Trend in Dependance

I saw a TV spot this weekend for a product that allows you to unlock your front door via your smart phone. Looked good! I immediately thought that it would allow you lock your door if you run out and forgot. Or if your babysitter just got back from an ice cream run with your kids and you want to be sure he locked the door when they got home.  Or if your newly driving teen forgets a house key and you are in a restaurant 20 minutes away you can let her in and scold her later.

 Now that is what technology is supposed to do - convenience, peace of mind and more.

They touted the ability to unlock the door from the car to avoid fumbling with keys when your arms are full of groceries. Or not having to leave A key with the neighbors when you are on vacation. This is good stuff.

But then I got to thinking about what would happen when you lose your phone. Or lose wireless coverage. What do you do when you are so happy with technology that you do not even carry a house key any more? If the technology has a glitch you are sunk.

This is the reason I am not giving up my land line phone to go 100% cellular. And I am not storing everything I have in the cloud.I won't even get a Kindle because you cannot toss it in the bottom of your beach bag and assume it will survive the trip undented and unbroken.

Our lives are moving towards smart phones having a role in everything and even if you take away my personal geezer factor I still see the risk of real problems should all of these elaborate and usually reliable systems break down.

My son did not know how to use a fax machine but he can command the web masterfully from his phone. My daughter used to send texts (before she could drive) to say "pick me up in 10- minutes."  She was lucky if I even looked at my phone (non-smart) every hour when I was sitting in my living room.

Technology is great and I do embrace it when it makes my life easier. But I also am leery enough to reject it when I see it making me a slave. 

There will always be a place for the good old ways. Not all of them, of course, but most of them are not ready to go away just yet.

Here Comes Santa!

Here comes Santa Claus!
Here comes Santa Claus!
Right down Santa Claus Lane! 
(Gene Autry and Oakley Haldeman)

Or for you modern day crooners, Here Comes Bernanke Claus.

Everyone thinks Ben will fire up the sleigh, er, helicopter thanks to the minutes of the last Fed meeting. They discussed it but they never said they'd do it. Who cares? Buy stocks!

But really, was there anything new? They already said they'd be standing by to meddle, er, stimulate the economy. 

I think it was just a ploy by the market to shut up the key reversal crowd - you know, the ones that got super excited after yesterday's gap up, close lower move.

Tom McClellan (yes, that McClellan) said this (used with permission):

Yet the market has the mission of continuing the uptrend into November, according to the Democratic Presidential Cycle Pattern and my eurodollar Commitment of Traders leading indication. To do that, the market is going to somehow need to restore fear and doubt into the hearts of traders in order to have the fuel for the uptrend. One good way is with a key reversal bar that gets everyone talking about how the market has topped, the sky is now falling, and we are all in fact doomed. Once that is accomplished, the uptrend can resume.

The man is a genius.


You set me up to knock me down  
And leave my shattered pieces on the ground
- Lifehouse - Wrecking Ball (2010)

I'll close with a quote from this morning's Quick Takes Pro:

We are not going to get overly excited over one bad day but unless the central bankers start to put other people's money where their mouths are this market does indeed look very heavy.

Oh, did I mention we are long gold?

This time it's different

Uh oh, I said it! The dreaded "this time it's different" phrase harking back to the the peaks of bubbles pasts when people ignored the basic principles of trading, analysis and the economy.

This time it's different.

No, earnings still matter (remember I am a technical analyst so this is heresy). Price to advertising in a dot bomb stock was bs. Price to earnings in 1999 was infinity in that case and we know what happened.

What is different this time is what is driving the stock market. It ain't corporations although yes, I'll admit there are profits being made. No, it's not interest rates 0which have not really moved much since they got down to ridiculous levels.And no, it is not even supply and demand. Who is buying? Certainly not retail.

Ah ha! You were waiting for me to give you something to blow holes in. Markets can rise on low volume and have done so many times in our recent memory.

Way back when I used to take non-air conditioned NYC subways to work (good times!) in the Merrill Lynch municipal bond market (now that was good times - seriously) I learned the concept of "putting them away." That meant bonds were sold to actual investors who would hold them for a while and effectively take them off the market. Big blocks of bonds were traded back and forth among dealers until their retail and institutional networks absorbed them - which is what you really want in your market, no matter what it is. You want the end customer demanding supply. You did not want dealers playing, thinking they could make some money on your mis-priced new underwriting.

Sound familiar? Who is doing the trading these days? Hedge funds? High frequency traders? Scalpers? None of that put shares "away" in true demanding investor hands.

So is the market different? You bet it is.

Again, the principles underlying value are the same. What is different is where the "demand" is coming from. Hey, give me trillions in free money and I'll buy plenty of stocks. The demand is artificial thanks to central bank meddling.

Do you know what is really different? Thinking the market is signalling something for the economy down the road.   Here is a quote from someone I do respect:

Price is the best indicator of the economy - it moves up before the good news hits the headlines. Therefore, some good news is coming. 

Before the money dropping helicopter arrived, I  believed that with my heart and soul. But now, rather than forecasting the economy it is forecasting what the central banks will do.  The good news referred to in the quote is QE 3 and QE 4.

Yes, this time it is different. Not they way the naive thought in the bubble era or the condo flipping era or even the beanie baby buying bubble but they way the truly smart think. This time, however, the smart are wrong. 

Waiting...

In Quick Takes Pro this morning, I (mis) quoted Green Day - Wake Me Up When September Comes.

I don't have to tell you all that the market is waiting. Waiting for the Sun (Doors). Waiting on a Friend (Rolling Stones). The Waiting (Tom Petty and the Heartbreakers). And from waaaay outside my genre, Patiently Waiting (50 Cent).

Sometimes, I use a book of financial quotations to enhance my writing. I should probably piece together a book of lyrics related to financial topics.

Anyway, here is some more from this morning's newsletter:

Stocks traded with an even smaller range and lower volume Wednesday and now it is topic du jour in chat rooms. What's going on?

The better question is will he or won’t he? Will there be more stimulus? Here are two headlines:

"The better tone of the economic data in the two weeks since the Federal Reserve’s last policy meeting have caused some Fed watchers to doubt that the central bank will launch another massive bond purchase program next month."

Uh oh. The gains of late July were directly due to the belief that QE is coming. The first leg was thanks to promises by the ECB. The second was thanks to hints by the Fed.

"Stock-index futures track modestly higher, as investors circle back to stimulus expectations for the No. 2 global economy (China)."

If Europe won’t print and the USA won’t print then surely China will. And if they don't, maybe we can start a movement in India.

This sarcasm is meant to illustrate the dependence on "help" from the outside. Earnings? Yes, they seem to be better but that's not moving the market. Interest rates? No, it's risk-on vs. risk-off. Economic policy? You would think the battle in Washington would have some effect but no.

All the fundamentals that traditionally move the market (said by a technician with a sour taste in the mouth) hold no sway. It's all about quantitative easing, no matter the source. Rational analysis can be tossed out the window while we debate "will he or won't he."

Should I trade or should I go? - The Clash (sort of).

Should I just hit the beach with the Europeans and wait for the Oracle of Bernank to speak in Jackson Hole on August 31?

Or as I wrote in my Barron's Online column yesterday, should I download the trading app from my online broker and get ready to trade big-time if the announcement of more QE or not comes through earlier when nobody is looking?

Dog Days of August

A note from a Quick Takes Pro subscriber got us talking about a theory I covered in Barron's on several occasions over the years. Most people think August is a throw away month - very quiet with light activity. After all, most of the world (sorry, Oz) is on summer holiday.

But just when you are not looking things happen. Peter Eliades, veteran technical analyst, looked at August over the years and found that many times it is the stage for a big market change. Sometimes the market reverses. Sometimes it accelerates the move in progress.


Granted, the past few years have not seen anything important happen in August (2009-today) and as usual we blame market meddling by central banks. But in 2008, the decline accelerated in August and in 2007 it provided the spike low on in the initial sub-prime crisis news.

We are not saying that we'll see anything important this year but it would be an ideal place to reverse the rally from last year's low and from the June 2012 low.

On a related note, the dearth of news is likely due to the summer holiday season in Europe. Yes, the hard workers in Euroland are taking their well deserved month off. (Side note - I have not taken a vacation since 2001 when I started my own business). 

Does anyone find this a bit out of touch with reality? The crumbling economies of (some of) Europe are happy to be sure productivity stays low this month.

Anyway, the lack of news from Europe is making it quiet here. As long as the bad news remains hidden, Ben won't print.

Priceline Follows the Negotiator

Priceline announced a crappy outlook and crashed 15% on the news. Perhaps Shatner had a rope around his waist when they shoved him off the cliff in his last ad for them. The company followed him into the abyss.

OK, the company sees problems. Or for other stocks that fell, they had a bad quarter.

But hasn't this been happening A LOT lately?  Just recently - Zipcar, Sealed Air, Aeropostale to name just a few.

Serious punishment. And if it happens enough the indices will follow. It's just math.

Have you looked at your health care bills?

I have. What a joke. With or without Obamacare, this has got to change because if you do not have insurance and you actually pay your bills you are screwed.

To wit.

I visited a medical person recently (type does not matter) and for one visit they billed the insurance company for four items. One of them, inexplicably, was for zero. But there were two identical items - same code - and one bizarre one.  Sort of like when you do one action that breaks the law and get charged with four crimes (not that I would know).

The bizarre charge was for $120. The insurance company allowed none of it.

As for the two identical charges, the insurance company denied the second as a duplicate and paid $50 on a $65 charge.

With insurance, the cost was $50. Without insurance, it would have been $250.  Wow!

Health care professionals throw everything but the kitchen sink on the bill and the insurance company gets to play the good guy bean counter with a giant "denied" rubber stamper.

So, I am forced to pay tens of thousands per year on family insurance - not only to protect against the financial calamity of a serious illness or accident but also to hire a bulldog to keep the costs I pay until my deductible is met to a minimum.

Do I blame the docs? Nope. The paperwork they must carry is like Atlas' burden. Blame the system that has conditioned everyone that insurance is that to pay your bills instead of protecting against disaster.