Posts filed under “Markets”

Amazing, isn’t it?

One of the more astonishing things about the market is how something that should matter doesn’t for the longest time . . .  and then it suddenly does.

I find it incredible that suddenly, the denial we have been living with for so long gets removed. The robust inflation has been denied, ignored for so long. Despite all the evidence, the price increases on ordinary goods, medical services, housing, insurance, all the while commodity prices run amuck has been overlooked, as if its irrelevant.

Then suddenly, it matters.

Meanwhile, we see Housing, the prime (domestic) driver of the economy for the past 4 years, rapidly cool — and the market has yet to discover this as an issue. If the Housing slowdown continues, expect Consumer spending in Q3 to be very soft. Target showed revenue growth of 12%, but missed earnings  estimates due to increased costs — (but there’s no inflation). Hey, we still have a full 6 months before we have to start thinking about Xmas spending yet — that could be way off also, if present trends accelerate.

It may be too early to "officially" say the end of this cyclical Bull market is upon us, but the past few days is certainly a warning shot across the market’s bow. As noted, I sold my QQQQ puts yesterday to lock in some games gains; This  is an expiration week, and that often sees option trader hedge by going long common against thier puts. I am still long SPY puts for June and September, and actually bought some Qs for a bounce trade. 

My first half targets for the year (and you know I think all forecasts are nonsense) were looking pretty good for a while: Dow 11,800, Nasdaq 2600, SPX 1350. The past few days makes them increasingly unlikely by June 30.

I do, however, suspect the next move up is shortable.

By year’s end, I still expect a correction of at least 25%. I believe we are very parallel to late 1972/73 right here.

Meanwhile, here are a few Real Estate headlines that I believe Mr. Market is in the process of discounting:

Homebuilder sentiment lowest since 1995

Real estate cools down

Growth in U.S. Home Prices Slows

More are struggling to pay the mortgage

Bankruptcy filings soaring again

UPDATE May 16, 2006 10:42am

Lots of good comments, so I wanted to address them sooner rather than later:

-A 25% sell off in the SPX or Dow is actually a modest correction historically; Consider the 1966-1982 period (which I believe is parallel to this, following as they both do a multi decade bull), there were five selloffs of 24% or greater;

-Consider this: There was a 10% SPX selloff every year from 1995 – 2000; We havent had one of those since March 2003;

-Inflation is quite simply a measure of the purchasing power of the dollar. That has been going down — domestically for some time now, and internationally more recently; "Real interest rates" are less relelvant to my analysis than the calculus of "What is your money worth?"

-As to things going down in price, I have to ask what? The only items I see dropping in price have nothing to do with deflation, and everything to do with manufacturing technologies, consumer adoption curves, and economies of scale.

Category: Commodities, Consumer Spending, Earnings, Economy, Inflation, Investing, Markets

What do you believe that’s actually false?

Category: Apprenticed Investor, Investing, Markets, Psychology


Category: Financial Press, Markets

White House Hits New Nadir: 29% Approval

Category: Markets, Politics

Tax Cuts Crash Market (?)

Category: Markets, Politics, Psychology, Technical Analysis, Trading

The Fed’s New Conundrum: Slowing Housing

Category: Federal Reserve, Inflation, Investing, Markets, Real Estate

Stephen Moore Gets Slick With the Data

Early this morning, I caught a few minutes of Stephen Moore’s Supply Side arguments on CNBC re Tax Cuts.

Rather than discuss what some have called Economic’s biggest mistake, and what the Chairman of President Bush Council of Economic Advisors Greg Mankiw described in the third edition of his book Principles of Economics textbook as the work of
"charlatans and cranks," I thought I would simply debunk his Capital Gains Tax Cut argument as increasing treasury receipts:

Moore is arguing that since tax reciepts went up after the Capital Gains Taxes were cut in 2003, it should therefore get all the credit. I would respond simply by going to the charts, and pointing out that THE ABSENCE OF CAPITAL GAINS FROM 2000-20003 is the primary reason.

This first chart shows the pre-tax cut period of October 2000 to March 2003; Gee, anyone want to hazard a guess for why Capital Gains Taxes paid were so low after the Nasdaq dropped 78%?


 Nasdaq 2000-03


The second chart shows what happened after the War began in March ’03. Note that the Nasdaq selloff was very similar in depth to the initial 1929 crash.


Nasdaq 2003-06


Gee, when markets rally, people pay more Capital Gains! Go figure . . .

(And this is before we even mention increased Housing sales due to half century low interest rates and the potential capital gains taxes there) 


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Category: Data Analysis, Markets, Politics

How This Recovery Stacks Up

Category: Data Analysis, Economy, Investing, Markets

Comparing present with 1973-74 cycle

Category: Investing, Markets, Psychology, Technical Analysis

Froth? Systemic Bullish Bias? Naaaah

Category: Financial Press, Investing, Markets, Psychology