Tuesday, October 12, 2010

Quantitative Sleazing

I had this on my Facebook page last week after the jobs report.

A quote from Charles Payne (from Fox Business - one of my favorite commentators)

"Today's jobs report is so awful its got traders giddy about the prospects of an avalanche of cash coming into the system (think QE2)."

Today, the Fed indicated that more easing is on the way in the short term. And stocks went up again. So far, it is a muted reaction. Perhaps all of this was already priced in days ago (as in last week) and this is just a little diversion on an otherwise boring day.

Whatever it is, the piper is running up a mighty big bill.


PD Quig said...

A pertinent quote from David Rosenberg:

"This is a market completely based on hope. Throw fundamental investment principles out the window. It’s now all about how the Fed can manage to inflate asset prices now that fiscal policy has tested its limits with the voting public. But where does this renewed faith in the Fed come from? Is this not the same Fed that took the funds rate from 5.5% to near- zero? The same Fed that tripled the size of its balance sheet in QE1? The same Fed that thought the housing and mortgage crisis would stay “contained” back in 2007? The same Fed that confused a credit contraction with a liquidity squeeze? The same Fed that believed, in the summer of 2007 when the crisis first broke that we would see 2.5-3.0% real GDP growth in 2008? The same Fed that was contemplating its exit strategy just a short six-months ago and believed it could start to shrink its balance sheet last spring? The same Fed that investors have so much faith in, and is the same Fed that passively tightened policy with a 25 basis point hike in the discount rate to 0.75% back on February 19th. The same Fed that just trimmed its forecast three times in the past four months, and is this not the same Fed that investors now have “faith” in? The question is, the “faith” to do what?

Give me a giant break."

Michael Kahn said...


The market may go up on hope but the higher it goes the more likely it will crash, IMO.

Harris said...


I really appreciate your Barrons columns. I've been following them the last couple years and it has been illuminating, never having been educated on technical analysis.

Regarding tonight's column, and the last couple months' generally, isn't the object of technical analysis to follow the market's technical signs, regardless of whether the fundamentals match up? I get that the economy is a disaster and the government's ability to do anything about that dubious at best. But if your charts say stocks are breaking out, isn't the lesson to listen until they say otherwise?

You seem to be undermining your own message. Is this based on your hunches, your read of the fundamentals, your politics, or am I missing the point of your columns?

I've been following your lead as expressed in your columns, not your blog. Am I the sucker at the poker table?

Rooney said...

I agree with you Harris, Mike, please don't feel offended and don't take it personal, I am just saying what I've seen. I think you've been fighting, fighting and fighting against the trend. Everyone knows how bad the economy is, but as a trader/chartist, you trade the price action instead of the fundamentals, right? the trend/bubble has been quite clear. If it is not clear enough in the US, then look elsewhere, the stock market of India, Thailand, Indonesia, Philippine and Mexico have broken the high of 2007, most of the others are about to break new high. And if you look at the fundamentals, I think you need to look at it differently this time round, not GDP growth or unemployment rate that kind of stuff, it is the money printing you need to look at, if they keep doing that, what else can the asset price go? although it is a number game, you don't get richer, but you do feel you have more money in your pocket so you go on a spending spree, consumer spending up then the economy seems better, so consumer confidence up, sociaty sentiment gets better, then companies start hiring and so on.....is it not what the government is trying to create? does it matter if the market crashs eventually, if you are good enough, you will be able to profit handsomely from this surgh, probably a final surge before it crashes. When everyone is getting drunk and having a good time in a party, you wouldn't like to be the odd one out, you only stay sober at the end of the party.

Michael Kahn said...

Offended? Hardly. I've been called a lot worse over the years but you are both right - I have been fighting it in theory. What you guys have not seen is the long-side of the newsletter. Granted, we am lagging but we are still in it.

The last time I saw this sort of thing was 2009 when liquidity stomped on everything that was holy to a chartist. The time before was 2000 when I would look at charts and say literally every day "this is sick!"

So, you are right, we play along but I stick by the earlier comment. When it does eventually end, we just might see a crash.

Paul O'Cuana said...

How about the bullish reversal today in long treasuries (+20) as represented by TLT!
This should represent the lower boundary of a balanced triangle which should resolve to the upside.

The spread between 10 year and 30 year treasuries is at a record.