Analyzing the Analyzers
One of the more fascinating things about a crisis and its resolution is the post-mortems: The after-the-fact analyses that some folks do to explain what occurred.
These analyses are fascinating for what they reveal about the beliefs, methodologies, biases and cognitive failures of the many crisis watchers.
Human fallibility being what it is, we can divide this universe into 3 buckets of observers:
1) Those who get it mostly wrong.
2) Those who can correctly describe a small slice of what happened;
3) Those who understand the full boom and bust — how all the moving parts came together to cause the crisis.
The first bucket is the easiest to both understand and dismiss: It contains the ideologues and market worshipers, as well as the perma-bulls — none of whom have much in the way of methodology. They are believers who know that in the long run stocks (and houses for that matter) will come back, whether we are dead or not. For the most part, they missed all of the warning signs of recession, credit crisis and boom and bust of the housing collapse. They called it a “mental recession.”
This motley crew says it was all the fault of too much regulation, no it was CRA/Fannie Mae — Why do we even have a Fed? That was the cause — No its mortgage interest deduction — no its all Barney Frank’s fault, no wait, it was caused by too much minority home buying — no, it goes back to FDR — No, Its all the Government’s fault, there should be no State — All hail John Galt, we should be free without any government intervention whatsoever — Bababooey!
As you might imagine, their ravings throw off a lot more heat than light. They provide no insight into the what actually occurred — But hey, its great theater.
The second group is a lot more instructive and interesting. They accurately detail a tiny aspect of the crisis in great detail. These observers are like the 6 blind men describing an elephant: Partly correct, yet mostly incomplete. Their individual descriptions accurately describes various body parts (Trunk, tusk, ear, etc.) but they never describe the creature in its entirety.
This group includes those who blame the entire debacle on derivatives or the formula for Value at Risk. The original concept of securitization. Wildly misaligned compensation incentives. They blame the ratings agencies and/or the the deification of markets via EMH, or the massive increase in use of credit since the 1950s. Some blame allowing Lehman to fail as the cause; others blame bailing out Bear Stearns, yet still others say it was all Goldman Sach’s fault. Fill in your own blank.
In the hunt for the unified field theory of the economic crisis, these observers may accurately describe a single aspect of what happened, but they fail to capture the fullness of what caused the debacle. They miss the crisis’ gestalt.
Lastly, we have the Big Picture observers (no pun intended). These folks try to put all of the moving pieces together. They look for proximate causes, not abstract theories. They try to see how one event led to the next event and the next and so on down the entire cascading collapse. These folks understand complexity, causation, risk, statistics and cycles. They are pragmatic, not ideological.
They are unfortunately, all too rare.
I only can wish that more of the people trying to repair what happened, and prevent the next crisis, were in the third group . . .
July 30th, 2009 at 7:43 am
http://www.rgemonitor.com/globalmacro-monitor/257383/gfc_cures__placebo_effects
GFC Cures – Placebo Effects
…..Excellent analysis of the crisis…..comprehensive….
July 30th, 2009 at 8:09 am
If the jobs situation doesn’t improve a LOT by mid terms O’B will have to throw BB and Geithner under the bus. They can join Greenspan and Paulson in the Hall of Shame. The more that gets pried out about GS/AIG/Paulson the worse it looks. O’B shares the blame by continuing the status quo with Paulson Lite. Whatever happened with the public/private partnership?
July 30th, 2009 at 8:31 am
B in T-
thx for the link- I like this line line from Wolfgang Münchau-
“Instead of solving the problems to generate a recovery, the political strategies have consisted of waiting for a recovery to solve the problem.
I would have to say that pretty much sums up where we are at the moment
and re China-
“over the last 25 years, Chinese consumption has declined from around 50% to it current levels of 37%. During that same period, Chinese savings have risen and exports have been the engine for growth. Given that a significant portion of exports is driven ultimately by American buyer, lower U.S. growth and declining consumption creates significant challenges for China.”
as I alluded to yesterday- China may be the flash point for a global collapse
July 30th, 2009 at 8:36 am
JC, Obama doesn’t have until the mid-terms to decide what to do with Bernanke. I suspect BB has until the 4Q2008 to hold onto his job and the jobs creation numbers reported in early January, along with the preliminary GDP results, will determine what happens. Job destruction must stop for BB to keep his job and blather about how the unemployment rate is a lagging indicator won’t satisfy. We should probably all look at BB, Geithner and Summers as the Unholy Trinity and decide that if one goes, they all go since they all signed onto the same policy.
July 30th, 2009 at 8:41 am
We are now also getting – live – summaries of how the crisis has been averted, the fire is out and we are ’saved’ by heroic action.
Except, of course, only the banks were saved and all the rest of us are rolling right into the teeth of the thing. Premature back-patting, I’d say, and not likely to play well with the people who are actually paying for the bank’s fat times.
July 30th, 2009 at 8:41 am
Put me at about 2 1/2, but at the amateur level. I will never be able to read Zerohedge and understand, for example, the Sigma X brochure they posted. Without an understanding of technical matters at that level, nobody can get to level 3.
On the other hand, I have a pretty fair understanding of a lot of other things and can usually recognize a line of shit when written or spoken.
Anyone who is paid to be in the financial business is already suspect and very likely at least marginally corrupt. Without getting along, most of these people will not get along and need to find other gainful employment.
July 30th, 2009 at 8:42 am
I don’t know how the markets work, I won’t even try, I just read what cats say around here.
But I do know that over 50% of households were in debt before the crisis and we have 6 to 8 million more unemployed right now; I can’t remember worldwide.
Looking at the impoverishment of the population, one would have thought something had to done there instead of dumping trillions into a black hole to free credit for people who couldn’t even pay their existing ones back.
It is all absurd to me, looking at the Healthcare comedy makes me sad, because if it passes It won’t do shit and if it doesn’t, well who the hell cares, it wasn’t designed to help people anyhow.
And the jobless recovery makes me laugh, what? we all gonna make stuff nobody wants to buy with deflated salaries.
July 30th, 2009 at 8:43 am
You missed the fourth group. This is made up of arrogant empty suits who believe that they can understand the complexity and chaos that is at work and ignore some of the basic factors that have been responsible for the mess that they are in.
It is this insecure group, which thinks it belongs to your imagined third group of people who really understand that is going on and dismiss those people who got it right when they explained that the cause of the problem was the regulatory system that allowed the Fed, rating agencies, regulators, and other players to use the power of government to suppress market forces. It is this group that was dismissing people like Ron Paul, Marc Faber or Peter Schiff, who saw what was happening and predicted the inevitable crash and were relying on model predictions that were no better than a coin flip and often worse.
~~~
BR: Those are group 1 players
July 30th, 2009 at 8:43 am
Praha, yup I agree.
I haven’t heard any analyst say what will bring us out of this downward spiral and restore hiring and consumption and none of the housing programs have accomplished anything significant beyond foreclosure moritoria.
July 30th, 2009 at 8:46 am
I can’t believe we are going to GAP OPEN at a new high. SPY has not stopped climbing in pre-market, this is either a blow off top or we are heading for 1000 today. Either way this is ridiculous and I’m about to capitulate.
July 30th, 2009 at 8:46 am
Weekly Jobless Claims Rose To 584,000
07/30/09 08:38 am (EST)
(RTTNews) – Thursday morning, the Labor Department released its report on initial jobless claims in the week ended July 25th, showing that first-time claims for unemployment benefits increased by a little more than economists had been expecting.
The report showed that jobless claims rose to 584,000 from the previous week’s revised figure of 559,000. Economists had expected jobless claims to rise to 575,000 from the 554,000 originally reported for the previous week.
Thursday morning, the Labor Department released its report on initial jobless claims in the week ended July 25th, showing that first-time claims for unemployment benefits increased by a little more than economists had been expecting.
July 30th, 2009 at 8:52 am
VangelV Says:
July 30th, 2009 at 8:43 am
You missed the fourth group. This is made up of arrogant empty suits who believe that they can understand the complexity and chaos that is at work and ignore some of the basic factors that have been responsible for the mess that they are in.
comment:
———————-
To me, these people are just the commissioned salesmen of the group or the shills that bring in the rubes so GS and others can fleece them with impunity. These phonies and psychopaths will always be among us, even someday when/if the markets become less corrupt than now. To me, the really scary ones are the mercenaries who spin open theft into ‘efficient markets’ and ‘liquidity provision’. I suspect some of these people look at GS and others as a ‘higher power’ and some of their slavish servitude is just an offshoot of what makes people religious. Of course, the commissions don’t hurt.
July 30th, 2009 at 8:58 am
“Sony, Sharp post losses, Nintendo loses steam”
Sony is such a bloated mess of a company- basically getting their ass handed to them by Apple and Samsung
kind of reminds me of GM- plodding along with no idea what it’s doing
July 30th, 2009 at 8:58 am
Analyzing numbers…Opening day attendence at Saratoga up 40% from last year…Handle up 30%
Last year it was a downpour opening day.
July 30th, 2009 at 9:03 am
@CapitalistCanuck
Now might be the time to start taking some short positions. I’m seeing a textbook momentum divergence in the making: http://www.regimenia.com/2009/07/duck-and-cover.html
July 30th, 2009 at 9:04 am
green chutes at Saratoga!
July 30th, 2009 at 9:05 am
BR concluded
Lastly, we have the Big Picture observers (no pun intended). These folks try to put all of the moving pieces together. They look for proximate causes, not abstract theories. They try to see how one event led to the next event and the next and so on down the entire cascading collapse. These folks understand complexity, causation, risk, statistics and cycles. They are pragmatic, not ideological.
comment:
———————–
It’s not even that complicated. Opportunity, motivation, and rationalization are the holy trinity of fraud. People steal when they see something they want and think they can get away with it. Everything else is just means and covering it up. Thieves will always be among us. Today, massive theft has become government protected and institutionalized. Small fry still get into trouble. The big fish are spun as ‘liquidity providers’ and ‘aiding price discovery’. Unless the government rises up to the occasion, this will continue as the new normal, until new ways to steal make today’s methods look quaint.
July 30th, 2009 at 9:20 am
Tom K
Nice charts and good observation is that your site? I hope you are right! I’m already short, been wrong through this whole move up and weighing on my confidence. I think this is a headfake, we have 3 hangman candles and lower highs over 4 sessions, then suddenly we GAP up to new highs on news that should not support such a move. Feels like Mr. Market is trying to hard to prove the rally has legs.
July 30th, 2009 at 9:21 am
The level of continuing claims decreased by 54,000 to 6.197 million in the week ended July 18, the lowest level since April.-
I would like to see some analysis on why the #’s went down- whether the folks dropping off the rolls had used up all their benefits- and now went onto to some other form of public assistance
July 30th, 2009 at 9:30 am
MSM grasping at air trying to explain the move, did they really say anything here?
briefing.com
“Stocks look to be headed higher this session, thanks to the emergence of buyers in premarket trade. That isn’t to say buyers had disappeared in recent sessions. In fact, an underlying, supportive bid has helped limit losses so that the stock market is down just 0.4% week-to-date. That’s of little consequence alone, but especially so when one considers that the stock market gained more than 10% during the course of the previous two weeks. Such a strong upturn in such a short amount of time has many anticipating a pullback, but we expect dips to remain shallow since idle money continues to look for opportunities to come in from the sidelines. Still, this morning’s assumed advance is expected to be broad-based as a raft of companies report better-than-expected quarterly results. The announcements continue to be headlined by upside earnings surprises, but demand remains considerably weak.”
July 30th, 2009 at 9:30 am
the bohemian Says:
July 30th, 2009 at 9:21 am
I would like to see some analysis on why the #’s went down- whether the folks dropping off the rolls had used up all their benefits- and now went onto to some other form of public assistance
reply:
—————-
The drop occurred because benefits ran out. They now must go on another form of assistance. Those other forms are not tracked, thus the decline continuing claims can be spun into a green shoot by liars and incompetents.
The markets are in an HFT bubble. It will continue to grow a little each day on average until something structural causes GS and others to withdraw from the markets. At that point it will drop like a stone because there will be far fewer buyers available when sellers appear. It will probably grow past S&P1100 by a lot due to HFT churn.
I’m completely out of the market. While my lizard brain wants to go in, I have worked a lifetime for my nut and don’t feel like speculating it away or gifting it to GS manufactured churn and bubble.
July 30th, 2009 at 9:31 am
@CapitalistCanuck
“your site?” – yep
July 30th, 2009 at 9:31 am
Unemployed are dropping off their extended benefits
July 30th, 2009 at 9:34 am
@the bohemian:
I posted a little on this last week. The NSA’s were 130k more than the SA’s the previous two weeks. This week the NSA’s are down 78k, but when you look at all three weeks together (these three weeks were supposed to be skewed because the traditional summer car layoffs were abnormal this year) then the government is still more than 50k behind on the SA’s….
http://www.dol.gov/opa/media/press/eta/ui/eta20090876.htm
July 30th, 2009 at 9:36 am
@ BnT @ 7:43
LMAO at this from “GFC Cures – Placebo Effects”
“Withdrawal Method…
Given the size of the intervention, a key question is the timing of withdrawal of government support for the economy. Like the eponymous technique of contraception, it will need to be carefully timed.”
I can envision it cartooned with the U.S. consumer/taxpayer economy as the “bottom” in this “act of congress.”
July 30th, 2009 at 9:39 am
Three nominees for Group Three (it goes without saying BR is in #3, ahem):
David Rosenberg, Elizabeth Warren, Hugh Hendry
July 30th, 2009 at 9:42 am
Just took positions in SKF, TLL, and SIJ with the S&P at 987.67. Interested to see if this hedge shakes out.
July 30th, 2009 at 9:46 am
The EUC..extended unemployment compensation…rose another 24,000….site is above….
July 30th, 2009 at 9:47 am
Why do we even have a Fed?– a Group #1 Q:
ya know, I’ll ask this Question.
July 30th, 2009 at 9:56 am
S&P 1000 today. Will it reverses as soon as it reaches 1000? Time will tell.
July 30th, 2009 at 10:00 am
Don’t like 65% of us think they’re above average drivers?
July 30th, 2009 at 10:01 am
Although nowhere near as intelligent and well-educated as most of the commenters here, even I could understand that if you loan money to people who don’t have the means to pay it back you are likely to have a bad outcome.
“No one could have foreseen” indeed!
Into which group can we classify those who are educated beyond their intelligence?
July 30th, 2009 at 10:03 am
Hey Mike,
Since you are posting from about 40 minutes in the future, where’s the market?
July 30th, 2009 at 10:03 am
@ BR:
Thank you for leading me from Group 2 to Group 3.
July 30th, 2009 at 10:04 am
you could blame your mother .. but she just wanted to give you life .. the good and the bad …
now be constructive ..
I heard an idea on a web-radio program yesterday that hit a nerve .. and see’g Steve Forbes on Kudlow last night made me think about it a 2nd time ..
Flat Tax .. but here is the catch Steve .. Tax All Money That Exchanges Hands .. that includes Marketeering in the Exchanges .. but I got thinking that is unfair to the money manufacturing industry in Markets .. so we have to remove the raw materials exemption from real widget manufacturers like glass manufacturer types
… the idea man Webster Tarpley pointed out the Trillions that exchange hands every month in our world .. Steve is that what you have in mind .. KIS
July 30th, 2009 at 10:05 am
Whats with the Euro dollar delinking from commodities?
Also, will be up for fantasy football… I think someone was talking about that the other day..not very good though
July 30th, 2009 at 10:07 am
Look out S&P 1015. Here we come. Will be adding to shorts at that point. It’s the 38.2% retrace. If it gets taken out then my stops will kick in and I’ll look to get in again around 1059 (89ema weekly chart).
July 30th, 2009 at 10:09 am
Sounds like a subtle way to blow your own trumpet……..”Lastly, we have the Big Picture observers (no pun intended). ” And the spotlight shines on……….?!?!
July 30th, 2009 at 10:10 am
MarkH .. that is an interesting bug
July 30th, 2009 at 10:10 am
Also…
Took a position in SSO this morning at 30, stop just below this mornings gap support at 29.80…
Pretty clean and easy set up for a day trade that can turn swing trade if it keeps moving higher.
I’ll be looking to raise my stop at the next consolidation and move higher, looks like thats right now at about 30.30.
I’ll be happy to stop out when I’m told.
Kinda wishing I had hung on to that UCO yesterday… but my patience is thin for losses at the moment given my short debacle from late May until earlier this week.
Dont fight the tape homies… there will be a nice lower high to short once the beast gets its mellow harshed a bit.
Until then, I’m riding the whirlwind with trailers.
July 30th, 2009 at 10:10 am
@Barry
I think you left out an important group:
4. Those who comprehend that housing, hyperleverage, anti-regulation, Wall Street culture and other “Big Picture” causes of the present difficulties are actually just symptoms of the real crisis in America. For 30+ years, American economic policy has been driven by free market fundamentalism, which argues that the market is always logical and right. It ignores the reality that greed drives people to choose short term gain that leads to long term pain, leaving us with an economy that produces nothing and consumes everything. This is inherently unsustainable.
The bubble was only a symptom of the fact that 30 years of no-so-benign neglect eviscerated the normal engines of economic growth: universities, infrastructure, and manufacturing for export. We were left with an economy in which 70% of GDP is produced by people who scrub toilets for a living, with the expectation that they will use credit to bridge the gap between the cost of living and their slave wages. The 30 year long credit bubble gave us the illusion of economic growth, but it was only a symptom of the real economic crisis in America.
The market does not always choose what is best–you need a government to police human stupidity, you need a government to send kids to college, you need a government to give development grants to promising industries, you need a government to ensure that people are healthy and not a drain on the system. None of these functions can be served by the market, which is pure blasphemy to the minions of Friedman and Hayek.
July 30th, 2009 at 10:12 am
Mike in Nola .. gets the last word x2 .. over and over .. till?
July 30th, 2009 at 10:14 am
Oh Mike in Nola, getting OT perma-dumped… I’m here if you need emotional support.
July 30th, 2009 at 10:15 am
@I-man
lil late in the game to be going long now, no? when did you capitulate on those shorts?
July 30th, 2009 at 10:17 am
MarkH .. I goofed .. Mark Mchugh caught it .. now bottom this Mike in Nola .. till 10:41am?
July 30th, 2009 at 10:18 am
@franklin
“you need a government to police human stupidity…”
because, as we all know, there are no humans in government, and even if there were, I’m sure they would never do anything stupid…
July 30th, 2009 at 10:21 am
Bah, just sounds like a bunch of psychobabble to me. Either way, don’t let the door hit you in the behind on the way out Wall Street – the party’s over mother*uckers!
July 30th, 2009 at 10:28 am
Quite the pump today. If enough believe the markets can’t possibly go down due to government intervention and support of asset prices at all costs, then the markets will drive higher day after day after day…….that is, until everyone heads for the exits at once (including the computer traders), at which point the PPT will reappear to try to save the day once again. Think I’ll go back to bed this morning.
July 30th, 2009 at 10:29 am
@spoon
Nope, because government factors in human stupidity and emotion. That’s why we have a Constitution; that’s why we have checks and balances. That’s not something the market can say.
July 30th, 2009 at 10:30 am
i suspect the reason the number went down is simple. states haven’t been able to implement the changes needed to extend the unemployment payments. and thats because to many didn’t even bother to do so. but when it comes to light that they have been asleep at the switch, the get it done in weeks. as opposed to months that they had been saying. we had that happen here in Texas. the state said that they weren’t able to extend the benefits because they weren’t ready, or the rules weren’t available in time. but after that came to light, they were johnny on the spot and were planning to get them done in weeks, as opposed to some time in October
July 30th, 2009 at 10:32 am
Bah, just sounds like a bunch of psychobabble to me. One last special dedication before the reckoning going out to all of the so called “masters ot the universe” and soon to be fast food ice cream sprinkly putter onners, doggy walkers or future hot dog stand guys:
http://www.youtube.com/watch?v=k2C5TjS2sh4
July 30th, 2009 at 10:35 am
Mannwich Says:
July 30th, 2009 at 10:28 am
Quite the pump today. If enough believe the markets can’t possibly go down due to government intervention and support of asset prices at all costs, then the markets will drive higher day after day after day…….that is, until everyone heads for the exits at once (including the computer traders), at which point the PPT will reappear to try to save the day once again.
Reply:
—————-
There’s a part of me that thinks the market will pump a while longer then mysteriously correct so it can go again. A mulligan from S&P800 would make TA chartists happy because it looks right and give GS an opportunity to pump a new range. What’s your opinion? To infinity and beyond until the rug gets pulled out in the distant future or a manufactured crash due to lack of buyers and a replay?
July 30th, 2009 at 10:40 am
Shell issues extremely negative statement today:
Pessimistic Shell plans ‘substantial’ job cuts
http://www.chron.com/disp/story.mpl/business/6554228.html
Same for BP, which is also cutting suppliers:
BP Q2 profit down 53 pct on lower oil prices
http://www.chron.com/disp/story.mpl/ap/business/6550969.html
Local firms to feel pinch as BP tries to reduce costs
http://www.chron.com/disp/story.mpl/headline/biz/6551876.html
And I think Exxon just missed badly.
But futures are still way up. After all, jobless claims were peachy. Green shoots.
July 30th, 2009 at 10:40 am
@f411: Agree with your second paragraph, but the our gov’t (comprised of those “flawed human beings”) has been flouting the Constitution and little things called “laws” for years now with no repercussions.
July 30th, 2009 at 10:40 am
@
Tax All Money That Exchanges Hands
a transaction tax has always appealed to me: whoever has money and uses it, pays for the “use” opportunity/privilege; favors investment (vs speculating) over consumption. Very regressive for those who have little moeny, so a need for rebates to those below the poverty line
July 30th, 2009 at 10:41 am
@ franklin411:
> that’s why we have checks and balances. That’s not something the market can say.
Yes, the market has checks and balances. It’s called bankruptcy, liquidation, failure. What we have right now is unconstitutional bailouts and crony capitalism. I’m not saying free markets are always correct, because they are not, but destruction is a necessary component of it. People get hurt regardless of what system is in place. The best system is one where those who took the risk are the first to suffer the consequences of their actions.
HCF
July 30th, 2009 at 10:41 am
Oh, forgot to mention that Shell profits dropped 70%, but still beat forecasts, so that’s bullish.
July 30th, 2009 at 10:42 am
@ Greg0658 at 10:04 am
Tax All Money That Exchanges Hands
a transaction tax has always appealed to me: whoever has money and uses it, pays for the “use” opportunity/privilege; favors investment (vs speculating) over consumption. Very regressive for those who have little money, so a need for rebates to those below the poverty line
July 30th, 2009 at 10:46 am
@ bubba:
“@I-man: lil late in the game to be going long now, no? when did you capitulate on those shorts?”
First question:
No.
No tape is ever too high to get long, or too low to get short.
Second :
Capitulated on Tuesday, after the reversal off of the lows (which made two days in a row of the market reversing off the lows.)
Did it feel good taking those losses? No, it almost made me puke. (I’m not kidding)
But does it feel good not being short this thing? Abso-freakin-lutely.
Does it feel good being long this thing? No, it kinda makes me feel dirty… but thats beside the point.
My fundamental take on things hasnt changed a bit, and I still think this rally is full of shit and built on lies. I’m just done fighting it. It was different when the market wasnt making new highs. It is now, so may as well be long. Its a lesson in not thinking you are smarter than the market, pretty much. Also a lesson in not ignoring stops. But the former is probably more important.
July 30th, 2009 at 10:46 am
BR: I think a hybrid of (2) and (3) is the best you can get – someone who has a general sense of the dynamics at play who can only accurately describe rather small aspects of what really is a very complex series of convoluted events involving millions, if not billions of discrete interactions. Unfortunately, (3) and (1) aren’t very different, for reasons explained here.
As for separating (2) from (1), we need an objective system for separating the wheat from the chaff.
July 30th, 2009 at 10:48 am
Anyone else getting their arses handed to them holding these 3X inverse ETF’s? I have gotten slaughtered on FXP and FAZ over the last three months. I will ONLY trade these going forward, but since I still believe we have to have one more leg down, I am just holding on……
Wonder if Steve Barry is in poorhouse yet with his QID holdings???? Just goes to show you how difficult it is to time the market. Last year, he looked like a genious, however, if I recall correctly, he never sold his position. He is almost certainly down yoy now. Investing is a tough game, even when you are right.
July 30th, 2009 at 10:50 am
@jdamon33: I learned the hard way to set your stops, cut your losses and live to fight another day. Just my opinion but you can always get back at a lower price rather than take your beating on these funds that deteriorate over time.
July 30th, 2009 at 10:50 am
There’s only one way I can explain this:
“There is no spoon”
http://www.youtube.com/watch?v=YXKFTzlBziI
July 30th, 2009 at 10:53 am
Yes, F411: All those stupid people greedily borrowing money as they clean toilets for slave wages will somehow create a government that is wise beyond pale so that they can all go to university and understand really, really well how to best clean toilets.
The wages of economic trading partners necesssarily seek equillibrium. That’s all you need to know about the last thirty years. China’s wage (and other LDC’s we trade with) have to go up and ours have to go down, unless you wish to pour massive amounts of money at trying to stop the tide, which will still wash in, no matter. Of course, that’s what we tried with the politically-powerful UAW. Too bad all the other workers of the US can’t unite to get premium wages for their semi-skilled labor. At least it would speed along the impending bankruptcy.
But to get at the point that government is the answer to all these economic ailments: How does the selfish will of individuals translate into an altruistic collective will in the form of the government such that all our economic problems are solved? The answer, of course, as history has proved time and again, is that it doesn’t. Government is not unnecessary. It helps economies grow by providing the infrastructure necessary for growth–even selfish individuals can see that defense and communications benefits them. But government can not, of itself, create growth. Economic growth requires individuals and/or businesses that need or want to grow. That happens best when government gets out of the way and allows individual economic actors to seek the level of activity and growth that most benefits them.
July 30th, 2009 at 10:57 am
@Curm: Agree with that too. The biggest issue that we another developed countries face is the whole wage arbitrage issue with other countries. Until there is some equilibrium there, we will continue to scuffle and invent ways (more credit?) to make up for that imbalance somehow.
July 30th, 2009 at 10:57 am
I-Man,
I capitulated on my short and took my lumps. The rug will be pulled out from under us but I cannot say when. Learned this back in 2006 and watched from the sidelines in cash as the market made new highs. When everyone rushes for the exits at once it will be to late to sell. Investing for most of us is only really luck.
July 30th, 2009 at 11:00 am
@Mannwich
Yep, checks and balances can fail. The best check/balance we have in our system is an informed citizenry, but that too has atrophied over the last 30 years. In the end, politicians only do what the people want or what the people will let them get away with. This is why I always blame the people in the end: because it’s our government, it’s our economy, and it’s our society. If it fails, it’s because of the choices we made. It irritates me when people try to shirk responsibility by finding scapegoats (“those politicians,” Goldman Sachs, minorities/immigrants, etc…)
The fact is that no system in the world has a better record of preserving the interests of the people than our system of government. Certainly not the unrestrained capitalism that the free market fundamentalists fantasize about.
@HCF
Yes, bankruptcy/failure is a kind of a check. The problem is that the unfettered market’s “checks” often inflict a lot of collateral damage on innocent people and rarely punish the guilty. Countrywide is a perfect example. Under free market fundamentalist theory, the people who caused the problem at Countrywide–management–would have suffered the consequences. The lesson would have been learned, and progress would result.
But that’s not what happened. The people who caused the problem got away with it, and the victims–the innocent taxpayer–is paying the price. The unfettered market’s “check” functions like a cluster bomb dropped over a crowded sports arena patronized by a criminal. It sprays shrapnel over the crowd and kills/maims thousands of innocents in a scattershot attempt to punish a single perpetrator.
The free market is rather inefficient.
July 30th, 2009 at 11:05 am
There are bigger and bigger pictures.
The proximate cause of the housing bubble was a prolonged period of very low interest rates. The Fed held interest rates down to try to maintain near-full employment.
Why did employment figures call for such a lax fiscal policy? Long-term trends in employment were dictated by several factors, notably foreign competition for jobs, the maturation and leveling off of the computer revolution, and less labor-intensive methods of production. Each of these has its own precursors.
Personally, I think that the best approach to the underlying problem is a combination of expanded government employment, coupled with progressive taxes to pay for it. We used to have a 90% bracket in the 50s and 60s, and the economy hummed along pretty well. I’m sure we could tolerate a 50 or 60% bracket now.
July 30th, 2009 at 11:08 am
@TC
Your premise is mistaken. The government is not, an never was meant to be, altruistic. It is selfish: it aggregates the selfish desires of individuals into interest groups, who then compete in a political market. Majority rules–whether that’s via the majority of votes or the majority of people who read the papers and are willing to hassle their Senators.
I’m not going to argue the whole “China has to go up/US has to go down.” That’s the conservative (and I use this term philosophically, not politically) ideology that there is no such thing as progress. The basic idea of “conservatism” is that resources are limited. The pie cannot grow, so we have to be somewhat ruthless in how we allocate slices. I disagree fundamentally with that notion.
July 30th, 2009 at 11:09 am
@The Curmudgeon
You mean we can’t just wave a magic wand and set a “living wage” for toilet cleaners? How unfair.
Do you mean Americans should actually take on some personal responsibility and rely less on government? That there is such a thing as a global labor market? That Santa Claus doesn’t really exist?
July 30th, 2009 at 11:10 am
@f411: You still never answered my question yesterday re: just how Obama is “taking on the money interests” and how things are any different in that regard from the Bush admin. Just sayin.
July 30th, 2009 at 11:10 am
I would suggest a bit more humility for those in the Third Group. It’s possible that even they don’t understand the truly big picture–that it’s a world of millions of shades of gray. There may not just be a “tidy” list of 10 main factors that fit nicely on a graph. Perhaps there were billions of little culprits all over the world who succumbed to the darker aspects of the human nature: Greed, Gluttony, Envy, Pride…etc..
This is not some new phenomenon. It’s happened before and it will happen again. Hate to go Ecclesiastical so early in the day: “What has been is what will be, and what has been done is what will be done; there is nothing new under the sun.”
In re: markets…don’t like oil or the SP500 right here, right now….i’m using 1009 as a stop on the SP500 at $69 as a stop on oil….
July 30th, 2009 at 11:13 am
“The unfettered market’s “check” functions like a cluster bomb dropped over a crowded sports arena patronized by a criminal. It sprays shrapnel over the crowd and kills/maims thousands of innocents in a scattershot attempt to punish a single perpetrator.”
whoever said the market’s are unfettered? There are regulators last I checked- who failed to regulate using laws avaialble to do so-
also- there are no guarantees in life franklin- and there are no rights- that is a fantasy- everyone plays along as long as it works in general- but once countries break down- throw laws, rights and benefits out the window-
it comes down to survival
July 30th, 2009 at 11:18 am
@franklin:
I think Countrywide is a bad example. They would have failed if they were not swallowed whole by Bank of America. And we all know that Bank of America SHOULD have been allowed to fail. If that were to happen, then B of A, Countrywide, and Merrill could have had their punishment all wrapped up neatly into a nice little package. Either way, I’m sure crap like this wouldn’t be happening:
http://www.nytimes.com/2009/07/30/business/30serviceside.html
HCF
July 30th, 2009 at 11:18 am
@Jdamon33
when steve barry cries uncle on his QIDs will be the all clear signal to “kitchen sink it” on the shortside. Man, can’t believe the dude rode it up to 100 and took nothing off the table.
@I-Man
I guess I’m just a glutton for a punishment, just picked up some SPY puts. Pure GA on this play.
July 30th, 2009 at 11:18 am
Total aside …. has everyone checked out the Paul Tudor Jones “Trader” documentary on Youtube? It was done in 1987 before the crash. Jones asked that it be taken out of circulation years ago. People were selling copies on Ebay for $1,000+ . Someone put it on youtube this week. It’s a whole combination of entertaining, funny (Jones drinking a bud and trading d-marks at 1 in the morning), instructful, etc. Definitely recommended.
And for the people who were hoping to sell their copy for $1000, good luck getting $100 now. I guess it’s just another sign of asset deflation. Hyperdeflation!
July 30th, 2009 at 11:22 am
Mike in Nola calling from the future. Anyone here?
July 30th, 2009 at 11:22 am
BR,
with this in mind — http://www.sing365.com/music/lyric.nsf/Brothers-In-Arms-lyrics-Dire-Straits/BD8E1F9E05F9E7D548256BCE000C7753
I’ll ask you : Why do We even have a Fed (federal reserve ‘bank’/ Central Bank issuing Fiat Currency)?
I would, actually, be very interested in clearing that piece of Ignorance from my Plate (G-d knows, there’s, already, enough on it, as it is.)
You should know, I’ve, yet, come across an intelligenly believable Answer to that query..
July 30th, 2009 at 11:23 am
@franklin:
>The free market is rather inefficient.
I do agree with the last statement you make. The market is very inefficient, in fact… The question remains, what is more efficient? Multiple layers of local, state, and federal regulation? A totalitarian regime? Socialism?
Market capitalism is much like a democratic republic. Not a perfect system,but certainly better than the alternatives!
HCF
July 30th, 2009 at 11:23 am
So, it’s October 31, 2009 where I am and the S&P is at 523
July 30th, 2009 at 11:23 am
@HCF: Great example. I’m sure there are 100’s of others like it. What a farce.
July 30th, 2009 at 11:30 am
@ Mr O:
Re: the Paul T. Jones “Trader” documentary on youtube:
It got taken down already (on tuesday) for copyright infringement. I got to catch parts 1-6 but missed the last 2. I shoulda downloaded that shit when I had the chance…
I’ve been trying to get my hands on that for three years.
July 30th, 2009 at 11:31 am
Thanks Mannwich…
It seems that the “collateral damage” argument is always used… GM, Citi, AIG, etc. etc. are all too big to fail, all too “interconnected.”
The Bush administration was very fond of saying that we “don’t negotiate with terrorists.” That’s a complete lie. We DO negotiate, but only if they have a big enough weapon. Instead of nukes or biological weapons, though, what we had was 100’s of billions or trillions in CDS exposure!
HCF
July 30th, 2009 at 11:31 am
so . . .what is the catalyst today? Was there someting I missed?
scary market if you ask me
July 30th, 2009 at 11:32 am
Market view:
Still looking for a final top in the 1050 +/- range which would set this leg up since 870 at 61.8% of the the March 6th to June 11th leg. Still too many people not believeing in the rally for it to be finished. A decent set back to 950 and then a grind higher and some more positive data would finally reinforce in people’s minds that the market is safe to go long or to scary to go short (linear mind versus non-linear market as uno would point out). Shorting the GBP and long the treasuries for a medium term trade this morning.
July 30th, 2009 at 11:33 am
@ahab: We don’t need no stinking catalyst!
July 30th, 2009 at 11:34 am
“The basic idea of “conservatism” is that resources are limited. The pie cannot grow, so we have to be somewhat ruthless in how we allocate slices. I disagree fundamentally with that notion.”
No “conservative” , nor any academically-prominent economist buys the premise you claimed underlies my assertion that wages for trading partners will tend toward equillibrium. In fact, the exact opposite is true–that the economic pie grows bigger for all to share when trade is freely allowed such that the individual or business that can most efficiently produce a product does so and trades for things it is less efficient at producing. This is called the law of comparative advantage, and it ranks up there with the law of demand as a truism of economic behavior.
What you don’t get is that in the process of finding the most efficient producer, inefficient producers must either fall by the way-side or become more efficient. This is what drives wages to equillibrium. But it will be a higher equillibrium than otherwise if trade is as unfettered as possible. That’s your expanding economic pie. The pie shrinks immeasurably when industries that should be allowed to whither and die or be forced to reform are artificially and necessarily temporarily propped up by government largesse.
Some in this pie-expanding exercise will, or should (US autoworkers), be forced to find other things to do if they are to receive premium wages relative to their trading partner competitors, but that shouldn’t be make-work projects of the government unless you wish all of the expanded pie to be devoured by paying people that add no value.
Comparative advantage and free trade are the premises underlying my observation that wages across trading partners will tend towards equillibrium, not that economic pies can’t be made larger. That, in fact, is quite the opposite of the premise.
July 30th, 2009 at 11:44 am
TC-
franklin is expecting this country to magically transform itself with more money for education and government investment- to a happeir time- when we dominated- regardless that it was because our economy was the only one not destroyed in a world war-
the only way for this country to become competitive and to employ people is to lower our living standard-
otherwise we will be a country with a large permanent class of unemployed- a middle class that will continue to shrink- and uber rich who will prosper
July 30th, 2009 at 11:48 am
Re: “toilet cleaners”…
Whaddya say we just give every politician in Washington a “swirlie” and call it a day?
July 30th, 2009 at 11:51 am
As I tried to say earlier before being gagged by Wordpress and shot into the future, one thing helping GS juice things is headlines like that at CNBC:
“Jobless Claims Showing Unemployment Trending Down”
The body of the article is copyright Reuters, which has the story headlined:
“U.S. jobless claims edged up last week”
But then Reuters isn’t being paid to sell stocks and funds.
Barry just posted some magazine covers that remind me of one I saw in the checkout line near the end of the tech boom. Believe it was money magazine and don’t know if it was being ironic, but it said “A New Era for Investors?” Those who’ve studied the Big One will get the allusion.
They even have David Rosenberg hedging his own dire projections.
We are getting there.
July 30th, 2009 at 11:53 am
@Mr Objective
I watched all PTJ segments on Mebane Faber’s site before they were taken down. Entertaining, yes. Interesting, yes. But I wouldn’t give $20 for the video. Over hyped imo.
July 30th, 2009 at 11:59 am
“so . . .what is the catalyst today? Was there someting I missed?”
silly rabbit, markets ALWAYS gap up on the 8th day after a total solar eclipse. look it up.
ok, i’m totally bullshiting. but is reading TA charts any different (no disrespect to all the well meaning TA enthusiast).
July 30th, 2009 at 12:01 pm
@Mr. Objective
I like the general parameters of your (11:32)…On both sides…
Here are a couple of thoughts to add…
- Amen Ra was pointing out the the resistance that the 55ema weekly was providing, but now that has been taken out to the upside all you really need to do is to hold on today and tomorrow and the 89ema weekly would be the next bogey (which is around 1,060 as we speak)…So this close to 1,000 I wouldn’t be surprised to see it (or perhaps 1007-1008 which is sort of a combination “technical number” & the number the S&P hit on election day 2008)…
- as far as a pullback is concerned, I’m still using 956-960 as my support (and 917 as far end support)…Andy T was working with some of those numbers and they were the EXACT same numbers I had in mind…
- So perhaps we see the move to 1008, the pullback to 960, then the final push up to 1,060? opex week is around the next corner (after NFP), so there’s lots of room for clowning on low volume…
Who knows? I’m just a useless spectator at the moment…I want to go short, but I either go short BELOW 918, or up around 1,060
July 30th, 2009 at 12:06 pm
It’s human nature, unfortunately for people to think they’re smarter than they actually are. And it’s pretty much impossible to get away from cognitive biases entirely but it is true that some people do have a larger grasp about what’s going on – unfortunately only hindsight can really tell how right they were. In addition, most people see to view analysts according to how accurate their ‘predictions’ are – which is impossible given so many contradictory facts – such as trying to read the direction of the stock market. Fundamentals pull stocks (all indices, along with oil & gold) lower, while loose credit – provided by central banks in China, the ECB or the Fed and these ‘v-shape’ supply-sider ideologues pumping it the other way.
I would dearly love to see pragmatists in charge – or at least with a higher media profile but right now it is mainly the ideologues who appear to believe that the same things that caused crisis will be what resolves it along with a few different ideologues for ‘balance’ who may have been partially right but whose ideas wouldn’t be much of an improvement… (return to the Gold Standard? yikes!)
As for going either short or long – I’m sitting in cash. I think there will be another huge rout but I don’t know when exactly and I don’t know how higher these stock markets can be pumped in the meantime.
July 30th, 2009 at 12:15 pm
Jessica6 Says:
July 30th, 2009 at 12:06 pm
It’s human nature, unfortunately for people to think they’re smarter than they actually are.
As of 10 minutes ago, Larry Kudlow would like you to believe that Q2 earnings … http://www.zerohedge.com/article/cnbc-now-openly-misrepresenting-reality
July 30th, 2009 at 12:20 pm
Franklin:
Curmudgeon is 100% correct that it is a tenet of fiscal conservatism that there is not a limit to the “pie”…that increases in trade enlarge the pie for all of us by creating opportunity.
“A foolish consistency is the hobgoblin of little minds,
Adored by statesmen and philosophers and devines…” Emerson.
You should try to get your facts, if not straight, a little more in line…
July 30th, 2009 at 12:22 pm
(return to the Gold Standard? yikes!)
Jessica6,
you are, obviously, an intelligent person, though, could you explain where this: (return to the Gold Standard? yikes!) , comes from.
IOW, what’s the basis of that ‘fear’/dread?
July 30th, 2009 at 12:32 pm
I-man:
Shoot! I wanted to download it as well. I watched it twice and have committed a lot to memory and paper, but it’s the kind of thing that I could probably digest for a long time before I extract most of the wisdom.
Cvienne,
Quite a reasonable view. I liked where the Treasuries and GBP got to, so I took a shot there. 1006 on S&P would close one of the gaps from last fall.
July 30th, 2009 at 12:32 pm
@ MEH…
Hey go easy on the new girl… we need more ladies around here.
Good question btw… what is the basis of Dread…?
July 30th, 2009 at 12:38 pm
@ Mr O:
Yeah, I got kind of a man crush on Paul Tudor Jones. He’s the counterbalance to my Seykota.
July 30th, 2009 at 12:40 pm
jessica6 has posted before-
good post by the way
July 30th, 2009 at 12:50 pm
My apologies to Jessica6… but I wont call you “old girl”.
July 30th, 2009 at 12:52 pm
here is a thought-
do we see zero percent rates for years to come?- that we are now addicted to them- and that by raising them- the market would sell off and the economy would nosedive- knowing that everything is predicated on easy money and speculation at the expense of savers and the thrifty
July 30th, 2009 at 12:56 pm
[...] Putting crisis post-mortems in perspective. (Big Picture) [...]
July 30th, 2009 at 12:59 pm
@ahab
One might suppose we’re the new BOJ
July 30th, 2009 at 1:02 pm
We are the new BOJ!
July 30th, 2009 at 1:02 pm
“do we see zero percent rates for years to come?”
If we keep the rates at this level for a long time, we can definitely expect the same disaster to play out again Another credit bubble and burst cycle will bring us unexpected consequences. Maybe that’s what is in the cards for our future.
July 30th, 2009 at 1:03 pm
Holy TLT… guess the auction went off ok today… I didnt think bond funds were supposed to trade like that…
July 30th, 2009 at 1:05 pm
@MeH:
I think we should go to conch shells as currency, like some islands in the South Pacific do, or did. Being a biological organism, conchs should grow shells at a natural rate, e.g., no more than about 3% a year, thus adding predictability to money supply growth that you will never get with humans fastidiously devoted to monetary mischief through the printing presses and pixel-creation:)
July 30th, 2009 at 1:08 pm
@I-Man
What I don’t get is they were auctioning off the short maturity stuff
July 30th, 2009 at 1:15 pm
I know… more evidence of la la land. What a strange vortex we find ourselves in…
My SSO has me feeling dirtier and dirtier by the minute.
July 30th, 2009 at 1:16 pm
There’s so much knee jerk action in the markets these days you just don’t know what’s going to happen. It’s clearly got a lot of folks scratching their heads. It’ll work ’til it doesn’t, as we’ve said. In the mean time it’ll make a lot of us look pretty stupid. I’ve clearly underestimated the psychology of what’s going on and am more and more intrigued by Prechter and the EW theory as it seems to have this pegged, thus far. Wow.
July 30th, 2009 at 1:16 pm
and to follow my thought above- from Yahoo Finance-
“You Fools Don’t Get It: This Is A V-Shaped Recovery!”
“the rally in the stock market, the low level of interest rates and the stabilisation in house prices all tend to limit the risk of a further sizeable increase in the savings rate”
so . . .it would appear that by forcing rates to non-existant levels- the thought is that people will have no incentive to save-
that they will turn to the stock market to get better returns-
and that Uncle Sam had orchestrated another rally out of thin air
July 30th, 2009 at 1:19 pm
“They are pragmatic, not ideological.”
Uh, I don’t know about this statement. I consider myself both and the musings of many other posters on this blog appear to me as being that way too. Right??
July 30th, 2009 at 1:20 pm
People just have no idea how the monetary system works, and thus why things are so screwed up. I know I didn’t myself until far too recently. So it’s like speaking Greek or talking physics with most people. That’s just the way it is. We’ve become soooo addicted to the magic of monetary pump priming, and we won’t kick it til we crash. That much is surely clear to me now.
The problem is figuring out when that comes. I think I’ll become a gold bug now!
But that trade just feels so crowded. The timing just has to be off. Doesn’t it? /scratches head, worriedly/
July 30th, 2009 at 1:20 pm
Does anyone here (aside from f411, of course) really believe the bailout money was money well spent?
http://www.zerohedge.com/article/all-juicy-bank-bonus-details-compliments-cuomo
July 30th, 2009 at 1:38 pm
@Manny
I don’t. But that was part of the calculation I had to conclude BEFORE I started making my investments. History was all I needed to read.
July 30th, 2009 at 1:49 pm
Interesting.
http://www.creditbloggers.com/2009/07/our-tendency-to-choose-to-believe-confident-people-over-cautious-people.html
July 30th, 2009 at 1:50 pm
@f411 – You say, “The basic idea of “conservatism” is that resources are limited. The pie cannot grow, so we have to be somewhat ruthless in how we allocate slices. I disagree fundamentally with that notion.”
I recommend you quickly review Orwell’s 1984, and assume you have been Winstonized.
Conservative principles assume the pie will grow, as it has for centuries. All you have to do is go back a few hundred year in human history to see how the average standard of living has increased while the population has increased at the same time. If the pie didn’t grow, this would be impossible. Conservative principles would claim, that humans accomplished this through conservative principles which are the ground work for societal and cultural incentives to be rewarded for what you produce. Human nature does the rest. Thus, the much bigger pie then we have ever had throughout history.
The other side is the much bigger issue of potentially ultimately exploiting and using up resources, breaking the growing pie model, and forcing either a static model of equilibrium (one size pie), or a cyclical model of destruction and rebuilding where the pie alternately shrinks and grows.
Franklin – I have appreciated your counterpoint arguments to a certain extent, but your slanted views just seem very “un-thought-out.” That’s about the nicest way I can put it.
July 30th, 2009 at 1:51 pm
AAII sentiment indicators look to be nearing a top.:
http://www.sentimentrader.com/subscriber/charts/WEEKLY/SURVEY_AAII_BULLS.htm
http://www.sentimentrader.com/subscriber/charts/WEEKLY/SURVEY_AAII_BEARS.htm
http://www.sentimentrader.com/subscriber/charts/WEEKLY/SURVEY_AAII_BULLRATIO.htm
The Bear chart looks odd because it’s inverted; it peaks as %bears decline.
All three are at levels they seldom see and where they do not remain long. Just eyeballing it, it looks like these charts peak a few weeks to a month before a top.
July 30th, 2009 at 1:53 pm
@MRegan: Hence our propensity to believe people who regularly lie to us over and over over again. We are a childish nation collectively. Our culture doesn’t like (actually loathes) cautious, analytical people. Those people tend to care about stubborn, “pessimistic” things like facts. In our culture, you must believe that if you just WILL it and think positively you can make anything happen. If you fail, it’s because you didn’t think positively enough.
July 30th, 2009 at 1:54 pm
BTW – if we are running out of resources, human history says we will cycle to a much lower standard of living rather than find a way to live at an equilibrium. Maybe cycling down (such as in the middle ages) is a good thing, because eventually, renewal, and pie growth may resume. Whereas, equilibrium can be seen as forced and against human nature, and therefore quite possibly and dead end, stifling the very progress which may take human societies to the next level.
July 30th, 2009 at 1:57 pm
mregan-
I like the title to the symposium-
“Often in Error- Rarely in Doubt”
which reinforces my belief in that people want to be lied to
July 30th, 2009 at 2:00 pm
@ahab: Hence our ability to vote GWB to the presidency not once, but TWICE. And hence our ability to re-elect our representatives time after time after time. Totally agree. If it’s a choice between hearing bad news but the facts, reality, if you will, and a lie, but a sunny, optimistic one that makes us all feel warm and fuzzy, most in the U.S. will choose the latter every time.
July 30th, 2009 at 2:04 pm
Curmudgeon,
Note, I’ve never advocated a ‘return to the Gold Standard’.
much to your point, peep should be Free to Choose.
Though, now, We cannot. Legal Tender statutes, and the USGov, mandate, by Fiat, the use of the FedRes’ Fiat.
The Currency Monopoly, handed to the FedRes, is the only chokehold, on Freedom, any Tyrant, would-be, or otherwise, has ever needed.
To dream that Absolute Power does Not corrupt Absolutely, is to be Delusional, not Devine.
http://www.thefreedictionary.com/divine
see #3.b.
http://www.thefreedictionary.com/dream
see #3.
July 30th, 2009 at 2:15 pm
Here comes the trap…
July 30th, 2009 at 2:17 pm
“The Currency Monopoly, handed to the FedRes, is the only chokehold, on Freedom, any Tyrant, would-be, or otherwise, has ever needed.”
well put Mark- I agree- manipulation of the currency at their discretion at any time with no input from anyone needed
July 30th, 2009 at 2:22 pm
Re: the Paul T. Jones “Trader” documentary on youtube:
It got taken down already (on tuesday) for copyright infringement. I got to catch parts 1-6 but missed the last 2. I shoulda downloaded that shit when I had the chance…
I’ve been trying to get my hands on that for three years.
UTORRENT. Watched it last night
July 30th, 2009 at 2:26 pm
@ Mike:
Thanks bro! Not familiar with the utorrent.
July 30th, 2009 at 2:48 pm
I-Man… you selling your SSO?
I’m soooo tempted to pull the trigger on a few hundred shares of BGZ right now, for a 1 – few days trade. Maybe it’s the gap up on the SPX that I didn’t like and expect to see it filled within a few days.
July 30th, 2009 at 2:56 pm
@I-Man
FWIW…It seems to me like you’ll probably be able to hang onto that until around 1007 or 1008…
I’m getting more & more the feeling that we see a move to there within the next 3 days (Maybe Tuesday we hit it)…
Then, I’m expecting a pretty big selloff (actually all the way down to 920 or so)…But then yet another monster move UP (1,060)…
July 30th, 2009 at 2:57 pm
@ broke:
I will if I get stopped out. I still have my stop just below gap support. Havent raised it yet. I almost raised it to 30.20 earlier but got distracted by the fireworks in TLT.
I’m actually sort of “feeling” a trap being set for shorts- think this thing is probably going to go parabolic here in the last hour.
July 30th, 2009 at 2:59 pm
Oye Marcos– te pego una llamada esta noche.
July 30th, 2009 at 3:01 pm
I predict some kind of upside surprise in the GDP number tomorrow will send us up and over the 1000 mark. I don’t know what factor it will come from, and it will be misleading when analyzed closely (as with so many things of late), but it will produce another great bullgasm. As is clear, this market wants to go up. I give. Until I see it react negatively to something for more than an hour, I’m not short. Not long either. Just cash (and a good chunk with Hussman, which is basically cash at this point).
I’m trying to remember, but recently I read something somewhere that talked about a possible upside surprise that could play out. Maybe it was export/import numbers. I’m not sure. Any thoughts?
July 30th, 2009 at 3:06 pm
In any case…
There’s no possible way in hell that this thing doesn’t tough 1,000 at some point…
I mean, christ, are all just maniacs…I still like 1007-1008 as the temporary top…
July 30th, 2009 at 3:09 pm
@I-Man: Right there with you, bailed on all my shorts Tuesday.
Feels good now that the bleeding has stopped. SOLD: DZZ, FAZ, QID, SDS, SRS,. There are NO fundamentals being applied to this Frankenstein market.
Sold my UYG and URE and BOT: XLF, SPY, QQQQ with 5% stops.
Not saying I”m done with Inverse ETF’s, just waiting for the flames to go out.
As long as GS and JPM are using taxpayer dollars to juice the market, I’ll ride the wave.
Dumb Question: Why is only double or triple inverse product available? Why cant I find “single” ETF product to short (one to one) long term, without all the voodoo economics?
July 30th, 2009 at 3:17 pm
Wait for it…
July 30th, 2009 at 3:35 pm
Jackson
Agreed re: the lack of good non-leveraged short ETFs. It’s aggravating. There is the Short S&P 500 ETF – SH
Another approach is to short the long leveraged ETF to get the “decay” working in your favor. Same goes for going long. Short the short leveraged one instead of going long SSO, etc.
July 30th, 2009 at 3:40 pm
I-Man,
I bot BGZ anyway, 27.10, I can ride it out if it does pop up a bit. $1 stop won’t hurt much if it goes the wrong way.
July 30th, 2009 at 3:41 pm
…huh?
July 30th, 2009 at 3:44 pm
Nice, last minute reversal. Head fake or short trap..tomorrow will tell. Wait for GDP report at 8:30 est.
July 30th, 2009 at 3:47 pm
First time we have sold off in the last 30mins in the past 5 sessions, first time also that we have closed well off the highs. Something is wrong here, but GDP report is going to be a catalyst.
July 30th, 2009 at 4:00 pm
jackson-
non-leveraged inverse ETF’s as follows-
short QQQ = PSQ
short Dow= DOG
short S&P500 = SH
short Russell2000 = RWM
short financials = SEF
short oil & gas = DDG
check the volume though- I know that SH is thinly traded compared to SDS- also keep in mind that they still track daily results
July 30th, 2009 at 4:04 pm
@ Onlooker from Troy:
Thanks for the advice, at least that gives me a way to go.
I’m also considering using “puts” to short. First, I have to find out what “puts” are and how they work :]
July 30th, 2009 at 4:05 pm
Last minute reversal could be to suck in some shorts for tomorrow’s upside surprise. Hard to believe that the government will let it be a downside surprise. And there’s enough irrelevant or bogus factors that it’s likely to be better than expected.
July 30th, 2009 at 4:14 pm
Wow… I cant remember the last time I saw an intraday triangle pattern on the SPX break to the downside.
I raised my stop just before I dipped out for lunch- got stopped out of SSO @ 30.10. Probably should have left well enough alone @ 29.80… but whatevs. No loss.
I’m gonna sit tight for awhile and see what happens… I’m not much of a daytrader.
July 30th, 2009 at 4:18 pm
@ call me ahab :
Thanks for the suggestions. As you mentioned, daily requirement and pretty low volume.
I think it is the “daily” requirement for all these products that don’t understand.
If I buy 50 shares of XLF should’nt I be able to buy 50 shares of a short “long term” ETF to cover?
Why aren’t “long term” short ETF’s available?
July 30th, 2009 at 4:19 pm
Wow. What a close. Leaves everybody scratching their head now, doesn’t it?
July 30th, 2009 at 4:20 pm
@I-Man
karen made a point earlier somewhere around here about the “re-emergence” of the “nifty 50″ swings in the DOW…
She may be onto something…Nervous money hanging around at this point…
July 30th, 2009 at 4:21 pm
perhaps lots playing with “short stops” just like you…
July 30th, 2009 at 4:29 pm
…and if that’s the case, I don’t see much point in hanging around day trading.
I mean look…the VIX has been creepin’ around “back door little joe” as of late…While there may be a move higher, it’s going to be tough to do it without without at least another pullback…
Premiums will rise…so I feel the “deltas” on Jan 2010 & 2011 stuff are kind of interesting right now…
Mostly the commodity stuff…
- I did a 2011 on FCX today (I really think copper is done going up – and gold may come under pressure too)…
July 30th, 2009 at 4:32 pm
@ CV:
Re: tight stops at technical levels
I think you got to at this point in the tape… capital preservation is key. The alternative being… dont play at all… which is where I’m going to be for a bit until we get some definitives.
I mean, I love the action and all, but I think the real meat on the bone is still to the downside… but as Ron at the chartpatterntrader has said, its tough to short when we’re above the 20 period MA. But… when you’re this far above the 20 period MA, its hard not to get sucked in to a short.
Thus, I think I better stop being cute with the day trades, and wait… wait… wait…
Theres definitely some revenge at work with my wanting to get long this tape. I must be guarded on that.
July 30th, 2009 at 4:45 pm
jackson-
you can go long in funds such as SPY or QQQQ – non-leveraged long position- but you can’t do that with an inverse or any leveraged product whether long or inverse-
to create the position on any leveraged or inverse product the fund invests in short term futures contracts and derivatives-
long non-leveraged ETF’s such as SPY invest in the equities represented in the index- so you can buy and hold
July 30th, 2009 at 4:58 pm
@ Jackson:
re: puts
Easy there cowboy… take your time on learning options. I got my start trading in options. I was seduced by the leverage. I rarely trade them now if that tells you anything.
And further…
IMO, its best to go long puts as a hedge against long exposure in your portfolio. ie, a basket of stocks that you own for the long haul, or heavy equity exposure period through mutual funds and the like.
If you are speculating on a downside move, ie: for a TRADE… I think its way more prudent to sell calls rather than buy puts. Do your homework on how spread trades work. For the example you gave, bear call spreads would be my preferred options strategy.
Its usually the herd that buy puts as a trade… and often, by the time they buy them for a trade, the market is already in freefall mode, and the premium has already been jacked up by the savvy.
That being said, if its your business to sell expensive volatility and buy cheap volatility against it, its a different story. But thats a more advanced discussion that the esteemed Mr Hoffer can best explain.
July 30th, 2009 at 5:45 pm
Andy T Says:
July 30th, 2009 at 11:10 am
“In re: markets…don’t like oil or the SP500 right here, right now….i’m using 1009 as a stop on the SP500 at $69 as a stop on oil….”
Because of where and how the market reversed today, I’m lowering my SP500 stop down to 997. If we’re now correcting the monster move up last few weeks it shouldn’t be able to break back above 997 over the next few days….it’s becoming almost a riskless trade at this point from trade entry this morning….similar story on the oil…tightening that stop to 67.75….so I’ll be risking $1.50 from entry….
I guess someone decided to take some profits into that round number near 1000…..
July 30th, 2009 at 6:42 pm
andy-
surreal- that is what it is like right now-
I am thinking- that this is the worst mess this country has been in- possibly even including the great depression- it will not be a V shaped recovery- we don’t have laid off factory workers waiting for the assembly lines to start running again- a la 1980’s-
it’s ugly- and I don’t see where prosperity will come from-
the stock market has become nothing more than a frenzy of speculation- people are more than ready to bail at any moment-
that’s why I think that when this ship goes down- it goes down fast- everyone running for the exits at the same time-
because the believers are all gone- for good reason
July 30th, 2009 at 7:38 pm
to batmando (been out today) .. if ALL* money exchanging hands were Flat Taxed the percentage number needed to run government would likely be less than 1% .. and that would be less of a tax on those below the poverty line then now .. so no need for rebates (all things being the same otherwise)
* market trading and raw materials for manufacturing
and to Camp hopeImwrong’ers .. your own words “ultimately exploiting and using up resources, breaking the growing pie model, and forcing either a static model of equilibrium (one size pie), or a cyclical model of destruction and rebuilding” … and to F411 comments “The basic idea of “conservatism” is that resources are limited. The pie cannot grow” F411 disagreed with that at some level
.. I say that the world human population going from 3 to 6 billion in my 50 year life span (so post Korean War) has a lot to do with your pie growing .. recycling will help with those other mineral resources but our precious oil from dinosaur flesh and vegetation compression … maybe we will be the oil for the inhabitants of AD6,000,000,2010?
July 30th, 2009 at 8:02 pm
Greg,
you posit that “Oil”, et al. are the resultant of “Fossils/previous Flora y Fauna”..
a few Q:’s 1. have you ever done the Volumetric conversions that would give you ~ the Starting Mass needed?
2. have you bother to know of the ‘abiotic theory’ of Hydrocarbon production? proven, or disproven it?
3. where the ‘Dinosaurs’ on Titan? can you explain the Hydrocarbon atmosphere of Titan, and other extra-Terrestial terrestial bodies? Did they,too, come from bodies?
~~
past that, the Trader.net squawk is interr-esting, though, anyone? BR? Jessica6? care to Answer my, above, Queries? Dare I call out to F411?
July 30th, 2009 at 8:16 pm
It is estimated that AD1804 had a 1 billion human population and AD1927 had 2 billion.
WW1 had 16 million deaths .. WW2 had 50 million to over 70 million killed .. Korean War 944,110 soldiers KIA and 2.5M civilian casualties (not all killed)
Point being .. those folks being gone could not reproduce offspring (pre my life) .. contributing to the earth only having 6 billion people today … 20 years to a create a generation … and my fuzzy compounding action math is done
http://en.wikipedia.org/wiki/Population .. and war casualties
July 30th, 2009 at 8:44 pm
@MEH
I think on Titan they have frozen orange cows that f@rt methane ice cubes…
July 30th, 2009 at 8:47 pm
Mark-
Why do you think we do not need the Fed? In a paragraph. I admit having not having done my own homework on the subject. I dont really know what the Fed does period, besides set rates, and issue arcane statements about inflation and risks to economic growth. Enlighten me. CV- feel free to chime in.
July 30th, 2009 at 11:29 pm
@I-Man
I have nothing to offer on the Fed…
I was just having with MEH’s response to Greg regarding abiotic theory…
Basically what I like is what I percieve to be MEH’s stance that “what the f*** do we really know anyway”?
So FWIW – Until someone can PROVE to me that there are no frozen orange cows on Titan f@arting methane ice cubes, I’m standing by my research…But beware, DON”T EVER ELECT ME TO PUBLIC OFFICE…Otherwise, I’ll fund useless endeavors at the taxpayer expense to prove my theory…
July 31st, 2009 at 9:01 am
old white guy on CNBC analyzing Mars and Wrigley M&A 3 minutes ago …
when are people going to wake up to what you do for a living .. ie cut jobs for your pay .. the pie gets bigger for who?
July 31st, 2009 at 9:59 am
I-Man,
see: http://www.amazon.com/Case-Against-Fed-Murray-Rothbard/dp/094546617X
July 31st, 2009 at 5:39 pm
Thank you Mark- I knew you wouldnt miss that.