Unless you live under a rock or are extreeeemely wealthy you know what went down with the Fed today. Another 50 basis point cut on top of a panic, er, emergency inter-meeting cut. I have a question - if all the genius economists out there think that the Fed Funds rate should have been much lower than it is even today then why the heck don't they cut to what they need in one shot? Why drag it out if they know, not think, that lower rates are needed?
Wednesday, January 30, 2008
Monday, January 28, 2008
I would like to revisit a chart produced by the Foundation for the Study of Cycles back in August. It ran in this blog a few months later after catching the entire rally into October. Not too shabby.
Check out the red line through mid-January. Again, not too shabby.
I wanted to run this in my column in November but at the time the market was rallying and I did not want to run something that was looking to be wrong. Well, look who was wrong - and chicken. Woulda, coulda, shoulda. My editor would have been proud.
If any of you FSC people are reading this, I would love to get an update and put it in my column. Who does not want to know where and when the bottom will be made, right?
Friday, January 25, 2008
Dateline St Pete Beach, Fl, Friday, January 25, 2008. I'm here at the annual Market Technicians Association winter retreat in my new favorite hotel, the Don CeSar, overlooking the Gulf of Mexico. Judging from the comments of the pros I really respect, this is a bear market in stocks and that means that whatever is happening now is just a speed bump in the forest for the bears.
Wednesday, January 23, 2008
Now what? Well, you don't need me to rehash the events of the past weekend. Aside from Eli coming of age it was a lousy time for investors.
I love how the pundits are coming out with their "sit tight" and "don't do anything" and "stay the course for the long-term" advice. Yep, that seems to be working right about now - not. Yes, in a few year the stock market is probably going to be higher than it is now but don't you think it might have been a good idea to reduce a little risk and take some money off the table? After all, if the market is creating such bargains we do need a little cash to buy some of them.
That's all I'll say about the stock market directly in this post. Gotta save the good stuff for paying subscribers, you know.
But what I can address is the futility of the Fed and the double futility of the vocal analysts and commentators calling for even more rate cuts while at the same time blasting the Fed for being late. The cat's out of the bag. The cow is out of the barn. Pandora's box is open. Getting my drift? The environment that kicked off the excesses of last year was years in the making and it will not end with a few rate cuts. In fact, I think the rate cuts will end up making it worse. The market was doing its self purging - which everyone agrees is healthy - but apparently those now getting hurt do not like taking responsibility for their own actions.
This process must hurt otherwise we won't learn. We will overleverage questionable businesses and credits. We will throw money at any whacko with a website that promises outrageous returns just so we can beat the benchmark S&P 500. We will sucker the public into financial deals, including housing, that is waaaaay over their heads. Boring old municpal bonds look pretty good in hindsight, don't they? In fact, one of the local muni houses around here just bought the lot next door and is expanding. Business will only get better as people decide risk, or at least too much risk, is not really that great.
So give me my $600 or whatever Dubya wants me to have and I'll pay a bill I already owe. Or maybe I'll just be able to buy a few tanks of gas and a Happy Meal. In any case, it is not going to make a dent in my life but the country will be billions poorer for the effort.
Go ahead, lower interest rates some more. Hey, why not take them to zero like they did in Japan? That worked, didn't it? Oh wait, that kicked of the yen carry trade that got this mess snowballing.
Pushing on a string.
Oh, as for the George Burns reference, he said late in his career that chasing after a young lady at his age would be like trying to play pool with a rope. I figured it was better not to lead a markets blog with a blue joke, albeit tame by modern standards.
Friday, January 18, 2008
With all the talk talk of a coming recession, I thought this chart might be of interest. I really don't know how to translate this to the economy but if shipping rates are plummeting something must be wrong.
This chart is fully attributed as seen in the graphic itself.
Wednesday, January 16, 2008
No, I am not going political. And for most of my readers this is going to be a shock. I am bullish on American stocks! But take heart, fellow worriers, I am not talking about this month or even this quarter. Let me explain.
China is sending us poisonous toys. Who wants to buy that?
China is sending us poisonous pet food. Ditto.
China and the rest of Asia are sending us crappy furniture and other household items. I speak from experience.
Oil exporters are sending us oil. I am not going to talk about what they do with their profits but that is a lot of money not being invested back home where it belongs.
Not to pick on China, which I am because I find them the biggest threat to our way of life here and not they are not going to explode things here, but the point is that the backlash has already started.
Again, read this through before judging. I do not mean for this to be political. You'll see why it is not at the end.
Are you sick of talking to outsourced customer service where communication is not quite the same?
Are you sick of sacrificing quality and safety for price? After all, if it breaks and you have to fix it or buy another it is no bargain?
Are you sick of disliking other people just because they have jobs and many of us here do not.?
And of course, are you worried that the "us against them" attitude is going to spark rules and regs that are anti-free market?
Now you get the drift. This is about the free market and the uber-capitalist way. Sooner or later, customers will get fed up. Personally, I switched from the cable company to the triple play with the phone company because I just could not take the lousy customer service they had. I am sick of the blue screen of death on my computer. I am sick of tables chipping and toys breaking and bridges that fall down and getting to the airport two hours before my flight and three @#$%^ dollars for a cup of designer joe (Oh, yes, they took them over) on the highway rest stop.
I do whatever I can to avoid these dislikes and I bet a lot of people are starting to do the same. The capitalist way will prevail to rid us of these scourges (ok, I am getting dramatic) but we have to wake up to it first. And who better to satisfy this new demand than American companies and quality controls they, and yes the government, put into place?
Sorry to my friends elsewhere. I am not putting you down. I am just saying that once sanity return to the markets here, whenever that may be, that US stocks are not going out of business. I am sure many other countries can say the same thing. The companies that can figure out the right balance of price and quality will win because I for one will pay a bit more (admittedly not too, too much) for something I know will work, comes with good support and puts money back to work domestically. Its not about giving the little guy a job. It is about having money to develop the whole enchilada - economy and innovation - so the little guy's job is always there and my own personal lifestyle is as good as it can be. The less money spent on oil means the more money spent on disease control, security, new products and education.
Man, that does come off as political. I apologize if it does. I mean for it to be a heads up that consumers will buy American sooner or later and that will indeed affect your portfolio. Hopefully, we'll be around to see it.
Tuesday, January 15, 2008
Welcome to the new blog home. I wanted to use a less "common" site but honestly nobody really cares about who hosts the blogs they read. Besides, this one was already up and running from a earlier attempt. Previous blog posts can be found at http://michaelkahn.tripod.com/blog. By the time I figure out how to move them here they will be old news anyway.
For those of you reading me in Barron's Online or in my newsletter, you already know I am bearish. Looking at today's action (Tuesday) I got even more so and as I was thinking about exactly why that was a few chat room posts came my way. Rather than reinvent, I'll post them here.
The first was posted by a trader by the name of Anindo Majumdar. I am unfamiliar with his work but this post really sums up my own thoughts. I have comments added in various places below.
Some of the things that bother me about this decline.
- I don't see the panic that accompanied the August lows.The VIX was close to 40 on August 15 , today its at 23.77 and we are almost at that level. Where is the fear the panic ? Its almost as if everyone is expecting a successful retest of the lows. (Note from Michael: see my Barron's Online column dated January 9. )
- The second thing is that the market has been oversold for days and it can only manage very feeble bounces, which are used as selling opportunities. (note from Michael - I always say that strong markets do not hang around support for long and this one is either on or just below support, depending on you perspective).
- The third thing that bothers me is that Bernanke has practically guaranteed that the Fed is going to provide whatever liquidity is needed by the markets. We had that pop on the news which was again sold. (Note from Michael - when will everyone give up believeing the Fed can save the market?)
- The fourth thing that bothers me is the lack of leading groups. Aside from the fertilizer group (that rally is long on the tooth), agriculture, gold and medical there are very slim pickings. (Note from Michael - True dat.)
- Investors are not particularly fearful at the moment because after six months of hearing about an upcoming disaster have bought all the puts they want and/or are getting desensitized to additional bad news. (True dat again)