Has the All Clear Been Sounded?
Bloomberg reports that the “All Clear Has Been Sounded:”
“Global markets are signaling that sustained economic growth will more than make up for Japan’s worst disaster since World War II, rising commodity prices and uprisings throughout the Middle East and North Africa.
Interest-rate derivatives, bond sales by the riskiest borrowers and rebounding benchmark stock indexes all show increasing confidence in the economy. New York-based JPMorgan Chase & Co. is putting up $20 billion of its own money in a short-term loan to finance AT&T Inc.’s $39 billion bid for Deutsche Telecom AG’s T-Mobile business.”
I am less than certain of that.
Contagious unrest and multiple regime change In the Mid-East, a spike in Oil prices, a devastating triple whammy in Japan of earthquake/tsunami/nuclear accident, and now military action in Libya, have all been shrugged off.
So much for the “black swans.”
Indeed, the snapback rally of the past few days reminds me of a very junior version of the deep selloff and bounce following the 9/11 attacks. After the selloff, markets became deeply oversold, fear and sentiment became so negative, it created a bounce that erased nearly all of the rally prior to rolling over again.
The key difference was that 9/11 occurred within an overall down trend that had begun with the top in March 2000; the present turmoil comes within an uptrend that began in March 2009. Hence, the environment is not quite parallel.
We had the early signs prior to this action of the formation of a top. I expected that process would take several months to develop. This latest drop/pop obscures that somewhat.
We do know one thing: Big historical events have a tendency to make the markets wobble somewhat before they resume their prior trend. Gary Smith did an excellent overview of this at TheStreet.com back on September 15 2001.
It remains to be seen whether this is just a bounce or the beginning of a more lasting move.
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Source:
All Clear Sounded as Markets Shrug Off Multiple Black Swans
John Detrixhe
Bloomberg, March 22 2011
http://noir.bloomberg.com/apps/news?pid=20601087&sid=aE__r5G7B6tY&pos=1
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March 22nd, 2011 at 7:28 am
Black is the new white.
March 22nd, 2011 at 7:44 am
This article seems to express human beings’ tendency to use recent past events when making projections of the future….and ignoring other lingering problems which have existed for some time because they have existed for some time and have not blown up.
Some warning signs in the article include:
“ING is overweight high-yield corporate bonds”
“There’s more confidence that…the U.S. central bank will not be shy about avoiding any close encounter with a double dip”
No mention of Europe for now….
Also, is the AT&T deal really a sign of “confidence in the economy” – or – is it a sign that one company found an opportune time to sell out to another because it could not afford to build out its telecom infrastructure — and the company that is buying needs capacity for its existing network and will be able to milk its increased customer base for the cash to pay the deal because there are only a handful of competitors now ?
March 22nd, 2011 at 8:04 am
[...] Now about that Bloomberg "All Clear" headline… (TBP) [...]
March 22nd, 2011 at 8:18 am
The broad market has shrugged off the effects of the current Japanese crisis.
Individual companies, however, are experiencing pain?
March 22nd, 2011 at 8:27 am
When you have a US government and complicit Federal Reserve that will do what ever it needs to do, including throwing money at every disaster, every uprising and continue to deface and destroy the dollar. BLACK SWANS WILL MEAN NOTHING. Mark my words, we will wake up one morning and wonder why….and how…things fell apart and we are opening DOWN 20%. I am sick and tired of all the bllshit that goes on, inclduing the assinine reporting by the also complicit (or completely brain dead journalists (so-called journalists) on CNBS. It is pathetic what this country is becoming.
March 22nd, 2011 at 8:27 am
12/21/12 just can’t come fast enough……
March 22nd, 2011 at 9:14 am
TEPCO is up 35% the past two days, what are they smoking, nuclear laced spinach ? They finally got electric to the plant and are finding pumps and other eqpt in the piles of steaming rubble don’t work (duuh) and the emissions continue.
Actually the only functioning TEPCO pump is the one they’re using to pump sunshine up our asses.
BOJ is making Gentle Ben look like a miser.
March 22nd, 2011 at 9:16 am
My gut tells me its all clear for the next 4-10 weeks.
I have selling targets of 1400-1450 on the S&P.
March 22nd, 2011 at 9:54 am
Yeah, everything’s just freakin’ jolly:
http://www3.nhk.or.jp/daily/english/22_35.html
————————-
High radiation detected 40km from nuclear plant
Japan’s science ministry says radiation exceeding 400 times the normal level was detected in soil about 40 kilometers from the troubled Fukushima Daiichi nuclear power plant.
The ministry surveyed radioactive substances in soil about 5 centimeters below the surface at roadsides on Monday.
The ministry found 43,000 becquerels of radioactive iodine-131 per kilogram of soil, and 4,700 becquerels of radioactive cesium-137 per kilogram about 40 kilometers west-northwest of the plant.
Gunma University Professor Keigo Endo says radiation released by the iodine is 430 times the level normally detected in soil in Japan and that released by the cesium is 47 times the norm.
Endo says the data means that a person staying at the location for one year would be exposed to 4 times the amount of radiation allowed by national standards. The professor says there is no immediate health risk, but that radioactive cesium can accumulate in soil and that radiation levels must continue to be monitored.
The science ministry says there is no environmental standard for radioactive substances in soil, and that it sees no problem at this time.
Tuesday, March 22, 2011 19:59 +0900 (JST)
March 22nd, 2011 at 9:56 am
Let me get this straight …
The equity markets should curl up and die if bad things happen to some people and no bad things happen to most people?
If there was a credit bubble explosion or an asset bubble explosion or if available credit vanished I would agree that troubles were ahead. None of these things happened, though. The markets rightly paused for a period of cautious evaluation and are now ready to move forward again.
But I really love the wall of worry. Cha-ching.
March 22nd, 2011 at 10:08 am
I agree…
http://efficientish.blogspot.com/2011/03/trading-black-swan.html
March 22nd, 2011 at 10:46 am
cant be short here, except japan corporate victims and chinese real estate
but have changed abt 2/3 of my longs
roll into daimler and ASML which will see their japanese competition fade for while
coal, JPM.
mideast could really blow up next few months meaning saudi or iran, i trade it if i see it
oil bizarre as japan took away the mideast premium
end of QE 2 could have been big
but effect different if japan keeps doin mother of all QE and fuel for the carry trade
my view on 2002-2003 history is early post 9 11 stocks pop completely offset mid 02 by building fears of iraq war. massive market bottom early 03 4 days before the war kickoff
March 22nd, 2011 at 10:50 am
And don’t forget how we got here…
http://www.fundmymutualfund.com/2011/03/despite-33-gain-past-3-sessions-s-500.html
March 22nd, 2011 at 11:15 am
Dead hobo…..Maarket never should have been where it is. Just because BEN wants it higher, does not mean it deserves to be higher. I really want to know where the market would be if the Goernment was not buying everything in sight.
Take the HOT Government money out of the equation and where would we be? I bet it is 4 figures on the DOW and 3 figures on the S&P…..
March 22nd, 2011 at 11:38 am
the all- clear will never ever sound
but you want to be long about 80% of the time
March 22nd, 2011 at 11:56 am
Dead Hobo:
http://www.zerohedge.com/article/guest-post-recovery-self-sustaining-heres-test
March 22nd, 2011 at 11:57 am
Sure, this post is just more grist for the bull/bear don’t-fight-the-tape thing, but there is an ongoing net loss of agricultural, fishing, and heavy industrial capacity, not to mention RE devaluation, in a semi-circle of coastal Japan of at least 40 km radius. It’s safe to say this semi-circle will expand over the coming weeks/months as monitoring continues.
The truism that plagues make good business for undertakers plays differently in my mind when you’re talking contamination of land for decades or a century. Of course there are infinite ways to turn one person’s misfortune into another person’s opportunity, but what looks like more surreal decoupling of paper wealth from basic resources (aka “reality”) is … just more of the same thing we’ve been seeing.
March 22nd, 2011 at 12:43 pm
Seems to me if we didn’t have any more black swans for the rest of the year, that would itself constitute a black swan. Maybe we’re just color blind.
March 22nd, 2011 at 2:57 pm
This is a TEST, a tesy ONLY for Ben& Co including the MSM!
“Federal Reserve Chairman Ben Bernanke has suggested the economic recovery is almost “self-sustaining,” meaning it is no longer totally dependent on Federal stimulus and unprecedented Fed intervention for its “growth.”
‘..the U.S. economy has been treading water. In adjusted-for-inflation dollars, the U.S. Gross Domestic Product (GDP) in 2010 was almost precisely the same as it was in 2007: $13.363 trillion in 2007 and $13.382 trillion in 2010.
So the Federal government will have spent over $6 trillion–almost 41% of the nation’s annual GDP–just to keep GDP stagnant. That $1 trillion a year in extra spending is 7% of the GDP, which implies that if the Federal budget returned to the carefree, free-money days of 2007, the GDP would
contract by 7%.
{..}
The Fed sees a “self-sustaining” economy as one which “only” needs $1 trillion in extra Federal spending and another $1 trillion in Federal Reserve goosing every year just to maintain the same GDP we had in 2007.
I suggest an addict analogy is more accurate: a high-cost, bloated, corrupt and inefficient cartel-State Empire of high-cost, bloated, corrupt and inefficient fiefdoms is like a heroin-addled junkie. The “high” of GDP “growth” keeps requiring ever-larger hits of smack; any slackening in this accelerating consumption of Marching Powder will send the addict careening into the agony of withdrawal.
So what we really have is a Status Quo that now needs $2 trillion or more in “free money” injected into its fiefdoms and Elites just to keep from crashing. It would laughable if it wasn’t so tragic: here is Ben Bernanke, shoving the needle of QE2 into the twitching half-dead addict and declaring that the zombied-out junkie is on the threshold of “self-sustaining” something or other…
http://www.oftwominds.com/blogmar11/self-sustaining-test3-11.html
March 22nd, 2011 at 3:14 pm
Am I the only one refusing to this kool-aid of Recovery- All clear?
1. What’s the ‘true’ capital ratio of ALL thse Zombie Banks trying buy back and issue dividends?
2. Pray some one tell me the ‘ value’ of ALL MBSs on the balance sheet of Banks, Lenders, Pensions Funds, MFunds + FED! Fed is trying to sell them – who is buying and at what price? How long they are going to ban/post pone the VALUE” discovery in real time?
3. Does any of past US recession has recovered without FIRST recovery in ‘housing’?
4. With gas at $4.00 and up and commodities adding to the pressure, how are they NOT going to affect the consumer confidence/sentiment etc?
March 22nd, 2011 at 3:28 pm
Well the last problem only hurt a few investment banks that made shitty decisions and leveraged their ass to the hilt. They should of curled up and died, instead it sure fuc&ed up everything I had.
March 22nd, 2011 at 4:33 pm
Sorry, but I have not yet lost the will to live. Perhaps tomorrow. Tonight, I will consult the magic charts for guidance. With slight effort, I believe I will find a pattern that matches my opinions of the future and, thus, my expectations will be confirmed. Or, then again, I may just decide to curl up and die since uncertainty prevails. Or maybe I’ll phone out for pizza.
March 22nd, 2011 at 5:31 pm
March 22nd, 2011
Via: Reuters:
“…Global electronics and autos companies have been hardest hit by the turmoil, but in an illustration of how the ripples are spreading, Rio Tinto, the world’s No.2 iron ore miner behind Brazil’s Vale, warned the disruptions posed a threat to its expansion plans…”
…
“…“There are a huge number of little bits of the high-tech food chain which are done nowhere but in Japan,” said Sam Perry, senior investment manager of Pictet Japanese Equity Selection Fund. “Nobody else has the quality or the consistency, and in some cases the technology, to do it.”…”
http://cryptogon.com/?p=21380
March 22nd, 2011 at 6:40 pm
Pizza sounds good.
March 22nd, 2011 at 6:51 pm
Mr Hobo has done quite the about face in the last five or six months; as I recall, he was one of the more comically bearish types on here.
March 22nd, 2011 at 7:54 pm
That “all clear” sound is one of the most scary things. I just moved even more into cash.
March 22nd, 2011 at 7:55 pm
I bought some put options today on the IWM. I think there’s enough bad stuff going on right now to get close to the 200 day moving average. Alth0ugh, I’ll probably take profits before that. I’ll take my loses if the S&P closes above the 50 day moving average.
As long as profits remain strong, I think you still want to buy the dip. I just think this dip has a little more room to run.