Just Another Manic Monday - $1.25Tn ESM Edition

Another week, another $1.25Tn.

That's the way the Global Markets function these days as RUMOR has it that Germany will now bow to International pressure and allow the "permanent" ESM Fund to be" temporarily" doubled from to $1.25Tn extending the due to expire EFSF and combining with the existing ESM. That then, in theory, will prompt the IMF to put in $1Tn of their own (40% US money!) as Christine Lagarde has said she would not advocate increasing IMF resources to help reinforce the euro zone firewall unless EU countries act convincingly first.

This "great" news sent to the Euro and the Pound up half a point this morning and turned the EU markets from down 0.5% to up 0.5% as Europe, once again, is "fixed." It also "fixed" oil prices, which were in danger of slipping back below $106 this morning but now back at $107 and that's still not enough because the S&P says if Russia can't get oil up to $120 a barrel, there is no way they can balance their budget this year and each $20 below that mark will cost Russia a notch of credit ratings.

On the other hand, according to the IEA's Chief Economist, if Russia gets their $120 oil – it's the rest of the World that will plunge into a Global recession. The IEA estimates that the EU will spend a record $502Bn this year on net imports of oil, up from $472Bn in 2011. That represents 2.8 per cent of the bloc’s gross domestic product, whereas between 2000 and 2010 it was spending on average 1.7 per cent of GDP on oil imports. The US will spend $426Bn on imports (2.7%), Japan $198Bn (3.6%) and China $251Bn (4.1%) while India is spending 5.9% of their GDP just on imported oil. The IEA notes that every recession in industrialized nations since WWII have been preceded by spiking oil prices.

That has not stopped Bernanke, this morning, from giving a speech where he once again hints at additional Fed easing and that has rammed our futures up (8:30) to the day's highs but pretty much exactly where I predicted they would be when I set shorting targets in this morning's Member Chat at 7:10, when I said:

Dollar rallied back to 80 and now is back to 79.67. The rally didn't drop the indexes but the drop back from 80 to here shot us up like a rocket in the past 90 mins. There's stimulus news from Europe but it's the same thing repackaged again – I can't see this move up lasting if that's all they have. S&P (/ES) 1,400 makes a good shorting line as does Dow (/YM) 13,100, Nas (/NQ) 2,750 and RUT (/TF) 835 BUT– above those lines – we're going to have to be bullish.

Bernanke's "conclusion" in his speech has this rally fuel to help goose the markets into the end of the first Quarter on Friday: "Further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies. I also discussed long-term unemployment today, arguing that cyclical rather than structural factors are likely the primary source of its substantial increase during the recession. If this assessment is correct, then accommodative policies to support the economic recovery will help address this problem as well." As Paul Simon says:

He’s a one trick pony
One trick is all that horse can do
He does one trick only
It’s the principal source of his revenue

He’s a one trick pony
He either fails or he succeeds
He gives his testimony
Then he relaxes in the weeds
He’s got one trick to last a lifetime

But that’s all a pony needs

Or, as 1020 pointed out in Member Chat this morning, Ben's "Gotta have more cowbell!" Bernanke's comments did the trick and the Dollar plunged back to 79.25 for the first time since early March, when the Dow first rocketed to 13,250. So we have cheap Dollars boosting US Industrial Exporters and cheap Yen boosting Japanese Industrial Exporters and that means we're all counting on the EU to buy all our stuff – what can possibly go wrong with this plan?

Actually, my bearish theory is the Dollar will hold 79.25 and bounce back as the unfolding crises in Spain, Italy and Portugal make it seem like $1.25Tn is going to be a drop in the European bucket and Chinese news continues to disappoint as well and THAT'S why we're bearish on my target lines!

Still, we have to expect $1.25Tn from the EU and another $1Tn from the IMF and another $1Tn from the Fed (all rumors, of course) to give us a nice run-up into Friday's end of quarter window dressing. After that – who cares – it's 4 days from now and you know investors don't look that far into the future…

Pundit scores Speaking of people who can't see the future, CXO Advisory's "Guru Grades Page" tracked the accuracy of many famous stock analysts and scored them based on the accuracy of their predictions and, not surprisingly, they are not, on the whole, any more accurate than flipping a coin. As I commented to Members on the subject:

Gurus – About what you'd expect, no better than just guessing. This is why the only sure bet in the markets is to BE THE HOUSE – Sell premium to suckers who think they are going to be smarter than the markets. These guys are the best of the best and only 4 are better than 50% (and not much better). Some, like Abby Cohen are so bad they make great contrary indicators and she's the SENIOR US INVESTMENT STRATEGIST AT GOLDMAN SACHS!!! It's a total joke folks – the only danger is if you take these people seriously…

There's a reason our mission statement at Philstockworld.com is "High Finance for Real People – Fun and Profits" – if you don't learn to have fun with the markets, they can be endlessly frustrating and you certainly don't have to take the markets seriously to make a profit – no more so than you do a roulette wheel or the roll of dice on a craps table – there are no "secrets" other than the one that our friends Steve Wynn and Shelly Adelson know all too well:

BE THE HOUSE!

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Pharmboy

Member

March 26, 2012 11:53 am

Done for the day! Later……

Phil

Author

March 26, 2012 11:54 am

Here's the joke – divide the $4.2M average of the top 0.1% by 999 (everyone else). $4,200 PER PERSON for the bottom 99%! What's better for America – that 140,000 people get $4.2M each or if 138,600,000 people get $4,200 each?

stjeanluc

March 26, 2012 11:59 am

Top 0.1% / Phil – Actually, what they don't realize is that another $4200 to the bottom 99% would actually be leveraged to much more to the top 0.1% given time. It's just insane…

Inkarri1982

March 26, 2012 12:00 pm

Long-term unemployment is cyclical? I recall reading an article from Mish a while back detailing how approxiamtely 500k US mfg. jobs a year are lost to Asian countries. Furthermore, I guess his statement means that all the construction jobs are also going to be coming back? This is not a surprising statement from him as last week he also said that "most evidence" points to the Fed not being responsible for the housing bubble.

March 26, 2012 12:04 pm

GS/Rpme – Of course they are going to tell you that – who do you think have been buying stocks since 2009? Now they need to sell them. Why didn't they tell you it was a generational opportunity 3 years ago when stocks were 50% cheaper? If we're getting the kind of hyperinflation that will make Dow 13,000 a better bargain than Dow 7,000 was – then we aren't missing much bu making sure GS isn't full of crap, right?

Dow volume 45M at noon – About normal for this slow year.

Thanks Bob, good explanation.

Cyclical/Ink – Very scary when the Fed chair is this clueless (or simply lying).

March 26, 2012 12:20 pm

Oh, PLX…thank you. And SGEN….And TSRX…and CLDX….now get UR arse in gear YMI!

March 26, 2012 12:23 pm

Is that gap in IWM right? On JRW's 2d, 3min, it goes from 83.74 to 84.06…??

biodieselchris

ARIA ARNA IMGN and PLX are making me look like a financial genius today.

rustle123

March 26, 2012 12:30 pm

Just want to point out when it comes to the oil factor in movement of the stock market, in 2008 we averaged over $100 oil for six months, then the market crashed, in 2011 we averaged over $100 oil for 6 months and we crashed or you can say a minor pullback of 2000 points in a little over a month, right now we're at 5 months of avg $100 oil, and back in 2000 oil went from 17 to the 50's for about 6 months, then we crashed.

March 26, 2012 12:39 pm

oops, meant we're at 4 months now.

March 26, 2012 12:40 pm

Watching the Tebow press conference, he looks like a young Jesus who juiced up.

1020

March 26, 2012 12:49 pm

Pharm – Did you "Wave the Wheat"?

http://www.youtube.com/watch?v=LwH03TVo7pQ&feature=player_embedded

🙂

March 26, 2012 1:00 pm

I'm A Jayhawk:

By George "Dumpy" Bowles
(Revised in Fall 2010 due to changes in the Big XII;
new lyrics by Matt Schoenfeld)
Talk about the Sooners, Cowboys and the Bears,
Aggies and the Tiger and his tail.
Talk about the Wildcats, and the Cyclone boys,
But I’m the bird to make ‘em weep and wail
CHORUS:
'Cause I'm a Jay, Jay, Jay, Jay, Jayhawk,
Up at Lawrence on the Kaw–
'Cause I'm a Jay, Jay, Jay, Jay, Jayhawk,
With a sis-boom, hip hoorah,
Got a bill that's big enough
To twist a Tiger's tail,
Rope some 'Horns and listen
To the Red Raiders wail–
'Cause I'm a Jay, Jay, Jay, Jay, Jayhawk,
Riding on a Kansas gale.

I like this "Bird" tune a bit more…. 😉

http://www.youtube.com/watch?v=2WNrx2jq184

shadowfax

March 26, 2012 1:02 pm

rustle
I checked Oil prices and thought when are they going to notice that there is only necessary travel. Commute roads don't show it but check the rest, empty, not enough to justify a patrol car, and that is another point less gas for for law inforcement. The allocation is in dollars not gallons and they go down as prices go up. I have also noticed that police stations are crowded when they used to be empty, why pay for personel that is stuck where crime isn't?

stuman

March 26, 2012 1:06 pm

Tidal & wave power – My brother in law is an engineer implementing tidal power in Nova Scotia. There are 100 billion tons of water that flow into the Bay of Fundy everyday, which has the highest tides in the world. The Nova Scotia government is doing a 4 player "bake-off" to see which is the best technology. A 10 metre turbine what was installed to generate 1 MW of power had its blades chewed up in 3 weeks. Cost of turbines is in excess of $10M so pretty much a big player game. Lockheed Martin is one of the players here as is Alstom from France. I checked out some of the smaller partners with tech patents but they are private at the moment. It will be cool clean technology though once deployed. Some turbines can also be deployed in rivers.
http://www.cbc.ca/news/canada/nova-scotia/story/2011/02/10/ns-atlantis-tidal-power.html

March 26, 2012 1:11 pm

Phil, admit it, you are in the running to publish Greg Smith's book on GS, aren't you.

jabobeast

March 26, 2012 1:15 pm

Phil—did you ever put more thought toward the PCLN idea that you had on Friday?

March 26, 2012 1:16 pm

We are sitting on the top of the break out at 140.8X on SPY. Needs to retest the highs soon, or it should start to circle the drain.

March 26, 2012 1:19 pm

TSLA on the way to giving us that free car we were playing for. We hit March on the nose and now everyone is over that battery issue already:

Anyway, it seems to me that you shouldn't look at it as trying to get a free car but to make a car payment monthly and that is much easier as you can buy 50 2014 $30/40 bull call spreads for $4 and sell 25 $20 puts for $4 for net $2 ($10,000) on the 50 spreads and then you can sell 50 $1 calls like the March $35s every month and you have $500 towards your car payment. Of course, you have to not pout about possibly owning 2,500 shares of TSLA for net $22 ($55,000) but you were going to spend that on the car anyway! TOS says net $3 in margin ($7,500) and you have $40,000 of upside on the bull call spread if all goes well.

Oil/Rustle – Good point on delayed reaction.

12:00 PM On the hour: Dow +0.93%. 10-yr -0.21%. Euro +0.42%vs. dollar. Crude 0% to $106.88. Gold +1.34% to $1687.15.

1:00 PM On the hour: Dow +0.88%. 10-yr -0.05%. Euro +0.42% vs. dollar. Crude -0.03% to $106.83. Gold +1.29% to $1686.35.

The average price at the pump creeps higher, rounding up to $3.90/gallon for regular, according to AAA. UGA +20.5% YTD. Beleaguered drivers can take tiny comfort from oil today, not participating in the Bernanke-led stock and commodity rally. WTI crude flat at $106.84.

European shares close mostly higher, given a boost midday by Bernanke's dovish speech. Spain was the exception after weekend elections dealt a blow to the country's ruling party and its austerity plans. Stoxx 50 +0.7%, Germany +1.2%, France +0.7%, Italy+0.8%, Spain -0.8%, U.K. +0.8%. Euro +0.4% to $1.3324.

The new narrative: A bit of capitulation is evident in the hedge fund universe as a gauge of bullishness climbs to 48.6 from 42 last quarter – the biggest jump since April 2010. With shares up 27% since early October, lagging managers are now more concerned with career risk rather than market risk.

Bernanke's dovish remarks provide the catalyst for a day maybe like none other yet in 2012 – a surging stock market leaving Apple (AAPL) behind. With the S&P 500 +1% and the Nasdaq+1.2%, the mighty tech giant is up a mere 0.15%.

While stocks might be rising on hopes of more QE, BTIG's Dan Greenhaus points out that Ben Bernanke said that "continued accommodative policies" would help bring down unemployment, not additional stimulus, meaning that the Fed chief possibly favors extending Operation Twist "rather than any new purchase program."

6 Things Bernanke is Clueless About (Mish)

"Everything that Richard Nixon did to me, for which he faced impeachment and prosecution, which led to his resignation, is now legal under the Patriot Act, the Foreign Intelligence Surveillance Act, and the National Defense Authorization Act (NDAA)." Daniel Ellsberg. Can Congress legalize tyranny by passing a law that says it can? Can Congress shred the Bill of Rights by passing a law that says it can?

Schlumberger's (SLB -0.9%) earnings will be hurt in this and coming quarters by downward pricing pressure for its fracking services, CEO Paal Kibsgaard says. In addition, the shift of equipment to liquids-rich basins is increasing costs and leading to lower utilization. Schlumberger's warning follows one from Baker Hughes last week.

EU Gas Now Over $10: Charting The Global Gas Pump Price Shock

Bearish commentary leads KB Home (KBH -5.2%) to add to the losses seen following its FQ1 miss, which was marked by a declining gross margin and rising cancellations from buyers unable to get financing. Goldman thinks a lot of KB's problems are company-specific, noting peers have struck a more bullish tone. Wells Fargo expects bottoming residential construction to give KB a lift, but remains concerned about its weak margins.

Being the house: Stifel Nicolaus hikes its price target for Las Vegas Sands (LVS +2.4%) to $69 from $63 and raises 2012-13 EPS estimates, believing the Cotai Central opening could be a "game changer." The firm says the new hotel plus LVS’ existing Macau assets will account for ~52% of total Macau mass gaming capacity, "which should put LVS in a unique position relative to its peers." (also)

Results from a Phase II trial of a cholestoral drug from Regeneron (REGN +0.7%) were good but were upstaged at a heart conference by the outcome of a Phase I trial of a rival treatment from Amgen (AMGN +1.5%), which was better. Still, both drugs have a long way to go before they'll be able to enter a market that could be worth $20B/year.

How often do you see this – M&A activity LOWERS the price: Comverge (COMV -8%) agrees to be acquired by PE firm HIG Capital for ~$49M, or $1.75/share, below its $1.88 Friday closing price and analyst estimates of its worth. COMV felt it had no choice, believing it "would be unable to raise the necessary capital to fund continuing operations, which would place existing stockholder investment in the company at significant risk."

Setting up for a great short: Buffalo Wild Wings (BWLD +6.1%) powers up to an alltime high in intraday trading on momentum buying that traders are tying to the exposure that the restaurant chain receives during NCAA basketball's March Madness period and positive comments from Stephens on the sector.

Intel (INTC) accounted for 15.6% of all chip sales in 2011,estimates iSuppli, up 250 bps Y/Y. Rising selling prices for Intel's PC CPUs (fueled by its Sandy Bridge launch), strong Xeon server CPU sales, and the acquisiton of Infineon's mobile baseband unit drove the share gains. Samsung (SSNLF.PK) remained the world's #2 chipmaker, while baseband giant Qualcomm (QCOM) rose 3 spots to #6.

Nokia has a patent on vibrating tattoos. Yes, you read that right. Nokia has created a type of ink that when applied onto the skin as a tattoo will be capable of vibrating or pulsing when your phone receives a notification.

Baird's survey of potential iPad (AAPL) customers – admittedly focused on a "younger, tech-savvier group on average" – found 42% of respondents planning to buy the new iPad to be first-time tablet buyers. In addition, 48% of existing iPad owners say they're in the market for the new iPad, and 15% of all respondents say they plan to buy the discounted iPad 2. 60% of non-buyers say they're turned off by the iPad's price. (previously)

March 26, 2012 1:22 pm

Major Euro Zone Developments that Most have Overlooked:

There are several developments that warn of future problems in the euro zone and these make us suspicious about the euro's ability to sustain the upside break.

First, we are surprised by the lack of commentary and focus on an important ECB decision last week. It decided to give member central banks the option of not accepting bonds as collateral under written (guaranteed) by countries receiving international assistance. The ECB was explicit, national central banks are not obliged to accept bank bonds guaranteed by such sovereigns. Recall that in early January the ECB allowed 7 of the 17 national central banks to accept a broader range of collateral. This may not seem to be significant at the moment, but if there is a new flare up of tensions, this could compound the challenge of the distressed countries' banks.

Second, and not totally unrelated, borrowings from the ECB require collateral and there is increasing concern that the banks may be asked to pony up more collateral. The line item on the ECB's balance sheet where this can be monitored is "credits related to margin calls". This exploded in December 2011, but has moderated each month here in the first quarter. The risk is on the upside here.

At the same time, there is some concern that a rising share of European bank asset are already spoken for (encumbered in the jargon). The more assets are encumbered (used as collateral) the fewer assets are available in a recovery situation for unsecured creditors. This becomes another form of subordination. This may keep the cost of unsecuredfunding high even though the risk of default, judging from the indicative pricing in the CDS market, has eased.

Third, when trying to assess a member's budget position, often ignored are the unpaid bills. The data is not easily available and when it is available, there are often long lags. Looking at Spain, for example, unpaid bills amounted 72.9 bln euros in Q3 '11 and 87.5 bln euros when trade credits are included. This compares with 50 bln in unpaid bills in 2005 (including trade credits) and 68.5 bln euros on the eve of the crisis (2007).

Fourth, bank deposits, excluding government and financial institutions (essentially individual and non-financial corp deposits) are falling in some countries. The January data showed Greece suffering the largest fall (17.6% year-over-year), followed by Ireland (-6.1%) and Spain (-2.8%) and then Italy (-1.9%).

Leaving aside tiny Malta, France has seen the largest increase in such deposits (10%) followed by Finland (8.3%). Of note Finland's deposit growth peaked last September and has been slowing every month since then. France's deposit growth accelerated in January to its fastest pace since May 2008, fully recovering from the slowing seen late last year.

Fifth, while Portugal's deposits in January 2012 were 3.2% higher than in January 2011, there has been significant fiscal deterioration. Tax revenues fell 5.3% in the Jan-Feb period, while the social security expenses, which include unemployment benefits rose 8.1%. This resulted in a core public deficit of almost 800 mln euros vs 274 mln for the same year ago period. Part of the deterioration reflects the repayment of debt by the state broadcaster RTP.

The euro has broken above the $1.33 area for the first time since it broke beneath there at the start of the month. The upper end of the wider range is seen near $1.35. The euro has not traded above $1.35 since early last December. While some observers attribute the euro's advance to Bernanke's comments which they interpret as dovish, we note that the debt market thinks differently as US 5-10 year yields are rising 4-7 bp today. The euro dollar futures strip from May through next March imply a 1 bp lower in yield.

While the dollar is heavy, the euro's gains against the greenback also seem to reflect cross rate demand against the yen, with euro re-taking the JPY110 area. That said, on other crosses, like the Australian and Canadian dollars, and Scandi's, the euro is losing ground.

March 26, 2012 1:24 pm

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March 26, 2012 1:26 pm

We might need to stay a bit bearish…

http://soberlook.com/2012/03/economic-surprise-index-is-now-trending.html

Notice how the US economic data coming out lately has been quite mediocre relative to expectations? For example, today's pending home sales came in -0.5% vs. +1% expected. Dallas Fed manufacturing activity came in at 10.8 with 16 expected. Citi has an index that tracks economic data surprises. Here is the definition:

The Citigroup Economic Surprise Indices are objective and quantitative measures of economic news. They are defined as weighted historical standard deviations of data surprises (actual releases vs Bloomberg survey median). A positive reading of the Economic Surprise Index suggests that economic releases have on balance beating consensus. The indices are calculated daily in a rolling three-month window. The weights of economic indicators are derived from relative high-frequency spot FX impacts of 1 standard deviation data surprises. The indices also employ a time decay function to replicate the limited memory of markets.

The index is now trending lower as the negative surprises are starting to weigh it down. The US economic forecasters have gotten a bit ahead of themselves, which may indicate a need for caution.

mrmocha

March 26, 2012 1:31 pm

Rustle – since I learned about the TVIX from your post back in Feb, I'm wondering if you are still following it looking for revenge or have looked away? I don't have time to follow but at this point I think it's below it's NAV (which was $7.34 last week) and so I am wondering if at some point it'll be a wild bounce candidate, since everything else seems to bounce in this market… If you do any further research, please post, I'd love to get back what that sucker took from me. Thx.

bobhu

Anyone else got double/triple trade confirmation from TOS?

March 26, 2012 1:34 pm

Last July 22
IWM was right here, August 9 was 63.87, October 4 60.15! Is this time different?

March 26, 2012 1:39 pm

Phil—are these MoFos (CMG and PCLN) ever going to stop going higher?
Didn't you think they were overvalued when they were ~~ 75% lower?
Has anything really changed or are they worth more just not close to these values in your opinion?

March 26, 2012 1:49 pm

Waves/Stu – Until they can improve the materials, I'm not a big fan of turbines due to the breakage. LMT is also a partner of OPTT as the military is a target group that would love to have deployable ocean energy solutions. I know 100M tons of water sounds like a lot but Niagra Falls drops about 50Bn gallons a day about 150 feet – imagine the power! They generate 2.4Gw over there – I think China has the right idea and just build some artificial dam projects – if you do it right, you can get centuries of use out of them. Look at the Grand Canyon, we could dam that up somewhere else I'm sure.

Smith/Rustle – I couldn't afford the advance he should be getting.

PCLN/Jabob – Yes, I am formulating an article.

Dollar right at 79.23, Euro $1.333, Pound $1.5945, 82.81 Yen and you know where EUR/CHF is.

Nat gas failing at $2.244.

TOS/Bob – Not yet. I did get some ugly color changes on my charts though.

Mofos/Jabob – I keep telling you, this is like 1998/99. Yahoo was ridiculous at $100, absurd at $200, incredulous at $300 and, at $400, it would have taken them 6,000 years to pay investors back the share value through earnings. Were the people who shorted at $100 right? Of course they were, they made 95% if they hung on until Sept 2001 off their Oct 1998 entry – well worth waiting for if they were able to ignore the 300% move against them in between. PCLN started this run back on Oct 2008 and, 3 years later, still hasn't had their pullback. Will they go another 3? Maybe – and I doubt they'll drop like YHOO did but they sure as hell could pull back 25-50% very easily – the trick is to catch that move when they do but for that you need PATIENCE and a very good rolling strategy.

March 26, 2012 1:54 pm

And there goes AAPL….

March 26, 2012 1:56 pm

AMZN is now over $200…

March 26, 2012 1:59 pm

BIDU $150, Qs naking new highs. SQQQ at $10.66 – MADNESS!

Even WFR coming back to $4 so you know it's a rally.

TLT holding up this week at $112.63, which is strange as we have a lower Dollar now and more QE talk than we had when they hit $109.69 last week.

March 26, 2012 2:00 pm

Last Monday and today, double top?

March 26, 2012 2:01 pm

I know – I need to stop reading Zero Hedge if I want to get more bullish:

March 26, 2012 2:04 pm

Phil/ZH – I need to stop going out of the house if I want to get more bullish.

March 26, 2012 2:06 pm

Phil
You have to not read me either!

scottmi

March 26, 2012 2:10 pm

VXX/Phil – i'm considering a new entry here, a few April 16/17 BCS at .32. What would make a good offset to the VXX staying weak/going down?

tradermoksha

March 26, 2012 2:14 pm

Phil i hold SQQQ april bullcs 13/15 @.45 now .10 and SDS bcs 116/18@..50 now .13
what could i do with them since i'm still bearish(i cant get bullish these days) ? thanks

Lincoln

March 26, 2012 2:15 pm

Phil: 1999?
I hope it is not going to take 3 years for the momo's to correct like YHOO did. In '99 the biggest cloud on the horizon was could computers handle the Y2K "disaster". The economic backdrop today looks way less benign. imo

As Pharm says we need to break out now!

lflantheman

AAPL portfolio: Stay on the AAPL horse. I'm not going to tell you how to play PCLN 'cause jabobay was mean to me last week. 🙂

March 26, 2012 2:16 pm

VXX/Phil still trying to get my head around the underlying drivers of VXX and how they interact with actual equities in general…

March 26, 2012 2:23 pm

PCLN 770 calls are doing nicely. Who would've thought you could buy PCLN 770 calls and make money?

Money that will be well spent for the eventual short.

russellb73

March 26, 2012 2:24 pm

Phil
Thinking of double down on TEO. Can't find a reason for it to drop 5-6% today, am I missing some new information?? One analyst, morgan stanley, downgraded but why the huge drop??

lolobear

lflan – Any new AAPL plays? Getting tired of staying on the sidelines.

March 26, 2012 2:28 pm

Could that be a plan…

http://www.slate.com/articles/business/moneybox/2012/03/chicago_fed_president_charles_evans_has_an_ingenious_plan_to_save_the_american_economy_listen_to_it_ben_bernanke_.html

Evans says that the Fed can guide these long-term expectations in two ways. First, what he calls “Delphic” guidance is a Fed observation that the future economy is likely to be weak and therefore future rates are likely to be low. What he calls “Odyssean” guidance, by contrast, is a Fed promiseto keep rates low, giving investors and potential durables goods customers confidence that come what may, the low rate climate will continue into the future. The Fed’s current language is somewhat ambiguous between the two, with formally Delphic statements often receiving Odyssean interpretations in the press and Fed watchers in the media and the business community receiving clear informal guidance that the statements are meant to stimulate the economy.

Much of Evans’ paper is dedicated to attempting to mathematically disentangle the market reaction to recent Fed language shifts in order to demonstrate that Odyssean signals are being heard. The real meat of the argument, however, is that the Fed should clear the confusion up with a much simpler and clearer statement. Specifically, Evans wants the Fed to promise that it won’t raise rates until unemployment falls below 7 percent, unless inflation rises above 3 percent.

That’s solid Odyssean guidance. It tells you that if you were at all considering investment in business equipment, structures, automobiles or the like, today would be a good day to take the plunge. Either nominal rates will stay low for a long time, or else the economy will recover unexpectedly quickly (turning your investment into a good value), or else the inflation rate will be unexpectedly high (reducing the real interest rate you pay). Either way, you want to invest today, and that should boost the economy.

March 26, 2012 2:32 pm

Or PCLN plays? Pretty please!

March 26, 2012 2:33 pm

1999/Phil

I don't know if we can ever compare this to 1999 since in my guess over 75% of the dot com companies had absolutely no earnings at all and were trading at market caps of over a hundred million, in fact many of these companies barely had any revenue at all. And the few companies that did have earnings were trading in excess of 300 times p/e. PCLN is only a 24x p/e on 2012 est year and 19.7 on est 2013 earnings. That's not crazy if they can make earnings and they are growing at 20% on earnings to justify it.

CMG is trading at 48.5x est 2012 p/e and 39x est 2013 p/e which is high, should be closer to half that which is a $200 difference in the stock but still not insane levels like 1999.

The company that is most inflated that we don't talk about as much as the other momo's is Amazon which is trading at 148.5x p/e est 2012 and 74x p/e est 2014. Again their growth rate in earnings should justify a high p/e but not that high and also note that they frequently miss on earnings.

exec

March 26, 2012 2:34 pm

Phil/840 line in the Futures

Are you referring to the RUT mini futures? Do you have an link?

Laddoo

March 26, 2012 2:42 pm

Phantom Bars/Phil & Kinkistyle & others
Thanks for the info…fascinating (and frightening!)

March 26, 2012 2:44 pm

FU CMG!!!

March 26, 2012 2:46 pm

The level chart is going to be quite bullish tonight… The RUT is nicely over the 5% line. Everywhere else, the intermediary 2.5% lines have been breached. Quite a day so far!