Since it is now September, let’s take a classic look at the seasonality of market returns.
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click for larger chart
Courtesy of Bianco Research
Eighty percent of success is showing up. —Woody Allen
Staying with the belief that the Fed can still do more, Bernanke said they are prepared for more accommodation if needed but he finally publicly acknowledges that "central bankers alone cannot solve the world's economic problems." He gives color on what left the Fed can do if circumstances warrant but acknowledges drawbacks to each perceived benefit. On the economy, "although private final demand, output, and employment have indeed been growing for more than a year, the pace of that growth recently appears somewhat less vigorous than we expected...Much of the unexpected slowing is attributable to the household sector, where consumer...
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September 9th, 2009 at 1:43 pm
+/1 3 sigma markers on each bar would be interesting….what does each months distribution look like?
rt
September 9th, 2009 at 1:44 pm
Guess I cannot edit…that was SUPPOSED TO BE +/- 3 sigma.
rt
September 9th, 2009 at 1:50 pm
http://www.philly.com/philly/news/breaking/20090909_Pair_steal_800_lb_ATM_with__96G_inside.html
Given the potential correction coming–we might see more brazen ATM thefts like this one—2 guys nonchalantly stole an entire ATM out of a hospital with ~$100K in it.
September 9th, 2009 at 1:57 pm
If those guys had proper health care – they wouldn’t have stolen any money. Health is wealth, and not having that is what drives people to such extreme measure. I am glad our gubermint has its priorities right.
September 9th, 2009 at 2:12 pm
speaking of theft, I just had a very interesting convo with another advisor in my office. He just got a call from a client sobbing, needing money out of her accounts right away. Turns out her son robbed a PNC this morning! That’s a first for the office.
Seasonality is fun to take a look at. I haven’t seen a lot like this that are longer term. Also interesting are:
Market behavior three days before and three days after holidays
Monday, Tuesday and Wednesday stock gains versus performance on Thursday and Friday
Since 1997, the performance on the first trading day of the month phenomenon
January effect now starting in mid-December
Trading the Thanksgiving market
among others
September 9th, 2009 at 2:34 pm
@ben22
Upon closer inspection of the calendar, I came upon an interesting phenomenon…
Since March 6th, 2009… I note:
- There are no Thursdays or Fridays
- Every day is the first of the month
- The January effect now starts in early March
- Turkey is served every night for dinner
- And there are only 40 minutes each day (3:20PM to 4:00PM)
Strange!
September 9th, 2009 at 2:45 pm
Economic activity is stabilizing or improving in the vast majority of the country, according to a government survey released Wednesday. The findings indicate that the worst recession since the 1930s may be over.
http://news.yahoo.com/s/ap/20090909/ap_on_bi_ge/us_economy
The Federal Reserve’s snapshot of economic conditions backs predictions by Fed Chairman Ben Bernanke and most other analysts that the economy has started to grow once again in the current quarter.
In the new survey, all but one of the Fed’s 12 regions indicated that economic activity was “stable,” showed “signs of stabilization” or had “firmed.”
Looking ahead, businesses in most Fed regions said they were “cautiously positive” about the economic outlook.
————————–
well, there you have it everybody !!
party the funk on like it is 1999 all over again !!!!!!!!!!!!!!!!!!!!!!!!!!!!
September 9th, 2009 at 2:49 pm
I’m guessing that this September will pull the averages back upwards, in a reversion-to-the-mean sort of way.
But look out in November-December!
September 9th, 2009 at 2:53 pm
while the Nasdaq broke out to new intraday highs for 2009 today, the S&P and Russell did not confirm, at least not yet. I would not be surprised to see the top for the market coming in soon given the seasonality of the market in September and October
September 9th, 2009 at 2:55 pm
Fed Beige Book says “Mission Accomplished”.
September 9th, 2009 at 3:03 pm
@ Lil Leg Humper 2:45 pm
Yeah, the Fed’s upbeat, and so is Greenspan …
http://www.bloomberg.com/apps/news?pid=20601068&sid=aFBopI.OOyKM
… and if that doesn’t scare you, nothing will.
Greenspan’s optimism is tantamount to an announcement by God, writing text in fiery letters across the sky that says “Repent, sinners!”
OTOH, the discussion of the trends in hiring (be sure to look at the graphic after reading the analysis) gives a somewhat different picture than the one scried by the seers at the Feral Reserve.
http://www.bloomberg.com/apps/news?pid=20601109&sid=avYl515PP_pM
September 9th, 2009 at 3:04 pm
I think that when the Feral Reserve goes home at the end of the work day, they exit into a portal into the bizarro dimension.
September 9th, 2009 at 3:07 pm
BTW, I’m hereby open-sourcing the term “Feral Reserve”, open to use by any and all, without attribution or compensation. I think that names should have meanings. And the Fed is clearly not housebroken.
September 9th, 2009 at 3:24 pm
September is a horrendous month….wonder why?
September 9th, 2009 at 3:25 pm
Greenspan, as usual, is just enamored by a rising market. It drives everything he ever did and he is still dazzled by it. I wish he’d just go away.
September 9th, 2009 at 3:27 pm
enamored with, he should have written
September 9th, 2009 at 3:29 pm
Here’s my take… swiftly fly the years. ;)
Sunrise:
New Years (hooray, party!), Easter* (hooray, springtime!), 4th of July (hooray, fireworks!), Thanksgiving (hooray, food!) and Christmas* (hooray, presents!).
*Pesach (hooray, wine!)
**Hanukkah (hooray, presents!)
Sunset:
Valentines Day (uh-oh, forgot a gift!), St. Patrick’s Day (uh-oh, better take tomorrow off!), Memorial Day (uh-oh, time to lose some weight!), Schools Out (uh-oh, time to send the kids to camp!), Labor Day (uh-oh, tuition is how much?!), Halloween (hey you kids! get lost!).
Vacation in August.
September 9th, 2009 at 3:35 pm
ECRI leading indicators growth rate is on a tear.
With the general bearishness of most economic prognosticators with many forecasting slow growth, double dip, W or L – the contrary position is likely that GDP growth rate over the next 2-3 quarters will surprise on the upside.
The current trend for the equity markets is UP. Until this trend changes being short can be painful. Despite a significant up move the sentiment on most financial blogs remains bearish.
Preannouncements are also few – meaning quarterly results will likely be surprisingly good. This continues to be a good trading environment on the long side with many stocks climbing a wall of worry. Until trailing stops are taken out I will stick to my long overweight.
September 9th, 2009 at 3:38 pm
@ab initio: I couldn’t agree more. It’s nice to see another voice of reason on this blog. Or any blog for that matter. It’s like everyone wants the market to go down and are ignoring all the positive economic news coming through. Did you see the article “The Failure Caucus” in Newsweek? It describes this phenomena perfectly that permeates this and other blogs.
Wake up and make some money, I keep telling people.
September 9th, 2009 at 3:43 pm
hey wanger-
as i asked the other day- explain your bullish stance? us here dunderheads just want to understand so maybe we can try- as best we can- to follow in your footsteps-
we just need a little reassuring that you are not just relying on blind faith- but have some insight that will help us see the light-
help us please
September 9th, 2009 at 3:45 pm
Gold cracks 990.
September 9th, 2009 at 3:48 pm
ab initio says-
“The current trend for the equity markets is UP.”
thanks for that insight
September 9th, 2009 at 3:48 pm
@call me ahab: I replied the other day that everything from housing stabilization, to manufacturing are all quickly turning for the better. Check out all the economic reports at Bloomberg over the past two months and you would be foolish to conclude that the economy is not improving – and rapidly.
September 9th, 2009 at 3:50 pm
HW, nice to see contrary opinions… curious, how bulls reconcile reflation (oil) vs. recovery (consumer)?
i.e. at what level does higher gas choke the recovery, if employment and compensation do not keep pace?
Can we reflate to $100+ crude… and keep on reflating?
September 9th, 2009 at 3:58 pm
Harry
If folks follow what companies are doing they will notice that many are ramping up production. Just like our Cash for Clunkers – Germany had a similar subsidy, China is now planning to extend their subsidy for white goods and we are planning to do the same after the subsidy for first time home buyers. And so on. Our fiscal and monetary stimulus is over 30% of GDP. China has had massive bank lending in the first half of this year – over $1 trillion. All this stimulus has had an impact on the near term and this is reflected in financial asset prices across the globe. With governments around the world backstopping financial institutions, risk appetite has grown – notice the spreads on corporate debt has contracted. At some point government credit will be questioned – that will be the time to short government debt.
As a trader it pays to not be dogmatic and play the setup as it is – not what it should be.
September 9th, 2009 at 4:00 pm
@HarryWanger
Getting worse less quickly isn’t the same thing as getting better!
September 9th, 2009 at 4:04 pm
Renting in Mass: “Getting worse less quickly isn’t the same thing as getting better!”
Actually getting worse less quickly IS the same as getting better. Think about it.
September 9th, 2009 at 4:05 pm
Check out all the economic reports at Bloomberg over the past two months and you would be foolish to conclude that the economy is not improving – and rapidly
—————
You mean the trillion government prints to boost GDP by a few billion?
September 9th, 2009 at 4:06 pm
I guess it depends on whether your real concern is for the economy and people’s lives, or just for whether the greater fool market will continue to go up, even if the gains are not durable.
It appears that we have not even started to wring out the speculative, momentum based, buy without regard to value, stock market that we’ve had for over a decade. And all that misallocation of capital, resources, and talent that goes with it. Yea! Go America!
September 9th, 2009 at 4:08 pm
Actually getting worse less quickly IS the same as getting better. Think about it.
————-
I guess in a weird kind of way… once I have no more blood to lose, I guess I’ll go to paradise.
September 9th, 2009 at 4:10 pm
http://www.amazon.com/Big-Con-Story-Confidence-Man/product-reviews/0385495382/ref=cm_cr_dp_all_helpful?ie=UTF8&coliid=&showViewpoints=1&colid=&sortBy=bySubmissionDateDescending
You all might want to read this book before you end up poorer than Job’s turkey…the game has more twists coming and if you haven’t tagged your mark, find the tag quick, cuz you might just be it…jajaja!
September 9th, 2009 at 4:11 pm
@Wanger
Stock markets have already discounted these green shoots starting 3/9/09. The rally is exactly 6 months old and the SP-500 is up 52%, which is great for any rally, much less a bear market rally.
The economy is improving due to massive federal spending, not consumer/business demand. What happens now that the Cash for Clunkers is done, and the stim money runs out?
A dead cat bounce in production from depression levels is good, but I would hardly call that an economic improvement that is sustainable. Even I have to buy new underwear every so often.
And the wealth effect from having the stock market return 52%, which is reliquifying everyone’s balance sheets can not be underestimated, but does it signify anything but stock prices going up?
The real question is: Now what? We will soon find out whether the dead cat bounce from the stimulus is sustainable in light of massive deficits, and the consumer who continues to retrench, lose their jobs, homes, and savings.
September 9th, 2009 at 4:12 pm
danm
Exactly. All these purported improvements in the economy are just more borrowed-from-the-future illusions. But hey, it satisfies the market gamblers who now think it’s telling them that great times are coming. If it’s anything, it’s no better than what we got in ‘03-’07. And I and others are skeptical that they can pull that little trick again. And I’m sure that I don’t want them to.
But hey, if you’re just all about the returns you can get from a momentum based market and hope you can find a greater fool at levels higher that would give you a good risk adjusted return, then the world must be wonderful.
I know, that makes me and others of my ilk suckers and dupes, just as in ‘03-’07. A moral and social conscience is just so old fashioned.
September 9th, 2009 at 4:15 pm
Edit:
“But hey, if you’re just all about the returns you can get from a momentum based market and hope you can find a greater fool at levels higher that would give you a good risk adjusted return, then the world must be wonderful.”
Should read: “But hey, if you’re just all about the returns you can get from a momentum based market and are convinced that you can find a greater fool at higher levels , then the world must be wonderful. I’m not convinced that you can really do that and also get a good risk adjusted return.”
September 9th, 2009 at 4:18 pm
Onlooker from Troy:
I don’t think it can last as long. They’ll try to push it off but there are too many people about to retire and/or get sick with not enough money.
September 9th, 2009 at 4:19 pm
“Bruce in Tn: Since you’re wondering if the $3,800 fine will be a way to force people to pay for the “public” option, it’s somewhat disingenuous that you failed to note that the fine was proposed by Max Baucus, a devout Republican and a high priest of faux conservatism. If Mr. Baucus is looking for ways to pay for healthcare for the hoi polloi, he should, perhaps, consider turning his jaundiced eye and dishonest mind to some of the waste and criminality he himself helped spawn. For instance, the cost of the Iraq war would have paid for healthcare for every man, woman, and child in the US.”
Marcus Aurelius Says:
September 9th, 2009 at 9:07 am
….Hey Marcus…just got through and somebody is posting with your nom de plume! I called uncle Max, and he tells me he’s still a democrat…but party affiliation doesn’t really matter. Please find that dumb#ss that is posting under your name and kick his hind end for me….
B in T
September 9th, 2009 at 4:20 pm
wanger and initio
so massive trillion dollar shortfalls are not a concern- as long as markets are going up- all is good?
how can creating another false economy based on massive government deficit sepnding help us- really?
and counter that with the consumer’s debt contraction- the consumers who are retrenching-
you can manufature all the stupid shit you want- but there has to be someone- in the end- willing to buy it-
double dip and deflation at a store near you-
September 9th, 2009 at 4:21 pm
I don’t think it can last as long. They’ll try to push it off but there are too many people about to retire and/or get sick with not enough money.
———-
Not to mention all the extra non-performing assets going through the pipeline that will need to be written off and will end up at the same place as the first batch.
September 9th, 2009 at 4:23 pm
1. propped up banks
2. propped up states budgets
3. propped up housing
4. propped up auto’s
5. propped up markets, which insurance companies benefit greatly
6. have announced they will prop up CRE
all equals a house on stilts, not my kind of risk,
September 9th, 2009 at 4:23 pm
danm
quote: “I don’t think it can last as long. They’ll try to push it off but there are too many people about to retire and/or get sick with not enough money.”
I agree. Any new bubble economy will only be a shadow of that last one, and much more limited in time and scope.
September 9th, 2009 at 4:24 pm
Last September the economy was an absolute mess and imploding. This September is the economy is much, much improved in comparison. I still think the market is relatively cheap here with at least 15-20% upside by EOY.
Pessimists here and at most other doomer blog sites, tend to dwell on the market run up from March as being unsustainable. In reality the market has leveled off beautifully and is setting up nicely for the next leg up which should see all indices break out by EOW.
September 9th, 2009 at 4:31 pm
@Harry: I think I figured it out. You used to be “jmborchers”, correct? C’mon now. Come clean. You strangely disappeared after predicting there would be no market crash and that things were fine last fall/December, but now you’re back…….after the fact, of course. Of course.
September 9th, 2009 at 4:31 pm
Either that or you must be Brian Wesbury. Maybe you’re all one and the same?
September 9th, 2009 at 4:39 pm
BR posted a chart:
observation:
——————
How very quaint and nostalgic. Look at the Y axis. The percentages are in tenths of a percent. That’s a chart for woosies. HFT masters would look at that, kick sand on it, and walk away with the pretty girl in the skimpy swim suit. With the Fed blowing cash up the axis of this year’s chart, I believe this year might be an exception.
If all you have is asset inflation, then that’s what you go with. You don’t have retail. You don’t have durable goods, unless you have massive subsidization to help out. You don’t have housing. You do have a lot of pending foreclosures, though. You don’t have employment. You don’t have exports. You don’t have investment, using the traditional definition. You don’t have consumer credit.
All you have is Wall Street, so that’s where you make the blow out happen. And you let the pundits say that high oil prices are a sign of prosperity.
Confusion is a good thing. Someone will believe it.
September 9th, 2009 at 4:40 pm
I always thought Oct was another down month but I think the stats I saw didn’t go back to 1926.
Except for jobs, residential and commercial real estate, consumer credit and retail I’d say the Fed is right.
The jobs forecast for the 4th Q is the worst since they’ve cooking this up in the 60s, all job segments are down except for FINANCIAL SERVICES. Isn’t that a gas.Must be all the fly-by-night credit and real estate counselors we see on TV, “WE CAN HELP” LOL
September 9th, 2009 at 4:40 pm
“In reality the market has leveled off beautifully and is setting up nicely for the next leg up which should see all indices break out by EOW.”
first off- is EOW- End of The Week or End of the World?
assuming end of the week- let us know what technical indicators you are looking at to make that conclusion- or-
barring that- let us know if you are just pulling shit out of you ass- or that your trading has been so prescient that you can pretty much say anything and it will come true
September 9th, 2009 at 4:46 pm
onlooker says-
“I guess it depends on whether your real concern is for the economy and people’s lives”
exactly
September 9th, 2009 at 4:46 pm
Back on the topic of Seasonality … these guys are big on it, and make a living selling it whether your tastes are the Q4 Season only, Year-Round Seasonality, or the 4-Year Presidential Cycle.
http://www.alphaim.net/about.html
Actually, their data is rather interesting.
Have at it, folks … the future is yours.
September 9th, 2009 at 4:48 pm
@Harry, so I can better understand your “logic”
Are you saying that because the economy is improving that therefore stocks will also continue to go higher? Or, that because the economy is improving, they MUST keep going up? Maybe you are not saying this but it’s how I read your comments, esp the 3:48 response as to why you are so bullish.
I hardly think it is that easy not to mention that this explanation describes an always rational marketplace no? Stocks do well when the economy heats up, and they don’t do well when it cools down.
Also, in reading ab initio’s post versus your recent “buy the dips” strategy posts there seems to be a crucial difference which is here:
” Until trailing stops are taken out I will stick to my long overweight.”
That’s way different than just buying dips. Maybe you are doing the same but I don’t recall you saying this.
As for the economic data improving well sadly I know of no data report of things that already occured that also tell us anything about the future so again improvement in econ data is not proof the market will go higher. “Fundamentals” are poor predictors of the trend and they only sound good in retrospect.
here is an example of what I think you are doing, using news as confirmation of what is moving markets,but again, you might have a much more detailed strategy than this and I’m just wrong:
Lets say the market got killed yesterday on the back of the huge drop in consumber borrowing (which didn’t get much notice btw):
“Well, of course: This economy is 70% consumer-driven, so a fall in consumer borrowing makes investors nervous.” If the Dow rallies, you will probably hear this spin: “Actually, a drop in consumer borrowing is healthy: People have less debt and more cash to invest — and the stock market likes that.” Notice that neither “explanation” tells you anything about the future trend.
Thoughts?
September 9th, 2009 at 4:48 pm
I can’t seem to recall a single post by the prescient Mr. Wanger back in March calling this rally BEFORE the fact. In fact, I can’t recall one in April, May, June, or July. The only posts that I recall AFTER the fact have been in August. Maybe it’s just me though.
September 9th, 2009 at 4:49 pm
Ahab,
So that’s what you look like. Good skin.
September 9th, 2009 at 4:49 pm
Actually, the more I think about it, I think perhaps HarryWanger is cvienne or leftback just fucking with all of us. Think about it for a second, guys.
September 9th, 2009 at 4:52 pm
call me ahab: Pull up the charts. Dow closes above 9580 and it’s off to the races. Oh, and BTW, TXN just raised their sales and earnings outlook. The turnaround in the economy is real.
September 9th, 2009 at 4:55 pm
H. Wanker,
You came to the right place for an education. I think even F411 has risen from a state of dull awareness and empty optimism to a place that is a little closer to common everyday reality. But only a little. Maybe you’re next.
September 9th, 2009 at 5:00 pm
How long will you perma bear/doomers keep this up?? At some point you will have to realize that you’re being foolish in maintaining a negative outlook. Did you just see what Texas Instruments said?? Did you read the Beige Book report?? With pent up demand and inventory cycles coming around, this economy is going to take off much quicker than even some of the rosier forecasts out there.
Yes, I came to the right place for an education – I just hope you are willing to be educated.
September 9th, 2009 at 5:00 pm
dh-
man i wished my skin was that good :-)
actually- a picture of Herman Melville himself-
i was playing around w/ navatars over the weekend
September 9th, 2009 at 5:04 pm
did i say navatars????
gravatar is the correct term- globally recognized avatar-
http://en.gravatar.com/
kind of fun- more people ought to throw something up there next to their post
September 9th, 2009 at 5:05 pm
HarryWanger Says:
September 9th, 2009 at 5:00 pm
…(airhead stuff)
reply:
———
At first I was going to converse, but decided to not feed the trolls. Best wishes.
September 9th, 2009 at 5:06 pm
We need more after-the-fact bull-trolls. That’s when the top will finally be in. In the meantime, I’m happy to sit and mostly watch like I’ve been doing all summer. No rush for me.
September 9th, 2009 at 5:09 pm
“How long will you perma bear/doomers keep this up?? ”
Hmm, I’ll bite again.
for the record, as was written here by me more times than I can count I had said for months the market would have a large rally. Like some of the johnny come lately crowd here though I was not saying this starting in July. I was properly long until the market reached 965, which was my low target, at which point I began selling things off. I’m not a perma anything.
And you did it again so now it’s just obvious:
“With pent up demand and inventory cycles coming around, this economy is going to take off much quicker than even some of the rosier forecasts out there. ”
conclusion: this means higher stock prices ahead.
It’s funny to me, anyone that had the vision to buy, and buy big very early in this rally is hardly so confident about the future. Jeremy Grantham comes to mind, perhaps you can educate him as well.
I don’t think you are borchers, though it’d make sense if you were. That said, he used to use things like “did you see what Texas Instruments said?” to confirm his bullish stance. Another winning investment strategy there, just listen to the conference calls!
September 9th, 2009 at 5:09 pm
dead hobo: I repeat: “Texas Instruments said?? Did you read the Beige Book report?? ”
I’m guessing “no” is your response. Otherwise, you would not have referred to the post as “airhead stuff” since it doesn’t fit with your “everything is bad/awful/terrible/getting worse, etc.” view point.
September 9th, 2009 at 5:10 pm
Benn – I don’t know how you do it with that patience. What do you do? Put Xanex in your drinking water? ;-)
September 9th, 2009 at 5:10 pm
call me ahab Says:
September 9th, 2009 at 5:04 pm
gravatar is the correct term-
reply:
——–
That would be avatar with gravitas?
September 9th, 2009 at 5:11 pm
wanger says-
“With pent up demand and inventory cycles coming around, this economy is going to take off much quicker than even some of the rosier forecasts out there. ”
with 17% true unemployment- pent up demand will remain that- pent up-
and sure you can build up inventories- but there needs to be someone to buy it-
does that make sense harry my man-
or maybe in your world- it is- “if you build it, they will come”
September 9th, 2009 at 5:11 pm
@Harry: Please pull out all of your prescient calls since March about the bull market. Please? I’m sure you have them saved somewhere?
September 9th, 2009 at 5:11 pm
ben22: Of course business/economic improvement is going to “mean higher stock prices ahead”. Especially in an environment where the markets are still relatively cheap. Better business, better revenue, better earnings…get it??
September 9th, 2009 at 5:11 pm
HarryWanger Says:
September 9th, 2009 at 5:09 pm
dead hobo: I repeat: “Texas Instruments said?? Did you read the Beige Book report?? ”
reply:
——–
In my world, facts beat empty optimism and happy anecdotes.
September 9th, 2009 at 5:14 pm
@Wanger: What about jobs? CRE fiasco? Consumers buried in debt? Alt-ARM resets? Don’t matter? Sure, the Feds can keep printing money for a while but this is not real prosperity. More of the same smoke & mirrors we say during the dot.com and housing bubbles.
September 9th, 2009 at 5:14 pm
dead hobo: Ok, I get it, you’re one of the “conspiracy, everything reported is bogus, etc.” crowd. TXN gave some facts – they’re going to make more money. Beige Book gave facts, economic indicators improving. So if it doesn’t jibe with your viewpoint, it’s not a fact? That’s how I’m reading you.
September 9th, 2009 at 5:15 pm
OK, I’m done with cvienne, I mean borchers, I mean Wesbury. Over and out.
September 9th, 2009 at 5:20 pm
I think that some of this dispute is due to a confusion surrounding market valuations and spheres of economic activity. Is it possible for the markets to increase in nominal terms as the consumer-based economy deteriorates? Not only possible, likely. People are being dealt out of the game. It’s the New Deal all over again only this time you ante up* but get no cards.
*Ante payin already happened, someone else was playing your cards while you were making googly eyes at the dealer…should’ve stayed sharp, this time around the shoes are no good for boiling soup, learn to love kudzu…
September 9th, 2009 at 5:22 pm
Mannwich asks: Please pull out all of your prescient calls since March about the bull market. Please? I’m sure you have them saved somewhere?
Actually, I posted on the AAPL board since early April on the bullish stance I had on the economy. I kept posting that the economy would run up as AAPL would run up. Along the way much resistance, as is here, from posters who refused to think the world would actually improve. Well, you know the rest of the story. And there’s nothing to change that in our immediate future.
September 9th, 2009 at 5:24 pm
harry my man-
the fed hasn’t been too good about spotting anything before it happens-
if you listened to the Fed you would have bought a house at the top of the market- with no clue-
and the Fed did mention consumers today-
do you think we need a few of those?
or is the USG going to be there for the duration- propping up the markets w/ stimulus and tax credits
September 9th, 2009 at 5:28 pm
harry -
c’mon man we know you’re a genius- quit tooting your own horn- you saw it all coming- probably took your money out of the market at Dow 14,000 and put it back in at s&p 666-
i wish we could all be that smart
September 9th, 2009 at 5:28 pm
Poor Harry – why are you posting here then? What point are you trying to make? Is there anything you’re trying to accomplish? Trying to change someone’s mind? Why would you even be interested in trying to argue with a group of people who obviously think so poorly of your ideas? It’s their money and their opinions.
September 9th, 2009 at 5:31 pm
To follow up – I think most of the regular posters here would be better classified as healthy skeptics. Certainly none of them are making bets that the economy is going to tailspin anytime soon. That would be as foolish as those who believe everything is sunshine and kitties. One would have to be seriously twisted to be hoping for things to get much worse, unless one is fabulously weather it would be hard to escape the financial consequences of financial Armageddon.
September 9th, 2009 at 5:36 pm
@Thor: I said it yesterday and I’ll say it again, it’s ‘06/’07 all over again. The stupidy and foolishness are back with a vengence. We haven’t learned a thing from this mess. In fact, if anything, we’ve learned all the wrong lessons.
September 9th, 2009 at 5:37 pm
http://www.newscom.com/cgi-bin/pub/s?f=PRN/prnpub&page=1&xtag=PRN-prnphotos-84809&redir=detail&TAG_ID=prnphotos084809
Only thing I’m betting is that this one is photoshopped…any takers? [Barry- no worries, not dirty]
September 9th, 2009 at 5:39 pm
Manny – You know I agree with you 90% of the time, as I do here. My only qualifier is that we don’t know when this bubble is going to pop. Nothing shocks me anymore, I wouldn’t be surprised if it all comes crashing down again next month, next year, or three years from now.
September 9th, 2009 at 5:41 pm
Hey BnT:
You’r right! How freekin’ embarrassing. Oh well, live and learn.
September 9th, 2009 at 5:41 pm
@Thor: Totally agree. The madness from the last bubble (and the one before that) took years to unfold as well. It could happen again now, although I’m a little suprised we’d all be that stupid, but maybe we really are that stupid, or greedy, or both.
September 9th, 2009 at 5:43 pm
mregan-
someone you know?
i recall you said you were in peru recently-
be pretty tough to have to share a tent with her ;-)
September 9th, 2009 at 5:48 pm
Manny – Agree, I’m thinking though (ok, I’m hoping) that the consumer is finally getting a clue. We’ve been good about paying down our debt for five whole months, I think a person would have to be almost insane to make the same kind of equity withdrawals from their homes again. Looks like now we’re mostly dealing with government and wall street insanity – maybe the average Joe will be smart enough to sit this one out.
September 9th, 2009 at 5:58 pm
@Wanger,
What were all these reports saying this time 1-2 years ago? (slow down expected, nothing major)
What was the message from the FED 1-2 years ago? (residential housing contained, don’t worry)
What was the message from corporations 1-2 years ago? (earnings outlook unchanged)
What was Bloomberg/MSM reporting 1-2 years ago? (hint: very little/no impending crash rather whatever your reports/FED said)
Regardless of obvious differnce in perspective I enjoy your posts. Please keep them coming. I appreciate alternate views. But when the market goes down for a few days or a week, keep posting and defending your view. Don’t run off like last time and only come out when the coast is clear. It does little to aid your credibility hence the semi-lynching you’ve experienced today.
To end, one question: Is your forecast for the markets to go another 20-30% based on your entry point and what you need to feel validated/vindicated or sound logic and reasoning? If the latter, please provide more evidence than “because I read/saw it in/on Bloomberg” or “the FED said so”. We know their track record and it ain’t purrdy.
September 9th, 2009 at 6:13 pm
SORRY TBP posters I forgot to give uncle Harry his meds last night.
Uncle Harry, come back home and I promise to make you a nice cup of tea when you take your meds and I will wrap you in a blanket and we can sit in your favorite chair on the back porch till sun down.
He really is a genious you know
Psssst Little family secret………Buy low, sell high. Great strategy I suggest you all use it.
September 9th, 2009 at 6:38 pm
ahab
As an investor I play with the deck that is dealt not what I wished I had. I separate my decision making for my portfolio relative to my preferences for economic policy.
Clearly, anyone with common sense will agree that you don’t solve a debt problem with more debt. And that you can’t substitute the government balance sheet for banks’ impaired balance sheets without risking the credit of the government. That being said I bet my portfolio that politicians will do whatever it takes including risking a bigger meltdown in the future for the short term benefit. That’s not how I would like it to be but that is what it is.
Additionally, we can be certain that if unemployment grows further and the economic downturn intensifies more and more fiscal and monetary stimulus will be thrown at the problem. The Fed and all the major central banks have clearly signaled that their monetary policy will continue to have a bias toward ease until they see inflation. Until they change their stance we must expect that they will act they way they have. My expectation is that government credit will continue to rise until they are forced not to expand by either the bond market or the currency market.
As far as how asset markets will respond no one knows. How I position my portfolio is to follow an established trend until it changes. There’s no value judgment here.
My earlier post was to point out that the ECRI leading indicators have a significant growth rate. Most of the companies that I follow are raising their production volumes and earnings estimate for the next quarter. I don’t see any volume of preannouncements that leads me to believe that companies will report in line with expectations. The consensus opinion is that the economy will contract with renewed emphasis in the short term. The contrary opinion is that it will surprise to the upside. That does not mean we have a sustainable economic recovery at hand – just a basis to inform a near term stance.
The markets have had a decent run. And Grantham was right on the money early this year to go long. No doubts risks have increased but sometimes a move last longer and there is no reason to take the short side at this juncture until it is clear that the market trend has reversed or the government is being forced to end their credit growth. I believe at some point there will be a great entry point to short government debt.
September 9th, 2009 at 7:23 pm
” there is no reason to take the short side at this juncture until it is clear that the market trend has reversed or the government is being forced to end their credit growth. I believe at some point there will be a great entry point to short government debt.’
the fed has been buying treasuries and MBS using money creation-
how long can someone conceivably believe in that- literally a foundation based on worthless paper-
but by all means- ride the bullshit train to riches
September 9th, 2009 at 7:51 pm
@Manny
How DARE you compare me with Wanger!… As ‘commish’ of TBP FFL I ought to fine your team! :-)
On the other hand… Maybe it was a compliment… After all, so far Wanger has it correct… But let me encapsulate that for everyone to keep it real…
The FIRST post I ever heard from was from Wanger talking about buying the 2-4% dips all summer (which means June on)… I don’t want to dredge up the ‘fact laced’ synthesis of that statement that I spelled out (it was a few weeks ago)…
But give Harry his due… The LATEST would have been if he’d actually SOLD razor sharp at the 1039 top a few weeks ago… I asked him where he was, and what his call was when the market hit 1,016… NO REPLY… He had another opportunity to reply at 4% (997), NO REPLY… So I assume he took flyer and bought 991 (even though the S&P had broken through HIS OWN imposed floor…
Where is he? Well, it’s still not broken out (above 1039)… It might, it might not… Andy T will tell you that 1044 and 1054 are important technical levels, so I’ll go with that…
Harry, be a dear and give us your calls BEFORE you make them…
Here… I’ll give you an example of how it’s done…cviennes NFL Week 1 Picks “against the spread” (cviennes picks are in CAPS – “units” are a measure of strength of pick)…
PITTSBURGH (-6) vs. Tennessee – 4 units
MIAMI (+4) at Atlanta – 0 units
Denver at CINCINNATI (-4) – 3 units
Minnesota at CLEVELAND (+4.5) – 1 unit
JACKSONVILLE (+7) at Indianapolis – 1 unit
DETROIT (+13) at New Orleans – 1 unit
DALLAS (-6) at Tampa Bay – 3 units
PHILADELPHIA (-1.5) at Carolina – 0 units
New York Jets at HOUSTON (-4.5) – 1 unit
Kansas City at BALTIMORE (-13) – 5 units – BALTIMORE/Survivor Pick of the Week
Washington at NEW YORK GIANTS (-6) – 2 units
St. Louis at SEATTLE (-8.5) – 3 units
CHICAGO (+3.5) at Green Bay – 1 unit
SAN FRANCISCO (+6.5) at Arizona – 4 units
Buffalo at NEW ENGLAND (-10.5) – 2 units
SAN DIEGO (-9) at Oakland – 1 unit
There… Now you can hold my nuts to the fire if my net unit picks record a loss…
See, it’s not so hard… NFL starts TOMORROW, not earlier this summer…
September 9th, 2009 at 7:58 pm
Ahab-
Helene Christensen? Uh no, we aren’t acquainted…although my wife did recently curse her, causing her suffer a significant case of soroche, o sea la tumbó a distancia por celos sin fundamento!
She was supposed to show up at the project in Pallpata, Espinar but fainted in Cusco due to soroche (see above) and was whisked back to Lima post haste…not a very successful PR play. Long story short, I drank the yogurt meant for her, and shook the hands of the delegation that was expecting someone far less hairy and far more lovely – I am the kind of handsome that works in the dark. All very odd, all very true. I even gave a speech on human ingenuity and topography- I was a doozie! More stream of consciousness at play than in Dutch Schultz’s last words…I think I may have even changed the town’s slogan in my flight of fancy- It was 4700 meters above sea level (for you greenhorns that’s many, many feet).
September 9th, 2009 at 8:20 pm
“but by all means- ride the bullshit train to riches” – ahab
Thanks :) I am enjoying the ride along with some great company like Grantham, Paulson, Fleckenstein, Faber and the host of this site who has leaned long all year while being short last year. Sailing means knowing the direction the wind is blowing! In fact I am having the best 2 years since I actively took over managing my portfolio.
September 9th, 2009 at 8:32 pm
@MRegan
“It was 4700 meters above sea level (for you greenhorns that’s many, many feet).”
Let’s calculate that in GreenBACKS, for fun (and for perspective)… 4,700 meters…
Take a building such as the dimensions of one of the former World Trade Center Towers…
The pile of greenbacks would need to be is 125 feet wide, 200 feet deep, and 450 feet tall… But to stretch the pile up to 4,700 meters, you’d need to get it to over 14,100 feet… That’s more than 31 World Trade Centers high…
Now the greenback fill of EACH of those World Trade Centers would be roughly 315 billion dollars… So the total amount would be between 9.5 and 10 trillion dollars…
So now if you compare THAT to the amount of cumulative debt that the present Administration plans to run over the next decade, it comes out be be roughly equal…
So I guess it depends on where you stand… You’re either in the ionosphere (needing an oxygen mask for survival)… Or you happen to be some kind of Andromeda Strain bacteria that somehow enjoys perfect pH equilibrium at that altitude…
September 9th, 2009 at 9:49 pm
Throw in another trillion ie 3 more WTCs and we’re at 15275…that’ll get you to Pallpata, but if you’re are going all the way to Condoroma, well, you’re need some more printing presses. As for geosynchronous orbit, Earth control to Major Ben…
Nice math, cvienne
September 9th, 2009 at 10:13 pm
@ ab initio 6:38pm
Great post and (finally) a reason behind a bull comment.
We tend to agree on debt, the response of governments around the world and what it will be again (more stimulus), and eventual inflation (don’t mean to put words in your mouth but I think it is safe to say you agree it will happen – when is the key). Our difference lies here:
“My earlier post was to point out that the ECRI leading indicators have a significant growth rate. Most of the companies that I follow are raising their production volumes and earnings estimate for the next quarter.”
What happens to these companies when inventory sits because people aren’t buying? Retail sales are down. Credit is disappearing and/or gone. Interest rates on used credit is rising. People owe more on houses than they are worth. New auto payments are starting thanks to CFC. Unemployment is still horrific and while “the numbers are not as bad” anymore they aren’t good either (the jury is still out if the last two months was a seasonal trend). Up to 1.5 million Americans will go off some sort of social assistance/welfare/government money by the end of the year. ETC. ETC. ETC. Where are people going to get the money to buy the inventory? If the inventory does not move, what happens to earnings estimates? If earnings estimates are off, that means demand was off, that means equities and commodities are currently way off.
September 9th, 2009 at 11:49 pm
I care about the price action absent volume. Last week the S&P didn’t violate the trendline from the fibo arc retrace (see here: Fibo Arc Retrace). The weekly TLB (3LB) turned up on 5/1/09 & started trending on 6/5/09 (see here: S&P Weekly TLB).
Even the dollar has been weak since turning down on 5/8/09 (weekly chart).
I know the consumer is saving, the fundamentals suck, the economic indicators lie and China is about to screw us over real good. And the month isn’t even over yet.
September 10th, 2009 at 12:22 am
mcHAPPY
What we have is an epic battle between two powerful forces. The force of contraction led by deflating consumer credit (and all the points that you bring up) countered by the force of fiscal and monetary expansion led by inflation in government credit.
In this environment and the associated volatility it is better as an investor to only play a move or two ahead. Not three to five as conditions and ground realities can change rapidly. This means being flexible and not tied to any particular dogma.
By no means have any of the problems that created the financial crisis been solved. Banks still have impaired balance sheets which are getting worse as delinquencies and defaults rise. CDS is still traded over the counter with no supervision. Regulatory capture continues unabated. Off-balance sheet accounting gimmicks still prevail.
As you point out unemployment is bad. But there’s no chance anyone will roll off the dole in an upcoming election year. The government will keep ponying up, guaranteeing risk and subsidizing spending until they can’t. The Fed couldn’t be more clear as they have stated they will not ease on the gas until they see inflation. And all the pundits that the Fed and Treasury listen to from Krugman to McCulley are calling for inflation. The Fed has already crossed the rubicon with their alphabet soup lending vehicles accepting dubious collateral. No measure will any longer be considered extreme. The rise in asset markets have allowed many folks to raise capital and retire expensive debt.
The markets will consequently gyrate between optimism and pessimism. Some point in the future consumer balance sheets will be sufficiently repaired as is beginning to happen over the past 6 months with rising savings rate and that will set the stage for a more sustainable recovery. In the mean time we will see swings to the upside as government stimulus produces gains and swings down as the contractionary forces seem to grip investors minds.
The next meltdown occurs when government credit gets questioned and there is a cascading crisis in government’s ability to finance its debt. The world political and banking establishment is betting that by that time the worst of the contraction is over and private sector balance sheets are sufficiently repaired that such a meltdown can be prevented.