Let’s open her up to the crowd — is this merely a little back and filling, or is the market getting tired?

How about this $6B National Semi bid — at an 80% premium? Will that invoke some animal spirits, or is that a redonkulous premium?

What say ye?

Category: Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

41 Responses to “Open Thread: Rally Pause or Reversal”

  1. Greg0658 says:

    say ye? .. is it possible to have another spectrum .. something other than bull bear tide flows .. or is that an impossibility? tide flows from grown to emerging back to to re-emerging to submerged re-emerging?

  2. snapwizard says:

    Emerging markets and tech are doing very well. I think the rally has some more room to run and we will take out the earlier highs. Things may start to look a bit wobbly in late April early may.

  3. Guillermo says:

    It’s a weird move from TI. I understand their push for analog, the other biz is getting commoditized and Asia (JP, SK, CH) is going to eat that lunch and there’s a good and growing market for the analog biz, particularly in autos. Less competition = better margins. Not such a sexy product, not so much growth, but they’re looking at margins over growth.

    And, you know, semiconductors are relatively cheap across the board, but this seems like a shitty deal. National is not a great company, they have loads of idle capacity and it just feels like TI is trying to keep-up growth through an acquisition. They had a bunch of cash and room to lever up the BS and got a little too eager IMHO.

    I’m glad I sold $TXN last week. That cash should have been returned to shareholders. Maybe there really will be a lot of synergies, but this is the kinda deal that wouldn’t have gotten done if it wasn’t because credit markets are so accommodating right now. When the deal works because you can finance it on the cheap and your cash generates nothing, then you got a shitty deal.

    IMHO, $TXN just broke the cardinal rule: buy low sell high. They sold their liquidity at historical lows. Deal should have been all-debt. And I just think that’s the only rule to play this market: nobody is willing to pay for your liquidity, so don’t fucking sell it!

  4. gloppie says:

    Like they say on ZH: BTFD, bitchez :c)

  5. MayorQuimby says:

    As bearish as I am overall – I would be bullish short term. Oil, silver – all going parabolic to the upside. Equities are clearly overbought in a HUUUGE way but there’s still over $200 billion in POMO coming and ZIRP of course. Free liquidity has no signs of abating so I’d say it’s a one way blast towards much higher levels after which we get a quite major top.

    I think the market will FORCE Ben to raise reluctantly so I’d expect vicious upside until Ben gets a call from HQ telling him – enough is enough.

    BTW- higher input costs are really going to hit main street by early summer as are gas and transportation costs.

    I expect downward revisions to hit the newswire by mid-summer because of all of this.

    Then there are the trillions of budget cuts that will be debated in DC.

    Overall – Ben has set a PHENOMENALLY dangerous precedent via QE – that he can intervene in the normal equations of supply and demand and depreciate the currency at will. We CANNOT let him maintain such controls for to do so would mean inflation would be FORCED upon the market regardless of whether or not it is bearable.

    THIS is the hyperinflation scenario that scares me – not a blast off towards $100 loaves of bread but a forced climb.

    We can call it the Bernanke death march (or climb).

  6. Liquidity Trader says:

    What ever happened to ZH’s “THE WORLD IS COMING TO AN END?”

    When did they finally capitulate?

  7. Jeff Hirsch says:

    Starting to get tired. QE2 and the best 6-8 months should carry the Dow to 13,000 over the next 1-3 months.

  8. TapeReader says:

    My mantra is:

    Price is always a function of Supply & Demand.

    In the electronic markets, Supply & Demand is always a function of Order Flow.

    Changes in Order Flow ALWAYS precede change in Price.

    Thus, we can hank and pank all day long about where the market is going…no one really knows because history may not repeat itself but it does rhyme.

    In order to really know what it going to happen in the market, one would be best served by monitoring Order Flow Momentum.

    You can view the CME’s S&P 500 e-Mini Order Flow Momentum, in real-time, for free @ http://www.algofutures.com/

    Hope this helps.

  9. MayorQuimby says:

    Fed is in danger of REALLY destroying thousands and thousands of lives. Anyone hanging on (barely) to a mortgage or small business is going to see high food and oil prices push them over the edge. Many with huge debts are going to choose to go bankrupt. Student loan defaults will rise and margins will compress.

    These sorts of rallies are actually nice short entries so I’d say back up the truck on the short end if we do rally.

  10. TapeReader says:

    …one last thought. Though I have no idea what the long-term looks like, our S&P 500 swing trading order flow momentum algos (http://www.algofutures.com/wow-indices/wow-index-sp-500/swing-trading-chart/) are indicating at the least a pullback…which is very, very tradable.

  11. Jeff Hirsch says:

    Quite true TapeReader and it is curious how the times these changes in order flow occure rhyme.

  12. bocon007 says:

    Why goose the markets this far only to have them form a significant double top in the middle of a declared recovery?

    As tired as I am of the damn anticipation of it all, I have to suspect the Fed will get as much out of these last ten weeks of QE2 as possible.

  13. realgm says:

    The market will have a correction once you step on the flight later this week. =)

    Then it will go higher and higher until the eventual serious correction to trigger the FED to go QE3.

  14. ShakyShot says:

    It is just back and filling. The power of Presidential Cycle 3rd yr stimulus will likely keep the party rolling to September, or longer. With short real interest rates negative and long rates rising, where else will Bernanke’s free money go, other than commodities? Also, the PMs are afraid to be out of the market and the individual clueless have yet to get euphoric. The party will end when Bernanke frantically raises rates after being the last human to recognize that inflation has surged far beyond his 100% control confidence.

    By the way, Barry, a few days back you stated “We added some more long exposure today: The S&P500 Dividends ETF (SDY)…..”. There is no “500″ in SPDR S&P Dividend (SDY). In fact, it is produced from a screen the S&P 1500 Composite Index, according to Morningstar. And is it an inferior selection?
    Vanguard Dividend Appreciation ETF (VIG) is providing better returns and selects larger Caps. Why would you not prefer it?

  15. ES says:

    The stock market cannot fall s long as Bernanke’s put is in place.

  16. NiNM says:

    Rally thru May, specifically May 16, then we all go away.

    Off-topic, does anyone else’s stomach still turn when they read about the latest banker crimes or has that portion of your brain turned comfortably to leather? I still seem to keep running across items that drive me bonkers about mortgage fraud, insider trading, private equity draining the life from good companies, etc, the usual rap sheet in my morning paper.

  17. Winston Munn says:

    The basic economic equation does not change simply because of added debt. Supply=productivity and Demand=wages+investement. In a healthy economy, supply=demand and productivity growth is shared as increased wages, keeping demand high and in balance. When debt falsely represents wage increases, profits skyrocket, quadrupling normal returns, but no real economic benefit follows, as the increase occurs only in corporate profits and asset values – as a bubble forms.

    There is still a huge disperity between supply and demand that is being filled with government debt – if that debt is withdrawn the oversupply will again pressure prices downward. Profits will begin to fall with the withdrawl of debt as debt falsely exaggerates profits by replacing wage costs. In aggregate demand, it doesn’t matter if the debt comes from consumer borrowing or government borrowing.

    The unemployment rolls represent lost demand, not simply jobs. Any recovery without jobs is simply serial bubble blowing.

    Once again the problem is debt. This time, like last time, a credit crunch would be the killer, only this time around it would be a drop in bond demand. As long as the U.S. can borrow cheaply, the illusion of recovery can be sustained.

  18. macrotrader603 says:

    BR, good post, makes for interesting conversation.

    The primary trend is up so until it reverses the correct trade is to stay long and buy pullbacks.

  19. socaljoe says:

    What the markets do in the short term is unknown and unknowable.

    I can’t help wondering if and when the markets will start to anticipate the end of QE2. There’s no way to know how the markets will respond to the end of $100 billion / month of new money, let alone rising interest rates… but it sure seems to me the downside risk is enormous, and the upside opportunity is limited.

    I am enthusiastically lightening individual positions (mainly high beta energy and materials) on strength and reluctantly buying (mainly quality, dividends) on (rare) weakness.

  20. wunsacon says:

    NiNM with the “win”, for a ballsy specific date for the reversal! (You’ve forgotten the rules of punditry!) :-)

  21. crunched says:

    Bearing in mind the only real participants in the market these days are Mutual Funds and small retail buyers on one side, and the Vampire Squid, it’s fellow brethren, and all of the hedge funds on the other… that probably means we crack the Feb. highs just long enough for Joe the Plummer to pile in on the long side with expectations for further upside… only to have a big reversal and we go back down and test the March lows.

    Beyond that we get stuck in a range… with Joe Lavorgna and Tim Seymour pumping their hardest on one side, and the reality of QE2 ending on the other.

  22. mathman says:

    How about all those TBTF banks laundering drug money? http://emptywheel.firedoglake.com/2010/07/06/creative-wall-street-and-money-laundering/

    Anything for profit, eh guys? Who cares about wrecked lives and a trashed planet as long as Wall Street keeps the rich and powerful where they are? No repercussions, no prosecutions, no downside.


  23. Global Eyes says:

    The Feds are desperaste to inflate. The market-especially housing-wants to deflate.

    It’s The Fed versus the forces of nature.

    I’m a nature lover who’s getting underneath this market.

  24. macrotrader603 says:

    Someone give Mathman a big towel to cry into ..waahhh.

  25. budhak0n says:

    Truth is “I don’t know”. Therefore staying on the long side. Sometimes the best thing to do is nothing.

    I’d keep my eye on Yemen though not so much b/c of it’s effect as “Yemen” but b/c of the spillover effect. It seems that we haven’t heard much from the black hats lately. Things get too wild over there. That could change.

    Something tells me that we don’t have the tendrils in the big Y as well as some of the surrounding areas. Just a gut instinct.

  26. budhak0n says:

    lol mt you’re bad and unrepentant…. love them both

  27. george matkov says:

    Commissar Bernanke is now in charge of asset allocation instead of the market. We are now a Potemkin economy with Potemkin prices. Healthy markets need regular corrections of 10% or more. Even the corrections are now fake. Historical data has no bearing on what is going to happen.

    I have no answers but all the nonsensical punditry out there is rather entertaining.

    Over and out!

  28. econimonium says:

    While everyone whines about the Federal Reserve, when I last looked at the reports its balance sheet was only 30% higher after all this supposed liquidity and QE2. That, as we say in my parts, a piss in the ocean. This story is not about what happens at the Federal Reserve.

    Step up from your personal political screeds and take a look at the macro world around you. There is a presidential election coming up, there are budget talks, the signs are all positive for the economy as a whole. What will now go on is an effort to keep the party rolling through the elections no matter what. So anyone that thinks they’ll be a market peel-back in the next 2 years overall is dreaming. Political reality says it won’t happen because it’s good for neither side. Look at Wisconsin. Look at which way the winds are blowing. And, again, but your personal political beliefs in your back pocket, learn to love Big Brother, and realize that there will be ups and downs over the next 2 years, but the trend will be up. Oh except for commodities, oil and gold. If you’re in any one of those in any big way you’re already fu%@ed unless you got in a long time ago. Get out now, and I mean like NOW.

  29. constantnormal says:

    definitely redonkulous

  30. wunsacon says:

    Winston Munn, were you blogging for a while?

  31. Greg0658 says:

    “look at the macro world around you. There is a presidential election coming up, there are budget talks, the signs are all” .. if POTUS Obama spends “one billion dollars” to get re-elected – pumping the coffers of the lame stream media – I may just have to throw my vote away at … umm – “your Fired” Trump – take that … the LSM can play all the “it didn’t cost me 1 red cent” ad spots all it wants (NOT)

    Meatballs – It Just Doesn’t Matter

  32. econimonium says:

    Greg0658 neither Trump nor Newt will make it that far. And, furthermore, no one they run will beat Obama. Especially now that Wisconsin will become the poster boy for a revitalized labor involvement in the election. And wait until the AARP mobilizes to counter any cuts on Medicare or SS.

    Take advantage of the winds of politics and give it all a big, wet, sloppy kiss and play the game.

  33. DeDude says:

    It is usually the unexpected stuff that moves the markets. So the guessing game for the future is to figure out if there is a higher likelihood of unexpected negative or unexpected positive events. I think we are more likely to see unexpected negatives that will drive stocks down, so I have moved more into cash. What would those unexpected US stock negatives be:

    1. Speculation in commodities finally drives inflation so high that the expected QE3 will not make it. Even worse the new Fed members vote down Ben so that panic grips those who have come to rely on Ben.

    2. The tea-partiers get out of control and forces a government shut-down as well as a failure to increase the debt limit.

    3. All that cash waiting to grab the bond bargains at the end of QE2 is not enough to fill the void and we get a much higher than expected increase in bond yields (drawing money away from stocks).

    4. The predicted implosion of Europe fails to materialize and money flow out of US into Europe.

  34. icm63 says:

    Cycles are topping, yet sentiment will be bullish until June : QE2 ending will be the fly in the pudding..


  35. cognos says:

    Its a recovery stupid!

    So obvious. Jobs will continue to grow. Unemployment will fall. Earnings will grow. Debt levels… and all the concern about debt will fade… as debt is a function of “income” and “taxes”. In the trough, everyone has too much debt. Its not a long-term issue. Financing will continue to loosen up spuring more risk taking, employment, capital investment, and profits.

    It may take a while… or it may surprise and move into a full boom on some good news much faster than expected. But 1yr out — things will be much better. 3yrs out — even more so.

    Basic business cycle, human speculation cycle will continue for next 100 years.

  36. cognos says:

    LBO wave and M&A will continue to grow as financing costs are super low…

    which means more buyouts at a 75% premium. How can that be a sign of a tanking market? (FCF yields at 8-10-12% and financing at 2-4-6%)

  37. gariki says:

    what is your take Barry?

    mine. Could go either way; as always. But i am slightly short given the run up.

  38. philipat says:

    In these days of HFT, they’re not going to wait for the end of QE2 to factor in the end of QE2?

  39. Bill Wilson says:

    Am I the only one, who thinks that too many people are expecting QE2 to end in a sell off? I’m zombie bear, so I expect a sell of eventually, but I don’t think it will be so obvious. We’ll see.

  40. daykevi says:

    Mutual fund inflows into US stocks have only recently turned positive. We’re starting to finally see some movement in large cap blue chips, which may be the next leaders. Some Fed officials are trying to send the message that rate increases may not come until 2012. We’re in year 3 of the presidential cycle, the Obama administration is fixated on jobs, jobs, jobs, the Fed will be under HUGE pressure to go slow from now until the 2012 elections. I personally think the end of QE2 may be a non-event. Even if long rates rise, as long as cash is pegged at zero, we’ll continue to see money go out the risk spectrum for return, until as Hussman points out, the short term return on risk assets is equivalent (i.e. zero). So while I do think stocks are generously valued, I do think they have a good chance to continue higher. We’ve just recently seen the S&P overcome resistance in the 1320 area, and the market has clearly accepted this higher value. So my most likely scenario is that we may churn for a little bit here, and then off to the races again!!