Seeking Advice

Thursday Outlook: Commodities, Global Markets

Dave,
I think you said it pretty succinctly, "So the liquidity bubble continues to expand and investors are lovin’ it. It is what it is folks, enjoy it while you can." I've kept invested in the market (albeit at lower levels than 2006 or 2007) against my better judgment and feelings but that has proved prudent so far. I remain watchful for signs that either the government is removing liquidity or that investors are getting tired of little signs of real recovery - if that ultimately comes to pass.

Right now, I get the feeling that the only things that matter are that the government says they intend to continue to provide stimulus (1st time home buyer credits and the like) and the Fed indicates that they will keep rates near zero. And for now, maybe that's most of the market...

Thursday Outlook: Commodities, Global Markets

Really sems hard to know how to invest right now, Dave. I do believe that we're seeing an equity bubble. And it seems that the Government is purposely fostering it as a way to increase confidence and allow the big banks to increase their value. The government is devaluing the dollar which makes all comodities rise and the zero interest rates make it impossible to get any return on cash. Hence, the tendency for money to find its way to riskier assets like equities as everyone searches for a way to get some kind of return. It seems so simple in way, though it's not.

As a flexible buy-and-holder, I've been sliding up and down on my equity exposure based on apparent risks (which seem high). And while my exposure is lower for sure, fortunately I have not sold off so I've floated along with the rising equity tide. I keep asking myself how long things can continue and then remind myself that the market can stay irrational for a long time, especially if conditions are pressuring it in that direction. I'll keep reading you're comments as part of how I try to stay informed.

Friday Outlook: Commodities, Global Markets

It's again frustrating for me how a normally great blog entry by you, David, once again gets brought down by ridiculous politics. Yes, politics and the economy/markets are tied, but please wtf does the US President wining the Nobel Peace Prize have to do with today's market action? Exactly, nothing. I suppose these blogs become a nice relief valve for some conservatives frustrated at finding themselves currently "out of power."

But David, for you to join the fray... come on. I get that you're a conservative and it's clear that many of your followers are as well, but as an Independent it just debases the discussion that I look to you for, which is unbiased technical analysis. I have no problem with your witty comments, and look forward to reading your analysis but please I ask you not encourage folks to head down that hole. I need to believe your interpretations of what's going on and what might be happening going forward. I don't want to start questioning your analysis as potentially colored by an ideological bias.

Tuesday Outlook: Commodities, Global Markets

Thanks for the charts, Dave. As always, the most informative blog on seeking alpha.
@ Dr. O. -- Your commentary almost always veers very political and I often find I disagree with your poltical points though not the economic ones, necessarily.
"...the administration's recent beating in the polls..."? Whether you agree or disagree with their approach, the poll numbers are hardly reflecting any 'beating' as they're approval numbers remain above 50% which is higher than many previous administrations at this point in their term. Perhaps it's wishful thinking on your part. And I've seen no "outright rebellion" of current policies as you describe it, just highly energized partisan fighting that I've seen when any administration tries to redirect policy.

That being said, one can't help but think that the big banks and the government are trying desperately to prop up the markets as we saw during the latter stages of the previous administration (these manipulations are good for whichever party is in power, after all). The temptation is probably too great. For the banks, they're benefitting from trading profits and from having their stock prices rise, while the government benefits from the rise in consumer confidence that results from 401k investments coming back somewhat.

Makes it hard to invest though when fundamentals appear not to matter much.

Thursday Outlook: Commodities, Global Markets

Dave,
I appreciate your charts on the MCD and the Summation Index. I expect that there will be some sort of bounce with the MCD below -60, now. I'll probably use the bounce to lighten up on equities, expecting a roughed road ahead again.

To Dr. O. Rational people understand that global warming is real. The northern and eastern parts of the country have had a very unusual jet stream pattern this summer, bringing in cool Canadian air. So what? That doesn't change the fact that the average temps on the surface of the earth have been rising over the past few decades and that there'is very strong consensus among those that study it that our industrial activities are driving it. I fail to understand the point of denying climate change or how it became political... but strangely it has. We'll need to deal with it one way or another and ignoring it won't make it go away.

Tuesday Outlook: Commodities, Global Markets

The concerns I see being articulated here and elsewhere is that the small time investors will get crushed if the apparent market manipulations (the "buy programs" of the really big players) stop and the market falls back 15% or 20%. But with few people I know interested in buying at this point (they're wary, shell shocked, or just confused), I don't think individual 401k investors have been jumping in. The light volume I think indicates it's mostly the big players buying and selling to each other. Those with 401k's in target date retirement funds probably could be the most exposed though, if this scenario comes to pass.

Wednesday Outlook: Commodities, Global Markets

So, Dave, do we just give up on fundamentals? Can 'we' just keep talking up the economy and the markets go up... indefinitely? Can we remain on the top side of the overbough/oversold chart indefinitely and not have any significant correction? I would love to believe the the 'all clear' bell has rung but I fail to see what's changed. Unemployment is high and likely to continue higher as there's no catalyst for that to change. Wages aren't going to increase in this environment. Home prices are declining and foreclosures remain severly elevated.

Personal debt also remains high and people still have to save more to make up for their lower home values and smaller 401(k)'s, neither of which are likely to leap up to their former trejectory.

I fail to see how we can just jump back to where things were. The way things were was/is part of the problem, it was demonstrated to be an unsustainable model. I admit being confused but still holding stocks, albeit at a little lower percentage.

Tuesday Outlook: Commodities, Global Markets

So what's driving the market? Still missing an "engine" to drive the economy forward, IMHO. The last several years, it was home prices and home equity loans that drove consumer buying while incomes remained flat. Another normally key piece to drive the economy is rising employment or incomes. Neither of these is present or appears to be coming soon. The government of the past and present administrations has looked to fill the "gap" with government money. Are we seeing some results of that?

I continue to hold equities (though less than 1 or 2 years ago) and am enjoying the upturn. But I still have trouble making the case for a return to a sustainable bull market when I can't make a case for sustainable economic growth, I can only make a case for this slow down to ease somewhat. How long can the market seperate itself from the apparent underlying economic fundamentals? I admit I don't know. I just don't want to get caught too severely on the wrong side - whichever way it's going to go next.

Tuesday Outlook: Commodities, Global Markets

"We’re paying a big price for past excesses, primarily from bubbles caused by easy money policies of the past combined with the demise of Glass-Steagall in 1999. So the lying and cover-ups just continue apace since, given the election cycle, politicians would just as soon inflate as admit mistakes and make the hard choices."

I guess that about says it all, Dave. It makes it very hard to believe in this rally. I guess my growing concern is that "we" eventually reflate a portion of the economy and equities come along for the ride only to be crushed on the next downside when the stimulus runs dry. If, by then, many small investors have jumped back in, this may do at least as much damage to investors as the initial downturn in equities. I'm afraid I could even become too complacent just in time for the next big leg down.

Friday Outlook: Commodities, Global Markets

Keep those charts and analysis coming, Dave. So, we appear to be in agreement that the markets are manipulated by... some combination of gov't and GS and maybe other large traders/funds? We also seem to agree that the "green shoots" being touted by some are mostly intended to cheer up the market. And some data shows a slowing down of the deterioration, but that's a far cry from anything resembling an upturn. Granted, you need to slow down prior to stopping and reversing direction but there are no real elements of the economy to actually draw strength from:
Unemployment numbers still rising (few finding work)
Unemployment new claims (fairly steady at a very elevated number)
Corporate earnings poor (unless you count beating horrendous expectations as "good").
Real Estate still slumping and prices still dropping y-o-y
Other world economies experiencing their own crises

Yet the market has been climbing. How is one to intelligently invest when there seems to be such divergence between economic fundamentals and the markets actions? Just thinking out loud, I guess.

Tuesday Outlook: Commodities, Global Markets

On your EEM chart, you ask "Is the US an EM yet?" To that I say, probably just the opposite. What would be the opposite of an emerging market be... maybe a retreating market (RM)?

Friday Outlook: Commodities, Global Markets

While the clawing back of AIG's bonuses became very 'theatrical' (who knew that the House and Senate could grand stand?), it is based on popular anger and opinion and that's why there was strong bipartisan condemnation. While the amount of the bonuses is small compared to AIG's bailout, it's the impression that's created by rewarding those who made mistakes, that causes the problem. As with the stimulus bill where the amount of supposed "pork" was tiny as a percentage of the total bill, opponents were able to make 'political hay' off of those items because of the impression it creates. Same thing here.

Thursday Outlook: Commodities, Emerging Markets

There probably will be a rally after something passes, but not necessarily because anyone really thinks it's overall a good idea, but probably just relief that this confusing proposal has been dealt with one way or another. (Treasury admits they made up the $700B out of thin air?). But as has been stated, the lack of transparency about just what the economy is up against and the poor track record of the Federal Government in perceiving the problems and acting effectively is probably going to weigh on the markets. And there is no free lunch. $700B or $1 Trillion, whatever the number ultimately turns out to be, is a whole lot of money and that has to paid for. It will have an effect on the economy and the nation for some time to come. And who exactly is going to provide those dollars we don't currently have?

Tuesday Outlook: Commodities, Emerging Markets

"The politicians will want to score points while the average investor and man on the street is flummoxed. "
Yes, how do individual investors decide on an appropriate course of action in a market that is mostly moved now by unpredictable government intervention instead of economic and market fundamentals?

Thursday Outlook: Commodities, Emerging Markets

Your comments on the IYT chart are spot on. I'm not a short seller but agree that many of the people who complain that short sellers cheer "bad news" will probably cheer the news that UAL intends to lay off 1500 Flight Attendants. That's a 'positive' cost saving business story, right? Certainly helps to put things in perspective. As Barry Ritholtz (another blogger) often says, "there are two sides to every trade".