Friday Roundup: Ask Alice, I Think She Knows

November 6, 2009




ASK ALICE, I THINK SHE KNOWS

Let’s see, everyone was hoping for a good employment report but instead we got a stinker and the stock market did what?!? Yeppers, it rallied. This is where logical and rational thinkers become lost like Alice. For us it’s been “don’t go down that rabbit hole”, just stand aside and let Da Boyz have at it.

RBS economist Stephen Stanley wrote today’s employment report was “a mild disappointment”. It’s easy to say with his firm and others, plied with cheap money from a generous Fed. And, that’s really the issue. The liquidity bubble for Da Boyz is creating a stock bubble. Like all bubbles it will have an ugly end. But with cash and bond yields low, going for higher returns in equities is an easier; “make hay while the sun shines” choice. So, spin bad news and go for returns in stocks.

The weirdest thing about today was retail stocks leading markets higher. What will unemployed consumers shop with and where? Beats me, but companies like Macy’s were upgraded today in anticipation of favorable holiday shopping data or at least a really good Thanksgiving Day parade.

Volume was light like all the dip buying we’ve seen over the past few months. Breadth was mostly flat.






































Chucky the Consumer you can’t kill must have another sequel left in him.

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Comments

[HERO1957:]

Feed your head.

Nov 07 08:06 AM

[Michael Clark:]

Have logic and proportion fallen sloppy dead? I think they have.

Boom Boom Bernanke is living on the other side of the mirror, I think. I can't find him anywhere on this side of the mirror. (It's a good thing for him I can't find him over here.)

Nov 07 10:03 PM

[Michael Clark:]

Sorry to post twice.

In my instablog for this weekened, I'm seeing a LOT of sell signals and a lot more shortsell signals.

seekingalpha.com/insta...

Nov 07 10:05 PM

[User 240063:]

Dear Mr. Fry:

Brilliant analysis! I agree with you, the US consumer binge is "FRYed!"

and "White Rabbit" was my favorite song---I blasted it on my "record player" (are you "seasoned" enough to remember them?!) in the barracks whenever the general came by!

Keep up the great work!

Brian

Nov 07 10:24 PM

[User 240063:]

Following up on "White Rabbit":

The Jefferson Airplane's career reminds one of a timeless investment lesson: as Carnegie said: put all your eggs in one basket--and watch the basket!

The "plane" didn't stupidly diversify their investments into frivolities like real estate, stocks, bonds---no (taking Peter Lynch's advice) they invested only in something they knew intimately--hard-core drugs! So now, while bands like the Stones, U2, etc., have to worry about tax havens, Inland Revenue, etc., the "plane"---despite 40 years of hits---is blissfully broke!

Nov 07 10:39 PM

[bobbybutte:]

Actually the market is very cheap and unemployment while important is a lagging indicator. As long as their is this much liquidity in the market the market will do fine and those who are invested in the market( about 52% of america,which have over 95% of the assets will feel like spending)

Nov 08 12:35 PM

[TonyNed:]

The steel reversal sign is questionable. The daily chart says the opposite of what you're saying. It looks like the past three session movements just pushed several of the steel names out of oversold conditions and far too early to push lower. Short selling would be ill advised until momentum starts showing signs of reversing. There is currently no technical evidence that this is the correct trade yet.

The charts are saying that any potential reversal won't be coming for at least a couple more sessions.


On Nov 07 10:05 PM Michael Clark wrote:

> Sorry to post twice.
>
> In my instablog for this weekened, I'm seeing a LOT of sell signals
> and a lot more shortsell signals.
>
> seekingalpha.com/insta...

Nov 08 08:18 PM

[TonyNed:]

Let me just add that the 30 minute is telling me that Monday may see some weakness in the steel names so don't claim victory because of that since it will be short lived. AND taking a look at your weekly chart shows that the steel names are extremely close to oversold conditions which is a historical base for a rally. Hmmm.


On Nov 08 08:18 PM TonyNed wrote:

> The steel reversal sign is questionable. The daily chart says the
> opposite of what you're saying. It looks like the past three session
> movements just pushed several of the steel names out of oversold
> conditions and far too early to push lower. Short selling would be
> ill advised until momentum starts showing signs of reversing. There
> is currently no technical evidence that this is the correct trade
> yet.
>
> The charts are saying that any potential reversal won't be coming
> for at least a couple more sessions.

Nov 08 08:36 PM

[skiman:]

To be realistic, the stimulus is the only thing supporting our equity markets. A bad employment report means that Uncle Sam will not pull the plug on stimulus. The stimulus will stop as soon as the employment situation improves or when Uncle runs out of money. Then the equity markets will have to face the music. This rally is a house of cards based on bold hope. When Uncle's money stops, so will the rally. And this may come sooner than we think.

Nov 08 09:26 PM

[Karldean:]

Noticed 3 things in here I didn't like, 1-nay sayers, 2-scairdy cats, 3-told ya so fart knockers. Didn't ya listen, Warren said "Price is what you pay, value is what you get!" Bought a coat, Carhart, C.E. Smidt was cheaper by 20 bucks. Both were canvas farm coats, triple stitched, lined, identicle except: the threads on the Smidt (Tractor Supply) were not trimmed were the stitching ended,the Carhart was.
Worth 20 bucks for me to look at that coat and think, somebody cared enough to build this right, cost be damned. Price was what I paid, value was worth it.

Nov 09 01:16 AM