The Bernanke Agenda - It Isn't What You Think It Is [View article]
Why is it hard to accept that both conditions created the collapse, i.e., bad underwriting which is clearly the case and pulling liquidity by the Fed which also occured. I don't think it is a great stretch to assume the first was the cause and the second exacerbated the situation or maybe even worked to be the final straw that pushed the whole thing over the cliff.
The Bernanke Agenda - It Isn't What You Think It Is [View article]
Tack
Your question:
"You're saying that with equity trading volumes at anemic levels, with corporate cash balances at record levels, with the vast majority of QE having gone into non-equity holdings (cash, Treasuries, bonds, excess reserves), with consumer credit-card delinquencies at all-time lows, with the Yen plummeting (pushing capital into dollars), and the euro declining, too, that there's "no dry powder?"
That is exactly what I am saying. Trading volumes are low - why? Corporate cash is extremely high - why? The public has not participated in this rally - why?
These conditions have existed for 4 plus years now. The industry and the full or close to full time traders have a sentiment bias based on a lot of profits that tends to shape and form ones view going forward. Those you mention that have not invested don't have that chemical high that comes from success as they haven't participated in the move (and it is a real physical phenomenon - not just a psychological one) and therefore the assumption that they will finally get on board is not likely. At least that is what I see.
You can of course make the argument that the fools always jump on board at the end and until they do this the market will go higher and that may prove true. It is just not how I see it but it is not a scenario I fully discount either as it could happen that way.
The Bernanke Agenda - It Isn't What You Think It Is [View article]
Dividends
I wrote an article that spells out exactly how I have played the bear side since 1475 and I am not down much at all relatively speaking and as it relates to total portfolio value. I have added on a scale up at these increments relative to the S&P - 1475, 1500, 1525, 1550, 1575, 1600, 1625 and 1650 resulting in a 1560 average.
My loss is at present about 5% of total portfolio value because of my relatively small position at the start of the trade. I now have more than I intended in total cash committed - about 40% vs 60% cash. My limit on loss on this trade is 15% of total cash.
If I hit the 15% level I will exit trade with loss and reassess but I am a long way from that at present.
I went long back in 2009 and played the cycles within the bull move all the way to 1475 so I did get the majority of the move and expect to get the majority of the bear trade as well but not all of it of course.
Where we are at present is as overextended as we have been in a long, long time. We are now at almost 3 standard deviation above the 90 day mean on S&P. The probability of moving above 3 standard deviation is 99:1 against. Additionally, we are about as leveraged at this point as we have ever been. When there are no buyers left in a market the sell off - when it starts - gets ugly.
Euphoria is not relevant if there is no dry powder and there isn't any in this market today. This rally is really fueled by very naive sentiment, the industry mantra of buy and hold and a belief that the Fed is actually impacting the economy and they are not. The spin is absurd.
Bernanke is actually talking the market down at present but no one is listening. Reduction in deficit will take a big toll on GDP and so will the global slow down and EZ recession. There is no way the economy can reach escape velocity from these levels and the further stocks move in a direction that is opposite the economy the harder and more viscious the crash when it starts.
What I fear for my readers is that they will assume - as most everyone does - that they will be able to exit when the signs of a breakdown appear. If everyone sees it that way - and most do - then how will that work? Everyone can't get out the door at the same time.
The greed at these prices is typical of herd mentality that ignores all risk and assumes the impossible - a market that just never stops climbing regardless of the real economy. I'm not to big on following the herd and have no intention of getting burned on the next turn down which I think will stun investors in its steep and rapid descent mainly because it is so irrational and so structurally imbalanced.
The Bernanke Agenda - It Isn't What You Think It Is [View article]
You are right - Bernanke is specific and to the point and he is clearly warning investors, stating that he can't predict or prevent a crash and suggesting that things aren't looking to good.
I don't find anything at all sinister in his decision to skip Jackson Hole. I do think that there is something on his schedule that pre-empts Jackson Hole and since Jackson Hole is one of the most important events of the year for the Fed Chariman what ever pre-empted it must be really big.
Why readers want to embellish a statement and present it in a way that the commenter neither stated or intended is beyond me.
Is The VIX Index Forecasting A Stock Market Surprise? [View article]
harrik
You don't have to be a genius to make this call. The probabiltiy of Vix and all its derivatives performing well in the next few months is incredibly high for all the reasons John notes.
The probabiltiy of the market continuing higher from these levels is incredibly low. We are within a few points of being at 3 standard deviations above mean and the odds of moving about that level are 99:1 against.
Buying a call on one of the Vix derivatives as a hedge is one of the smartest moves an investor could make right now and you don't have to be a genius to recognize it - just use a little common sense.
The Bernanke Agenda - It Isn't What You Think It Is [View article]
Robert
"Night of the living Fed? None of it makes sense to me." Please.
It is all conjecture at this point as to when a new and improved system is ushered in but it will happen at some point and needs to happen and we would be better off for it. My Bernanke quotes are offered as examples of the warnings he is offering if one would only listen.
You have a PhD in economics and should be well qualified to discuss the issue and I don't see why you want to confuse sound policy decisions with the "career builder" comments or suggest that the IMF wants to take on the role for any reason other than the right reason.
Keynes has been disparaged by some of late and it is a shame. We take a part of his theory and discard the rest - implement the part we like and then claim his theory is no longer valid in today's world. You are particularly well qualified to understand the point. Do you think Keynes was wrong and that a sovereign reserve currency makes sense? Do you think Triffin was wrong?
We can't implement effective monetary policy which at times requires an expanison in M2 as a stimulus to domestic economy when the demand for the dollar as a reserve currency works to counter our efforts. Explain how you think that isn't true.
I have no idea what Ocampo's career goals are and would like to think he is proposing a solution to the dilemma and not simply trying to promote himself.
That said - China and Russia seem determined to effect this change even to the point of war if necessary as they stated in a recent policy statement that was actually released to the media. The UN has been working on the matter for 5 + years. The numbers of SDR's was increased by 10 fold in the last 5 years and with US endorsement and the IMF is taking a larger and larger role. There seems to be a growing consensus of opinion on why this needs to take place and I personally don't think it is to the disadvantage of the United States if it does happen.
There is widespread support for this and I don't know if Bernanke is on board or not. I sure don't think he is a co-conspirator in some sinister plot though and if it were to happen it would explain his absence at Jackson Hole although I am not making that a prediction - just a "what if".
As a final point we are extremely vulnerable at this point. What do you think would happen if China made the decision to dump all their US treasuries on the market at one time? Here is another way to look at it - what if the Fed decided to dump all their treasuries on the market at one time? We all know the answer to that question - market crash - and China is in a postion to do just that if they want to and they are in the same league with the Fed on treasury holdings.
The Bernanke Agenda - It Isn't What You Think It Is [View article]
Bill
Actually it was at 1666.12 I think and several hours later the adjusted close was at 1667.47 - a price that the market never even traded at. Here is the high and low for the period between 3:54 and 3:59 - 1666.78 to 1666.01. Here is the high and low for the period between 3:59 and 4:04 - 1666.48 and 1665.70.
Anadarko's market value was effectively wiped out for a few seconds going into the close as the price fell to nothing. Why do you suppose that happened? My guess is some NUT wanted the close to be 1666.?? and went to great lengths to make that happen.
Significant or relevant? Only if Friday's close is the market high. Then we have a market low of 666 and a market high of 1666. I'm not the only one that saw that either and it was sufficeintly distrurbing to the exchanges to manipulate the close to a price above 1666. That I do find a little disturbing and very relevant.
Keep in mind the last trade was recorded at 1666.43 and the settlement price was 1667.47 a full point above the last trade and outside the days trading range.
Pretty odd if you ask me. In other words somebody spent a whole lot of money to get the close to settle at 1666 and the exchange made a very unusual decision to settle the price outside the days range.
None of this matters if we close on Monday at 1668 or 1669 as the market high close price will not be 666. Be interesting to see if those who manipulated the S&P with Anadarko will try to manipulate the market to protect that 1666 (now adjusted to 1667) close.
If I were doing it and had the money I would put the S&P 500 mini limit down on Sunday when the market is thinly traded and a little money goes a long way. Whoever had the money to tank Anadarko has the money to tank the S&P mini in Sunday evening trade which is likely to be pretty thin.
No predictions here so don't call me a nut or throw it back in my face when it doesn't happen - just saying it was really odd and a little disconcerting to me for its implications.
The Bernanke Agenda - It Isn't What You Think It Is [View article]
Goldstriker
"All of what you said, reminds me of much of what Bible prophecy is forecasting for the world."
I agree.
That said I am not suggesting that we end up with a one world government. The proposal is Keynes version of what Bretton Woods should have been to start with. All sovereigns retain their own currencies. The SDR has been in use for a long time as a reserve asset. In 2009 the allocations of SDR's was increased from 21 billion to 204 billion.
The only thing missing is an agreement amongst members that would set a fix or a range based floating fix against the SDR and an agreement to settle balance of payments in SDR's. It is not that complicated a process and certainly not sinister or evil in concept.
The Bernanke Agenda - It Isn't What You Think It Is [View article]
Tack
One area we disagree on and it is an important one is the amount of liquidity outside the market. If it is there then perhaps the extent of the move is less severe. If not it is not going to be a pretty picture as the sell off will feed on itself. I think we are all in and borrowed to the hilt on margin as well.
Kevin has been negative in the last few months but almost always advised that higher prices were in store. I know as I pay attention to his views and have great respect for his opinion.
Give credit where credit is due and please do go back and look at his recent articles as you are wrong. If he calls the turn here I would say his timing this year was better than anyone on SA. .
The Bernanke Agenda - It Isn't What You Think It Is [View article]
Exactly. We are now 2 standard deviation above mean on my 90 day chart and the probability of extending gains from here is slim without a correction first.
The Bernanke Agenda - It Isn't What You Think It Is [View article]
tack
I don't know that you are fair in your assessmnet of SA articles. I would say at best the split between bear and bull is about 60-40 to the bull side.
As to my views - when the market broke I was biding my time waiting for the bottom to buy based on what I knew Fed policy would be - inflate out of the hole. I only got bearish when QE3 was announced in September so please don't include me in that group of bears going back to 2009 as it is simply not true.
Markets move up and down - always have and always will. I typically play the medium term cycles - 6 months or so - but also look for points where the fundamentals start to diverge. I saw that back in September. I will once again turn bullish after we move back to the bottom end of the 15 year trading range but I see almost no upside from here and huge risks. Anybody that doesn't see that is just not looking.
The Bernanke Agenda - It Isn't What You Think It Is [View article]
Actually I think you got all that right. CAPE does show that we are pushing the envelope but not yet in bubble territory.
We are not in a bubble at the moment and I don't think Bernanke wants to create one either. Earnings peaked early last year and we are now taking measures to contract GDP through deficit cuts. I also look at the EZ crisis which will impact all and the China slowdown. Sequester cuts and federal employee furloughs. The deflationary bias coming from the strong dollar. A lot of negatives and not many positives.
It is simply not rational to think stocks have much left from these levels as "the world IS going to hell in a handbasket".
Here's the problem - we've extended the market beyond the point where it should have had a normal correction, we have rapidly deteriorating fundamentals, we are at record highs and markets will soon price that in. Maybe fair value on the S&P today is back to the mean but it will push through that when it finally starts down as is usually the case.
Bubble - not yet but close. Over extended - absolutley.
The Bernanke Agenda - It Isn't What You Think It Is [View article]
JS
The Bernanke Agenda - It Isn't What You Think It Is [View article]
Your question:
"You're saying that with equity trading volumes at anemic levels, with corporate cash balances at record levels, with the vast majority of QE having gone into non-equity holdings (cash, Treasuries, bonds, excess reserves), with consumer credit-card delinquencies at all-time lows, with the Yen plummeting (pushing capital into dollars), and the euro declining, too, that there's "no dry powder?"
That is exactly what I am saying. Trading volumes are low - why? Corporate cash is extremely high - why? The public has not participated in this rally - why?
These conditions have existed for 4 plus years now. The industry and the full or close to full time traders have a sentiment bias based on a lot of profits that tends to shape and form ones view going forward. Those you mention that have not invested don't have that chemical high that comes from success as they haven't participated in the move (and it is a real physical phenomenon - not just a psychological one) and therefore the assumption that they will finally get on board is not likely. At least that is what I see.
You can of course make the argument that the fools always jump on board at the end and until they do this the market will go higher and that may prove true. It is just not how I see it but it is not a scenario I fully discount either as it could happen that way.
JS
The Bernanke Agenda - It Isn't What You Think It Is [View article]
I wrote an article that spells out exactly how I have played the bear side since 1475 and I am not down much at all relatively speaking and as it relates to total portfolio value. I have added on a scale up at these increments relative to the S&P - 1475, 1500, 1525, 1550, 1575, 1600, 1625 and 1650 resulting in a 1560 average.
My loss is at present about 5% of total portfolio value because of my relatively small position at the start of the trade. I now have more than I intended in total cash committed - about 40% vs 60% cash. My limit on loss on this trade is 15% of total cash.
If I hit the 15% level I will exit trade with loss and reassess but I am a long way from that at present.
I went long back in 2009 and played the cycles within the bull move all the way to 1475 so I did get the majority of the move and expect to get the majority of the bear trade as well but not all of it of course.
Where we are at present is as overextended as we have been in a long, long time. We are now at almost 3 standard deviation above the 90 day mean on S&P. The probability of moving above 3 standard deviation is 99:1 against. Additionally, we are about as leveraged at this point as we have ever been. When there are no buyers left in a market the sell off - when it starts - gets ugly.
Euphoria is not relevant if there is no dry powder and there isn't any in this market today. This rally is really fueled by very naive sentiment, the industry mantra of buy and hold and a belief that the Fed is actually impacting the economy and they are not. The spin is absurd.
Bernanke is actually talking the market down at present but no one is listening. Reduction in deficit will take a big toll on GDP and so will the global slow down and EZ recession. There is no way the economy can reach escape velocity from these levels and the further stocks move in a direction that is opposite the economy the harder and more viscious the crash when it starts.
What I fear for my readers is that they will assume - as most everyone does - that they will be able to exit when the signs of a breakdown appear. If everyone sees it that way - and most do - then how will that work? Everyone can't get out the door at the same time.
The greed at these prices is typical of herd mentality that ignores all risk and assumes the impossible - a market that just never stops climbing regardless of the real economy. I'm not to big on following the herd and have no intention of getting burned on the next turn down which I think will stun investors in its steep and rapid descent mainly because it is so irrational and so structurally imbalanced.
JS
The Bernanke Agenda - It Isn't What You Think It Is [View article]
I don't find anything at all sinister in his decision to skip Jackson Hole. I do think that there is something on his schedule that pre-empts Jackson Hole and since Jackson Hole is one of the most important events of the year for the Fed Chariman what ever pre-empted it must be really big.
Why readers want to embellish a statement and present it in a way that the commenter neither stated or intended is beyond me.
JS
The Bernanke Agenda - It Isn't What You Think It Is [View article]
"The drop in commercial & residential real-estate directly coincided with Bernanke draining required reserves for 29 consecutive months"
Absolutely great point and doesn't one have to ask why did he to that.
JS
Is The VIX Index Forecasting A Stock Market Surprise? [View article]
You don't have to be a genius to make this call. The probabiltiy of Vix and all its derivatives performing well in the next few months is incredibly high for all the reasons John notes.
The probabiltiy of the market continuing higher from these levels is incredibly low. We are within a few points of being at 3 standard deviations above mean and the odds of moving about that level are 99:1 against.
Buying a call on one of the Vix derivatives as a hedge is one of the smartest moves an investor could make right now and you don't have to be a genius to recognize it - just use a little common sense.
JS
The Bernanke Agenda - It Isn't What You Think It Is [View article]
"Night of the living Fed? None of it makes sense to me." Please.
It is all conjecture at this point as to when a new and improved system is ushered in but it will happen at some point and needs to happen and we would be better off for it. My Bernanke quotes are offered as examples of the warnings he is offering if one would only listen.
You have a PhD in economics and should be well qualified to discuss the issue and I don't see why you want to confuse sound policy decisions with the "career builder" comments or suggest that the IMF wants to take on the role for any reason other than the right reason.
Keynes has been disparaged by some of late and it is a shame. We take a part of his theory and discard the rest - implement the part we like and then claim his theory is no longer valid in today's world. You are particularly well qualified to understand the point. Do you think Keynes was wrong and that a sovereign reserve currency makes sense? Do you think Triffin was wrong?
We can't implement effective monetary policy which at times requires an expanison in M2 as a stimulus to domestic economy when the demand for the dollar as a reserve currency works to counter our efforts. Explain how you think that isn't true.
I have no idea what Ocampo's career goals are and would like to think he is proposing a solution to the dilemma and not simply trying to promote himself.
That said - China and Russia seem determined to effect this change even to the point of war if necessary as they stated in a recent policy statement that was actually released to the media. The UN has been working on the matter for 5 + years. The numbers of SDR's was increased by 10 fold in the last 5 years and with US endorsement and the IMF is taking a larger and larger role.
There seems to be a growing consensus of opinion on why this needs to take place and I personally don't think it is to the disadvantage of the United States if it does happen.
There is widespread support for this and I don't know if Bernanke is on board or not. I sure don't think he is a co-conspirator in some sinister plot though and if it were to happen it would explain his absence at Jackson Hole although I am not making that a prediction - just a "what if".
As a final point we are extremely vulnerable at this point. What do you think would happen if China made the decision to dump all their US treasuries on the market at one time? Here is another way to look at it - what if the Fed decided to dump all their treasuries on the market at one time? We all know the answer to that question - market crash - and China is in a postion to do just that if they want to and they are in the same league with the Fed on treasury holdings.
JS
The Bernanke Agenda - It Isn't What You Think It Is [View article]
Actually it was at 1666.12 I think and several hours later the adjusted close was at 1667.47 - a price that the market never even traded at. Here is the high and low for the period between 3:54 and 3:59 - 1666.78 to 1666.01. Here is the high and low for the period between 3:59 and 4:04 - 1666.48 and 1665.70.
Anadarko's market value was effectively wiped out for a few seconds going into the close as the price fell to nothing. Why do you suppose that happened? My guess is some NUT wanted the close to be 1666.?? and went to great lengths to make that happen.
Significant or relevant? Only if Friday's close is the market high. Then we have a market low of 666 and a market high of 1666. I'm not the only one that saw that either and it was sufficeintly distrurbing to the exchanges to manipulate the close to a price above 1666. That I do find a little disturbing and very relevant.
Keep in mind the last trade was recorded at 1666.43 and the settlement price was 1667.47 a full point above the last trade and outside the days trading range.
Pretty odd if you ask me. In other words somebody spent a whole lot of money to get the close to settle at 1666 and the exchange made a very unusual decision to settle the price outside the days range.
None of this matters if we close on Monday at 1668 or 1669 as the market high close price will not be 666. Be interesting to see if those who manipulated the S&P with Anadarko will try to manipulate the market to protect that 1666 (now adjusted to 1667) close.
If I were doing it and had the money I would put the S&P 500 mini limit down on Sunday when the market is thinly traded and a little money goes a long way. Whoever had the money to tank Anadarko has the money to tank the S&P mini in Sunday evening trade which is likely to be pretty thin.
No predictions here so don't call me a nut or throw it back in my face when it doesn't happen - just saying it was really odd and a little disconcerting to me for its implications.
JS
The Bernanke Agenda - It Isn't What You Think It Is [View article]
"All of what you said, reminds me of much of what Bible prophecy is forecasting for the world."
I agree.
That said I am not suggesting that we end up with a one world government. The proposal is Keynes version of what Bretton Woods should have been to start with. All sovereigns retain their own currencies. The SDR has been in use for a long time as a reserve asset. In 2009 the allocations of SDR's was increased from 21 billion to 204 billion.
The only thing missing is an agreement amongst members that would set a fix or a range based floating fix against the SDR and an agreement to settle balance of payments in SDR's. It is not that complicated a process and certainly not sinister or evil in concept.
JS
The Bernanke Agenda - It Isn't What You Think It Is [View article]
One area we disagree on and it is an important one is the amount of liquidity outside the market. If it is there then perhaps the extent of the move is less severe. If not it is not going to be a pretty picture as the sell off will feed on itself. I think we are all in and borrowed to the hilt on margin as well.
JS
It's Now Safe To Sell [View article]
Kevin has been negative in the last few months but almost always advised that higher prices were in store. I know as I pay attention to his views and have great respect for his opinion.
Give credit where credit is due and please do go back and look at his recent articles as you are wrong. If he calls the turn here I would say his timing this year was better than anyone on SA. .
JS
The Bernanke Agenda - It Isn't What You Think It Is [View article]
JS
The Bernanke Agenda - It Isn't What You Think It Is [View article]
I don't know that you are fair in your assessmnet of SA articles. I would say at best the split between bear and bull is about 60-40 to the bull side.
As to my views - when the market broke I was biding my time waiting for the bottom to buy based on what I knew Fed policy would be - inflate out of the hole. I only got bearish when QE3 was announced in September so please don't include me in that group of bears going back to 2009 as it is simply not true.
Markets move up and down - always have and always will. I typically play the medium term cycles - 6 months or so - but also look for points where the fundamentals start to diverge. I saw that back in September. I will once again turn bullish after we move back to the bottom end of the 15 year trading range but I see almost no upside from here and huge risks. Anybody that doesn't see that is just not looking.
JS
The Bernanke Agenda - It Isn't What You Think It Is [View article]
We are not in a bubble at the moment and I don't think Bernanke wants to create one either. Earnings peaked early last year and we are now taking measures to contract GDP through deficit cuts. I also look at the EZ crisis which will impact all and the China slowdown. Sequester cuts and federal employee furloughs. The deflationary bias coming from the strong dollar. A lot of negatives and not many positives.
It is simply not rational to think stocks have much left from these levels as "the world IS going to hell in a handbasket".
Here's the problem - we've extended the market beyond the point where it should have had a normal correction, we have rapidly deteriorating fundamentals, we are at record highs and markets will soon price that in. Maybe fair value on the S&P today is back to the mean but it will push through that when it finally starts down as is usually the case.
Bubble - not yet but close. Over extended - absolutley.
JS
The Bernanke Agenda - It Isn't What You Think It Is [View article]
Agree totally on euro going away.
JS