can’t change your views with the market, you won’t survive.
May 6th, 2009 at 5:38 pm
I-Man. thanks for the Donchian link. I’m embarrassed to admit I had never heard of this person.
fwiw, I’m hearing tales from the front line of lots of traders throwing in the towel today…giving up on fighting the upward mo’.
May 6th, 2009 at 5:39 pm
Mannwich (I’m sure you’ll show up shortly) I’m either appalled or unsurprised that, in some sense, what was first some combination of joke and serious (although presumably more of the former than the latter) turned out to be correct. BAC was up for the day (definitely no exclamation point here).
Another minor surprise, news stories on finance.google.com now include the ‘Market Oracle’.
http://www.google.com/finance?morenews=10&rating=1&q=INDEXSP:.INX
I’ve read one of these and will take a look later at the other:
1. “Wall Street Oligarchs Engineer Stock Market Recovery”
2. “Why Stock Market 2009 is Turning Out to be a Repeat of 1975 “
May 6th, 2009 at 5:41 pm
My analogy is the ex-addict going back to the hard drugs, getting high and higher. Select quotes from trainspotting:
- One final hit to get us over this long, hard day.
- And the reasons? There are no reasons. Who needs reasons when you’ve got heroin?
- Propelling ourselves with longing towards the day that it would all go wrong, because no matter how much you stash, or how much you steal you never have enough. No matter how often you go out and rob and fuck people over, you always need to get up and do it all over again.
[couldn't find the one when he says reality coming to get him hard]
May 6th, 2009 at 5:42 pm
Andy-
the question is- forward momentum to what? Stagflation, deflation, currency crisis, hyperinflation-
sure makes me want to jump in
May 6th, 2009 at 5:46 pm
@ Super-Anon: from 666 to 999 = 50%. A repeat of 1938.
Would it surprise me after all we have seen? Nah.
@Andy T: We had some “bear capitulation” on TBP today as well.
I’m just playing what I see and staying alive in case of the above.
Plenty of people still sitting in 3-month T-bills…
May 6th, 2009 at 5:49 pm
This has got the stink of manipulation or something propping up the move. If I hear or read the words better then anticipated” or “better then expected” one more time, I’m gonna puke. Does it mean that the estimates really are better then expected, or does it mean that the expectations were wrong or misleading to begin with. This, the leaks from the stress test who’s results are “better then expected” and the extreme cheerleader from the press seems to be coordinated like some kind of dog and pony show with happy clowns disguised as media people.
May 6th, 2009 at 5:55 pm
Credit markets, equities and commodities are all going up pretty fast in tandem. I don’t think this can be written off as some type of manufactured equity pump.
I think the euphoria at the Fed right now is going to turn to horror a lot more quickly than they ever thought possible. (We are constantly surprised by the financial markets, aren’t we?) They’ve poured a ridiculous amount of liquidity into the system over the past couple of years. Plus the QE program isn’t even halfway finished. They need to start turning off the spigot now to get in front of this.
All that money created and thrown at the crisis is starting to move around.
I was too young to remember the seventies, but I know there was a lot of hand-wringing over stagflation. Feels like the inflation genie is out of the bottle now. I don’t know what else explains the moves.
May 6th, 2009 at 6:08 pm
ahab,
the ‘currency crisis’ possibility is one that, virtually, noone is even thinking about..
May 6th, 2009 at 6:14 pm
To those who asked, I’m still here…still bearish…still holding gains while many are down 20-30% the last couple of years. I decided early on, I would not try to trade this market…my long term thesis is unchanged.
As for sentiment, here are some more indicators…II Bullsis basically right at the July 2007 (all-time Dow high) level. Nasdaq 100 Bulls at 85% is at 3 year highs. I only have 3 years of data (anybody have earlier data?). It would surprise me if this indicator has ever been higher except maybe the height of the bubble. And of course, credit to GDP, what started me on this bearish journey, has not only NOT improved, it has gotten much worse. So enjoy the rally.
May 6th, 2009 at 6:23 pm
MEH-
many variables out there- however, I do not see the prospect of a resurgent USA being believable- I want it to be true but not feeling it- this country has become nothing more that the primary destination for all the goods made everywhere else- not a good economic model- that and everyone wanting to get on the next train to easy money- bubble economy’s-
what am I missing?
May 6th, 2009 at 6:27 pm
GMAC “bank” needs another 12B capital? It isn’t even a real bank, just a schlock mortgage broker co-owned by Cerberus (Chrysler) & GM.The US will let 2 of the largest industrial employers in the country go bankrupt but not a potamkin bank that’s a poster child for sleazy mortgage practices? Just think Tiny Tim converting US loans to GMAC common and moving our tax dollars up to first loss position to game the capital accounting requirements and hoard his dwindling pile of TARP chips
May 6th, 2009 at 6:32 pm
no, ahab, that’s just it.
we owe everything we have to the kindness of Strangers.
then, we get the MSM blowing a bunch of ‘lone-Superpower’-smoke up our ***
we’ve Never been in a more brittle situation.
‘Caines need to put down the Coke, and understand that there’s more than, just, HFCS that’s imperiling their existence..
http://www.westonaprice.org/motherlinda/cornsyrup.html
http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.24.8441
May 6th, 2009 at 6:34 pm
@patfla: I’m here. Just got back from the gym. Had to work off all that angst. I was sort of joking about BAC last night but not entirely, so I’m not totally surprised they were up 17% today. What did I say last night, 20%?
May 6th, 2009 at 6:35 pm
Couple ideas:
In general Some short term signals are getting to extremes.
Hang Seng is on fire, anyone have any thoughts on that? I’m long FXI.
at trade futures.com you can get the DSI which is now at 80%, I said last few days we’d see bullish levels at the levels we saw in October 2007. This might indicate that most of this rally is over. I think, but not sure, this is the highest level of bulls since then, which was 88%in 07. I’d still look for it to move higher as this rally goes on, just slower then disappointment.
Steve Barry watches put/call close which I didn’t think was a great metric but Steve is obviously bright so in watching that closer. Cboe put/call hit .67, recently hit around those levels in March and April. Both times things got a little hairy not long after, sideways and choppy. but both times it was more sideways than down so if there is a pullback I would estimate 5-10% but not more than that. to go along with my general theme for the rally then it would go lower than .60 as we get to the top.
I read somewhere today that options traders are getting into this more now, does anyone know a good way to track overall options trades trends? this would make sense b/c the rally has been two months now basically so I would think that would draw people in, MEH also talked about call premiums today a couple of times. I’d think that after a small push down that could still drive this to higher extremes.
I’m not a master chart reader but it looks like the S&P has some pretty serious resistance up around 940ish not sure if we get there slowly or a down up, or sideways up move to that level next
Maybe worth watching as well but the Nas is looking a little tired lately + the tech cycle is almost over according to the Almanac. If you traded that well you probably have some nice profits to take.
May 6th, 2009 at 6:36 pm
Wells needs another 15B, those second mortgages, HELOCs and Pik-a-(non)Pays are all sucking chest wounds that will only get worse when the foreclosure moritoria end
May 6th, 2009 at 6:43 pm
I’m an idiot, I just basically wrote steves post, which I didn’t read before I wrote mine.
May 6th, 2009 at 6:43 pm
If you folks will take up a sufficiently large collection, I’ll throw in the towel in exchange for it.
That has, in the past, been an unbeatable formula for turning the markets. As soon as I abandon all hope and bail, things turn within 10 days. It’s only failed once, and that’s when I ran out of money before I ran out of determination.
And for those True Believers counting on the green shoots growing to become a giant beanstalk stretching up into the clouds, I have a plan for you too. Same deal, except I’ll continue to stay short and the markets will continue to rise.
Whichever side delivers the most money, that’s the way I’ll go — the losers will have their money returned to them. I’m nothing if not charitable.
All in favor of a return to rationality, throw in some money — a LOT of money.
May 6th, 2009 at 6:45 pm
does anyone have any data on HELOC defaults? The reason I’m asking is b/c I’m a little skeptical of them having higher default rates right now, Home Equity Loans maybe but the HELoC rates are very low right now, lots of people are carrying those at 3-4% interest.
May 6th, 2009 at 6:46 pm
Oh, and on the employment front, does anyone know how the auto workers who are out of work over the summer get counted? Or do they get counted at all?
May 6th, 2009 at 6:51 pm
ben22,
file it under: Ripley’s, but, a lot of peep were using their HELOCs to pay their CC minimums into the RE spike/top..
it was that whole “Fake it, til’ you make it”-meme..
HELOCs cut back/ RE no longer going parabolic, those things could be @-2%, many would still bust..
and, here: http://www.optionsclearing.com/
a start on that data..
May 6th, 2009 at 7:02 pm
‘Buy and hold’ looks increasingly ‘less bad’ .
May 6th, 2009 at 7:03 pm
Mark,
thanks for the link. I got a data point out of a OTB letter by Mauldin:
Q2 2006 MEW ~232 billion
Q2 2008 MEW ~9.5 billion
your answer just goes to show that I can apply that data to an awful lot of questions to come up with the answer.
May 6th, 2009 at 7:22 pm
Over the last 112 trading days, back to Nov.24, during this whole massive QQQQ rally, QQQQ volume has decisively been above its 100 day MA on an up day exactly 2 times. This astounds me.
May 6th, 2009 at 7:23 pm
ben22
HELOC defaults are due to people defaulting on their mortgage- 1st and 2nd’s- it is irrelevant that HELOC rates are low- because they cannot afford the 1st trust- you are not going to default on your 1st trust and pay your 2nd trust- what’s the point
May 6th, 2009 at 7:33 pm
@Steve Barry: You are still exactly correct. Nice to see you back.
May 6th, 2009 at 7:40 pm
It’s like Schiff says, “cash is trash”. So all those folks (think globally) with all that money are looking for a place to park it. Be my guest. Someone here said the other day that fundamentals don’t matter. Really? A lack of fundamentals or the complete disregard of them due to greed is what led us to 2008. I ask you, has anything changed? One thing. The global fiscal response to finance this mirage has exploded. Other than that NO. Wishin and Hopin’ was a song done by Dionne Warwick that doesn’t apply to the markets. But cast your lot into the casino and hopefully you will be smart enough to get out again, at the correct time.
May 6th, 2009 at 7:40 pm
@US…I never left…just been busy…also big Fantasy Baseball player, so that has been time consuming. Plus if I were posting, it would sound like a broken record.
May 6th, 2009 at 7:43 pm
Long time ago reading the first Market Wizards there”s a description of a guys throwing an open chart book (remember those?) on the floor and then climbing up on the desk to get a little perspective.
May 6th, 2009 at 7:45 pm
I wouldn’t worry too much about that currency crisis.
You will be too old and helpless to do anything about the ultimate reckoning.
Enjoy the bull market though.
May 6th, 2009 at 7:46 pm
some interesting charts – i think.
uyg:skf ratio
http://1.bp.blogspot.com/_RHwzqq5yGy0/SgIcA1nRM...
spyders closed the gap today
http://4.bp.blogspot.com/_RHwzqq5yGy0/SgIat1iYg...
full retracement rally for the financials
http://4.bp.blogspot.com/_RHwzqq5yGy0/SgGv4X5zV...
May 6th, 2009 at 7:50 pm
And Ritholtz, the hell with your “resilient” bearish spin. I am now bullish on the stock market. I am so depressed about the manner with which we are kicking America’s can of worms far down the road that I would not be surprised to see Dow 15K. In fact, Dow 15K would be a rip-off considering how much money we are printing to buy a “recovery”.
The rage is gone. My blog is obsolete. Yours will soon be too.
May 6th, 2009 at 7:50 pm
@ahab,
sure, I get that but this is why I was asking:
http://www.helocbasics.com/can-you-walk-away-with-a-heloc/
look at the short list of non-recourse or one action states which is within the link. It’s not very long though all the worst RE states are on the list.
I’m not exactly sure of how a recourse state then ultimately works this out but it seems that the liability portion of the Heloc is eventually paid, even if they default on the primary.
I guess the follow up would be how many helocs are done in the non-recourse compared to the other states, I suppose you’d probably find all the same markets being problematic.
May 6th, 2009 at 7:56 pm
i don’t know why the charts don’t link. but they are here:
tradepostings.blogspot.com
May 6th, 2009 at 8:00 pm
Seems as if China also has a Potemkim economy and market. Anyone else suspicious they’re so-called “recovery” ain’t what it seems? Of course, this news is roundly ignored.
http://www.nakedcapitalism.com/2009/05/china-power-generation-falls-suggesting.html
May 6th, 2009 at 8:11 pm
Mannwhich, my 2 cents worth (Chinese growth). Much of the idea of current Chinese growth started with monthly total loan values in China. Which shot up staggeringly in Q1 of this yr.
These values need to be very carefully deconstructed. The best think to do is look through Michael Pettis’ recent posts.
http://www.mpettis.com
Michael is a professor finance at a university in Beijing. The rate at which Brad Setser ( http://blogs.cfr.org/setser/ ) – and others – reference Michael is growing.
May 6th, 2009 at 8:15 pm
ben22-
a HELOC is a credit line against the equity in your home- you can have a HELOC with a zero balance- only means that you did not draw against the equity-
on foreclosed properties- the 2nd trust company can secure a judgment against you for any unpaid line of credit- the chances of a garnishment against wages is negligible- however- whenever the foreclosed upon borrower attempts to secure additional credit- especially as it relates to secured property- then they will have to satisfy the judgment before the new lender will lend- so- the foreclosed upon borrower needs to resolve this issue before they can enter into other credit arrangements.
May 6th, 2009 at 8:51 pm
Cramer declares on “Daily Booyah” that the “bulls have won”. God, I don’t even care about my portfolio anymore. I just want to see this jackass be wrong again and watch how he tries to weasel out of it.
May 6th, 2009 at 9:02 pm
Jeff – LOL
As I wrote before, everyone of us (TBP commenters) is too sentimental.
May 6th, 2009 at 9:02 pm
Looks like I need to chime again with some ‘big picture’ parameters. Question: (1) Why was the FIRE economic model necessary in the first place to drive ‘growth’ during the 00’s? Why didn’t we rely on pumping oil, building rail, hunting whales, conquering new territory, or engage any of the other various models employed by this country over the last 250 years? (2) If the FIRE components are stripped out of the last 8 years of economic data, what was rate of growth in real GDP & wages?
The point behind these two questions is meant to focus attention on the underlying challenges still to be faced. Has anything changed? What new technologies have been developed that will drive productivity, employment, wage growth and capital formation? What new sources of energy?
None? Ok, but if expansionary credit policies fueled the last 8 years of consumer activity, how effective will it be this cycle? Not much, because we long ago reached (and surpassed the point of marginal return). But unless it is comparable to the 00’s, we are still looking at poor economic growth. Problem is, our debt has basically doubled in the mean time, so how is this debt to be serviced?
Answer: It cannot be and it will not be. I hope every0ne realizes that the national debt will never be repaid. Never – not by this generation or any future generation. Nor will it be defaulted – we as Americans have too much pride. So it will be inflated away. Funny thing is, money supply happens to be one of the Fed’s actual mandates.
So here we are boys & girls: an economy based on credit expansion, not production, a debt load that cannot ever be serviced, and the Fed authorized to pursue the exact policy needed to get us out of this mess.
The DJI will double not because of green shoots, but simply because of monetary policy. Why it is so difficult to see that while we will have both 20% unemployment and a 20% contraction in GDP, we’ll also have the DJI at 16K?
May 6th, 2009 at 9:05 pm
Cash is still king in my opinion. I’m reasonably certain that before we are done with this “recession” those with cash and will be able to buy bargains if a lifetime as they say. This rally will at least retrace 50% before it entices new longs who “missed out” this time. After that everything will depend on whats happening in the real economy. Jobs, Earnings, Solvency.
Kudos to SB for not trading and holding on his shorts. Mine would have filled long ago. There is not much doubt the he is absolutely right we are far from out of the woods yet. Say No to Leverage!
May 6th, 2009 at 9:08 pm
Hey Mark,
To answer your question from the previous thread: No, this is not how I would destroy a country. If I were in the country destroying business I’d do it for keeps.
If I were the gods who first drive mad those who they would destroy (i.e., because of hubris) this might be the way I’d do it. IOW, I think the current predicament has grown organically out of our nature as Americans — our national character or lack thereof.
I think it’s very possible the SLP (or some other hidden mechanism) is an air compressor reinflating the equity market in a way that looks pretty realistic to the untrained eye.
But if history is any guide, America sucks at exit strategies and the clever boys and girls who devised this “noble lie” for the greater good (or at least to prevent social unrest) haven’t got the foggiest what happens next.
May 6th, 2009 at 9:13 pm
@centiare: You continue to make good points, but here’s the thing – what will be the social ramifications of a sustained truly weak economy and job market when those folks who are taking it on the chin see their cost of living explode while the stock mark goes to the moon? Do we really think there will be no adverse effects here? Will people just continue to be delusional and think they’re “wealthy” when in fact they are not? I find this whole time period to be just increasingly bizarre and surreal. Maybe I should do what CNBC Sucks advises – - stop thinking so much. Basically if you can’t beat ‘em, join ‘em?
May 6th, 2009 at 9:14 pm
ahab,
thanks, I know what a heloc is.
you said exactly what is discussed in the link I posted above. I’m not familiar with the methodology of how Heloc defaults are counted but if they are eventually paid then I’m thinking there is some creative way that it doesn’t get counted.
Also, to my comment about low rates, in this environment I thought it would be possible for the lower rates to have an impact on the number of defaults. Today lots of households might be able to make that primary payment but maybe the line payment is now just too much,perhaps one or the other person in a dual income home lost a job. in other words I think the defaults are coming more lately as a result of income loss, not the cash outflow itself as the payment on the heloc is low due to a lower rate. In some (not sure how many) cases the primary lender and line provider are the same bank so they might work with you on payment terms on the line as the line default could lead to a complete foreclosure and the lower rates give them more options. am I completely wrong about a banks ability to work in this manner? there seems to be a frenzy of refi activity going on right now.
In any event, it’s probably a waste of both of our times, the real estate market is a complete disaster, we both know it.
May 6th, 2009 at 9:16 pm
@ centaire
Wait a second…Franklin WILL actually produce something in his nanotechnology lab sponsored by the government…
Vaporware will propel this country to new heights!
Let’s just hope the supply of Hafnium doesn’t run out…
Or copper, or lithium, or nickel, or iron ore, or H2O to refine the elements…yada, yada, on & on
May 6th, 2009 at 9:17 pm
centiare, I saw your post regarding Steve Keen. Thanks for the heads-up; my whole rant was based on the money printing requirements of the PPIP, so I had not even seen Keen’s analysis until today. You are right that the national debt will probably never be paid, but I say we will print $10 – 25 trillion anyway.
What astounds me more than anything is how everyone on this blog – despite their intelligence – continue to behave as though they hold on to the idea that the US asset markets still have any semblance of “honesty”. The book is cooked! The stock market will go up because the political necessity is for the stock market to go up. And the stock market will go up because the US government can print money with impunity, until the system ultimately breaks.
The stock market will go up because CNBC wants it to go up.
May 6th, 2009 at 9:37 pm
I feel your pain Mannwich. I really do. The words coming out of your mouth every day are the same as mine. (It’s actually a little spooky!
Don’t go to the dark side though. Following the lemmings will seem great, until you go over the cliff with them. I think we’re both getting quite the education in market psychology, especially that which occurs in an epic bear. I’ve said it before, I never could understand the market chart for ‘29-’32. Now I believe I get it.
May 6th, 2009 at 9:40 pm
CNBC-
you seem to have become resigned to the fact that we are powerless- and at this point in time I agree- but do you think that common sense will prevail? That the stock market will in the end reflect the real situation on the ground.
Ben22-
sorry man- disregard any dictionary definition I laid on you-
the 2nd trust company obviously has a lien on the home- they can pursue a foreclosure as well as the 1st trust company but would be behind the 1st trust company as far as proceeds from the sale- if the home is under water- then would not be a reasonable course of action- they would write off the debt and slap a judgment against you
May 6th, 2009 at 9:40 pm
Hey, the futures are down. That should be good for a big pop in the market tomorrow. Buy the banks! They’re printing money.
May 6th, 2009 at 9:41 pm
@CNBC Sucks
If Bernanke inflates away the debt won’t he be out of a job?
May 6th, 2009 at 9:50 pm
30/30/30/10 QID/SDS/TBT/GLD
…..and sleeping like a baby……
I don’t even pay attention to the daily madness anymore.
It’s beyond silly.
The US domestic economy actually might end up being among the LEAST of our concerns.
It’s all fun and games until a nuclear state collapses into anarchy.
http://www.americandailyreview.com/home-features-articles-blog/2009/5/6/pakistans-coming-collapse.html
May 6th, 2009 at 9:54 pm
Leftback: @ Super-Anon: from 666 to 999 = 50%. A repeat of 1938.
Would it surprise me after all we have seen? Nah.
Could be a repeat of 1929-30.
http://www.ameinfo.com/16529.html
48% off the 1929 (leftback) low.
Leftback: @ Super-Anon: from 666 to 999 = 50%. A repeat of 1938. Would it surprise me after all we have seen? Nah. Could be a repeat of 1929-30. http://www.ameinfo.com/16529.html 48% off the 1929 (leftback) low.
May 6th, 2009 at 9:54 pm
we are a more modern UK- a broken empire- soon to fold up our tent and go home- waiting for the currency debasement- so we can compete with all the other low wage countries for jobs
May 6th, 2009 at 10:01 pm
@ all
technically…I’m seeing the ‘quadruple EVEL KNEIVEL formation’…expressed on this blog about a months ago…
Funniest thing I ever saw
May 6th, 2009 at 10:02 pm
or maybe it’s the TRIPLE LINDY…
May 6th, 2009 at 10:05 pm
I got one thing to say: back up. back back back back back back back up. No, further. Back WAAAAAAAAY Up. Now look at this chart from dshort.com (a useful site–THANK BR for spotting this one)
http://dshort.com/charts/bears/mega-bear-quartet-real-extended.gif
Now, if that isn’t a crystal ball as to where we will most likely go…
Look, at the beginning of this financial crisis, there were some pretty smart people who were saying that the government can throw all sort of stimulus at the problem, they can try to soften the landing or slow the trajectory, but in the end, time is the healer and little else has an effect on the process. Anything else is but an illusion of control. I still believe this. The chart says it all. 4 massive bears, inflation adjusted. It is scary how similar the first few years are between the events. It is the ultimate argument to the “it’s different this time” I don’t think the circumstances leading to the events are as important as the fact that the charts illustrate **How humans reacted** And I would daresay humans probably react the same regardless of the era, the nation, the circumstance, etc. My base argument for the fact that we are experiencing a massive, beautiful, substantial bear market rally is time. That is it. TIME there hasn’t been enough of it passing.
Frankly there simply hasn’t been enough rigorous research done on my part relating to the human behavior aspects of investing for me to substantiate this as much more than a hunch. If someone can back this hunch with academic research, I would appreciate the notation.
The punch bowl is nearly empty, people are frolicking, the bass is turned up on the stereo, and my moms vase fell of the mantle. The cops haven’t arrived yet, but I wouldn’t wait for their arrival for the opportunity to leave this rockin’ party… Better to arrive late and leave early. Don’t get caught with your drawers down… And if you don’t get what I mean, you haven’t been to enough parties.
May 6th, 2009 at 10:05 pm
Transor,
you’re ’snapshotting’ the recent Timeframe, I was asking about the last ~35 years, to your point about US Corps filleting their R&D infrastructures–your post about Bell Labs..
Centiare,
this: “Why didn’t we rely on pumping oil, building rail, hunting whales, conquering new territory, or engage any of the other various models employed by this country over the last 250 years?” is the problem I have w/ your construct.
past this:”hunting whales, conquering new territory” being unnecessary, I think the answer is: We didn’t do those, productive, things b/c “we weren’t allowed”/”that wasn’t the Goal”/”we’ve had no American Leadership”
We’ve a serious problem, most of us can tell the MSM is, for lack of the better word, lying to us, yet we fail to see/acknowledge how much other G*rbage is pumped into us, broad-spectrum, on a continuous basis..
See any Romans, recently?
May 6th, 2009 at 10:11 pm
Gentlemen…
Step above the forest for a second…I think anecdotes count for a lot…
I talk to my friends these days (of different generations)…When I ask about their hopes & dreams, most of them “just want to survive”…these days…They’re interested in simpler things…
Very few are talking anymore about retirement homes on the beach with golf club memberships, world travel, etc…(as they did just 2 years ago)…
In spite of this rally, there has been a SHIFT…
It’s hard for me to imagine that we’re just going to snap back to CONSUMERICA and re-ignite our cannibalism of the recent past…
So a better descending “glide path” for the economy may result, and we may not have even yet regained the previous altitude of the descending glide path…But it’s bound to happen soon…
Then we all can be happy with a ‘foam” landing rather than crashing to earth in a fiery ball
May 6th, 2009 at 10:12 pm
@Jeff: As Transor points out, even I can’t follow my own advice. Otherwise, I would have made one of my fifteen prior retirements from The Big Picture stick. My problem is that I am having a super tough time accepting how hard, disciplined, and smart I am going to have to work over the next 10, 15, 20 years to survive the ultimate reckoning that will be inevitable from all of this borrowing and money printing. For the record, this registered Republican still supports Obama, because the GOP would have done exactly the same thing and worse. But the die for what America will look like in our old age is being cast.
@cvienne: What a sweet zinger – “Wait a second…Franklin WILL actually produce something in his nanotechnology lab sponsored by the government…”
@ahab: Common sense will not prevail because common sense is politically unacceptable. We have allowed the numbers to become too staggering for any elected President to risk using common sense. Maybe Obama will do so in his second term, but he knows he has to do everything to keep the GOP out in 2016 or we will definitely be in the shitter.
@RPH: Bernanke can neither “inflate” (the Chinese won’t let him) nor “away the debt”. The only thing that can stop Ben Bernanke is Mother Nature. Maybe she can restore some sanity to the proceedings without punishing us too much.
May 6th, 2009 at 10:21 pm
@ CNBC Sucks
Franklin da man!
Maybe he can help Bernanke come up with some synthetic “nano-paper” to save our cotton crop and keep all those textile workers in NC in their jobs…
Oh wait, they all got fired when the production lines moved to China and subsequently got jobs at Bank of America right?
My recollection is a little foggy…
May 6th, 2009 at 10:43 pm
All,
One thing that’s been my mind recently has been the following:
I’ll preface this…
I’ve been a GOLD bull since 2004…I started buying it at $375 an ounce…I’m NOT a gold bug, but suffice it to say that I saw it as the ONLY asset class (vs. BONDS, REAL ESTATE, STOCKS, etc.) that had basically done squat for more than 20 years…
I held onto that notion for awhile…
I felt vindicated as gold crossed $1,000 last year…I never sold, never added…It’s less than 10% of my total assets…
Between 2004-2008, I never heard ANYONE speak of any notion that it was anything other than an inflation hedge…I had a different approach…I spoke of the idea that it would actually end up becoming a CURRENCY (as in, oil priced in GOLD, wheat priced in GOLD, etc. NOT dollars)…
Then in the past year I started hearing chatter about what I’d been thinking about all along…
Fast forward…
It was part of the reason that I’ve always kept my gold holdings (that notion), but recently I came across another statistic that I was previously unaware of…My numbers aren’t exact, but if you take the supposed GOLD HOLDINGS of all the soverign nations of the world, it goes something like this:
The US has something like 8 metric tons…
I forget the rest, but it’s like when you get to 5th or sixth, they’re down to 1.5 metric tonns…
The GLD actually ranks 8th or 9th on the list (because it holds its deposits in bullion)…
China actually only has about 70% of what the GLD holds (which is about 1 1/10th of what the US holds)…
So think about it…Let’s say the FED prints all the $$ it wants and the price of GOLD ramps up 3x-4x of what it’s worth today…($3,000 – $4,000 an ounce)…Well, at a ratio of 8-1 (US holdings in metric tons versus China at present), put a multiplier on that…That means the US goes to 32 and China goes to 4, OR Us goes to 24 and China goes to 3…
Either way you slice it…The appreciative value of the bullion multiplier would FAR outweigh the trade deficit we have with China (and make us a far richer nation by comparison)…
What thoughts do any of you guys have on this because it’s made me rethink my macro strategy?
Basically , you could condemn the FED for printing money, but if that ended up disintegrating to a GOLD standard, we’ve hold the multiplier effect to a large degree over everyone else…we could bring out account deficits into balance very quickly…
I really don’t know what to think…So it’s a TOSS OUT to you all…
May 6th, 2009 at 10:51 pm
Contrarian indicator?
http://www.nytimes.com/2009/05/07/business/07bank.html?hp
May 6th, 2009 at 10:59 pm
cvienne, you could say our fiat currency is backed buy a) gold and b) that we’re the reserve currency. Not directly of course, but indirectly. We keep our gold reserves for a reason. Just a thought… I’m not an expert, just a novice with an opinion
May 6th, 2009 at 11:01 pm
cvienne
wow- a lot of thought into that comment- great question- hope someone has more insight into it than I do.
May 6th, 2009 at 11:13 pm
cvienne @ 10:43
I’m not sure what you’re arguing exactly. It seems that you’re arguing that we would come out ahead, at least with respect to our national debt and our trade deficit (at least with China).
Maybe so. But, once a “banana republic”, always a banana republic. We’d be drastically diminished as a nation.
May 6th, 2009 at 11:28 pm
SPX 1010 is only 90.47 points higher.
May 7th, 2009 at 12:30 am
Mannwich Says:
May 6th, 2009 at 10:51 pm
Contrarian indicator?
http://www.nytimes.com/2009/05/07/business/07bank.html?hp<<<<<
I love this line from the article: “All of this assumes that the economy does not take another turn for the worse, which would result in even more losses at the banks — and the need for even more money to prop them up.”
Naw, that could never happen. There aren’t any real problems with the economy. It was all just a crazy confidence problem. Nothing bad looms in our future. Good grief.
May 7th, 2009 at 12:35 am
And this: ““The banks are healing themselves”
Man we’re getting some serious B.S. out there. The denial about future loan losses is just amazing.
May 7th, 2009 at 12:47 am
BR’s buddy Taleb is not following the script……..
BR – you need to tell your buddy to get with the program.
http://www.bloomberg.com/apps/news?pid=20601087&sid=axyo1pG9j0ws&refer=home
May 7th, 2009 at 12:49 am
Since most of the stress test results have been leaked the market will react with enthusiasm if the actual results are in line or better. If the weekly unemployment claims are also in line then it’s up up and away. All this will make the short squeeze even stronger. And that’s just for Thursday. Now if the Employment Situation comes in close to estimates or better, I’d advise the shorts to run for cover. Your time will come. Just be patient.
May 7th, 2009 at 1:07 am
I agree with Taleb on his defaltion and global economic call…but i don’t see then how his call for gold and oil to surge will happen…either it’s mamssive deflation or it isn’t. The surge for gold must wait till deflation ends…and that may be a decade or so.
May 7th, 2009 at 2:18 am
I see it more as a really trending market, and the trend is now up…
The Dow Jones also moved from 8000 to 6400 non-stop almost… It was a trend, as is this one now.
Brazil and China are leading the pack, and this time these markets are much more expensive than January when Dow Jones was 9000. This is a serious red flag for you american investors. I’`d sell all my Dow position at 8500 anytime.
May 7th, 2009 at 6:53 am
gollum, get out of your cave. The Dow swept past 8,500 yesterday.
Sheez.
May 7th, 2009 at 7:24 am
@ Steve
I’d say I’m in agreement with you regarding deflation (even though I own about 10% gold and have owned that since 2004 at $375)…I never sold at the TOP and frankly wasn’t looking to sell…I’m not trying to TRADE gold…In fact, I think it’s very likely that it will go down and test in the 750-720 range (possibly as low as 680) sometime later this year…
So I don’t own gold as either an investment OR an inflation hedge…In fact, most of what I own I actually hold the bullion (that’s why I don’t really trade it)…Maybe I belong with the ‘tinfoil’ hat crown, but my reason for holding it this way is more if there ends up being some kind of crazy event in the world which renders currencies obsolete…What if electronic payment systems shut down, or if people can’t get to their cash…I’d own something I could barter in case of calamity…
I know that in a case like that FOOD & H2O would be pantamount, but I have ample supplies of those…
All of that is off subject though…The subject is DEFLATION, and while I believe there will eventually be an INFLATION problem (cause by the difficulty in undoing the monetary policy measures that BB has put in the system), I think DEFLATION is still a real risk…
It just seems to me that since this whole fiasco began (with the burst of the housing bubble), the NEED to spend a lot has largely been wiped out…Think about it…
If you have to buy furniture, services, and energy for a 2,500 – 4,000 house (and all the littler ones behind that), that’s A LOT of goods (which need to be manufactured and supplied)…Eliminate that, and move back into condos, and the whole dynamics change (no need for lawnmower, yard service, nat gas bill is reduced, power tools, couches, wallpaper, kitchen accessories, etc.
Furthermore, the NEED TO COMPETE with the next door neighbor goes away when everyone is living smaller…
So in the end, I think that some industries will flourish just fine…A smalller living space doesn’t precluse you from having a different cellphone (perhaps you still want all the bells & whistles there)…Maybe you still want to travel on vacations…Maybe your disposable income actually goes UP if you are lucky enough to keep your job, but go ahead and let your house get foreclosed on, return to being a renter, and take the burden of a large mortgage payment off your back…
It’s a dynamic shift in attitude which I think we will see play out in consumer habits…The lack of need for some things will deflate the prices…Whereas other things may thrive…
May 7th, 2009 at 8:05 am
@cvienne,
If you stop thinking about deflation in terms of people spending less as a result of moving to a smaller home or losing a job and you start thinking of CREDIT deflation you will see.
it’s already here.
May 7th, 2009 at 8:06 am
Also, I agree with Steve, if credit deflation completely takes hold, gold is going to deflate just like everything else. I’m not sure I understand that call by Taleb either.
May 7th, 2009 at 8:36 am
ben22,
Gold is North of your U$D 920 target, as we speak..
Silver North of U$D 14..
May 7th, 2009 at 9:55 am
Mark,
Yeah I see it, I mentioned in another thread I may need to change my call on that. I’m officialy just watching gold now from the sidelines, I have no capital allocated there. I’ll look again at the close.
May 7th, 2009 at 4:57 pm
I’m already short the Dow at 8500…
Listen to my words, this is a good exit for your investments… The US has made a vicious top when Dow was at 14k, now it probably will take at least a decade to go back there.
Maybe emerging markets could climb back to their previous tops, but not US equities.
I don’t wanna hear anyone cry when S&P500 hits 530.
May 7th, 2009 at 4:58 pm
If you wanna know what’s happening, google “asset inflation”.
May 7th, 2009 at 5:21 pm
I see a retracement to the 800-850 area on the S&P 500 followed by an upside push. If that happens, then the market will have formed a head-and-should in the S&P, a “W”-type triple bottom in the NASDAQ. For a chart, check out http://tinyurl.com/200dma