A Happy New Year to all blog readers and their families!
My advice is not to overdo it during your holiday celebration or on your stock buying. The year ahead in the real world will be better than the year behind but the stock market is another story.
I'll see you back here in 2011.
Tuesday, December 28, 2010
Monday, December 27, 2010
Hindenburg
One very highly regarded technician (name withheld) said:
"I am always surprised by the discussions of the Hindenburg Omen as it fails what is for me the first test of an indicator, robustness. A good indicator or system must, in my view, be insensitive to small changes in
parameters. Any indicator failing that test, and the HO fails it without question, cannot be trusted."
Another also highly regarded technician (Tom McClellan) responded:
"By that same reasoning, a railroad crossing sign would also fail as an indicator due to too many false positive indications. But we still use RR XING signs because of the observation that most car-train encounters occur at points where streets cross tracks. The sign is not the sole determinant that a train is there; we also can use confirming indications like the horn, or like seeing it.
If the HO identifies the preconditions for each and every great decline, crash, or whatever you want to call it, plus has a bunch of extra false indications at times when crashes don't come, I can live with that. I'd rather know, and accept the possibility that it may turn out to be a false positive reading."
MK opines - I love being around really smart people (both of these gents). Critics who said it predicted 10 of the last 3 crashes should attempt to learn how to use technicals properly.
"I am always surprised by the discussions of the Hindenburg Omen as it fails what is for me the first test of an indicator, robustness. A good indicator or system must, in my view, be insensitive to small changes in
parameters. Any indicator failing that test, and the HO fails it without question, cannot be trusted."
Another also highly regarded technician (Tom McClellan) responded:
"By that same reasoning, a railroad crossing sign would also fail as an indicator due to too many false positive indications. But we still use RR XING signs because of the observation that most car-train encounters occur at points where streets cross tracks. The sign is not the sole determinant that a train is there; we also can use confirming indications like the horn, or like seeing it.
If the HO identifies the preconditions for each and every great decline, crash, or whatever you want to call it, plus has a bunch of extra false indications at times when crashes don't come, I can live with that. I'd rather know, and accept the possibility that it may turn out to be a false positive reading."
MK opines - I love being around really smart people (both of these gents). Critics who said it predicted 10 of the last 3 crashes should attempt to learn how to use technicals properly.
Thursday, December 23, 2010
Inflation food for thought
I think inflation is on the way although it is not yet in the Gubment's figures. Then I saw this post by Joseph Barbuto in a chat room:
"But keep in mind — the biggest ingredient by cost in a box of Corn Flakes ain’t corn — (not cardboard for the box) it is labor. This is true for many processed products — including food — the biggest input costs are labor."
Good point and I'll certainly agree that there is no inflation in labor costs. Just ask my accountant when the last time I raised my prices was (hint - never and I started in 2001).
"But keep in mind — the biggest ingredient by cost in a box of Corn Flakes ain’t corn — (not cardboard for the box) it is labor. This is true for many processed products — including food — the biggest input costs are labor."
Good point and I'll certainly agree that there is no inflation in labor costs. Just ask my accountant when the last time I raised my prices was (hint - never and I started in 2001).
Wednesday, December 22, 2010
Socionomics
The study of the stock market to detect social mood - and vice versa. From the latest Socionomics Institute release - The Socionomist.
This shows the Dow priced in gold. My forecast remains for higher gold so what will that do to this chart?
Banks
The banks are in self preservation mode.
- Eric Von Baranov
Nothing we did not know and nothing that wasn't dropped like a bag of hammers on Count De Money, er, Henry Paulson back in 2008. But the stock market changes its mind like a girl changes clothes. (Don't flame me, ladies, its a Katy Perry song). Check out this chart of the Banks ETF.
No matter what I think of the market or banks or anything else, this is a resistance breakout following a small pause.
- Eric Von Baranov
Nothing we did not know and nothing that wasn't dropped like a bag of hammers on Count De Money, er, Henry Paulson back in 2008. But the stock market changes its mind like a girl changes clothes. (Don't flame me, ladies, its a Katy Perry song). Check out this chart of the Banks ETF.
Monday, December 20, 2010
Beware the SLX
Today's column is about the steel sector, its momentum conditions, breakouts and potential upside targets. Since it is not yet on the site I'll have to limit the details but you should see it by 4-4:30 NYT at Barrons.com. Click on my picture to read it (free).
Anyway, they like me to use ETFs whenever possible and there is one you might think is a good one - the Market Vectors Steel Index Fund (SLX). When doing the research, I noticed that the ETF and the Dow Jones Iron and Steel index did not line up. Was it the "iron" part? Nope. That's more of a technicality as just about all components are really iron and steel.
Digging further, I noticed these components of the SLX - Rio Tinto, Vale SA, Cliffs Natural Resources and Foster. That's three miners and a rail/construction stock (Cliffs does mine iron ore). Rio and Vale alone make up 24% of the index's weight, too.
That does not mean the ETF is useless and it is no more useless than the HGX index is for the housing sector (it contains paper, construction materials and a mortgage stock aside from the homies). You just need to know what you have and not just assume by its name.
You know what happens when you assume? No, you can make an a** of yourself and leave me out of it. What happens is you increase your risk with faulty analysis that may work for a while just to sucker you in to making ever bigger bets. .
Anyway, they like me to use ETFs whenever possible and there is one you might think is a good one - the Market Vectors Steel Index Fund (SLX). When doing the research, I noticed that the ETF and the Dow Jones Iron and Steel index did not line up. Was it the "iron" part? Nope. That's more of a technicality as just about all components are really iron and steel.
Digging further, I noticed these components of the SLX - Rio Tinto, Vale SA, Cliffs Natural Resources and Foster. That's three miners and a rail/construction stock (Cliffs does mine iron ore). Rio and Vale alone make up 24% of the index's weight, too.
That does not mean the ETF is useless and it is no more useless than the HGX index is for the housing sector (it contains paper, construction materials and a mortgage stock aside from the homies). You just need to know what you have and not just assume by its name.
You know what happens when you assume? No, you can make an a** of yourself and leave me out of it. What happens is you increase your risk with faulty analysis that may work for a while just to sucker you in to making ever bigger bets. .
Friday, December 17, 2010
Interest rates - the long-term view
I found this chart at multpl.com.
I would not call it a bond bubble but it sure does look as if rates have bottomed to me.
I would not call it a bond bubble but it sure does look as if rates have bottomed to me.
Thursday, December 16, 2010
Belgium?
Channel NFL coach Jim Mora when you say this. Belgium? Belgium? You gotta be kidding me!
Word this week is that S&P just put Belgium on a negative watch this week.* So they don't have a government in place (for real). But how can this be? It is not one of the PIIGS! We expected Spain after Ireland after Greece. We expect Portugal to be the next domino before Italy. But there is no "B" in PIIGS.
How about this - BPIIGS? It has BP in it and that company is facing its Gulf spill legal troubles now.
Or BIPIGS? Sort of looks like two little swine.
Now before we panic, we are talking of a ratings cut from AA+ to possibly AA.That is still something you'd put in Grandma's portfolio.
It is not the cut that is the problem. It the fact that it is a country most of us did not consider. We know Greece is already junk. And we kind of knew about Hungary just one level above junk (PIIGSH?)
It's a good thing Turkey, already in junk status, is not in the EU. Rearrange the letters and it is not a very nice word - PIIGSHT. Although, it does cut to the chase.
* Capital city Brussells, home of the EU, was downgraded in June
Word this week is that S&P just put Belgium on a negative watch this week.* So they don't have a government in place (for real). But how can this be? It is not one of the PIIGS! We expected Spain after Ireland after Greece. We expect Portugal to be the next domino before Italy. But there is no "B" in PIIGS.
How about this - BPIIGS? It has BP in it and that company is facing its Gulf spill legal troubles now.
Or BIPIGS? Sort of looks like two little swine.
Now before we panic, we are talking of a ratings cut from AA+ to possibly AA.That is still something you'd put in Grandma's portfolio.
It is not the cut that is the problem. It the fact that it is a country most of us did not consider. We know Greece is already junk. And we kind of knew about Hungary just one level above junk (PIIGSH?)
It's a good thing Turkey, already in junk status, is not in the EU. Rearrange the letters and it is not a very nice word - PIIGSHT. Although, it does cut to the chase.
* Capital city Brussells, home of the EU, was downgraded in June
Wednesday, December 15, 2010
Hindenburg Schmindenburg
Well, it happened again. The dreaded Hindenburg Omen flashed Tuesday but curiously it went rather unnoticed - except by professionals it would seem.
When it happened in August, it got a lot of people's panties in a bunch. Glenn Beck did a rather lengthy segment on his show (I wrote him to point out some problems with the analysis but never heard back). And self help guru Tony Robbins recorded a YouTube message urging people to sell stocks. Oy, when non-financial people pick up on something financial "that trick never works" (Rocket J. Squirrel). It is the basis for the Magazine Cover indicator. And it proves that what everyone knows is not worth knowing.
The pros debated the signal today and the biggest issue was the composition of all those new 52-week lows. A lot of them were bond funds, ETFs and worse - inverse ETFs. So did it matter?
Well, maybe not for the signal but perhaps because a sagging bond market is probably not a good thing. Bonds know better than stocks.
And that brings me to today's Barron's Online column where I point out that most of the BRICs are not doing so well lately. Aren't they the engines of global growth? Well, yeah. So what's up with that?
To me, it is another bit of evidence that rose colored glasses lead to disaster. Of course, you half-full folks would say that the USA is outperforming the so-called engines and that means we are on the mend.
No conclusions here. Just food for thought.
When it happened in August, it got a lot of people's panties in a bunch. Glenn Beck did a rather lengthy segment on his show (I wrote him to point out some problems with the analysis but never heard back). And self help guru Tony Robbins recorded a YouTube message urging people to sell stocks. Oy, when non-financial people pick up on something financial "that trick never works" (Rocket J. Squirrel). It is the basis for the Magazine Cover indicator. And it proves that what everyone knows is not worth knowing.
The pros debated the signal today and the biggest issue was the composition of all those new 52-week lows. A lot of them were bond funds, ETFs and worse - inverse ETFs. So did it matter?
Well, maybe not for the signal but perhaps because a sagging bond market is probably not a good thing. Bonds know better than stocks.
And that brings me to today's Barron's Online column where I point out that most of the BRICs are not doing so well lately. Aren't they the engines of global growth? Well, yeah. So what's up with that?
To me, it is another bit of evidence that rose colored glasses lead to disaster. Of course, you half-full folks would say that the USA is outperforming the so-called engines and that means we are on the mend.
No conclusions here. Just food for thought.
Tuesday, December 14, 2010
Deflation - not
From the St Looie Fed (hat tip to the Longwaves chat room)
Does this look like deflation?
The technician in me sees either a bear flag or a dip to the rising trendline. But if prices went up parabolically then more often than not they come down in a mirror image. That's not there. Therefore, I'm stickin' with commodities and even stocking up on some (I'm not a survivalist wing nut) non-perishable food. You never know.
The technician in me sees either a bear flag or a dip to the rising trendline. But if prices went up parabolically then more often than not they come down in a mirror image. That's not there. Therefore, I'm stickin' with commodities and even stocking up on some (I'm not a survivalist wing nut) non-perishable food. You never know.
Gasoline rising
In case you are a city dweller and don't drive, here is a little tidbit from my local village email newsletter about gasoline prices.
The Hess located at 42 Jericho Turnpike offers the lowest gas price per gallon in three categories:
- They offer the lowest regular grade at $3.239.
- They have the lowest plus grade at $3.339.
- And they have the lowest premium grade at $3.439.
Check out your own area and compare to the rest of the country at gasbuddy.com. Click back to the home page for more intersting stuff - like the heat map.
Is it me or, with the usual exception of Hawaii where everything costs more, does this list look like all the blue states are piled close to the most expensive gasoline places?
And who can explain why Alaska is the number one most expensive state on average? Isn't that were the oil is? Or do they ship it to Louisiana for refining and then ship it back? I would not put it past anyone.
The Hess located at 42 Jericho Turnpike offers the lowest gas price per gallon in three categories:
- They offer the lowest regular grade at $3.239.
- They have the lowest plus grade at $3.339.
- And they have the lowest premium grade at $3.439.
Check out your own area and compare to the rest of the country at gasbuddy.com. Click back to the home page for more intersting stuff - like the heat map.
Is it me or, with the usual exception of Hawaii where everything costs more, does this list look like all the blue states are piled close to the most expensive gasoline places?
And who can explain why Alaska is the number one most expensive state on average? Isn't that were the oil is? Or do they ship it to Louisiana for refining and then ship it back? I would not put it past anyone.
Monday, December 13, 2010
Investors don't have a chance
I lamented over this one jusst after it happened so consider this a follow-up.
With trading action like this, regular investors do not have a chance. And now it has a textbook resistance breakout just to rub it in our faces.
Friday, December 10, 2010
The public does not understand bonds
This is from a Casey Research email:
--------------------------------------------------------
So, what happens to bond prices if interest rates rise? FINRA (the Financial Industry Regulatory Authority) recently asked that question as part of a random survey of 28,000 folks around the country. They were hoping to get a sense of the average person’s level of financial acumen.
The results are in:
“If interest rates rise, what will typically happen to bond prices?”
And so, out of the entire sample, only 28% actually understand that rising interest rates are like arsenic tea to bonds.
--------------------------------------------------------
You can fool some of the people all of the time.
- Abraham Lincoln
--------------------------------------------------------
So, what happens to bond prices if interest rates rise? FINRA (the Financial Industry Regulatory Authority) recently asked that question as part of a random survey of 28,000 folks around the country. They were hoping to get a sense of the average person’s level of financial acumen.
The results are in:
“If interest rates rise, what will typically happen to bond prices?”
- 18% – They will rise
- 28% – They will fall
- 5% – They will stay the same
- 10% – There is no relationship between bond prices and the interest rate
- 37% – Don’t know
- 2% – Prefer not to say
And so, out of the entire sample, only 28% actually understand that rising interest rates are like arsenic tea to bonds.
--------------------------------------------------------
You can fool some of the people all of the time.
- Abraham Lincoln
Thursday, December 9, 2010
Munis
When typing the title to this post, I showed my hand-brain disconnect and typed minus. Same letters, interesting meaning.
The conversation about state defaults and municipal bonds failing seems to have died down. Build America bonds, whatever they are (federally subsidized taxable bond sales by states and municipalities), are not part of the tax plan. California's Governer Moonbeam is supposed to be giving citizens a choice of higher taxes or lower spending - sure, I'll pay more or get less! Blue states, which send in most of the money to DC, are whining about sending more than they get back yet want to tax the rich more.
Blah, blah, blah. I turn to tube off as soon as any politician starts with the partisan speak.
You know where we should get out cues? The market. Check this out.
The muni-bond ETF had just what I called it last month - a dead cat bounce. How high will a dead elephant bounce? A dead 800-pound gorilla?
Funny, the market is pure capitalism, isn't it. And it tells us the truth.
The conversation about state defaults and municipal bonds failing seems to have died down. Build America bonds, whatever they are (federally subsidized taxable bond sales by states and municipalities), are not part of the tax plan. California's Governer Moonbeam is supposed to be giving citizens a choice of higher taxes or lower spending - sure, I'll pay more or get less! Blue states, which send in most of the money to DC, are whining about sending more than they get back yet want to tax the rich more.
Blah, blah, blah. I turn to tube off as soon as any politician starts with the partisan speak.
You know where we should get out cues? The market. Check this out.
The muni-bond ETF had just what I called it last month - a dead cat bounce. How high will a dead elephant bounce? A dead 800-pound gorilla?
Funny, the market is pure capitalism, isn't it. And it tells us the truth.
Wednesday, December 8, 2010
Monday, December 6, 2010
Housing peak 2011
This is from Tom McClellan (yes that one). He does a lot of work on offsetting two markets to see relationships, sort of like overlaying the birth rate with recession offset by 9-months. If you can't go out to a fancy restaurant, well, you know.
According to this chart, housing stocks should peak in the middle of next year. Of course, nowhere near where it was a few years ago. Believe it or not.
Do these guys get it?
When I first got the email for Delta's private jet service I thought "Are these guys kidding? Do they read the newspaper? Most people can barely afford a regular sardine can seat let alone "only" $27,500 for five hours of private jet time.
Then I thought about it a bit more. Who is the customer for this stuff? Nope, not Joe Sixpack, Joe The Plumber or even Mama Grizzly. It's the super rich and for them there is no recession. So be it. I know I can't hop on a private jet for a comfy ride down to South Beach with the crew. But there are people who can.
So, perhaps Delta does get it. Well, some of Delta anyway. Their marketing people must have been left back a few grades.
First of all, the email was addresses to my 15 year old daughter who, like me and everyone else in the family and your family, has her own frequent flyer account. OK, so Delta did not scan ages when the created the mailing list. I'll let this one slide.
But they do know how many miles someone a has now and has over a lifetime and my daughter flies to Florida at most twice per year and not always on Delta. There is no way she has anything close to elite business flyer status and the possibility that she'd have legitimate interest in a private jet.
But for you, dear reader, if you've got the time, we've got the beer. Er, I've got the trash and you've got the cash (Joe Jackson - I'm the Man 1979).
Print this out and stuff your favorite stocking - http://deltaprivatejets.com/holidays.asp
Then I thought about it a bit more. Who is the customer for this stuff? Nope, not Joe Sixpack, Joe The Plumber or even Mama Grizzly. It's the super rich and for them there is no recession. So be it. I know I can't hop on a private jet for a comfy ride down to South Beach with the crew. But there are people who can.
So, perhaps Delta does get it. Well, some of Delta anyway. Their marketing people must have been left back a few grades.
First of all, the email was addresses to my 15 year old daughter who, like me and everyone else in the family and your family, has her own frequent flyer account. OK, so Delta did not scan ages when the created the mailing list. I'll let this one slide.
But they do know how many miles someone a has now and has over a lifetime and my daughter flies to Florida at most twice per year and not always on Delta. There is no way she has anything close to elite business flyer status and the possibility that she'd have legitimate interest in a private jet.
But for you, dear reader, if you've got the time, we've got the beer. Er, I've got the trash and you've got the cash (Joe Jackson - I'm the Man 1979).
Print this out and stuff your favorite stocking - http://deltaprivatejets.com/holidays.asp
Friday, December 3, 2010
Why did the market rally this week?
This is the question everyone asks. Have you ever noticed that the financial media always has an answer?The market rallied because the Fed this and earnings that. An analyst upgraded stock X.
Here is something I used in a presentation I did on dealing with the media (if you are so inclined to be quoted by it).
"Stocks rallied on rising oil prices (economic demand)."
The next day - "stocks fell on rising oil prices (inflation)"
The NY Times uses the phrase, "all the news that's fit to print." I cannot remember who said this, and it could have been Mad Magazine, "all the news that fits, we print."
Get the point? Journalists get paid to fill a column so they have to say something.
I was asked by a colleague this week why stocks rallied. Was it a knee jerk reaction or is the economy really on the mend. Let's assume everyone believes the stock market looks forward - which I do. How can something that happens today effect something that moves on events that are expected to happen nine months into the future? You get that point, too.
Here was my response:
"Stocks rallied because all the supply that supposedly came out this week thanks to economic (Ireland) and geopolitical (Korea) concerns was handily absorbed by demand in the market. It was also an affirmation that the liquidity pump (EU/IMF) would remain open (sentiment).
The market will reflect the real world one day - triggered by the liquidity pump shutting down. Until that happens, stocks are for traders or long-term investors willing to ride out another cyclical bear."
Let me close with another excerpt from my presentation:
"U.S. stocks will rise next week as Wall Street bets that corporate bellwethers including Citigroup, International Business Machines and Google Inc. will post stronger-than-expected financial results, strategists said."
- uh, fellas, if they expect them to be better then they won't be better than expected.
Here is something I used in a presentation I did on dealing with the media (if you are so inclined to be quoted by it).
"Stocks rallied on rising oil prices (economic demand)."
The next day - "stocks fell on rising oil prices (inflation)"
The NY Times uses the phrase, "all the news that's fit to print." I cannot remember who said this, and it could have been Mad Magazine, "all the news that fits, we print."
Get the point? Journalists get paid to fill a column so they have to say something.
I was asked by a colleague this week why stocks rallied. Was it a knee jerk reaction or is the economy really on the mend. Let's assume everyone believes the stock market looks forward - which I do. How can something that happens today effect something that moves on events that are expected to happen nine months into the future? You get that point, too.
Here was my response:
"Stocks rallied because all the supply that supposedly came out this week thanks to economic (Ireland) and geopolitical (Korea) concerns was handily absorbed by demand in the market. It was also an affirmation that the liquidity pump (EU/IMF) would remain open (sentiment).
The market will reflect the real world one day - triggered by the liquidity pump shutting down. Until that happens, stocks are for traders or long-term investors willing to ride out another cyclical bear."
Let me close with another excerpt from my presentation:
"U.S. stocks will rise next week as Wall Street bets that corporate bellwethers including Citigroup, International Business Machines and Google Inc. will post stronger-than-expected financial results, strategists said."
- uh, fellas, if they expect them to be better then they won't be better than expected.
Thursday, December 2, 2010
Another reason for higher interest rates
This was posted by Boris Simonder in a pro chat room this morning.
The Eurozone bail-out fund will issue bonds next month to provide emergency loans to indebted nations.
The European Financial Stability Facility is expected to raise between €5bn and €8bn in bonds in a triple A rated deal,which will be the first bond issued by the Eurozone as one entity, to fund aid to Ireland.
Bankers expect the bonds will price between 50 to 90 basis points over German Bunds. However, German investors have warned that the bonds could “crowd out” the German Bund market, which saw the first signs of stress this week from the Eurozone crisis.
One hedge fund manager said: “Why would you buy German Bunds, if you can get extra spread on another bond that is risk-free?
http://www.ft.com/cms/s/0/f637db9a-fd45-11df-b83c-00144feab49a.html#axzz16vIKdxMU
The Eurozone bail-out fund will issue bonds next month to provide emergency loans to indebted nations.
The European Financial Stability Facility is expected to raise between €5bn and €8bn in bonds in a triple A rated deal,which will be the first bond issued by the Eurozone as one entity, to fund aid to Ireland.
Bankers expect the bonds will price between 50 to 90 basis points over German Bunds. However, German investors have warned that the bonds could “crowd out” the German Bund market, which saw the first signs of stress this week from the Eurozone crisis.
One hedge fund manager said: “Why would you buy German Bunds, if you can get extra spread on another bond that is risk-free?
http://www.ft.com/cms/s/0/f637db9a-fd45-11df-b83c-00144feab49a.html#axzz16vIKdxMU
Wednesday, December 1, 2010
Spain
You make the call.
Oh billions of dollars (euros), is there nothing you can't fix?
- Jon Stewart (The Daily Show, c 2008)
Oh billions of dollars (euros), is there nothing you can't fix?
- Jon Stewart (The Daily Show, c 2008)
Gold
My wife will kill me for writing this but ever since gold backed off 1440 she has been on my case to sell her baubles. When it dropped to 1330 she was in "I told you so" mode.
But as we watch the stock market rally out of its correction today, gold is once again spitting distance to 1400. Another example of how you can find sentiment analysis everywhere (she is not a finance person).
I'll say it again, gold is heading to 1500 before I have to worry about my next forecast.
To infinity......and beyond!
- Buzz Lightyear
But as we watch the stock market rally out of its correction today, gold is once again spitting distance to 1400. Another example of how you can find sentiment analysis everywhere (she is not a finance person).
I'll say it again, gold is heading to 1500 before I have to worry about my next forecast.
To infinity......and beyond!
- Buzz Lightyear
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