Its a Friday, the sun is shining, we were positioned correctly for the face ripper. And yet . . .

There remains an undercurrent that should give one pause. The ripper was based on some rather ephemeral news, some bad sentiment, and too many people on the wrong side of the boat.

Consider:

• US GDP: While the economy in Q3 grew at the fastest pace in 4Qs, it was primarily driven by Corporate spending, and household reduced savings. GDP improvement occurred despite the biggest drop in household incomes in 2 years, on top of the ongoing decline in home prices, and near rock bottom consumer confidence. Can spending drive GDP in Q4 and beyond? Is it repeatable? Hey, 2.5% is better than 1.3%, but I have my doubts that it is the start of a new trend.

The girl with the curls and the sweet pink ribbon in her hair
She’s crawling out her window ’cause her daddy
He just don’t care

European Debt Crisis:  Can it really be that easy? Deeply indebted Europeans decide to go deeper into debt, and that somehow is a solution? These is a  high probability that Greece will fall out of the Eurozone, go back ont he Drachma, and start printing (Maybe they can borrow Ben’s chopper). A recession in Europe is a very high probability, assuming they are not in one right now. And yet, on this ephemera, we

The clown with the frown driving down to the sidewalk fair
Finger on the trigger let me tell you gave us quite a scare

Take ‘em higher boys: Hedge funds are dramatically under-performing, and it seemed to be a group decision to rally ‘em hard yesterday. This was not based on fundamentals, but rather, something else entirely. We started with short covering, saw some under-invested hedgies pile in, then it was off to the races. (Mutual fund managers are not as lucky, investors have been dumping funds, even as stocks rally)

The kids flip their lids when their ids hear that crazy sound
My neighbor digs the flavor still he’s moving to another town
And I don’t believe he’ll come back

Breakout/New Trading Range: Last Friday’s breakout saw S&P and Dow break free of the range they had been mired in for 3 months. The breakout seems to have stuck, and barring any catastrophic reversal, we should be in rally mode for a short while.

Well I don’t know how you take in all the shit you see
No don’t believe anyone and most of all
Don’t believe me
Believe you

Which leads us to:

Year end rally:  I have mentioned seasonality several times over the past week, and this rally seems to be running (or perhaps front running) into the best 6 months of the year. This does not mean the secular bear market is over, but it could very well clear us for a few weeks as we “melt up“.

Come on! Goddamn right it’s a beautiful day.

~~~~

Full lyrics from “Mr. E’s Beautiful Blues” after the jump


Mr. E’s Beautiful Blues” from Daisies of the Galaxy

The smokestack spitting black soot into the sooty sky
The load on the road brings a tear to the indian’s eye
The elephant won’t forget what it’s like inside his cage
The ringmaster’s telecaster sings on an empty stage

Goddamn right it’s a beautiful day
Goddamn right it’s a beautiful day

The girl with the curls and the sweet pink ribbon in her hair
She’s crawling out her window ’cause her daddy
He just don’t care
Come on

Goddamn right it’s a beautiful day
Goddamn right it’s a beautiful day

The clown with the frown driving down to the sidewalk fair
Finger on the trigger let me tell you gave us quite a scare

Goddamn right it’s a beautiful day
Goddamn right it’s a beautiful day

The kids flip their lids when their ids hear that crazy sound
My neighbor digs the flavor still he’s moving to another town
And I don’t believe he’ll come back

Goddamn right it’s a beautiful day
Goddamn right it’s a beautiful day

Well i don’t know how you take in all the shit you see
No don’t believe anyone and most of all
Don’t believe me
Believe you

Goddamn right it’s a beautiful day
Goddamn right it’s a beautiful day

~~~

Category: Markets, Psychology

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.

24 Responses to “Goddamn Right, It’s a Beautiful Day”

  1. Doctor Bang says:

    It seems the consensus is looking for the Nov-Dec rally, as they were looking for an October puke, and short interest has now cratered, the contrarian in me thinks this may not be a Merry Christmas for the bulls.

  2. machinehead says:

    Hmmm. BR has been thinking to music (easiest to do when high) and has reached some important insights about the insubstantiality of the market’s seductive veil of illusion.

    Well done! And thanks for the Mr. E reco …

  3. Petey Wheatstraw says:

    I don’t know, BR — seems like insanity begetting more of the same. An endless blood transfusion, donated by family members, consisting of more being put in but none coming out. The patient is unresponsive and gangrenous, but the fact that her corpse is still warm is cause for celebration. “Sure mom is dying, but look on the bright side — she has life insurance. Here, snort this, you’ll feel better. Trust me, brother.” We’re going from absurd to grotesque.

  4. dougc says:

    He who uses crystal ball to invest will learn to love the taste of broken glass…Don’t know who first said it.

  5. Through the Looking Glass says:

    Thanks for the tunes I havent heard that before . Kids these days think a good song is a guy playing 2 notes on a tone generator and wrapping words around those notes.

    But it always about a ghetto crime gone wrong in the hood,
    and he would try to make it better wit da bitches if he could
    because he got class but will pop a cap in your ass
    If you take his grass or touch the bitches ass.

    Yea thats what my teenager thinks is cool, its all over the radio. Some of its not bad, just not a lot of talent involved in playing a ton generator. I wrote those lyrics above think they will sell? Let me know and ill buy jeans that fall off my ass with striped boxers underneath and wave my hands in cool ways and act tough.
    Anything for a buck …right.

  6. dead hobo says:

    I’m in 30%, giving me 70% cash. I put it all in actively managed mutual funds dealing with sectors, each of which has a 30 day minimum holding period. There is likely to be an appreciable dip before the end of the year, but not a certainty. If the dip is not accompanied by an end of the world event, I will buy the dip, as I expect an end of year rally. There will be no new money going out after November. Assuming gains occur as I would like to see, I plan to sell when the S&P hits certain target levels and take profits. 2012 will undoubtedly have a dip or two and I want to be cash rich when it / they occur. My sector funds each potentially have 10% – 15% capacity to run up from today, with 15% associated with an end of year blow out rally. A lot of cash appeared to go out of UST debt yesterday judging by the interest rate increase. This cash has to go somewhere, as does all cash pulled out earlier by fund managers who need good end of year window dressing. Equities appear to be the place du jour.

  7. louis says:

    Christmas bonuses?

  8. farfetched says:

    “Well i don’t know how you take in all the shit you see
    No don’t believe anyone and most of all
    Don’t believe me
    Believe you”

    Goddamned right.
    How about we stop looking thorough rose colored glasses?
    Anyone compare a 2007 dollar with a 2011 dollar/
    GDP is measured in nominal “chained” dollars. What does it look like in inflation adjusted terms?
    NO Martha, we are NOT back where we started.

  9. dead hobo says:

    Rallies need cash, animal spirits, and volume. Cash is available, animal spirits are potentially high, volume should accompany end of year window dressing needs and wall of worriers who gradually stop fretting and start buying, providing there are no end of world events pending for the next 90 days. Robots know exactly what do do in this element.

  10. GeorgeBurnsWasRight says:

    I guess the fact that the fiscal year for most mutual funds ends Monday is not a factor?

  11. deanscamaro says:

    Increased corporate spending? Someone is twisting the numbers to come up with that view! Everyone knows that companies are not going to spend because of the uncertainty of government regulation. Let’s see, who said that……..oh, yeah, it was a frantic, hard right, drum beating Republican, representing the party that is desparately scrambling to find something for them to use for the next election.

  12. One Step Beyond says:

    Barry

    You and I are of like minds when it comes to music, my brother.

    Let me return the favor for your Eels clip:
    http://www.youtube.com/watch?v=fJsqHrq3pEk&feature=related

    Rock on.

  13. Boots or Hearts says:

    Congrats on being positioned well.

    I agree that the rally has a clear Path to continue for a bit, after perhaps consolidating.

    However if the ECRI proves correct in their recession call this could prove to be one heck of a head fake.

  14. Bob is still unemployed   says:

    @dougc – broken glass quote

    Look at the very end of this article

  15. HarleyHoward says:

    Keep printing dollars, inflation hits commodities, keep issuing debt, print dollars to cover. When does inflation hit stock market? Maybe now? You know the entrenched elites will continue to blow up the balloon until it pops. Then say “Wow!!! Didn’t see that one coming!!”

  16. Joe Friday says:

    BR: “The ripper was based on some rather ephemeral news, some bad sentiment, and too many people on the wrong side of the boat.

    And here I thought somebody musta been passin’ out the Acapulco Gold.

  17. poppy2530 says:

    Really disciplined game plan to say the least Barry im taking notes. The backing to strong economic recovery doesnt seem to be present as its pointed out spending save us since thats what our GDP is mostly based on. In my view recessions pretty much halt that or create the balance (savings) needed to keep it going in the future (hence job loss, increased costs, far less payroll increases, commodities go up it recalibrates and introduces new pricing points for consumer goods or allows the inflation (hidden tax) to be implemented. Wonder why price of Gas even trading at 76 a barrel never went below 3.00 its in plain sight lol (excuse the tanget i know it might help someone).

    Consumers will provide relief we are conditioned to spend and support capitalism for the holidays but it may not be as powerful or it could boom people using there cash for deals. (Just like i am im not exempt from the conditioing lol or the holiday expectations.)

    I still have a gloomy outlook on the fate of things but you gotta play the ripper and this is just another example know the herd mentality reactions and formulate accordingly. Obviously no one really wants to see the Euro zone collapes be massive exodus and a really hard time for all other monetary systems globally I guess thats why debt is the answer to debt honestly its insanity but its whats out there. Solutions evoke certain emotions and I feel as long as that high is still ago its goign to be interesting to see what happens.

    Hopefully US gets the debt party going because we will be placed in another fear trap something all traders cant take even managers this can affect the health big time.

    Interestingly note that im waiting to see is after bank deleveraging what the sector is going to look like financials sky rocketed yesterday I guess thats what happens when the show goes on……..

    As always thanks for your ideas they sure help explain the process everyone at the BP thanks.

  18. dougc says:

    The Greek restructuring was “v oluntary” in order not to create a credit default situation, a lot of greek debt is not covered including Greek bonds held by hedge funds and private investors. What would prevent a hedge fund buying 10 year Greek bonds at 40 cents on the dollar along with CDS protection, collecting the interest payments for 10 years and when the bonds mature the Greek government would either have to redeem at par or default . If they default the CDS pays off.

  19. Frwip says:

    @dougc

    Nope, no one will collect on CDS, unless you are called JPM or GS, who are smart enough to bypass ISDA arbitration on their own hedging.

    For everybody else, my bet is that ISDA is going to say mumble, mumble, abracadabra, hocus pocus, not a default, cough, cough, mumble, mumble, very complicated, hey! look over there ! a bird !

    The good news? CDS markets are probably dead. Back to “If you don’t want to assume the risk, don’t buy the asset”. About effing time…

  20. Frwip says:

    @dougc

    Btw, go buy a CDS on Greek bonds. Good luck :-)

  21. streeteye says:

    Instead of Eels could also have gone with REM

    You know with love come strange currencies
    And here is my appeal:
    I need a chance, a second chance, a third chance, a fourth chance
    A word, a signal, a nod, a little breath,
    Just to fool myself, to catch myself, to make it real, real

  22. GeorgeBurnsWasRight:
    That’s BR’s point, although he thinks it could last until actual calendar year end.

  23. PDS says:

    BR…”The Ripper”? I thought that was a hot dog made at Rutt’s Hut….anyhow…..I think you may have set yourself up for more of a “Whipsaw” with your Oct 21 move to increase exposure to stocks at expense of cash…ie…you missed appox 15% of the rally off the Oct 3 S&P lows…yes you caught Thursday’s move but that was an anticlimax (been ther done that in July on similar Eurocrat BS)….so…now as Portugal takes center stage with 21% drop in money supply and big austerity hurt coupled with expected Super 8 failure….not to mention the 8 to 12inches of snow coming at OWS….(say… where’s the banner of support?)

    BTW….I prefer “I am the 53%”