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Saturday, September 24, 2022

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Monday Market Momentum (or Lack Thereof!)

It’s all about the Nikkie and the Fed this week.

I mentioned last week that we had to assume there is a 1,000-point tether between the Dow and the Nikkie and, in general, we can usually count on that relationship holding and we had several day (overnight) trades on EWJ that went well using that logic.  Today we should get a proper test of our connection as the two indexes are reaching their maximum gap once again with the Nikkei closing this morning at 9,572, 1,081-points below Friday’s Dow close at 10,653.  Europe seems to think it’s the Nikkei that needs to catch up to the Dow as the EU markets jumped 1.5% this morning – pretty much gapping up at the open and holding it through 8am, so far – that will lead us to go back in on EWJ for a catch-up trade if our markets make a similar move (with our target levels as easy indicators of a "real" rally).

Maybe Europe is right as the Yen was jammed all the way up to 85.8 to the dollar in our 3am trade and only fell back to 85.55 before being turned back up.  Both China indexes jumped 0.5% this morning as investors were happy with the Central Government’s decision to order 2,087 companies in 18 sectors to shut down obsolete plants in a decision aimed at streamlining industries that were polluting, energy-intensive and had excess capacity. 

This kind of makes me laugh at the talking heads on TV, whos think they are being clever when they call GM "Government Motors" as any fool reading the papers can see what real government intervention looks like – and the investors in China LOVE IT!  "This is very good news for the steel and cement sectors, as it will foster the development of these industries," said Chen Jinren at Huatai Securities.

Japan will close for a vacation next week and, of course, we have the FOMC rate decision tomorrow.  While no one is expecting a rate change, EVERYONE is now expecting some form of quantitative easing to pump more money into the US economy and we moved on and ignored Meredith Whitney on Friday afternoon – on the same day that we ignored some terrible jobs news:

China is not just managing their economy, they are managing ours as they risk their own growth in order to pull up the slack we were beginning to see as Factory Orders tapered off in July.  China is lagging behind a target for reducing the amount of energy used relative to gross domestic product, with only months to run in Premier Wen Jiabao’s five-year plan.  It must be nice to live in a country that has a plan…  “If the government has true resolve, then investors, especially overseas investors, may have not fully comprehended the implications of such policies on China’s heavy industry and demand for commodities,” UBS’ Beijing-based economist Wang Tao said in a note last month.

Never doubt the true resolve of the Chinese government and that means commodities may be getting far ahead of themselves.  We’re watching that $3.40 line on copper as what kind of rally do we have if Copper can’t even get back to it’s April highs?  Oil also isn’t looking too impressive under $82.50 and we sure aren’t seeing the kind of US demand that supports that level and China wants to consume LESS, not more oil and is taking DRASTIC steps to do so so what makes us think we have enough momentum to get through the roof (Dow 10,700, S&P 1,155, Nas 2,300, NYSE 7,350 and Russell 666) – where we had plenty of trouble last week?

Before we get too excited about Europe’s 1.5% gain at the open, let’s keep in mind they fell about that much on Friday and they are only changing their minds based on our "stick-save" close, as indicated on David Fry’s SPY chart:

That’s all Europe is doing this morning – getting back to where they were before they saw the jobs data we all seem to have decided to ignore as of about 2:30 on Friday.  We had been fortunate enough to select a couple of lovely day trades in Member Chat and Mr. Stick closed out our week with a bang but we went neutral into the weekend as we think the ENTIRE rally is based on nothing more than expectations of QE2 and expectations like that are very easy to disappoint – especially if investors think the answer to their prayers will be twitted by the Fed in between their normally tight regular policy statement.  

I’ll believe in QE2 when it’s matched by a big-gun stimulus program that creates JOBS FOR THE MIDDLE CLASS – a situation we discussed in detail over the weekend in "The Crisis of Middle-Class America."  We are not taking any positive moves in the markets too seriously until we see some improvement in the lot of the bottom 90% of our people.  We are bullish – in that we are betting the rich (Big Business) will get richer under current market conditions but the foundation of this country is still crumbling and that makes it kind of hard for us not to take all of these moves with a Lot’s wife-sized grain of salt. 

Speaking of how we are greedy, immoral bastards who are dooming ourselves:  Saudi Arabia agrees to lift the ban on RIMM’s Blackberry and, as a bonus, they get $30Bn worth of F-15s (84, made by BA) in the biggest arms deal ever!  When asked if there were any security threats to the US by giving Saudi Arabia our most advanced fighter jets – an official said: "Of course not, everyone knows that Saudi Pilots are very accurate with jets!"

Let’s all be careful out there!

 

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I find it interesting that you guys will debate all day long on the pensions of some teachers or other working class people who have worked their entire lives in an honorable profession, but have no comment about a CEO who could walk away with a $40,000,000 severence package after doing something less than honorable.

goldman,
California is a more aggressive about use tax collection than it used to be.  They’re now auditing U.S. Customs import forms and harvesting use tax on things bought and shipped from out of the country.  (Well, maybe they’ve been doing it all along, but I just got a letter not too long ago about something I bought in 2007, so I’m guessing that this is a fairly new thing.)
I’m now wondering if they’ll be able to find an investigative angle on things bought from other states in the U.S.

OK … that should have been:  "Cue"


That’s easy. Mark Hurd is paid by a corporation.  You don’t like Mark Hurd’s agreement with the compensation committee, sell your stock, and he no longer affects you.
"Public Service" pensions are paid by the taxpayer. If you don’t like what the teachers are doing, tough.  You must eat it.  And long ago these jobs ceased being about public service and have morphed into positions without consequence for the senior level staff. If you want to fire that councilman in California with a multimillion dollar pay package, tough. Eat it.
$40,000,000 wouldn’t cover the expense of one year’s contributions to a state pension fund for tens of thousands of teachers (police, fireman) on the payroll, and retirees.
The control that the people have over their "public servants" has been hijacked by unions and the people are the losers.

goldman: AMD actually owns ATI, so you were right the first time 😉

but have no comment about a CEO who could walk away with a $40,000,000 severence package after doing something less than honorable.
 
My comment:  a) Shareholders should sue the company if they don’t like it ( and I wouldn’t like it if I were an HP shareholder; b) taxpayers don’t pay for it and its not causing states to go broke c) seems outrageous for sure; although HP may be constrained by what they can do vs. would like to do due to contractual issues.  Certainly another example for excessive CEO compensation.
 
I bet we see lawsuits over that pay package.

Flipspiceland:  Well said …

Unions/Cap/flispiceland – I see your points about private vs public pensions….the structure and corporate nature of unions could be an interesting weekend or late evening topic. I do wonder, though, Cap – at first blush the idea that shareholders, not taxpayers, pay for exorbitant CEO packages seems obvious, but I bet a little digging would show taxpayers kicking in on that as well.

Teachers:  another factor to consider is that there were 6.2 million teachers in the USA 5 years ago; so the math adds up really fast. 
http://jd2718.wordpress.com/2009/08/29/how-many-teachers-are-there/
I hate how much Hurd is going to walk away with, but  same goes for the producers/actors in hollywood, sports figures and supermodels.  
 

Good point there– that maybe someone should do something for the people who did more than "make deals" and skim as they "worked" and created EVERYTHING THERE  Am I the only totally pessimistic one who sees the PR for the Owning Class as being almost totally successful? All the people who would benefit from positive programs don’t seem to have the remotest understanding of economics ( I work with people with doctorates in non-financial field and they are completely clueless about how Congress gutted the FInancial Reform bill IF THEY KNOW THERE WAS ONE AT ALL!) The Lumpenproles have a vague idea that the rich get richer, ahve no intention or idea what to do about it,  the brainwashed tough-guy rural people who have bought the Owning Class anti-socialism hook, line and sinker– they think everything would be solved by firing all gubmint workers and cutting Social Security. Except for their parents and them. HOw can the Owning Class lose here, unless they try to take away an overweight nation’s Fritos and large-screen TV’s?

From the comment section of the above article:
 
"It’s clear that Apple is now working on building the shape changing robot from the second Terminator movie." 🙂
 

boobearsdad/Internet Sales tax  – New York, NC, Rhode Island, CA, and Hawaii have interstate internet sales tax laws…other states are following.  You are right, you need to pay internet sales taxes and I will too (I can write it off on one of my biz!)…I was kidding about the wink wink.  I’ve seen the worst of the IRS before,  when in doubt, I send them extra money to keep them happy!
 
Kinkistyle/AMD – I forgot they bought then out…and soon when Intel buys what is left of AMD after the price wars, they will own ATI next…=D

 It makes perfect sense that Apple would build the Terminator out of this "new alloy, stronger than titanium"   Isn’t that the way–we love the company, it’s the company America is proudest of, and they go create Armagedon.  I suspect it will happen when Steve jobs passes away (cancer–yeah right!) and either Tim Cook or Forestall is a cyborg plant.  But hey, that should help stock performance for the long run.  

goldman,
I hear ya.  An accountant told me that there’s only one organization you should more concerned with, as a Californian, than the IRS: the Board of Equalization (who, among other things, collects the use tax).  Needless to say, a valuable lesson learned.

Where’s the V-shaped jobs recovery everyone’s missing? Here. Essentially one of the arguments goes like this:
"Even the knowledge of a potential extension in unemployment benefits might put off the acceptance of a job offer. An unemployed person might wait (we would) until after he knows whether or not he will receive extended government benefits before taking a job with pay equal to or lower than his benefits. Thus as job openings rebounded, as shown in the middle chart above, many Americans may have decided to hold out due to hopes of extended unemployment, thus keeping unemployment high despite a rebound in job creation."
The other argument suggests employers may need to raise salaries to offset the extended unemployment benefits. As an armchair psycho-economist, I’d like to see a chart of the number of unemployed people vs the number of months they been on unemployment.

I love wolframAlpha. As of July 2010:
– unemployment average duration: 34.2 weeks (mean 22.2 weeks)
– unemployment duration over 27 weeks: 6.6 million people (45%)
– unemployment duration 15-26 weeks: 2.2 million people (14.7%)
– unemployment duration 5-14 weeks: 3.1 million people (21%) 
– unemployment duration less than 5 weeks: 2.8 million people (19.4%)
 
That should roughly total 14.6 million people, minus rounding errors. If you go here and click the more button at towards the bottom of the page, there’s actually a nice plot per month from 2008 – 2010 of the unemployment trends for each category. The average and median durations have been steadily increasing, but there are generally fewer unemployed people now than there was at the beginning of 2009 in each category, with the trend decreasing. EXCEPT for people unemployed over 27 weeks, which has steadily increased over the same time frame.
 
So these data say there aren’t as many new people filing for unemployment and staying on it for short periods of time compared to early 2009, but the number of people on unemployment for 6 months or more is increasing. And presumably the previous post illustrated it’s not because jobs aren’t available, which does in turn suggest people are content with the benefits they’re receiving from the government versus working for them like everyone else and getting an equivalent amount or less.

Pivot Points for Tomorrow

Hi Cwan,
Yes, the SPX Aug 1180 & 950 short strangles is a big win.  I would roll 10 950 August putters to 1 950 putters so that I don’t spend out of pocket money buying them back.  Since the margin is improved by reducing the number of contracts from 10 to 1, you have plenty of fire power to sell additional contract.  Same for the caller side, but the ratio may be different.

wow more bad news out of Europe and Asia.  Futures down almost a percent…..  reality?  is it possible?

Whheeee goes my overnight FAS short!  The party has started a little early, huh?

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