taojaxx

Clues to the Next Market Move

I admire your certainties. Plus, based on ideas such as "the general complacency of traders as can be seen in the low price of the VIX". At 28. isn't the VIX at about 3 times its pre crisis level?
As to the natural gas play, the bounce after the EIA inventory statement lasted about 60 mn. NG contract ended the day at $3.65, about $.06 lower than the opening. Unfortunate illustration of the consistent failure of any bullish natural gas strategy. But maybe you use the ETFs rather than the futures contracts, in which case, I'd be interested in learning how you manage the added risk of the relative contangos.
Not disputing your bearish case. I'm just surprised how certain you are, especially as I'm not fazed by the arguments: the fact that home builders and regional lenders were early warnings in the recent past doesn't mean they're going to lead the market this time. They may, or may not. I too am skeptical about the green shoots theory, but for more fundamental reasons: Deleveraging doesn't stop in weeks as this is a structural shift. The US consumer retrenches for good and it's unclear to me who's going to pick up from them, certainly not the Chinese as they have no social security, no retirement benefits and no children to care for them in old age (one child policy) so they don't have a choice but to save like crazy, which is what they will keep doing.

Inflation Is Going to Be a Major Problem... But Not Today

The Fed has not inflated money supply, it has inflated the monetary base, namely reserves held by commercial banks. As long as these reserves sit on the Fed balance sheet as they do now, money supply is sterilized and creates no inflationary risk. When banks start lending again to earn more than the 25 bp the Fed is currently paying them, then money supply will rise and inflation will be a problem. At that time, the Fed will have plenty of time to mop up liquidity by selling Government bonds (or its own securities, if Congress allows the Fed to issue them).
So, no rush on commodities for inflationary reasons. You might wish to load up on them though, as most don't make the above distinction. As we know, in trading what's important is not what you think, but what the market thinks. Enjoy the commodity party, but stay close to the door as there will be money changing hands when people realize that Marc Faber's certainties ($ debased, buy commodities and a handgun, head for the hills or for China) might change overnight.

Great Depression Not Imminent, But Inevitable

The reason the CDS market deflates is it was a bubble in the first place. The whole credit enhancement mechanism was relying on institutions the size of AMBAC and MBIA....
AAA ratings have been exposed to what they are: worth every bit of what they cost to investors, i.e. $0, and great value to those paying for them, the borrowers, or sellers of toxic waste repackaged as "AAA".
Left unchecked, this financial Chernobyl could trigger the nuclear winter the author wishes for. The Fed and US/China/others Gov'ts are busy burying it under a concrete blanket.
That short SPY position is 1 year past its sell by date.

More Proof the Bear Rally Is Over

To think that the Fed is powerless is, to say the least, a bold statement. Credit markets are thawing: see JPM & BAC loosening covenants on $2Bn facility to Macy's (no less, consumer discretionary), money market rates nosediving, VIX plummeting. Have we seen the lows? not for me to say, but the crunch sure relaxes some of its grip.
You may remember that stock indices have lost about 50% of their value lately. It takes Armageddon to justify more, and even Armageddon after a while loses its momentum.

A Long and Painful Consumer Slowdown - Barron's Interview

Not sure I'm terribly interested by what "should happen". I can figure it out myself: if de-leveraging is left unchecked, we're probably talking several years of dire contraction, not 1% growth. To invest my money, I need to figure out as best as I can what "will happen".
Besides, there are no powers that be conspiring against Joe Sixpack. I'm surprised I have to mention this but there's just an elected government that has a stake in ensuring the economy doesn't go down the drain. This being a great country, you have a chance every 4 years to kick it out of office and every two years to put checks and balances.


On Dec 14 04:30 PM Top Gun wrote:

> Guess you didn't get the memo - the real estate mega growth was caused
> by credit inflation and was not real growth. She was right, the powers
> that be manipulated us into growth. This time she realizes the Fed
> is doing the same thing now. What she is saying is what should happen,
> but as she says will be socialized away as best as our money printers
> can.
>
> There is no such thing as investment any more. It's all just gambling.
> Some day we will invent and make new things, but that looks like
> a generation away.

A Long and Painful Consumer Slowdown - Barron's Interview

I guess that person's track record is a good hint at the value of her current opinion: she's presented as bearish real estate in 2002, that is right ahead of one of the most bullish periods (2002/2006) in the history of the asset class.
I too can predict 5 of the next 2 crisis.
Just wonder how much she charges for the "macroeconomic research and commentary (she provides) to the institutional investment community".
I don't mean to disparage anybody here and her guesses are probably as good as anybody's. What I appreciate in comments is the capacity to abstract from the immediacy to focus on the big picture.
You can't do that by projecting the last five months into the coming five years. Mr. Market is smarter than that.
Just my $0.02.

Fundamentals Remain Negative This Week

As regards markets, the issue is not really so much about whether the economy improves or deteriorates. The issue is whether the market has or has not already factored in the likely deterioration.
You may remember Keynes' image: It is not about choosing the prettiest lady, it is about picking the lady that the market as a whole views as the prettiest. So we don't care about what you (or I, for that matter) think, we care about what Mr. Market thinks.
With the S&P 500 cut in half, dividend yields above bond yields for the first time since 1958, monetary and fiscal policy in full reflation mode, positioning a portfolio for a deflationary outcome means betting heavily against the impact of policymakers on the economy. Could be right, but unlikely.
Today's doomsayers are akin to yesterday's real estate or dot com bulls. Remember "they don't make real estate anymore"? "Tech stocks are a safe heaven against interest rates as they're valued differently"?
Not calling a bottom here. I think we're in a secular bear market since 2000, probably ending sometime in 2015 or 2020. My bet (that's what it is, just a bet) is that the bulk of the cyclical bear market (S&P down from 1550 to 750 or so) is behind us.
So, upside potential far outweighs downside risk today. We may (35% probability?) undershoot, because that's how markets work. It's worth the risk in my best judgment.
Isn't it funny that the "smart money" fat cats invested with Bernie Madoff would bail out now, to the point that Bernie's voodoo finance thingy would implode? If they're smart, then you're right. If they're not so smart, then I may have a point.

Analysts, Strategists, Pundits and Fools: Which Ones Are Right About the Markets?

I agree on the bear market rally. But why sell calls? It would get you out of the game and you would have to chase the stock thereafter.

Can You See Apple Under $60?

Zach,
Thanks for responding, especially on a day where the market hasn't been kind to you on AAPL.
I respect your opinion as it is backed by action. My point is whatever the severity of the expected contraction, I am only short if I feel the market has underestimated the potential shock.
Here, the market has corrected from 1550 a year ago to 7xx last week. The risk reward of a short position has deteriorated accordingly. I was short SPY from August 07 to Jan 08 (so in the 1300/1500). I don't think it is an attractive proposition to short when we have corrected about 45%. And shorting quality stocks when they have themselves been cut in half sounds all the more unattractive.
It is human nature to project the recent past in the foreseeable future. My experience tells me this is a source of illusion. My best decisions have come from visualizing a future that is different.
I think now is the time to do just that.
Not saying you won't make money on your position. Just saying you might be luckier than smart on that one.
Good luck anyway,
TJ




On Nov 24 10:11 AM Zach Bass wrote:

> taojaxx, I'm short because we're in the worst economic disaster in
> our history as a nation and the world. We're crashing man! Why would
> I expect anything else but to keep crashing until there's a reason
> not to crash? But even in a crash there are minor corrections on
> the way down. That's what is happening today (Monday Nov 24). But
> it won't last, because nothing has changed on the economic front
> to suggest an end to this disaster.

Can You See Apple Under $60?

I e mailed that article to myself to reflect on it when we get out of this mess.
Typical projection of the last 5 days in the coming 5 years. Plus, talking his own book... Remember the key question: are you short because you're bearish, or are you bearish because you're short?

From Subprime to Meltdown: Is Peak Oil Responsible?

The sub-prime crisis results from monetary tightening linked to inflation pressures.
It would have happened no matter what the source of inflation was. In this respect, the current de-leveraging crisis is no different from that of 1929 or 1990 Japan.
The major source of tension results from unsustainable housing price appreciation which triggered voodoo finance to keep the party going. Oil prices were certainly not central to this, just one of the causes of interest rate hikes.
As to Peak oil, with prices falling from $147 to $75 in 3 months, it starts looking more and more like the Y2K bug and avian flu to me. (Whatever happened to the avian pandemic, by the way?)
JMHO, of course.

Percentages of Stocks Above 50-Day Moving Averages

My understanding is that to use this as a forward looking instrument, you need to accept the assumption that if a sector has rallied lately, then it will rally further (financials). Conversely (the case of energy here), if it has been beaten down lately, the beating will continue.
Seems to me that may or may not be true. Am I missing something?

On Speculation - Cramer's Mad Money (5/22/08)

Didn't know SeekingAlpha wold comment about Cramer, I thought it was all about investing...

On Speculation - Cramer's Mad Money (5/22/08)

Why comment on Cramer on this website? I thought SeekingAlpha was about investing...