Sell the News
By Barry Ritholtz - June 10th, 2009, 10:15AM
What happened to the plus 100 futures this AM ?
I turned my head for a quick call, and we are now flat — and Nazz is down ~1%.
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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.
June 10th, 2009 at 10:31 am
it’s early BR.
June 10th, 2009 at 10:40 am
There’s a lot of evidence that we are putting in a ‘TOP’: http://www.bushongbusiness.com/opinion.html
June 10th, 2009 at 10:42 am
Running out of greater fools?
June 10th, 2009 at 10:45 am
Oil just jumped 1 to 71.5. Stockpiles went down instead of up, lol.
June 10th, 2009 at 10:45 am
Mannwich Says:
June 10th, 2009 at 10:42 am
Running out of greater fools?
reply:
————–
I think you got it in one, buddy. The pump was in the futures instead of the close and it blew up. Hardy Har Har Har. I hope somebody just flushed a couple hundred million down the crapper. What a bunch of jerkfaces. They sure look stupid.
June 10th, 2009 at 10:47 am
Gaming the futures market in overnight trading isn’t a done deal anymore. I’m still trying to figure out what sent the futures into the stratosphere. Oil was up, dollar was down, the 10yr at 3.9% (and rising) and the futures market was up. That pump was deflated in the first five minutes of trading.
June 10th, 2009 at 10:48 am
@dead hobo
I see we were thinking the same thing about the futures market.
June 10th, 2009 at 10:48 am
SRS showing some spunk this morning. Don’t have it anymore (yet) and it’s early but just thought I’d point that out. FAZ coming to life a bit too.
June 10th, 2009 at 10:54 am
Russia to reduce U.S. Treasurys holdings: reports
http://www.marketwatch.com/story/russia-to-reduce-us-treasurys-holdings-reports
But not a problem as long as the clowns at Fed are buying them
June 10th, 2009 at 10:58 am
@AmenRa
The pump in the futures was because Hong Kong traded up 4% in positive speculation in China…
That faded quickly this AM on Trade deficit figures, and mortgage applications…
I wouldn’t get giddy here…I think the S&P could trade all the way down to 924 without batting an eye as to putting the countertrend rally in jeopardy…
June 10th, 2009 at 10:59 am
In fact…If it hits 924 I’m tempted to go long SSO with some tight stops…
June 10th, 2009 at 11:01 am
I’m tired of justifying fundamentals…
Let ‘em take oil to $85…see if I care…
June 10th, 2009 at 11:02 am
Once the TARP has been repaid, no more Dimon/Blankfein bid.
I think the stories coming out of Europe are also a factor, E. Europe debt is now causing new problems for European banks, which will in turn be expected to support the $. I wonder when China will cease stockpiling raw materials? That trade has been one of the underpinnings of the “Green Shoots” rally.
Gary Shilling was on Bloomberg this morning, singing a deflationary song. Didn’t seem too concerned…
Taleb had a cameo on CNBC as well, and Jim Grant. Arianna Huffington took over the show from Kernen.
June 10th, 2009 at 11:11 am
AmenRa Says:
June 10th, 2009 at 10:48 am
@dead hobo
I see we were thinking the same thing about the futures market.
comment:
——————–
Great minds think alike.
June 10th, 2009 at 11:14 am
Lefty:
Good thing you didn’t take me up on the Unemployment rate burger…how about next month??
June 10th, 2009 at 11:18 am
@cvienne
That’s the top of the rising window (920.02 to 923.85). I’m expecting this window to get shut before the weekend.
***Disclaimer. Now that I’ve said it it’ll never happen.
June 10th, 2009 at 11:19 am
It’s all one trade, BR….the Dollar. Stocks will have difficulty ‘catching a bid’ without debasing the dollar….
DX found support into the 61.8% retrace of the 78.38 -> 81.53 move, and now it’s bouncing a bit…so stocks are now having difficulty…
June 10th, 2009 at 11:22 am
Dollar debasement may be over for a little while. Time for more deleveraging? As Taleb said this morning, the consumer debt hasn’t gone away. It is all still out there waiting to be repaid, converted to equity or written down.
June 10th, 2009 at 11:25 am
@AmenRa
The most reliable technical indicator I’ve been using is to take the S&P from the March lows and chart it on an HOURLY basis using a fibonacci (144EMA)…
Until that EMA is taken out seriously to the downside (for more than two days or so), then this rally still holds in my opinion…
Note: That “support” line is all the way down at 917 as we speak
June 10th, 2009 at 11:28 am
@leftback:…………..or defaulted on.
June 10th, 2009 at 11:29 am
Whoops, you said that already (written down). Need another cup of coffee. 5th dreary day in a row outside. Hard to wake up without light.
June 10th, 2009 at 11:29 am
@AmenRa (and also Andy T)
Furthermore…if you do that EMA analysis that I gave you and started an EW pattern off the last time it bounced off that line (I know that’s not exactly how you do it Andy, but play along for fun)…
It appears that we’re only on Wave 3 of the upward move off that point (roughly 890, or 879 because I think “either” draws the same EW)…
June 10th, 2009 at 11:32 am
cvienne, wait for 920ish… 26.26 on sso… jmo : )
June 10th, 2009 at 11:35 am
SRS, for example, hasn’t even broken above an 18 day downtrend line…(and that “high” was a piddly $25 bucks)…
I agree with LB (and I have been saying this for awhile)…When Dimon & Lispy pay back the TARP, kiss the “bid” in the market goodbye…But that may actually be several weeks from now…
I’m sure everyone will mind their knitting, dot their “i’s’ & cross their “t’s” before ASSURING they have as few strings attached as possible before they part with that money…
June 10th, 2009 at 11:35 am
@karen
Good conclusion…I concur…
June 10th, 2009 at 11:44 am
@LB
In fact, if I’m Dimon or Lispy right now, I’ll tell you EXACTLY what I’m thinking…
…’OK, back in March, all you Congressional MF’s sitting in chairs that WE paid for had the nerve to run us down here to Washington and humiliate us with inane grandstanding to smooth things over with your constituents…Here’s your payback…We put a bid in stocks for 4 straight months, make money TRADING doing so, grab other concessions, pay you back your money…then when the whole transaction is complete, we’re going to short the entire market and you’ll be groveling back to us for a bone cause we’re going to have to finance your 2010 campaign…The one with the best ideas to shovel us more taxpayer money gets to keep their job!…”
June 10th, 2009 at 11:45 am
Relief for CRE debt coming? Why not? Everyone else in TBTF getting bail outs. Another round, barkeep!
http://www.calculatedriskblog.com/2009/06/wsj-relief-for-cre-debt.html
June 10th, 2009 at 11:47 am
The feds are so far into manipulating everything now, they’ll never be able to get out without everything eventually falling apart. This whole thing is going to end in disaster.
June 10th, 2009 at 11:49 am
cvienne, EXACTLY. Payback, not clawback, is coming for that charade turned debacle.
June 10th, 2009 at 12:06 pm
Mannwich @ 11:47
Oh, I don’t know. If they devalue USD far enough, all that mortgage-back junk they’re holding might actually become worth something.
The 1970’s redux.
June 10th, 2009 at 12:21 pm
Andy T @ 11:19
“DX found support …and now it’s bouncing a bit…so stocks are now having difficulty…”
Yes and no.
June ’09 DX is up 0.45, but December ’09 DX is down by the same amount. Commodity stocks O.K. today.
June 10th, 2009 at 12:26 pm
They read my comments about shorting AAPL? :)
June 10th, 2009 at 12:37 pm
DL, seeing that negative divergence take hold of the XLF now?
June 10th, 2009 at 12:40 pm
Plz let the b2c be 2 or less. If there was ever a time to put the US in check it would be today and tomorrow. Maybe then we can get some real “change”.
btw the 10yr hit 3.95% and that’s before the results of the auction.
June 10th, 2009 at 12:40 pm
Karen @ 12:37
You mean between $KRX and XLF…?
Also, the homebuilders have been weak lately.
June 10th, 2009 at 12:43 pm
DL.
I’m not sure about that one. The volume traded on DXZ09 today is 2 lots….a long time ago…last print was 80.245, but the current bid/offer is 80.96/81.21…very, very thin contract. Volume traded on DXM09 is 4,600+ lots…so I think I’d pay more attention to the prompt contract.
AT
June 10th, 2009 at 12:44 pm
LB – China and raw materials.
They may stop stocking up if they think they can buy them cheaper later (deflation), or if they start buying natural resource companies instead. There must be something holding them back from buying the sources (companies) because that seems like a better “investment” than materials.
June 10th, 2009 at 12:44 pm
Andy,
You’re the futures expert, not me. But commodity stocks do “look ahead” 6 months or more.
June 10th, 2009 at 12:56 pm
Notice how the SP500 has been completely flat since June 1st?
http://money.cnn.com/quote/chart/chart.html?symb=spx&sid=3377
Plateaus like this don’t happen anywhere but near the top.
June 10th, 2009 at 12:57 pm
KC:
Also, the transport index
June 10th, 2009 at 12:59 pm
DL,
I gotta go with AT on this one. I’m long UUP with average cost of 23.90. Accounts are now only 35% equity overall, if/when we get to 1k I’ll be out of the market. We’ll see what happens. You still holding any commodities? I think you sold OIH.
Karen,
I’m guessing you made some money on FAZ. You are a sicko, …in a good way of course.
LB,
Saw Taleb this morning on CNBC, I posted on the earlier thread about it but it was in moderation for about 2 hours. I never went to her blog but the few times Huffington has been on CNBC lately I thought she did really well and had good questions for the guests. She seems very bright to me. I also caught GS on Bloom, he’s solid, and it was music to my ears what he had to say.
Credit deflation folks.
And now, for those of you that think I’m nuts, I’ll say it for the trillionth time: I’m not double or triple short, but I am bearish. Not every bear is Steve Barry.
June 10th, 2009 at 1:00 pm
I wouldn’t say I’m an expert on anything…I was just suggesting the DXZ09 price was a “stale print” from earlier this morning.
Current bid/offers down the curve:
DXM09 80.27/80.285
DXU09 80.70/80.715
DXZ09 81.00/81.250
So, the dollar is in contango….
June 10th, 2009 at 1:03 pm
@KC,
It’s hard to say, one could argue you could see flatness for a time in April as well. I know what you are saying but I think we are more likely setting up for one more push up before things start to blow up.
June 10th, 2009 at 1:07 pm
ben22 @ 12:59
Yes, I did sell OIH at the recent peak. You remembered!
I was hoping for more of a pullback in OIH than we got.
I still think that, 2-3 years from now, commodity stocks will be way, WAY higher than they are now. That’s not based on any technical analysis; it’s based on my reading of Obama’s political interests, and what he’s going to tell the Fed to do, and what the Fed is doing now.
June 10th, 2009 at 1:15 pm
hopeImwrong:
Chinalco or whatever it’s called, had a deal to buy a big stake in Rio Tinto that was made months ago. Rio Tinto just back out last week. My guess is the Aussie government wasn’t happy about it. China has been trying to acquire resources in Austrialia for the past couple of years.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aqq.tkhsn3RA
June 10th, 2009 at 1:15 pm
DL,
I certainly understand that thesis. I was convinced what you are saying was going to come true late last year, now I’ve obviously switched camps. In my case I ended up being very lucky by thinking what I was late last year because it’s the only reason I was so heavy in stock going into this rally.
Even if you end up being right I’m thinking in the short term though I’d rather not be in anything commodity. I made some big time returns getting long a few of those during this rally, the best one being FCX.
Hat tip to Faber on that one.
On another note, since I’m on the phone 24/7 lately, does anyone know the silver short etf’s off the top of their head?
June 10th, 2009 at 1:20 pm
@ben22
ZSL
June 10th, 2009 at 1:24 pm
thanks emmanuel117
June 10th, 2009 at 1:25 pm
BTW, a friend asked me about buying RIMM. I looked at it and it’s had a bigger run than AAPL and may be a better short.
The competition is really heating up. AAPL and Rimm aren’t really in the same market – no keyboard and inferior messaging. Apple may tempt a few customers away wth the cheap iPhone, but the hotter competition will be RIMM and Palm Pre. There are a slew of new Blackberries coming out in the next couple of months.
The rom in the Pre indicates that there is a smaller cousin to the Pre in development. There are also new phones from HTC, Samsung, Nokia and others coming out this summer that straddle the line and will compete with both groups. HTC and Samsumg both have models with a keyboard. They are both introducing keyboardless phones with bigger screens than the iPhone. One Samsung model takes HD video that was pretty impressive. I expect there will be a lot of bloodletting and lower profits next quarter.
June 10th, 2009 at 1:25 pm
SSIL. Unleveraged.
I agree with both DL and ben on this debate.
Even Gary Shilling believes that there will be more stimulus eventually and that WILL lead to commodity inflation. This current commodity bull was started by China buying at cheap prices in order to stockpile, and surely will end soon. This is an echo spike in oil and stocks that was started by cheap prices and maintained by hot money from QE; it will be followed by an echo crash. All more or less from the Japanese playbook, 1990s.
June 10th, 2009 at 1:37 pm
The 10-yr yield spiked to 3.99% today, and we may see it tickle 4% this week. Not sure how Lawrence Yun of NAR will spin this as a positive for the housing market, but we know that the refi market is stone dead for now.
4% would seem to be the logical conclusion of the unwind from 2% – for fans of TBT and its equivalents. A rotation from equities and commodities into Treasuries and corporates is probably not very far away, now that the yield is once again much more favorable for bonds than the S&P 500.
June 10th, 2009 at 1:38 pm
DL,
One of my favorite formations: ramp-consolidate-ramp. At the end of the consolidation, usually there is a fast dip then a rebound and a breakout. If you look at the peaks in markets during a credit contraction, they’re all run ups into a sharp peak. No consolidation.
Weird things have been going on. There has been some tumult on the short end. The 2-year went from 0.96% to 1.4% in a couple of days. Now its hovering at 1.33%. Sharp yield increases, especially at the short end, are often credit problem related. The economy usually doesn’t move that fast. And we have been selling off on good news and going upon bad. And of course the 2:30 PM party.
June 10th, 2009 at 1:43 pm
to borrow from Taleb, there be Black Swans about..
or, IOW, there are a few more ‘Fractal Arms’ fixin’ to be shed from the body..
non-linearity is soon to be @ a Bijou near you, buy Volatility..
June 10th, 2009 at 1:43 pm
well- the 10 year auction went well
M in Nola Says-
“The competition is really heating up. AAPL and Rimm aren’t really in the same market – no keyboard and inferior messaging. Apple may tempt a few customers away wth the cheap iPhone, but the hotter competition will be RIMM and Palm Pre. There are a slew of new Blackberries coming out in the next couple of months. ”
you have just reinforced your original idea to short AAPL- no?
June 10th, 2009 at 1:43 pm
LB,
Yes, thats a better way than I could have explained. DL is going to be right someday, I just don’t think it’s soon, or at least not soon enough for someone that really wants to trade it, if you weren’t long oil, you’ve missed this run and should def. wait for better prices. That’s probably the captain obvious statement of the day.
@Mike,
I know nothing at all about RIMM though I do own the storm. It’s alright. Don’t they do very well with the business segment? All the advisors I know use BB’s because nothing on our platform is compatible with Mac. You are becoming the in house tech reporter. You should ask for Jim Goldman’s job.
June 10th, 2009 at 1:44 pm
Mike in Nola @ 1:25
Isn’t RIMM coming out with the blackberry Storm soon with a bigger screen?
I don’t know if this is the best link or not:
http://www.blackberry.com/blackberrystorm/specifications.shtml
June 10th, 2009 at 1:47 pm
thetanman @ 1:38
There are some ETF’s I’d like to buy if they can pull back to their 21 day MA. Could be a long wait, though.
June 10th, 2009 at 1:56 pm
10y T’s hit 4%…
Now they’ll sell them to 4.5% just to scare the living shit out of everyone at the NAR
June 10th, 2009 at 1:57 pm
that sound you hear is BB clearing his throat and singing…”MiMiMiMiMiMiiiiiiiiiiiiii”
June 10th, 2009 at 1:59 pm
7 years of college right down the drain!
June 10th, 2009 at 2:01 pm
cvienne @ 1:57
It’s hard to tell the extent to which BB is doing what he thinks should be done, and the extent to which he’s following Obama’s orders.
June 10th, 2009 at 2:01 pm
SRS up 8%.
June 10th, 2009 at 2:05 pm
As I mentioned earlier, Russia is not dumping our long treasuring. China might do something to that effect.
BB/Fed’s strategy to intervene in the housing market in certain ways may have caused more problems then they tried to fix. Trying to find a short term band-aid fix to a systemic problem will take us nowhere.
June 10th, 2009 at 2:07 pm
not=now
treasuring=treasuries
sorry about the typo
June 10th, 2009 at 2:07 pm
cvienne,
the long bonds yield will probably continue to move up in line with the countertrend rally. It’s almost over.
It’s hilarious to me to see what has gone down in the long bonds since the March announcement of $300 billion in purchases.
June 10th, 2009 at 2:08 pm
DL-
I think Obama listens to the Fed
June 10th, 2009 at 2:10 pm
DL,
do you really think BO is giving the Fed orders? I’m thinking someone else is giving the orders. If O is giving the orders we are f-ed. His personal financial decisions have been well documented on the web. He’s not exactly a great manager of capital.
I wonder how low the DSI is going to be on the bull side for the $ and long bonds after today. We are getting close to some extreme readings there.
June 10th, 2009 at 2:12 pm
Larry Summers is in full control over there. He and Ben. Timmay just listens and nods in agreement.
June 10th, 2009 at 2:12 pm
some of you pay no attention to me.. a rate of 5.5 or 6% on a 30 year does not make much difference in a monthly payment… and is historically low : ) I amortized it out for you last week. Higher yields may be desirable to stabilize the dollar (collapse would be untenable!) and bring down the cost of $gaso…
June 10th, 2009 at 2:13 pm
ben22 @ 2:10
Absolutely I think Obama is giving the orders. That’s the main reason for my bullishness on commodities.
However, I’m sure that Obama gives a great deal of weight to what Summers and Geithner tell him.
June 10th, 2009 at 2:13 pm
“BB/Fed’s strategy to intervene in the housing market in certain ways may have caused more problems then they tried to fix. Trying to find a short term band-aid fix to a systemic problem will take us nowhere.”
Agreed! As many have stated here and elsewhere the Fed would now be well advised to just shut up and do nothing. There are some signs of price discovery in the housing market and these should be encouraged, and not restrained. The rest of the economy is going to adjust and the stimulus spending will prevent a total collapse.
June 10th, 2009 at 2:14 pm
@karen: I think you’re wrong here. Makes no difference to you but to those hanging on by their fingernails, a few extra hundred dollars a month makes a big difference.
June 10th, 2009 at 2:15 pm
karen @ 2:12
We pay rapt attention 24/7
June 10th, 2009 at 2:18 pm
“a rate of 5.5 or 6% on a 30 year does not make much difference in a monthly payment”
With respect, Karen, you do not realize how deeply indebted and overwhelmed people are in the US middle income bracket. In addition, people have been conditioned to equate low interest rates = cheap monthly mortgage payments. The housing market will not normalize until people start to think about PRICE rather than payment. There are plenty of potential buyers (LB for example) but these buyers are not going to bail out malinvestments.
June 10th, 2009 at 2:18 pm
agree with Mannwich 2:14
For an average debt laden consumer every $100 increase counts.
Also to comment on 5.5%-6% as being historically low, how long do you think it will stay low? I suspect we will see double digit rates in a year or two.
June 10th, 2009 at 2:22 pm
Karen-
by refinancing people are typically trying to free up cash by reducing their monthly payment- someone who is 6.5% will refinance to 4.5 % but will not bother if the rate is 6%- so the higher the rate the less pool of people that will refinance
June 10th, 2009 at 2:22 pm
DL, Ben, ahab:
As I said, there are a slew of new Blackberries comng to various carriers. Really too many for me to keep track of. I know Verizon is getting a Blackberry flip and the Tour. ATT just relased one and supposedly T-Mobile has one coming. And maybe Sprint will have a variant of the Storm. They do have the big business market mostly sewn up.
I think there are two ways you could win shorting it
First, if we are right and business does not recover, Rim is not going to be able to repeat its last years miracle of boosting earning that is powering the stock now.
Second, there is increased competition among people who are just looking for a phone with a keypad, like me. The Palm Pre looks pretty hot and is more modern. Other new models from HTC are looking good also.
I don’t know if either of these is a short term play. If the general market crashes, RIMM and AAPL will go with them. RIM’s earnings are due next week. It may be that they can produce some decent earning this quarter.
On the AAPL play, I think it’s still valid. Based on the stoc the last two days, maybe I should have bought puts on the news. The $100 iphone is a sign that competition is tougher. As I said in another thread, it could cannibalize sales of the higher end phones. You also have some very nice touch screens coming from HTC and Samsung. Depending on the pricing, they could be good competition.
June 10th, 2009 at 2:22 pm
Karen,
I’ll pile on also, and point out that a lot of people live “on the edge”…. every last penny of their paycheck is accounted for, and then some.
(That’s not the way I do it, but I think many others do).
June 10th, 2009 at 2:23 pm
I’m guessing we’ll see one last rush into buying homes to try to lock in a rate below 6%, but I’ll also guess that many of those either won’t get approved or will eventually default on their mortgage and lead to even more foreclosures. Nothing like a little law of the unintended consequences to bite ole Banana Ben in the arse.
June 10th, 2009 at 2:26 pm
The question on everyone’s mind this afternoon (or at least mine): will we get the final hour pump today?
June 10th, 2009 at 2:27 pm
karen,
I’m sort of with mannwich on this one. While a rate change of the magnitude you discuss might not matter to someone already in a fixed rate mortgage, since the monthly payment doesn’t really change much at 5.5 vs 6, what about folks that are still in an arm with a rate more than a point lower than a fixed rate they can get.
The dollar isn’t going to collapse, at least not in the near term.
Clearly you make some bank and as a result you seem to be displaying something I see my wealthier clients doing all the time which is making trivial what to you is a small amount of money but for an average working class family with children might put them right over the edge.
Couldn’t we use gasoline last year as an example. Let’s say you spent $2k per year on gas at $2 a gallon and then $4k per year at $4 a gallon, that’s only an extra $166 per month, but clearly it hurt a lot of households.
Last, the minor change in payments only doesn’t matter if you are employed, we know most people dont’ have enough savings that are liquid and don’t result in penalties or income tax to carry them for more than a few months or so if the steady income goes away. This seems to be showing up now all over with prime defaults starting to rise. In the end 2-300 per month more in expenses could really hurt a lot of people.
June 10th, 2009 at 2:30 pm
@ben22: I would add that’s 200-300/month that’s not going into the economy via discretionary or non-discetionary purchases. Bye-bye new I-Phone, well, unless they decide to charge it up.
June 10th, 2009 at 2:37 pm
Jeff, if you borrow $400k for 30 years the difference in payments between 5.5 and 6% is $127. the price of $gaso has a greater impact on the monthly budget… especially if you are borrowing even less. $200K for 30 is a difference of $63. Negligible..
June 10th, 2009 at 2:37 pm
Mannwich,
Re: 2:30
That is one of the keys to the idea behind credit deflation. I don’t think many people are willing to use the plastic as they have in the past. Certainly some are, but the majority is moving now in the other direction. Most people are poorer than they were this time last year, and average households are making less than they were 10 years ago adjusted for inflation.
Thrift is making a comeback. I’m seeing it with my most irresponsible clients which is anecdotal, but I believe is more common and I’m not the only one seeing it. I could tell you some really funny stories about a few people I’ve had meetings with lately that fall into the spend all my income and then some category.
June 10th, 2009 at 2:38 pm
Karen,
You are loaded, just admit it. : )
June 10th, 2009 at 2:40 pm
@karen: What’s the difference between 4.75 and 6% though? I hear your point and totally respect your point of view but what might seem “negligible” to you is far from negligible to others. That’s all I’m saying. And do you think it’s going to stop at 6%? I don’t.
June 10th, 2009 at 2:43 pm
@ben22: karen lives on or near the beach in Orange County. Of course she’s loaded! ;-) She probably spends $127/week on arugula.
June 10th, 2009 at 2:43 pm
but Karen-
a person wouldn’t put off refinancing because they want gas to be lower- would they?
June 10th, 2009 at 2:44 pm
I think rates will be heading to double digits just like in the 80s
http://www.thompsonsrealty.com/wp-content/uploads/2009/05/30-year-mortgage-rate-history.jpg
June 10th, 2009 at 2:46 pm
Karen,
Still think no one pays any attention to you?
June 10th, 2009 at 2:48 pm
@Mann,
Lol. She is money isn’t she.
@manhattanguy,
Care to put a time frame on that prediction? Man would that kill any housing recovery.
June 10th, 2009 at 2:50 pm
Isn’t Libor still low? super low as a matter of fact. a good percentage of adjustables are based on that. And, prime is steady at 3.25… Adjustables don’t seem to be in danger to me..
http://www.bloomberg.com/markets/rates/keyrates.html
My point probably really is that 1/2 percent change in mortgage rates isn’t a problem for real estate.. the affordability ratio is.. and yes, as it should have been for the last 6 years, having an income is a prerequisite to having a mortgage.
June 10th, 2009 at 2:53 pm
the only reason rates would go into double digit is if there was serious inflation issue
June 10th, 2009 at 2:53 pm
Karen:
You now know how F411 feels :)
June 10th, 2009 at 2:53 pm
Karen,
That was my point above, if some of those arms have to reset or be recast they can’t afford these historically low fixed rates.
June 10th, 2009 at 3:00 pm
@Manwich
I see the pump started early today. Guess they needed more time to pull a fast one on us.
June 10th, 2009 at 3:00 pm
It’s 2:00 CDT. Guess what time it is?
June 10th, 2009 at 3:01 pm
@karen
Actually karen…I agree with you in concept…The difference in “payment” is negligible…
OR in a different sense…It’s negligible in comparison to, say, what a spike in gas prices to $4 a gallon, or higher food bill, or higher property taxes might cause VERSUS that mortgage differential…
I always laugh at the people who do a re-fi to save $100 a month, yet don’t adjust their thermostat and flush the exact same money down the toilet heating or cooling their house…
But…
I think the issue here is RE-FI’s…
Most of the interest/FEAR right now is those who are anticipating ARM resets in the coming months…
4.5% and they might have done a RE-FI…6% and that notion is toast…It would kill the demand…and I think that is an important notion to follow regarding green shoots in economic activity…or so it seems…
I actually think contrary…I say let 10y yields spike to 10% and put a dagger in housing…Then let there be tons of foreclosures, let the banks really fail, give up on bailing everyone out, deflate asset prices across the board, write it all off and let’s get on with our lives for crying out loud…
Rootless_cosmopolitan would disagree with me though because it would effectively harm living in his luxurious Manhattan apartment
June 10th, 2009 at 3:03 pm
Mike, you said it… I couldn’t even keep up with the arguers, let alone the argument!
ahab, we have a serious inflation issue! and if they don’t put a lid on it quickly..
DL, my faz is barely in the money.. bot fxp this morning and dug, both up.
June 10th, 2009 at 3:04 pm
@karen
“having an income is a prerequisite to having a mortgage”
great comment…now if the United States Government could apply that idea to themselves…
Having a country that actually produces something should be a prerequisite for selling treasury notes…
June 10th, 2009 at 3:06 pm
@cvienne: Does producing a lot of worthless financial paper count? ;-)
June 10th, 2009 at 3:07 pm
@Manny
It’s worked for awhile…SUCKAS!
June 10th, 2009 at 3:09 pm
@cvienne: Don’t I know it……all too well. ;-(
June 10th, 2009 at 3:28 pm
The insanity continues. A gift to the high income constiuencies on the coasts. Question: Where exactly are these tax “credits” coming from? Oh yeah, that’s right, future tax revenues that haven’t even been collected yet. If this continues, leftback may not get his properly valued home Fraudfield County.
June 10 (Bloomberg) — Lawmakers are pushing to revive legislation in the Senate that would almost double an $8,000 tax credit for first-time homebuyers and expand the program to all borrowers.
Senator Johnny Isakson, a Georgia Republican, plans to introduce a bill today that increases the tax credit to $15,000 and removes income and other restrictions on who can qualify for the credit, according to his spokesman, Sheridan Watson.
The legislation, which is co-sponsored by Senate Banking Committee Chairman Christopher Dodd of Connecticut and other Democrats, would extend the homebuyer credit to multi-family properties that are used as the borrower’s primary residence. It would also eliminate income caps of $75,000 and $150,000 on individuals and couples seeking to claim the credit.
June 10th, 2009 at 3:42 pm
maybe it was the realization that oil prices (going up) and the economy have nothing in common, but in fact the reverse is true. oil keeps climbing, the economy will restart that express elevator down again
June 10th, 2009 at 3:46 pm
I agree with Karen. Let them eat cake.
June 10th, 2009 at 3:49 pm
Show of hands: So who thinks Blanfein’s statement this morning about the recession not being over and all the CNBC.com stories abut expecting a pullback are just to sucker in shorts so JPM and Goldman can hit all their stops tomorrow?
June 10th, 2009 at 3:50 pm
@Mike in Nola: To channel my inner-horshack – - ooh, ooh, ooh, Mr. Kotter!
Yes, I have clearly lost my mind.
June 10th, 2009 at 3:52 pm
Manny, that tax credit is being hurried out to replace the low mortgage rates. Desperate stuff !!!
It is also aimed at helping some well-connected Fraudfield County, LA and Manhattan residents sell their expensive domiciles before the next crash. No doubt LB will be “priced out forever”, LOL.
Nouriel Roubini has a post at RGE today about how Latvia may set off an Eastern European funding crisis along the lines of the Asian Contagion. (We won’t talk about the American contagion).
Unimpressive pump action today. A trip down to 925 tomorrow?
June 10th, 2009 at 3:55 pm
@leftback: I think we may stay in our delusional summer haze until the fall hits. Like my post in Jack McHugh’s column, then the Fall will hit, just like last year. Deja vu all over again, Yogi.
June 10th, 2009 at 3:55 pm
Manny: showing your age.
June 10th, 2009 at 3:56 pm
Every day lately it’s basically been the same script. How long can this go on?
June 10th, 2009 at 3:58 pm
leftback, for the last time, you do not fit the profile of someone that needs to own a home… please allow bruce or me to straighten you out whenever you weaken to that foolishness.
June 10th, 2009 at 3:59 pm
This is nearing my worst case scenario… a flat-lining market.. which is why i wanted dividend stocks.
June 10th, 2009 at 3:59 pm
I agree, karen. He can buy mine if he wants to bundle up 4-6 months out of the year and do some ice fishing.
June 10th, 2009 at 4:00 pm
Maybe it will be a Sideways Summer?
June 10th, 2009 at 4:01 pm
1/2 point bump in mortgage rates? Sell the 2-4 TVs and cancel cable. That will cover the difference.
June 10th, 2009 at 4:03 pm
oh, wow, what we can look forward to tomorrow!
8:30 AM Retail Sales ex-auto
8:30 AM Retail Sales
8:30 AM Initial Claims
10:00 AM Business Inventories
June 10th, 2009 at 4:05 pm
Home Shopping/Online Retailer VVTV stock nearly doubles in just two days. Up 58% yesterday and another 18% today.
June 10th, 2009 at 4:05 pm
@hope: Or just charge it on the credit card and default. Problem solved.
June 10th, 2009 at 4:06 pm
“leftback, for the last time, you do not fit the profile of someone that needs to own a home”
There may come a time when LB yearns for a more stable and less desultory lifestyle. Right now LB is more worried about Mr Market’s instability and maintaining this upward move in the $.
June 10th, 2009 at 4:06 pm
Karen,
Do you have a downside target when you say something like worst case scenario, or don’t you play those games like the rest of us?
June 10th, 2009 at 4:10 pm
This is almost becoming a little comical lately….the meandering/trendless days followed by last 20 min buying into the close….
This sort of consolidation near the top is not such a great sign for bears…usually indicative of yet another small leg up coming…maybe we get to 962 after all….
The DX sure seems like its trying to carve out a bottom…..
Annoying days….like watching grass grow….
June 10th, 2009 at 4:12 pm
I think my plan until further notice is to sleep in until about 1:45 CDT, at which point I’ll make my coffee and breakfast and get settled in for the real market open at 2 p.m. CDT.
Either that, or hit the golf course or beach until that time. With a new I-Phone, maybe I can just watch the final hour out there and get out for a change?
June 10th, 2009 at 4:14 pm
AT,
I’m thinking the same per my 1:03 post above.
June 10th, 2009 at 4:16 pm
ben22, yes, my current downside is 919-921 in which i want to buy sso… my upside of 1000+ is still working.. i’m also still working under the premise that 880 won’t be seen again..
June 10th, 2009 at 4:21 pm
Andy, your summations are becoming the highlight of my day!
June 10th, 2009 at 4:21 pm
LB…you don’t need a home.
If you get a really big sleeping bag, there should be plenty of room for you and the Swedes…
June 10th, 2009 at 4:23 pm
Andy T: Annoying indeed, still watching for the US$ rally as some commodity currencies show signs of weakness. Brazil, Canada, Australia have all rallied strongly and look extended.
Some of the chatter out of Europe suggests some flight to safety may ensue from Eastern European debt problems. Every time oil rallies I wonder what possible BS they could use to goose the market next time….
June 10th, 2009 at 4:23 pm
karen,
I’m pretty much with you though I think I have a more bearish intermediate term outlook than you. That 919-921 range then a push up seems very realistic to me at this point. I really don’t like the idea of eventually trading against you though.
880 is very important, if we go there and break through, that’s trouble from what I can see.
June 10th, 2009 at 4:42 pm
karen@4.21….
You must be having some incredibly dull days….I’m sorry.
FAZ hit the top of the downtrend line from 5/14 and reversed…it seems like it has one more lower into maybe 3.84….would love to see it break out of the falling wedge pattern to the upside…that’ll be a very clear buy at that point.
That said, even I would be a 3.85 bid. :-)
June 10th, 2009 at 4:43 pm
I think Tyler is getting frustrated with this market as well. Note the comment from “B9K9″ which exhibits a level of cynicism that one has also arrived at after the last two years of government intervention.
http://zerohedge.blogspot.com/2009/06/perspectives-on-tarp-repayment.html
June 10th, 2009 at 4:48 pm
Tune in tomorrow, when we will be able to compute Total Credit as a % of GDP for 1Q09. It is at 370% now. If you look back to the GD, TC didn’t take off until 1932, when GDP plunged and government revenue tanked and they developed the New Deal. As such, it is possible that the 370% today could soar to 500% IMO. Can’t say it enough…you can’t solve a debt problem with more debt…but they sure as hell will try it.
The P/E for the S&P is about 130…previous all-time high was 46. But brace yourselves kids…because as of next quarter, due to the incredible write-offs, as reported P/E will be…DRUM ROLL PLEASE….NEAR 4000. That’s not all…the next qtr after that, it will likely be NEGATIVE, resulting in a discontinuity in the monthly P/E chart. This is an unsustainable condition of course…so if earnings don’t rocket back up, you will have a pretty bad mess here.
June 10th, 2009 at 4:54 pm
Thought this might be worth a read:
By Bill Fox, Senior Bonds Analyst
Tue, 09 Jun 2009 13:00:00 ET
The Federal Reserve’s balance sheet has exploded, with total reserve bank assets now standing at $2.079 trillion. This same time last year, total assets stood at $1.181 trillion. Inflation? Yes, the balance sheet is significantly inflated — but is it inflationary?
Not necessarily.
Such a huge reserve certainly has the potential to catalyze inflation (indeed a hyperinflation), but only if the Fed Chairman Bernanke liquidates the assets that make up the reserve accounts. Simply put, there is no inflation if the Federal Reserve refuses to turn those assets into cash and dump that cash into the economy.
Consumer-driven inflation is not there. Consumers have to have cash (or credit) in hand to create demand upon products, services and raw materials — and thus drive up their prices. When rising home prices and easy-to-get credit cards financed consumer purchases, demand was strong. But now the housing equity is gone, millions are out of work, average wages are stagnant and lending standards have returned to the world of reality. “Inflationary pressures”? Not here.
What about the U.S. government’s $300 billion in bond purchases and $1 trillion in agency debt purchases — i.e., monetization of debt? Well, when it comes to the total balance of assets sold and bought by Foreign Central Banks and Sovereign Wealth Funds, we are not seeing is a run on Treasuries — we are seeing as a shift in risk tolerance. The Saudis, Russians and Chinese, who had tens of billions happily invested in U.S. agency paper, were not so happy to see Fannie Mae and Freddie Mac go the way of de-facto nationalization. But did they sell their dollar portfolios and look for euro-denominated chateaus in France? No — they shifted to shorter-dated U.S. Treasuries. The Chinese and the Russians dumped their GSE paper to the Fed, took those dollars and re-invested in explicitly guaranteed U.S. government paper. Therefore, total dollar pool remains essentially unchanged. No inflation here.
What about the Fed’s $300 billion in “quantitative-easing” Treasury purchases? Not significant enough. While the Fed is announcing its steady, small purchases, the yield on the 10yr note continues to rise. First 3% came and went, then 3.50%, and now we just tested 3.75%. Paying less for a 3.5% par value bond that yields 4.7% is not inflationary.
Finally, my subscribers point to my presently bearish Elliott wave count for the 30-year U.S. Treasury bond. How can I be bearish unless we are headed into inflation? In turn, I point to the near-vertical yield curve of late. Yes, in deflation, you would expect a relatively flat curve, but it’s been steepening not because of inflationary pressures. Those who view it as a green shoot for recovery and future inflation do not understand WHY the curve has steepened so much and so fast. This country’s recent fiscal policies have necessitated a massive debt, and the resulting Treasury sales are simply overwhelming the bond market. What should be a flat curve — fitting the deflationary cycle we are in — is artificially steep due to the lack of demand for long-dated Treasuries at auction. There has been no demand from foreigners for the long bond at 4% or 4.5%. How high will the yield need to go before demand returns? Who knows, but it will be substantially higher than current levels.
Bottom line, while the Federal Reserve certainly retains the fuel for inflation, there are no sign that inflation is at hand — in fact, all signs point to continuing deflation. It’s all there to see on the U.S. yield curve.
June 10th, 2009 at 4:56 pm
@DL:
Do you have data going back further than 5 years for II bulls from stockcharts.com? When has it been higher?
http://www.investorsintelligence.com/x/free_chart.html?r=101#
June 10th, 2009 at 4:58 pm
As I was saying about Rim facing cutbacks in spending by businesses. Interesting chart:
http://news.cnet.com/8301-1001_3-10261647-92.html?part=rss&subj=news&tag=2547-1_3-0-20
Of course, they are relying on green shoots for later in the year so they don’t plan to cut more.
June 10th, 2009 at 5:00 pm
As I wrote a few days ago, a move towards flattening of the yield curve is indicative of an economy that is WEAKER than people think. Supply or no supply, those Treasury yields will start to look attractive again soon enough once Q2 earnings are out and people realize how high the P/E ratio has become for stocks.
June 10th, 2009 at 5:04 pm
I thot this was a good post from acrossthecurve… hope the person doesn’t mind:
By Gary on Jun 10, 2009 | Reply
Fred — while long term, the risk/reward ratio is less than abysmal, there are trading (not investment) reasons someone might buy:
(1) many players are betting other people’s money. Primary dealers borrow from taxpayers (via the Fed) at 0% and then lend it back to the same taxpayers at 4%. Even a bank CEO can make money doing this
(2) Fear and panic #1 … CMBS. Thousands of laid off people need less office space, and pay less rent on over-levered CMBS structures
(3) Fear and panic #2 … credit card defaults
(4) Fear and panic #3 … European banks failing (like WestLB almost did last weekend?)
(5) Fear and panic #4 … the next wave of ARM resets this September / October. If you refi with negative equity, someone takes a loss (bank or taxpayers/Fed). The variable rate on many mtges is 1y CMT + spread, but is subject to a max and a minimum (no points if you guess whether the minimum is higher than the teaser rate).
Number 1 is a slight variation on that age old question, “Where are all the customer’s yachts?”
Numbers 2-5 might cause a flight to perceived safety — kind of like cattle fleeing from the ranch dog into the holding pen of the slaughter house. Long term you are hamburger meat, but short term you got away from that barking dog
In the meantime, rest assured that a man that managed to screw up a monopoly in the phone business (which he supposedly knew about) is now going to be running GM — which he admits he knows nothing about. This phone man, with a lot of second guessing by Congress, is going to watch over the taxpayer’s investment in a car company that somehow lost a 65% global market share over the last 40 years when it was being run by car guys.
Its only a matter of time before we are all alcoholics — so I think a really safe investment would be a beer making kit
http://acrossthecurve.com/?p=6220#comments
June 10th, 2009 at 5:04 pm
@Mike:
I never bought the argument that technology is helped in a downturn, because businesses cut people and turn to technology. The reverse is true…a fired employee needs no PC…no Blackberry…no software license…no network connection…etc.
June 10th, 2009 at 5:23 pm
Karen: I assume this is about buying Treasuries? This is a classic long-term investor v short-term trader type of argument. The follow up from the same guy caught my attention:
“I almost forgot — if you are a trader at a primary dealer (trading other people’s money), you don’t have duration risk on the 10y. You are borrowing at 0% (unless Bernanke raises, which is unlikely) and you are lending at 4% for ONE YEAR (or less), not ten. Yes, the note might say ten years maturity / 7 years duration on it, but this ignores the “trader’s call”. Heads, the trade works and the trader gets a million dollar paycheck. Tails, the trade loses and the trader switches jobs — leaving the bank with the loss / duration risk.”
I certainly don’t plan to own my Treasuries for 10yrs, but I bet someone will want to buy them at a higher price this Fall, once the equity market goes pear-shaped again. Over the long-term, I am short the 10-year for ever or until sound money management returns to Washington DC.
June 10th, 2009 at 5:30 pm
good catch, lb! i got side tracked and didn’t finish the thread.
June 10th, 2009 at 5:40 pm
Some news on high end RE from one of Karen’s favorite OC neighbors.
http://lansner.freedomblogging.com/2009/06/09/real-housewives-default/25165/
Needless to say, here at Schadenfruede we just cannot wait to read similar sob stories of high-end distress among our esteemed neighbors on the Upper East Side, in trendy Tribeca and out in Fraudfield County and the Hamptons. Tough times in Richistan.
June 10th, 2009 at 6:01 pm
B22 @ 4:54
great post- I agree- I don’t see inflation on the near term horizon
June 10th, 2009 at 6:08 pm
ben22 and Gary Shilling.
Usually correct. Always on the same page. Never seen together in the same place…..
June 10th, 2009 at 6:30 pm
b22 did say he was but a youngster – but he does seem wise beyond his years . . .hmm . . .could be
June 10th, 2009 at 7:23 pm
Fantastic link, leftback on the OC. Thank God we’ve hit the bottom and are in a recovery. I really though that more ugliness was/is to come.
June 10th, 2009 at 7:50 pm
haha, I’m not GS, maybe someday I’ll get that far, maybe farther.
I’m really not that smart but I read a ton and I have a very good memory. I have some really good ideas about the market from time to time but most of the ideas that have made me the most money came from someone else. I really have no problem saying that either.
June 10th, 2009 at 7:53 pm
ben22 = Gary Shilling Jr.
June 10th, 2009 at 8:12 pm
anna schwartz is not happy
with bubbles
or helicopter
June 10th, 2009 at 11:34 pm
Steve Barry @ 4:56
I don’t think that stockcharts.com has “II Bulls” data at all, do they?
June 10th, 2009 at 11:41 pm
Steve Barry @ 4:56
The following shows the bull/bear ratio:
http://www.market-harmonics.com/free-charts/sentiment/investors_intelligence.htm
It only goes back to June of 2005, but the point is that one should consider the RATIO, in addition to the % bulls.
June 11th, 2009 at 12:14 am
Next Green shoots comment – A 10% correction is healthy for the market.
June 11th, 2009 at 2:15 am
@cvienne:
“Rootless_cosmopolitan would disagree with me though because it would effectively harm living in his luxurious Manhattan apartment”
Actually, I am renting and the housing is subsidized. With my income in academia, I haven’t been able to afford to buy any apartment in Manhattan so far. If my apartment weren’t subsidized I even couldn’t afford to rent in Manhattan, except in Harlem or Washington Heights. I wish prices came down in Manhattan. Why do you think I am heavily into trading the stock market? Because I need money. As much as possible, as quickly as possible.
rc
June 11th, 2009 at 6:54 am
All this discussion about inflation/deflation leads me to clarify this issue (with help from the FED).
As long as wages are not impacted there can be no inflation, just relative price adjustments. So sayeth the FED in published FED papers.
Hence inflation isn’t an issue and won’t be an issue, since there is about as much chance of big wage increases (and hence inflation according to the FEDs thinking) in this country as there is of Cheney voting for gun control.
See how easy it is when you are the FED. Just define the problem to your liking and hence problem solved. How else do you think the FED justified keeping interest rates so low when housing, energy and food were going nuts. That’s right you just define inflation without those nasty things. PRoblem solved.
It’s all so simple, but some people just don’t have the ability to grasp the finer points of the FEDs job. So be it.