by Phil Davis - September 29th, 2010 8:24 am
Everything is proceeding exactly as I have foreseen – Emperor Palpatine
In Monday’s post I said: "we really would like to see a little volume consolidation before we make another run at the 1,150 line on the S&P" and we zigged and we zagged until yesterday’s close where "THEY" punched it up to EXACTLY the 1,150 line (see Dave Fry’s chart) where we, of course, failed – because it’s all a load of BS end-of-quarter window dressing but HEY – 1,150, how about that!?! 1,150 is the 7.5% line on the S&P (see Monday’s chart) and that goes hand in hand with Dow 10,965 (not there yet), Nasdaq 2,365, NYSE 7,280 and Russell 672.
As I mentioned yesterday, our betting is still all over the place as we may go up on a technical breakout or we may go down and the fulcrum for the markets is currently the dollar, whose devaluation relative to the exchange value for a stock certificate is responsible for the vast majority of our recent market. We’re positioned bearish in that we have 10:1 bets made to the downside on some ultra hedges so we will be thrilled with a pullback but, on the whole, we’re still really just protecting our bullish bets – even our review of the September Dozen this weekend couldn’t find too many reasons to take the money and run as we just didn’t look weak enough to quit on our most bullish trade ideas.
Our overriding concern is that Japan makes good with their promise to intervene on the Yen, which will boost the buck, knock down commodities and tank the markets. Why is that not happening? Well our own Government is doing everything they can to de-value the dollar. We talked out quantitative easing yesterday and GS issued a report yesterday saying there was NO CHANCE that the Fed would raise rates and, in fact, they may even lower rates to ZERO.
Now, I don’t know about you but I’m holding out for when the government PAYS ME to borrow money. Maybe then I’ll be willing to let them lend me $1Bn as long as they pay me $2.5M a year to hold onto it. Our greedy little IBanksters couldn’t wait though, and they rushed out and borrowed another $500M from the Fed yesterday (POMO) at the outrageous rate of 0.25%.…
by ilene - September 28th, 2010 8:45 pm
Courtesy of Mish
The economy is stuck in neutral so stepping on the QE gas pedal is highly unlikely to accomplish much except increase the noise level. Yet, the philosophy at the Fed seems to be, if gas doesn’t work, give the engine more gas.
So the engine continues to rev louder and louder, and treasury yields drop, but that does not and will not put Americans back to work.
5-Year Treasury Yields at All-Time Low
Curve Watcher’s Anonymous notes Treasury Five-Year Yields Near Lowest Since 2008 Before Auction
Treasuries rose, pushing five-year note yields to the lowest level in almost two years before today’s auction, as a drop in consumer confidence spurred bets that the Federal Reserve will increase debt purchases.
Bonds also advanced as an official said the Bank of England should step up quantitative easing and Standard & Poor’s said the price of bailing out nationalized lender Anglo Irish Bank Corp. could exceed $47 billion
“The engine is revving, but the car is going nowhere,” said Thomas L. di Galoma, head of U.S. rates trading in New York at Guggenheim Capital Markets LLC, a brokerage for institutional investors. “It’s the combination of QE and a possible QE2 in England. You’ve got some sovereign-debt problems, which is also sending a safe-haven bid into Treasuries.”
Yield Curve Weekly Close
Providing unneeded liquidity may or may not help asset prices (please see Sure Thing?! for a discussion) but if quantitative easing helped the real economy, at some point yields would stop falling.
Clearly the Fed has no clue as to what to do, but it wants to "do something". The only thing the Fed can think of doing (or is willing to do) is have another round of quantitative easing, so the Fed eases whether it makes any sense or not.
The amazing thing here is talk of "Sure Things" regarding equities, with treasuries universally despised.
Of course it is no "Sure Thing" for treasury yields to drop either, but arguably it is more likely given the economic engine is stuck in neutral.
The simple fact of the matter is increased borrowing power or lower interest will not cause businesses to expand. I have discussed this point at length in
by ilene - September 28th, 2010 1:32 pm
Insightful article by Pragcap, explaining why discouragement is the devil’s favorite tool and a very insidious enemy to us. – Ilene
Courtesy of The Pragmatic Capitalist
Most economists ignore the behavioral side of finance. They tend to stick to their models, equations and textbooks. This is, in large part, what makes economics such a frustrating endeavor for so many people. They tend to ignore the simple fact that there is an unquantifiable variable in the equation – human emotion. And no matter how much we evolve and advance technologically this variable will always be the most important piece of the puzzle.
Over the last few years I have argued that much of what the
“Once upon a time it was announced that the devil was going out of business and would sell all his equipment to those who were willing to pay the price.
On the big day of the sale, all his tools were attractively displayed. There were Envy, Jealousy, Hatred, Malice, Deceit, Sensuality, Pride, Idolatry, and other implements of evil display. Each of the tools was marked with its own price tag.
Over in the corner by itself was a harmless looking, wedge-shaped tool very much worn, but still it bore a higher price than any of the others. Someone asked the devil what it was, and he answered, “That is Discouragement.” The next question came quickly, “And why is it priced so high even though it is plain to see that it is worn more than these others?”
Because replied the devil, “It is more useful to me than all these others. I can pry open and get into a man’s heart with that when I cannot get near him with any other tool. Once I get inside, I can use him in whatever way suits me best. It is worn well because I use
26 of Last 88 Trading Days have been 90% Days (Either Up or Down); 7 More Lean Years in Stock Market?
by ilene - August 31st, 2010 3:46 pm
26 of Last 88 Trading Days have been 90% Days (Either Up or Down); 7 More Lean Years in Stock Market?
Courtesy of Mish
Here is an interesting snip from August 31 Market Commentary by Art Cashin for UBS. Sorry, no link.
Monday’s market evaporated nearly all the gains from Friday’s rally. Despite lighter volume, it was a 90% down day. That means the bears got a lopsided advantage in negative breadth and negative volume. In Friday’s rally, the bulls had had a similar 90% advantage. Robert McHugh of Main Line Investors says 26 of the last 88 trading days have been 90% days – one way or another. Any wonder the public is wary.
Are these 90% Days a Good Thing?
While the big boys push the market around, small investors have thrown in the towel and are not coming back.
Market volume now consists of black boxes pushing all stocks one way or the other on 30% of the days. Is this a good thing? For who? Investors or Goldman Sachs?
Holding the Line
Today, the 1040 level on the S&P held for about the 8th time on "fabulous" news consumer confidence rose to 53. Bear in mind number in the 70′s are typical of recession lows.
How long the 1040 level can hold is a mystery, but each bounce seems to be weaker and weaker.
Last Friday, I noted Market Cheers 1.6% Growth; Treasuries Hammered; while asking "what’s next?"
We have a partial answer already. Treasuries have regained the entire selloff that started (and ended) on the "great news" that 2nd quarter GDP was +1.6% instead of the expected +1.4%. Never mind that growth was revised down twice from above +2.5% to +1.6%.
Looking ahead, I expect GDP to be negative in the 3rd quarter.
Art Cashin’s 17.6 Year Cycles
A little over a year ago Art Cashin commented Dow Trapped in 17-Year Cycle
Art Cashin, director of floor operations at UBS Financial Services, offered CNBC his stock-market insights. Cashin decried the idea of a second stimulus, in light of the "infamous" first attempt.
"There was no ‘stimulus’ in the stimulus package. It was mostly social engineering," Cashin said. Thus, talk of a new plan is shaking markets with fears of even more debt — with "nothing to show for it."
Cashin revisited his theory of "the 17.6-year cycle."
"It’s like the Biblical story of the fat
by ilene - August 31st, 2010 10:33 am
Courtesy of Tyler Durden
Paul Farrell’s take on Jeremy Grantham’s recent essay Seven Lean Years (previously posted on Zero Hedge) is amusing in that his conclusion is that should Obama get reelected, his entire tenure will have been occupied by fixing the problems of a 30 year credit bubble, and if anything end up with the worst rating of all time, as the citizens’ anger is focused on him as the one source of all evil. "Add seven years to the handoff from Bush to Obama in early 2009 and you get no recovery till 2016. Get it? No recovery till the end of Obama’s second term, assuming he’s reelected — a big if." Also, Farrell pisses all over the recent catastrophic Geithner NYT oped essay, which praised the imminent recovery which merely turned out to be the grand entrance into the double dip: "In his recent newsletter, "Seven Lean Years Revisited," Grantham tells us why expecting a summer of recovery was unrealistic, why America must prepare for a long recovery. Grantham details 10 reasons: "The negatives that are likely to hamper the global developed economy." Sorry, but this recovery will take till 2016."
For those who have not had a chance to read the original Grantham writings, here is Farrell’s attempt to convince you that Grantham is spot on:
But should you believe Grantham? Yes. First: Like Joseph, Grantham’s earlier forecasts were dead on. About two years before Wall Street’s 2008 meltdown Grantham saw: "The First Truly Global Bubble: From Indian antiquities to modern Chinese art; from land in Panama to Mayfair; from forestry, infrastructure, and the junkiest bonds to mundane blue chips; it’s bubble time. … The bursting of the bubble will be across all countries and all assets … no similar global event has occurred before."
Second: The Motley Fools’ Matt Argersinger went back to the dot-com crash of 2000: Grantham "looked out 10 years and predicted the S&P 500 would underperform cash." Bull’s-eye: The S&P 500 peaked at 11,722; it’s now around 10,000. Factor in inflation: Wall Street’s lost 20% of your retirement since 2000. Yes, Wall Street’s a big loser.
Third: What’s ahead for the seven lean years? Wall Street will keep losing. Argersinger: "Grantham predicts below-average economic growth, anemic corporate-profit margins, and other
by ilene - August 14th, 2010 2:46 am
Courtesy of Michael Panzner at Financial Armageddon
In my latest column for DailyFinance, "The Disconnect Between Consumer Confidence and Retail Sales," I argue that the yawning gap between these two measures is telling us something. Chances are, it’s saying that consumers know better than the official statistics about what’s really going on in the U.S. economy.
Click here to read the article.
by ilene - July 28th, 2010 7:44 pm
Courtesy of Washington’s Blog
Numerous current stories show how disconnected mainstream policy-makers are from reality.
For example, Ryan Grim points out that there is an "unbelievable disconnect" between the American people (who are people are against the Afghanistan war) and Congress and the political elite (gung-ho to escalate this never-ending war):
Even after the Wikileaks revelations, even though there is no logical reason to be in Afghanistan, even though the war won’t help the economy, and even though most Americans want us to get out, Congress keeps increasing funding for the endless war.
And Alan Blinder (economist, banking consultant and former Vice Chairman of the Board of Governors of the Federal Reserve System) and chief Moody’s economist Mark Zandi wrote a paper yesterday called How We Ended the Great Recession:
A source on Capitol Hill sent this to me, telling me that the paper is making the rounds on the Hill.
In the paper, Blinder and Zandi congratulate the Bush and Obama administrations for saving us from the Great Depression 2.0:
Eighteen months ago, the global financial system was on the brink of collapse and the U.S. was suffering its worst economic downturn since the 1930s. The Great Recession gave way to recovery as quickly as it did largely because of the unprecedented responses by monetary and fiscal policymakers.
In other words: "Mission Accomplished".
In the real world, however, the economy is on the second leg down of the crash, and the government’s policies have not addressed the real problems. See this and this (no wonder consumer confidence is plunging but Wall Street is partying like it’s 1999).
Indeed, while Blinder and Zandi and Congress are patting themselves on the back for a job well done, the facts simply do not bear out their claims. As just one example, they claim that the TARP bank bailouts helped the economy. But as I pointed out in March 2009, the bailout money didn’t actually…
by ilene - July 23rd, 2010 1:59 pm
Courtesy of Robert Reich
We’re not in a double-dip recession yet. We’re in a one and a half dip recession.
Consumer confidence is down. Retail sales are down. Home sales are down. Permits for single-family starts are down. The average work week is down. The only things not down are inventories – unsold stuff is piling up in warehouses and inventories of unsold homes are rising – and defaults on loans.
The 1.5 dip recession should be causing alarm bells to ring all over official Washington. It should cause deficit hawks to stop squawking about future debt, blue-dog Democrats to stop acting like Republicans, and mainstream Democrats to get some backbone.
The 1.5 dip recession should cause the President to demand a large-scale national jobs program including a new WPA that gets millions of Americans back to work even if government has to pay their wages directly. Included would be zero-interest loans to strapped states and locales, so they didn’t have to cut vital services and raise taxes. They could repay when the economy picked up and revenues came in. The national jobs program would also include a one-year payroll tax holiday on the first $20,000 of income.
The President should stop talking and acting on anything else – not the deficit, not energy, not the environment, not immigration, not implementing the health care law, not education. He should make the whole upcoming mid-term election a national referendum on putting Americans back to work, and his jobs bill. Are you for it or against it?
But none of this is happening. The hawks and blue dogs are still commanding the attention. Herbert Hoover’s ghost seems to have captured the nation’s capital. We’re back to 1932 (or 1937) and the prevailing sentiment is government can’t and mustn’t do anything but aim to reduce the deficit, even though the economy is going down.
It looks like there’ll be an extension of unemployment benefits. (If it weren’t for the human suffering involved, I wish the Republicans had been forced to filibuster that bill all summer and show the nation just how much they care about people without jobs.) But the fiscal stimulus resulting from this will be tiny. Jobless benefits are humane but they alone don’t get jobs back.
by ilene - July 8th, 2010 6:34 pm
If you watch any mainstream news program these days, it is almost a certainty that someone will mention the word "recession" before a half hour passes. In fact, it seems like almost everyone is either predicting that we are going into a recession, or they are warning of the need to avoid a recession or they are proclaiming that we are still in a recession. So will the U.S. economy once again be in recession in 2010? When you consider all the signs that are pointing that way, the evidence is compelling. The truth is that there is bad economic news wherever you turn. There is bad news in the housing industry. There is bad news in the financial markets. There is bad news in the banking system. There is bad news coming out of Europe. There are even signs that the bubble in China may be about to burst. Plus, the economic impact of the Gulf of Mexico oil spill could end up being the straw (or the gigantic concrete slab) that really breaks the camel’s back. So there are certainly a lot of pieces of news that "gloom and doom" economists can hang their hats on these days. There is a very dark mood in world financial markets right now, and it seems like almost everyone is waiting for the other shoe to drop. But does all of this really mean that we are looking at the start of another recession before the end of 2010?
The truth is that nobody really knows. Things certainly look very ominous out there. The dark clouds are gathering and the economic winds are starting to blow in a bad direction. The following are 24 pieces of evidence that do seem to indicate that very difficult economic times are imminent….
-U.S. Treasury yields have dropped to stunning new lows. So why are they so low? Well, it is because so many investors are anticipating that we are headed into a deflationary period. In fact, many economists are warning that the fact that Treasury yields are so low is…
by ilene - July 7th, 2010 11:35 am
Courtesy of The Pragmatic Capitalist
The latest data on global semiconductor
The Semiconductor Industry Association (SIA) reported today that worldwide sales of semiconductors in May were $24.7 billion, a sequential increase of 4.5 percent from April when sales were $23.6 billion and a year-on-year increase of 47.6 percent from May 2009 when sales were $16.7 billion. As expected, the year-on-year growth rate declined slightly from the 50.4 percent reported in April. All monthly sales numbers represent a three-month moving average.
“Global sales of semiconductors in May reached a new high and remain on pace to reach the SIA forecast of 28.4 percent growth to $290.5 billion in 2010,” said SIA President George Scalise. “Chip sales have been buoyed by strength in sales of personal computers, cell phones, corporate information technology, industrial applications, and autos. Unit sales of personal computers are now expected to grow by 20 percent this year and cell phone unit sales are predicted to be up 10 to 12 percent over 2009 levels.
“Emerging markets, including China and India, are fueling sales of computation and communications products,” Scalise continued. “The automotive market is also slowly recovering after several years of weak sales. Demand from the corporate information technology and industrial sectors that had pushed out replacement cycles during the global economic recession is beginning to come back.”
SIA once again noted that the industry year-on-year and sequential
growthrates are likely to continue to slow during the second half of 2010. “Recent chip sales have shown robust demand, but the year-on-year growth rates also underscore the very depressed market conditions of the first half of 2009. Going forward, the year-on-year growth comparisons will reflect the industry recovery that gained momentum in the second half of last year.
“Growing concerns about issues such as government debt, declining consumer confidence, and pressures on government spending do not appear to have affected worldwide semiconductor sales to date, but given the semiconductor industry’s growing sensitivity to macroeconomic conditions, these issues bear watching in the second half of 2010,” Scalise concluded.