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Sunday, October 2, 2022

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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 scoresSpeaking 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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Done for the day!  Later……

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…

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. 

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

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

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

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.

oops, meant we're at 4 months now.

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

Pharm – Did you "Wave the Wheat"?
 
http://www.youtube.com/watch?v=LwH03TVo7pQ&feature=player_embedded
 
🙂

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

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? 

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

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

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

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.

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.

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.

Anyone else got double/triple trade confirmation from TOS? 

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

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?

And there goes AAPL….

AMZN is now over $200… 

Last Monday and today, double top?

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

Phil
You have to not read me either!

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?

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

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!

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.   🙂  

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

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.

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??

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

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.

Or PCLN plays? Pretty please!

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.

Phil/840 line in the Futures
 
Are you referring to the RUT mini futures?  Do you have an link?

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

FU CMG!!!

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!

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