October 2, 2010 by CTA Trading Desk
Bill Cara has extended his vacation another week, taking care of business in Nassau, preparing to move office and residence to Freeport Bahamas. Week in Review postings will resume when he returns to work. He welcomes Cara Community members to continue your discussions.
Login or register to post comments Comments EXEL, JOYG, ARRY, TLR Submitted by tobyt (75 comments) on Sat, 10/02/2010 – 08:17 #70604
have to leave and go work on a house…major upgrades on the vacant ones…. had neglected them the last fre years…….my thoughts on several of the stocks mentioned in the last several hours, ONE=congrats to baz22 on calling ARRY to our attention day or two ago…up 15% after hours, someone complained about JOYG performance but it looks ST toppy chart wise and has gone up 20% in last month…..risk/reward in ST? EXEL looks real interesting here and I will probably sell the Nov at-the-money puts on monday…..loved the article on mining on flecks site and have alredy sent it to several people,,,,,,,,,,an intersting Texas Gov election coming up in nov…. white(who a case can be made put Houston on the verge of bankrupcy) or Perry (who is now running a 18-22 billion deficit in the texas budget)???? as far as signs of an improving economy here personally still have too many houses vacant but the ones we are slowly renting are getting a tad more than the previous rents………Texas has created over half the new jobs in the country since 2006 or so says the political ads this season??????? the weather here is joyous, lantana blooming everywhere….have a great week-end and thanks to everyone for their contributions to this blog…….
Login or register to post comments October Submitted by Bull Hunter (1444 comments) on Sat, 10/02/2010 – 10:38 #70605
Like many other economic doomsayers, I was ill prepared for the September Surprise in the markets. Positioned close to market neutral, my portfolio only managed to rise about 2%, while the markets saw a 9% gain. I certainly don’t want results like this in the coming month.
For we non day traders, this is a very tough environment in which to play. The bigger picture is cloudy at best. My basic economic outlook remains unchanged but I’m awed by the powers/manipulations of the FED.
While a Black Swan Event could always throw the proverbial monkey wrench, here at the DENSA Desk, I’m leaning towards an October scenario seeing the Administration and it’s evil minions pulling out all the stops, in an effort to paint the rosiest possible picture of the US economy, continuing the rally into the mid-term elections…..but can it really be that simple?
I’m curious what the other swing traders in here are thinking about the month of October. What is your strategy going in?
Thanks in advance.
Login or register to post comments 30 Yr Bond To 2.75% – Dow To 4200 ? Submitted by Bull Hunter (1444 comments) on Sat, 10/02/2010 – 11:19 #70606
from Yahoo Tech Ticker:
After helping corporations issue over $1 trillion of debt at record-low yields, the Fed is now turning its attention to consumers’ balance sheets, says John Lekas, senior portfolio manager at Leader Capital where he runs the Leader Short-Term Bond Fund.
“They’re going to continue to buy” Treasuries until the yield on the 30-year bond hits 2.75%, Lekas predicts. That, in turn, will drive 30-year fixed rate mortgages to around 3.75%, which “reloads the consumer with a 30-year stream of income,” he says, estimating savings of about $400 per month for the average U.S. household.
Of course, you have to be able to get a refi, but “they’re setting this thing up to get the consumer refinanced, it is a critical piece of the puzzle,” he says.
The bad news is Lekas’ believes this “huge wave of refinancings” will be preceded by severe deflationary pressures that will batter the economy and financial markets. Among his dire predictions:
* — The Dow will fall to 4200 by the middle of 2011.
* — The VIX will rise back into the 80-90 range.
* — The “real” unemployment rate (U6) will hit 24%.
* — Housing prices will fall another 20%
“It’s all about GDP,” he says. “Either incomes go up or prices go down. We’re going to see a lot lower prices.”
Lekas attributes the stock market’s robust September rally to short covering and the “reflation” in commodity pries, which he (naturally) expects to end soon.
“We’d be taking this opportunity to get off here and move into the credit markets,” the bond fund manager says. “You’re taking excessive risk in the equity market.”
Pretty extreme stuff. Anybody agree with him?
Login or register to post comments Re: October Submitted by davefairtex (2293 comments) on Sat, 10/02/2010 – 11:57 #70608 (in reply to #70605)
My magic eight ball says: “reply hazy, try again later.”
I did ok in the September rally, but I missed out on the last third of the move. That was ok by me, since I’m still learning how to trade the consumer metrics data I feel will eventually make itself felt, but i have no idea what the lag will be when it shows up on GDP, so I’m a little quick on the trigger to sell rallies.
Speaking of which, the CM index has resumed its long march down, now hitting -6% y/o/y contraction.
I jumped into the buck a little too soon on Thursday; what I saw as an intraday double bottom was actually just the pause that refreshes on the long march downhill. I closed out my buck long with a loss and I’m back to watching the currencies again.
The breakdown in whats happening since the Fed announcement:
* oil is up big
* natgas is down
* gold and silver continue up
* equities are drifting up
* bonds are up, but not as much as one might expect
Natgas in the US seems to be a domestic energy market, and as such its not affected by the move down in the buck. I feel it is saying “bad economic times ahead.” Oil which is affected by the dollar, is getting seriously goosed. Check out the $NATGAS:$WTIC weekly chart. Looks like a big descending triangle to me.
I’m going to wait for the buck to start turning up – for this seemingly endless euro rally to stop (137.77!) – and then I’ll go short equities. I don’t think equities will tip over until the buck stops falling. In the meantime, I’ll hold onto my PM positions and watch. You can’t lose money watching.
I have a few longs and a few shorts, but that leaves me effectively market neutral right now. And in the meantime, I’ll collect my utility dividends.
Login or register to post comments Re: 30 Yr Bond To 2.75% – Dow To 4200 ? Submitted by MoKat (202 comments) on Sat, 10/02/2010 – 15:40 #70609 (in reply to #70606)
It will be interesting to see if Bernanke can manipulate the long bond down to 2.75%.
I think we may witness what Lekas projects plus selective price increases on essential goods. So inflation and deflation at the same time or stagflation with a chance for a hyper-inflationary burst if the FED goes full out on QEII.
If the dollar collapses and trades at 40-45…. wouldn’t investors flee the bond market as their principal value gets destroyed? UGH! An ugly scenario. Not sure of Lekas’s timing projection. I’d guess 18-24 months before the SHTF- not mid 2011…. maybe longer depending on how successful Bernanke is in maintaining the solvency of the country.
There will probably be ashes in the end, as all empires collapse from spending too much. Something new will arise from them. Let’s hope it is something good.
Login or register to post comments Re: 30 Yr Bond To 2.75% – Dow To 4200 ? Submitted by davefairtex (2293 comments) on Sat, 10/02/2010 – 16:08 #70612 (in reply to #70609)
If the dollar starts to drop dramatically, I would expect some number of foreigners to start to dump the dollar holdings and the treasuries that they are invested in – probably not the big holders, but the small ones first.
Signs that there is trouble with the currency for me are, all at the same time:
* the dollar dropping
* bonds dropping
* equities dropping
* commodities rising
This is probably the result of QE 2 (or QE 3, etc).
Take a step back. The US has had recessions before. A recession isn’t the end of the world. A double dip recession is what we allegedly face. Yet if that’s true, then WHY is the Fed threatening to PRINT MONEY for only the second time in its history in order to “spur economic growth” in a “weakening economy”. I mean, really, do we believe that growth of 1.6% is so dangerous to the Republic that we need the Fed to start printing money to avert this utter disaster?
Please, the Fed is LYING. The Fed only talks about printing money to avoid the MASSIVE DEFLATION which they know is waiting in the wings. Its right there in their playbook. All of the talk-talk about spurring the economy is a bunch of crap, so the sleeping public thinks the Fed is still on their side. “Yes, they’re printing money and maybe I’ll get a job out of it.” Awww Ben is such a thoughtful fellow.
No, its all to rescue the banks from deflation. The public statements are just show business.
Will it work? Everything has costs. It remains to be seen what the costs are, and how they appear. I’m going to predict unintended consequences – the more dramatic the action, the more dramatic the consequences…
Login or register to post comments MISC Submitted by MoKat (202 comments) on Sat, 10/02/2010 – 16:17 #70613
Foreclosure crisis developing
Dealers of toxic mortgage paper such as JPM, ALLY BANK (ex-GMAC), BANK OF AMERICA all announced a stop
to foreclosures as courts are starting to rule that unless they have the correct documents, they cannot foreclose.
This is a big problem and will be very expensive and cut into earnings. Some banks have had success going to court to seeking “quiet title” to the foreclosed property… a process where the court awards title to the lender but each is a separate hearing. But now judges are saying if they don’t have the original documents… good bye… and don’t come back until you get them. I have a friend who used to own a company that was hired by the big banks to review and validate their mortgage documentation. We were talking back in 2005/2006 about the need for a central repository for the original documents and using MERS for input and retrieval. Who knows what is recorded in the thousands of counties across the country? They will be finding out.
Pockets of Prosperity
From reading the posts here at the Cara site, it’s interesting to see how viewpoints relate to where one lives. Some areas of the country are much better off than others. Those who are from the Rust Belt have a much different view of the world than say suburban DC or San Francisco or other more prosperous metro areas. My guess is that 50% of the population is soldiering on with no loss of job or decline in living standard. Their net worth may be less but events have not yet affected them to any great degree. But their Confidence in the future is waning as they approach retirement which may contribute to further erosion of economic activity which in turn will lead to more loss of Confidence. A spiral down is developing.
Grym posts a great narrative of the decline of the Rust Belt. I am from Michigan originally and know exactly what he describes. We went through it in the 70’s and early 80’s, then a plateau before the decline resumed again. Not much left now. All the factories moved away to cheaper labor with nothing to replace them. Whole communities devastated with their citizen’s now on the dole or in marginal jobs with much lower standards of living.
Just as wealth is concentrated among individuals, so will it be in geographic locations.
Login or register to post comments Re: MISC Submitted by MtnGntx (180 comments) on Sat, 10/02/2010 – 17:38 #70614 (in reply to #70613)
Yeah… that mortgage issue is gonna be absolutely HUGE. That by itself is enough to tank the banks and the markets. Once “homeowners” realize how to defend themselves through demanding proof of clear t
itle or validation of authenticity of legal transfer, this game is over. As the system now works, the banks get paid on the same property two or three times; first, when the cash is generated by the promissory note (remember banks cannot, by-law lend their own credit… they lend the money that you generate when you establish a credit line through the promissory note that you sign). Secondly, by hypothecating the original promissory up to ten times its original value through fractional lending. Thirdly, when they turn around and sell this note to one of these bundling operations. And finally when the extort the homeowner for repayment plus interest over 30 years for something that didnt cost the banks anything to begin with and for which they have already been compensated for as mentioned above…. Is a sick system to be sure. Anyone with a basic understanding of contract law can stop mortgage foreclosure in its tracks. Is gonna get real ugly.
Login or register to post comments Re: MISC Submitted by Les (3485 comments) on Sat, 10/02/2010 – 17:38 #70615 (in reply to #70613)
MoKat – MERS appears to be part of the problem:
Login or register to post comments Re: 30 Yr Bond To 2.75% – Dow To 4200 ? Submitted by Les (3485 comments) on Sat, 10/02/2010 – 17:57 #70616 (in reply to #70612)
“Please, the Fed is LYING.”
And Bernanke’s on record with these lies:
How does a market, savvy enough to understand this, handle Bernanke’s words and deeds at the next point of crisis?
Login or register to post comments Re: MISC Submitted by gforce (358 comments) on Sat, 10/02/2010 – 18:14 #70617 (in reply to #70614)
Ben Davies interview part I; he discusses the call to loosen the china peg:
Login or register to post comments Robin Griffiths Submitted by gforce (358 comments) on Sat, 10/02/2010 – 18:21 #70618
He says seasonality has worked fairly well so far and we had reached exhaustion in April last…the four weakest weeks are upon us…we know the market makes its own bed so lets not be caught sleeping:
Login or register to post comments Thoughts On Monday’s Mini Flash Crash & HFT Submitted by Bull Hunter (1444 comments) on Sat, 10/02/2010 – 18:34 #70619
“There’s no doubt that manipulation is going on to an extent far greater than I’ve expected, and the exchanges need to dismiss it outright because any exchange that puts out enforcement loses that business to other exchanges,”
“It won’t be long now before we won’t even have quotation systems that function. We’re rapidly approaching that day,”
Although Monday’s mini crash was mostly swept under the carpet, it’s good to see that at least a few people are openly discussing it.
Login or register to post comments Foreclosures Inevitable MERS mess Submitted by loannetter (809 comments) on Sat, 10/02/2010 – 18:37 #70620 (in reply to #70613)
Your concern about MERS records being flimsy at best are well documented: Here’s the NYT on the subject:
Real Estate Industry Stake Holders are split on this all this: Laywers want your fee for tying your house up in court indefinately. Realtors just want to move inventory, hang the loss to sellers and banks. Mortgage sellers want to close that loan, hang the inventory pileup. Minicipalities just want their recording fees. Homeowners want it all. Too much has gone on for too long behind closed doors!
Our guys make their case: http://tinyurl.com/23ykgz5
California is setting precident: judges are refusing to allow MERS to foreclose on a chain of title technicality. The actual title holder will surely turn up eventually. If you bought a foreclosed home your title could be worthless!
The argument is MERS transfers loans (on behalf of lenders) are being deemed ‘void’ because they did not ‘own’ the loan. There are huge civil fines due to MERS avoiding $2.4 Billion dollars of recording fees — now causing civil suits by city governments against MERS.
If banks become any less willing to lend — selling or developing real estate will become turf for Guido’s pals.
Login or register to post comments Re: October Submitted by Ross (365 comments) on Sat, 10/02/2010 – 18:36 #70621 (in reply to #70605)
For swing trading, Jeff Saut at Raymond James has been my go to guy for several years. He has been around almost as long as I have (1,000 years!!!) and has an excellent grasp of TA. He is also VERY risk averse. For a sell side guy, he is remarkably honest. He also thinks the way I do… 😉
As to the guy talking down the 30 year to 2.75% and the DOW under 5,000, I would put about a 5% probability on that. He could be a good guesser but I would like to see his calls over the last 15 years. I have yet to find anyone who did NOT call the ’87 crash!!! Most people have selective memories and always fight the last war. Human nature among herding mammals.
Login or register to post comments Re: October Submitted by Fox1 (122 comments) on Sat, 10/02/2010 – 18:37 #70622 (in reply to #70605)
O.K., you began the month with a certain bias and positioned your portfolio accordingly. The period ends and you’re not totally pleased with the results. Seemed like a good strategy at the time, yes?
Personally, I don’t hedge my portfolio when swing trading. If an individual stock or ETF meets my entry criteria, I’ll initiate the trade and control risk through position size and stops. If I felt I also needed to buy insurance, then I wouldn’t enter the trade.
Here’s a September trade where I followed my plan, (but left some money on the table):
Entered DV (Devry) on 9/03 after price made two consecutive higher highs and higher lows off a basing pattern on the daily. MACD had turned positive and price was crossing above the 20EMA. Entry was at $40.45 with an initial stop of $39.54 (the 9/01 close). Price target was +10%. First close below the 20EMA was trailing stop. Exit was on 9/17 at $44.68. The stock closed the month at $49.21.
Looking at October, I don’t like to enter or hold a swing close to earnings, so I’ll be more critical on entry and quicker on exit.
FD: I do hedge my IRA using futures. Here’s a little video that helped me.
Login or register to post comments Chris Whalen tells it like it is Submitted by gforce (358 comments) on Sat, 10/02/2010 – 20:23 #70623
He suggest we are about 1/4 through the financial decay and yes uncle Sam, thats me and you, will have to ride to the rescue again:
Login or register to post comments Re: October Submitted by terryC (141 comments) on Sat, 10/02/2010 – 21:55 #70624 (in reply to #70605)
I am not a day trader but am an active trader and have struggled to get back to the high water mark on my portfolio value attained last March. From that high Point I found myself down about 20% by July. Last Friday, when I finally had the value back to the high point, I cashed out on all but two positions ( NOT which is a Ring Of Fire spec play, and RIMM which I have been accumulating for the past two months ). This leaves me with a 12 month return of a hair below 10% and a large cash position. This is certainly nothing to brag about but In this market I am feeling fortunate to be in the lifeboat and not the water. I am going to stay there until Bill leads us to shore and says ” Back up the truck “. I’m not expecting this to happen any time soon. This is one brutal market and I cannot see the good times rolling for many years to come.
Login or register to post comments Re: Chris Whalen tells it like it is Submitted by baz22 (1408 comments) on Sat, 10/02/2010 – 22:16 #70625 (in reply to #70623)
one of the truly ‘ good guys ‘… thanks, g
Login or register to post comments Re: MISC Submitted by davefairtex (2293 comments) on Sun, 10/03/2010 – 03:04 #70627 (in reply to #70613)
MoKat – “Pockets of Prosperity”
Charles Hugh Smith had a recent set of articles, one of which covered this exact topic:
“There is much suffering in the U.S. right now. The level of suffering is not uniform; perhaps a fourth of Americans are largely untouched by the Great Recession: Federal employees, members of the Armed Forces, the millions of people living off contracts with the ballooning Federal National Security State and Empire, retirees with fixed pensions (government/military/state) and the Wall Streeters divvying up their $117 billion in employee compensation. The top 10% of earners–those who account for fully 37% of all spending–have been touched lightly if at all.
For these fortunate few, incomes have remained unaffected, though their perception of their relative wealth may have declined. Another 10% – 20% have been affected, but their lifestyle changes have been modest. (Cutting back eating out from five nights a week to two, etc.)
Cities with global tourist trades (New York, Los Angeles, San Francisco, etc.) have seen their coffers swell with tourist dollars; the health of the city’s finances may appear to be improving. The streets are crowded now, but it’s all a false dawn.
The ranks of those left unscathed will dwindle with time; by 2014, many who reckoned themselves secure will have discovered otherwise.”
Login or register to post comments Re: MISC Submitted by kaimu (1798 comments) on Sun, 10/03/2010 – 05:52 #70628 (in reply to #70627)
Here Charles visits a place I am very familiar with on his vacation …
What about POCKETS OF POVERTY?
Since I was three years old I have lived in POCKETS OF POVERTY. The first such place was Maracaibo, Venezuela. What is “poverty”? It is different depending on your locale/country. Poverty in many countries is a way of life and people there can be remarkably happy and generous compared to some of the most wealthy Americans I know. In America very few starve to death but many go hungry, meaning have less than three meals a day. Mainly I have discovered it is a condition of “less” when compared to America’s Land Of Plenty:Suburbia. I have always regarded Suburbia as a disaster waiting to happen and one of the most poorly designed life systems humans have ever produced. Suburbs are highly dependent on low cost fuel and the unbroken supply chain. Usually America’s suburbs are far away from shipping ports and major cities. Rural America is not so vulnerable and especially rural Hawaii. I live in one of the poorest regions in the State of Hawaii and its probably pretty low on the income scale for all of America. When your neighbors don’t have electricity or water you can assume they have little income. The logic for me is that there is very little room to fall when you are already living near the bottom of the income scale. We out here in rural Hawaii and many other rural American areas already get by with less and have not come to expect the higher living standards and the ego-materialism of city and burb dwellers. Contrast that to some of the East Bay burbs around San Francisco or other major US cities, which I used to call home.
My footprint is so small compared to most of America, whereas my house(a converted warehouse)is tiny my land/lot is not, by US standards. My wife and I have a bedroom 8’x12′ and the rest of the house is more like a carport. We do not even have a formal kitchen, but we do have our own jungle grocery store on five acres. Even though we could afford more we don’t want more. In fact my typical reaction to a huge McMansion is almost one of complete disgust. I place no value on a big house. With such a lifestyle the over consumption of America from SubPrime to the West Palm Beach Porsche dealer are lost on us. I would even go so far as to say the vast cause of America’s over-consumption can be tied to “low self esteem”. In fact some of my more wealthy friends who have now fallen on hard times, after decades of decadence, are now questioning their entire life’s materialism goals. I guess the threat of poverty does that. One of my friends recently told me, “I wish I had that $60,000 I spent on fiber optics and water features for my pool now!” Like another friend told me that he’d like to “downsize” but in his area(Walnut Creek,CA) there isn’t much of a selection to downsize to … It seems all of America has been on this SUPER-SIZE ME mentality that all the two bedroom bungalows were all bulldozed ten years ago to make way for condos and McMansions! Then to downsize to a condo you are forced into “fee-due servitude” the rest of your life, which is not conducive to fixed income.
Maybe this is the future real estate trend to invest in …
GO SMALL and GO RURAL!
The thing about going SMALL in your lifestyle that I have found is it is Freedom. How many people are slaves to their house in America? Not just the mortgage payments and insurance and property tax, but the maintenance as well. It gets to the point where that “Middle Class” tax deduction(aka: debt incentive) on mortgage interest is a joke. In many countries no such tax deduction exists. Here we call such incentives to hold debt the AMERICAN DREAM!
A long time ago America and WE THE PEOPLE got off the track of fiscal responsibility and I lay that at the feet of “easy money” of the fiat.
CHS PHILOSOPHY in SURVIVAL+
Survival+ The Primer is an introduction to many of the key concepts of the full 140,000-word book. While it is impossible to distill all the ideas into a short primer, we can at least address these key understandings:
— The status quo of a rapidly expanding Savior State in thrall to global cartels is heading for inevitable insolvency.
— Though the devolution and insolvency of the debt-based status quo is driven by large-scale forces, the opportunities will be small-scale and open to individuals, families and communities.
— Though the forces at work are global, we are not powerless. As individuals, we have the power to create our own transformation.
This can be expressed very simply: we are what we do every day.
In a very real way, we “vote” for our health by what we choose to put in our mouths three times a day, just as we “vote” on which kinds of food and companies we support when we buy the food.
Every purchase we make is a “vote” for or against a high-cost, debt-serf lifestyle that serves the interests of Power Elites and cartels.
Every hour we spend “consuming” mass media “entertainment” is a “vote” in favor of passivity, powerlessness and propaganda. Every time we turn off the mass media we are “voting” for our own productivity and well-being.
Every time we offer our effort to others in voluntary social networks, we “vote” for the reciprocity and trust which are the foundations of sustainable communities.
Every vote for the incumbent politician is a vote for a doomed status quo that is in servitude to Power Elites (with rare exceptions).END
Essentially he speaks of RESILIENT COMMUNITIES … It is my opinion that “centralized” anything sucks, especially government and banking. You cannot expect a monopoly to act in any other way other than a monopoly.
Login or register to post comments Re: MISC Submitted by davefairtex (2293 comments) on Sun, 10/03/2010 – 06:00 #70629 (in reply to #70628)
Kaimu – “…the vast cause of America’s over-consumption can be tied to “low self esteem”. In fact some of my more wealthy friends who have now fallen on hard times, after decades of decadence, are now questioning their entire life’s materialism goals.”
I’d go further. Over-consumption is driven by societally programmed low self-esteem. Relentless advertisements and even parents (who themselves were likewise programmed for decades) reinforce this message. The “whole orchestra” of society is playing the same tune. And if you can’t afford to actually buy such things (few can), then the answer is to go into debt to get them.
We are educated from a young age that the stuff we have shows ourselves, our parents, our in-laws, and our friends that we are “good enough.” Not enough stuff means you are not good enough. As a result, absurd debt levels are actually a rational response to all that programming.
How did this happen?
Best to ask, who benefits? That would be our masters, the banks; the law allows them to create money from thin air and “lend” it to us so that we can buy things in order to prove we are good enough – and this cycle continues for the rest of our natural lives. What are your interest payments per year? 25% of income? More? Who are you really working for? Ah, that would be the banks, and the government. And as we saw in 2008, they’re one and the same.
Debt = slavery. What a system!
As Kaimu pointed out, every action you take is a vote. Me, I’m out. No debt, and a simple lifestyle in Thailand. How will you vote?
Login or register to post comments Re: MISC Submitted by kaimu (1798 comments) on Sun, 10/03/2010 – 07:16 #70631 (in reply to #70629)
LESS IS MORE!
Login or register to post comments Re: 30 Yr Bond To 2.75% – Dow To 4200 ? Submitted by Grym (2586 comments) on Sun, 10/03/2010 – 08:08 #70632 (in reply to #70612)
First, let me say I am a true believer that not only the Fed, but all government agencies lie.
It is their automatic first reaction to any problem for a number of reasons:
• They believe they are wiser than the public.
• They think the truth may cause panic.
• They get their way by using lies.
• They’ll do or say anything to stay in office.
I saw a Chinese gent on TV a couple t=years ago who was buying U.S. company shares and staying under 5% to avoid disclosure. I suspect their government may be doing the same. I know if I had huge amounts in U.S. Ts I would buy tangibles gradually unloading the bonds to avoid a plunging price.
“Will it work?”
I have no way of knowing. I’m not smart enough to juggle all the variables. I don’t think anyone is, including Bernanke & Co. Arrogance and too much control may be their downfall (and ours).
Since I’m 90% in government bonds and corp bonds I hope it will continue to perk a while longer, but will be ready to dump at any obvious trend reversal. In the mean time I’ve been making slow, steady gains in GNMA and T-bond funds as well as Zeros.
I’m in the David Rosenberg camp with gold and bonds because, like him, I have believed for over ten years that we are in a totally new economic and therefore unique investing era. I am consciously trying to avoid locking into any historical pattern as my guide. Much of what affects my thinking is what I heard and see happening to people who I know and can relate to from my own experiences.
I think this IS the end of the world as we in the U.S.A. have known it for my entire fortunate life. (1938 to date) I followed the Greatest Generation in the “Luckiest Generation”.
Login or register to post comments Re: 30 Yr Bond To 2.75% – Dow To 4200 ? Submitted by Grym (2586 comments) on Sun, 10/03/2010 – 08:14 #70633 (in reply to #70609)
“I think we may witness what Lekas projects plus selective price increases on essential goods. So inflation and deflation at the same time or stagflation with a chance for a hyper-inflationary burst if the FED goes full out on QEII.”
I can see this happening already.
Big increase on my prescriptions in the last two years and lots of price cuts, zero interest deals on optional purchase products and services.
Our purchasing power has been in a basic down trend for 3 decades while taxes have massively increased.
We are being played by experts and no end in sight.
Login or register to post comments Re: MISC Submitted by Grym (2586 comments) on Sun, 10/03/2010 – 08:27 #70634 (in reply to #70613)
“We went through it in the 70’s and early 80’s, then a plateau before the decline resumed again. Not much left now. All the factories moved away to cheaper labor with nothing to replace them. Whole communities devastated with their citizen’s now on the dole or in marginal jobs with much lower standards of living.”
I first saw it in the mid-1980s and it increased to the point where our local “leaders” are trying to make us into a tourism center. No mountains, no sea shore, too hot in summer and too cold in winter. They are subsidizing a MetroCentre ($23 million facelift) which has never had a profit in over 25 years. We ripped out the mall which was to have rejuvenated the downtown. Talking about building a $39 million “campus” to bribe a company to move here which at the most will provide a few hundred full time jobs.
City services like library, teachers, police and fire are being cut.
It is just like watching a family member slowly succumb to terminal cancer — helplessly observing the inevitable.
I feel like I am in a bad dream — shouting at those who could do something and watching them offer aspirin and Band-aids.
Login or register to post comments Re: October Submitted by Grym (2586 comments) on Sun, 10/03/2010 – 08:31 #70635 (in reply to #70621)
“Jeff Saut at Raymond James has been my go to guy for several years. He has been around almost as long as I have (1,000 years!!!) and has an excellent grasp of TA. He is also VERY risk averse.”
Well, perhaps he has changed, but in the fall of 2008 when I heard his assessment, he was in favor of buying condos in Florida. I seldom read his comments on line since then.
I’ll check it out.
Login or register to post comments Re: Red October/Mr. October Submitted by 2nd_ave (4716 comments) on Sun, 10/03/2010 – 10:56 #70639 (in reply to #70605)
BH- Congratuations- a 2% gain in one month (in light of your bearish outlook) is quite good.
Most of us aren’t that great at forecasting more than an hour/day at a time, much less a month (don’t meterologists have the same problem), but I’ll take a swing at it.
The market (which is to say crowd psychology) is really no different from the weather- you see the same patterns repeated over and over. So I think the market sells off enough to test recent buyers, then ramps up to higher levels, leaving most of them behind. From a trading perspective, of course, the devil lies in the details. If you’re going to be short, take profits when you have them. If you want to get long, wait for the inevitable pullbacks. Nothing new there- we’ll see significant selling in October, which simply sets up significant buying opportunities (for swing traders, you may even see the perfect pitch). This take, of course, presumes we’re going higher.
I think we are going higher. The ‘pockets of prosperity’ argument notwithstanding, I believe the next decade does in fact set us up for another Roaring Twenties. Things weren’t great during the Seventies, yet there were no market ‘crashes-‘ the indexes (from a zoom-out perspective) pretty much remained static. They may do pretty much the same for the next ten years- tread water while waiting for the economy to ‘get it together.’ I know it’s easy to imagine Martians looking at the human race and thinking ‘What a bunch of losers,’ but most of the time we do get it together.
Login or register to post comments Re: Red October/Mr. October Submitted by Grym (2586 comments) on Sun, 10/03/2010 – 11:11 #70640 (in reply to #70639)
Perhaps it is a generational perspective difference — kind of relativity theory effect.
I’m old enough to remember when things were REALLY good in the U.S. and the rest of the world was pathetic.
This, IMO, is not going to come back — ever. Neither do we necessarily “deserve” it to do so. We, as a nation, have arrogantly squandered our national heritage.
In the 1970s we still had comparatively little debt — individual or national. One family member working had been the norm, but was just beginning to change to two or more.
We had a 3o-yr party when we could have achieved energy independence, improved our public education system, and made the globe a better place.
We are still seeing a major decline in the middle class and a future with massive tax increases both openly and hidden. Congress has become a tool of the wealthy.
While we have deflating wages and benefit we have inflation disguised by smaller size packages with static or some increase in price. With a national mentality of “either or” we continually get mixed indicators.
The 24/7 info overload makes it harder than ever to get a handle on what is or what may be. Campaign slogans and sound bites are for the masses who are too busy with texting, phoning and other diversions to stop and reason things out.
Every day I become more in tune with Vad’s theme of going with what you see, not what you think, hear or expect.
Predictions and prophecy are for the gullible or blindly faithful.
Login or register to post comments Re: Red October/Mr. October Submitted by davefairtex (2293 comments) on Sun, 10/03/2010 – 11:59 #70641 (in reply to #70639)
Long term we may be going higher, but not in real terms. Real GDP growth is strictly dependent on an increase in energy input. WIth peak oil in 1-5 years, and peak easy oil behind us, net energy inputs into our economy are falling and have been for a while now. Tell me, how do we get growth out of that, short of some deus ex machina?
The reason we have always “muddled through” until now is because we’ve had worldwide exponential growth in energy production since perhaps 1900. A rising tide lifts all boats, even the mis-managed ones. Now that this isn’t happening any longer, it’s a “stockpicker’s market” rather than a case where simply throwing a dart at the board blindfolded results in a likely gain.
In trading terms, we’re seeing distribution and the MACD is rolling over. A trend change has already occurred.
Our margin for error is dramatically lower than before, given our energy input constraints, yet many people persist in seeing a return to business as usual as the likely case going forward – and the government is working like mad to perpetuate this myth, ignoring all the evidence to the contrary.
While I’m very loath to predict what will happen in the next month or so, predicting 10-20 years from now is much easier. The world will be less complex, lower energy, and more local. It may look like the roaring 20s, but only because we’re going back 100 years in terms of energy consumption…we’ll be taking more trains and fewer planes, more bikes and fewer cars. Individuals may be happier or less happy, but absent any civilization-changing energy related invention produced and in wide use, our GDP will be substantially lower than it is today.
From Wikipedia: deus ex machina is a plot device whereby a seemingly inextricable problem is suddenly and abruptly solved with the contrived and unexpected intervention of some new character, ability, or object. The Latin phrase “deus ex machina” comes to English usage from Horace’s Ars Poetica, where he instructs poets that they must never resort to a god from the machine to solve their plots.
Login or register to post comments Re: October Submitted by steveo (134 comments) on Sun, 10/03/2010 – 14:00 #70642 (in reply to #70605)
Looking for a change of heart in currencies. That will signal US indices down, dollar up, gold down.
Login or register to post comments Week Ahead Submitted by Bull Hunter (1444 comments) on Sun, 10/03/2010 – 14:17 #70643
(that’s w-e-e-k….not w-e-a-k)
10:00 – Factory Orders
10:00 – Pending Home Sales
POMO Injection Scheduled
10:00 – ISM Services
POMO Injection Scheduled
Cara 100 COSTCO (COST) reports earnings before the bell.
7:00 – MBA Mortgage Apps
8:15 – ADP Employment Change
10:30 – Crude Inventories
8:30 – Initial/Continuing Claims
15:00 – Consumer Credit
8:30 – Nonfarm Payrolls
8:30 – Unemployment Rate
8:30 – Hourly Earnings
8:30 – Average Workweek
10:00 – Wholesale Inventories
Login or register to post comments U can see the FED is going to pull the trigger Submitted by Les (3485 comments) on Sun, 10/03/2010 – 14:38 #70644
I thoroughly enjoyed this response from an ivory tower historian of the Fed – “this is stupid!”:
how to play QE2? Ha, your guess is as good as everyone else’s…
Login or register to post comments Re: Chris Whalen tells it like it is Submitted by MoKat (202 comments) on Sun, 10/03/2010 – 15:32 #70645 (in reply to #70623)
GForce…. Thanks for the Chris Whalen referral
Excellent reportage on the future consequences of mortgage failure.
Chris mentions that the ad valorem tax base is under attack due to falling asset values. Every jurisdiction is affected. Thousands of municipalities and state institutions are dependent on this revenue base and it is falling. Many borrowers are turning over properties to the local authority… and poof, the annual tax receipt disappears and the property falls into disrepair. This directly involves all of us… with real consequences ahead for those who own real property and pay property taxes. The mortgage failure ratio is reported to be 1 in 5. A similar loss could also come
from the commercial sector, making conditions even worse.
Mortgage Limbo Land
Chris reports the court systems are overloaded with delays now 2 yrs in some locations. Retired judges are being recalled in an attempt to reduce the backlog. Lawyers are licking their chops as the big banks will be forced to incur large costs to deal with an assault on their foreclosure claims by both borrowers and securities holders, with mortgage fraud claims likely to develop. Bank earnings will be under pressure. If interest rates fall, the banks borrow at 0% and receive TBond interest of 3-4% scheme to generate profits falls apart, while foreclosures grow more dysfunctional and costs are skyrocketing.
Chris says “oh by the way, all of this is deflationary too! ” (Chalk one up for the deflationists !!)
IMO When the big banksters were cutting up the pie, they have failed to realize the ramifications of the title problems they created with their slice and dice operation and peddle scheme. They made deals which are coming back to haunt them. If some of them end up going to jail, our system worked and karma did too. If they skate free with no consequences then our justice system has sold out to these fraudster’s. Honest justice is what is needed.
Login or register to post comments The latest bear Crushing Ramp Submitted by steveo (134 comments) on Sun, 10/03/2010 – 15:57 #70646
The latest bear Crushing Ramp Job is actually steeper with less pullbacks than the March 2009, climb out of the bottom. See Chart.
And this Summation index chart lifted from Breakpoint Trades shows a very strange effect starting Sept 2010….a complete wipe out of the cycle that has been so consistent.
Finally, OMG! An update from TOS on the same Weekend as an Elliot Wave Financial Forecast. What madness drives this market now?
This indicator (another Fear Factor) TNX has predicted market declines well in the near past. Will the real triangle please stand up. could be bouncing here, for an October run up. My thoughts…3% more frog boil, into the full moon.
The Fear Factor, deeply conflicted, at support for courage (aka foolhardiness)
Login or register to post comments Re: October Submitted by cheapy (382 comments) on Sun, 10/03/2010 – 16:21 #70647 (in reply to #70621)
IMO, 2.75% and 4200 would imply that the Fed stops printing money and/or credit, or taxes hiked to where many are forced to sell their short and long term holdings to avoid higher rates next year.
I honestly don’t know how anyone could see something like that in the cards with the way they have been printing and talking about more printing, even with the dollar devalued vs gold by 32% and commodities up 13% in the past year. I think they keep on printing as though it were working, even though any fool can see it didn’t.
On the other side of the coin, its also obvious that companies wouldn’t be doing these M&A deals for cash at big premiums if they thought values were way too high, and yet people still panic and sell, on news, etc, and insider selling is high.
Maybe it says the numbers might be high, but nobody knows better things to invest the money into, even when faced with the huge devaluation. Or maybe its that people and managers don’t notice the huge devaluation because all their account statements are in those same devalued dollars.
Its all a MESS, and I think the confusion is rooted in having money that doesn’t function as a store of value. I don’t like any of it. Lets implement Warren Buffet’s Import certificates idea, end the trade deficit, put Americans back to work supplying the exports needed, and get back to an even keel where we produce as much as we consume instead of borrowing/printing the difference and trying to debase and devalue in order to export our way to higher employment…
Login or register to post comments Re: October Submitted by goldbug58 (128 comments) on Sun, 10/03/2010 – 16:35 #70648 (in reply to #70605)
Bull Hunter, a 2% gain was better than what I did.
Whatever upside comes next, I will certainly miss it; technically the 1157.16 peak on Thursday looks like it might have been the top, but my intuition does not believe that; so I should be flat or slightly long, but find myself leaning to the short side with SPY and DIA puts out to March. Mostly in bonds and cash, and my usual 1-5% in PMs.
Login or register to post comments China’s Premier – impressive command of issues! Submitted by jock (591 comments) on Sun, 10/03/2010 – 19:23 #70649
A fascinating interview with Wen Jiabao :
Fareed Zakaria is the first western journalist to have at the Premier in several years. His questions are great, Wen’s answers better.
When asked of his favorite books, Wen cites Adam Smith and Marcus Aurelius. He reads history (as he charts China’s future).
If we only had such Strategic thinkers leading the West!
Login or register to post comments Re: China’s Premier – impressive command of issues! Submitted by Luggie (228 comments) on Sun, 10/03/2010 – 23:15 #70651 (in reply to #70649)
Hi Jock – Mr.Wen J. announced China’s dedication to support the Greek ship building industry in due course. Any ideas on that front? Asia / Australia up nicely this morning – is this doom & gloom or the new order of a world market counter-balancing against one another, as the U.S takes a lower case position following its leadership role over the last two decades. I have noted the last 6-7 years, during an annual pilgrimage for golf in and around Manzanillo, a Chinese outpost (at the turn of the cheap golf course in town) dedicated to industrial minerals for export. They do it right – here we can’t even drill a hole in some areas to keep the wackos happy, and a good explorer in China gets a government guarantee while in the U.S. they are endlessly battered. Happy Trading
Login or register to post comments Re: MISC Submitted by loannetter (809 comments) on Mon, 10/04/2010 – 00:23 #70652 (in reply to #70628)
Tiny Houses look like the bungalows of the post WWII and Depression era. I had one with solid brick walls, thick oak floors and hard plaster lathing built to last; unlike the junk box boxes of the 80’s and 90’s.
The modern equivalent are these prefabulous homes: well built and small is beautiful. Built Green or LEED standard. Plans start at 565 sq feet.
Time lapse of a local installation: http://www.youtube.com/watch?v=28SWiBVl4pA&feature…
Login or register to post comments Watching for $SILVER:$GOLD rollover this week Submitted by Les (3485 comments) on Mon, 10/04/2010 – 02:10 #70653
doesn’t mean it has to happen. As others have pointed out here, overbought can become overboughter until it becomes overboughtest, but the MACD and RSI indicators are suggesting that one keeps an eye on this relationship. As I recall from Bill, once the $SILVER:$GOLD relationship is declining than it’s time to get bearish on the POG, at least for a retest of support.
Looking for double top or lower high, which may require more than one week to occur. The Euro is likely to come unstuck at some point as trigger for such an event or in conjunction with.
AttachmentSize silvergold_daily.png 47.09 KB Login or register to post comments Ubs and credit s. Submitted by NYUGrad (2872 comments) on Mon, 10/04/2010 – 02:14 #70654
ZURICH (Reuters) – Switzerland’s global banks, UBS and Credit Suisse, must hold capital well in excess of new international standards, a top government commission said on Monday, to limit the risk that a bank failure could drag down the whole economy.
Following are key points from the German version of the commission’s final report:
* UBS and Credit Suisse must hold at least 10 percent of risk-weighted assets based on new global standards (Basel III) in form of common equity (4.5 percent as a base requirement and 5.5 percent as part of a buffer)
* Based on their current size, they must hold another 9 percent in capital, which could be contingent convertible (CoCo) bonds, taking the current total capital requirements to 19 percent.
* The so called CoCo bonds would be turned into equity if the common equity ratios fell below pre-defined levels.
* The capital requirements should rise if the banks’ balance sheet or their domestic market share increases.
* Banks will be given until the end of 2018 to meet the new requirements, which is inline with the timeframe for the new global rules.
* Both banks should be organized in a way that would allow for a break out of parts that are relevant for the functioning of the economy in case of a failure.
* It should be up to banks to find the right structure and regulators would only order changes if the banks failed to come up with a convincing structure themselves.
* The banks’ leverage ratio should be at least 5 percent, in line with what regulators have already defined as a level for “normal times.”
* The liquidity rules announced this summer will remain in place.
(Reporting by Sven Egenter)
Login or register to post comments Speaking of overboughter and overboughtest Submitted by Les (3485 comments) on Mon, 10/04/2010 – 02:28 #70655
BRL/USD lost support at 1.70, making the Brazilian Real an overboughter currency. The Fed continues to push the boundaries of unintended consequences throwing out free money – stupid is as stupid does:
Gotta wonder how far traders can push this currency position. Weekly shows a 2008 low of 1.55. I wouldn’t dream of getting on the EWZ trend bandwagon for anything longer than a couple of hours, but profit taking, when it comes, ‘should’ be worth the wait.
AttachmentSize BRL/USD daily 17.95 KB Login or register to post comments futures 3 am – Asia green, ASX breaching recent support Submitted by Les (3485 comments) on Mon, 10/04/2010 – 03:24 #70656
Australian all ords breaching 2 week support before todays snap back. watching to see if it’s a bear or bull trap. More likely just noise as the RBA’s rate decision is due tomorrow. I see commercial banks are gouging mortgage customers for everything they’re worth down under:¨
“There is a growing expectation the banks will add at least 15bp on the next official RBA move to offset higher offshore funding costs. If so, this would move mortgage rates in Australia close to 8 per cent, almost matching the pre-global financial crisis levels.”
Looks like Shanghai closed today.
Login or register to post comments EWA Submitted by Les (3485 comments) on Mon, 10/04/2010 – 05:10 #70657
thinking about the moves and contrarian trades at this point in the market led me to look at EWA. That’s a damn fine peak in the chart coinciding with a peak in the AUD/USD. With a majority looking for a further rate peak and the peaks in these currency/equity charts, I can’t help but be ready for a reversal, maybe even tomorrow should the RBA surprise the markets.
Note the swings in EWA are pretty impressive. There’s 20% moves in peak to trough in smaller swings like that of February, even more during the middle of the year. A swing in EWA could be very profitable, if the market decides to get bearish. Even a return to support in EWA is worth a point at least, should the Ozzie dollar return to support before swinging higher.
AttachmentSize ewa_daily.png 89.9 KB audusd_daily.gif 17.76 KB Login or register to post comments futures 6 am – Europe selling off Submitted by Les (3485 comments) on Mon, 10/04/2010 – 06:08 #70658
US markets testing support of the range developed over the last couple of weeks. We see traders hand today, or more drifting?
$ bottoming out? Awaiting double bottom or higher low:
Login or register to post comments Re: MISC Submitted by Grym (2586 comments) on Mon, 10/04/2010 – 07:20 #70659 (in reply to #70652)
Interesting video. For decades this was prevented due to union opposition. They protected their own at our expense. Ironically, today the official line is we can’t/shouldn’t protect US jobs from foreign competition, but the administration is protecting the unions — at our expense.
In 1965 a prefab (approx 1500 sq ft)was delivered by semi to the lot next to our 3-yr-old conventional construction house. People in the neighborhood were aghast fearing property values would plummet. Today the house is still there as is our first home and I doubt anyone living around there knows it went up in 2 days. (Our 970 sq ft house took 3 months.)
The construction was a bit less than ours — no window frames and metal siding (noisy in a rain storm), but solid and inexpensive.
Login or register to post comments Cara 100 Ratings Changes For Monday Submitted by Bull Hunter (1444 comments) on Mon, 10/04/2010 – 07:46 #70660
NO POMO Injection Scheduled
10:00 – Factory Orders
10:00 – Pending Home Sales
AAPL – Ticonderoga Initiates with a Buy. Target $430
JCP – J.C. Penney downgraded to Neutral from Buy at Goldman. The firm expects near-term comps to be “choppy.” Target to $26 from $25.
LLTC – PT Lowered from $34 to $33 @ FBR Capital. Underperform
MSFT – Goldman downgraded Microsoft to Neutral from Buy. The firm believes Microsoft needs to take action to unlock value and is cautious on the longer PC refresh cycle. They recommend increasing the dividend beyond the recent increase, a coherent consumer strategy, and a leadership position in Cloud. Target to $28 from $32.
Login or register to post comments Re: MISC–today’s prefabulous homes Submitted by loannetter (809 comments) on Mon, 10/04/2010 – 15:42 #70716 (in reply to #70659)
The advantages of today’s prefab homes are
1. No weather delays (biggie here–built in dry undercover factory) 2. Less time to install
3. Better than average construction quality due to resouce use (factory efficiencies) and tighter factory management.
PLUS green economies of scale can be built into a structure by centralizing your production/shipment/expenses/recycling.
Have yours shipped and installed by local skilled craftsmen. Just makes sense!
Login or register to post comments Re: MISC–today’s prefabulous homes Submitted by Grym (2586 comments) on Mon, 10/04/2010 – 17:22 #70726 (in reply to #70716)
About a year ago I watched a This Old House factory made house being assembled.
Great idea. Unless you are a carpenter. Far fewer people will be needed just as with most jobs.
Login or register to post comments Re: MISC–today’s prefabulous homes Submitted by loannetter (809 comments) on Tue, 10/05/2010 – 02:57 #70741 (in reply to #70726)
A understand the operators of the highly robotic prefab plants are ex carpenters now working under cover. The vid I posted of Method Homes installaton actually hires skilled craftsmen to build theirs by hand–most are custom designed pretty high quality fit outs. You can rent their cabin in the woods in Demming, WA for a weekend and test drive it! http://www.methodhomes.net.
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