Nice take on the rally gains, 200 day moving average, and what it means, from Naked Hedge:
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click for mucho gigante charts
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Full PDF here: Naked Hedge
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
Faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof. —John Kenneth Galbraith
Knowing that the vote over the weekend in Greece was really a referendum on Euro membership, a majority of the Greek Parliament said yes to staying. European Finance Ministers meet again on Wednesday to solidify the 2nd bailout package for Greece at the same time hopefully a deal is consummated between Greece and its creditors this week. The Greek 14.5b euro bond that matures on March 20th is up by 2 pts. The optimism that all will be completed and contained AGAIN to Greece has yields lower in Portugal, Spain and Italy. The iTraxx Financial Index is also narrower by...
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June 5th, 2009 at 1:35 pm
Great stuff and the historical perspective is terrific, but I have qualms about the last bullish point that “the current rally has defied all technical and fundamental logic thus far and has no reason to stop”. Seems to me that this could just as easily be interpreted as a call to head for the hills because the bottom could drop out at any moment.
June 5th, 2009 at 1:36 pm
My take: at this juncture, give even more weight to one of the shorter-term moving averages, such as the 21 D.M.A. Strategies that call for holding stocks for months at a time are very risky at this point.
June 5th, 2009 at 1:57 pm
@BR — “… and what it means …”
OK, so what does it mean? From what I can see, we are almost perfectly balanced, and things could go either way.
We could even take 2 paths where both bears and bulls are serially validated, differing only in the order in which they are “proven” correct.
Probably, the course that will be followed is the one that inflicts maximum damage — and even with the surplus of bulls, I think that would be to hug the 200 day MA for 6-9 months before finally deciding whether to re-test the lows or to set new highs.
It’s a pretty set of charts, but not terribly useful.
June 5th, 2009 at 2:21 pm
This reminds me of roulette in Las Vegas. In the past it came up red when i drank vodka with Susie, and it came up black when i drank scotch with Veronica. Today i’m drinking gin with Laura so i’m betting on red because gin is the same color as vodka and Laura has the same number of letters in her name as Susie.
Ok, here goes……..i won! It’s red! I told you this system works!
June 5th, 2009 at 2:38 pm
-Almost Sell-
I have developed a number of indicators, over the years, and more of mine have started pointing down than up. Of course, that could change, but probably won’t.
http://www.bushongbusiness.com/opinion.html
June 5th, 2009 at 2:52 pm
The slope of the 50 DMA has actually flattened and, once again, it is the 200 DMA that is moving toward the 50 DMA, not the other way around.
I like the last bullish point: “The current rally has defied all technicals and fundamental logic thus far and has no reason to stop.”
And that folks, is why I’m sticking it out with cash (and a few small long positions just in case I’m wrong).
June 5th, 2009 at 3:00 pm
matt
Indeed, it has truly been going up because it’s going up since the early squeeze that got it started. That has to end some day unless the economy really does firm up soon enough for some fundamentals to come into play again.
Typical bear market rally. The herd takes the leap, hoping that something will be on the other side by the time they get there. If there’s nothing, then they fall again. Later they’ll try again until it sticks. Thus the “predictive power” of the market. Sooner or later it’s right and then everybody says how prescient that rise was.
June 5th, 2009 at 3:11 pm
@onlooker: I agree with you. At least “Green shoots” was something original… but if I hear the annual mantra of “recovery in second half” one more time I’m going to puke! You hear every year how the second half is going to be super earning/recovery/justify the PE ratio/…
June 5th, 2009 at 3:38 pm
Somebody (last year) had a chart/strategy that said should the 200 DMA be breached either way by 5% then a direction has been established.
June 5th, 2009 at 4:05 pm
I thought the job losses numbers were actually quite interesting this morning, and would even have called them the first green shoot I have seen.
A BIG BUTT, that I see this afternoon is the 10 year rises to3.86 and comsumer credit? Revised is a whopping 5 billion less and today is 2 1/2 times more contraction than expected. Color me back in the “if the consumer ain’t spending we ain’t going anywhere camp.”
http://briefing.com/Investor/Public/Calendars/EconomicCalendar.htm
June 5th, 2009 at 4:11 pm
Bruce:
I was very impressed with the NFP this morning, until I noticed the leading indicators deteriorated.
Both the temp help and hours worked numbers were worse month over month (and, of course, year over year). As the DB analyst mentioned, the hours data was the “equivalent of an additional loss of about 350k jobs.”
It doesn’t look very good when you put it in that perspective.
June 5th, 2009 at 4:12 pm
I’ll give you some ironclad trading rules
1. If I sell something it either
a. Explodes upward immediately
b. Hangs around within a few %, and then explodes upward.
Mirror image on buys. This indicator is flashing a strong buy signal since I dumped a ton of SSO a few days ago at 27.47 it has been oscillating above and below. This even happened on AOL years ago. I sold everything after a 10 bagger and the damn thing took off and went up another 50%. So it doesn’t matter how much something has gone up already.
June 5th, 2009 at 4:19 pm
I have been pretty busy lately and haven’t blogged much but here is the chart of the last few years of what consumer credit has meant to the economy….
http://briefing.com/Investor/Public/Calendars/EconomicReleases/credit.htm
You can see that even in the tech bubble consumer credit was positive, but the curve today looks ominous to me. The facts are that we are oversupplied with productive supply, and interest rates are rising. What more could a retiree and someone in debt desire more than rising rates? Yes, there were fewer job losses than last time, but the unemployment rate is higher than predicted, rates are higher than the fed wants, and consumers are saving and not going further into credit hell.
…And you call this a recovery? The first green shoots of a recovery? Maybe because of the savings…but unemployment will still have a ways to run…and so will be further delayed the prospects of new hirings…
June 5th, 2009 at 4:20 pm
Really at this point its the bond market that’s dictating things. If it keeps doing what its been doing… watch out.
June 5th, 2009 at 4:21 pm
Matt:
I noticed that too….average workweek continues to shrink…yes.
June 5th, 2009 at 4:22 pm
I was very impressed with the NFP this morning, until I noticed the leading indicators deteriorated.
I was too.. but it seems somewhat at odds with the unemployment rate and the jobless claims (not to mention ADP).
June 5th, 2009 at 4:29 pm
http://stats.bls.gov/news.release/empsit.t15.htm
Compared with one year ago, The US is working 1/2 hour per week less than they did….for the entire workforce.
And, as I understand these figures, this is for employed individuals only. That is, the unemployment rate and the number of unemployed does not figure into these calculations..
June 5th, 2009 at 4:37 pm
@ Bruce:
Interesting, but this number jumps out at me:
Maunfacturing (M-o-M)
Motor vehicles and parts (2). -1.4
We know that auto production is being slashed to the bone, and the magnitude of the average hours lost in auto production is much greater than any other industrial sector in the data set. The next nearest in terms of magnitude is Leather and Allied Products, -0.7.
Manufacturing overall came in at -0.2, construction gained 0.1, and most other sectors were +/- 0.1.
So it might be reasonable to strip out the outlying auto industry number.
June 5th, 2009 at 4:43 pm
@Franklin
Kid – are you in your own world or something…
It’s like you’re in a house that’s burning to the ground and staring at some “inflammable” fabric on some insignificant piece of furniture in the house and and saying “Look – it’s not burning! we’re all ok!”
June 5th, 2009 at 4:45 pm
Franklin:
I still like your enthusiasm. And eventually you can tell us all “I told you so.”
But the consumer is really hunkered down. These really are amazing amounts of consumer credit destruction, which, of course, in the long run will be good, since we were so “overbought” in consumer credit. But for the next few months, it says retailers, car manuf., home builders, et al….all will still find the consumer to be a tightwad…
June 5th, 2009 at 4:54 pm
It’s only one company, but Du Pont employees in DE are forced to take mandatory time off this summer. They have also cut all over time at plants in DE and NJ. DD is a company that, imo, does a pretty good job giving some indication of the overall economy. Like I said, just one company, but lets not say stuff like it’s all the auto companies but outside that there is not anything but small unimportant issues.
Regular, employed people, understand this b/c it’s all around them right now which should help to reveal spending moving forward, especially as credit contracts. It’s hard to see now b/c of all the optimism but this should eventually feed the leg down when the market finishes the countertrend rally.
June 5th, 2009 at 5:02 pm
Ancedotal but the largest developer in our area was in the salt mine yesterday, just having built a new shopping center.. he and I are friends, and he even offered space to my group for expansion, which we declined…anyway, he is, to say the least, not happy with the economy and the financial tight he is now in…he’s a long way from BK, but the ‘cuffs of the economy have chafed his wrists…quite a bit.
Thus far…one lease in the last 8 months…and not from lack of trying…
June 5th, 2009 at 5:11 pm
Ben22:
I am certain that I heard Leisman say that the government has brought in 34% less revenue this year so far than for the same time in 2008…do you have an idea where he got these numbers?
As always, thanks
B in T
June 5th, 2009 at 5:21 pm
From the second chart:
“The current rally has defied all technical and fundamental logic thus far and has no reason to stop.”
Same can be said for a crack head or meth addict. Without intervention (and we all know the enablers hold all of the influence), this will end ugly. Never trust a junkie.
June 5th, 2009 at 5:28 pm
bruce, I think these could be a start in looking into that:
http://www.psg.us/resources/pogcalculatepog.html
http://research.stlouisfed.org/fred2/graph/?chart_type=line&s1id=FGRECPT&s1transformation=ch1
http://research.stlouisfed.org/fred2/graph/?chart_type=line&s1id=FCTAX&s1transformation=ch1
http://research.stlouisfed.org/fred2/graph/?chart_type=line&s1id=ASLCTAX&s1transformation=ch1
June 5th, 2009 at 5:44 pm
Ben,
Found it. Zero Hedge has something similar from last month.
http://zerohedge.blogspot.com/2009/05/guest-post-tax-revenues-tanking.html
“•Looking to confirm the trend, we compared the data for April – the big kahuna of tax collection months – to the 2007-2008 average, and found that individual income taxes this year were down more than 40%. The situation is even worse for corporate income taxes, which were down a stunning 67%!”
Going to go to supper and a movie, but this is the problem with the debt/GDP ration, and why if I were China and other holders of our debt, I’d be more than a little worried…it is NOT the debt/gdp ratio per se that is important but rather the tax revenue that the GDP generates.
Follow me here…so if our gdp of 13 trillion generates x in tax revenues to service debt…and if revenues are down by .33…then the real debt/gdp is 10 trillion (debt) / gdp x.66 (reality of amount of tax revenue)
or…10/13x.66 or 116%…!!!
Ain’t ciphering grand!
June 5th, 2009 at 5:46 pm
For those who responded to my P/E arguments last night, you made some good points. However, nobody seemed to reconcile why, if this is just a normal recession, and earnings are temporarily depressed and will bounce back, why in the last 85 years, we have no other instance of a P/E above 45 for the S&P, let alone the 130 we have now. It is unprecedented and not in a good way. Throw out the really bad quarters and the forward P/E is still near 30, only before seen in the tech bubble…and this also assumes earnings DO bounce up to $36 in 2010 from $6.66 in the last 12 months.
With that backdrop, II Bulls seems to be at a 5 year high…even more troubling is the rate it exploded up, not seen for at least 5 years. Does anyone have the ability to check a Bloomberg for a longer data series on this? If this is a sustainable market turn, would bullishness be so rampant? Along these lines, total put/call has not closed above one for over two months and only above one 8 times ALL YEAR! QQQQ Bulls also is at very high levels.
http://www.investorsintelligence.com/x/free_chart.html?r=101#
June 5th, 2009 at 5:47 pm
bruce,
I put up some charts but they are awaiting moderation
June 5th, 2009 at 6:42 pm
Last evening Bruce in Tn said
My wife says supper, and she must be obeyed…maybe I can give you some more details later…suffice it to say, he is of the opinion there is no way the recession ends this year…and I’ll try to give reasons later.
B in T
Did I miss those reasons? Are you just keeping idiots in suspense?
June 5th, 2009 at 6:44 pm
@steve b,
Onlooker directed me to a good Hussman article, so I’m retracting the points I was making re your P/E arguments. :-)
June 5th, 2009 at 6:45 pm
Seems almost every post is still bearish. It may be smoke and mirrors but geez we are in the middle of a 40% gift. Really what’s the problem? I’d like to get smart and call the top but I’ve been run over too many times to think they’ll stop the train for me.
June 5th, 2009 at 7:01 pm
@Whammer:
I always recommend that article too…glad you read it. Correcting P/E, or its inverse E/P (earnings yield) for interest rates actually destroys the great predictive power of P/E, rather than aiding it. Sure, if every other factor was the same, lowering rates would increase equity valuations…but that NEVER happens in a vacuum.
What we must debate is not if a current P/E of 130 is bad…but HOW bad.
June 5th, 2009 at 7:10 pm
Marcus Says-
“Same can be said for a crack head or meth addict. Without intervention (and we all know the enablers hold all of the influence), this will end ugly. Never trust a junkie.”
funny stuff Marcus- and true
well it’s Friday- got the Natty Ice working- not PBR I know- but sometimes I trade down- I can’t remember if it’s usphnx or wunsacon that lays on the Friday night tracks- but bring ‘em on-
really liked the $5 cover tracks from a week or two ago
June 5th, 2009 at 7:14 pm
catman- Says-
“It may be smoke and mirrors but geez we are in the middle of a 40% gift. Really what’s the problem? ”
you are so right- problem is many here have been shorting and losing or stayed cash not believing the gift-
tough being a bear sometimes
June 5th, 2009 at 7:20 pm
bulls
bears
pigs
June 5th, 2009 at 7:35 pm
I continue to lead a chart-free lifestyle which enables me to see the graphs that really count.
(wink)
June 5th, 2009 at 7:48 pm
http://www.contrahour.com/contrahour/2009/06/if-youre-bearish-1991-nikkei-redux.html @ Contrahour Contrahour had an interesting comp but against the S&P. Might be worth a look.
June 5th, 2009 at 7:50 pm
@Steve B — P/E of 130 seems, at a minimum, to be pretty dang bad. ;-)
June 5th, 2009 at 7:51 pm
PDB is a technical finance term……
June 5th, 2009 at 8:02 pm
@Whammer:
yes, considering that outside the tech bubble, since 1926 and maybe forever (I don’t have the data), the P/E never spent a day over 27.
June 5th, 2009 at 8:44 pm
Steve Barry @ 5:46
I’m not going to comment on the P/E issue, since I don’t follow it as closely as you do.
Instead, I’m going to throw out a bit of trivia. Following is the 21 day M.A. of the put/call ratio (available on stockcharts.com) for selected dates:
current: 0.85
January 2005: 0.72
March 2003: 0.8
January 2000: 0.48
August 1998: 0.78
I wouldn’t give this a tremendous amount of weight. Nevertheless, there is room for an even higher level of optimism among stock market bulls.
June 5th, 2009 at 8:49 pm
@Steve Barry
Sorry I missed the posts from last night. Anyway, I’d like to interject the P/E 10 into the P/E discussion. I also think the market is very overvalued and I appreciate your take on valuations. I more or less agree with Doug Short’s analysis in the last paragraph:
After dropping to 13.4 in March, the May 2009 monthly average P/E10 has rebounded to 16.2 — right on the average. In fact, with the index now hovering around 940, the P/E10 stands at 17. The chart below gives us a historical context for these numbers. The ratio in this chart is doubly smoothed (10-year average of earnings and monthly averages of daily closing prices). Thus the fluctuations during the month aren’t especially relevant (e.g., the difference between the monthly average and monthly close P/E10).
Of course, the historic P/E10 has never flat-lined on the average. On the contrary, over the long haul it swings dramatically between the over- and under-valued ranges. If we look at the major peaks and troughs in the P/E10, we see that the high during the Tech Bubble was the all-time high of 44 in December 1999. The 1929 high of 32 comes in at a distant second. The secular bottoms in 1921, 1932, 1942 and 1982 saw P/E10 ratios in the single digits.
Where does the current valuation put us?
For a more precise view of how today’s P/E10 relates to the past, our chart includes horizontal bands to divide the monthly valuations into quintiles — five groups, each with 20% of the total. Ratios in the top 20% suggest a highly overvalued market, the bottom 20% a highly undervalued market. What can we learn from this analysis? Over the past several months, the decline from the all-time P/E10 high has dramatically accelerated toward value territory, with the ratio dropping from the 1st to the upper 4th quintile in March.
A more cautionary observation is that every time the P/E10 has fallen from the first to the forth quintile, it has ultimately declined to the fifth quintile and bottomed in single digits. Based on the latest 10-year earnings average, to reach a P/E10 in the high single digits would require an S&P 500 price decline below 600. Of course, a happier alternative would be for corporate earnings to make a strong and prolonged surge. When might we see the P/E10 bottom? These secular declines have ranged in length from over 19 years to as few as three. The current decline is now in its ninth year.
http://dshort.com/articles/2009/SP-Composite-pe-ratios.html
June 5th, 2009 at 8:55 pm
Cursive @ 8:49
“…every time the P/E 10 has fallen from the first to the forth quintile, it has ultimately … bottomed in single digits….. [a process which can take as long as] 19 years…”
19 years. And there’s the rub. It’s not happenin’ this year.
June 5th, 2009 at 9:14 pm
thanks, Ahab.
June 5th, 2009 at 9:20 pm
@DL
There’s the problem I have from a long perspective. I know the market is overvalued and I am uncomfortable going long for a trade. Yet, I concede that the process of achieving “proper” valuation may take years. Quite a dilemna unless you want to sit in cash.
June 5th, 2009 at 9:27 pm
PE 10, earnings 33.3 = S&P = 333,
but until not until S&P=999
on the way through 666
June 5th, 2009 at 9:27 pm
Cursive @ 9:20
“Quite a dilemna unless you want to sit in cash”.
Hence the pursuit of profits via technical analysis.
June 5th, 2009 at 9:30 pm
Does selling out of the money puts make any sense here?
June 5th, 2009 at 9:32 pm
I sold my gold today
down 2.68%
I did not realize that I had such an influence on the market
June 5th, 2009 at 9:37 pm
DL-
excellent point- if you look at the 1929 crash it took 2 years before the carnage continued- the way I see it- it is trader’s optimism trumping reality until reality brings the truth home-
so you have to be nimble on your feet- and trade accordingly- or sit in cash
June 5th, 2009 at 9:42 pm
sorry ahab
but I keep thinking about this, whenever I see your name, your posts are cool…
You can call me Al , Call me Al – Paul Simon song
exchange Al for Ahab. and I am crackin’ up
June 5th, 2009 at 9:52 pm
“Call me Ahab.” is the first line from the novel “Moby Dick”- look it up-
I have always thought that was the coolest start to any book – and that is why it is my handle- it is a man telling his story-
as we all are
June 5th, 2009 at 9:54 pm
sweet
June 5th, 2009 at 10:01 pm
uh . . .
. . . not to be up in anybody’s business, or anything, but the opening line to Moby Dick is, “Call me Ishmael.”
Sorry, Ahab. I’ll still call you Ahab, though. You can call me Al. (Just don’t call me Betty, Shirley, or late for dinner).
June 5th, 2009 at 10:06 pm
Steve Barry – how you doin’. Yes, I agree that P/Es of 130 are unprecedented, but so are government spending, borrowing, and lending. Despite being criticized minute-by-minute by CNGOPBC, Obama is running both a Democratic AND Republican platform at the same time. Nobody loses. We didn’t actually cut defense spending, you know, and even THAT pales in comparison to the Wall Street bailout megabonanza. All those freshly printed greenbacks will flow through the economy and have to get invested in something. No, it hasn’t quite happened yet, but the market — whatever volume there is — likes to anticipate to the upside, always.
In other words, we are witnessing asset reflation on a scale never seen before in the Milky Way Galaxy.
But more importantly, are you emo or indie?
June 5th, 2009 at 10:07 pm
@Bushong
Your website predictions page says you moved to a sell signal on April 17th.
You then say the following: “Since then, the market has traded mostly sideways, but with a slight upward tilt, gaining very little. ”
The S&P 500 is up 8% since then and the NASDAQ is up 10.5% How can you justify referring to that as gaining very little? Those are decent gains for a year let alone less than 2 months.
The top is hard to call and your sell call on Apr 17 may have been fine, but if I was taking advice from someone I would want someone would would shoot it straight with me and say something like, “I made a sell call and the market has went up almost 10% since then. Based on the indicators at the time I think the call was correct and I believe the recent rally has made a near term reversal even more likely as the indicators are now over extended.” Or something to that affect. Saying the market has gained very little when it is up around 10% in 2 months would just tell me you can describe things creatively, which would make me nervous.
June 5th, 2009 at 10:15 pm
Marcus-
hahahaha- you’re right- my name is officially changed-
that cracks me up- how our memories become clouded- my first post to BR many moons ago- I used that as my handle because he was getting all literary on “Atlas Shrugged”-
Moby Dick still a great book though- too bad I fucked up the first line- hahahahaha
June 5th, 2009 at 10:17 pm
Ishmael, funny
June 5th, 2009 at 10:19 pm
…but, you can’t change your name!
June 5th, 2009 at 10:21 pm
arbitrader Says:
“Saying the market has gained very little when it is up around 10% in 2 months would just tell me you can describe things creatively, which would make me nervous.”
_____________
Saying that the market is up around 10% in two months — despite the reality of our situation — should make you shit yourself with fright.
June 5th, 2009 at 10:23 pm
Ahab – don’t change it! Damn, bro! It’s a common mistake! I’m still calling you Ahab (it was, after all, his name).
Change it back!
June 5th, 2009 at 10:23 pm
And to think for all these months I thought you had made a clever variation on a classic opening line … and have been trying to figure out who/what is your white whale.
June 5th, 2009 at 10:28 pm
J6P-
no shit- I am a literary persons non grata- ahab sure is easier to say though- I may have to just change my name to Fred or something real simple-
I never cease to amaze myself
June 5th, 2009 at 10:29 pm
I was impressed with “ahab”, as I assumed it a deliberate twist. I’ll have to check your points and stats more thoroughly now, seeing that you’re a, um, mis-rememberer.
June 5th, 2009 at 10:30 pm
Ishamael
you will always be ahab to me
whenever I see Ishmael, it will mean ahab
June 5th, 2009 at 10:30 pm
The last line of Moby Dick:
“It was the devious-cruising Rachel, that in her retracing search after her missing children, only found another orphan.”
June 5th, 2009 at 10:32 pm
I’m changing my Rachel. Rachel Aurelius.
June 5th, 2009 at 10:32 pm
@ahab: That is hilarious. Keep it as ahab though. There’s a good little story behind it. Definitely worth keeping!
June 5th, 2009 at 10:33 pm
Shit! I can’t write!
I’m changing my name to Rachel. Rachel Aurelius.
June 5th, 2009 at 10:34 pm
frizzione-
please do- I am going to check myself- who knows what the fuck I was saying
June 5th, 2009 at 10:35 pm
you guys are freakin me out
how can you tell the players when the names keep changing
i guess you gotta know the soul
June 5th, 2009 at 10:35 pm
Marcus-
I have tears coming out of my eyes dude- you a re cracking me up- hahahahahaha
June 5th, 2009 at 10:36 pm
he does that
June 5th, 2009 at 10:43 pm
C’mon Ahab – change it back. Please. I’ll never forgive myself if you don’t.
June 5th, 2009 at 10:44 pm
Ishmael is just “everyman”. That’s not you Call Me xxx. Ahab is the much more interesting character. Him and Quequegg both.
I see you much more as a crusty old salt Ahab type. And if I may be so bold, your great white whale is the day of reckoning for the markets, debtors, banksters, etc etc that you may never see come but you’ll die in pursuit of (shorting?).
About Quequegg, Ishmael gives the best line of the book:
“Better sleep with a sober cannibal than a drunken Christian.”
June 5th, 2009 at 10:46 pm
I don’t comment on market moves much because I am not as sophisticated as most of you in regards to trading strategies; but it seems to me that when the average American still has a debt load of 130% of personal income (an improvement due to savings from 135%), I question the ability of the economy to recover even within the next year. There is simply too much debt, still.
That to me is the one factor that overrides everything else. The rising unemployment rate will only compound this fact. Then there is rising health care costs combined with more workers whose COBRA health insurance costs take an extra bite out of their already shrinking budgets. Then factor in that many of those same workers will lose their health insurance benefits. Some will lose their pensions in their company’s Chapter 11 bankruptcy. Medical debts are still the number one cause of bankruptcy (now up to 60%) and we have not even started effectively dealing with that issue.
From my own perspective, I got laid off in February and there is no immediate prospects for getting back to work — and I will probably be one of the first people back to work when things start improving. (I am no longer actively practicing law and now work for a private company.)
Almost all of the government spending has been directed to the banks and not to productive employment. The banks are not lending the money for new business ventures, but are instead trying to shore up their own “black hole” deficits.
So could someone who is in the know (Franklin411?) just what innovative and productive initiatives are going to put us collectively back to work? I would honestly like to know. I actually think that reviving the old Civilian Conservation Corps and Works Projects Administration would be far more beneficial to repairing household balance sheets and uplifting our collective spirits than throwing money at the banks will. We have plenty of work that needs to be done; and there is an insufficient amount of private opportunity at this time to fill the void. Yet this seems to be the one answer that no one in Washington (or probably on this discussion board) is willing to consider.
Another thing that needs to be considered: the Pareto distribution of wealth and income is way out of whack (assuming that one accepts that such a distribution is “normal”). Whether you realize it or not, this is also affecting our ability to get out of this financial mess. But that is a whole can of worms in and of itself.
June 5th, 2009 at 10:52 pm
sorry dudes- gotta be true to the book- Ishmael it is- I am certain though that word will get around what a literary loser I am-
in the future- any advice I give- please assume that I am on a 3 week bender and have no clue what I am talking about
June 5th, 2009 at 10:52 pm
OkieLawyer:
Financial/economic balance will not be brought back under the current system (and I don’t mean regime or administration). Social change is coming. We’re pregnant with it, and it will come out (if we’re lucky, it won’t be Rosemary’s baby).
June 5th, 2009 at 10:52 pm
… and the market continues to move up despite all gloom and doom predictions…
~~~
BR: Um, not in the charts. Take a closer look.
If you read the 2nd chart, the author offers a best case scenario that can hardly be described as either doom or gloom.
Indeed, what attracted me to these chart were their lack of predictions, but rather, the technical approach of saying “Here’s an upside scenario, here is a downside scenario.”
June 5th, 2009 at 10:54 pm
Aha . . .whatever,
You’re no kind of loser. You have respect here. But it was funny!
June 5th, 2009 at 11:01 pm
okielawyer-
understood- you are correct IMO that the staggering amount of money that has been thrown around has been misdirected-
hang in there- you are the 2nd lawyer today that has posted with a similar story- sign of the times I guess- with enough people in the same circumstances I would think that somebody in Washington should take notice before long-
what happens now may be an opportunity- when one door closes- another one opens
June 5th, 2009 at 11:05 pm
@Ahab, ahem, I mean, Ishmael: Must have been a few too many PBR’s in your life. No worries. Happens to the best of us. Still pretty damn funny though.
On a more serious note – a neighbor of ours and her husband were over for some wine earlier this evening. She’s a nurse practioner at a children’s hospital here in Minny and they’ve even had layoffs of nurses AND nurse practitioners recently. She says she’s not worried about her situation because she’s basically the longest serving practioner there but she is definitely seeing a drop off in people who can afford to come in for regular health care. It’s not getting any better either, although she did say that some folks who used to come in all the time for everything under the sun and theoretically overuse their health coverage because it was mostly paid for are now thinking twice (or even thrice) before doing so.
June 5th, 2009 at 11:11 pm
@DL:
“I’m not going to comment on the P/E issue, since I don’t follow it as closely as you do.
Instead, I’m going to throw out a bit of trivia. Following is the 21 day M.A. of the put/call ratio (available on stockcharts.com) for selected dates:
current: 0.85
January 2005: 0.72
March 2003: 0.8
January 2000: 0.48
August 1998: 0.78″
That’s interesting…is that from the subscription part of their site for $CPC? We were at .8 a few times this month…I see .84 now. That .48 will likely never be reached again in my lifetime.
June 5th, 2009 at 11:26 pm
mannwich-
I find it troubling that two attorneys with a similar story posted today- much angst out there- especially as it relates to finding work at salaries they are accustomed to-
sign of the times- upwardly mobile is a relic-
has to be jobs to move into
June 6th, 2009 at 12:18 am
Steve Barry @ 11:11
Yes, a subscription is required to go back that far. The $CPC chart goes back to 1996.
(You can buy just a one month subscription, and then save a copy of that chart, and others of interest)
June 6th, 2009 at 12:28 am
i tried reading this thread from the bottom up and it didn’t make a lot of sense. : )
June 6th, 2009 at 12:28 am
Can’t a poor man get a Friday Night Music Thread??
Cheers to Mr. Freddie King
http://www.youtube.com/watch?v=vdyvPg0c6bI
June 6th, 2009 at 12:34 am
“Call me Ahab.” is the first line from the novel “Moby Dick”- look it up-
Dumbass.
June 6th, 2009 at 12:34 am
Moss @ 9:30
Selling “naked” puts is downright suicidal (and your broker might not let you do it anyway). A put spread would be far less risky; for example, buy a July 33 QQQQ put, and sell a July 36 QQQQ put for a net gain of about $70 per pair.
Just hope that the Nasdaq doesn’t drop 7% in a day.
June 6th, 2009 at 12:36 am
karen @ 12:28
“I tried reading this thread from the bottom up and it didn’t make a lot of sense”
Does it ever?
June 6th, 2009 at 12:36 am
….cause one is never enough….
http://www.youtube.com/watch?v=WLdRh7qdi_g
June 6th, 2009 at 1:24 am
Christopher @ 12:28
Hope this helps you some – Pete Townsend sitting in with the Grateful Dead doing Not Fade Away from ’81
http://www.youtube.com/watch?v=de1Miicm3Bc
June 6th, 2009 at 1:28 am
my goodness — this is STILL going on?
Folks pondering the “inevitable” collapse due to overvaluation/ginormous debtitude/continuing deflation/rampant inflation should look to the past for guidance. Following the Crash of ’29, the markets had a bear market rally that lasted 4 years, before it had the rug pulled out from under it when FDR got a little nervous at the size of the deficits and tried hiking taxes a bit to try and balance things out a bit.
I contend that the goal in the current governmental intervention is to get Obama into a second term. I intend nothing slanderous by this, it is ALWAYS every president’s first priority to get elected a second time — which is why no significant policy changes or legislative adventures occur during the first term. Those things are always reserved for when the incumbent president has nothing to lose.
Obama and his cracked economic team have a few things going for them that FDR and his minions did not have — they are immensely better skilled in manipulating markets, and have tools that FDR’s market manipulators never dreamed of, and can probably keep the markets rising all the way to December 2012.
Of course, by that time, the economy will be so twisted that nothing can save it, and it will mark the end of the USofA, if not Western Civilization.
Just a thought.
June 6th, 2009 at 1:40 am
@Ahab/Ishmael: Maybe consider “Call me Mr. Tibbs”?
Legal employment right now is hideous. See some of the items at http://www.jdjournal.com/
It’s hideous.
Yours truly is fortunate to have a hand in a few growth areas to weather this mess.
June 6th, 2009 at 1:41 am
Posts being eaten . . . hmmm.
June 6th, 2009 at 1:44 am
Legal employment is hideous at big firms right now. Not just anecdotal. Demonstrably bad.
Fortunately, I have work in some recession “growth areas” to keep the kids in chicken nuggets and french fries.
@Ahab/Ishmael: Maybe consider changing to Call me Mr. Tibbs!
June 6th, 2009 at 2:44 am
@Transor, that’s the second time you’ve cracked me up this week — Mr. Tibbs!
I’m thinking I might change my name to Whammus Ahaberelius in honor of our two compadres….
June 6th, 2009 at 3:04 am
@constant normal
Your definitely right on the ability of todays govt. to manipulate the market… it is a different ballgame in those terms. And when you’ve got mega banks/brokers on the same page with the govt. in the single mission of raising capital you have a freight train you need to jump on or get out of the way.
Even though I have bearish thoughts in the back of my mind…. having long positions has been a guilty pleasure in that I know no matter what .. I can wake up in the morning and those guys are going to work and twist this market whatever way they want to get their stock prices up to sell shares and raise capital.
I know you don’t find these charts useful constantnormal, but the 200 day MA is and has been a significant turning point either way it decides to go… and in order to manage risk thoroughly its important to stay informed of where we are. thanks for the comments nonetheless.
June 6th, 2009 at 8:51 am
I cannot help but wonder if I were a member of the Chinese Central Bank this morning, how I would feel about those treasuries I’ve been buying, now that I am beginning to lose my shirt…
http://www.latimes.com/business/la-fi-petruno6-2009jun06,0,3556163.column?page=1
Reality check for U.S. bond binge
“Yet with every tick higher in market yields, the value of China’s $770 billion in Treasury holdings erodes.
In an editorial this week, the China Daily newspaper expressed fear that “Washington’s mushrooming deficit, generated by the massive government borrowing to fuel its economic recovery plan . . . will undermine both the dollar and U.S. bonds.”
Good thing Geithner left China before Friday, when Treasury yields soared after the government reported that the economy lost a net 345,000 jobs last month — far less than the 520,000 that analysts, on average, had expected.”
June 6th, 2009 at 9:00 am
I’ve made the Chinese central bank thought before, but what I really wonder about here is are these interest rates going to continue to rise? That is the 64k dollar question…and would be part of the back loading of this huge borrowing…if they do continue to rise, since this quest is to get us back in the borrowing mode, will we borrow, or will we continue to eschew debt? The Chinese will take care of themselves, but the potential homeowner is already seeing significantly higher rates on potential mortgages.
June 6th, 2009 at 9:11 am
Sorry if I gave the impression that I thought the charts were not useful, as they most certainly are.
But being almost perfectly balanced between moving upward into a new bull market and plunging back to test/make new lows doesn’t do much for me. A decent hint of which is likely to occur would do so, and the 200-day MA doesn’t provide that (until it is broken decisively one way or the other, at least). It is more of a historical “here is where it happened” kind of event than a signpost of impending changes. It CAN be a signpost of change, but also a wall that gets bounced off of, and there is no way to tell which it is except in hindsight.
That is the aspect that I find to be not terribly useful, and why I think that the markets may hug (or be forced to hug) the 200-day MA line for as long as possible, implying a slow decline, and the death of a thousand cuts to bears and bulls alike.
June 6th, 2009 at 9:13 am
@Bruce:
Due to the massive debt bubble, we are going to see a wave of defaults. The economy cannot service debt at 370% of GDP…it’s like somebody making 50K a year with a 4000 a month mortgage and no savings. ..default is a comin’. The 370% is 100bps more than the great depression spike of 260% (the new number will be calculated next Thursday…I will post it here). I suspect the economy will stay moribund and bond rates across the whole spectrum of credit will soar due to the defaults.
June 6th, 2009 at 9:15 am
Correct that…10000 bps (370 vs 270%)
June 6th, 2009 at 9:32 am
Steve,
I suspect you are correct in your thinking, and the one thing I’ve been doing is keeping everything short term in case inflation reignites. Rising rates, at least in my lifetime, have been generally (not always, granted) bad for the markets, and I don’t see how they couldn’t be bad this time, too.
I thought the Carter stagflation was bad, and at that time actually was buying Kruggerands..but this is so distorted this time, that I am not exactly sure how it plays out. I can follow the deflation and inflation end game thesis, but markets are like a pretty woman, you know what you’d like her to do, but she can be so unpredictable…
June 6th, 2009 at 9:39 am
@ Bruce
I’ve been having an interesting discussion with a friend about Penske’s purchase of Saturn. He contends that Penske will never build a single vehicle at the Saturn facilities, instead choosing to contract out the manufacture to others, including GM itself. I can see how this might be, even to the extend that Penske loses money on every vehicle sold, and knows and accepts this going into the transaction. Shuttering all of their Saturn dealerships might prove to be a lot more painful for them than taking a small loss on every car sold.
Similarly, the Chinese may find that taking a small haircut on their herd of Treasuries would be less painful than dumping them and allowing the largest marketplace for their exports to collapse. There is certainly a point beyond which they will not go, and I suspect that the purpose of Geithner’s visit was for them to communicate to him in no uncertain terms what they expect in the way of a dollar devaluation schedule. They might accept having the USD decline by 30% over the coming year (for example), but no more than that.
In any event, what the Chinese leadership can tolerate and what the American people can tolerate are two entirely separate things, and Obama’s difficulties are far more likely to come from a hugely unemployed population suffering under alternating courses of inflation and deflation and they attempt to micromanage their way to the goal (a second term in office).
But as the Chinese proceed with the conversion of their own domestic economy into a western-style consumer marketplace from a largely agrarian society, they will have less and less of a need for the USofA. Things cannot go on like this forever.
June 6th, 2009 at 9:52 am
bitplayer-
no argument from me my friend
June 6th, 2009 at 10:43 am
@ constant…good points. To me the massive amounts of treasuries the Chinese now hold are destined to give them the “stop loss” question we all have in equities…do I hold on and hope things won’t get worse, or do I take my loss now and move on to something else?
…If rates rise all year, it would seem pretty painful to me…will they hold on for a year and just grin and bear it?
June 6th, 2009 at 10:50 am
good article -
ALL BUSINESS: Bond-market rout boosts mortgage rates, undermining economic prospects
“If the meltdown continues in the bond market, then mortgage yields will soon be at levels that choke off refinancing activity,” said economist Ed Yardeni, who runs his own investment firm. “Even worse, they could abort any necessary recovery in home sales and prices.”
“The bond market is calling the Federal Reserve out,” said Mike Larson, a real estate analyst at Weiss Research Inc. in Jupiter, Fla. “Investors are saying that the Fed can’t just print money out of thin air to finance a massive deficit.”
http://finance.yahoo.com/news/ALL-BUSINESS-Bondmarket-rout-apf-15457158.html?sec=topStories&pos=main&asset=&ccode=
June 6th, 2009 at 11:59 am
Dude, you’ve got to be ahab! You can’t change your name now, that would be like renaming your 5 year old kid half way through kindergarten. All the other kids are gonna be very confused. :)
June 6th, 2009 at 4:02 pm
EW wave analysis of the market: http://tinyurl.com/nsncnf
June 7th, 2009 at 9:12 am
The SMA slope on the monthly chart still points firmly down. It has to move up before you have any prayer of a bottom.
Sorry little children, hate to ruin your day, but this looks to be nothing more than a mean-reversion (i.e. “suckers”) rally.
See you at SPX 150.
June 7th, 2009 at 11:56 pm
@Marcus:
“Saying that the market is up around 10% in two months — despite the reality of our situation — should make you shit yourself with fright.”
That may very well be. Never the less, even if your shorts were filled with scary feces, would you be inclined to call a 10% move something that had been “gaining very little”