So, was that it?
Is the EU fixed? Is the the worst of the market correction now over? Is everything hunky-dory once again?
I don’t buy it — how about you? Do you think we have more down side to this mess, and why?
Bonus points if you can work something in about the east coast blizzard coming my way . . .
~~~
What say ye?
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
"Overall household indebtedness is up from $7 trillion to almost $10 trillion since 2000. On this sum, we estimate, the American consumer has an annual interest bill of more than $500 billion; a sum, by the way, that vastly exceeds his current income growth." —Kurt Richebacher
"The Greek offer is not sufficient and they have to go away to come up with a revised plan," said a spokesman for the German Finance Ministry. The Greeks must first have a plan that satisfies the Germans which this comment states they clearly don't yet and then the Greek Parliament will vote on it this weekend. This said, whatever package gets voted on in Greece is basically an up or down vote on euro membership so we are entering another uncertain weekend for global markets. A failed vote will likely lead to a hard default which may be what...
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February 9th, 2010 at 7:37 pm
EU is not fixed at all. They can’t open up handouts. It’ll never end. The fact is almost every country is in some type of debt trouble and if they aren’t as the depression drags on they will be. I’m glad to see you don’t buy it. At least then you’re money is adjusting accordingly for your customers.
We have a lot more down side to go because of the almost insane earnings projections for 2011. I think growth expectations are somewhere around 30%+. I think it’s impossible and maybe the market takes time selling down over the year. The debt crisis spreading just will make it go quicker.
Some joker came out this morning on CAT and projected earnings of $8-10. CAT just barely squeezed out $2.50 this year and they are going to get $10 bucks next year? 400% growth, yeah that’s likely. I think it was just a ploy by Morgan Stanley who maybe had put options going really against them or major stock positions. Either way it’s a joke.
Looks like I may get out of the major snow fall in Allentown here. Doesn’t look as good for you Barry.
February 9th, 2010 at 7:48 pm
I do not know what to call today’s activity – Head Fake/Dead Cat Bounce/ETC…I do not buy it either.
The mountain of debt GLOBALLY will have a negative efferct on earnings…especially here in the states. I read/heard somewhere that approx. between 30-50% of S&P earnings come from overseas…this Euro action HAS to have a negative effect on earnings. Those Bulls out there are fooling themselves or believeing the hype (you’d think they would have learned their lessons from the credit crisis).
“This Time Is Different” is a fantastic read (not as good as Bailout Nation, though) & roadmap for what’s coming (this is HUGE as I’ve never been the chicken-little-type). The sky will eventually fall…only those blinded by their own hubris cannot see this!
February 9th, 2010 at 7:52 pm
The EU will be fixed the way our housing problem was fixed – by a series of maneuvers that results in shifting private losses to socialized losses. It will likely be a little bit of every solution that has been proposed so it looks like no one has to put too much skin in the game. Before the fecal matter finally hits the circulating blades a whole bunch of other more pressing issues will capture the attention of the bond and CDS markets and everyone will return to thinking of Greece and the other PIIGS as mere culinary choices.
Market correction is not over until everyone sees the emperor has no clothes.
After about 30 inches in DC and another 8 – 14 inches expected it still doesn’t exceed the snow job we’ve gotten from the Geithner & Bernanke tag team about everything being hunky dory (one r or two?).
February 9th, 2010 at 7:53 pm
The rally on the rumor of an EU rescue plan is almost as big a snowjob as I’m expecting tomorrow in Westchester, NY.
My sense is this European sovereign debt crisis may snowball anyway.
February 9th, 2010 at 7:58 pm
It isn’t snowing snow you see
In Greece we merry be!
So if it’s snowing, don’t run under a tree
They’ll be dracmas from Germany for you and me.
SS
February 9th, 2010 at 8:05 pm
I think the broad has put in a short term bottom at the Friday low and now it’s back up. That said I am not convinced we will see a new high and expect we’ll see struggles getting past 1100 on the S&P. So I expect a choppy and more volatile rise that will get up to 1100 and maybe as high as 1140 over the next 3-5 weeks. Rationale is the long term trend remains intact and support last Friday came right at the level where my trading system was showing continued uptrend support in the weekly time-frame. Fighting that uptrend is continued downtrend resistance in the intermediate time-frame, which currently I mark at 1100.5 on a daily chart. Really bad weather on the East coast will catalyze the short-term stock market recovery as Washington will be shut down for probably the rest of this week, which means short-term political gridlock. A great catalyst to get stocks rising.
Is the Euro fixed? Well in currencies the question is always compared to what? Relative to the Pound, yes. Relative to the yen, no. Relative to the dollar, maybe but not likely. More likely the dollar and the Euro will trade sideways for a while, with the dollar index ranging between 76.5 and 81.
February 9th, 2010 at 8:08 pm
Don’t know if you saw this: http://blogs.reuters.com/felix-salmon/2010/02/09/how-greece-hid-its-borrowing-in-the-swaps-market/
This is not over. The EU is not saved. And the scope is much larger than it appears. Unlike what your local weatherman is predicting.
February 9th, 2010 at 8:09 pm
Now that the crisis is over and we will all live happily ever after….:-)
I ponder what a real depression will look like in the 21st century? How do we differ as a society from the 1930′s crowd? What lasting effects will it have on our generation and on our children?
Open questions into an open thread…
February 9th, 2010 at 8:18 pm
Was the Wall Street crisis “fixed” with Bear Stearns? (is it fixed now?)
There are a LOT of leaky boats in the EU flotilla …
http://www.businessinsider.com/chart-of-the-day-cds-evolution-for-some-emu-countries-2010-2
February 9th, 2010 at 8:22 pm
The US view is that there ‘must’ be a bailout; that’s just how we are conditioned.
That’s not how the Germans think.
February 9th, 2010 at 8:25 pm
Well, the Brits are having some troubles ….remains to be seen about NYC, DC and the rest of the Country…but it’s been a bad start to the new year. The South got the snow last weekend. I know we had a business client meeting with folks flying in from other areas of the country scheduled that ended up with everyone canceling out of it last Friday because of the weather forecast. So far, no one has been able to re-schedule the meeting which was an important one for funding a project. How much commerce is being delayed…and how many opportunities lost because of this crazy weather? Then there’s retailing. But, that’s always slow in January, anyway.
===========
From “The Guardian”2010-02-09
” Sales hit by snow and economic woes” The Guardian
The High Street suffered its worst January in at least 15 years after snow and economic woes hurt sales, the British Retail Consortium has said. The “awful” start to 2010 followed the strongest December for eight years and dampened hopes of a strong retail recovery. Total UK sales rose 1.2% on a year earlier in the month, the lowest ever reading for the month since the BRC’s Retail Sales Monitor began in 1995. Same-store sales values fell 0.7% in January compared with the same period last year, which was the worst figure for 14 years. The figures are much lower than economist…
http://article.wn.com/view/WNATBEFADBDE24DAEF8C92F366B7F2093A9D/
February 9th, 2010 at 8:26 pm
First, you better hunker down out East, b/c the winds are howling tonight in Indiana. While our snow amount came in less than expected (ah, weathermen and economists…) It is the type of snow that drifts well…children are praying for snow day… I suspect this puppy will be supercharged once it gets to you all tomorrow and gets that infusion of southern moisture.
J Saut stated we are in the midst of a selling stampede (his words). I think he says those last ~25 sessions with a couple one or two day lifts in the midst to give hope (kind of like that bully that gave you a swirly in jr high…)
I think we’re stuck in the 1070-1085 area and will retest that 200 day level sometime soon. Whether we hold it or break it will be news driven… The reaction to this Greece thing reminds me of the Asian contagion, when this little country, Thailand, revalued their baht… all the talking heads said “no big deal”, “tiny country”, “non-event”….They, of course, were wrong and it created a cascading event in Asia and ultimately a few more fun memorable events. So my spidey senses are pinging on Greece, the Piigs, the Stupids, or whatever. I find no solace in hopeful words like “contained”, “minimal”, etc. This is a real test of the U in the EU. All for one and one for all, or, that’s not my problem…??
Of course, this has naturally led to Greece/California compares. Nice areas, on oceans/seas, with no sense of fiscal responsibility and leaders that speak in thick accents…I think if “we” get a chance to think about these things too much or too long, the whole market environment could get very ugly quickly as I believe psychology plays an important part in convincing people to take their work credits (money) and place them into facsimiles of companies (stock) based on the hope that tomorrow will be better financially for the companies and be reflected in the facsimiles. There’s a lot of hope and trust involved in what most of us try and convince ourselves is a mathematical, fundamental, logical process called investing.
By the way, how much do we save each day that D.C. is shut down because of snow? Maybe we should pray for blizzards more often.
February 9th, 2010 at 8:36 pm
BR,
10 inches of snow in Detroit and 20 in D.C. at least we can still drive.
Disturbing news from mutual fund cash flow in 2009. The public was buying foreign funds and bond funds. This tells me the bottom in international markets is a long way down and the bond market has problems ahead. Has anyone noticed that JNK is breaking down? Maybe the Fed is pushing on a string and the great American consumer is really dead.
I am 55 years old and I hit my “Number”, that is the amount I figured I had to have to retire at age 60. I am down to 30% equity from 50% in January. I am paying off my mortgage, I paid cash for two cars at the Pontiac going out of business sale and won’t need another car for 5-7 years. I bought 3 suits at the Hickey Freeman bankruptcy sale and probably don’t need another suit till I retire (or lose 15 pounds, like that is going to happen).
I don’t buy unless the Sale is compelling and that means I don’t buy equities at PE10=21 and I don’t buy corporate debt at 2007 spreads. The way I see it Deflation is right here and points to more trouble ahead.
February 9th, 2010 at 8:36 pm
Here’s my take:
We have a candy jar with 55 candies and 50 people. We have enough for everyone to have a candy and some left over in case someone drops theirs in the dirt or accidentally loses it. The problem is everyone is trying to grab more than one candy, which is unsustainable and will inevitably end in punches being thrown.
Workers in Greece want to take out more than they put into the system. People in Spain want their inflated wages but don’t want to pay taxes on them. US citizens want the government to bail them out but not to tax them, net-exporters want people to buy their things, but would rather not see *their* money go anywhere else. Day traders want to make a ton of money, hedge funds want to chase arbitrage, banks want to carry their way into prosperity, etc etc.
It’s unsustainable. Everyone is spending so much time trying to take advantage of another or take more than they put in that we are left with a bunch of capital and no good place to put it. In other words, people need to stop trying to extract value and start worrying about creating it.
I, myself, sold off what had been a purely FI portfolio and did what I swore I never would–bought equities. Right now I am concentrated in companies that I have determined to be value producers. That means that they may make modest sums of money compared to competitors, but they make a very little % of their money and spend a very little % of their inputs trying to extract value. Yeah, I may miss out on some huge rallies, but at least I know I don’t have to run for my chair when the music stops.
The correction will continue, IMHO. I don’t think we’ll see a retest of March lows by any means, but I am fully anticipating losses across the board in all risky assets and some upside in TSYs and high-quality credits as people realize deflationary pressures last longer than their stocktwits-generation attention spans do. Eventually, we will have inflation as the entirely world devalues their fiat currencies to inflate away the debt they had to take on because their greedy citizens demanded to get more than they put in, but in the short-term, deflationary pressures will be hard to fight-off. We are on track for a couple of years of sideways movement and slow growth. Simply put, we borrowed too much in good times, and now that we could really use that money, not only can we not have it, but we are paying interest on it. This is going to be a big drag for a while.
Personally, I see a good case to be made for buying dividend-paying providers of low-elasticity services like water and sewage with IG credit ratings and fixed-rate long-term liabilities. In case of a deflationary environment, They’ll keep collecting their money and paying off their long-term debt, and in case of an inflationary scenario they’ll benefit in the short-run from having borrowed long-term, which should help deal with the shock of possibly having to raise wages months or years before they can raise rates.
It might not be a gold-mine of an industry, but I think the value created means it’s money earned, not taken.
(Disclosure: long IG munis, EMKT SOV, a couple of water utilities, short HY)
February 9th, 2010 at 8:38 pm
I have seen a pickup in my employer’s retail sales since the middle of January. I want to know what will be the aftermath once the U.S. starts to default on bond payments.
February 9th, 2010 at 8:42 pm
Short the U.S. government
http://theburningplatform.com/economy/charlie-dont-surf
February 9th, 2010 at 8:45 pm
from this morning’s Breakfast with Dave (Rosenberg) … a cautionary note (what else?):
“… as for the Euroland, don’t take its longevity for granted either. Go back to the history books and read about how long other currency unions lasted in that part of the world in the past (like the Latin Monetary Union circa 1867 or the Scandinavian Monetary Union circa 1873).”
Always good to keep history in the back of one’s mind …
February 9th, 2010 at 8:51 pm
The main problem in Greece is that Tax evasion is the National Olympic sport of choice. Tax revenues expressed as a percentage of GDP are about half what they should be comparing to other “Developed” nations.
Trichet is no fool and knows very well that if Greece gets a bailout, there will be a line outside the ECB with Ireland, Spain, Portugal, Italy at the front. Best guess is that some sort of IMF solution will be found, if not using the IMF directly. It’s got to the point all over the world that our Politicians are congenitally incapable of making tough choices about spending and need to be forced to do so. More importantly, being Politicians, they need to be monitored every step of the way like naughty the school children they actually are.
February 9th, 2010 at 8:57 pm
No it’s not over. I’m hopeful but not convinced that we won’t see 666 again. Why you ask? Because I believe politicians and bankers are essentially the same the world over. Truth is not being told anyplace in the world so there is no way to accurately assess risks in the world monetary system. The BIS website lists 165 central banks in the world. Let’s estimate that half of those banks are such minor world players that they probably could crash and burn and produce chaos and misery for only it’s own citizens and immediate trading partners. That leaves approximately 80 central banks of greater consequence. I will assume that there are only 20 (as in G20) central banks of such singular importance that an uncorrected minor mistake could lead rapidly to international financial contagion. That leaves about 60 2nd tier central banks of enough significance that a major mistake on their part could initiate a chain of events that, due to the globalization of the financial markets, leading to another major crisis. I believe that the hurdle to be cleared that will initiate the next crisis is much lower than the last one.
There is a blizzard of debt raining down around the world that makes the ongoing East Coast blizzard look like a New York City ticker-tape parade. A ticker-tape parade will be cleaned up in a few hours by a brigade of street sweepers following the parade. Unfortunately, the world debt problems are being dealt with by a bunch of semi-coordinated self-interested central banks that are responsible for their own constituency first. Add the geopolitical complications of Islamic fundamentalists and an increasingly belligerent China and it appears to me that we find ourselves in a situation similar to trying to thread our way though a minefield in the dark with only one eye open.
Washington is probably beautiful under a blanket of white show. Heaven knows that a white blanket of snow would be the only virginal thing about the place. In my minds eye I visualize it more as a big white pillow being gently lowered over the face of a sleeping Washington. But then again, rebooting Washington might be the biggest black swan of all.
February 9th, 2010 at 9:00 pm
I don’t know who Mr. E is — but I dig his style…
On a long term basis (monthly chart) we never flipped bullish during this entire countertrend rally from 6500…
PS Its not snow coming, its surplus feta!
February 9th, 2010 at 9:02 pm
The S&P surge from the March low to the January peak was a very hefty 70% retracement, and so far we’ve corrected to nearly 7% after approaching 10% on the 5th of this month. Where do we go now? I have no friggin clue.
I do know this, we perhaps reached the market top in January, and we could run back to that point in the next few months, but it’s a highly speculative play to pickup some chips here with the hopes of reaching anywhere near 1200 on the S&P.
I entered my short positions a few months ago, and if the market continues to rally substantially higher, I’ll mark it as an opportunity to increase my stakes, because I see the downward trend continuing well into the year.
By the way, reports from Germany suggest the Greece bailout rumors are fundunded, so tomorrow ought to be interesting:
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/madoff/ES%202.9.jpg
February 9th, 2010 at 9:06 pm
My prognosis: It’s going to be cold. It’s going to be gray. And it’s going to last the rest of your life.
Wait… Are we talking about the weather or the stock market?
February 9th, 2010 at 9:10 pm
hahahahahahaha-
the only way to fix the debt problem is credit destruction = deflation = depression-
not the end of the world-
but a new beginning
February 9th, 2010 at 9:16 pm
wunsacon-
I love that- your last post- very Henry Miller-ish-
from Tropic of Cancer-
The weather will continue bad . . .There will be more calamities, more death, more despair. Not the slightest indication of change anywhere . . .The weather will not change
February 9th, 2010 at 9:16 pm
What happened to CNBC Sucks? Did he get banned for life?
Is the selloff over? Did Kramer call the RE bottom in June 09? Did Summers call the economy bottom in July 2009, was it really the 7th inning a year ago?
February 9th, 2010 at 9:19 pm
yeah, on Mr. E’s team, took long positions late monday
got a major pivot point on the dollar of 80.40 going back years, inching up, pulling back for a test is my guess, so got a positive bias on equities, coming into options and then ?????
now who knows how this stuff goes, yet, if you read the blog hogs, the present teaser is Euro in total needs 1.6T like we do this year, now, i know there banks are in worse shape per gdp of there countries, etc., yet, this is a new take on things
long term bearish
February 9th, 2010 at 9:31 pm
We’re still walking the tight rope between hyper deflation and hyper inflation. CB’s want to bail out everything without the liquidity bleeding into commodities and choking off what “good” they hope to accomplish by maintaining expensive asset prices (like homes). If they bail out nothing, all these undercapitalized businesses and central banks will fall like dominoes. If they can, they will “extend and pretend” for the next 10 years.
I don’t think they’ll be able to do it. So many things can go wrong. But, I don’t know which side of the tightrope we’ll fall.
February 9th, 2010 at 9:34 pm
I’ve mentioned several times that:
- I would not have elected to bail out Fannie/Freddie. But, that ship has long sailed.
- Given where we are and putting myself into the Establishment’s shoes, I would:
(a) mostly “extend and pretend” but selectively allow some non-critical businesses to fail
(b) coordinate with all Central Bankers to provide cash to their constituents in return for the worthless assets on their books
(c) eventually engage Central Bankers and negotiate mutual debt cancellation (e.g., US forgives Japan debt while Japan forgives US debt, at current or negotiated exchange rates).
But, it’s probably important to “hide” this plan from private players until event (c). Why? Replacing all that bad debt with actual currency is implicitly incredibly hyperinflationary. If private investors knew the outcome, they would immediately rush out of Treasuries/bonds/cash and bid up the prices of commodities and commodity producers to very, very high levels. CB’s would either have to allow yields to rise (which kills the hoped-for recovery) or be the only buyer in bond markets. When they’re the only buyers in the bond markets, they’re on one hand adding to the national debt and on the other hand supplying even more liquidity to the market (which “justifies” the inflation expectations). So, “mums” the word.
Since I don’t work in Treasury or even in the FIRE sector, it’s hard for me to try to associate a probability with the above scenario. I just don’t know how far ahead central bankers think. (Yes, I know all indications should cause me to be pessimistic.) But, if Ben’s thinking very far ahead, maybe he’s planning a “mutual debt cancellation” “end game” but keeping private players in the dark as long/much as possible.
Lastly, avoiding “moral hazard” is left as an exercise to the reader.
February 9th, 2010 at 9:38 pm
ahab, I was ripping off Groundhog Day. (Do you know I can recite French poetry, too?!! ;-) )
February 9th, 2010 at 9:41 pm
wunsacon-
hahahahahah- it doesn’t matter- poetic none the less(-:
I take inspiration from all sources!
Actually more succinct then Miller himself(-:
February 9th, 2010 at 9:47 pm
Is everything hunky dory? I’m a software contractor and phone is ringing again, noticeably more so in the last week. I am being asked to do entire projects instead of the usual of supplementing existing full timers which means full timers will remain unemployed. Companies have no confidence in “The Great Recovery”. I don’t either, but welcome the paycheck. I’ll add it to my stash of nuts in short term US treasuries and keep an eye out for something of value to purchase. That does not currently include stocks…I’m short this market as of last month, getting shorter with each +1% rally.
February 9th, 2010 at 9:53 pm
Maybe the EU will save Greece … but what about the next country … and the next … and the next…
I had a professor in college that that used to constantly rail against the Euro and the EU. His reasoning was that the EU is a collection of countries that historically do not get along and the strong were losing a lot to support the week (in money, jobs, etc.). He also added that each country still runs their own deficits. His point was that the EU would reach a point in which some sort of financial crisis would come along and the EU wouldn’t be able to pass the test.
Think of Germans and French citizens dealing with their own problems being told they have to bailout the Greeks? Or the Bulgarians? Or the Turks? Or the … Or the … Or the ..?
Could you imagine if tomorrow we woke up and our government was hatching a plan to bail out Mexico or Canada? We would flip.
In America, most of us wouldn’t even be thrilled if we had to bailout eachother’s states. I’m in California and our government has really screwed the pooch. You think Wall Street rolled the dice on housing? California has been deficit spending for years betting property taxes would never go down and housing would continue doubling every few years.
Now how do you folks in the Northeast, Midwest and South feel about that? Are you guys anxious to come to the rescue of California? But aren’t we all Americans together?
Now take that idea and mix in centuries of Nationalism and a few good measures of economic despair in the richer nations about to take on all the risk or drop in the money and tell me how long the EU will prop up some of its defunct member states?
I have a German friend, that looks down on Austrians. I (being an American) thought Germans and Austrians were the same group.
So I put my money on the EU tossing some money on these fires but they won’t be going “Helicopter Ben”-style and dropping a flood of money to put them out.
Once The Marketeers figure that out … I don’t care how cold it is in NY, ya betta have ya shorts on…
February 9th, 2010 at 9:54 pm
I got one for ya Barry
During this snow storm, we’re going to see a massive slowdown in normal activities and an uptick in rational thought due to the hatred of cold toes, car crashes, and leaving the kids at home to burn up the upside down house. During this reflective period, people are going to start thinking about their investments, wondering if they’re safe. Obviously the EU is in some debt trouble. This means their governments are going to be paying out higher yields, moving some capital from our markets into theirs. This also means that the dollar will continue to strengthen with an inverse effect to equities. The only argument concerning EU investment I see is this – it’s bad now, but we must believe they will recover and must invest in it; breaking apart and redoing entire economies will be a kick in the nuts to the world and our investments would be screwed anyway, especially when considering that they’ve implied a ‘we’re in this together’ mentality by backing their black sheep Greece. It’s going to be a snowball effect of small investors getting out before their retirements and well being are wiped out again. However, I don’t think it’s going to be nearly as bad as a March 09 run- after this last recovery people will be overconfident that another money making opportunity is in the atmosphere and jump back in to securities much faster. For shits and giggles, I’m going to make a guess at 850 for May, then a smooth recovery into the summer, when you east coast kids are not so prone to cold, thought-filled days.
Last thing Barry, could you call my university and let them know you don’t need me going to my advanced accounting class tomorrow night with all the snow we’re due. I need to be learning how to make money, not count it.
February 9th, 2010 at 10:00 pm
Sell the rips, not buying any dips.
It’s not over, still think we will get that 1038 pretty soon. Bloggers are bearish. Trichet will have to come up with some choice words on how to mitigate the EU problem. Hussman market commentary as well as Mr. Hui is jangling around in my head. LOL.
Living in CT., ready to move a mountain….
http://www.businessinsider.com/check-out-the-snow-thats-about-to-reign-down-upon-the-northeastern-us-2010-2
February 9th, 2010 at 10:02 pm
I would be blown away if we traded under the 200 ma during this consolidation. I mean who’s not bearish? I still think this market has a 618 written all over it pointing to 1228 ish. If we are going lower I think we will do it in a big chunk, no real trading. Market opens and two hours later we are down 700-800 points when the ship of state gets holed during the night by something bigger than the ink well they are using to print money bailing everyone out.
Short of that event we are trading higher. We went full tilt Keynesian mode when we decided to print trillions last year. We are all in, in a no limit game. There is no turning back. Every country in Europe and every state here will be bailed out if necessary. When the ink runs out its over–it could be several years.
February 9th, 2010 at 10:19 pm
Down here in Texas I just don’t feel the panic. The bull just ran and ran in 2d half of 2009, no correction because the money managers were playing catch up. Now was a good time for a correction both because it was overdue and because the money managers remember the stomach turning free fall of last February, so there was some acting out over —– Greece? Greece isn’t the cause of anything in the stock market.
Regular people in 401(k)’s ran away from stock funds into bond funds, and that money is like a big glacier that will feed the stock market for quite some time to come. Why? Because no regular person understands the risk of principal loss in bond funds. Until they do, the flow of 401(k) money to stock funds and index funds will be slow but steadily increasing as the negatives of bond funds are felt by the 401(k) investors and, on no particular schedule, stock fear abates.
February 9th, 2010 at 10:22 pm
I really liked John Hussman’s latest piece on the market still being overvalued and prone to high risk:
Cautiously Pessimistic
February 9th, 2010 at 10:26 pm
If someone has minute, please explain a how “possible aid to Greece” is bullish for EC and bearish for the dollar—the move today really surprised me…
February 9th, 2010 at 10:36 pm
bobby-
it’s not-
trade accordingly
TK-
hahahahhahha-
dumbest thing I ever read
February 9th, 2010 at 10:49 pm
If the observation of an astute stock market trader is accurate then no it’s not over.
“It is impossible to know if the stock market will go up or if it will go down. But it is a certainty that it will fluctuate.”.
February 9th, 2010 at 10:54 pm
This market has emotional issues. It doesn’t pay to try to assign any rhyme or reason to anything you read in the news, only distracts you.
I pity investors who attempt to trade silly things like earnings guidance, or fundamentals, credit contagions. Thats gotta be rough. This market cares not for any such things.
Truth be told, its equally terrifying to be long it or short it.
Anyone with the guts to put an idea out into this market deserves to get paid. But baby, don’t get stubborn.
Which of course means you are gonna get spooked out of a lot stuff, and get ground up. So ya gotta have alot of heart and a short memory to trade this market. Kind of like a good boxer.
My parting advice: Do more of whats working, less of what isn’t.
No charge for this meander-ing-ly crappy post – on the house tonight, boys.
February 9th, 2010 at 11:16 pm
It ain’t over until the fat lady sings “DJIAAAAaaAAAAAa 3600″.
February 9th, 2010 at 11:36 pm
Dow 20500.
February 9th, 2010 at 11:37 pm
Is the market correction over? Don’t know, i’m not good at the short term stuff.
But i love Supply and Demand, everything is Supply and Demand, as is drilled into you in Econ 101.
Somehow, the hedge funds and money managers seem to have a complicated leveraged bet using
borrowed dollars (dollar carry trade) which bought oil/OIH, commodities and commodity companies,
China related stocks, early/mid cycle stocks, … When the dollar goes up, they desperately need to
sell the stocks and stuff they bought with the dollars to deleverage their portfolios.
Other demand for stocks items: There is in incredible amount of money out there, due to central banks
trying to recover from this economic meltdown. The money has to go somewhere, there will be “inflation”
in assets, it’s a matter of time and which assets see this “inflation”. One prob with stocks right now is,
that the American public is rightfully PO’ed about being lied to by the system, “Put your money
into stocks for the long run, you’ll be OK”. People have been fooled twice in the last decade, so they
are not putting money into the stock market like they should under “buy low, sell high”.
When does the downturn end? Supply and Demand issues effecting this:
1) When the dollar stops going up, so the hedge funds can play their dollar carry trade stuff again to
buy stocks and commodities. Or, they find a new currency to borrow to ply this trade.
2) When the Chinese get back from their New Year vacations, they usually start to buy commodities again.
I don’t understand China, but even with their bank lending pullback to curb their speculative housing
and stock bubble last year, they seem to have new goals set and the money to implement them at the
start of each of their New Year. And each of them are singularly focused on implementing their goals.
(Totally the opposite of Greek workers, argh in frustration)
3) Stocks get cheap enough that value buyers overwhelm the hedge fund trader selling. There are so
many stocks cheap right now, such as Intel (forward p/e=11), HPQ (same), Apple ($13, after subtracting
$40 in cash), and many others. Cramer said buy SLB when OIH panics to just above $100, …
There is just so much money supply sloshing around out there, courtesy of both monetary policy and
fiscal policy, these low P/E’s won’t last.
During this downturn over the last few years, government intervention was what temporarily stopped
the downturn and eventually reversed it’s course. This government intervention in Europe gives the
feel of being a temporary stop to the downturn, it should be obvious whether this stop to the downturn
is temporary or not after the short covering completes late in the day tomorrow.
My take is that this is a good time to SELECTIVELY buy stocks, on panics, that are extremely undervalued
on a long term basis, and set stop losses underneath them in case it’s wrong. I think it would be very good
to be back into the markets, in selective stocks, prior to the Chinese ramping up again after their long break.
I wish i knew though.
————————————————————————————-
BTW, great article in the Atlantic, “How a New Jobless Era Will Transform America”, http://www.theatlantic.com/doc/201003/jobless-america-future
We’re basically going through a mini-depression in employment, with U6 at 18% for a LONG time.
The economists and rah-rah cheerleaders are bozo in saying things are better with 2 quarters of
improving economic growth and some stock market recovery. There needs to be more articles like
this in the media, telling it like it is, and the effects from it. Such as the stories we heard from our
grandparents who lived through the great depression, but updated by us for the current mini-depression.
February 10th, 2010 at 12:05 am
Someone I know pointed this out to me…that in the last 3 weeks, some 50 CEOs and CFOs have resigned abruptly. Anybody hear about this? is this abnormal or a sign of very bad things to come? I haven’t had time to dig further.
http://www.rumormillnews.com/cgi-bin/forum.cgi?noframes;read=166381
February 10th, 2010 at 12:12 am
BTW, unless I’m insane, I calculated 50 Trillion in excess global credit. So no, I don’t believe vague plans to bailout Greece have fixed the problem.
February 10th, 2010 at 12:18 am
This is the beginning of the end of the beginning of the sell off. With the cluster of f&^*& that are the EU financial books, this ain’t over, not by a long stretch.
The snow party is in full swing here (west of Philly) . Gonna be ugly; heavy and wet snow that will freeze overnight. Fortunately, wind is behaving like a good boy…for now.
February 10th, 2010 at 12:25 am
@Bobby
In economics cause and effect are difficult to discern. Here is a simple answer to your question.
The Euro is considered a safe-haven currency. If Greece defaults, investors will worry that investments, valued in Euros, are at risk. Investors will therefore seek safety in investments in other safe-haven currencies such as the dollar. Since both the Dollar and Euro are both fiat currencies (ie. they are valued based solely on supply and demand) if one currency is in higher demand than another, it appreciates.
February 10th, 2010 at 12:59 am
Where is the bottle of vodka?
February 10th, 2010 at 1:20 am
Up, down, left, right. Nobody has a clue, but it sure is fun to talk about. I surely don’t have a clue, so I choose to follow the market rather than try and predict it. The unarguable fact is that we are still in a secular downtrend that started from the high in 2007 and is fully intact. We bounced off the downtrend line on the weekly chart like clockwork. We are also in a daily chart downtrend that began mid-January . However, a small uptrend has formed on the hourly chart, so I am long until that small uptrend breaks.
All I do is follow the market, and after more than a decade of managing money on a daily basis, I suggest everyone does the same. Take a look for yourself and see what you think. Nothing is for sale, this is just sharing info….
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3274981
February 10th, 2010 at 1:23 am
Guess it depends on your portfolio.
Just read that China Minmetal’s chairman estimates that China’s imports of refined copper will drop 50+% yoy in 2010. Should present a nice opportunity.
February 10th, 2010 at 1:50 am
Depends on your time frame. Go short if it’s 1 day, long if 3 days, short if 2 weeks, long if 2 months, short if 8 months.
And if there’s an east coast hernia surgeon ETF you should sell volatility on it tomorrow…. the dead of winter is over in 5 days.
Buy Greek olives at all times.
February 10th, 2010 at 4:51 am
remember, that there is this, still, in the background..”…On the surface Keynesian theory allowed for continued capitalism with periodic massive government infusion the markets by borrowing trillions of dollars and inserting it into the economy. In 1944 this theory was implemented at the Bretton Woods New Hampshire, Conference as Western leaders met to establish the World Bank and the International Monetary Fund. Also on the table was Keynes’ one world currency he called the Bancor. Recently China’s economic leader Zhou Xiaochuan has asked the world to revisit implementation of the Bancor.
What is most surprising about Prime Minister Harper’s statements and actions is the fact that he has been a life long opponent of Keynesian economics. Harper used to be well known for opposing deficit spending and he wrote his Master’s thesis against political manipulation of the economy. Somehow he had an epiphany on the Road to Damascus and has been converted to Keynes’ global economic system. He promptly scrapped his balanced budget and replaced it with a massive deficit spending plan. In Harper’s speech he explains “If I may be indulged in a personal recollection, what I saw at the Washington Summit made a huge impression upon me. Nations whose interests have been often at odds, nations with different traditions of governance — rivals, even former enemies — found themselves addressing common problems with a common will. In this globalized economy, they recognized that a flood engulfing one would soon swamp them all. So, even though these twenty-some leaders all represented sovereign states, they agreed to common, synchronized actions to chart the same course toward calmer waters.”
With Harper’s new found enlightenment he went on to describe this new “global economy” with hope saying “But ladies and gentlemen, in that brief parting of the veil, I saw world leadership at its best, a glimpse of a hopeful future — one where we act together for the good of all. The world we have been trying to build since 1945. The world we want for our children and grandchildren. It can be done if we act together.”
With new globalist vigour the G-20 Chairman announced that his task this year is to fight against national sovereignty amongst the twenty nations. He first warned of the perils that would follow if sovereignty was exercised. No one wants to see another massive economic crash described as a double dipped recession or even worse a recession. Harper admonished all stating that “In fact, if inadequate regulation is not addressed, I believe the consequences could actually be worse than before this crisis.”
…”
http://www.canadafreepress.com/index.php/article/19829
while, courtesy of the MSM, we get bombarded by ‘Snow-pocalypse’-reports, and the tragedies of Federal Bureaucrats not being ‘on duty’ for a spell..
~~
From The Washington Post
Reviewed by Michael Kazin
What do Richard Wright, Gloria Steinem, Henry Kissinger, George Meany, Nina Simone and Arthur Schlesinger Jr. have in common?
Answer: Directly or indirectly, they all took money from the Central Intelligence Agency during the early years of the Cold War.
http://www.amazon.com/Mighty-Wurlitzer-How-Played-America/dp/0674026810
~~
MOCKINGBIRD
The Subversion Of The Free Press By The CIA
“You could get a journalist cheaper than a good call girl, for a couple hundred dollars a month.” – CIA operative discussing with Philip Graham, editor Washington Post, on the availability and prices of journalists willing to peddle CIA propaganda and cover stories. “Katherine The Great,” by Deborah Davis (New York: Sheridan Square Press, 1991)
As terrible as it is to live in a nation where the press in known to be controlled by the government, at least one has the advantage of knowing the bias is present, and to adjust for it. In the United States of America, we are taught from birth that our press is free from such government meddling. This is an insideous lie about the very nature of the news institution in this country. One that allows the government to lie to us while denying the very fact of the lie itself…
http://whatreallyhappened.com/RANCHO/POLITICS/MOCK/mockingbird.html
~~
yes, let us speak of Snow Jobs..
February 10th, 2010 at 4:57 am
It might have solved fears for now. But things could change quickly if a clear plan from Germany/EU does not come out soon to reassure the markets. They might have pushed the ball further down the road this way, and if a clear plan is ultimately presented,I think Germany will not give a free cheque for sure, there will be IMF style conditions as there should be, otherwise you never fix the problem. If so, It will mean realy ugly economic conditions for Greece for a while, with serious deflation, but hey, its the way out. It seems like politicians in greece at least publicly have accepted that the situation is going to be bad either way, and that the least bad for them would be to remain in the Eurozone and not default. Other scenarios like EZ+Default (Like a US State) are not so impossible, probably making a 30% haircut on the debt to bring it to a serviceable level, I would not rule it out. It depends on who are the big loosers in this situation. Greek banks for sure, but they are not the major holders of Greek bonds..
February 10th, 2010 at 6:56 am
“…What this means is that we’re creating less wealth here, because we’re not making much anymore. (And the biggest growth in American manufacturing has been in the military sector, where goods are made that are then destroyed when they explode over foreign cities, causing even more of our wealth to vanish.)
The main effect of the globalism fad of the past 30 yearrs — lowering the protective barriers to trade that countries for centuries have used to make sure their own local economies are self-sufficient — has been to ship manufacturing (the creation of wealth) from developed nations to developing nations. Transnational corporations love this, because in countries with lower labor costs and few environmental and safety regulations, it’s more profitable to manufacture products. They then sell those products in the “mature” countries — the places that used to manufacture — and people burn through the wealth they’d accumulated in the earlier manufacturing days (home equity, principally, along with savings and lines of credit) to buy these foreign-manufactured goods.
At first, it looks like a good deal to consumers in developed nations. Goods are cheaper! But over a decade or two or three, as the creation of real wealth is reduced and the residue of the old wealth is spent, the developed nations become progressively poorer and poorer. At the same time, the “developing” nations become wealthier — because those are the places that are producing real wealth.
Which brings us to Spain and Greece — and the problem of all developed nations including the USA. So long as globalism continues apace, the transnational corporations and their CEOs will continue to become fabulously wealthy. But, more importantly, they also acquire the political power that comes with that control of economies.
So they tell us that instead of putting back into place tariffs, domestic content laws, and other “protectionist” policies that built America from the time the were first proposed by Alexander Hamilton in 1791 (and largely adopted by Congress in 1793) until they were dismantled by Reagan/Bush/Clinton/Bush, we should instead simple “accept the reality” that we’re “living beyond our means” and we have to “cut back our wages and social programs.”
In other words, they get richer, our nations become poorer, and national sovereignty is reduced.
Nations — and in large countries like the USA, even states — must again rebuild their manufacturing base and become locally self-sufficient, so their own consumers are buying products manufactured by their own workers.
“But won’t that make Wal-Mart’s stuff more expensive?” whine the flat-earthers.
Yes, it will. But most Americans (and Greeks and Spaniards) would gladly pay 10 percent more for the goods in their stores if their paychecks were 20 percent higher. And manufacturing paychecks have always been higher, because manufacturing is where “true wealth” is generated…”
http://www.opednews.com/populum/print_friendly.php?p=Globalization-Is-Killing-T-by-Thom-Hartmann-100208-651.html
Globalization Is Killing The Globe: Return to Local Economies
By Thom Hartmann
February 10th, 2010 at 8:10 am
President Barack Obama said he doesn’t “begrudge” the $17 million bonus awarded to JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon or the $9 million issued to Goldman Sachs Group Inc. CEO Lloyd Blankfein, noting that some athletes take home more pay.
After the tough talk in the SOU speech it’s suddenly be kind to banksters week.
This is why we still have Turbo Timmy running the Corporate Welfare Department
February 10th, 2010 at 8:14 am
Steve Barry,
my gut would say no it’s not alot, first off 10,000 publicly traded companies, most ceo’s are older, so sure alot is retiring, screwed it up, they didn’t want to change in midstream and they have guided thru whatever, again just my gut, ceo’s for most part can’t create demand, ie, sales, u go with market
February 10th, 2010 at 8:22 am
David Stockman on Starving the Beast: “It doesn’t work. Game over.”
http://www.asymptosis.com/david-stockman-on-starving-the-beast-game-over.html
February 10th, 2010 at 8:27 am
Mark E Hoffer Says: Yes, it will. But most Americans (and Greeks and Spaniards) would gladly pay 10 percent more for the goods in their stores if their paychecks were 20 percent higher. And manufacturing paychecks have always been higher, because manufacturing is where “true wealth” is generated…”
Mark, manufacturing employment is in permanent decline. Factory productivity is about 4% a year as automation, robotics and other production advances take away the need for workers. Labor costs are a steadily decreasing share of the total cost of manufactured goods.
It wouldn’t be surprising if a number of factories return to the USA in the future because the percentage of labor costs declines and offsets shipping and delay costs from overseas production. Never the less, few manufacturing jobs will be coming back even if the factories do.
The agricultural revolution freed up workers to make goods, the “automation revolution” freed up workers to provide services and now that services are being automated, I guess workers are being freed up to …… collect unemployment?
February 10th, 2010 at 8:42 am
@SiValleyEE
+100
Pretty much says it all. Without tens of millions of new relatively well-paying jobs the future will devolve here into the one in England where entire generations live on the dole. It looks like our society
will split apart even more.
If there is a Jobs, 0r Gates, Packard, Ellison, or other spectacularly successful entrepeneur out there or a whole lot of them, the adjustment to be made is going to be wrenching.
February 10th, 2010 at 8:44 am
Sarah Palin uses a hand-o-prompter and defends Rush Limbaugh for calling liberals “retards.”
http://www.colbertnation.com/the-colbert-report-videos/264042/february-08-2010/sarah-palin-uses-a-hand-o-prompter
February 10th, 2010 at 8:50 am
I think the better question is, is this short rally on Germany bailing out Greece euphoria over…
Personally, I’d wager it has another 10-15 S&P points in it…before the rally’s gains are wiped out (very quickly).
February 10th, 2010 at 9:05 am
Can we keep the bulls%^t full articles, random history book pages, and conspiracy theory… to a minimum?
SPX will do $80-85 in eps, $23-25 in divs — (did $58/22 last yr) — what is that worth?
The biggest stimulant is the Fed’s ultra-low rate policy and this works with a long lag. Rates only moved down last May/June with the drop in 3L. So this is just starting to hit its sweet spot in terms of stimulus, now.
It looks like bank credit losses flat-lined in Q4, which was somewhat masked by final TARP repayments and the continued addition to very high loan-loss reserves. Regionals have been the best stock play in 2010 (RF, ZION). Isn’t Q1 the point where credit losses come down?
Companies are varied as F, CSCO, MCD, and UPS have said that Q1 is ALREADY looking very strong, markedly stronger than the last 4 Qs.
February 10th, 2010 at 9:43 am
@mbelardes:
“Could you imagine if tomorrow we woke up and our government was hatching a plan to bail out Mexico or Canada? We would flip.”
I don’t know about that… when US banks had heavy exposure and there was imminent danger of Mexican defaults, what did the USG do? Bailed them out as I recall. Others I’m sure can provide more detail but it was done. The public perhaps was not quite aware at the time.
I sense that Greece will be the EU/Germany&France’s version of the US/Mexico. Ultimately, I believe they will be bailed out – not because it’s the right/wrong thing to do but because there is likely some significant bank exposure in the system that has connections in the right places.
February 10th, 2010 at 10:10 am
Good luck with the assumption that the S&P will do $80-85 in EPS (i.e. a return to 2007′s peak)…
The biggest stimulant was the FED buying 1.25trn of mortgage securities, the cash from which found its way into the asset markets leading to the bounce we’ve seen over the last 10months.
February 10th, 2010 at 10:32 am
Hmm… why would you say SPX “wont do $80/shr”? Here are my points:
1) Current avg analyst est on bbg is $78/shr for 2010. These have been raised for 4 straight Qs, and in fact continue to go up as we recover. Avg ests for 2010 were $75 on Jan 1… so there up $3 already this year based on Q4 earnings and early indications on Q1 from mgmt.
2) Companies continue to guide conservatively and worry about the future. Plus companies always plan to “beat” by a little. So unless something big happens… 6 weeks from now, Q1 is baked. And you can guarantee the average company beats by 5-15%. In normal conditions we get “slight beat, small guidance raise”.
3) Business cycle, baby! The short trade lasted from late 2006 through Q1 2009. Close to 2.5 years. It was housing driven, and AAA-credit driven. That trade is over. The expecations of future pain are >> the reality (see defaults, recovery rates, 50-100% price recovery in credit bonds since 1-yr ago). Everything from leading economic indicators to company revenues shows… this is likely to be the recovery section of the business cycle.
(Aside – remember… 1 yr ago, avg estimate for SPX 2009 eps was $45/shr. Actual number came in at $58+. Estimates get beat in recovery. Also remember, dividends get paid and cash balances are very high.)
February 10th, 2010 at 10:43 am
bsneath,
that’s a cute story, though it doesn’t address:
“…Nations — and in large countries like the USA, even states — must again rebuild their manufacturing base and become locally self-sufficient…”, in the Author’s words.
personally, I’m ‘technology agnostic’ on whether ‘Rosie the Riveter’, or ‘Roger the Robot’ is making the new Turbine Car/Bus/Locomotive;though,I’d be betting Rosie has better things to be doing, if she chose..
the point is: “Where? is the locus of the activity..”
though, with this: “It wouldn’t be surprising if a number of factories return to the USA in the future because the percentage of labor costs declines and offsets shipping and delay costs from overseas production. “, I’m sure we could ask Boeing what building/shipping/assembling the ‘Dreamliner’, all over the place, has done for their efficiency..(much, to your point..)
locally self-sufficient spheres of Manufacturing activity, also, have the head start toward being, Ecologically, sounder propositions..
February 10th, 2010 at 11:50 am
@cognos: Certainly valid point and reasonable people can disagree on this (it’s what makes the market interesting!). I lean towards the camp that says:
1). Analysts were spectacularly wrong in both their predictions for SPX EPS in 2008 (when they were way too high) and 2009 (when they were way too low). They’re always a lagging indicator at any turning point. Furthermore, their estimates are heavily back-end weighted (most of their EPS, $42, is in Q3/Q4) — for it to happen it needs recovery/revenues to come back. Also (I think) the $78 estimate is for Operating Earnings (i.e. it shouldn’t get a full market multiple, since shareholder/owner E are substantially less).
2). Depends on the company; some (*cough* CAT *cough*) have been anything but conservative in their guidance. Furthermore, numerous companies are basing their entire growth predictions on “China” either directly or indirectly. Personally, I think they’re smoking crack…but that’s a discussion for another time. The average company beats because analysts consistently lower their estimates as the time period gets closer.
3). Deleveraging Cycle baby! I think a lot of the debate boils down to whether you believe the recession was a business cycle recession or the start of a deleveraging cycle. One’s V-shaped and you’ll get your $80-85 of earnings, etc….the other is (almost certainly) not.
February 10th, 2010 at 12:17 pm
bsneath; as we industrialized and got more efficient so it took less and less man-hours to produce the food we need, the cars, houses and goods we need, we were supposed to have our time freed up to pursue other activities. Our work weeks were supposed to get shorter, vacations and retirement periods longer, without anybody being any less wealthy for the reduced manual labor. Unfortunately, we allowed our financial masters to use globalization to harvest all the profits of increased productivity, and many people are now faced with reduction in both work and wealth. The wealth created from efficiency and structured society has not been distributed in a fair way, and will have to change either by evolution or revolution.
February 10th, 2010 at 1:08 pm
@OMI-NYC: Lucid points.
1) I like that you point out that H2 2009 was $35-40/shr in SPX earnings. If 2010 just looks like the last 6 months (no further recovery) we get $75-80.
2) I dont think that “op eps” is systematically downward biased (and in fact, Q4 is better on “net” than on “op”). There are as many downward biases to “net” that mislead in the other direction — goodwill write-offs, lumped forward depr, depr of appreciating assets, double counting of stock compensation. Merger deals to not count as “net” write-ups, why should goodwill write-offs downward bias “net”? Almost universally, EPS understates cashflow.
3) Finally… one of the great mis-leaders in PE is that the “avg PE” across an index includes company losses. But no single company is really worth negative to the index. So an “index PE of 15″ in this environment… is a combination of 10-12x multiples on most of the large companies… with some lumpy losses. This mis-led alot of dumb “value” guys 1-yr ago… to say that “SPX was 100x” earnings. But this was just because of very large losses at 2 or 3 companies. They other 97% of the index was sub-10x. Thus we doubled. Or said another way, AIG’s equity losses do not offset the value of MSFT (which has zero losing Qs).
4) Re: Deleveraging — I agree with you here. Further deleveraging which is just driving DEFLATION… will be tough. I think the Fed and American spirit will sort this. And I think good tech stocks, consumer stocks, healthcare stocks should not really care (or care less). Nintendo had a number of 400% runs against a declining Nikkei in Japan. Deflation mainly kills banking and levered industrials.
February 10th, 2010 at 3:15 pm
Mark E Hoffer,
A major impediment to manufacturing in the U.S. is the time required to obtain necessary permits and approvals. The CFO of a domestic toy manufacturer told me that his company would not consider adding new products if he had to build a factory here because it would take him 4 years from concept to final production. He stated that in China it takes only 12 months.
Time is money and bureaucratic approval processes are expensive. Perhaps we need to rethink how we conduct our governmental affairs here if we want to encourage manufacturing to stay and expand.
February 10th, 2010 at 9:10 pm
I’ll be Frank. The EU has been zapped. Don’t Eat The Yellow Snow.
February 11th, 2010 at 2:46 am
bsneath,
w/this: “A major impediment to manufacturing in the U.S. is the time required to obtain necessary permits and approvals….Time is money and bureaucratic approval processes are expensive. Perhaps we need to rethink how we conduct our governmental affairs here if we want to encourage manufacturing to stay and expand.”
definitely. It isn’t the (Labor) Rate, it’s the Rules (Regulations)..