Is the Diving Dollar Driving Equities?
What does it mean when the dollar falls, commodities and equities rise in thin volume, with lots of the program driven trading?
Perhaps Art Cashin’s comments this morning might shed some light”
“Dollar Hits New Low For 2009. S&P Makes New High For 2009, Duh!
While economic data continues to come in “less bad”, many traders are pointing to the inverse relationship of the dollar to the market as the influence for movement.
Yesterday, the dollar fell and oil, stocks and commodities rose. Late in the day, oil pulled back as it hit chart resistance and recoiled.
There is speculation among brokers that a “dollar carry trade” may be evolving. For decades, arbitrageurs would borrow money in Tokyo at zero percent and short the yen. They would then take the “free money” and buy commodities, crude, high yielding bonds and even stocks. With U.S. rates held at zero for months, traders wonder if an American version of the “carry trade” is beginning to evolve.
Whatever the source, there is no denying the influence of dollar movements across asset classes. It is clearest against oil and commodities but quite evident versus stocks.
Sure sounds like Cashin is onto something here . . .
August 4th, 2009 at 9:34 pm
Cashin is a good guy…One of only 2 CNBC worth their paychecks…
But BR…
‘Sure sounds like Cashin is onto something here . . .’
Many of us have been saying that for MONTHS here now on TBP…(I’m glad Cashin is an avid reader)…
August 4th, 2009 at 9:45 pm
I should qualify that last statement…
Ever since the dollar made an intermediate low at the beginning of June (which DOES qualify as “months” at this point)…
Many of us here have been barking about the oversold behavior of the dollar (and the ties to the equity rally)…
Technically, (for those interested), it even appears that the dollar is in the process of completing a 5 wave “elliott” move down (from the March highs)…This times out with what seems to be a technical PEAK in the SPX…
My God…there have been a million posts (but probably by only a half dozen here), about this phenomenon…
- Commodities are a crowded trade
- Dollar short is a crowded trade
- 2x silver ETF looks attractive at these levels
- Govvies may be the place to be for the 2nd half
- Yada yada
So great…we’ve been talking about it since June…
August 4th, 2009 at 9:52 pm
I’m pretty sure Hugh Hendry would agree with my comments…
August 4th, 2009 at 9:54 pm
and . . . is this the future?
a long steady decline of the $-
or will a resurgent $ beat down all the other asset classes-
hmm . . .
also- is a rise in the treasury yield inevitable??
I think yes
August 4th, 2009 at 10:10 pm
Rest assured, the US government has found a new way to rid itself of debt and thus will be strengthening the dollar: http://contraryriches.blogspot.com/2009/08/gubmints-latest-plan-to-rid-of-us-debt.html
August 4th, 2009 at 10:15 pm
@ahab
I try not to be a conspiracy theorist, but WTF?
Banks that have paid back the TARP have made profits with risky trades (using US taxpayer money as leverage)…
They toss the US Government back a bone by helping fund the balance of the $2 trillion in funding needed before 9/30…
Well…you gotta do that some way…So you rout equities a little here (causing a scare)…Sorry J6P who listened to your broker after the July 4th barbecue…You lose again…Thanks for the charitable contribution…
The scare causes a race back to the 10 & 30 year (which go up for auction in less than 2 weeks)…
As “W” put it…”mission accomplished”…(rolls eyes)…
August 4th, 2009 at 10:22 pm
Yoicks … if indeed there IS a “dollar carry trade”, the only thing that will stop it is a sufficient rise in Treasury rates, something that the Fed+Treasury will not want to allow to happen, and neither will a host of foreign interests. This could eventually propel the equities markets to even more ridiculous heights — something the administration would enjoy seeing. This ought to make all bears extinct, or at a minimum in deep hibernation.
S&P 1200, here we come …
In the words of Buzz Lightyear — To infinity, and Beyond!
August 4th, 2009 at 10:22 pm
cvienne-
may be much to what you say- I wonder if treasuries will be supported in the upcoming auctions by the very banks given the “play money” since foreign interest is waning
August 4th, 2009 at 10:24 pm
Yeah, I think Art Cashin probably reads some of these threads. We’ve been talking about this phenomenon for many months now….”it’s all one trade.”
The only way for stocks to go up is for the dollar to depreciate….i.e. we’re “forcing it up”….stocks aren’t rising on their own merit….they’re being pushed higher on the back of the weak greenback.
Yeah, a carry trade in the dollar…get heavily short the currency the whole world is already short via debt…..what a grand idea….what could possibly go wrong? Genius!
Wish I could see a clearer signal that the DX is about to bottom in a major way. It would make it much easier to get insanely bearish stocks…instead I’m just short term bearish on the back of what looks to be a rising wedge from 7/29….if that steep uptrend line breaks in the next 24-48 hours, we should witness a very sharp little retreat back to at least 968….just a little 40-45 pt scratch on the back of this beast….
August 4th, 2009 at 10:33 pm
I’m telling you all, the Onion has it right as they always do, with what’s coming next from our government (see my link above)!
August 4th, 2009 at 10:40 pm
@Andy T
I’m WITH you on that rising wedge…
From CV’s view, here’s what I see…
There is a slight “acceleration” of that wedge since 7/30…But it is basically the same opening wedge that you could take back to the top on February 9th…
Now follow me…
If you do a LOWER line to that “trumpet” (as I’ll call it)…and start on March 5th…(therefore you’d have to draw that line from about an 892 price point on 3/5)…Then, you get a line that, taken forward, perfectly forms the base of the 5/15 & 7/8 lows…
Meaning…Let’s say we print 1008 by tomorrow or Thursday (or 1014 by 8/11)…Why couldn’t we test back at 860 within the end of the month?
JM2cents…
August 4th, 2009 at 10:48 pm
cv….not sure about all that. It’s been such a vicious upward trajectory market that I have to give it all the respect. I’m just observing this rising wedge look on the 30-60 min chart….the market can of course negate it by accelerating harder next few days, but for now it’s pretty ominous looking. Wedges like this tend to go back to where they started (968) in less than 1/2 the time it took to form….so all I’m thinking for now is just some sort of super swift little move back to 968. I won’t get medium term bearish this mrkt till I see a “five wave” lower on a 30-60 min. time frame, then I’ll start laying some bigger bets….
August 4th, 2009 at 10:52 pm
@Andy T
I respect your caution…In practice that’s how I’m playing it…
I’m looking for outliers too though…
August 4th, 2009 at 10:53 pm
…and I think the DOLLAR is going to have a big say in this (per this thread)
August 4th, 2009 at 10:55 pm
gold pushing 965 and silver is getting closer to 15/oz…is there an asset class that has not gone up in the past few months other than the buck?
August 4th, 2009 at 10:57 pm
@investorinpa
Interesing comment because I own the physical bullion of BOTH (a lot)…I don’t trade it…
I’m not particularly “bullish” on either at the moment…In fact…I want to “short” paper silver…
August 4th, 2009 at 10:57 pm
Excuse the view of a novice who is still learning but I had figured that since most people had pulled out of equities and into dollars in the collapse that it had driven the dollar to appreciate due to higher demand for people wanting to hold cash. Thus now that people are rushing back into this new ‘bull’ with an insatiable appetite for risk, they’re trading in their dollars for equities thus dropping demand for dollars and causing the value to drop inversely to the markets.
Can someone clarify how I’ve oversimplified and perhaps point me in the direction of further reading so I can educate myself on the pieces of the puzzle I’m missing? Thanks
August 4th, 2009 at 10:59 pm
another thought-
China stock market crashes- worldwide markets crash- $ goes parabolic-
hmm . . .
by the way- Cvienne and Andy- I have no idea what you are talking about
August 4th, 2009 at 11:01 pm
Art is saying what most smart people have been trading for a few months now
I’d love to have a beer with Art and hear stories from his career. One of the few cool people in financial TV …
August 4th, 2009 at 11:03 pm
@ahab
It’s all hocus pocus
August 4th, 2009 at 11:07 pm
@Damien H
Agreed…If I actually did have some weird desire to turn on the TV and tune into CNBC…It would be he, & Santelli that I’d enjoy listening to…
August 4th, 2009 at 11:15 pm
okay, the “all one trade” is over now.. no disrespect to Mr. Cashin.
@denis, equities don’t really count for much, if anything, vis à vis the dollar… bonds count, and currency trading counts..
August 4th, 2009 at 11:22 pm
Ahab. I’m going to put out something in the morning on “rising wedges” or “diagonal triangles” and their associated dynamics/implications. A picture is worth at least a few hundred words. G’night.
And, BTW…I like you Art Cashin…keep up the clear thinking commentary….I know you’ve been reading the blogs….
August 4th, 2009 at 11:23 pm
karen says-
‘“all one trade” is over now’
I never understood that whole “one trade” mantra- but please-
elaborate on your observation
August 4th, 2009 at 11:28 pm
ahab, you know, when everyone is on to something, it is no longer on.
August 4th, 2009 at 11:28 pm
O’ …Karen showed up.
I think it still is “one trade”….. As a wise man once said: “It ain’t over till it’s over.”
August 4th, 2009 at 11:35 pm
Andy, tomorrow you will wake up to a new world.. let’s just be nice. Besides, i’ve just returned from a spin class with Hercules and I’m still alive.
August 4th, 2009 at 11:36 pm
@karen
k-girl…That post, was, very MEH-ish…:-)
August 4th, 2009 at 11:38 pm
@karen … how long was the yen carry trade common knowledge, and yet still continued to function?
August 4th, 2009 at 11:40 pm
constant, it functioned until the usd became the carry… what do you think the banks are doing with TARP.. investing out-a-here…
August 4th, 2009 at 11:41 pm
[...] Ritholtz/Art Cashin have a related take. A carry trade with the dollar. It’s ugly, but it makes sense given [...]
August 4th, 2009 at 11:41 pm
This is a concept that Todd Harrison at Minyanville has been talking about ad naseum for 3 years? We either inflate assets and deflate the dollar or vice versa—but we can’t have both. There are some who think that for the govt. to succeed this is exactly what has to happen. The stick in the mud has been that as sucky as the dollar is, it has been better than all other currency–and the gold thing just hasn’t been working like people thought it would. What’s the saying I hear about the dollar? “In the land of the blind, the one eyed man is king”—David Rosenberg (who got it from somewhere else, surely)
In the fullness of time, we will truly see how deep we’ve sunk into the muck, but at the moment all that govt stimulus floatin’ about is doing what they thought it would in their white ivory papers back in college…
You know, I remember that Wile E Coyote also levitated a bit after the cliff broke way—but it didn’t ever work out in the end. The laws of gravity held for him even in the land of cartoons. In the end this market and economy will do what it needs to do. Our external inputs that make us believe we have control can only shorten or lengthen the timeframe in which it occurs. And I’m not convinced that by lengthening the timeframe we aren’t making it worse rather than “softening” the impact…
Good night all.
August 4th, 2009 at 11:43 pm
If there is an ongoing dollar carry trade, the only thing that will stop it is a sufficient rise in Treasury rates, such that the dollar gets support. But there are plenty of parties willing to buy Treasuries in order to keep rates low (and the carry trade operational), which perfectly suits our gummint’s desire to borrow and spend its way to prosperity.
Granted, there is an unhappy ending to this tale, but it lies quite a way down the road from here, and well past that famous “signpost in the road up ahead”.
I repeat — next stop, S&P 1200.
August 4th, 2009 at 11:48 pm
Andy, tomorrow you will wake up to a new world..
Karen, is that a prediction or a zen West Coast post-spin class saying of some sort?
August 4th, 2009 at 11:53 pm
Spin class with Hercules? We need a Southern California interpreter here….
Aside:
I completely understand what you’re suggesting in re: dollar v. assets….When “everyone” knows something, that’s normally the time the relationship breaks down….that’s sort of my M.O. of trading….
This is why I’m trying to ignore the DX for now in re: what I’m seeing with the indexes….
August 4th, 2009 at 11:54 pm
So it’s cash and carry all over again… We’re no longer using earnings metrics to value equities….? It’s the new valuations paradigm. I guess that this means that the dollar is going to go to zero….. WAIT…! The dollar can’t go to zero, can it…..? It can’t even go near zero, it’s physically impossible….. But it sure will try to……
So what should we be looking for PE/wise basis S&P 500……? 1005.65 x e….?
Yes, I agree with any theory that suggests temporary insanity, however, it’s only temporary.
I’m too fond of my head to stick my neck out like that. One bad roll of the dice and it’s all over baby.
Mars to Earth….. Are you there Earth….?
Best regards,
Econolicious
August 5th, 2009 at 12:00 am
Andy T :
“..When “everyone” knows something, that’s normally the time the relationship breaks down….that’s sort of my M.O. of trading….”
Rule #1. Once a trend is established, it will change…..
Rule #2. No market collapses unless you are long…..
Ciao
August 5th, 2009 at 12:17 am
One can draw a (poor) analogy between a carry trade and mining the equity in one’s home via a HEL.
Seems somehow appropriate, given the recent history …
August 5th, 2009 at 12:21 am
@contrabandista13
“I guess that this means that the dollar is going to go to zero”
Well…let’s see…Has the YEN gone to zero yet?
That’s, perhaps, a starter kit for the long journey we might be embarking on VIS-A-VIS this thread…
August 5th, 2009 at 12:23 am
I’ve spent a lot of time looking at this…..
I call it the Uni-trade –
It’s a laughingly simple wealth siphon…..
I won’t be publishing it, but will email it to anyone who wants it.
mchughfinancial(at)gmail(dot)com
August 5th, 2009 at 12:26 am
People…until a different system of global exchange is agreed upon and established (easier said than done)…
This will continue to operate as a sloppy “slosh bucket” of FOREX designed to…
- make the Fed chairmen look competent (and keep their payroll checks rolling in)
- put out the fir, or crisis, of the moment…
…and of course, GS would have it no other way…
August 5th, 2009 at 2:14 am
[...] also the notion that a weak dollar is driving commodity prices (again, from Ritholtz). There’s been a lot of fanfare about China’s stockpiles, since metals are more tangible [...]
August 5th, 2009 at 5:47 am
Had a conversation about the dollar driving equities higher today and then a comment in MSM about the dollar carry trade from Art Cashin
Discussed briefly were these points:
Aug 1971 dollar devaluation and Dec 1971 Smithsonian Agreement to craft a free-floating currency exchange helped fuel demand for exports that translated to a 35% increase in the Dow fourteen months later in Jan 1973
The dollar has been leading change in trends in the SP500 since Nov 19 2009. See chart below. Nov 19 2009 high in the dollar preceded the SP500 2008
By 2 days. The March 4 2009 yr high in the dollar preceded the March 6 2009 low in the SP500. The June 3rd low in the dollar preceded the Jun 6 high in the SP500 by 3 days.
As most of you know, I am expecting some sort of cresting or momentum high in the stock market around the Aug 7 NFP date. As it stands right now, keep an eye on the dollar as a leading indicator for the stock market. If the dollar does not continue lower, do not count on the stock market continuing higher by more than 2-3 days. The stock market may just end up choking on the green shoots they have been inhaling these paste several months between the Aug 7 NFP and the Aug 13 retail sales report for July. (We have to keep an eye on the July cash for clunkers program driving up headline retail sales on Aug 13). So, roughly a short term a double topping between Aug 7-13 could unfold. At the least, downside risks will begin to outweigh upside risks beyond Aug 7-13.
Art Cashin commented today that there is speculation among brokers of a “dollar carry trade” evolving. Like “duh.” This is bound to happen when the Fed leads the race to zero rates in Dec 08 and QE in March 09. My point is the brokers are stating the obvious, and now that it is in the news, the “carry trade” probably won’t work so well over the near term.
August 5th, 2009 at 7:31 am
[...] Sean Brodrick on August 5, 2009 Via The Big Picture, Art Cashin talks about something that a bunch of us have been talking about for months – the [...]
August 5th, 2009 at 7:37 am
challenger job cuts 97,000…so much for forecasting..
August 5th, 2009 at 8:04 am
Last year while things were still falling, I remember predicting a dollar carry trade as one of the economic repair mechanisms to be used to inflate a recovery. I was also being a little cynical and didn’t really expect to see a full blown one. Just real loose money that the Fed would hope would reignite some kind of asset inflation. I also didn’t think it would work and, really, nobody in government would be idiotic enough to actually print that much money for such negative purposes.
Looks like me, being at my most cynical and sarcastic worst, didn’t go far enough. Of course there’s a carry trade in dollars. Oil is extremely elastic with respect to the value of the dollar. Thus, speculators are using the cheap dollars to pump up the price of oil. Its a two-fer. We don’t even need to talk about the Fed using the stock market as a tool to manage interest rates and to pacify a population that is financially illiterate.
Secrecy about it doesn’t matter because the Fed will never admit to it. This is economic policy. It’s just another reason why the Fed doesn’t want to be audited. Just think. If the Democratic Party gets control of the Fed via an efficient one stop regulatory authority ( HA HA), and spending without taxation goes ballistic, we may look back nostalgically at Republicans and their quaint little need to take over the courts, force a hateful and intolerant Jesus down everyone’s throat, and start unending wars everywhere. Those were the good old days.
Replacing the Republican ideal lifestyle will be massive asset inflation, a worthless currency, and joblessness since nobody will be spending on anything other than necessities. But wait, there’s more. America will have massive debts that will still need to be repaid. Maybe Alaska will be sold to China in lieu of some of what we owe it. Face it. It’s an inevitable and logical conclusion to the wastefulness and corruption of today. America will be repossessed by it’s creditors. On a large scale. We will be renters in our own country.
I’m sticking with this prediction since I blew the last one so badly by thinking it would never happen.
August 5th, 2009 at 8:08 am
Planned job cuts announced by U.S. employers totaled 97,373 last month, up 31 percent from June when it had hit a 15-month low, according to a report released on Wednesday by global outplacement consultancy Challenger, Gray & Christmas, Inc.
CNBC needs to get to work and find the pearls in this swill, find some comparison to make 97K look good
Challenger also said they expected job losses over 100K in 4 Q
August 5th, 2009 at 8:12 am
Job losses keep climbing, US disposable income keeps declining. How long can China keep a happy face with US consumer on strike?The China market is NASDAQ on steroids, they’re gonna blow up and Kudlow and maria will be stuttering worse than ever.
August 5th, 2009 at 8:13 am
http://online.barrons.com/public/page/barrons_econoday.html
Highlights
In a reminder that employment lags economic recovery, Challenger’s July count of layoff announcements jumped to 97,373 vs. 74,393 in June. Trouble is centered squarely in transportation where factory shutdowns and reopenings in the auto sector have been skewing jobless claims badly for the last month. Announcements don’t correlate immediately to actual layoffs but today’s report is not a plus for Friday’s monthly jobs report. ADP’s count, which aims directly at monthly changes in payrolls, will be posted at 8:15 ET.
August 5th, 2009 at 8:14 am
jc:
I follow the numbers just as you do…and I still think there is plenty of trouble ahead…
August 5th, 2009 at 8:16 am
The american peso is an answered prayer as long as the Chinese and Japs keep lending too us while our weak dollar policy crushes their export driven economies.
August 5th, 2009 at 8:17 am
ADP numbers worse than expected also…we may make the U3 10% by September…
August 5th, 2009 at 8:18 am
jc Says:
August 5th, 2009 at 8:08 am
CNBC needs to get to work and find the pearls in this swill, find some comparison to make 97K look good
reply:
———-
That’s a gimme. Next time as a hard one.
“News Flash: ONLY 97,000 jobs forecast to vanish. Over 500,000 went away last month. This is amazing news and bullish for the Dow. Wow. This is less than normal monthly friction in boom times. Huzzah. Happy Days Are Here Again!!!!! Dennis Kneale was right. Isn’t He Amazing!!!” Fade to parade music.
August 5th, 2009 at 8:21 am
The dollar carry trade will work until it doesn’t. Like much else that’s happened, some shock somewhere starts the snowball rolling, the overleveraged traders start running for the exits and asset prices drop like a rock. Who knows exactly where it will come from? The Baltics, Brazil, China, Australia, or US. Problem is, no one knows when.
Chinese can’t be happy with the situation as their much-vaunted hoard now buys less oil and other commodities.
Also, they have been keeping the Yuan tied to the dollar for awhile, so European exports are going to get killed.
August 5th, 2009 at 8:23 am
ADP better than expected. Rally.
Zero Hedge said it best this morning:
GM chapter 11 = PRICED IN
125K+ jobs lost from GM chapter 11 = PRICED IN
unemployment @ 9% = BETTER THAN EXPECTED
unemployment @ 10% = DOW SOARS
unemployment @ 11% = GREEN SHOOT RALLY
unemployment @ 12% = ALREADY FACTORED IN
unemployment = 35% = DOW DROPS 100 POINTS
housing price =1% = RECESSION ENDING
housing collapses = GREEN SHOOT
Housing falls 20% = STABILIZATION
Government spends 1 trillion of OUR dollars = STIMULUS
North Korea fires nuke = RALLY
Israel bombs Iran = 30 MINUTE END OF DAY RALLY
world explodes = ASIA RALLIES
PMI crashes = HUGE RALLY
No jobs are created = RECESSION ALMOST OVER
U.S. debt overwhelming = TOO BUSY RALLYING TO CARE
Consumer stops spending = RETAIL RALLY
Banks are insolvent = SIGNS OF STABILIZATION
American auto industry BK = GOOD THING
Banks pass scam stress tests = HUUUUUUUUGE RALLY
Banks “only need 75 billion = OUT OF THE WOODS
Banks pass a real stress test = NEVER WOULD HAPPEN
Banks pay back tarp = LATE DAY SURGE
Banks can’t pay back TARP = EARLY MORNING SURGE
12% mortgage delinquency = GOOD FOR STOCKS
Hundreds of thousands of mortgages underwater = HOUSING BOTTOMED
Dollar rises = RALLY
Dollar crashes = RALLY
Inflation = BULL MARKET
Deflation = BULL MARKET CONTINUES
REFLATION = MASSIVE SHORT COVERING RALLY
Gold rises = STOCKS RALLY
Gold falls STOCKS RALLY BIG
Banks’ fake earnings = SIGNS OF STABILIZATION
CRE stabilizing= 1000 POINT RALLY
CRE CRASHING = STOCKS SHAKE IT OFF TO RALLY
CONSUMER INSOVENT = CONSUMER IS SPENDING
OIL @ 50 = BULL RALLY
OIL @ 60 = GREEN SHOOT
OIL @ 100 = IMPORTANT RECOVERY SIGN
OIL @ 20 = TAX BREAK
And the one we should all interpret correctly:
NO ONE IS BUYING STOCKS = BILLIONS ON THE SIDELINES
August 5th, 2009 at 8:28 am
Mike in Nola Says:
August 5th, 2009 at 8:23 am
ADP better than expected. Rally.
Zero Hedge said it best this morning:
reply:
————
Things I wish I wrote.
August 5th, 2009 at 8:36 am
Nice crash article on high frequency trades & low intrinsic volume
http://seekingalpha.com/article/153555-five-reasons-the-market-could-crash-this-fall?source=email
August 5th, 2009 at 8:37 am
http://www.cnbc.com/id/32295270
“Expected job cuts hit a 15-month low in June, but rebounded sharply in July, the first monthly increase since January, Challenger said. The 103,312 planned layoffs for July are 6 percent lower than in they year-ago period.
Total planned layoffs now stands at 994,048 for 2009, 72 percent higher than in the first seventh month of 2008.
“After June’s surprisingly low job-cut total, a July rebound was not entirely unexpected,” John A. Challenger, CEO of Challenger, Gray & Christmas, said in a press release. “While there are signs that the economy is stabilizing and the pace of layoffs slowing, we are still a long way from a full recovery. In fact, monthly job cuts are likely to return to levels in excess of 100,000 by the fourth quarter.”
August 5th, 2009 at 8:42 am
worse than expected is the new better than expected when compared to prior months
Automatic Data Processing, a payroll-processing firm, said private-sector employers cut 371,000 jobs in July. It was the smallest monthly total since last October.
Economists surveyed by Briefing.com had forecast a loss of 350,000 jobs last month.
August 5th, 2009 at 9:01 am
Sometimes I think those guys over at ZH must be on meth.
Endless energy it seems!
August 5th, 2009 at 9:06 am
@OT
Re: ZH…Yeah but it was funny as hell though wasn’t it? I found myself reading it out loud (using some dumb@ss CNBC reporter voice to get the full effect)…I kept cracking myself up!
August 5th, 2009 at 9:18 am
Mark Twain’s observation: “Ignorance more frequently begets confidence than does knowledge.”
I saw this elsewhere and thought it particularly apt to today’s markets.
August 5th, 2009 at 9:20 am
cvienne
Oh no doubt, very funny stuff. I’m just amazed at the volume of material they pump out. I wonder how many there really are behind the scenes there.
August 5th, 2009 at 9:24 am
New day! Hey, we might have to board the stocks only go up train.. what could be easier? a money tree for everyone : )
August 5th, 2009 at 9:29 am
@karen
No worries for me…that penny stock that I own a half million shares of is up 1000% in the past 3 days
…
August 5th, 2009 at 9:36 am
@karen
It’s really kind of screwed me up…
…because even though I skimmed some profits, I’m holding onto the rest (because I like the concept long term)…
But I have no idea if it’s [the stock] going to come cascading straight back down or not…So it messes with my overall trading account balance…I have to now calculate MINUS those paper profits, or else, one day I might find myself unwittingly on MARGIN…
weird
August 5th, 2009 at 9:41 am
Indeed karen. I stand in awe of the market’s inexorable climb, and greatly fear the forces and broken psychology behind it. We’ve got one screwed up world here, and it seems to be spinning faster and faster, the energy building up in unbalanced ways that will lead to a flying apart at some point.
That’s my feeling anyway. Maybe I’m just paranoid but it’s an eerie feeling with that juxtaposed against this notion of economic stabilization that has taken shape. Maybe it’s stable, but the immense forces are just canceling each other out right now, and if one gives way a bit, the other will move things very violently.
August 5th, 2009 at 9:48 am
This Rubber band (aka stock market) seems to be getting stretched every day. When it recoils you don’t want to be in the middle of it. A week ago I noted Dollar is the only reason why Oil/Commodities is going up. It applies to overall market as well.
August 5th, 2009 at 9:48 am
Buying $FAZ, $SRS and $DUG, shorting $COF for a trade. Today might be a down day.
August 5th, 2009 at 9:51 am
I’ve been out. Covered some time ago and I won’t stand in front of this insane rampaging monster, and won’t risk money long either. It’s clear that significant forces are at work here that I certainly don’ t understand. But know how broken the world economy is and how unbalanced things certainly are under the surfaces, I can’t help but think that when the dislocation happens again things will get violent.
August 5th, 2009 at 9:58 am
You mean…these “significant forces”
http://www.zerohedge.com/article/goldmans-42-100mm-trading-days-q2-absolute-unprecedented-record-just-two-days-trading-losses
I just vomited up my oatmeal
August 5th, 2009 at 10:08 am
Blows to refusal. Will the Japs & Chinese continue to buy US gummint debt while our defacto dollar devaluation undermines their export driven economies and their existing debt holdings diminish in value? Can China continue to stimulate their economy while funding our exploding gummint debt? They’ve warned us twice.
Anybody else think we’re headed to a very extreme reaction to all this, a blow out collapse in the Chinese stock market sending out a financial tsuami?
August 5th, 2009 at 10:09 am
ISM services worse than last month?? Is this going to be poopy data day?
….Apparently they just don’t make massive government stimuli like they used to…
August 5th, 2009 at 10:09 am
Yep, that’s some of it, no doubt, Mortimus.
And yet people keep feeding this beast their monthly allotment.
August 5th, 2009 at 10:15 am
Re ISM decline, nobody is buying any “things”, now we’re cutting out hair at home to stretch our budgets (those of us still blessed with hair)
August 5th, 2009 at 10:15 am
jc
And yet, there’s this:
http://www.reuters.com/article/ousiv/idUSTRE5740B620090805
No quick end to China’s fiscal stimulus
“China will stick to its loose fiscal policy for at least three years despite a growing budget deficit, a government economist said in comments published on Wednesday.”
Ah, they’ve learned from the masters of “fiscal stimulus”, haven’t they? The madness continues with no end in sight.
August 5th, 2009 at 10:16 am
Yeah, I guess that notion that we were going to service ourselves to prosperity is leaking at the seams, no?
August 5th, 2009 at 10:25 am
Troy,China is riding a tiger in terms of social unrest from an abrupt economic shutdown, all their single-industry cities with guest workers from the ag provinces making gizmos for export. Their stimulous has doubled their stock market, they’re trying to pump up their economy but the hot air has formed a different bubble, oyyyyyyyyyy. Major unintended consequences. As Confucius says “Let a thousand bubbles bloom”
August 5th, 2009 at 10:35 am
@karen
Wrong day to go long. If financials reverses today, we will see 2+% down day on indices today.
August 5th, 2009 at 10:50 am
Well. This is the sort of action you see when a rising wedge support line gets taken out. I would be surprised if the SP500 wasn’t trading 969 in the next few days….I mentioned yesterday, sold 1006 with a 1014 stop. With today’s reversal from 1007, I can now lower the stop loss point to 1008, making it a near riskless trade….
August 5th, 2009 at 10:54 am
manhattanguy, i was joking! went much shorter yesterday.. may not stay short though.. i hate having to second guess the money printing machine, but fundamentals matter not in this market.
August 5th, 2009 at 10:57 am
Well, just saw a long time salt mine regular this am who tells me she is moving to Las Vegas. Very interesting conversation…she has her house on the market here, and actually owns 3 houses…(er, owns is bank/she…you know…) a widow, and her son talked her into this. Has bought her house in LV, before she sold the one she lives in here…very unhappy with her realtor, has lowered her asking price 3x in the last 3 months, and so far, no serious offers…
I explained to her that LV has a >12% UE and that it will be some time before it recovers, if it does…
“But I got a steal on the home I bought in LV, you should see it!”
….ah, humanity…..back to work..
August 5th, 2009 at 11:07 am
@AndyT
Yeah, by the looks of it…it [969-972] could hit as early as tomorrow or Friday…
And why not? It would create a nice volatility range going into opex next week…
August 5th, 2009 at 11:10 am
@AndyT
Andy – What’s the Euro looking like?
August 5th, 2009 at 11:13 am
Am I the only one short oil here?
August 5th, 2009 at 11:16 am
I-Man, i am and suffering with it : (
August 5th, 2009 at 11:16 am
Hanlon had this one back in March when it could have been of some use: http://www.greenfaucet.com/intl/when-you-turn-bullish-look-overseas/11449
When this b.s. rally comes to an end it is going to be ugly. Same trades as last Fall? Long the dollar, short everything else? Why not?
August 5th, 2009 at 11:21 am
I-Man – re-opened my shorts today $DUG.
August 5th, 2009 at 11:28 am
I-Man. Oil is a bit spooky to me…I don’t have a good way of interpreting the price action, so I wouldn’t even know where my stop loss would be. Very basically it looks like a double top, so I guess I wouldn’t want to be holding shorts above 73.50. If I was long it, I wouldn’t want to see action below 69 bucks, so 69/73.50 looks to be the short term “twilight zone”….
Euro just continues to congest near the highs…it looks like it has maybe a little further to go higher….shorter term 143.15 (sep futures) is definitely the support…Tough to get bearish until it breaks below there….
August 5th, 2009 at 11:29 am
I am starting to think I should have closed SCO when USO bounced off of 37.10 (gap fill) earlier…
August 5th, 2009 at 11:37 am
I-Man
FWIW…I’m suffering a little with you there on oil too (as I have a short)…
I’m just not going to mess with it…It’s what they call a CORE holding now LOL
August 5th, 2009 at 11:38 am
@ Andy:
I know you wouldnt touch USO with a ten foot pole…
But I have my stop on SCO set for a USO move over 38.50. Probably works out to be about 15.35 stop on SCO.
I opened SCO on Monday.
August 5th, 2009 at 11:42 am
Always fascinates me to watch you guys talk stock. Seems like a love hate relationship you all have
August 5th, 2009 at 11:43 am
Links to today’s testimonies before the CFTC:
http://www.marketwatch.com/story/centaurus-arnold-calls-for-energy-trading-limits-2009-08-05
http://www.marketwatch.com/story/caps-on-energy-speculators-could-hit-etfs-2009-08-04
August 5th, 2009 at 11:43 am
@I-Man
See what happens when you start daydreaming about ISLAND REVERSALS
August 5th, 2009 at 11:44 am
What is the deal with the financials? Anyone have any insight?
It’s not every day that AIG goes up 25% (Oh wait, yes it is)
August 5th, 2009 at 11:45 am
@karen (11:43)
The CME seems to be taking it in stride…
August 5th, 2009 at 11:46 am
@Mortimus
Timmy wants to keep his job…
August 5th, 2009 at 11:47 am
Mortimus – all I know is that FAS has done nothing but gone up up and up – regardless of what the rest of the market seems to be doing
August 5th, 2009 at 11:50 am
@ Thor:
I think I am going to propose a new investment rule myself and just call it Bruce’s rule. I am all cash but bought 2k of bgu last week since I couldn’t get what I wanted on short term cd’s and had that much interest paid last week, so I thought I would see what happened.
Well, I think I may post on Bruce’s rule in the future to help all you old hands invest. Bruce’s rule would state: If Bruce is bored enough during a recessionary market that he put any money in a long position, it is a guaranteed top and a bonafide sell signal…
I may begin an investment letter, and make money calling tops in this way….
August 5th, 2009 at 11:51 am
I seem to recall some “expert” a while back saying that you would know we were topping when the strongest sector in this rally “Tech” pulled back while financials surged.
Does anyone else think this holds water?
@Thor – I was just admiring that chart. I don’t think it’s had one down day in the last month.
August 5th, 2009 at 11:54 am
If Andy’s broken wedge is correct and we make a move down to 969…The SPX “should” meet with some resistance here at 999…
August 5th, 2009 at 11:57 am
from chuck butler in the daily pfenning:
Ty Keough and I had a quick conversation yesterday about Bank Earnings that have been reported… I discussed how disgusted I was with all this yesterday, but left it at that. Ty decided to try and get me talking about this… I know I shouldn’t, but I must! These Big Banks that borrowed funds from the Gov’t, got to stop marking to market the securities/bonds that had gone bust, which means they then got to sell them to the Gov’t at inflated prices, then take the money they Gov’t gave them for the inflated securities/bonds and pay back the Gov’t! The funds also allowed the Big Banks to post those earnings that the markets got so wound up about! Now… How’s that for getting your cake and eating it too!
I shake my head in disgust, folks… But hey! We’ve got the cartel folks over at the Fed taking care of all of this for us… Isn’t that nice? NOT! We had all better be careful or before we know it, the Fed Heads will be doing an Oliver North on us!
August 5th, 2009 at 12:14 pm
Thanks for posting the links karen…
I lean more and more towards futures everyday, because we can avoid these issues with the ETF’s. The ETF’s have been great to me in terms of learning… but I still feel that if I’m going to trade commodities, its “cleaner” to trade in the actual futes as opposed to the funds. I’m sure theres a range of opinions on this.
As an aside, I’ve heard long time pit guys like Gartman espouse the greatness of the funds, but for everyone of him, I’ve heard other long timers swear against ETFs.
UNG is a prime example of fund distortion when compared to actual NG contracts.
I think the funds do as good a job as they can for what they are trying to do… but they cant mirror the underlying like many retail folks think that they do. A lot of assumptions with “how” these things trade.
I’ll be the first to admit I trade alot of these things and I cant tell you crap about what is on the books of SCO, or DTO, for example. But I just take them for quick rides and never plan on holding them for more than a few days.
I guess I see the commodity and currency ETFs as a necessary evil… if you want to trade macro, but dont have a futures account.
August 5th, 2009 at 12:19 pm
AIG now up 40%
August 5th, 2009 at 12:21 pm
999…
we’ll see if this IS resistance
August 5th, 2009 at 12:27 pm
If this holds pattern now…
Good chance of 969 at 10:30AM Friday…
August 5th, 2009 at 12:34 pm
cvienne Says:
August 5th, 2009 at 12:27 pm
If this holds pattern now…
Good chance of 969 at 10:30AM Friday…
reply:
———
It won’t. The 10 year was rising and approaching a top. With momentum it might have broken into the 4%. The market rise is being stalled so dampen the 10 year. This is about the 20th time this pattern has appeared and about the 20th time the shorts appeared to fall for it. A squeeze will follow in a couple of days. New highs will follow and the 10 year will timidly rise again. Then this pattern will repeat again in a weeks or so and the shorts will fall for it a 21st time.
I know, this time the short system will work. The charts speaketh so.
August 5th, 2009 at 12:37 pm
@dead hobo may be right. That’s why I am only trading, never keeping longs or shorts for a long ride. This will be my strategy until after labor day.
August 5th, 2009 at 12:42 pm
@dh
I’ve got a penny stock up 1000% in the past 3 days so I’m feelin’ “saucy”
August 5th, 2009 at 12:49 pm
@ hobo:
Uh-oh… we got the Dead Hobo making trading calls with authority… and he’s probably right.
I salute you… with a “Lost Sailor” from May 16th, 1980… (Go to Nassau, disc 2)
http://en.wikipedia.org/wiki/Go_to_Nassau
“Being free dont come for free.”
August 5th, 2009 at 12:51 pm
In fact, I would put the following idea into the the realm of “A year ago this would have sounded really nutty but now it sounds almost reasonable:”
The fed is financing the market pump to pacify those who lost a fortune in their 401k and brokerage accounts, with the possibility of stimulating consumption and with hope that the boost becomes self sustaining. They regard it as stabilizing the markets. GS and probably other HFT traders are working as their agents in this regard.
These traders are allowed to keep their profits providing their market pump is halted whenever the 10 year or other UST securities approach a given level that is considered too high to stimulate housing. Whenever rates get “too high”, they are expected to let the market go down to make UST debt look like a safe haven, dampening rates in the process.
Shorts see this as the market finally coming to its senses and sell into it. the HFT crowd thanks the shorts appropriately a couple of days later after the 10 year drops enough by squeezing them and sending the stock markets onto another leg on the fed financed pump.
August 5th, 2009 at 12:58 pm
DH-
your idea is not new my friend- many here have kicked around that very idea
August 5th, 2009 at 1:00 pm
Hobo – I don’t think that sounds nutty at all. What I think will be curious to see is what happens if and when the market keeps going up up up. Will people collectively decide that since they’re gained back much of their 401K losses from last year that now would be a good time to shit that money out of equities? Or will people just get greedy again hoping to get rich of the next bubble . . . .
August 5th, 2009 at 1:01 pm
shift the money, sorry, n0t shit
August 5th, 2009 at 1:03 pm
@ Thor:
That money will be “shit” out of equity.
August 5th, 2009 at 1:04 pm
call me ahab Says:
August 5th, 2009 at 12:58 pm
DH-
your idea is not new my friend- many here have kicked around that very idea
reply:
———
I know. It’s just fun to refine it and tighten it up periodically. I’ve been one of the proponents ad nauseum on this. So far, nothing reasonable has been proffered to refute it. Green shoots theory hasn’t worked. Neither has ‘better than expected’ theory. Earnings quality sucks and spending quality is only going to get worse. A pump is the only rational explanation at this point and the Fed is the only one with the cash to sustain one for this long.
August 5th, 2009 at 1:06 pm
http://www.cnbc.com/id/32299360
Treasury Plans to Sell Record $75 Billion in Debt Next Week
“Treasury also said the government will hit the current debt limit of $12.1 trillion in the fourth quarter.”
OK….all those who said that government debt/GDP wouldn’t make it to 100% this year, as B in T said (!!!!)…kindly take yourselves out behind the woodshed and give the appropriate punishment…
…massive government stimulus has massive repercussions….by Dec 31, 2009 we will make it….1/1….
——————————————————————————–
August 5th, 2009 at 1:08 pm
Thor Says:
August 5th, 2009 at 1:00 pm
Will people collectively decide that since they’re gained back much of their 401K losses from last year that now would be a good time to shit that money out of equities? Or will people just get greedy again hoping to get rich of the next bubble . . . .
reply:
————
Probable neither. Buy and holders who have ridden it out probably think it will keep going up, but are also too afraid for their jobs to spend any. They’ll probably just sit still. Most won’t do anything and will watch it go down again. Most others don’t have enough cash to put in, so only the day traders will get killed when it finally goes down.
August 5th, 2009 at 1:11 pm
@Bruce
Those clever chaps!
Do a huge auction while Congress is OUT of session (and not swiping the VISA card)…
August 5th, 2009 at 1:16 pm
dh-
well- initially i had an uneasy feeling- that maybe the fix was in- but now- I know the Fed won’t come out and say so- but it seems pretty certain that there is a concerted effort to prop up equities- an agreement between the market makers and the Fed/Treasury-
Karen was one who didn’t buy into the “conspiracy theory” but how else do you explain the market action over the last few months-
and i know the Fed will do everything in its power to not be audited- but that is what should happen- so we know what is going on- i wonder why that can’t get traction-
taking a short position in the environment is very risky indeed- becasue you are taking on the USG and the ibanks at the same time
August 5th, 2009 at 1:17 pm
In fact, I wouldn’t be surprised to find out that those HFT traders who are working as agents of the Fed with respect to the pump put a lot of pump profits into UST debt as a condition of their work. This works as a store of value and assists in lowering rates.
August 5th, 2009 at 1:19 pm
@cvienne:
We had this discussion several months ago now…the Obama supporters of the massive stimulus would quote old figures that the gov. debt/gdp was only about 60% of the gdp and would never reach 100% this year…being an old figures guy, every time I put a pencil to this, the numbers looked awful.
Well now even treasury admits to 12.1 T by 4th quarter and our economy is 13-13.5 T tops…it certainly appeared to me that we’d make it, and it still does…
What is even more upsetting is where does our national debt go next year, and will the Chinese still convince themselves that treasuries are a good idea in 2010? My bet today, (and I still think I understand most of the reasoning to date) is that they are leaving the treasury market…
August 5th, 2009 at 1:20 pm
AIG now up 46%…
August 5th, 2009 at 1:25 pm
Bruce – I don’t think China has much choice in the matter – their biggest concern is a rising currency which is going to hit them extremely hard in terms of exports. Without exports China is dead, period – I don’t believe for a second that their consumer class is going to suddenly change spending/saving behavior that is rooted very deeply in their culture. China, like our own government, can’t stimulate their own economy indefinitely.
August 5th, 2009 at 1:26 pm
Bruce N Tennessee Says:
August 5th, 2009 at 1:19 pm
What is even more upsetting is where does our national debt go next year, and will the Chinese still convince themselves that treasuries are a good idea in 2010? My bet today, (and I still think I understand most of the reasoning to date) is that they are leaving the treasury market…
reply:
———
You haven’t seen anything yet. When the Chinese debt / real estate bubble explodes, they will need to raise great mountains of cash. They have a lot of UST debt available to sell. No Fed / iBank conspiracy – pump can compete with that effect. Rates will go mid double digit.
Now that would be the mother of all naked CDS opportunities if someone could figure out how to structure it. GS, do you have a piece of this yet?
August 5th, 2009 at 1:28 pm
Yahoo Finance: Mark Dow on Dollar
http://finance.yahoo.com/tech-ticker/article/296025/Good-News!-The-Dollar-Is-Falling?
August 5th, 2009 at 1:29 pm
that AIG shares were even allowed to trade at all staggers me- if not for the resources of the USG-
AIG= ZERO-
benefits the stupid shareholders and bondholders of the company- when- they invested in a company that should be BK-
AIG reports on Friday- so I guess everyone is wetting themselves ahead of time- unfucking believable- my guess is that advance word is making the rounds to all the lucky Wall Street shills “in the know”
August 5th, 2009 at 1:31 pm
DH (or anyone else who knows) Can the Chinese do that? If they buy debt from the US, they can sell it to anyone else they want to? They’re not obligated to hold it to maturity? If they do have to sell that debt how does that work? If the original interest rate was say 3.0% and they have to sell the debt at 5% – who pays the 2% difference? The US Government or China?
August 5th, 2009 at 1:33 pm
AIG up 60% now
August 5th, 2009 at 1:35 pm
Thor-
you can bonds/notes at any time- the price you get determines the ultimate yield to maturity
August 5th, 2009 at 1:36 pm
Thor Says:
August 5th, 2009 at 1:31 pm
DH (or anyone else who knows) Can the Chinese do that? If they buy debt from the US, they can sell it to anyone else they want to? They’re not obligated to hold it to maturity? If they do have to sell that debt how does that work? If the original interest rate was say 3.0% and they have to sell the debt at 5% – who pays the 2% difference? The US Government or China?
reply:
——–
There’s an active secondary market for debt that has already been issued. Bonds are priced as the sum of the present value of the cash stream generated plus the present value of the principal, plus accrued interest. It’s a standard and old formula. UST debt is considered to be the highest quality, believe it or not.
August 5th, 2009 at 1:38 pm
correction to previous post-
“you can sell” bonds/notes at any time
August 5th, 2009 at 1:38 pm
Maybe AIG is just the HFT way of popping that last bottle of champagne before the lights go on?
I can dream
August 5th, 2009 at 1:38 pm
@Thor- what do you mean “can they do that”? Why would they not be able to sell their holdings to anyone else? If they sell at a higher interest rate, the coupon is the same, but price is lower, hence a higher coupon. They take a loss.
This seems pretty basic, but I don’t know if that is what you mean.
August 5th, 2009 at 1:41 pm
ndmaster-
Thor’s background is not in finance or economics- he is just trying to understand
August 5th, 2009 at 1:41 pm
How would you like to be Maria Bartiromo or someone who has to do a RECAP on the Wall Street trading today and explain to people why AIG was up 60%????
with a straight face…
August 5th, 2009 at 1:43 pm
65% now
August 5th, 2009 at 1:44 pm
Ahab – thanks buddy!
learned something new today!
August 5th, 2009 at 1:44 pm
AIG will be back in the DOW by the end of the day…
August 5th, 2009 at 1:44 pm
70%…
August 5th, 2009 at 1:46 pm
AIG @ 5x normal volume so far today. Pavlov’s computers are well past the ass sniffing stage. Maybe somebody knows something. But, since these are mostly just computers, I suspect Pavlov’s computers are having the time of their life against someone’s leg they have been fooled into thinking is a fine date.
August 5th, 2009 at 1:48 pm
Thor: The other posters are correct…and rates should continue to go up with either option…if the Chinese stop buying OR if they stop buying and start actively selling.
I have been in short term CD’s for almost two full years now, when my longer term cd’s got called….and so this is the sort of idea I am used to…but any long term paper the Chinese hold now is probably going to lose value as rates go up, and maybe a double whammy if the value of the dollar continues to go down….
This is why, with these massive deficits, that nationalized health care, clunker trade ins, subsidizing mortgages, heck…anything from the laundry list of wants by the government just exacerbates this mess..once we’ve gotten started down this road it is hard to stop…
…Consider this…think all the way back to last August 5th…now if someone had told you August 5th, 2008 that uncle Sam was going to throw in enough taxpayer money (DEBT) to make new cars as cheap as a one year old trade-in, you’d have said they were F.O.S. …..but now increasing the CARS program…well, hell, just a few more billion…
It looks like government debt is the little engine that could…
August 5th, 2009 at 1:48 pm
AIG seems like met the resistance at the 50dma line.
August 5th, 2009 at 1:51 pm
I don’t know about the rest of you, but I’m going to go buy me some Lehman Brothers before that sucka gets squeezed!!!
August 5th, 2009 at 1:53 pm
While you are at it, buy some Enron and Worldcomm if they are still trading in pinksheets
August 5th, 2009 at 1:54 pm
AIG, excuse me, 6X average volume at this time.. Maria will just say ‘green shoot’ or something just as air headed. Maybe ‘woo woo’ also.
August 5th, 2009 at 1:55 pm
hope I’m wrong about the socioeconomic path ahead, but I hope I’m right about this trade.
Still short spy (100.38) from yesterday. Glad it couldn’t stay above 100 for any length of time yet today. I don’t have to struggle with moving my stops as long as new highs aren’t breeched.
I’m a little nervous, but I really feel the tape is failing. My biggest worry is my stop gets hit before the swoosh down. (stop 101.28)
August 5th, 2009 at 1:55 pm
See…Whenever Larry Summers gets near anything, all equity market compasses start whirling around directionless…
August 5th, 2009 at 1:55 pm
Anyone know what the ticker symbol is for “Crazy Eddie’s?”
http://www.youtube.com/watch?v=4yYGoO5imyY
August 5th, 2009 at 1:56 pm
B in T-
good point about the effect of USG incentives on used cars- the value of that one or two year old car would have to down to compete with new cars with the incentive-
funny how economics work
August 5th, 2009 at 1:56 pm
OT: I’ve been using IQCharts for charting but I am switching over to Investor/RT because they have the TLB indicator. Plus it can get fundamental data if you want it. It also has an insane amount of technical indicators that can be configured to your personal taste. To those who use charts, what charting software do you use or prefer?
August 5th, 2009 at 1:58 pm
@hopeImwrong
There seems to be no way of playing this tape intraday…
It’s like you have to place your bets at the close and roll the dice…
August 5th, 2009 at 2:00 pm
@cvienne – I’m looking for a swing trade here. I don’t have the time or tools for intra-day trading.
August 5th, 2009 at 2:01 pm
ok- my typing skill officially suck-
my 1: 56 post should read- “would have to come down to compete with new cars . . .”
August 5th, 2009 at 2:01 pm
I saw AIG is a short above 22 assuming you can borrow shorts.
August 5th, 2009 at 2:01 pm
zh says AIG is a short squeeze. Oh well, the system will work for sure next time.
August 5th, 2009 at 2:02 pm
correction saw=say
August 5th, 2009 at 2:04 pm
Fannie and Freddie are only up 30%…pathetic
August 5th, 2009 at 2:10 pm
Or use AIG puts.
August 5th, 2009 at 2:11 pm
Wasn’t it around the time that you started seeing 30+% moves in the things like Bear – Lehman – Fannie & Freddie last year right b4 the shit hit the fan?
August 5th, 2009 at 2:12 pm
[...] the US dollar carry trade now ruling the markets? (Big Picture also [...]
August 5th, 2009 at 2:12 pm
Given my spy short position, the financials getting pumped today is good and bad:
Good – possible blow off top before going down on “good” news.
Good – S&P down with XLF up. Market not following financials.
Bad – shorts are too aggressive (about accumulating positions) yet fearful (tight stops only) to allow the market to correct much here.
August 5th, 2009 at 2:14 pm
@ Cvienne
Yup, September 19th or so…right before the nosedive (Freddie quadrupled)
August 5th, 2009 at 2:14 pm
In options…
The August 25 calls on AIG are up 8,566%…but down off their highs…LOL
August 5th, 2009 at 2:16 pm
@ Ra:
Thompson One at work.
stockcharts.com at play.
One of these days I am going to hunker down and spring for the subscription at stockcharts, so I finally get my hands on 60min charts and all those fancy indicators, the ability to save a crapload of annotated charts, etc.
August 5th, 2009 at 2:20 pm
amenRa-
AmenRa-
I use etrade’s trading platforms- they have a couple (not direct access obviously)- outside of EMA’s the only indicators I look at are MACD and the fast stochastic (not that seeing an oversold postion means anything anymore)
however- I don’t consider myself much of a trader-
just want this beatch to go down- substantially- so i can go long on a few stocks
August 5th, 2009 at 2:23 pm
amenRa- the name so nice I used it twice-
I stole that from Pineapple Express by the way
August 5th, 2009 at 2:24 pm
Since July 10th, there have not been more than two successive DOWN days…
And that only happened once…All the rest were ONE DAY retreats…
August 5th, 2009 at 2:25 pm
Another day, another intraday wedge…
These things keep following me around. One in USO, one in SPY.
August 5th, 2009 at 2:30 pm
…givin you a “wedgie” I-Man?
August 5th, 2009 at 2:36 pm
well…in re: oil…if you want to believe in hangman dojis, that’s the spirit of a hanging man….
of course you need a good down day to confirm it, otherwise it’ll just be a “failure to selloff.”
August 5th, 2009 at 2:40 pm
@Andy
That “hanging man”…is I-Man, who is hanging himself on that Island Reversal…
jk – I-Man
August 5th, 2009 at 2:41 pm
@I-Man
I had been using stockcharts.com for the TLB option. You can use IRT’s end of day version and get any time frame (costs less).
@cvienne
IRT has versions that can access many different data feeds.
***and no I don’t work for them. I needed a change and spent about a month looking over different software.
August 5th, 2009 at 2:42 pm
Can’t keep a good market down. Arrgghh!!!
August 5th, 2009 at 2:44 pm
Anyone else have a funky FXI print?
I have an intraday low of 39.06… which only shows up on the daily chart.
Doesnt show up on the 15 or 5 min charts.
Interesting level, as thats just above the 50 d EMA. (at 38.80)
August 5th, 2009 at 2:44 pm
@AmenRa
cool…I haven’t used anything b4 that had a TLB function…I’d like to work that concept in with the other things I look at to see how the landscape changes (if, indeed, it does)…
August 5th, 2009 at 2:44 pm
Fannie/Freddie are up because Bush buddy Lockhart is finally leaving. I remember him lying thru his teeth insisting they were adequately capitalized. I don’t know why all these people say the gummint lies to us and suspect BB and Turbo Timmy are pumping the market – for our own good with GS carrying out their noble task!
August 5th, 2009 at 2:45 pm
@I-Man
Re: FXI…yeah…around 11:15AM…39.06
August 5th, 2009 at 2:45 pm
ten year at 3.72…there are folks noticing how fast the debt is going up with continued declines in tax revenues…not just us old malcontents….
Soon there will be a pony…I would love to know how much value the Chinese are losing here on a monthly basis as they try to mantain their status quo by buying our debt…
I wonder if the little red book has anything about global meltdowns in it…..?
August 5th, 2009 at 2:46 pm
Funny CV…
But I didnt leave much rope to hang myself… this time.
August 5th, 2009 at 2:49 pm
This ripped off from Minyanville:
“For those wondering why the big rip in the big banks and PMI players, it is because of the comments Radian Group made on their conference call this morning. The company said it saw a significant decrease in early default activity in ‘09 vintage mortgage business because of improved underwriting. Improve underwriting…imagine that! It also said its ‘08 book is showing a turn (a.k.a. not having to pay out as much insurance for foreclosures). This shouldn’t be too much of a surprise because its worst exposure was in ‘05 thru early ‘08 subprime. That has already been flushed down the toilet. Hence their benefiting from improved underwriting.
The extrapolation by the market is that the banks and other mortgage players with big mortgage exposure are not going to suffer as much in losses as have been modeled in. Given that back in ‘07 Radian and its brethren had perhaps the most whistling past the graveyard, rose colored glasses wearing, Kool-Aid drinking attitude of perhaps any group of companies I have ever seen…I can’t help but express a little skepticism about their comments translating into blue skies for housing loss mitigation. Maybe they have finally found religion…who knows. One thing I do know is that I would not take the other side of that trade either. There was a lost of negative built into the PMI names and they can now likely raise capital to survive and fight another day.
This is also why AIG is having a McRipper rally today. They have exposure in the PMI space and obviously to mortgages in general.”
Me: Seems like its got to be another typical overreaction combined with a short squeeze in this space. It’ll be interesting to see where things settle out over the next couple of days as the reality sets back in (OK, maybe a little bit).
August 5th, 2009 at 2:50 pm
IT’S BACK. RALLY OFF THE LOWS, CNBC!
August 5th, 2009 at 2:50 pm
@I-Man
Talk about “hanging” onesself…Anyone staying in that toad SRS?
I was looking at SPG as a reverse benchmark for that, and it looks like SPG is doing a moonshot…It’s almost at a 50% retrace back from the lows to the all time high…
August 5th, 2009 at 2:54 pm
They are selling the 5, 10 and 30 year like crazy. Which treasury did the NYFRB buy 7.2BB of earlier today?
August 5th, 2009 at 2:55 pm
Mao: Let 1000 stimuli bloom; let 1 million clunkers return to the good earth
August 5th, 2009 at 2:56 pm
this is just a replay of 2007.. the market trusting faulty analysis
onlooker, thanks for posting that! i should have checked there..
well, my sso target was achieved 31 plus but i sold in the 29s..
August 5th, 2009 at 3:01 pm
Holy crap. That’s why I’m not short anymore. No friggen way. Show me some real cracks and I’ll consider it.
August 5th, 2009 at 3:01 pm
If the indexes close positive for the day then I’m exiting almost all short positions. It is obvious that they have pleasure of squeezing/screwing shorts. Death by a thousand cuts (or pumps).
August 5th, 2009 at 3:01 pm
10 year yield going up. Market going up. GS is playing with fire. The market will be interesting if the 10 year rate passes 4%. The Fed will have to do some fancy dancing to keep housing affordable. Will the Fed support the pump afterward if the HFT crowd ignore payback for the pump? Uncle Stupid is on thin ice. Maybe Tim will curse at them for profiteering. That’ll show ‘em.
August 5th, 2009 at 3:02 pm
Heavens to betsy CV… NO.
I am happier than a pig in shit that I dont own SRS anymore. I bailed at 16. It wasnt a fun ride… some at 24, some at 18.
August 5th, 2009 at 3:18 pm
hard to believe that SKF was over $300 at one point- pretty soon it will be a penny stock and cvienne will be all over it
August 5th, 2009 at 3:20 pm
Ahab – won’t the just do a reverse split like they did with FAZ/FAS? I see that FAZ is well on it’s way back down to 4 bucks a share
August 5th, 2009 at 3:21 pm
so no one thinks it’s “safe” to buy FAZ here?
August 5th, 2009 at 3:23 pm
@ahab
Hey man…that penny stock I was talking about…I’ve held onto that dude for 3 years now…I just kept buying it fo some crazy reason (actually, I like the concept)…
I thought, this is going to ZERO…or It’ll be nice someday…
Finally, up 1000% off my cost basis in 3 days! WTF?
August 5th, 2009 at 3:25 pm
thor-
I was making an observation and getting a bit of a laugh at cvienne’s expense since he won’t stop talking about his 1000% return on a penny stock he bought recently
August 5th, 2009 at 3:25 pm
Karen – I dunno, someone else mentioned that they bought some today, I looked at the price at the time and I think it was down 4% – it’s now down 9%
August 5th, 2009 at 3:26 pm
@ahab
Come on ahab…It’s the first time I’ve ever won with a lottery ticket…
I declare…A FEAST!
August 5th, 2009 at 3:27 pm
SPX back in positive territory
August 5th, 2009 at 3:27 pm
correction-
did not realize that it was a buy and hold- LOL-
good for you cvienne- may we all get 1000% returns!
August 5th, 2009 at 3:30 pm
10 year now near 3.77…
As Robert Palmer once said about equities….”Simply Irresistable”
August 5th, 2009 at 3:31 pm
@ Ra-
Far be it from I and I to tell another brother how to trade… its just you sounded a little “tilt” at 3:01pm… and I hate to see someone tilting.
We may indeed close positive on the SPX today.
But consider this:
The bearish rising wedge pattern that starts on 7/1 for the upper boundary, and lower boundary, which I have drawn starting at 7/10… its getting pretty tight in that wedge to be closing a short SPX position, IMO.
It sure looks to me that that lower boundary was penetrated today by today’s long candle shadow… definitely not something to be taken lightly.
But that said, you know as well as I do that rising wedges can rise for awhile… but this one’s getting pretty long in the tooth.
Just thought I’d throw out some insight. Take it for what its worth- free advice.
August 5th, 2009 at 3:33 pm
http://finance.yahoo.com/news/Signs-show-slow-start-on-apf-3169866984.html?x=0&sec=topStories&pos=2&asset=&ccode=
Signs show slow start on back-to-school sales
” By the end of July, sales of items like jeans and other back-to-school merchandise usually have started kicking in. But this year, it won’t be until the third or fourth week of August before stores have a sense of the best sellers because shoppers appear to be delaying their purchases, Morris said, even though back-to-school marketing began in mid-July. That will make it difficult for retailers to reorder popular items.
Craig R. Johnson, president of Customer Growth Partners, a retail consultancy, described the season so far as “late and lousy.” He added, “Shoppers are still holding back.”
August 5th, 2009 at 3:34 pm
What do you think China’s position is on the US stock market rally?
Is everyone complcit in the need to pump up the new bubble?
August 5th, 2009 at 3:36 pm
@I-Man
No problem. Actually the TLB is usually late to the trend. So it’s hard to deny that there’s a major move going on. I look for reversal candles and their confirmation. Usually tells me if a trend is about to be reversed on the TLB.
August 5th, 2009 at 3:38 pm
Bruce – I must thank you for your continued focus on retail sales. You give us the good stuff!
August 5th, 2009 at 3:53 pm
Bruce@ 1:19;
Most of what you are calling government debt is simply a result of government having to take over and fill in for the dysfunctional private sector. Capitalism has become dysfunctional, so the cost of private debt issuance is way out of line. To prevent the disaster from this credit collapse, the government is taking the role of issuing debt and can still do that at the rate needed to help rather than sink a seriously wounded economy. If you only look at one side the numbers can be made to look big and scary, but the reality is that total credit is not growing so why would it become more difficult to find cusomers for it?.
August 5th, 2009 at 4:01 pm
Well….that was sort of a goatf*%k….gotta love it….yeah this feels like a real “normal” market….crappy banks are roofing….funny stuff.
August 5th, 2009 at 4:06 pm
Midday wedge as someone pointed out. Wondering how long they will do this. Continue to trade small in size and timeframe.
August 5th, 2009 at 4:07 pm
“Shoppers are still holding back.”
No actually, THEY’RE BROKE! (most anyway, especially in this demographic)
And just imagine, the idea that people don’t have to buy all new stuff just to go to school. How quaint.
August 5th, 2009 at 4:17 pm
blurtman-
I think China better be more worried about the Shanghai exchange- up 100% off its lows
August 5th, 2009 at 4:19 pm
Usually old boy Johnny Chambers is good for a 1.5% selloff in the Naz the day after CSCO reports… we’ll see tomorrow.
August 5th, 2009 at 4:21 pm
@Thor, Bruce N Tenn and other China watchers:
Long time viewer and first time poster in this site. I have been wondering about China’s US Treasuries purchasing outlook as well. I see some talk of China starting to “insist” on some inflation protection via TIPS. If the USA does end up with big inflation in the future, what means do the Feds have to do this?
If we’re borrowing 46 cents out of every govt expenditure from them, how do we guarantee a return? I see some humorous posts that say “give ‘em Alaska, CA, etc”….just curious.
August 5th, 2009 at 4:29 pm
DeDude:
Government has to take over for the private sector?
Away from me, before I sprinkle holy water on thee, devil!
Peddle that old Marxist line somewhere else buddy…
August 5th, 2009 at 5:08 pm
Bruce;
Government must defend our country whether we are being attacked by Russian forces or market forces. Hey even if criminals are attacking us we do not leave that up to free market forces to do what they want, but expect government to intervene and defend us. This is not Zimbabwe
August 5th, 2009 at 5:15 pm
Dedude – do you know if the increase in government debt is equal to the retrenchment of consumer and business debt? I’d be curious to see what the numbers actually are. If they’re a wash then we could say that total credit is not going up . . . .
August 5th, 2009 at 5:16 pm
We don’t allow poor people to use guns to rob us, why should be allow rich people to use pens to rob us, or to destroy our economy. The role of government is to intervene whenever individuals or systems begin to serve themselves to the detriment of “we the people”. And that is not Marxism that is just common sense (let me see if I can sprinkle some of that on you).
August 5th, 2009 at 5:22 pm
Thor, I think we had the real numbers somewhere here a few months ago. From what I remember total credit has been reduced by over a trillion. That is why they have been able to keep rates so low, there is an exess of money wanting to purchase safe credit. Though the last month or so seem to indicate that the balance is shifting a little and supply is catching up to demand (or maybe demand is catching down to supply because capital is getting more willing to flow into the stock market).
August 5th, 2009 at 5:56 pm
Thor; I found it. Andy T commented on the credit contraction (25-30 trillion) in a july 20’th tread talking about the 23.7 trillion infusion by government (and ben22 suggested it would not be enough to counter the contraction).
http://www.ritholtz.com/blog/2009/07/total-bailout-cost-237-trillion-dollars/
August 5th, 2009 at 6:05 pm
DeDude – thanks! I wonder though, can this go on indefinitely. I’m not sure consumer spending is going to ever go back to the levels we saw a few years ago. If that is the case, we cannot count on the government to prop up the economy indefinitely. At some point we’re going to have to take the training wheels off . . . .
August 5th, 2009 at 6:39 pm
Thor; its only a short term solution until the private markets begin to stabilize and recover. I actually think that the movement in intrest rates lately (up about 50 bp) is an indication that the federal government is slowly trying to pull back (lift the training wheels a little). They still have pleanty of purchasers for the 3 and 6 month paper so by switching between issuing short or long bonds they can set the rates where they want it, yet get the money they need. They must be quite convinced that the stimulus is working to begin pulling back already. But I agree that the recovery will be slow and take a long time. A lot of self-indulgence will have to be replaced with hard work – and spoiled little brads will protest. However, the purpose of the stimulus and all this credit was to stop the free fall, not to blow the old bouble right back up again.
August 5th, 2009 at 7:23 pm
Here’s a TLB daily of the US Dollar Index from stockcharts.com. It just started a downtrend.
http://stockcharts.com/h-sc/ui?s=$USD&p=D&yr=0&mn=6&dy=0&id=p26763217615
August 5th, 2009 at 7:26 pm
The weekly looks even worse: http://stockcharts.com/h-sc/ui?s=$USD&p=W&yr=2&mn=0&dy=0&id=p42167893060
It hasn’t been able to break the weekly downtrend since the reversal in March.
August 5th, 2009 at 8:14 pm
@AmenRa
I’m still in the camp that the dollar is making a five wave down soon to be supported (after a final quick move down)…
I mean, think of the alternatives…
1. You just say SCREW THE DOLLAR (let it collapse)
POSITIVE
- That may help our equity market keep getting pumped to the moon but people are already starting to see thru it)
NEGATIVE
- If the 10 year keeps creeping towards 4%, housing re-fi’s will vaporize, and many more will default (I don’t think the banks, the Fed, or the administration want that)
- Europe will be pissed and cry foul
- Oil prices will continue to soar
- Import prices will start to crowd out other things on the CPI
- China will be pissed it’s Treasury holdings lose value
- Nominate you own here, I’m thinking off the top of my dome
2. You manufacture a move back to the dollar & Treasuries for awhile (perhaps ’till year end)
POSITIVE
- the 10 year note stays in check (re-fi’s are still manageable)
- China DOESN’T get pissed, and chips in on our 10 and 30 auctions next week
- The Euro pulls back, giving relief to business over there
- Oil prices pull back (relief to consumer)
- Money Managers can exist the scary equity rally for awhile, and cruise thru year end with a few more stable basis points of profit by buying low.
NEGATIVE
- The stock market corrects, so what?…Joe & Jane speculator get crushed…They deserve to buying equities at these valuations…
What’s the problem here?
August 5th, 2009 at 9:39 pm
@cvienne
The dollar has to get to 78.88 to reverse (a 1.7% increase) on the daily TLB. That will hold up unless we make a new low (which changes the reversal to 78.29). So what has to happen to get a 1.7% fear move? I don’t know. I do know that with the auctions coming up they have to get traders out of equities and into treasuries. Because a failed auction would have the 10 year on its way to 5% (or more) in a hurry and the dollar searching for a place to land (after freefall).
August 5th, 2009 at 9:53 pm
@AmenRa
“I do know that with the auctions coming up they have to get traders out of equities and into treasuries. Because a failed auction would have the 10 year on its way to 5% (or more) in a hurry and the dollar searching for a place to land (after freefall).”
—
I know that LOGIC doesn’t count for much these days, but at least it “feels” to me that exactly that is being calibrated to happen…
I mean, even if you believe in a CONSPIRACY THEORY, what better scenario could occur?
Let’s say GS & JPM are in charge of ‘engineering’ this walkover…They position themselves properly and then pull the floor out under equities…Move over to govvies & the dollar for a bit…
- They save the auction
- People who ONLY focus on equities, get off their jock for fluffing the market
- and all the positive things from my previous post occur
It’s TOO OBVIOUS to me…That’s probably why it won’t happen…
August 5th, 2009 at 10:22 pm
@ cvienne
The thing is whatever needs to happen doesn’t need to happen here. Another country defaults, CIT decides to file, another rogue trader (aka Soc Gen), etc. Something insignificant becomes significant.
August 5th, 2009 at 10:24 pm
@cvienne
Looks like a reorganization of Fannie Mae & Freddie Mac is now in the works. LMAO.
August 5th, 2009 at 10:36 pm
http://www.washingtonpost.com/wp-dyn/content/article/2009/08/05/AR2009080504063.html
U.S. Considers Remaking Mortgage Giants
‘Bad Bank’ Would Wipe Slate Clean for Fannie Mae, Freddie Mac by Taking Their Toxic Loans[/size]
By Zachary A. Goldfarb and David Cho[/b]
Washington Post Staff Writers
Thursday, August 6, 2009
The Obama administration is considering an overhaul of Fannie Mae and Freddie Mac that would strip the mortgage finance giants of hundreds of billions of dollars in troubled loans and create a new structure to support the home-loan market, government officials said.
The bad debts the firms own would be placed in new government financial institutions — so-called bad banks — that would take responsibility for collecting as much of the outstanding balance as possible. What would be left would be two healthy financial companies with a clean slate.
The moves would represent one of the most dramatic reorderings of the badly shattered housing finance system since District-based Fannie Mae was created by Congress to support mortgage lending during the Great Depression. Both Fannie Mae and Freddie Mac, based in McLean, have government charters to buy home loans from banks, which they then repackage and sell to investors. The banks can then use the proceeds to offer more loans to home buyers.
August 5th, 2009 at 11:04 pm
ndmaster Says: at 1:38 pm
@Thor- what do you mean “can they do that”? Why would they not be able to sell their holdings to anyone else? If they sell at a higher interest rate, the coupon is the same, but price is lower, hence a higher coupon. They take a loss.
Bruce N Tennessee Says: at 1:48 pm
Thor: The other posters are correct…and rates should continue to go up with either option…if the Chinese stop buying OR if they stop buying and start actively selling.
I caught those statements and am deducing that senario a bit further .. slam me if I’m off base …
1st – Central Banks suffer no penalty for early withdrawl? I suppose but why not? If you meant they sell to some other entity than I suppose the barter would go down like a derivative (me to you at a deal price)
2nd – China sells to the UST with or without penalty at the accrued interest to date. They can now buy new treasury bonds at the new interest rate with a new date for maturity. UST guarantees new rates at the new date.
Now we’re still in the China selling UST in mass because they are mad and say f’it. What do you think UST rates go Down or Up? … Down because nobody else wants them either? Or Up because the great buyer China is dropping out of the picture and the broke UST needs casholla now?
If your in the Down camp …. ummm we print more money and Zimbabwe here we come .. and wealth gets redistributed away from cashed #s in accounts?
If your in the Up camp then China compounds its earning by trading up in UST interest rates as well as everyone else who is holding UST .. but the US Worker / Taxpayer is enslaved all the more to future interest payments to the banksters of the world over
Balanced budgets were so yesterday. I’m for tripping on the table leg and upsetting the monopoly board. Thats not stealing is it? Or maybe something else?
August 6th, 2009 at 3:33 am
Bruce, I’m not sure I follow you. As far as I know, no one can “withdraw” (put) a US Treasury bond. Unless it is held to maturity, it can only be sold on the secondary market, at a price determined by prevailing yields. Because the coupon rate is fixed, the price moves inversely with yield.
When relative demand for bonds is strong, buyers bid up prices, pushing down yields. This is what happened last fall during the “flight to quality,” when yields fell to historic lows. If a major holder were to flood the market with supply, however, yields would rise dramatically, and prices would plummet. It would be impossible for them to quickly unload their holdings without realizing a huge loss.
August 6th, 2009 at 8:14 am
having slept on these posts .. and Seattle I had to refresh what “yield” means in this industry and Ken Little’s blog broke them into 3 types in meanings – Nominal Yield – Current Yield – Yield to Maturity … imo those meanings come into play more for the flippers market .. China probably has bonds maturing any day of the year .. year over year
me above and transposed “If your in the Down camp …. we print more money and Zimbabwe here we come .. and wealth gets redistributed away from SAVED #s in accounts AND stuff get more expensive in an attempt to hold on to whats been worked for” … trying to fall asleep I was wondering what is holding UST rates down .. the buyers .. why .. printing money .. stop printing money and we see rates go up and Now owe more in interest .. keep printing money and basically the same thing happens – but a different set of players are held over to a new day to deal
but China why not stop buying? .. would see higher rates on their Savings when they turn in the mature bonds for new ones .. the UST is sure to need again .. but would some kind of airport briefcase bond deal need to done because the banks are not buying yours now .. nano rfid to the rescue (for real holdable certificates) .. so the answer is keep playing by the rules of etiquette all the while hoping your opponent will also