Carl Spackler

Bad News? They're Just Lagging Indicators

Green shoots! Green Shoots! Ahhh, that is so lame! I work in the real world, and in the real world, no one sees any green shoots yet! The evidence of green shoots is solely in Wall Streets world - not Main Street (I love using Obama's cute catch phrases for un-Obama purposes). All the increases in economic indicators are financial instrument driven. There has not been any statistically relevant blip in new orders, new sales, employment, wage increases, etc... It has all been investor driven. As one smart gentleman said: "Mirages in the desert can provide hope, but you cannot find water with them!"

With that, I will also leave you with one other - " A wink is as good as a nod to a blind horse" - and those buying into this rally are blind.

John Hussman: The Outlook Is Not Up, But Very Widely Sideways

Right On!


On Jun 15 01:55 PM Dave Wrixon wrote:

> Unemployment is not a leading indicator, it generally lags. However,
> in a prolonged downturn one metric feeds from another in a viscous
> circle. It is such viscous circles that Keysians seek to break, because
> they know that Unemployment can be self-reinforcing in a deep and
> prolonged downturn.
>
> The problem is that borrow to squander actually destroys so much
> wealth that the net effect is transitory at best. There was of course
> a lot of talk about investment in infrastructure, but that has no
> immediate effect on poll ratings, and so therefore gets quickly sidelined
> by politicians.
>
> Yes, we may be past the worst in terms of the speed of the downturn,
> but things have a long-way to go yet and the second leg of the W
> might resemble the first, meaning that the drop is a lot deeper than
> the immediate recovery.

Surging Liquidity: There's Money to Be Made Now

One flaw in your reasoning is that all the above comparisons (of high money supply equals stock appreciation) involves our economy in a long term secular bull economy where consumers are in a long term movement towards spending. Essentially, consumers were almost always returning to a spend-crazy mood. This downturn is different. Consumers and businesses are hoarding cash and moving to a save first mentality. The collapse of the consumer's net worth caused by falling real estate and stock prices has caused everyone to re-evaluate their pending retirement. With the baby boomers now staring at a much more stark retirement and with this pending retirement coming very soon, this recession has caused them to move into full savings mode. This is a major development that will not be short lived. Expect for savings rates to remain high, and thus the amount of cash and checking deposits will also remain higher than normal.

Now, will some of this new savings show up in equities - yes, but this will be tempered by investor's long memories of previous stock losses over the last 18 months. A study of most asset bubbles found a very simple formula - that after a bubble pops, it takes 3 years to see positive appreciation return and ten years to see old highs revisited. This is because investors tend to shun asset classes that they have incurred large losses. The memory of their losses has to fade before they commit serious money at a previously failed investment. These two factors (higher savings rate and shunning of bubble assets) are markedly different than any time in the last 70 years. If you follow the old playbook on recessions this time, you may be in for a rude awakening!

Great Depression II? It's Not Even Close

Everyone needs to quit trying to pigeon hole this economic crises into previous ones. No two deflationary events (or inflationary) are exactly the same. There are too many differences in money supply, employment, M1, banking structure, etc... Remember, the U.S. in the 1930's was more like China - we were the manufacturing giant. Today, we are a service economy. As a result, trying to lay the Depression template over this time period is futile. For all we know, this economy could continue to spiral slowly down the tubes for the next six years, or it could recover quickly. My only point is that this bear market is going to follow a completely different set of dynamics from previous ones. I just get fed up with everyone wanting to paint it in the exact same way as previous downturns. Yes there will be some similarities, but expect the path to deviate at many points.

At this point in the market, it appears as though everyone is realizing that cash is quickly becoming cheaper (debased) and as a result, everyone is wanting to put it into assets that have higher returns. It is a mini-bubble where everyone is searching for assets that can produce returns to offset a future perceived loss in buying power because the Obamans have cheapened their money by printing too so many dollars. Since the real estate market has such a bad name, and because it lacks the ability to liquidate it quickly, money is flowing into stocks. So, while people are willing to put money to work (and put money at risk) in liquid assets, they are unwilling to spend money on illiquid investments or to spend it on consumption. This is why sales are not kicking in. Consumer sales remain at their low levels and show no spark. My contention is that when everyone notices that there is no "consumer kick" or recovery of sales, you will see people very quick to protect their assets - that is why they put their money in stocks and other liquid assets. Everyone will run for the door quickly. This market has the underpinnings of a very quick retest of the lows. I just do not trust it, because their is no rebound of demand. But we still have a lot of investable cash out there that will hunt for a home. Right now, everyone is watching equities to see if that is the spot for their money, but as the economy and market stalls, look to see them shift to other areas. This bubble of cash will continue to hunt for a safe haven that can return higher yields, but I just cannot see the market continue to rise unless we have an all out devaluation. In that case, stocks may rise, but they will not keep pace with our eroding dollar.

1918 Spanish Flu and the Market

Did you eat paint chips as a child? How can you call this economy "just right"? Is it ok that over 400,000 Americans file for unemployment each week? I would like to think that there is a better economy than this in our future.


On Apr 28 04:47 PM Cetin Hakimoglu wrote:

> An economy that is just right; no hyperinflation or deflation. <br/>
>
> On Apr 28 03:49 PM BigJake wrote:

1918 Spanish Flu and the Market

When it comes to the flu, what is important is access to antibiotics. Tamiflu does not cure the flu. You have to take tamiflu within 48 hours of the symptoms or it is worthless. Tamiflu just slows down the replication rate of the flu, but after it is widespread in the body, Tamiflu does nothing. What kills in all flu cases is pneumonia. I actually got pneumonia a few years ago after the flu and I can tell you that without access to several varieties of antibiotics, you basically drown as your lungs cannot get air anymore. Anytime you get pneumonia, it may be resistant to one or more types of antibiotics, so you have to find the right antibiotic to kill the infection. As for the flu, there is no cure and it has to run its course.

In essence, there is no difference in the flu strains. The only difference is how you treat the resulting infection that results from the flu. In any case, you cannot fool around with it. If you get pneumonia, your odds of dying just climbed. Roughly 3% of all pneumonia victims die. Sounds like small stuff, but 3% is a pretty high figure when it is you!

A Particularly Bad Time for a Pandemic

Normally, these events have the impact of a small "trip or fall". Just imagine you are walking along the sidewalk and trip on a bump - no big deal just pick yourself up. Now imagine you trip on the edge of a cliff - bad news. It is all relative to your current situation. If the economy was good, this might get shrugged off easily, but in this environment it could cause us to tilt deeper or to a depression. You just do not know. I tend to think we will contain it, but viruses are a pesky lot. Once the genie is out of the bottle, lookout. Just look how long it took to eliminate Polio. FYI - the Spanish Flu (the last pandemic) killed many more people than Polio. Wikipedia places the death toll of the 1918 Spanish flu at over 50 million. Some sources list as high as 80 million.

Would the economic crisis have been less severe if women were in charge?

She is cute too, but I still have to give the nod to Betty Liu. I will say this however - you have got to give the nod to the Asian talking heads versus their American counterparts. I think there was a reason why Warren Buffet agreed to be interviewed by Betty - because she is the hottest meat puppet on TV!!!!


On Apr 27 03:46 PM User 255687 wrote:

> What about Melissa Lee at CNBC?
> she's pretty cute too

Would the economic crisis have been less severe if women were in charge?

I do not think the economy would be much different, but at least everyone's clothes would match and all the curtains would be prettier. If we did nominate a woman to be in charge, give me Betty Liu (Bloomberg TV). I would follow her anywhere.

Nasdaq Bullish Percent Index at 2007 Levels

Can everyone be right? Is it possible that everyone can be bullish and the market go up? If this truly a bull market, we obviously need to have a good pullback to get rid of all the bullishness and create new buyers. If this is a bear market, we could revist the lows and go lower. Either way, we have a down move that need to develop for both scenarios to occur.

Bear or Bull? History Is a Good Indicator of Things to Come

Cetin, I think everyone knows you beat the Bull drum pretty hard each day, but at this point in the rally you are the one that better be careful. This market is way over-extended and is predicting a V shape recession. As people see a "L" shape recovery, you will see a move back to 750 or lower. At this point, if the S&P cannot take out the prior 875 high within the next day or two, it will sell off quickly as everyone tries to take profits quickly. I know you love, love, love the long side, but you have to realize that the underpinnings of this market are very fragile. Investors have been burned many times and they will be very fickle holders. The first sign of trouble and they will run to lock profits - that makes them very easy to shake by the seasoned traders and they will exploit that eventually.

Bear or Bull? History Is a Good Indicator of Things to Come

We saw the late day selloff - lookout because the s%$# is about to hit the fan. Watch the 828 mark, and set your sell stop orders for tommorow, because this market looks cooked!


On Apr 22 11:26 AM Carl Spackler wrote:

> We continue in a bear market counter rally, but this run up is getting
> tired. Your figures highlight that there will be several rallies
> like this in this secular bear market. If the S&amp;P cannot get
> above 860 today, we could see a selloff near the end of the day.
> A full bore selloff will be in the mix if we can get below 828. The
> prevailing bear trend will emerge here soon, and then everyone will
> bolt for the door at the same time.

Bear or Bull? History Is a Good Indicator of Things to Come

We continue in a bear market counter rally, but this run up is getting tired. Your figures highlight that there will be several rallies like this in this secular bear market. If the S&P cannot get above 860 today, we could see a selloff near the end of the day. A full bore selloff will be in the mix if we can get below 828. The prevailing bear trend will emerge here soon, and then everyone will bolt for the door at the same time.

John Hussman: Wishful Thinking

I am always quite amused by those that spout old adages and witticisms to defend their positions. During this market, I have heard hundreds of times about how the market tends to rise 6 months before the recession is over - garbage. It rises because there is good proof that the end is over. To date, you hardly have any proof that their is an end in sight except for some "jacked up" financial company earnings that are pumped by trading gains and relaxed accounting rules. I work in the financial industry and I can tell you that loan demand is at its lowest level in the last 2 years - hardly the makings of a bull market. The WSJ also ran a story on how bank loans are actually decreasing. If things were truly getting better Cetin, would not loan demand be increasing? Please answer without using "old wives tales" or market adages. We do not want to hear that a bull market climbs a wall of worry, but actual economic facts.

As Expected, Big Down Day Arrives

Today should be a pause day in the action with the S&P bouncing between support at 820 and resistance at 850. We need some news to get a move in either direction going. You are right that the market has broken its pattern and appears to have brokern a rising wedge formation to the downside. These moves usually have a headfake up before they resume downward. For a good down move, I would like to see some bulls get trapped by a fake rally up to 850. If the market breaks 818, however, we could see the downleg early.