I made an observation this morning that we usually can make in bear markets. Today, the government (over)stepped in with sweeping reforms and more meddling, er, regulation to stabilize the financial markets. Nothing today is structurally different than it was a year ago but now that the poo has hit the fan and people are losing money WE HAVE TO FIX IT!
Nobody in Washington was hot to trot out reforms when everyone was making money. Hmm, sounds like Enron to me. When that failed company was printing money had over fist everyone was quite willing to overlook certain excesses. The same went for the tech bubble when the market valued Priceline.com - a travel agent - more highly than all the airlines put together. That may be an exaggeration but not by much (if at all).
Who in their right mind would buy stock in a company today that had no earnings, no revenue and no assets other than a good idea? Sounds like 1999! Back then, they were evaluating stocks not on price to earnings ratios - since there were no earnings yet in the new economy- but on price to advertising. After all, the more aggressive they were to get customers, the more revenue they should eventually have.
Then came the bear market and all that poo was flushed down the porcelain idol. All the excesses that built up during the greatest bull market most of us have ever seen were exposed and eliminated. Today, all the shady dealings in the mortgage market, all the over-leveraged hedge fund tricks and all the carry trade shenanigans have come back to bite everyone in the collective backside. Thank goodness the government is doing something (kidding!). Why don't they do something before the mess begins?
This market is walking like a duck, talking like a duck and getting everyone quacking. Substitute bear for duck because everything that is happening today happens in bear markets.
Time to ride the slippery slope of hope (the inverse of the wall of worry). If your are not being fooled by the idea that inflation is contained and a death spiral in the dollar is good for the economy then break out the cherry sauce and let's eat this duck together.
Monday, March 31, 2008
Friday, March 28, 2008
Failure
I often preach about success from failure meaning that the best technical signals are often failed technical signals. In other words, if the market is in a trading range, which it is, then a failure to trade all the way to the top of the range (resistance) is a failure of the bulls. Usually, it portends a trip all the way back down to the bottom of the range, support, if not an outright breakdown.
This week, the stock market opened very strong and I removed some hedges on the idea that stocks were on their way to another 400-point melt-up. That was Monday but by late afternoon the gains were pared a bit and it was all down hill the rest of the week. Prices should (silly word in the market) have paused and then headed toward resistance.
Housing and REITs had breakouts. Financials were still enjoying their dead cat bounce and it looked like there was some more spring in Tabby's flight. But there there wasn't. I put the hedges back on Tuesday.
It's a pretty good bet that even if this market is carving out a bottom that it is going to test the lows one more time. So much for the "double bottom" chatter out there. And boy am I glad to have written Monday's Barron's Online column on funky financials.
I had a pretty good week in the advisory services by going long the double short financials ETF Tuesday and buying the oil ETF at the open Wednesday. That can make a month, for sure.
This week, the stock market opened very strong and I removed some hedges on the idea that stocks were on their way to another 400-point melt-up. That was Monday but by late afternoon the gains were pared a bit and it was all down hill the rest of the week. Prices should (silly word in the market) have paused and then headed toward resistance.
Housing and REITs had breakouts. Financials were still enjoying their dead cat bounce and it looked like there was some more spring in Tabby's flight. But there there wasn't. I put the hedges back on Tuesday.
It's a pretty good bet that even if this market is carving out a bottom that it is going to test the lows one more time. So much for the "double bottom" chatter out there. And boy am I glad to have written Monday's Barron's Online column on funky financials.
I had a pretty good week in the advisory services by going long the double short financials ETF Tuesday and buying the oil ETF at the open Wednesday. That can make a month, for sure.
Wednesday, March 26, 2008
With all the talk of a commodities bubble bursting don't you find it interesting that unleaded gasoline hit an all-time high today?
There was no bubble. An overheated rally that was traveling on momentum, yes, but not a mortgage the house (if you can get financing, that is), forget to pick up the kids from school, buy commodities at any !@#$% price bubble, no.
What does it mean? My view is that financial assets are not the place to be and commodities have a long rally left in them. If steel stocks are soaring thanks to foreign demand then so, too, can commodities for the very same reason.
But even more than that, since commodities as we have seen can get whacked hard every once in a while, wouldn't you sleep better knowing you were preserving your wealth instead of risking it? Where are the muni-bond (short-term, of course) hawkers when we need them?
There was no bubble. An overheated rally that was traveling on momentum, yes, but not a mortgage the house (if you can get financing, that is), forget to pick up the kids from school, buy commodities at any !@#$% price bubble, no.
What does it mean? My view is that financial assets are not the place to be and commodities have a long rally left in them. If steel stocks are soaring thanks to foreign demand then so, too, can commodities for the very same reason.
But even more than that, since commodities as we have seen can get whacked hard every once in a while, wouldn't you sleep better knowing you were preserving your wealth instead of risking it? Where are the muni-bond (short-term, of course) hawkers when we need them?
Monday, March 24, 2008
Quotable Quotes
Just some stuff heard on the 'net.
Everybody on the other side of the boat...
(Len Smith, commenting that everyone went from bear to bull in a flash)
Regarding "A recession is IMPOSSIBLE" quote, Pete Kendall said: It is one of several offering the same sentiment -- looks an awful lot like a recession but it can't be. LA Times version even offers headline that says, "This Time is Different."
There is simply no justification of a US economic renaissance. Hoaxenomics has blinded the American people to how serious the situation is and the economy is simply to far down the track for it to rise like a phoenix from here. The US is in a state of delusion common in all empires just before their fall
(Craig Tindale)
(Bernanke) has yet to learn that buying time with bailouts is not the same as solving the crisis. The fact remains... they are still in crash-prevention mode. The "Bear" bailout is bordering on illegal and may have to do with phantom"Level 3" assets gone worthless causing the "beginning" of the latest derivatives implosion in the history of financial markets when coupled with worthless AAA wallpaper....
Everybody on the other side of the boat...
(Len Smith, commenting that everyone went from bear to bull in a flash)
Regarding "A recession is IMPOSSIBLE" quote, Pete Kendall said: It is one of several offering the same sentiment -- looks an awful lot like a recession but it can't be. LA Times version even offers headline that says, "This Time is Different."
There is simply no justification of a US economic renaissance. Hoaxenomics has blinded the American people to how serious the situation is and the economy is simply to far down the track for it to rise like a phoenix from here. The US is in a state of delusion common in all empires just before their fall
(Craig Tindale)
(Bernanke) has yet to learn that buying time with bailouts is not the same as solving the crisis. The fact remains... they are still in crash-prevention mode. The "Bear" bailout is bordering on illegal and may have to do with phantom"Level 3" assets gone worthless causing the "beginning" of the latest derivatives implosion in the history of financial markets when coupled with worthless AAA wallpaper....
(Al Marchione)
The bang at the bottom. Every bear market ended when a financial company was banged.
(Jim Cramer)
Is it any wonder I am still a bear.
The bang at the bottom. Every bear market ended when a financial company was banged.
(Jim Cramer)
Is it any wonder I am still a bear.
Thursday, March 20, 2008
Stampede to safety
I could have drawn this chart myself but someone beat me to it (Michael Swanson posted on Safehaven.com). Check out what happened to T-bills.
The low yield Wednesday when this huge rickshaw man doji candle formed was 0.65. Today, it dipped to 0.20 before closing at 0.50. That does not even give a positive after tax return let alone deal with inflation. Yet everyone stampeded like wildebeest with lemming guidance systems into the safest investment that ever existed.
Gee, you think that's why commodities sank? Or emerging markets cratered this week with nary a recovery today?
The credit crisis cannot be close to over.
The low yield Wednesday when this huge rickshaw man doji candle formed was 0.65. Today, it dipped to 0.20 before closing at 0.50. That does not even give a positive after tax return let alone deal with inflation. Yet everyone stampeded like wildebeest with lemming guidance systems into the safest investment that ever existed.Gee, you think that's why commodities sank? Or emerging markets cratered this week with nary a recovery today?
The credit crisis cannot be close to over.
Wednesday, March 19, 2008
Cash is King
So, the stock market has failed to deliver on its supposed bottom and the Fed is just about out of blanks, er, ammunition to shoot down the gremlins of the credit crisis. Bonds yield nothing. Commodities cracked. Real estate is reeling. What's left? Diamonds?Art? Rare coins?
The point is that just about everything is going down so where are we supposed to put our money? Even money markets are not as safe as we thought but still cash in one form or another is king. When all assets go down, cash goes up by definition so that's where I am advising my retirees to be.
Yeah, yeah, you need a little growth and hedge against inflation. I get that. But I'd rather not get negative growth in a bear market. What's that medical mantra? First, do no harm. Don't lose money, something with which Warren Buffett would agree.
Save the bumpy ride for traders.
So, was Bear Stearns alone in the bankruptcy dance? Did anyone see the chart of Interactive Brokers (IBKR). Sure, its not exactly a CDO shop but it underscores how the whole sector stinks like a restaurant dumpster in July (or January, for you down under-ers).
In closing, check out the emerging markets and BRIC ETFs today. While the Dow only gave back 3/4 of its rally, these sick pupplies are at new lows.
Risk is dead. Keep it in cash.
The point is that just about everything is going down so where are we supposed to put our money? Even money markets are not as safe as we thought but still cash in one form or another is king. When all assets go down, cash goes up by definition so that's where I am advising my retirees to be.
Yeah, yeah, you need a little growth and hedge against inflation. I get that. But I'd rather not get negative growth in a bear market. What's that medical mantra? First, do no harm. Don't lose money, something with which Warren Buffett would agree.
Save the bumpy ride for traders.
So, was Bear Stearns alone in the bankruptcy dance? Did anyone see the chart of Interactive Brokers (IBKR). Sure, its not exactly a CDO shop but it underscores how the whole sector stinks like a restaurant dumpster in July (or January, for you down under-ers).
In closing, check out the emerging markets and BRIC ETFs today. While the Dow only gave back 3/4 of its rally, these sick pupplies are at new lows.
Risk is dead. Keep it in cash.
Monday, March 17, 2008
Metals in Danger?
These Futuresource.com charts came in smaller than I had hoped but you can still see the bearish RSI divergence in silver with bearish candle at resistance plus the shooting star in gold.
Where is the flight to hedges? Gone. Don't forget the platinum breakdown I showed in Barron's Online and a breakdown in copper (it was in
Quick Takes Pro this ayem)
And in the toot your own horn category, I sold out my oil Friday thanks to signals in candle charts. I will be happy to send an excerpt from this morning's newsletter on oil to anyone who asks.
Where is the flight to hedges? Gone. Don't forget the platinum breakdown I showed in Barron's Online and a breakdown in copper (it was in
Quick Takes Pro this ayem)And in the toot your own horn category, I sold out my oil Friday thanks to signals in candle charts. I will be happy to send an excerpt from this morning's newsletter on oil to anyone who asks.
The Lighter Side (if you are a bear, that is)
This graphic was posted to a chat room this morning by veteran trader Larry Williams. I do not know if it is attributable to anyone before him but hey, it's just some macabre web humor.
If it is not animated then it won't be funny so click on the image to see it. And don't worry that it is the wrong market. Just thinks stocks.
If it is not animated then it won't be funny so click on the image to see it. And don't worry that it is the wrong market. Just thinks stocks.
Friday, March 14, 2008
Not a Good Day
Blame the bear - Bear Stearns, that is. I would like to know how firms making so much money in the good times can fall so far from grace in the bad. Personally, I might sock away a few pennies in an insurance type of investment - like govies or cash - just in case. But no, good old fashioned greed got the best of them, as it always does.
What I thought was particularly bearish was the rejection of the morning news that said inflation was tame. Of course, if you eat or heat a house, as I have said for months, your view is a little different. Maybe people woke up to that and sold into the early morning rally.
At one point, the Dow was down 300. Within minutes it was down only double digits before the afternoon selling commenced. To me, this is all bearish action on good news. Toss in Bare Stearns (typo intended) and there was the excuse to head for the weekend flat (that's with no position, not the weekend apartment in London).
Fibonacci Phreaks, check out an intraday chart of the Dow - The morning snapback retraced exactly 78.6% of the day's decline!
And for the rest of us, here is a chart. That tall green candle from Tuesday has so far held the onslaught by providing support at its middle, which is more or less the bottom of the Janaury real bodies. Oh how critical is the close Friday! Too bad volume on many indices Friday exceeded that of the Tuesday rally.
If it walks like a bear and talks like a bear - IT'S A BEAR!
I don't have to be told twice. Do you?
What I thought was particularly bearish was the rejection of the morning news that said inflation was tame. Of course, if you eat or heat a house, as I have said for months, your view is a little different. Maybe people woke up to that and sold into the early morning rally.
At one point, the Dow was down 300. Within minutes it was down only double digits before the afternoon selling commenced. To me, this is all bearish action on good news. Toss in Bare Stearns (typo intended) and there was the excuse to head for the weekend flat (that's with no position, not the weekend apartment in London).
Fibonacci Phreaks, check out an intraday chart of the Dow - The morning snapback retraced exactly 78.6% of the day's decline!
And for the rest of us, here is a chart. That tall green candle from Tuesday has so far held the onslaught by providing support at its middle, which is more or less the bottom of the Janaury real bodies. Oh how critical is the close Friday! Too bad volume on many indices Friday exceeded that of the Tuesday rally.
If it walks like a bear and talks like a bear - IT'S A BEAR!
I don't have to be told twice. Do you?
Wednesday, March 12, 2008
Hello Inflation (again)
So the Fed does a liquidity dump to bail out knucklehead bankers and chowderhead home buyers and Wall Street rejoices. Or was that just revenge for the now defunct governor of NY's past as a CEO killer?
Anyway, the dollar at first liked the news but today it gave us an Emily Litella (nevermind) and hit a fresh new low. First, we thought that it would reduce the need for a huge rate cut by the Fed. Less cuts means better dollar and a better dollar means less inflation.
In my best Shaggy (from Scooby Doo) impression, "Zoinks!" What's up with that?
With the dollar sinking, we've got both inflation and less room for the Fed to act further. Check out this blog by a colleague asburyresearch.blogspot.com. In it, they argue the case that the bond market, and especially TIPs, those inflation adjusted bonds, are absolutely pointing towards inflation despite pundits' denial.
Is it any wonder I am a bear on stocks? Yeah, there may be some range bound stuff for now as super high bearish sentiment is worked off (Yay! We did not fall off a cliff. Here come the helicopters!) but a buying opportunity this is not.
Anyway, the dollar at first liked the news but today it gave us an Emily Litella (nevermind) and hit a fresh new low. First, we thought that it would reduce the need for a huge rate cut by the Fed. Less cuts means better dollar and a better dollar means less inflation.
In my best Shaggy (from Scooby Doo) impression, "Zoinks!" What's up with that?
With the dollar sinking, we've got both inflation and less room for the Fed to act further. Check out this blog by a colleague asburyresearch.blogspot.com. In it, they argue the case that the bond market, and especially TIPs, those inflation adjusted bonds, are absolutely pointing towards inflation despite pundits' denial.
Is it any wonder I am a bear on stocks? Yeah, there may be some range bound stuff for now as super high bearish sentiment is worked off (Yay! We did not fall off a cliff. Here come the helicopters!) but a buying opportunity this is not.
Monday, March 10, 2008
Spitzer at al
What I find funny about my Governor getting caught is not that he knocked himself off his high and mighty ethics pedestal but rather how the media tried to tie it to the stock market. One trader, when asked if it mattered said rather bluntly, "no." It's a side show.
So is the election at this point. Are investors really thinking about how health care will change if a dem is elected or how defense issues will change with an elephant? Nope. What people are thinking about is how to get the hell out of the market whole.
I love when a pundit comes on to tell me how cheap Merrill Lynch or Bank of America is today and that the stock market will bounce back. Where these mentally challenged but entirely overpaid experts around in 2000? How about 2001? or even 2002? That's a long time to be long and wrong.
Yeah, the market will one day be higher than it ever was but I don't want to lose my house while I wait. A retiree asked me with panic in his voice about saving his nest egg. "I don't care about making money," he said. I just don't want to lose any more!
Well, that is a pretty smart thing to say. Not the panic part but the capital preservation part. My advice is to live it. (Disclaimer - blah blah, I am not a registered investment adviser, blah blah, so check with your own adviser before buying or selling anything.) I have been working a client account from stocks to cash in increments and hedging with double short in case I cannot get him into 50% cash in time.
Bring on that next Fed rate cut. Make it a surprise, even! Make it a full 100, while we're at it. It will be just what the doctor ordered to let my client sell out all the stuff I told him to sell in mid-January before the final death spiral began. After that, the Fed will be out of ammo and oil will still be on its way to 115 - first stop.
So is the election at this point. Are investors really thinking about how health care will change if a dem is elected or how defense issues will change with an elephant? Nope. What people are thinking about is how to get the hell out of the market whole.
I love when a pundit comes on to tell me how cheap Merrill Lynch or Bank of America is today and that the stock market will bounce back. Where these mentally challenged but entirely overpaid experts around in 2000? How about 2001? or even 2002? That's a long time to be long and wrong.
Yeah, the market will one day be higher than it ever was but I don't want to lose my house while I wait. A retiree asked me with panic in his voice about saving his nest egg. "I don't care about making money," he said. I just don't want to lose any more!
Well, that is a pretty smart thing to say. Not the panic part but the capital preservation part. My advice is to live it. (Disclaimer - blah blah, I am not a registered investment adviser, blah blah, so check with your own adviser before buying or selling anything.) I have been working a client account from stocks to cash in increments and hedging with double short in case I cannot get him into 50% cash in time.
Bring on that next Fed rate cut. Make it a surprise, even! Make it a full 100, while we're at it. It will be just what the doctor ordered to let my client sell out all the stuff I told him to sell in mid-January before the final death spiral began. After that, the Fed will be out of ammo and oil will still be on its way to 115 - first stop.
Wednesday, March 5, 2008
What the hell is going on?
While a song lyric from hair metal band Poison (how did that lead singer get a reality show?), "what the hell is going on?" is my new mantra. Yes, some may say it has been my M.O. for years and many others will say that it is theirs too, but haven't you noticed that the stock market has been making giant reversal after reversal lately?
It would not be unusual except that it is happening intraday. Up 100, down 70, flat, down 40, up 40 by the close. Yes, that was today for the Dow. It seems that everyone is saying what the hell is going on and that includes the people actually putting money at risk. Is everyone just guessing? Or so afraid to be left behind that they do no analysis whatsoever?
This is not a market for rational investors. What the hell is going on? I'm staying the hell out. or maybe I'll just hang on to my ultrashort S&P ETF.
It would not be unusual except that it is happening intraday. Up 100, down 70, flat, down 40, up 40 by the close. Yes, that was today for the Dow. It seems that everyone is saying what the hell is going on and that includes the people actually putting money at risk. Is everyone just guessing? Or so afraid to be left behind that they do no analysis whatsoever?
This is not a market for rational investors. What the hell is going on? I'm staying the hell out. or maybe I'll just hang on to my ultrashort S&P ETF.
Monday, March 3, 2008
The Baby Bear
Last week, I mentioned in Quick Takes Pro that stagflation was here, not that I and many others have not mentioned this before. I drew further parallels to the 1970s calling the bear of 73-74 the big one and the bear of 77 the baby. Fast forward to today where the big one was 00-02 and the baby could be 08. The timing is right. The start of stagflation is right.
Just a thought.
Just a thought.
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