The source that I utilize for the Investor Sentiment Survey actually had the WRONG number this past Wednesday when I posted it. They had it as .86. I noted in a post this past Wednesday that it was a BAD sign indeed.
This morning when I was checking another site, I noticed that they had a different reading for the "bull-to-bear" ratio of .63. I double checked the reading in Investors Business Daily, and indeed.....the CORRECT reading is .63 bulls for every 1.0 bear.
I have changed the reading from .86 to .63 on my blog. The reading of .63 makes much more sense......especially as things that usually occur as we close in on an INTERMEDIATE TERM BOTTOM are now "coming into form."
I'll post more later.......just be aware that an intermediate term bottom (but NOT the end to the bear market) should be at hand WITHIN the coming days/weeks.
Saturday, February 28, 2009
Friday, February 27, 2009
S&P Earnings Estimates: Next Two Years...
Here's an article that lays out the trailing 12 months S&P 500 earnings estimates for the coming two years. I've noted this several times over the last 6 months........that earnings estimates CONTINUE to come down. The paragraphs below are from the article, and they reference a table in the article.
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Looking at the earnings forecast from Standard & Poor's we might be able to assess which way the S&P 500 will likely move. The table below uses the trailing GAAP four-quarter earnings from Standard & Poor's. It then applies a PE ratio to derive the S&P 500 index. When looking at the table, keep in mind that the historical median PE ratio is 15.7. The PE ratio is mean reverting, so we should expect it to fall further, possibly to 10.
In the upcoming March 2009 quarter, the earnings forecast are $27.01. A PE ratio of 25 gives us a target price for the S&P 500 index of 675. On Friday, February 20, 2009, the S&P closed at 770.
The S&P trailing earnings falls throughout 2009, placing further downward pressure on the S&P 500 index. The falling earnings are due to the negative earnings for the fourth quarter 2008 and the low earnings forecast for all of 2009. With a PE ratio of 30, the S&P could fall to 404, far below the current level.
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So......you can see by the above article......that my long term S&P target of less than 360 is downright conservative compared to some targets/estimates. Right now......its just a "directional target" that has a support level in a long distant prior year. And note....it is a LONG TERM TARGET.
Just keep in mind, that markets don't look at a table before they choose to buy or not. Markets move in INTERMEDIATE TERM spurts. When they run out of sellers........the buyers take control. When they run out of sellers.........the reverse happens.
Right now......this market seems to be "out of buyers" and they are sitting on their hands. Sellers are using every short term rally to get rid of their shares.
The NASDAQ is really where I expect the greater damage to be done. MSFT, GOOG, JNPR, AMZN, RIMM etc.......still have a lot of downside.
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Looking at the earnings forecast from Standard & Poor's we might be able to assess which way the S&P 500 will likely move. The table below uses the trailing GAAP four-quarter earnings from Standard & Poor's. It then applies a PE ratio to derive the S&P 500 index. When looking at the table, keep in mind that the historical median PE ratio is 15.7. The PE ratio is mean reverting, so we should expect it to fall further, possibly to 10.
In the upcoming March 2009 quarter, the earnings forecast are $27.01. A PE ratio of 25 gives us a target price for the S&P 500 index of 675. On Friday, February 20, 2009, the S&P closed at 770.
The S&P trailing earnings falls throughout 2009, placing further downward pressure on the S&P 500 index. The falling earnings are due to the negative earnings for the fourth quarter 2008 and the low earnings forecast for all of 2009. With a PE ratio of 30, the S&P could fall to 404, far below the current level.
====================================================
So......you can see by the above article......that my long term S&P target of less than 360 is downright conservative compared to some targets/estimates. Right now......its just a "directional target" that has a support level in a long distant prior year. And note....it is a LONG TERM TARGET.
Just keep in mind, that markets don't look at a table before they choose to buy or not. Markets move in INTERMEDIATE TERM spurts. When they run out of sellers........the buyers take control. When they run out of sellers.........the reverse happens.
Right now......this market seems to be "out of buyers" and they are sitting on their hands. Sellers are using every short term rally to get rid of their shares.
The NASDAQ is really where I expect the greater damage to be done. MSFT, GOOG, JNPR, AMZN, RIMM etc.......still have a lot of downside.
SOHU revisted........
I mentioned many weeks ago (months?) that SOHU was building a "bowl". It is continuing to work on the right side of the bowl.....and is now set to likely PULL BACK towards its trend line at the 40ish area over the coming couple of weeks.
On a pull back to 40 - 41 area.....this has potential to move back up to $50 (and beyond eventually). Right now....its a good short.........but in a week or two, it looks like a good short term buy at its trend line with a tight stop.
On a pull back to 40 - 41 area.....this has potential to move back up to $50 (and beyond eventually). Right now....its a good short.........but in a week or two, it looks like a good short term buy at its trend line with a tight stop.
Thursday, February 26, 2009
California Drought.........
As if the housing crisis and the overall economic crisis weren't enough........looks like California's mild drought is intensifying a little bit, especially in central California. This is a drought monitor map of the US. There is also a drought outlook map.....which forecasts the upcoming forecast/trend in the drought.
This may be of use to some of you, especially if you ever look at agricultural stocks (Archer Daniel Midlands), commodities, and the like.
It is interesting to note that California, the southeast Atlantic states, and Texas are three areas that have had persistent drought conditions over the last couple of years. The drought in Georgia just won't seem to end.
This may be of use to some of you, especially if you ever look at agricultural stocks (Archer Daniel Midlands), commodities, and the like.
It is interesting to note that California, the southeast Atlantic states, and Texas are three areas that have had persistent drought conditions over the last couple of years. The drought in Georgia just won't seem to end.
Goldman Sachs Revises View.....
I see that Abby has "nailed it" again. Does anyone really listen to ANYTHING that Goldman says? Maybe she should start an economic forecasting firm with Larry Kudlow. Now THERE would be a steller two-some. People would pay BIG MONEY to see those economic and market calls:) I can see it now. "Kudlow and Cohen........we aim to please, but our aim 'aint so great."
Here's the whole article from Reuters. And here is a key paragraph:
Goldman Sachs on Thursday lowered its year-end price target on the S&P 500 to 940, a level that still represents upside of 22 percent. However, the firm has a near-term target of 650, a level that represents downside of 15 percent. "Peak-to-trough, we expect S&P 500 operating earnings to fall 56 percent, the third-worst fall in corporate earnings over the past 100 years. Excluding provisions and write-downs, we forecast $63 in 2009 and $71 in 2010," the firm wrote.
Abby missed her 2008 target by almost 50% in October of 2007 when she made it public. THAT.....was a "nice call." I hope she got a nice bonus for her excellent work.
I do see that they were able to sprinkle in some "pixie dust" on their forecast. In the last sentence above they REALLY should have said:
"If you pretend there won't be any write-downs and other provisions for overstated earnings...........then we forecast $63 in 2009 and $71 in 2010." I wonder how Abby likes living in Fantasia? It does seem to pay well.
Here's the whole article from Reuters. And here is a key paragraph:
Goldman Sachs on Thursday lowered its year-end price target on the S&P 500 to 940, a level that still represents upside of 22 percent. However, the firm has a near-term target of 650, a level that represents downside of 15 percent. "Peak-to-trough, we expect S&P 500 operating earnings to fall 56 percent, the third-worst fall in corporate earnings over the past 100 years. Excluding provisions and write-downs, we forecast $63 in 2009 and $71 in 2010," the firm wrote.
Abby missed her 2008 target by almost 50% in October of 2007 when she made it public. THAT.....was a "nice call." I hope she got a nice bonus for her excellent work.
I do see that they were able to sprinkle in some "pixie dust" on their forecast. In the last sentence above they REALLY should have said:
"If you pretend there won't be any write-downs and other provisions for overstated earnings...........then we forecast $63 in 2009 and $71 in 2010." I wonder how Abby likes living in Fantasia? It does seem to pay well.
Not Enough Bears......
Yesterday I noted that a few more "bears" had moved over to the bullish camp to the "bullish" camp too early. The bull/bear ratio had RISEN over the past week BEFORE getting to a bearish enough level.
Those new "bulls".....now add to overhead resistance and a new "supply" of sellers over the coming days and weeks.
Those new "bulls".....now add to overhead resistance and a new "supply" of sellers over the coming days and weeks.
S&P 760....
Watch this level.....especially around 2 PM this afternoon when FDIC is releasing bank report. Market likely to break ONE WAY OR THE OTHER HARD.
Wednesday, February 25, 2009
Is It Just Me............
........or does this sound like a REALLY bad idea:
TOKYO, Feb 26 (Reuters) - The Japanese government is considering asking the central bank to buy stock exchange-traded funds (ETFs) to prop up Japanese share prices, the Yomiuri Shimbun daily reported on Thursday. Without citing sources, Yomiuri said the government was also considering giving a government guarantee on any losses the the Bank of Japan may incur from buying ETFs.
Yiiiiiiikkkkkkkkkkeeeeeeeeeeeesssssssssssssssss............
TOKYO, Feb 26 (Reuters) - The Japanese government is considering asking the central bank to buy stock exchange-traded funds (ETFs) to prop up Japanese share prices, the Yomiuri Shimbun daily reported on Thursday. Without citing sources, Yomiuri said the government was also considering giving a government guarantee on any losses the the Bank of Japan may incur from buying ETFs.
Yiiiiiiikkkkkkkkkkeeeeeeeeeeeesssssssssssssssss............
S&P: 10 Minute Chart Over 5 Days...
Here is ONE possibility to where we are going SHORT TERM. S&P could be forming a short term "bearish wedge".
Keep in mind......
1) We are very "oversold" based on many technical readings.
2) Even though we are "oversold", market "crashes" like we had a few months ago.....happen in OVERSOLD markets like we have now.
3) At the same time......also be aware that you can have your face ripped off and thrown away on the bearish side......just as easily as the bullish side.
4) Having "covered my ass on both sides" (with 2 and 3 above).........if the bottom trend line breaks (which is now at 760).......first support is the low from yesterday which is about 743. If that gives way.........we could be headed for an ugly several days.
Keep in mind......
1) We are very "oversold" based on many technical readings.
2) Even though we are "oversold", market "crashes" like we had a few months ago.....happen in OVERSOLD markets like we have now.
3) At the same time......also be aware that you can have your face ripped off and thrown away on the bearish side......just as easily as the bullish side.
4) Having "covered my ass on both sides" (with 2 and 3 above).........if the bottom trend line breaks (which is now at 760).......first support is the low from yesterday which is about 743. If that gives way.........we could be headed for an ugly several days.
More Bad News For Equities.....
I just posted the new Investor Sentiment Survey numbers from the survey done last Friday. Sentiment went UP to .86 bulls for every bear.
That is NOT bullish news. Bulls CONTINUE to get cut up as the knife falls. We need to get REALLY bearish numbers in sentiment before the market turns around.
The market is setting up for a fall off the cliff. Rydex Cash Flow numbers are also way too bullish (which is BEARISH).
Next few weeks are NOT going to be pretty.
That is NOT bullish news. Bulls CONTINUE to get cut up as the knife falls. We need to get REALLY bearish numbers in sentiment before the market turns around.
The market is setting up for a fall off the cliff. Rydex Cash Flow numbers are also way too bullish (which is BEARISH).
Next few weeks are NOT going to be pretty.
Mr. Market Is In REAL Trouble Here.....
Intermediate term......Mr. Market is in big trouble. Short term......he may also be in serious trouble. I see two "paths" in the short term.
1) Market is able to "hold" onto yesterday's lows and get a "low volume" levitation up to the 790 - 800 level.
2) Market ISN'T able to hold onto yesterdays lows (about 745ish on the S&P) and rolls off the cliff (again......like this past autumn) in the coming days.
Right now......any SHORT TERM leg up, is looking questionable as buyers have their hands in their pockets. All rallies are being sold into or shorted.
Take a look at the VIX. Popped out of the bullish wedge, and backed into support. It is heading much higher........as the market heads much lower.
1) Market is able to "hold" onto yesterday's lows and get a "low volume" levitation up to the 790 - 800 level.
2) Market ISN'T able to hold onto yesterdays lows (about 745ish on the S&P) and rolls off the cliff (again......like this past autumn) in the coming days.
Right now......any SHORT TERM leg up, is looking questionable as buyers have their hands in their pockets. All rallies are being sold into or shorted.
Take a look at the VIX. Popped out of the bullish wedge, and backed into support. It is heading much higher........as the market heads much lower.
Dividend Yield......and Eric Chevrete's Article
Two things I will discuss briefly:
1) First, I need to CORRECT my statement yesterday that Eric Chevrette's target for this intermediate term leg down was 616. It is actually 513.........NOT 616. That is roughly a 33% decline from here. I encourage you to take a look at his article again.
2) Secondly, here's an article I came across yesterday that discusses "value" based on dividend yield. So for all you "fundamental types" (and I definitely have a fundamental side) this is a good read. The "short of it" is that "fundamentally......the market is "fairly valued" at 526 right NOW.
Here are a few KEY paragraphs from the dividend yield article I want to highlight:
A) Without dividends, investing in equities may not be worth the risk. Dividend income accounted for about 70 percent of average U.S. equity returns since 1900 after inflation, according to Elroy Dimson, Paul Marsh and Mike Staunton at the London Business School, in a study published by Zurich-based Credit Suisse this month.
B) A total of 288 companies cut or suspended payouts last quarter, the most since Standard & Poor’s records began 54 years ago, when Dwight D. Eisenhower was president. While the S&P 500 is trading at the lowest price relative to earnings since 1985 and all 10 Wall Street strategists tracked by Bloomberg forecast a rally this year, predictions based on dividends show shares are overvalued by as much as 46 percent.
C) The measure, which values a stock as the sum of all its future dividends, shows equities are still overpriced. With S&P 500 companies projected to pay a combined $25.27 in dividends this year, the index would need to fall to 526.46 before investors are compensated for owning shares.
Keep in mind that this was written on February 23rd. As more companies decrease their dividends (like JP Morgan did yesterday, and like GE likely WILL in the future)......that 526 number will also come down.
1) First, I need to CORRECT my statement yesterday that Eric Chevrette's target for this intermediate term leg down was 616. It is actually 513.........NOT 616. That is roughly a 33% decline from here. I encourage you to take a look at his article again.
2) Secondly, here's an article I came across yesterday that discusses "value" based on dividend yield. So for all you "fundamental types" (and I definitely have a fundamental side) this is a good read. The "short of it" is that "fundamentally......the market is "fairly valued" at 526 right NOW.
Here are a few KEY paragraphs from the dividend yield article I want to highlight:
A) Without dividends, investing in equities may not be worth the risk. Dividend income accounted for about 70 percent of average U.S. equity returns since 1900 after inflation, according to Elroy Dimson, Paul Marsh and Mike Staunton at the London Business School, in a study published by Zurich-based Credit Suisse this month.
B) A total of 288 companies cut or suspended payouts last quarter, the most since Standard & Poor’s records began 54 years ago, when Dwight D. Eisenhower was president. While the S&P 500 is trading at the lowest price relative to earnings since 1985 and all 10 Wall Street strategists tracked by Bloomberg forecast a rally this year, predictions based on dividends show shares are overvalued by as much as 46 percent.
C) The measure, which values a stock as the sum of all its future dividends, shows equities are still overpriced. With S&P 500 companies projected to pay a combined $25.27 in dividends this year, the index would need to fall to 526.46 before investors are compensated for owning shares.
Keep in mind that this was written on February 23rd. As more companies decrease their dividends (like JP Morgan did yesterday, and like GE likely WILL in the future)......that 526 number will also come down.
Tuesday, February 24, 2009
"All That Money On The Sidelines"......
Reminds me of the saying......"all dressed up, and nowhere to go."
Some people (economic and political pundits) are apparently having a hard time understanding WHY all that money is on the sidelines.........AND........why it is growing. If you look at the earnings estimates for 2009.....you will soon understand. Why would ANYONE want to go long the market (and for the long term) when you have these two conditions present:
1) Sentiment is not yet bearish enough to get to an intermediate term bottom.
2) If you assume an AGGRESSIVELY BULLISH S&P 500 GAAP earnings estimate of $40 a share for 2009....(I think we'll likely be much lower)......AND......you assume a PE of 15 (also too high).....you'll get to a value of 600 for the S&P 500. A 10 PE on those bullish earnings estimates gets you down to 400 on the S&P.
Note......I expect that the market will get down to a PE of 10 or BELOW eventually. That is what history has shown to happen every 20 to 25 years (the last time was in the early 1980's). So even on AGGRESSIVELY BULLISH earnings forecast of $40 for 2009, you would get to an S&P of 400. My LONG TERM TARGET is 360 or below.
So all those people who think that just "talking positively about the economy" with a splash of pixie dust...........will make investors ignore future earnings.........are delusional.
What ARE those folks drinking? And why aren't they sharing it with me:)
Some people (economic and political pundits) are apparently having a hard time understanding WHY all that money is on the sidelines.........AND........why it is growing. If you look at the earnings estimates for 2009.....you will soon understand. Why would ANYONE want to go long the market (and for the long term) when you have these two conditions present:
1) Sentiment is not yet bearish enough to get to an intermediate term bottom.
2) If you assume an AGGRESSIVELY BULLISH S&P 500 GAAP earnings estimate of $40 a share for 2009....(I think we'll likely be much lower)......AND......you assume a PE of 15 (also too high).....you'll get to a value of 600 for the S&P 500. A 10 PE on those bullish earnings estimates gets you down to 400 on the S&P.
Note......I expect that the market will get down to a PE of 10 or BELOW eventually. That is what history has shown to happen every 20 to 25 years (the last time was in the early 1980's). So even on AGGRESSIVELY BULLISH earnings forecast of $40 for 2009, you would get to an S&P of 400. My LONG TERM TARGET is 360 or below.
So all those people who think that just "talking positively about the economy" with a splash of pixie dust...........will make investors ignore future earnings.........are delusional.
What ARE those folks drinking? And why aren't they sharing it with me:)
GE: "We Bring Good Things To Light"....
Here are some "major players" to watch as we move towards an intermediate term bottom.
GE: Here is some light, but I don't see a lot of good things:) $7.50ish is first support.
MSFT: The lost decade?
RIMM: Still has that nice little gap at $30 - $33 from 2006 (can't see it on the monthly chart).....but its here on the daily from 2006. I have to believe that is going to likely come into play at an intermediate term bottom.
GE: Here is some light, but I don't see a lot of good things:) $7.50ish is first support.
MSFT: The lost decade?
RIMM: Still has that nice little gap at $30 - $33 from 2006 (can't see it on the monthly chart).....but its here on the daily from 2006. I have to believe that is going to likely come into play at an intermediate term bottom.
Monday, February 23, 2009
Shocking Revelation........
Poll: Washington more trusted than Wall Street
A national poll indicates that when it comes to dealing with the economy, Americans have more confidence in the White House and Congress than Wall Street, the banks or auto executives.
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Gee......I'm SOOOOOOO surprised;) I can't imagine why. Let's make a brief list of just a few items:
1) Martha Stewart is guilty of insider trading of Imclone stock, even though she was on the Board Of Directors of the New York Stock Exchange.....AND....previously worked on Wall Street before selling a ridiculous and pompous lifestyle. Before that, she took her company public at $20 a share........and it is now selling at a 90% loss of $2 a share 9 years later......and it is STILL overpriced!! How's this for long term value?
2) Jeff Skilling thought he could pull a fast one, so he "raped" California power users by fixing prices in the energy markets in California. Of course he "had to" because the business he was trying to promote........."trading of almost any commodity" was a sham operation. He "quit" two months before Enron imploded.......having seen the writing on the wall. Nice try Jeff.
3) Bernie Ebbers might have been a good basketball coach.......but he was a horrible accountant. He had his CFO capitalize billions of dollars of items that should have been immediately expensed. This is the typical CEO ploy: If you can't make your numbers..........get your CFO to manufacture them!! Personal foul on Bernie Ebbers.
4) Henry Blodgett........a journalist............actually thought he was an analyst and "played one" on Wall Street until the tech bubble imploded. Then his "calls".........didn't turn out so well. Then he went back to playing a journalist on Yahoo.........and he's not very good at that either. I think Yahoo got what they deserved.
5) CNBC employs a "so-called" economist by the name of Larry Kudlow. Larry was bullish on the market all during the "tech bubble" implosion in 2000 - 2003 (all the way down). Larry went on to prove that wasn't a fluke. He then missed the housing bubble.........and for good measure, missed the current recession call as well........likely causing anyone who was foolish enough to actually listen to him, millions of dollars. Fortunately, he is on national television where he only spews his nonsense to millions of mis-informed listeners.
If that wasn't enough.....CNBC is apparently trying to fill out a "trifecta" of "financial idiots". They also employ Dennis Neil. Dennis.........on air........stated that people don't REALLY have a loss, until they sell their stock. Really Dennis? Anyone who bought Dryships at $120......and are still holding.......will be VERY relieved to hear that:) Or.....anyone who bought GE at $30.....are likely THRILLED that they really don't have a $21 loss as of today.
I just can't wait till they hire a third stooge to join the first two. Fortunately for them, they actually have a few people that are sharp AND value added such as David Faber, Rick Santelli, and Diana Olick.
6) Abby Joseph Cohen is pumping the market ON AIR in late October of 2007.......as Goldman Sachs is shorting the hell out of the bank stocks which they know are bloated cows waiting for slaughter (good call by Jan Hatzius.........but I'm sure he and Abby NEVER talked;). You know......Chinese Wall and all..........right.
So......gee......I just can't understand why someone wouldn't trust Wall Street...:) They all seem like such believable people.
A national poll indicates that when it comes to dealing with the economy, Americans have more confidence in the White House and Congress than Wall Street, the banks or auto executives.
===========================================================
Gee......I'm SOOOOOOO surprised;) I can't imagine why. Let's make a brief list of just a few items:
1) Martha Stewart is guilty of insider trading of Imclone stock, even though she was on the Board Of Directors of the New York Stock Exchange.....AND....previously worked on Wall Street before selling a ridiculous and pompous lifestyle. Before that, she took her company public at $20 a share........and it is now selling at a 90% loss of $2 a share 9 years later......and it is STILL overpriced!! How's this for long term value?
2) Jeff Skilling thought he could pull a fast one, so he "raped" California power users by fixing prices in the energy markets in California. Of course he "had to" because the business he was trying to promote........."trading of almost any commodity" was a sham operation. He "quit" two months before Enron imploded.......having seen the writing on the wall. Nice try Jeff.
3) Bernie Ebbers might have been a good basketball coach.......but he was a horrible accountant. He had his CFO capitalize billions of dollars of items that should have been immediately expensed. This is the typical CEO ploy: If you can't make your numbers..........get your CFO to manufacture them!! Personal foul on Bernie Ebbers.
4) Henry Blodgett........a journalist............actually thought he was an analyst and "played one" on Wall Street until the tech bubble imploded. Then his "calls".........didn't turn out so well. Then he went back to playing a journalist on Yahoo.........and he's not very good at that either. I think Yahoo got what they deserved.
5) CNBC employs a "so-called" economist by the name of Larry Kudlow. Larry was bullish on the market all during the "tech bubble" implosion in 2000 - 2003 (all the way down). Larry went on to prove that wasn't a fluke. He then missed the housing bubble.........and for good measure, missed the current recession call as well........likely causing anyone who was foolish enough to actually listen to him, millions of dollars. Fortunately, he is on national television where he only spews his nonsense to millions of mis-informed listeners.
If that wasn't enough.....CNBC is apparently trying to fill out a "trifecta" of "financial idiots". They also employ Dennis Neil. Dennis.........on air........stated that people don't REALLY have a loss, until they sell their stock. Really Dennis? Anyone who bought Dryships at $120......and are still holding.......will be VERY relieved to hear that:) Or.....anyone who bought GE at $30.....are likely THRILLED that they really don't have a $21 loss as of today.
I just can't wait till they hire a third stooge to join the first two. Fortunately for them, they actually have a few people that are sharp AND value added such as David Faber, Rick Santelli, and Diana Olick.
6) Abby Joseph Cohen is pumping the market ON AIR in late October of 2007.......as Goldman Sachs is shorting the hell out of the bank stocks which they know are bloated cows waiting for slaughter (good call by Jan Hatzius.........but I'm sure he and Abby NEVER talked;). You know......Chinese Wall and all..........right.
So......gee......I just can't understand why someone wouldn't trust Wall Street...:) They all seem like such believable people.
More Good News: Pension Underfunding
This really is an ugly monster of a downturn we are in, both on Main Street........and Wall Street. It is an "animal" that is continually feeding on itself from various directions.
Housing declined........so spending started to drop and weaken the economy. Because the economy drops......employment drops. Because employment drops.........housing drops further because of more foreclosures. Because the market drops..........so do the pension funds, and thus, pension expense goes UP as pensions become underfunded. Because those things are happening........people put their money in either gold or cash. Because they pull their money out of the market to go into cash or gold, the market goes down further.
And round.........and round.........she goes. Feeding on itself with each successive lap it takes.
Here's an article from Morningstar on the underfunding in many of the pension funds.
Housing declined........so spending started to drop and weaken the economy. Because the economy drops......employment drops. Because employment drops.........housing drops further because of more foreclosures. Because the market drops..........so do the pension funds, and thus, pension expense goes UP as pensions become underfunded. Because those things are happening........people put their money in either gold or cash. Because they pull their money out of the market to go into cash or gold, the market goes down further.
And round.........and round.........she goes. Feeding on itself with each successive lap it takes.
Here's an article from Morningstar on the underfunding in many of the pension funds.
Couple Things To Note....
1) First, Eric Chevrette......who I highlighted in a blog over the weekend......came out with a "target" in an article this morning on the "Market Oracle." His "target" is 613 on the S&P for this leg down (you can link to Eric on the right side of my blog under "Market Oracle". If someone were to put a gun to my head RIGHT NOW...I would have given a target of 650. Eric probably only has about 10 times the experience that I do.......so I listen to people like Eric (and Carl & Ian & others). It's amazing what a little experience can do.
My point is this: If we DO get down to the low 6XX's on this leg down. There will be a LOT of body bags needed. And with that kind of volatility that it will bring......there will be some more nice short gains.....AND.....a likely good bounce WHEN we get down there.
2) I expect continued weakness in the BIG CAPS. I see that GE is in a race to the bottom......and I expect that MSFT, GOOG, AMZN, and other big cap techs to remain WEAK in this leg down.
Happy hunting.......
My point is this: If we DO get down to the low 6XX's on this leg down. There will be a LOT of body bags needed. And with that kind of volatility that it will bring......there will be some more nice short gains.....AND.....a likely good bounce WHEN we get down there.
2) I expect continued weakness in the BIG CAPS. I see that GE is in a race to the bottom......and I expect that MSFT, GOOG, AMZN, and other big cap techs to remain WEAK in this leg down.
Happy hunting.......
Sunday, February 22, 2009
Two Important Housing Items....
I reference two important housing articles. One, based on the work of Robert Shiller of Yale and Carmen Reinhart of the University Of Maryland.......and the other that is an article in The Atlantic by Christopher Leinburger from March of 2008, that is based on a 2006 study done at Virginia Tech looking "carefully at trends in American demographics, construction, house prices, and consumer preferences."
I encourage you to read BOTH articles, as their implications will be played out over YEARS....or decades.
First, the long term trend of housing is rather bleak for the next 10 years overall. This shouldn't be a surprise given the humongous rise since the mid 1990's. If you look at the article by Ira Artman, you can see that the downside is still CONSIDERABLE. This should NOT come as a surprise.
Secondly, the article in the Atlantic shows that the housing market in the SUBURBS is especially vulnerable. Here's a brief snippet from that article:
"Perhaps most important, the shift to walkable urban environments will give more people what they seem to want. I doubt the swing toward urban living will ever proceed as far as the swing toward the suburbs did in the 20th century; many people will still prefer the bigger houses and car-based lifestyles of conventional suburbs. But there will almost certainly be more of a balance between walkable and drivable communities—allowing people in most areas a wider variety of choices."
Everyone wants a reversal of the housing price downturn. That reversal is a long ways off I'm afraid. Shiller's work has shown that over the very long term, housing shows an almost negligable rise in "real price" (inflation adjusted).
I encourage you to read BOTH articles, as their implications will be played out over YEARS....or decades.
First, the long term trend of housing is rather bleak for the next 10 years overall. This shouldn't be a surprise given the humongous rise since the mid 1990's. If you look at the article by Ira Artman, you can see that the downside is still CONSIDERABLE. This should NOT come as a surprise.
Secondly, the article in the Atlantic shows that the housing market in the SUBURBS is especially vulnerable. Here's a brief snippet from that article:
"Perhaps most important, the shift to walkable urban environments will give more people what they seem to want. I doubt the swing toward urban living will ever proceed as far as the swing toward the suburbs did in the 20th century; many people will still prefer the bigger houses and car-based lifestyles of conventional suburbs. But there will almost certainly be more of a balance between walkable and drivable communities—allowing people in most areas a wider variety of choices."
Everyone wants a reversal of the housing price downturn. That reversal is a long ways off I'm afraid. Shiller's work has shown that over the very long term, housing shows an almost negligable rise in "real price" (inflation adjusted).
Roubini, Mishkin & Zandi.....
No.....it's NOT a law firm:) Here's a good clip from late this past week. Roubini of course has been way ahead of the pack for quite some time. But Mishkin and Zandi are finally catching up to reality.
Excellent Read.....
I've mentioned this book before....and I'm mentioning it again. If you want an "easy read".....and one that will improve YOUR communication skills in both your personal AND professional life, I encourage you to buy and read "The 7 Powers Of Questions". It's in paperback form, and very inexpensive. An excellent investment in your life.
We have to ask others the "right questions"......at the "right time", and we also need to ask ourselves the appropriate questions during our lives. This is........by far.......the book that is at the very top of my "must read" list. If you want to improve your life.......no matter how good your life is now.........read this book.
We have to ask others the "right questions"......at the "right time", and we also need to ask ourselves the appropriate questions during our lives. This is........by far.......the book that is at the very top of my "must read" list. If you want to improve your life.......no matter how good your life is now.........read this book.
Saturday, February 21, 2009
Battoning Down The Hatches....
Since I'm not a rocket scientist, I like to keep things simple. I've discussed many of these things before, but here I'm just going to lay out in brief snippets what I see ahead of us over the coming year. This isn't meant to be negative, just what I see. Because THAT is how you need to invest.......with unbiased eyes.
1) Housing: No surprise here. Gravity continues to grip the housing market. Some of the policy's to slow down foreclosures will likely help to a small degree.......but gravity still has a firm grip on the housing market for at least the next year.......and likely longer than that. The "experts" I follow, expect housing to decline about 15% - 20% THIS YEAR. Yes.....that is going to continue to put pressure on the banks.
2) Employment: This is just part of the "spiral mix" that now engulfs WORLD economies. As our over indulgence of the last 25 years unwinds.....and people discover the "S" word (savings).....businesses will fail putting further downward pressure on most asset classes.
One of the things affecting employment, is the "hangover" from the tech bubble. We also have a hangover from the "credit bubble". Too many companies were started in the tech hay day and the credit hay day. They were able to receive a LOT of cash in the public markets, and many of them just continue to survive on that cash hoard. But many of them will be running out of cash, because there is no need for their company. Going back to my "barbecue" example of several weeks ago........we don't have the need for 80 types of BBQ sauce, and the same can be said for 80 chip companies.........80 women's apparel stores........etc. The pullback from the "days of overindulgence" will be a painful process........and one that is likely to take years.
3) Investor Sentiment: Sentiment will likely stay in the toilet for quite some time. I expect that INVESTOR SENTIMENT will vacillate between "horrible" and "not so horrible". If you look back at the early 1980's, in terms of the Investors Sentiment Survey......this means that the "bull-to-bear ratio" will fluctuate between .3x - 1.5 bulls for every bear. At "intermediate term bottoms"......we'll be in the .3x - .5x range; at intermediate "tops", we'll be in the 1.2x - 1.5x bull-to-bear range.
4) Equity Markets: The equity markets are going to have to find a "comfort level" with a lower level of earnings. On Friday, Lowe's guided significantly lower........and most companies, in general, continue to drop their earnings outlook. I heard for the first time a "pundit" on tv (other than long term bears) mention S&P in the 6xx range. At least they are moving in the right direction.
1) Housing: No surprise here. Gravity continues to grip the housing market. Some of the policy's to slow down foreclosures will likely help to a small degree.......but gravity still has a firm grip on the housing market for at least the next year.......and likely longer than that. The "experts" I follow, expect housing to decline about 15% - 20% THIS YEAR. Yes.....that is going to continue to put pressure on the banks.
2) Employment: This is just part of the "spiral mix" that now engulfs WORLD economies. As our over indulgence of the last 25 years unwinds.....and people discover the "S" word (savings).....businesses will fail putting further downward pressure on most asset classes.
One of the things affecting employment, is the "hangover" from the tech bubble. We also have a hangover from the "credit bubble". Too many companies were started in the tech hay day and the credit hay day. They were able to receive a LOT of cash in the public markets, and many of them just continue to survive on that cash hoard. But many of them will be running out of cash, because there is no need for their company. Going back to my "barbecue" example of several weeks ago........we don't have the need for 80 types of BBQ sauce, and the same can be said for 80 chip companies.........80 women's apparel stores........etc. The pullback from the "days of overindulgence" will be a painful process........and one that is likely to take years.
3) Investor Sentiment: Sentiment will likely stay in the toilet for quite some time. I expect that INVESTOR SENTIMENT will vacillate between "horrible" and "not so horrible". If you look back at the early 1980's, in terms of the Investors Sentiment Survey......this means that the "bull-to-bear ratio" will fluctuate between .3x - 1.5 bulls for every bear. At "intermediate term bottoms"......we'll be in the .3x - .5x range; at intermediate "tops", we'll be in the 1.2x - 1.5x bull-to-bear range.
4) Equity Markets: The equity markets are going to have to find a "comfort level" with a lower level of earnings. On Friday, Lowe's guided significantly lower........and most companies, in general, continue to drop their earnings outlook. I heard for the first time a "pundit" on tv (other than long term bears) mention S&P in the 6xx range. At least they are moving in the right direction.
Credit Crisis Video....
This is a GREAT 10 minute video laying out a big part of the home mortgage crisis. Simple, straightforward, easy to understand.
You might want to pass this video on to some of your friends if they want to understand more about the mortgage crisis.
You might want to pass this video on to some of your friends if they want to understand more about the mortgage crisis.
Friday, February 20, 2009
Possible Reversal Day....
The Banking Index made a very nice BULLISH hammer today. Also....it traded RIGHT DOWN to its lower support in a BULLISH WEDGE.
As goes the banking sector........so goes the market.
Also....other stocks have touched their support in bullish fashion. So watch yourself on the bearish side for the short term.
As goes the banking sector........so goes the market.
Also....other stocks have touched their support in bullish fashion. So watch yourself on the bearish side for the short term.
Take A Look At The VIX.....Not Good
Take a look at the VIX. NOT GOOD. It has BARELY been creeping out of its bullish wedge over the last few days. In fact.....the VIX is LOWER than it was in January.
It still looks to me like people are STILL WAY too complacent. And that is likely being born out in the Investor Sentiment Survey numbers. Not enough bears.
You have to remember that there are a LOT of "day traders" in the market.........and most of them are with hedge funds or investment banks. They will take a "quick scalp" in a heartbeat.
It still looks to me like people are STILL WAY too complacent. And that is likely being born out in the Investor Sentiment Survey numbers. Not enough bears.
You have to remember that there are a LOT of "day traders" in the market.........and most of them are with hedge funds or investment banks. They will take a "quick scalp" in a heartbeat.
What The Market Is Telling Us....
There is an article I read a couple weeks ago, and I'll have to hunt it down. But the thrust of it is this:
The market doesn't "tell us" squat about ANYTHING other than when buyers outnumber sellers.......or sellers outnumber buyers.
The people who "think" that........"the market is telling us it doesn't like something".......or "the market is telling us it DOES like something".........must be smoking the "good stuff."
What was the market "telling us" when the market moved into and pushed up ethanol companies? Was it "telling us" that ethanol has a bright future? Uhhhhhhhhhh..........NO. It was telling us there were more buyers then sellers.........and price was pushed up. If you didn't get off of that escalator........you now have a worthless stock on your hands.
Over the coming months..........and perhaps years.........the market is trying to come to grips with earnings that continue to collapse. As earnings drop, and sentiment for a stock drops.........the market drops. So for all the pundits that think the market is trying to tell us something.........I cry "bunk".
There are two movers of the markets: (1) net money moving INTO....or OUT OF....the market, and (2) the direction of INVESTOR sentiment. PERIOD.
The market doesn't "tell us" squat about ANYTHING other than when buyers outnumber sellers.......or sellers outnumber buyers.
The people who "think" that........"the market is telling us it doesn't like something".......or "the market is telling us it DOES like something".........must be smoking the "good stuff."
What was the market "telling us" when the market moved into and pushed up ethanol companies? Was it "telling us" that ethanol has a bright future? Uhhhhhhhhhh..........NO. It was telling us there were more buyers then sellers.........and price was pushed up. If you didn't get off of that escalator........you now have a worthless stock on your hands.
Over the coming months..........and perhaps years.........the market is trying to come to grips with earnings that continue to collapse. As earnings drop, and sentiment for a stock drops.........the market drops. So for all the pundits that think the market is trying to tell us something.........I cry "bunk".
There are two movers of the markets: (1) net money moving INTO....or OUT OF....the market, and (2) the direction of INVESTOR sentiment. PERIOD.
An Important Item To Keep In Mind....
One important item to keep in mind over the coming months or years........is that you should NOT focus on "consumer sentiment" numbers. As an INVESTOR.......these are pretty USELESS numbers.
If you looked back at the recession in the early 1990's........consumer sentiment didn't BOTTOM until almost a YEAR AFTER THE STOCK MARKET BOTTOMED.
What YOU (as an investor) need to watch closely........are the INVESTOR SENTIMENT NUMBERS. THOSE......are the numbers that move money into......or out of......the equity markets.
So for investment purposes........don't bother looking at the consumer sentiment numbers. They are misleading from an investment point of view.
If you looked back at the recession in the early 1990's........consumer sentiment didn't BOTTOM until almost a YEAR AFTER THE STOCK MARKET BOTTOMED.
What YOU (as an investor) need to watch closely........are the INVESTOR SENTIMENT NUMBERS. THOSE......are the numbers that move money into......or out of......the equity markets.
So for investment purposes........don't bother looking at the consumer sentiment numbers. They are misleading from an investment point of view.
A Few IMPORTANT Notes.....
1) Market "crashes"......like the one we had in October and November of this past year.......happen in very OVERSOLD markets, like we have now. So things can "waterfall" pretty quickly.....
2) I have not read ANYONE ELSE other than Carl Swenlin that even BREATHES the possibility of some really "low numbers" eventually in the major averages......and I was talking about 490 in the S&P even before it was on Carl's radar. I only say this because of this: Most people are "jumping in" even though sentiment is not YET at REALLY BEARISH levels. THAT.....is dangerous, because there are NOT enough buyers to bail them out (because they are already in the market). THAT.....is why you have crashes.
3) I have a 6xx target on the S&P in the INTERMEDIATE TERM. PLEASE BE AWARE.......it is just THAT......an INTERMEDIATE TERM TARGET. Even though most people DON'T like to think about it in this manner........"investing" is a LOT like gambling: (a) You have to put your money AT RISK in order to make money, (b) You should put more money at risk when sentiment levels are REALLY AWFUL (this is the same view as "card counting" in black jack: If the "count" is heavily in your favor.....you bet more......if the count is NOT in your favor......you don't bet, or you bet very little). This is why I watch sentiment (especially the bull/bear count) so closely. I want to know that there are a LOT of bears that can SWITCH to bulls when I go long the market, and I want to know that sentiment is getting WORSE when I am short the market.
4) Bull vs Bear sentiment as of LAST FRIDAY was .73 bulls to bears. Keep in mind that we won't have the survey that will be done today.......until next Wednesday. There is always a 5 day lag. I "believe" that sentiment will likely head back into the .4x area.....but may even get as bearish as the .3x level. This is based on my look back at the same levels that were attained SEVERAL TIMES during the recession in the early 1980's. Keep in mind that the sentiment levels we are likely to experience may not be experienced again in our lifetimes. So these readings will be looked at as "off the charts."
5) Bad bear markets don't tend to end when the BULLS give up.......they tend to end when the BEARS give up. What I mean by THAT........is this: People like Doug Kass and other prominent "bears" are calling for the bottom now. When THEY give up, because the market pushes much lower than they are calling for........is when the bear market will give up.
6) We are at S&P 780 right now. My LONG TERM TARGET is 390.......so we're HALF WAY to my target. Now think about this: My target ASSUMES a "historically expensive market of 20 times GAAP earnings." If we get down to 10 times earnings on the S&P.......which is HISTORICALLY what the market has done every 20 - 25 years.........that IMPLIES an S&P of 159. I know.......it sounds ABSOLUTELY ABSURD doesn't it? Just remember......NOBODY........NOBODY would have predicted..........and nobody certainly would have RATIONALIZED the NASDAQ at 5,000 in 1998. It could be a LONG ROAD ahead of us.....
7) We will eventually have a TREMENDOUS INTERMEDIATE TERM RALLY (or 2 or 3....).
8) Nobody........NOBODY......"knows" where the market will stop. All we can do is use the tools available to us. It is probably much like the weather men before they had satellites: They used all the tools available, and the more tools that "pointed" in a certain direction, the more LIKELY they would be correct.
9) I invest based on the INTERMEDIATE TERM cycle. My target (educated guess) as to the LONG TERM TARGET is just that: An educated "guess" at where the market COULD be in the future. But I NEVER invest based on my long term target............I only invest based on the intermediate term direction of the market. I don't believe that ANYONE knows where the market will be in 6 months or 12 months......and that CERTAINLY includes me. SO KEEP YOUR FOCUS ON THE INTERMEDIATE TERM. EVENTUALLY.......one of the intemediate term bottoms WILL turn out to be a LONG TERM bottom.
2) I have not read ANYONE ELSE other than Carl Swenlin that even BREATHES the possibility of some really "low numbers" eventually in the major averages......and I was talking about 490 in the S&P even before it was on Carl's radar. I only say this because of this: Most people are "jumping in" even though sentiment is not YET at REALLY BEARISH levels. THAT.....is dangerous, because there are NOT enough buyers to bail them out (because they are already in the market). THAT.....is why you have crashes.
3) I have a 6xx target on the S&P in the INTERMEDIATE TERM. PLEASE BE AWARE.......it is just THAT......an INTERMEDIATE TERM TARGET. Even though most people DON'T like to think about it in this manner........"investing" is a LOT like gambling: (a) You have to put your money AT RISK in order to make money, (b) You should put more money at risk when sentiment levels are REALLY AWFUL (this is the same view as "card counting" in black jack: If the "count" is heavily in your favor.....you bet more......if the count is NOT in your favor......you don't bet, or you bet very little). This is why I watch sentiment (especially the bull/bear count) so closely. I want to know that there are a LOT of bears that can SWITCH to bulls when I go long the market, and I want to know that sentiment is getting WORSE when I am short the market.
4) Bull vs Bear sentiment as of LAST FRIDAY was .73 bulls to bears. Keep in mind that we won't have the survey that will be done today.......until next Wednesday. There is always a 5 day lag. I "believe" that sentiment will likely head back into the .4x area.....but may even get as bearish as the .3x level. This is based on my look back at the same levels that were attained SEVERAL TIMES during the recession in the early 1980's. Keep in mind that the sentiment levels we are likely to experience may not be experienced again in our lifetimes. So these readings will be looked at as "off the charts."
5) Bad bear markets don't tend to end when the BULLS give up.......they tend to end when the BEARS give up. What I mean by THAT........is this: People like Doug Kass and other prominent "bears" are calling for the bottom now. When THEY give up, because the market pushes much lower than they are calling for........is when the bear market will give up.
6) We are at S&P 780 right now. My LONG TERM TARGET is 390.......so we're HALF WAY to my target. Now think about this: My target ASSUMES a "historically expensive market of 20 times GAAP earnings." If we get down to 10 times earnings on the S&P.......which is HISTORICALLY what the market has done every 20 - 25 years.........that IMPLIES an S&P of 159. I know.......it sounds ABSOLUTELY ABSURD doesn't it? Just remember......NOBODY........NOBODY would have predicted..........and nobody certainly would have RATIONALIZED the NASDAQ at 5,000 in 1998. It could be a LONG ROAD ahead of us.....
7) We will eventually have a TREMENDOUS INTERMEDIATE TERM RALLY (or 2 or 3....).
8) Nobody........NOBODY......"knows" where the market will stop. All we can do is use the tools available to us. It is probably much like the weather men before they had satellites: They used all the tools available, and the more tools that "pointed" in a certain direction, the more LIKELY they would be correct.
9) I invest based on the INTERMEDIATE TERM cycle. My target (educated guess) as to the LONG TERM TARGET is just that: An educated "guess" at where the market COULD be in the future. But I NEVER invest based on my long term target............I only invest based on the intermediate term direction of the market. I don't believe that ANYONE knows where the market will be in 6 months or 12 months......and that CERTAINLY includes me. SO KEEP YOUR FOCUS ON THE INTERMEDIATE TERM. EVENTUALLY.......one of the intemediate term bottoms WILL turn out to be a LONG TERM bottom.
Thursday, February 19, 2009
Good News........
I knew I would get your attention with that:) The good news is that I have someone you should add to your "financial tool belt".
I know that I probably bitch too much about nincompoops like Kudlow, Cramer, Laffer, Dennis Neil, etc...etc....etc. So its really nice to be able to say good things about the 20% that really know their stuff.
I've been fortunate enough to come across people like Carl Swenlin, Ian Woodward, and Eric Chevrette in my stock market journey. I've mentioned Carl and Ian several times.....but I haven't mentioned Eric until now. He writes for "MarketOracle.com" from time-to-time......and he is usually spot on. Here's a recent article from earlier this month. I'll go ahead and add the "MarketOracle" to the toolbelt list on my blog......and link it to this article so you won't forget Eric's name.........and take a look at some of his work at marketoracle.co.uk.
And while I am at it, I should also mention that I added Rebecca Wilder of Newsneconomics.com to my toolbelt list. She writes a very good daily economics blog that contains some great information in a "quickhitting" format.
I know that I probably bitch too much about nincompoops like Kudlow, Cramer, Laffer, Dennis Neil, etc...etc....etc. So its really nice to be able to say good things about the 20% that really know their stuff.
I've been fortunate enough to come across people like Carl Swenlin, Ian Woodward, and Eric Chevrette in my stock market journey. I've mentioned Carl and Ian several times.....but I haven't mentioned Eric until now. He writes for "MarketOracle.com" from time-to-time......and he is usually spot on. Here's a recent article from earlier this month. I'll go ahead and add the "MarketOracle" to the toolbelt list on my blog......and link it to this article so you won't forget Eric's name.........and take a look at some of his work at marketoracle.co.uk.
And while I am at it, I should also mention that I added Rebecca Wilder of Newsneconomics.com to my toolbelt list. She writes a very good daily economics blog that contains some great information in a "quickhitting" format.
Note On Oil & Gold/Silver
It was noted on CNBC by one of its guests YESTERDAY, that oil and gold had "decoupled" since the late November 2008 intermediate bottom in the market.
Today.....we see at least a HINT of that decoupling coming undone. Oil and oil stocks are UP.......and precious metals are DOWN.
It's something to keep an eye on over coming days and weeks. Today.....USO is trying to pull a "reversal" to the upside. In a half-way descent market.......I would be absolutely thrilled and jumping in with both feet. Take a look at a 10 minute chart of USO and you'll see that it has been trying to break through.......and STAY ABOVE the $24 resistance. Long term.....I like oil.... I think I pointed out a few days ago that I referenced a chart of oil and showed how it "looked" like it was trying to find a bottom via how its RSI was behaving.
Take a look at the USO and other oil stocks over coming days. IF (BIG IF) the equity markets can find a SHORT TERM BOTTOM for a bounce.....USO looks good. If the market goes to "you know where"..........then the oils would likely suffer as well.
Something to look at........
Today.....we see at least a HINT of that decoupling coming undone. Oil and oil stocks are UP.......and precious metals are DOWN.
It's something to keep an eye on over coming days and weeks. Today.....USO is trying to pull a "reversal" to the upside. In a half-way descent market.......I would be absolutely thrilled and jumping in with both feet. Take a look at a 10 minute chart of USO and you'll see that it has been trying to break through.......and STAY ABOVE the $24 resistance. Long term.....I like oil.... I think I pointed out a few days ago that I referenced a chart of oil and showed how it "looked" like it was trying to find a bottom via how its RSI was behaving.
Take a look at the USO and other oil stocks over coming days. IF (BIG IF) the equity markets can find a SHORT TERM BOTTOM for a bounce.....USO looks good. If the market goes to "you know where"..........then the oils would likely suffer as well.
Something to look at........
Watch The US Dollar.....
Watch the dollar closely over coming days. It is at resistance right now......if it drops (as it is doing this am).......then that could trigger a short term rally in the equity markets AND in oil/gas.
Here's the daily US dollar chart.
Here's the daily US dollar chart.
This Bird Is In Trouble......
My "carnary in the coal mine" looks to be in DEEP TROUBLE. THIS.....is not a good chart. Even a snake oil salesman like Benioff can't hold this birds altitude much longer.
24.13% Of ALL Mortgages Are In Trouble...
24.13% of ALL MORTGAGES are either late....REO....or in foreclosure as of January 31st(Bloomberg). THAT....is staggering.
With unemployment rising, these numbers will grow worse, unfortunately. Gravity bites......and I'm afraid that mother natures pull on these numbers over the coming months and years will be too much for the government to fight.
With unemployment rising, these numbers will grow worse, unfortunately. Gravity bites......and I'm afraid that mother natures pull on these numbers over the coming months and years will be too much for the government to fight.
Tuesday, February 17, 2009
Here's A Good Picture Of The Credit Bubble...
Here's a long term chart of American Express. This is about as good a picture of the credit bubble as you will get.
Take a peek at the early 1980's when the bubble started. THAT....was the low for American Express. You can see that the bubble really got traction in 1995 and rocketed with the rest of the market. Then......it TRIED TO END in 2000........but Greenspan pumped it up again. And then.....the final bursting of the bubble that is STILL IN PROCESS.
Take a peek at the early 1980's when the bubble started. THAT....was the low for American Express. You can see that the bubble really got traction in 1995 and rocketed with the rest of the market. Then......it TRIED TO END in 2000........but Greenspan pumped it up again. And then.....the final bursting of the bubble that is STILL IN PROCESS.
Monday, February 16, 2009
New S&P Target......&...... Reinforce Prior Posting
First, I am moving my "LONG TERM target" for the S&P 500 down to 360........from <500 (where I have had it for about a year). If you look on this long term chart of the S&P, you'll see where my PRIOR target was (490 - 500), and my new target (equal to or less than 360) is. My SHORT TERM & INTERMEDIATE TERM target of S&P 6xx remains unchanged right now. I am still looking for that shorter term target to receive a "bounce".....but I will be watching how sentiment plays out over the coming weeks.
In addition, I want to repeat and reinforce my blog of two days ago concerning the "trailing twelve month" earnings (TMT earnings). The estimates for TMT earnings are $15.90 looking out to the second quarter (Q2) of this year (in 5 months). A PE of 20 gets me to 380 on the S&P. My long term "target" is for slightly less than that.......=<360 (equal to or less than 360). There will likely be a MONSTER RALLY before we arrive at that point........and that could be a year or more in the future. After we get to an intermediate term low this spring..........we'll have to watch the markets closely.
In addition, I want to repeat and reinforce my blog of two days ago concerning the "trailing twelve month" earnings (TMT earnings). The estimates for TMT earnings are $15.90 looking out to the second quarter (Q2) of this year (in 5 months). A PE of 20 gets me to 380 on the S&P. My long term "target" is for slightly less than that.......=<360 (equal to or less than 360). There will likely be a MONSTER RALLY before we arrive at that point........and that could be a year or more in the future. After we get to an intermediate term low this spring..........we'll have to watch the markets closely.
Sunday, February 15, 2009
Sentiment......Banks....& Major Indexes.....
I. Sentiment: The Investors Setiment Survey is at .83 bulls to 1.0 bears. Likely to get down to .4ish to 1.0 or even slightly lower before the market finds its next intermediate term bottom. Also, the Rydex Cash Flow Ratio is at .82 so this is still way too bullish (which is BEARISH because this is a contra indicator).
II. Banking Index: Looks like the banking index is breaking down from a "bearish pennant/flag" (using daily candlesticks).
III. S&P is hanging on to its bottom trend line in a "triangle". Dow Jones is much weaker than S&P and NASDAQ.........I read that as BEARISH, as the DOW is usually the leader in direction on both the downside AND the upside. S&P trying to hang on to its triangle. The NASDAQ 100 looks particulary vulnerable here.
Likely going to be a rough ride over the next 3 - 5 weeks.
II. Banking Index: Looks like the banking index is breaking down from a "bearish pennant/flag" (using daily candlesticks).
III. S&P is hanging on to its bottom trend line in a "triangle". Dow Jones is much weaker than S&P and NASDAQ.........I read that as BEARISH, as the DOW is usually the leader in direction on both the downside AND the upside. S&P trying to hang on to its triangle. The NASDAQ 100 looks particulary vulnerable here.
Likely going to be a rough ride over the next 3 - 5 weeks.
Saturday, February 14, 2009
Good News........Bad News......
Here's the good news: It looks like we're moving towards trough earnings. Notice I say towards.....because NOBODY knows how much lower the earnings will go.
Here's the bad news: Twelve month trailing (TMT) earnings are dropping off a cliff, and what some people say is a "cheap market"......is quickly becoming VERY EXPENSIVE from a historical point of view.
Standard and Poor's twelve month trailing (TMT) GAAP earnings are as follows:
Q3 2008................Q4 2008 Est.......Q1 2009 Est......Q2 2009
=================================================
$45.95..................$27.69..............$20.51.............$15.90
The current estimated quarterly earnings for Q4 2008 S&P 500 is ($10.44). The S&P has never in history reported negative earnings for a quarter. THIS.....will be a first.
Peak GAAP twelve month trailing (TMT) earnings as of Q3 2007 were $84.92 for the S&P 500. The Q2 2009 estimated TMT earnings are $15.90. THAT.....is a drop of over 80%. Yikkkkeeeeesss!!!!
So....let's take a look at what HISTORY has shown us over the last 85 years:
A) Stocks have been "overpriced" (ready for a significant correction) when the PE on GAAP earnings is near 20 or higher.
B) Stocks have "averaged" a PE of 15 on GAAP earnings.
C) Stocks have been "under priced" when the PE on GAAP earnings is 10 or lower (it has gotten as low as 6 or so as a low).
First, perhaps you should sit down. Then.....hold your jaw, because it will likely drop to the floor after looking at the following numbers. Let's take a look at "historical pricing" taking the estimated Q2 2009 trailing twelve month (TTM) GAAP earnings of $15.90:
PE of 20 (overpriced): $15.90 X 20 PE = S&P of 380
PE of 15 (hist average): $15.90 X 15 PE = S&P of 285
PE of 10 (underpriced): $15.90 X 10 PE = S&P of 159
Historically speaking......the market is EXTREMELY EXPENSIVE. If you "assume" that we will have a historically AVERAGE PE of 15........then the S&P could get down to 285. If we are able to keep an "expensive market" in tact somehow.........then the S&P should be 380. And if you really want to get depressed........then take a look at where the S&P could eventually get to if the market gets down to a PE of 10 (which it has done on 4 or 5 occasions over the past 85 years: S&P of 159. Remember NASDAQ 5,000? NEVER........say NEVER.
This does NOT mean that the market "has to get down to these levels." What this says.....is that the market HISTORICALLY has gotten down to these levels.
Also, note that this uses GAAP earnings, NOT "operating earnings"........or EBITA earnings. EBITDA is used by many analysts (and CEO's) who live in some fantasy world. They should be ignored.
NOTE: The above information was pulled from a 2/13/09 note from Carl Swenlin of Decsionpoint.com to his subscribers.
Here's the bad news: Twelve month trailing (TMT) earnings are dropping off a cliff, and what some people say is a "cheap market"......is quickly becoming VERY EXPENSIVE from a historical point of view.
Standard and Poor's twelve month trailing (TMT) GAAP earnings are as follows:
Q3 2008................Q4 2008 Est.......Q1 2009 Est......Q2 2009
=================================================
$45.95..................$27.69..............$20.51.............$15.90
The current estimated quarterly earnings for Q4 2008 S&P 500 is ($10.44). The S&P has never in history reported negative earnings for a quarter. THIS.....will be a first.
Peak GAAP twelve month trailing (TMT) earnings as of Q3 2007 were $84.92 for the S&P 500. The Q2 2009 estimated TMT earnings are $15.90. THAT.....is a drop of over 80%. Yikkkkeeeeesss!!!!
So....let's take a look at what HISTORY has shown us over the last 85 years:
A) Stocks have been "overpriced" (ready for a significant correction) when the PE on GAAP earnings is near 20 or higher.
B) Stocks have "averaged" a PE of 15 on GAAP earnings.
C) Stocks have been "under priced" when the PE on GAAP earnings is 10 or lower (it has gotten as low as 6 or so as a low).
First, perhaps you should sit down. Then.....hold your jaw, because it will likely drop to the floor after looking at the following numbers. Let's take a look at "historical pricing" taking the estimated Q2 2009 trailing twelve month (TTM) GAAP earnings of $15.90:
PE of 20 (overpriced): $15.90 X 20 PE = S&P of 380
PE of 15 (hist average): $15.90 X 15 PE = S&P of 285
PE of 10 (underpriced): $15.90 X 10 PE = S&P of 159
Historically speaking......the market is EXTREMELY EXPENSIVE. If you "assume" that we will have a historically AVERAGE PE of 15........then the S&P could get down to 285. If we are able to keep an "expensive market" in tact somehow.........then the S&P should be 380. And if you really want to get depressed........then take a look at where the S&P could eventually get to if the market gets down to a PE of 10 (which it has done on 4 or 5 occasions over the past 85 years: S&P of 159. Remember NASDAQ 5,000? NEVER........say NEVER.
This does NOT mean that the market "has to get down to these levels." What this says.....is that the market HISTORICALLY has gotten down to these levels.
Also, note that this uses GAAP earnings, NOT "operating earnings"........or EBITA earnings. EBITDA is used by many analysts (and CEO's) who live in some fantasy world. They should be ignored.
NOTE: The above information was pulled from a 2/13/09 note from Carl Swenlin of Decsionpoint.com to his subscribers.
GM: The Inevitable......
Well, you KNEW it had to happen sooner or later. Here's an article regarding the possibility (I would say PROBABILITY) of a GM bankruptcy. Chrysler will likely follow in short order, or merge its viable brands (actually.......that would be singular.....BRAND.....ie Jeep) with another automaker.
Citigroup will be "on deck" over the coming year. But that one will take a while. They are STILL in denial about the housing crisis, and its impact on their balance sheet. Housing prices are expected to continue downwards into 2010 at least. That will wipe out Citi's common shareholders.
Citigroup will be "on deck" over the coming year. But that one will take a while. They are STILL in denial about the housing crisis, and its impact on their balance sheet. Housing prices are expected to continue downwards into 2010 at least. That will wipe out Citi's common shareholders.
No Punishment Sufficient For Madoff......
There is truly no punishment that is sufficient for Bernie Madoff. As you can see from this article, another person has committed suicide after discovering that their life savings went up in smoke with the Madoff scheme.
One of the problems I have with our "justice system" is the LIGHT penalties given to the perpetrators of white collar crime in our country. Our legal system seems to think that stealing $500 with a gun at a convenience store is a much more egregious crime than stealing millions or billions of dollars from hundreds or thousands of investors.
Look at the time that Andy Fastow will do for his participation in the Enron scandal. He will do 6 years in prison. Several other executives are serving between 18 months and 5 years.
Jeff Skilling is the only one who will do any "consequential" time in prison. He will do 26 years, assuming that his sentence is NOT overturned (Skilling is appealing the sentence). He should be in prison for life, and Fastow should do 15 - 20 years.
How many THOUSANDS of people........if not tens of thousands of people.......did these folks affect? Think of all the employees of Enron. Think of all the investors. Now tell me.....which is worse.......robbing a convenience store at gunpoint for $500........or stealing millions of dollars from thousands of people?
In Madoff's case, there are at least 2 people now that have committed suicide because of the Madoff scam. That blood is definitely on Bernies hands. There is NO SENTENCE that we have in our justice system that is strong enough for Bernie Madoff. Death wouldn't be fair. He needs to rot in prison without any visitation rights for the rest of his disgraceful life.
One of the problems I have with our "justice system" is the LIGHT penalties given to the perpetrators of white collar crime in our country. Our legal system seems to think that stealing $500 with a gun at a convenience store is a much more egregious crime than stealing millions or billions of dollars from hundreds or thousands of investors.
Look at the time that Andy Fastow will do for his participation in the Enron scandal. He will do 6 years in prison. Several other executives are serving between 18 months and 5 years.
Jeff Skilling is the only one who will do any "consequential" time in prison. He will do 26 years, assuming that his sentence is NOT overturned (Skilling is appealing the sentence). He should be in prison for life, and Fastow should do 15 - 20 years.
How many THOUSANDS of people........if not tens of thousands of people.......did these folks affect? Think of all the employees of Enron. Think of all the investors. Now tell me.....which is worse.......robbing a convenience store at gunpoint for $500........or stealing millions of dollars from thousands of people?
In Madoff's case, there are at least 2 people now that have committed suicide because of the Madoff scam. That blood is definitely on Bernies hands. There is NO SENTENCE that we have in our justice system that is strong enough for Bernie Madoff. Death wouldn't be fair. He needs to rot in prison without any visitation rights for the rest of his disgraceful life.
Friday, February 13, 2009
Long Term Charts....
We are at some critical junctures in the SHORT TERM on MANY long term charts. Within DAYS.... If things start to break down today, then next week could turn ugly.
GOLD The only question: Does it go lower BEFORE.....it goes MUCH higher?
US Dollar Here, the only question appears to be......higher before it goes lower? If it pushes higher, then gold will likely head lower (before gold ultimately goes higher).
Transports They look to have "back tested" the break down in the trend line. Transports are VERY OVERSOLD......but in bear markets, oversold can become more oversold.
Banking Index This is only on the daily charts, but this may hold the "key" to how all things play out in the coming HOURS and days. Do note that there is a "bullish hammer" formed yesterday after the big 3:30 rally. This would require a "confirming" candle TODAY for a short term move up.
Here is what I "think" will play out today and/or early next week:
Market: Down
Gold: Down
Dollar: Up
Banks: Down
Commodities: Down
The key area to "hold" on the S&P is 805. Yesterday, the market hit 806 and bounced. Will the bounce "hold"........we'll see over the next day or next few days. The S&P has hit its lower trend line 4 or 5 times over the last month. My belief is that the market will move lower fairly soon.
We will have a REALLY nice rally at some point (maybe 35% - 40%).....but I think it will come from LOWER LEVELS.
We'll see.......
If it moves the "other way"......I'll change directions in a New York second.
GOLD The only question: Does it go lower BEFORE.....it goes MUCH higher?
US Dollar Here, the only question appears to be......higher before it goes lower? If it pushes higher, then gold will likely head lower (before gold ultimately goes higher).
Transports They look to have "back tested" the break down in the trend line. Transports are VERY OVERSOLD......but in bear markets, oversold can become more oversold.
Banking Index This is only on the daily charts, but this may hold the "key" to how all things play out in the coming HOURS and days. Do note that there is a "bullish hammer" formed yesterday after the big 3:30 rally. This would require a "confirming" candle TODAY for a short term move up.
Here is what I "think" will play out today and/or early next week:
Market: Down
Gold: Down
Dollar: Up
Banks: Down
Commodities: Down
The key area to "hold" on the S&P is 805. Yesterday, the market hit 806 and bounced. Will the bounce "hold"........we'll see over the next day or next few days. The S&P has hit its lower trend line 4 or 5 times over the last month. My belief is that the market will move lower fairly soon.
We will have a REALLY nice rally at some point (maybe 35% - 40%).....but I think it will come from LOWER LEVELS.
We'll see.......
If it moves the "other way"......I'll change directions in a New York second.
S&P Trendline Getting Beat Up....
The S&P trend line is getting pretty beat up. What do I think? I think it's getting ready to "give way." The DOW has already broken its trend line in its "triangle" many days ago. The DOW always LEADS.
The Wall Street types want the banks balance sheets to magically mend themselves. The Main Street types want their own balance sheets to magically mend themselves. Neither will happen to any large extent.
The S&P trend line has been "hit" about 4 or 5 times over the past month. It's going to give way. Also watch the banks. As you'll note from the BKX chart, it is in a "bearish pennant". Could it break to the upside? It could.....but the odds favor a break DOWN.......pennants, like triangles, are continuation patterns.......and they usually break in the direction of the market PRIOR to the pennant, and that is down.
As well, this "fits in" with the DIRECTION of sentiment (getting more bearish)........as well as fundamentals.
The Wall Street types want the banks balance sheets to magically mend themselves. The Main Street types want their own balance sheets to magically mend themselves. Neither will happen to any large extent.
The S&P trend line has been "hit" about 4 or 5 times over the past month. It's going to give way. Also watch the banks. As you'll note from the BKX chart, it is in a "bearish pennant". Could it break to the upside? It could.....but the odds favor a break DOWN.......pennants, like triangles, are continuation patterns.......and they usually break in the direction of the market PRIOR to the pennant, and that is down.
As well, this "fits in" with the DIRECTION of sentiment (getting more bearish)........as well as fundamentals.
Thursday, February 12, 2009
Couple Things To Watch For....SHORT TERM...
There are a LOT of ways the market can "work out" in the short term....but here are a couple:
1) We could test or slightly undercut the 805ish - 800ish area tomorrow morning and then get a reversal day to the upside. If we do that......then the market is likely to push up in the short term for a counter-trend rally. Don't forget....a lot of "shorts" will cover their positions near the end of the day on FRIDAY.
2) We could "dink around" and head slightly below 805ish (into the high 7's) on Friday, and then on Monday........GAP LOWER. That could set us up for some continued selling into early-to-mid week of next week. THAT....would certainly be gut wrenching.
Those are just TWO of many, many possibilities in the very short run (days). But intermediate term and long term.....this is one sick puppy (market). And.....it's STILL NOT CHEAP by historical standards.
Just remember......that 50% - 70% of the daily trading is COMPUTERIZED PROGRAM TRADING. So the big boys are going to be pushing this thing hard in BOTH directions.
1) We could test or slightly undercut the 805ish - 800ish area tomorrow morning and then get a reversal day to the upside. If we do that......then the market is likely to push up in the short term for a counter-trend rally. Don't forget....a lot of "shorts" will cover their positions near the end of the day on FRIDAY.
2) We could "dink around" and head slightly below 805ish (into the high 7's) on Friday, and then on Monday........GAP LOWER. That could set us up for some continued selling into early-to-mid week of next week. THAT....would certainly be gut wrenching.
Those are just TWO of many, many possibilities in the very short run (days). But intermediate term and long term.....this is one sick puppy (market). And.....it's STILL NOT CHEAP by historical standards.
Just remember......that 50% - 70% of the daily trading is COMPUTERIZED PROGRAM TRADING. So the big boys are going to be pushing this thing hard in BOTH directions.
Brief ECRI Article...
There are a FEW things that I follow VERY CLOSELY. One thing, is sentiment indicators like the weekly Investors Sentiment Survey that I post on the blog each week. Another thing I follow very closely is ECRI. Keep in mind that the market is going to turn WAY before ECRI's leading indicators tell us the economy is going to turn. But....it can tell us if the economy is getting worse. The folks at ECRI are a sharp group of economists (I know......you didn't know there was such a thing did you?).
Here's the latest press release from ECRI.
Here's the latest press release from ECRI.
ENER....
Here's a daily chart of ENER. It seems to be forming a couple bullish formations. In this market, you DO need to be careful. But rumor has it that solar energy will be a big thing in coming years:)
Why we would want to use CLEAN, RENEWABLE ENERGY.............when we can pollute the planet with carbon fuels is beyond me:) Does Dick Chaney know about this?
Why we would want to use CLEAN, RENEWABLE ENERGY.............when we can pollute the planet with carbon fuels is beyond me:) Does Dick Chaney know about this?
Two Things Of Special Note...
1) The weekly Investors Sentiment Survey was at .83 to 1.0 (bulls to bears) in the latest survey. Please note that this is the survey that was done LAST FRIDAY.....but not released until YESTERDAY (there is always a 5 day "lag"). I expect this survey to get to the range of about .35ish to .45ish "bears" for every 1.0 bull BEFORE we hit our next "intermediate term bottom". And yes, I expect that bottom to have a 6xx handle on the S&P.
2) Also, watch Europe, as they have been "late to the game". They have some catching up to do, and the DAX, FTSE, CAC, etc will likely be VERY WEAK over the coming weeks as we move towards the next INTERMEDIATE TERM BOTTOM.
On the S&P........820ish is first resistance, 805ish is next resistance. If (when) those go....we could get some "technical" selling.
Also......watch the oil chart as well. That support could break down as well in the mid-$30's (and I expect it to).
2) Also, watch Europe, as they have been "late to the game". They have some catching up to do, and the DAX, FTSE, CAC, etc will likely be VERY WEAK over the coming weeks as we move towards the next INTERMEDIATE TERM BOTTOM.
On the S&P........820ish is first resistance, 805ish is next resistance. If (when) those go....we could get some "technical" selling.
Also......watch the oil chart as well. That support could break down as well in the mid-$30's (and I expect it to).
HousingPredictor.com......
Two things:
1) Take a look at housingpredictor.com. This is a great site that I have referenced before, but I finally added to the "resources" list on the right hand side of the home page. You can find predictions for each individual state in the country, as well as significant cities within EACH state. They also have a "25 Best" and "25 Worst" housing markets in the country, as well as many other "tools". I encourage you to take a look at it........it is well worth your time. They have been EARLY on the housing call, and ACCURATE on the housing call.
2) Secondly, I have alphabetized the "resources" part on the right hand side of the home page so you can find things a little more easily (I know......it's about time).
1) Take a look at housingpredictor.com. This is a great site that I have referenced before, but I finally added to the "resources" list on the right hand side of the home page. You can find predictions for each individual state in the country, as well as significant cities within EACH state. They also have a "25 Best" and "25 Worst" housing markets in the country, as well as many other "tools". I encourage you to take a look at it........it is well worth your time. They have been EARLY on the housing call, and ACCURATE on the housing call.
2) Secondly, I have alphabetized the "resources" part on the right hand side of the home page so you can find things a little more easily (I know......it's about time).
Brandsmart.....Buying Find....
We just had a refrigerator that went to refrigerator heaven, and I was shopping around for a replacement. Now......I'm a pretty good shopper, because I NEVER want to pay "full bore" for anything. So....I shopped around for what I THOUGHT was a great price on a fridge at Home Depot. Little did I know about a store called "Brandsmart" that my girlfriend introduced me to.
We ended up getting a MUCH better fridge, for a LOT LESS than I was going to pay for a fridge at Home Depot. Before you buy ANY appliance, home audio, computer, cook ware, etc.......be SURE to find out if you have a "Brandsmart" in your regional area. It is WELL WORTH THE TRIP.
We ended up paying $800 for this stainless steel, 25 sq foot fridge made by Fisher and Paykel (I was astounded). The lowest price on the Internet was about $1,300. And this was NOT a "second". I really didn't want to pay $1,500 - $2,500 for a fridge......so I was tickled pink, thanks to my girlfriends knowledge of Brandsmart. They do publish their weekly advertised items on the internet, but you can't access their "non advertised prices" on the internet.....they make you fill out a form or call them up.
In these difficult times......EVERYBODY is cutting back. But if you need to buy something.....check out Brandsmart.
We ended up getting a MUCH better fridge, for a LOT LESS than I was going to pay for a fridge at Home Depot. Before you buy ANY appliance, home audio, computer, cook ware, etc.......be SURE to find out if you have a "Brandsmart" in your regional area. It is WELL WORTH THE TRIP.
We ended up paying $800 for this stainless steel, 25 sq foot fridge made by Fisher and Paykel (I was astounded). The lowest price on the Internet was about $1,300. And this was NOT a "second". I really didn't want to pay $1,500 - $2,500 for a fridge......so I was tickled pink, thanks to my girlfriends knowledge of Brandsmart. They do publish their weekly advertised items on the internet, but you can't access their "non advertised prices" on the internet.....they make you fill out a form or call them up.
In these difficult times......EVERYBODY is cutting back. But if you need to buy something.....check out Brandsmart.
Dubai Craters......
CNBC had a little segment on Dubai this morning. Apparently Dubai passed a law that you could be fined up to $250,000 if you say "bad things" about the country of Dubai. Dubai is in the middle of.......drum role please.............a REAL ESTATE CRASH. Who would have guessed it?
Here's an article that describes how people are just leaving their cars at the airport with the keys in them.
Here's an article that describes how people are just leaving their cars at the airport with the keys in them.
Wednesday, February 11, 2009
60 Minute Playing Field....
Here's the playing field so far today. Right now.....it is testing the lower end, and may be testing 820ish yet today.
Not enough buyers in the market. Not enough insider buying. Not enough "other" buying. A really ugly number in tomorrows jobs report could push it over the edge.
First things first....watch support.
Not enough buyers in the market. Not enough insider buying. Not enough "other" buying. A really ugly number in tomorrows jobs report could push it over the edge.
First things first....watch support.
A Picture Is Worth A Thousand Words....
Here's an article with two graphs to take a look at. One charts out Housing and GDP from 1945 - 2007. The second graph, looks at just the period from 1945 - 1980.
Take a peek at these two graphs and you will get a broader perspective as to the problems we are now facing.....and will face over the coming years as the bubbles deflate.
You can see by looking at the charts, that BOTH housing and GDP started to ramp up in the mid 1960's. Then.....in the early 1980's housing started to go parabolic even compared to GDP which was still going up.
Interesting charts...........that tell a story.
Take a peek at these two graphs and you will get a broader perspective as to the problems we are now facing.....and will face over the coming years as the bubbles deflate.
You can see by looking at the charts, that BOTH housing and GDP started to ramp up in the mid 1960's. Then.....in the early 1980's housing started to go parabolic even compared to GDP which was still going up.
Interesting charts...........that tell a story.
Humerous Video....
I'm not a watcher of Fox News myself. I prefer to get both sides of the news.....not just the conservative slant....nor just the liberal slant. Plus....why would anyone watch a "news station" (loosely defined) where the apparent qualifications appear to be:
1) You have to be a ultra right conservative.
2) You have to either sleep with hookers like Dick Morris ...
3) OR participate in sexual harassment like Bill O'Reilly
4) You have to shout over guests when they disagree with you.
You might think that a real news station would have higher standards than that. Apparently not.
But here is a video clip from Youtube that Jon Stewart did of Bill O'Reilly. This one is pretty funny.
1) You have to be a ultra right conservative.
2) You have to either sleep with hookers like Dick Morris ...
3) OR participate in sexual harassment like Bill O'Reilly
4) You have to shout over guests when they disagree with you.
You might think that a real news station would have higher standards than that. Apparently not.
But here is a video clip from Youtube that Jon Stewart did of Bill O'Reilly. This one is pretty funny.
Nouriel Roubini clip....
Here's a brief current video clip of Nouriel Roubini, which pretty much summarizes my feelings about the economic outlook over the next two years. He is of the belief that we won't see a positive GDP until early in 2010.......and then it will be very low GDP in the range of 1.0% or so. But we have a LOT of "repairing" to do. Two or three years ago Roubini was looked at as being very "fringe". Now.....he's almost main stream. I guess that is what "being right" will do.
Investors want a "quick fix".....and after the popping of so many bubbles......quick fixes won't happen. This is going to be a long rehabilitation........and anyone that has had physical therapy done (like Tiger Woods is going through now).....knows that it takes time, and you have to go through pain to come out stronger on the other side.
The investment bankers want Washington to wave a wand to wash away the toxic assets on their balance sheets. Even if those toxic assets are removed from some of the banks balance sheets.........those toxic assets are STILL out in the market where nobody wants them (yet).
We're in a deflationary environment where everyone is tightening their belt. This is NOT a "garden variety" recession that can easily be "reflated" because many in the US are still up to their neck in debt. And many of those that are up to their neck in debt on their house, are under water on their mortgage. Roubini expects that 40% of those with a home mortgage will be "under water" by next year. That....is not going to promote a lot of spending by consumers.
Investors want a "quick fix".....and after the popping of so many bubbles......quick fixes won't happen. This is going to be a long rehabilitation........and anyone that has had physical therapy done (like Tiger Woods is going through now).....knows that it takes time, and you have to go through pain to come out stronger on the other side.
The investment bankers want Washington to wave a wand to wash away the toxic assets on their balance sheets. Even if those toxic assets are removed from some of the banks balance sheets.........those toxic assets are STILL out in the market where nobody wants them (yet).
We're in a deflationary environment where everyone is tightening their belt. This is NOT a "garden variety" recession that can easily be "reflated" because many in the US are still up to their neck in debt. And many of those that are up to their neck in debt on their house, are under water on their mortgage. Roubini expects that 40% of those with a home mortgage will be "under water" by next year. That....is not going to promote a lot of spending by consumers.
Tuesday, February 10, 2009
A Message From Mr. Market....
"Mr. Market" went down almost 400 points today.........and this is what "he/she" knows.....
1) Mr. Market KNOWS that many of the banks are what Bill Seidman calls......"Zombie banks." Too much crap on their balance sheet, and not enough capital. Citigroup is walking death. Put them out of their misery. If this was a fight.......there would be a DELUGE of towels being thrown in ring.
2) Mr. Market also knows, that the Feds.......and Treasury......CAN'T do away with gravity. Housing has further to go on the south side. In the VERY BEST of circumstances........and I do mean the VERY BEST......housing prices could bottom by the end of this year. Personally......I don't think they will see the bottom (in prices of existing homes) till sometime in 2010 at the best. Just think of ALL the houses that are STILL headed for foreclosure. Also think about all the houses that are IN foreclosure.....but still aren't being listed for sale by the banks (thousands of homes are on the balance sheets of banks but aren't listed on the MLS yet).
3) Mr. Market also knows that if.......or when......."mark-to-market" is actually done away with, the market might like it in the short term.......but it would HATE IT for the intermediate and long term. Mark-to-market is like "EBITDA" (earnings BEFORE Interest, Taxes, Depreciation, and Amortization). EBITDA is "imaginary".........like saying "pretend we don't have Interest, Taxes, Depreciation, and Amortization...........if we didn't have ALL of those expenses, our bottom line would have been GREAT!
Mark-to-market is much the same. "Pretend that we don't actually take the write-downs to CURRENT fair value"..........if we don't have to write down our assets, our balance sheet would be GREAT! It's a fairy tale. If mark-to-market is done away with, it will PROLONG the pain.
I call them as I see them. Good......bad......or ugly. "Hope" has no place in profitable investing.
1) Mr. Market KNOWS that many of the banks are what Bill Seidman calls......"Zombie banks." Too much crap on their balance sheet, and not enough capital. Citigroup is walking death. Put them out of their misery. If this was a fight.......there would be a DELUGE of towels being thrown in ring.
2) Mr. Market also knows, that the Feds.......and Treasury......CAN'T do away with gravity. Housing has further to go on the south side. In the VERY BEST of circumstances........and I do mean the VERY BEST......housing prices could bottom by the end of this year. Personally......I don't think they will see the bottom (in prices of existing homes) till sometime in 2010 at the best. Just think of ALL the houses that are STILL headed for foreclosure. Also think about all the houses that are IN foreclosure.....but still aren't being listed for sale by the banks (thousands of homes are on the balance sheets of banks but aren't listed on the MLS yet).
3) Mr. Market also knows that if.......or when......."mark-to-market" is actually done away with, the market might like it in the short term.......but it would HATE IT for the intermediate and long term. Mark-to-market is like "EBITDA" (earnings BEFORE Interest, Taxes, Depreciation, and Amortization). EBITDA is "imaginary".........like saying "pretend we don't have Interest, Taxes, Depreciation, and Amortization...........if we didn't have ALL of those expenses, our bottom line would have been GREAT!
Mark-to-market is much the same. "Pretend that we don't actually take the write-downs to CURRENT fair value"..........if we don't have to write down our assets, our balance sheet would be GREAT! It's a fairy tale. If mark-to-market is done away with, it will PROLONG the pain.
I call them as I see them. Good......bad......or ugly. "Hope" has no place in profitable investing.
Couple Things To Watch....
1) Watch the "triangles" of course. On the S&P daily chart.....825ish is the lower trend line on the triangle. After that...820.......then 805. "Only" 40% more to the downside and we'll be at 500 on the S&P. My how time flys.
2) VIX is right near resistance on its BULLISH WEDGE.
3) Oil is now breaking down and comfortably under $40 dollars.......maybe headed to $30.
4) Gold stocks look to be breaking further. They have been holding up better than I thought they would......but IF this is a "liquidation trade" in the works......they will also get hit hard.
2) VIX is right near resistance on its BULLISH WEDGE.
3) Oil is now breaking down and comfortably under $40 dollars.......maybe headed to $30.
4) Gold stocks look to be breaking further. They have been holding up better than I thought they would......but IF this is a "liquidation trade" in the works......they will also get hit hard.
There Goes 850......820 Next.....
I know that Geithner & Obama will likely get all the blame for today's fall in the market. I can hear the "far right" now............"the market obviously didn't like the plan." If the market had rallied.....the Democrats would have said (just as falsely) that "the market liked the plan." Most of the participants in the market (except for Larry Kudlow and Dennis Neil) seem to "know" that there are STILL a boatload of bad loans that are growing worse as time passes. THAT....is why the market is going down.
It really has nothing to do with "the plan." As I have said before......it is gravity. And gravity is pulling asset prices down, and the Fed can do very little to stop it (asset price deflation). That is what a 25 year bubble will do to assets..........they eventually come down to earth.
It really has nothing to do with "the plan." As I have said before......it is gravity. And gravity is pulling asset prices down, and the Fed can do very little to stop it (asset price deflation). That is what a 25 year bubble will do to assets..........they eventually come down to earth.
Couple Things To Note...
First.....remember that China and some other Asian companies ARE, and will likely CONTINUE, to come out of the recession BEFORE the US does. For instance, China is a country with a LOT of SAVINGS......and the economic decision makers in China are trying to prod that money out of their hands, and into the economy.
Contrast THAT.....with the US, that has TOO MUCH DEBT, and the consumers are likely to continue to be cautious with their cash and use it to pay down debt. Debt levels in the US are STILL historically high.....and need to be worked down over the coming YEARS.
The Shanghai Index is looking pretty healthy right now.
Secondly, SOHU looks particularly good for a China play. I have mentioned this a few months ago, and its "bowl" is continuing to form as it moves up the "left side" of the bowl. A little pull back from its $50 resistance is expected.....but the pull back will likely be minimal as it fills SOME or all of the "gap" it just formed. It reported great earnings yesterday and a positive outlook for the coming quarters.
Contrast THAT.....with the US, that has TOO MUCH DEBT, and the consumers are likely to continue to be cautious with their cash and use it to pay down debt. Debt levels in the US are STILL historically high.....and need to be worked down over the coming YEARS.
The Shanghai Index is looking pretty healthy right now.
Secondly, SOHU looks particularly good for a China play. I have mentioned this a few months ago, and its "bowl" is continuing to form as it moves up the "left side" of the bowl. A little pull back from its $50 resistance is expected.....but the pull back will likely be minimal as it fills SOME or all of the "gap" it just formed. It reported great earnings yesterday and a positive outlook for the coming quarters.
Monday, February 09, 2009
Good Article........
Here's a good article that bears reading. I posted the long term chart (85 years) that is contained in this article a couple times over the past year. As you will see from reading the article AND from looking at the chart, the downside risk to the market is STILL significant.
The markets will continue to deleverage on many fronts, and the housing market has a good ways to run as well.
And to make things worse......earnings continue to drop. As the article points out, "500" is CONSERVATIVE as far as a target for the S&P 500 goes. It can definitely go lower.
The markets will continue to deleverage on many fronts, and the housing market has a good ways to run as well.
And to make things worse......earnings continue to drop. As the article points out, "500" is CONSERVATIVE as far as a target for the S&P 500 goes. It can definitely go lower.
Sunday, February 08, 2009
GOLD....DOLLAR.....TREASUREY's....
Below.....I have layed out a few long term charts. The object in technical analysis, is to trade on WHAT YOU SEE......NOT.....WHAT YOU FEEL, nor what you WANT TO SEE. I lay out the following charts because...."they are there", and it is what I "see" right now. As you will note after you look at the charts, the "story" is not a good one over the coming months (likely many months or a couple of years). But....it is, what it is.
GLD: Gold looks to be setting up for a move higher. The only questions now, are whether it pulls back BEFORE heading up........and if it does pull back, how much will it pull back?
DOLLAR: Over the past several months the US Dollar has been able to maintain its price as the economy's in Europe have weakened significantly and the European banks have dropped their interest rates. This will come to an end fairly soon. WATCH THE DOLLAR CLOSELY OVER COMING DAYS & WEEKS. If the dollar starts to drop.....it will likely be treated by the "talking heads" as a good sign that will make US imports more competitive. When it KEEPS dropping....then it will become a problem. You will also notice that the US Dollar has a POTENTIAL "massive head and shoulders." The "extreme dollar bears" will tell you that the dollar could go to $40.....and THIS is where they get that from. Just keep in mind that "head and shoulders" are one of the LEAST reliable formations......so while it "could" play out.....it is certainly NOT a "sure thing" by any stretch of the imagination.
10 Year Treasury: You can see that interest rates on the 10 year have begun to rise significantly as of late as the "Treasury bond bubble" begins to burst. Higher interest rates going forward will NOT be a good thing.
Overall.....the above 3 items do NOT portend a good stock market in the LONG TERM. The banking index looks like it could have more "bounce" in it in the short term.....but longer term....it is likely to "pierce" its recent support at some point.
GLD: Gold looks to be setting up for a move higher. The only questions now, are whether it pulls back BEFORE heading up........and if it does pull back, how much will it pull back?
DOLLAR: Over the past several months the US Dollar has been able to maintain its price as the economy's in Europe have weakened significantly and the European banks have dropped their interest rates. This will come to an end fairly soon. WATCH THE DOLLAR CLOSELY OVER COMING DAYS & WEEKS. If the dollar starts to drop.....it will likely be treated by the "talking heads" as a good sign that will make US imports more competitive. When it KEEPS dropping....then it will become a problem. You will also notice that the US Dollar has a POTENTIAL "massive head and shoulders." The "extreme dollar bears" will tell you that the dollar could go to $40.....and THIS is where they get that from. Just keep in mind that "head and shoulders" are one of the LEAST reliable formations......so while it "could" play out.....it is certainly NOT a "sure thing" by any stretch of the imagination.
10 Year Treasury: You can see that interest rates on the 10 year have begun to rise significantly as of late as the "Treasury bond bubble" begins to burst. Higher interest rates going forward will NOT be a good thing.
Overall.....the above 3 items do NOT portend a good stock market in the LONG TERM. The banking index looks like it could have more "bounce" in it in the short term.....but longer term....it is likely to "pierce" its recent support at some point.
Saturday, February 07, 2009
Banks.....BKX....BAC....C....
First off.....let's get this one out of the way quickly. Ken Lewis bought 400,000 shares.....or just over $2.0 million dollars worth of BAC stock this past week. That is roughly equal to 5 weeks of pay based on his last years salary of $20 million. In other words......he bought SQUAT. It started a short covering rally......but don't be thinking that "hey....he is really bullish."
I won't make the case that BAC is going to zero (which I DO believe will happen to Citibank eventually).......but BAC is nothing that I would invest in for the long term. A very nice bounce that was predicted by the technicals in the stock AND the banking index......but not a long term buy (imho).
Here's a chart of daily candlesticks for the banking index. Here's the weekly chart. You can see that the weekly chart looks pretty darn bullish. We'll see how much "ooommmmphhh" the banking index can give to the market. Just remember.......technicals are a WIND SOCK.....they are NOT a crystal ball. I have to admit I am somewhat "suspect" of the bullish wedge in the banking index. But at the same time.....I realize that it is what OTHER PEOPLE do......not me....that moves the market.
The market has a couple things to digest in the coming week:
1) The direction of the banking "solution" which comes out Monday.
2) The stimulus bill....which may be passed by Tuesday.
It's going to be a fascinating week. If the banks "catch a bid" and rally further.....then the market could pop. If the market likes the stimulus package or the banking bailout as much as the market liked the initial TARP agreement.........then the market is going to be in BIG TROUBLE.
The key area on the S&P on the low side is the 805 area. Everyone and their cat are watching that on the low end. On the upper end of things.......940 - 950 area looks to be initial resistance (and the 20 day moving average is at 939).
Should be interesting.........watch yourself on BOTH sides of the fence.
I won't make the case that BAC is going to zero (which I DO believe will happen to Citibank eventually).......but BAC is nothing that I would invest in for the long term. A very nice bounce that was predicted by the technicals in the stock AND the banking index......but not a long term buy (imho).
Here's a chart of daily candlesticks for the banking index. Here's the weekly chart. You can see that the weekly chart looks pretty darn bullish. We'll see how much "ooommmmphhh" the banking index can give to the market. Just remember.......technicals are a WIND SOCK.....they are NOT a crystal ball. I have to admit I am somewhat "suspect" of the bullish wedge in the banking index. But at the same time.....I realize that it is what OTHER PEOPLE do......not me....that moves the market.
The market has a couple things to digest in the coming week:
1) The direction of the banking "solution" which comes out Monday.
2) The stimulus bill....which may be passed by Tuesday.
It's going to be a fascinating week. If the banks "catch a bid" and rally further.....then the market could pop. If the market likes the stimulus package or the banking bailout as much as the market liked the initial TARP agreement.........then the market is going to be in BIG TROUBLE.
The key area on the S&P on the low side is the 805 area. Everyone and their cat are watching that on the low end. On the upper end of things.......940 - 950 area looks to be initial resistance (and the 20 day moving average is at 939).
Should be interesting.........watch yourself on BOTH sides of the fence.
FTSE......DAX......OIL....VIX......US Dollar...
Here's a look at the DAX and the FTSE. I believe they are consolidating in some triangles....and they are likely to break DOWN after they finish their recent rally off of the bottom of the triangle.
Also, here's another look at oil.......which I also believe is poised to break DOWN in the near term. It is struggling to find a bottom if you look at the short term RSI, but inventories are continuing to build, and people are STILL cutting back on consumption. I'll be watching this closely....but I expect it to break DOWN in the short term.
Here's the VIX.....which has been consolidating....although in a BULLISH WEDGE....which is BEARISH for the equity market.
And here is the US Dollar. This one is key. Watch this one over the coming days and weeks. If Europe continues to weaken.......as accelerated deflation in Europe continues......then the US dollar could continue its move UP......oil and other commodities would move down.....and the market would likely move DOWN.
Also, here's another look at oil.......which I also believe is poised to break DOWN in the near term. It is struggling to find a bottom if you look at the short term RSI, but inventories are continuing to build, and people are STILL cutting back on consumption. I'll be watching this closely....but I expect it to break DOWN in the short term.
Here's the VIX.....which has been consolidating....although in a BULLISH WEDGE....which is BEARISH for the equity market.
And here is the US Dollar. This one is key. Watch this one over the coming days and weeks. If Europe continues to weaken.......as accelerated deflation in Europe continues......then the US dollar could continue its move UP......oil and other commodities would move down.....and the market would likely move DOWN.
Thursday, February 05, 2009
Couple Things To Watch For...
First.....the banks are looking "bullish" right now. They have formed a "bullish wedge" over the past month or two. Here's a couple of charts. Fundamentally........I HATE the banks......but fundamentals are a LONGER TERM view. The technicals are looking bullish on the banks......and they could turn around.
$BKX Bullish wedge and positive divergence on banking index daily chart
$BKX Bullish wedge on WEEKLY chart of banking index
BAC Bullish wedge and positive divergence on Bank Of America
If the banks turn around.......we could get a SHARP short covering rally in the market. SO WATCH YOURSELF........on both sides of the market.
WATCH THE TRIANGLES........
$BKX Bullish wedge and positive divergence on banking index daily chart
$BKX Bullish wedge on WEEKLY chart of banking index
BAC Bullish wedge and positive divergence on Bank Of America
If the banks turn around.......we could get a SHARP short covering rally in the market. SO WATCH YOURSELF........on both sides of the market.
WATCH THE TRIANGLES........
Bounced At 820.......Rejected At 850...
Bounced at support......and a nice bounce to boot. Then.....rejected at 850 resistance on the 60 minute charts. Also.....you can see it on the daily chart.......as I have drawn in a green dashed line that represents the 60 minute chart.
S&P 60 Minute Chart
S&P Daily Chart
VIX
S&P 60 Minute Chart
S&P Daily Chart
VIX
Important Housing Article....
Here's a GREAT article on housing affordability. It shows that the law of gravity.....has not yet been repealed, and when it comes to housing, it likely has much further to go in some areas.
I have written a few times on the areas that I feel will get hit especially hard over the next year or two....and that it will impact the stock market as well because they are the "money center" cities of New York, Los Angeles, San Francisco, etc. If peoples housing equity is falling.....they will not be able to tap their home equity and they will likely have to liquidate some equity holdings.
You can see from this "affordability index list, that the most unaffordable cities in the country are:
1) San Francisco
2) San Jose
3) Los Angeles
4) New York
5) San Diego
6) Miami/West Palm Beach
7) Boston
8) Seattle
In addition.....Portland, Baltimore, and Chicago are in the "seriously unaffordable" category right below the 8 listed above.
Here are three important paragraphs from the article. Note the dropoff IN JUST THE LAST 3 MONTHS. Staggering.
==========================================
But the re-entry into earthly prices is just beginning. In the four coastal markets, the Median Multiple has plummeted since our third quarter 2008 data just reported in our 5th Annual Demographia International Housing Affordability Survey. The most recent data from the California Association of Realtors would suggest that the Median Multiple has fallen from 8.0 to 6.7 in San Francisco, in just three months. In San Jose, the drop has been from 7.4 to 6.3. Los Angeles has fallen from 7.2 to 6.2 and San Diego has slipped from 5.9 to 5.2.
Yet history suggests that there is a good distance yet to go. California’s prices will have to fall much further, particularly along the coast. Due largely to restrictive land use policies, California house prices had risen to well above the national Median Multiple by the early 1990s, an association identified by Dartmouth’s William Fischel. During the last trough, after the early 1990s bubble and before the 2000s bubble, the Median Multiple in the four coastal California markets fell to between 4.0 and 4.5. It would not be surprising for those levels to be seen again before there is price stability.
Using this standard, I expect median house prices could fall another $150,000 to $200,000 in the San Francisco and San Jose metropolitan areas. The Los Angeles area could see another $100,000 to $125,000 drop, while the San Diego area could be in store for a further decline of $50,000 to $75,000.
==========================================
I have written a few times on the areas that I feel will get hit especially hard over the next year or two....and that it will impact the stock market as well because they are the "money center" cities of New York, Los Angeles, San Francisco, etc. If peoples housing equity is falling.....they will not be able to tap their home equity and they will likely have to liquidate some equity holdings.
You can see from this "affordability index list, that the most unaffordable cities in the country are:
1) San Francisco
2) San Jose
3) Los Angeles
4) New York
5) San Diego
6) Miami/West Palm Beach
7) Boston
8) Seattle
In addition.....Portland, Baltimore, and Chicago are in the "seriously unaffordable" category right below the 8 listed above.
Here are three important paragraphs from the article. Note the dropoff IN JUST THE LAST 3 MONTHS. Staggering.
==========================================
But the re-entry into earthly prices is just beginning. In the four coastal markets, the Median Multiple has plummeted since our third quarter 2008 data just reported in our 5th Annual Demographia International Housing Affordability Survey. The most recent data from the California Association of Realtors would suggest that the Median Multiple has fallen from 8.0 to 6.7 in San Francisco, in just three months. In San Jose, the drop has been from 7.4 to 6.3. Los Angeles has fallen from 7.2 to 6.2 and San Diego has slipped from 5.9 to 5.2.
Yet history suggests that there is a good distance yet to go. California’s prices will have to fall much further, particularly along the coast. Due largely to restrictive land use policies, California house prices had risen to well above the national Median Multiple by the early 1990s, an association identified by Dartmouth’s William Fischel. During the last trough, after the early 1990s bubble and before the 2000s bubble, the Median Multiple in the four coastal California markets fell to between 4.0 and 4.5. It would not be surprising for those levels to be seen again before there is price stability.
Using this standard, I expect median house prices could fall another $150,000 to $200,000 in the San Francisco and San Jose metropolitan areas. The Los Angeles area could see another $100,000 to $125,000 drop, while the San Diego area could be in store for a further decline of $50,000 to $75,000.
==========================================
Wednesday, February 04, 2009
820....805.....750....
Those are the initial support areas of the S&P but I expect it to get into the 6XX's for this leg down.
S&P 60 Minute Triangle....
Still in "the triangle". Support at 820ish.....resistance at 920ish on the 60 minute chart.
Tuesday, February 03, 2009
VIX.....DOW....S&P
I've posted a "hurricane warning" for the next 4 - 6 weeks. I expect that we will "find" an intermediate term bottom at the end of this swing down.....and it is likely to be in the 6XX on the S&P. Could it be longer than 4 - 6 weeks? Sure it could....I can't "see" the future....I only know how the cards are setting up......and "likely" time frames and outcomes.
Remember.....the first 2 days of the month have some strong inflows because of pension fund and mutual fund moneys that routinely go into the market during the first couple of days of each month. After that....I expect the market to weaken.
VIX
DOW
S&P
WTIC Crude Oil
US Dollar
Remember.....the first 2 days of the month have some strong inflows because of pension fund and mutual fund moneys that routinely go into the market during the first couple of days of each month. After that....I expect the market to weaken.
VIX
DOW
S&P
WTIC Crude Oil
US Dollar
Remember The Components Of A Healthy Market...
As discussed by Trimtabs.com in their discussion of the forces that move the markets......here are those components....
And keep in mind, that the stock market is just that: A market of SUPPLY and DEMAND. SUPPLY of shares........and DEMAND for shares.
1) Are insiders BUYING or SELLING stock?
2) Are companies are BUYING their own company's stock.....or ISSUING new shares in secondary offerings?
3) Are companies BUYING other public companies for CASH? This reduces shares outstanding. Remember during the tech bubble a LOT of companies were buying OTHER companies.....but they were doing the purchase with their own STOCK (their own OVERVALUED STOCK)....not cash. This was because their own stock was overvalued. The truly stupid CEO's were doing acquisitions with cash during the bubble.
4) Are companies cutting their matching 401(k) contributions? NOT GOOD. That is money that would have gone into the market to help prop it up. Motorla and Starbucks are just two in a growing list of companies that have suspended the matching portion of 401(k)'s.
5) Are companies increasing or decreasing dividends? Increasing dividends is bullish, because it puts money in the investors hands and some of that money makes it BACK into the stock market for additional investment. Cutting dividends............uhhhhhhh.....bearish.
The only bullish sign right now is that the IPO market has dried up. There have been 4 IPO's over the last 6 months. If you go back to October of 2007........when Abby Joseph Cohen was pushing S&P 1,600 for a target at 12/31/08 on CNBC........IPO's for October of 2007 were greater than 20 IPO's FOR THE MONTH OF OCTOBER ALONE. Nice call Abby:)
You don't think there is any conflict of interest in the investment banks do you? I just wonder when Mary Meeker and Abby Joseph Cohen are going to join Henry Blodgett at Yahoo. Let's get all the people we can trust in one place:) Now that Mary Meeker is done hyping the Chinese market for the last 18 months as it imploded.......I think it wold be great to all three stooges in one place at Yahoo.
And keep in mind, that the stock market is just that: A market of SUPPLY and DEMAND. SUPPLY of shares........and DEMAND for shares.
1) Are insiders BUYING or SELLING stock?
2) Are companies are BUYING their own company's stock.....or ISSUING new shares in secondary offerings?
3) Are companies BUYING other public companies for CASH? This reduces shares outstanding. Remember during the tech bubble a LOT of companies were buying OTHER companies.....but they were doing the purchase with their own STOCK (their own OVERVALUED STOCK)....not cash. This was because their own stock was overvalued. The truly stupid CEO's were doing acquisitions with cash during the bubble.
4) Are companies cutting their matching 401(k) contributions? NOT GOOD. That is money that would have gone into the market to help prop it up. Motorla and Starbucks are just two in a growing list of companies that have suspended the matching portion of 401(k)'s.
5) Are companies increasing or decreasing dividends? Increasing dividends is bullish, because it puts money in the investors hands and some of that money makes it BACK into the stock market for additional investment. Cutting dividends............uhhhhhhh.....bearish.
The only bullish sign right now is that the IPO market has dried up. There have been 4 IPO's over the last 6 months. If you go back to October of 2007........when Abby Joseph Cohen was pushing S&P 1,600 for a target at 12/31/08 on CNBC........IPO's for October of 2007 were greater than 20 IPO's FOR THE MONTH OF OCTOBER ALONE. Nice call Abby:)
You don't think there is any conflict of interest in the investment banks do you? I just wonder when Mary Meeker and Abby Joseph Cohen are going to join Henry Blodgett at Yahoo. Let's get all the people we can trust in one place:) Now that Mary Meeker is done hyping the Chinese market for the last 18 months as it imploded.......I think it wold be great to all three stooges in one place at Yahoo.
The Schork Report....
Here's a brief video clip of Stephen Schork of the Schork Report. He's still bearish on oil....and with good reason.
Monday, February 02, 2009
Some Interesting Dynamics......
OK.....let's see.......currently we have the following situations:
1) House prices continue to fall nationwide......with New York City being the last man standing to finally fall into place over the past several months..... Housing prices not likely to hit bottom until 2011/2012 in various parts of the nation.
2) Companies are starting to "line up" in the bankruptcy line. Charter Communications looks like it will be joining that line soon. Charter is one of the many "venture capital" companies that NEVER should have gone public. Their highest price was the month they went public in 1999.
Here's one of the problems with all of these companies lining up right now in bankruptcy: Credit is very hard to come by right now.........and some of the bankrupt companies will WANT to try to come out of bankruptcy via Chapter 11.......but there is not enough credit to go around to finance the "debtor in possession" that is needed. That means that many of them will have to liquidate via Chapter 7 bankruptcy.......just like Computer City and Linen & Things have done.
3) For the companies that have to shut down......that just makes the unemployment problem worse in the country.......which then makes the housing crisis worse.........which then causes banks to write down more mortgages.........which then tightens credit because after the banks write down the mortgages, they have less capital base on which to loan.........etc.
We really DO have "our panties in a wad" in the mess we have gotten us into. It will end eventually......but only when assets find prices that they can actually clear at.......with actual long term holders of those assets.
1) House prices continue to fall nationwide......with New York City being the last man standing to finally fall into place over the past several months..... Housing prices not likely to hit bottom until 2011/2012 in various parts of the nation.
2) Companies are starting to "line up" in the bankruptcy line. Charter Communications looks like it will be joining that line soon. Charter is one of the many "venture capital" companies that NEVER should have gone public. Their highest price was the month they went public in 1999.
Here's one of the problems with all of these companies lining up right now in bankruptcy: Credit is very hard to come by right now.........and some of the bankrupt companies will WANT to try to come out of bankruptcy via Chapter 11.......but there is not enough credit to go around to finance the "debtor in possession" that is needed. That means that many of them will have to liquidate via Chapter 7 bankruptcy.......just like Computer City and Linen & Things have done.
3) For the companies that have to shut down......that just makes the unemployment problem worse in the country.......which then makes the housing crisis worse.........which then causes banks to write down more mortgages.........which then tightens credit because after the banks write down the mortgages, they have less capital base on which to loan.........etc.
We really DO have "our panties in a wad" in the mess we have gotten us into. It will end eventually......but only when assets find prices that they can actually clear at.......with actual long term holders of those assets.
Couple Things To Note Today....
1) Dow Jones Industrial Average is starting to break DOWN through its triangle. The DOW usually leads the way. The others will follow.
2) With markets having a tough time breaking even on a day that is NORMALLY bullish for stocks.....that does NOT portend good things. Remember....the first two days of EACH MONTH are historically the strongest, because pension and mutual fund money goes to work these two days.
3) Gold/silver stocks breaking down further today.....and I expect them to break down further in the short term as the market weakens. Deflation and de-leveraging will take down most stocks.
2) With markets having a tough time breaking even on a day that is NORMALLY bullish for stocks.....that does NOT portend good things. Remember....the first two days of EACH MONTH are historically the strongest, because pension and mutual fund money goes to work these two days.
3) Gold/silver stocks breaking down further today.....and I expect them to break down further in the short term as the market weakens. Deflation and de-leveraging will take down most stocks.
Same Song....
Look for US Dollar to be strong in the short term as Europe continues to drop interest rates.
Look for commodities to DROP.....including gold.....while the dollar remains in up trend.
Look for market to be weak over the coming month.....although perhaps just through a lack of any real buying interest. One step up.....two steps down.
Major indexes are STILL within their triangles although both the NASDAQ and S&P tested the lower trend lines this am.
Look for commodities to DROP.....including gold.....while the dollar remains in up trend.
Look for market to be weak over the coming month.....although perhaps just through a lack of any real buying interest. One step up.....two steps down.
Major indexes are STILL within their triangles although both the NASDAQ and S&P tested the lower trend lines this am.
Next Intermediate Term Bottom....
Early-to-mid March is setting up as the possible time frame for the next intermediate term bottom. I am expecting for the late November lows to be "taken out" in this leg down.
Right now......the weekly Investor Sentiment Survey Index numbers are .92 bulls to 1.0 bears. I expect this bulls to bears ratio to get down to the .4ish to 1.0 ratio (give or take.....it could push into the .3Xish range).
If we get into the 6XXish range in the S&P (as I also expect)......then we might get a bigger bounce (on a percentage basis) than we got in November/December. But we're STILL a long ways until this bear ends.
Again....I expect the triangles to break down that have formed in the major indexes. Here's a look at the S&P triangle.
I wouldn't touch Citigroup or Bank of America with Sara Palin's money. Especially Citigroup. They are "dead man walking." Here's the most recent article from Meredith Whitney regarding the banks. I expect Citigroup shareholders to be "taken out" before this is all over. Too many "future losses" still sitting on their balance sheet.
With real estate prices ready to fall further this year AND next year, the Fed's are trying to deny physics.......specifically gravity. With housing prices now dropping in the New York City area.....the last man standing is now standing on weakening legs.
Right now......the weekly Investor Sentiment Survey Index numbers are .92 bulls to 1.0 bears. I expect this bulls to bears ratio to get down to the .4ish to 1.0 ratio (give or take.....it could push into the .3Xish range).
If we get into the 6XXish range in the S&P (as I also expect)......then we might get a bigger bounce (on a percentage basis) than we got in November/December. But we're STILL a long ways until this bear ends.
Again....I expect the triangles to break down that have formed in the major indexes. Here's a look at the S&P triangle.
I wouldn't touch Citigroup or Bank of America with Sara Palin's money. Especially Citigroup. They are "dead man walking." Here's the most recent article from Meredith Whitney regarding the banks. I expect Citigroup shareholders to be "taken out" before this is all over. Too many "future losses" still sitting on their balance sheet.
With real estate prices ready to fall further this year AND next year, the Fed's are trying to deny physics.......specifically gravity. With housing prices now dropping in the New York City area.....the last man standing is now standing on weakening legs.
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