Morning Call [6:56am ET] Today’s Wall Street Journal reports that investors in Morgan Stanley’s largest real-estate fund will lose two-thirds of their capital investment, or $5.4 billion.
http://online.wsj.com/article/SB4000142405270230369560457518202209364586...
Shameful and shocking, such news is not exceptional; there are and will be many more losses like it, and something must be done about this. The nonsense must stop.
If you read one paragraph in this WSJ article, it should be the following:
The struggling MSREF VI fund once projected a 22.1% average annual return on its commercial-real-estate deals around the world. When times were good, the fund generated fat fees for various segments of the bank. In 2007 alone, Morgan Stanley earned $104 million in acquisition fees, $22 million in fund-management fees, $13 million in financing fees, $36 million in real-estate-management fees, and $21 million in financial-advisory fees, according to documents reviewed by the Journal.
Yesterday I received a letter from the senior teacher of finance and economics in one of the world’s top-rated private schools. Without the names, here is the correspondence:
Dear Bill,
I just showed my class the Frontline PBS special on Bernie Madoff as part of my ethics unit in business. One of my students "wondered" what Mr. Cara thought of the whole ponzi scheme. If you have a moment during your busy day could you share some of your thoughts on the matter? I told them that this would not be the last ponzi scheme they will be hearing about in their lifetime. I hope all is well in Bahamas. All the best, Bill.
Kind Regards,
(anon)
After giving the matter some thought, I responded:
Hi (anon),
Ethics and the law as it regards Ponzi. This is an important discussion for young people to understand because they need to prepare themselves now to prevent unnecessary losses as they get into careers where they can start saving and investing.
The discussion is really about control.
Whenever capital is pooled among owners (i.e., where personal control is given up) and placed under the control of a capital manager for the purposes of obtaining a satisfactory return on capital, there is a loss of control. Because there are con artists in our society, the owners of capital can not rely simply on the ethics of the capital manager for protection, but must have checks and balances. The owners of capital need to offset that loss of control in the transaction with transparency and independent audit. Without the latter, there will always be a capital manager who delivers a return of capital, calling it a return on capital, which is a fraudulent representation.
Obviously, the smaller the capital pool, the harder it becomes to earn a satisfactory return on capital. In order to stay in control, the capital manager then turns to the fraudulent act of producing falsified statements of account. Without transparency and independent audit, this fraud will continue until there is a demand by one or more of the capital owners for a legitimate return of capital that the capital manager cannot meet because the capital pool has been depleted to that extent.
Because there will always be unethical capital managers, this scenario will always be played out as long as there are capital owners who give up control without the requisite checks and balances to prevent it.
This problem really goes back to the power of banks to self-regulate and to market their services on the “trust us” principle. I have always said that trust without a check and balance will always fail when it comes to money.
As long as a simple financial transaction involves a banker saying “trust us” but also acting in the multiple capacities as advisor, agent, dealer, salesman, principal, custodian, insurer, and regulator, where we must trust them, the capital owner is at extreme risk of losing capital when giving up control to such a powerful party. That’s why I say the entire financial system needs to be overhauled.
Hope that helps, and yes, all is well here.
/Bill
Anon was thankful and quickly replied:
This is great, Bill. Thank you so much - I will "cut and paste" it into a word document so that we can discuss it in class with regard to Bernie Madoff. A quick question: do you use Skype? I would love to Skype into my class for 20 minutes and have the students ask you questions if you would be available? Thank you again for your response, Bill - no textbook would ever provide such insight. All the best!
Regards,
(anon)
Yesterday was actually not a terrific day for me as I’m dealing with the outage of landline and DSL and now Blackberry. Such is life in The Bahamas. As I didn’t have the time to stay focused on this other matter, I asked a colleague to respond to anon. He agreed and then sent me this note:
B
This brilliant exposition contains another fine nugget:
“(Without safeguards) there will always be a capital manager who delivers a return of capital, calling it a return on capital.”
This stands with my other favourite:
“Selling risk by calling it opportunity.”
Nice.
J
Like I respected my parents so much for the values instilled in me, knowing they had so little of material wealth, I also hold dear the formal education I received, and I know that the next generation’s leadership will come from today’s secondary and college school youth. It is imperative then that these students receive an education that measures up to the demands they will be put under. I recommend the study of virtue ethics and the work of the Greek intellectuals Socrates, Plato and Aristotle.
http://en.wikipedia.org/wiki/Virtue_ethics
http://en.wikipedia.org/wiki/Socrates
http://en.wikipedia.org/wiki/Plato
http://en.wikipedia.org/wiki/Aristotle
[Wiki] Socrates believed the best way for people to live was to focus on self-development rather than the pursuit of material wealth. He always invited others to try to concentrate more on friendships and a sense of true community, for Socrates felt this was the best way for people to grow together as a populace… Socrates stressed that "virtue was the most valuable of all possessions; the ideal life was spent in search of the Good. Truth lies beneath the shadows of existence, and it is the job of the philosopher to show the rest how little they really know."
Thankfully we are all students here.
This morning’s market action shows a weaker US Dollar, Crude Oil reaching for $86 and Gold almost $1160. Equity futures are pointing to a modestly higher open with the S&P 500 June contract at 1195.50.
Bonds are still favored over Equities, from a risk perspective, according to the comparative relative strength chart.
But, Silver was showing more strength against gold yesterday, indicating another high-risk advance might be setting up.
Earning’s season is underway. Let the spin begin. Hopefully the volume will pick up and we’ll get to see the path ahead.
Have a great day. I’ll be spending mine on mundane matters like getting my telephones working again.
CTA Trading Desk Post-Close Report
Forecasting vs. Trading
All day long, financial television trots out market prognosticators who make short-, intermediate-, and long-term predictions based on Fed policy, future economic growth, corporate fundamentals, and technical analysis – or maybe a combination of all these factors. Most of these market seers are articulate, well-educated people who studied past data in order to make accurate projections of future outcomes. Each person has an impressive array of back-tested statistical analysis to support their thesis, giving them credibility with their audience.
Many times an interview begins with a question like, “Six months ago you correctly predicted stock XYZ would report $1.20 a share. How are the company’s prospects going forward, and should investors buy the stock now?” Talk about a loaded question! The analyst may have gotten the earnings right, but that doesn’t indicate whether the stock actually went up or suffered a large decline over the period in question.
A company normally gives out fairly accurate guidance to analysts so earnings per share projections should be in the ballpark, but this has little bearing on the day-to-day fluctuations in stock prices.
A forecaster makes a prediction about the price of stock or a stock index at some point down the road, usually including many assumptions or if /then scenarios to give him some wiggle room. If the stock or market immediately moves against him it’s no big deal because he doesn’t have his own money on the line. He can calmly wait until the stock or index moves in the anticipated direction during the forecasted time period.
Forecasting is neat and tidy, black and white.
However, trading is very messy, with a lot of grey areas thrown in to completely fool the unsuspectingly speculator. When your money or your clients’ money is on the line, decisions become much more difficult.
It may be that the unprecedented government involvement in world capital markets is interrupting the natural ebb and flow of daily price action. This is the subject of discussion among floor traders and upstairs traders. All are shaking their heads in disbelief at the intraday price patterns, not because the market went from point A to point B but rather because of the ways in which it got from A to B.
The S&P is nearing initial resistance at 1225 to 1230. Option expiry weeks tend to be positive for equity prices so handicap the odds of hitting that target accordingly. Initial support moves up to 1180 with 1165 and, more importantly, 1150 prices needing to be taken out for the prevailing trend to potentially end.
Have a great evening.
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Comments
Re: They all decay, so why not short a reverse split ultra ETF?
Re-posting a reply to yesterday's thread done this morning:
They all decay relative to the index that they track. Don't misconstrue this to mean that they all have a negative slope. If you choose an ultra ETF that tracks something that is rising, then the ultra ETF will still rise just with a little less of a slope than the index that it tracks (or a lot if it's very volatile). Shorting this because it's an "ultra ETF" with no other factors considered can still be a big loser of a trade.
The time decay is just an added bonus to something that we expect to have a downwards slope in the first place. So for something like the inverse of gold you are probably right that shorting it is a good "investment", but that still doesn't mean that it's a good "trade". If the millions of factors affecting the price of gold conspire to send it down over a period of time longer than your time horizon for holding positions then it's still a bad trade.
In short, don't get too distracted about the time decay factor - the underlying trend in whatever your shorting must be down. The time decay is just an add-on bonus.
Nice and succinct
Bill, thank you for the comment on control, transparency, and checks and balances. Very nicely put.
Cara 100 Ratings Changes
Good morning.
BBBY - BB&T Initiates Coverage with a Hold.
FSLR - Auriga U.S.A. Initiates Coverage with a Hold. PT = $143
INTC - PT Raised from $27 to $30 @ FBR. Market Perform
INTC - PT Raised from $28 to $30 @ Oppenheimer. Outperform
INTC - PT Raised from $25 to $30 @ Kaufman Bros. Buy
LLTC - PT Raised from $31 to $33 @ FBR. Underperform
MCD - Upgraded to Buy @ Janney Montgomery Scott.
Re: They all decay, so why not short a reverse split ultra ETF?
understood sadleb, tis why I chose gold and not real estate for example. heaven forbid, if sanity should actually return to the market place and I was short such an ultra-short ay ay ay...
I have my IB account unlocked (just to show that I can't count, it was unlocked a month ago) and noted Bill's risk pursuit in the silver/gold relationship, a setup I'm not keen to enter without a pullback or some other validation of the b/o.
Not all bad guys...
As Bill pointed out and rebelrouser linked not all bankers are crooks and many are bothered by the present behavior.
I recommend "The Fourteenth Banker," as a hopeful read.
http://www.huffingtonpost.com/2010/04/13/the-fourt...
This story parallels the experience of my friend with forty years in banking trust depts. During his last several years prior to retiring his boss was a marketing major with no trust experience. The focus was on selling and bonuses were paid to those signing clients into "new" accounts which gave the bank greater latitude to invest.
One trust employee received over $20,000 for simply shifting existing clients' money to these "new" accounts.
At the same time, over the objections of my friend, trust accounts were taken on which required far more time and attention to manage than they had staff qualified to handle. As retirement lowered the number of staff my friend gained accounts until he had been assigned more than 200 additional ones in his last year. This major bank was one of the recipients of the bailout.
"Trust" is not a word I associate with banking in any way.
Cara 100 Update
INTC - PT Raised from $30 to $32 @ Credit Suisse. Outperform
NOK - Downgraded to Hold @ Stifel Nicolaus.
NUE - PT Raised from $50 to $53 @ Deutsche Bank. Buy
POT - Downgraded to Neutral @ Government Sachs.
Morning Call
Thanks Bill for your thoughts this morning. Bob.
Cara 100 Update
AAPL - PT Raised from $260 to $300 @ Caris & Co. Buy
INTC - PT Raised from $27 to $30 @ Canaccord Adams. Buy
LLTC - PT Raised from $30 to $33 @ Caris & Co. Average
Hotels
all near highs. H (Hyatt) may breakout here.
C/ C calls
C off @ 4.77
C June 5 calls off @ 0.23
Probably clearing them off early, but nice gains with minimal capital at risk.
Better to watch a blow-off top from the sidelines.
BPOP Calls
Took my BPOP May $3 calls off at $.72 average that I bought at $0.55. Clearing the deck and trying not to get too greedy. I believe we will be entering the "euphoria" phase soon enough.
BX
Hopped back in at $15.12. Play on rebound in M&A and Private Equity and the fact that they have fewer competitors.
Re: BPOP Calls
Nice work on both the BPOP and GOOG calls. Options are probably the only safe way to play with RSI readings at these levels.
very odd movement
today... what happens if mom & pop don't get back in ? Has bubblevision ever considered that the ' public ' has a brain ?
intel: good news being sold?
Just to remind everyone, yesterday our friends at CTAB said:
"The key Wednesday for Intel will be to sustain price strength into the close; good news being sold is a solid indication that an upward move is over."
Intel has treaded a normal day's volume in the first hour of trading, and its below the open price at this point. Where it ends up, of course, is what matters. I'll be watching it closely today.
EDIT: amusingly, I noted the number of upgrades on INTC today - D/W/M RSI = 82/86/76.
Re: very odd movement
baz22,
"...what happens if mom & pop don't get back in ? Has bubblevision ever considered that the ' public ' has a brain ?"
There are those who think Mom & Pop will stay out not just from fear of losing, but because they just don't have the resources right now. (A. Gary Shilling, Mish, Van Hoisington) A 50% retracement of a 30% to 40% loss is not a lot to play with for those who held and even worse if they sold late and didn't get back in.
I've read a number of reports of withdrawals from mutual funds and switches to bonds.
The question for me is — what kind of recovery can we have if people have no trust in the financial system, a government which is shoving more unfunded mandates at us, and those who caused all of this still benefiting from the "solution"?
The Tea Party protesters are being labeled as "racial motivated" in the MSM.
How long before we hear, "Shoot 'em all and let God sort them out!" ???
FD: Mostly in corporate bonds with a small part long XLY and EWG (with stops) and 30% cash. (age 72 and more cautious than ever)
Re: BPOP Calls
Options...safe? Pshawww. I learned that lesson years ago when I got my butt handed to me. I'm pushing my luck on these.
Great call (pun intended) on your C position!
Soaping over one's eyes...
... is Russian expression to describe this activity by SEC. Create an enemy to use as a straw-man and a scapegoat, and pretend you are doing something, while real problems and culprits remain ignored. Appease hysterical lunatics with their conspiracy theories with acts doing absolutely nothing for the markets or its participants.
April 14, 2010 10:36:09 AM
SEC proposes giving high frequency traders ID numbers to track trading activity
- votes 5-0 to propose large trader reporting ID system
come on in... waters fine..
... http://www.youtube.com/watch?v=etZeA6Bc4ds&feature...
Volume is up
Lets pile in at the apex of the terminating diagonal? Or rotation from strong hands to weak hands?
Layering on tech shorts and SZK.
it was all a dream
So many of the big financials are trading as if "difficulty" of 2008 was just a bad dream.
GS, JPM, WFC, AXP, COF - all trading in the upper end of their 2008 trading range.
20% of America is un/deremployed, 10% aren't even paying their mortgage, fannie and freddie ARE the mortgage market, yet in the big banking world, things are back to status quo ante. Must be nice.
VIX
VIX candles algo-perfect duplicate of those from Jan 11. Trend says be full short by Friday.
bout' that time for some good ol'
swine/bird flu scares... seeing some activity in the wild blue....
Re: it was all a dream
RE: 10% aren't even paying their mortgage,
that is a scary amount. Basically lenders should be looking at 1/2% as bad loans,
But if faced with 20X that amount there should be "panic in the streets"
Housing starts are "down" in Canada, yet mortgage rates are on the rise, as they should be.
here is the question: Are we getting anything close to the truth from mortgage lenders ?
(banks, Insurance companies, credit unions or even "Aunt Millie")
Re: it was all a dream
As for mortgage rates, its my understanding that Fannie/Freddie/FHA are the only organizations actually retaining loans on the books these days. The "mortgage lenders" are simply handing them off to USG and collecting a fee.
Another sign of the times: Home Depot (HD) has blown through its 2008 high, and is now back to the upper end of its 2005-2007 trading range. Perhaps the foreclosure-flippers are responsible? Or maybe we really are back to the days of "flip that house." What do you think? RSI D/W/M = 89/87/79.
I'm expecting to see HD upgrades any day now from HB&B.
Re: it was all a dream
Good point Dave !
I have reno'd and sold a few houses. And, of course it's love/hate with Home Despot !
What about "Lowes" and "Ace Hardware" ?
No, not flip that house" but "fix it" . The DIY market will drive all of the above.
And DIY is very inefficient. But profitable for all the related industries.
Agree, upgrades on related consumer industries to come
Wow.. common sense for a change??
and in both Treasury and Fed?
April 14, 2010 12:10:21 PM
(US) Fed's Bernanke: A financial transaction tax is not the way to raise revenue; agrees with Treasury Dept advise against the idea
- the tax would lead to a reduction in liquidity; leverage taxes would also cause issues in the repo market
'extend and pretend' post the FASB 157
As reported by David Galland's Daily Report of Casey Research, this number is almost entirely made up of financials, not industrials:
THE PROFIT PICTURE - THE REAL STORY
Total U.S. corporate profits (national accounts basis) rose 30.6% YoY in Q4, a huge swing from the -25.1% trend a year ago.
Almost the entire story is in the financial sector where profits have soared 240%, which is unprecedented. With the banks shrinking their asset base, the surge in earnings has been due to the ability to 'extend and pretend' post the FASB 157 changes a year ago and the ability to play a super steep yield curve.
Financial sector profits have accounted for 85% of the overall increase in corporate earnings. Total nonfinancial earnings are up the grand total of 5.2% on a YoY basis, though this is still much better than the -17.9% pace a year ago.
Entire article:
http://tinyurl.com/y4suxnp
Re: it was all a dream
allengg, davefairtex,
I found this regarding the "mortgage crisis" by Jon Hussman to be very interesting. Too big to fail? No. The best and the brightest? Well, bright enough to get free money to play with.
"To a large degree, the idea that there was "no market" for troubled assets was false even at the time. Last year, Dean Baker of the well-regarded Center for Economic Policy Research (CEPR) testified before Congress, observing "There has been considerable confusion about the nature of the troubled assets held by the banks. While banks do hold some amount of mortgage-backed securities, these securities are in fact a relatively small portion of their troubled assets."
"Last year, Dean Baker of the well-regarded Center for Economic Policy Research (CEPR) testified before Congress, observing "There has been considerable confusion about the nature of the troubled assets held by the banks. While banks do hold some amount of mortgage-backed securities, these securities are in fact a relatively small portion of their troubled assets. The troubled assets on the banks' books are overwhelmingly mortgages, both first and second or other junior liens, not mortgage-backed securities. The FDIC has acquired large quantities of mortgages from its takeover of several dozen failed banks over the last year. It auctions these assets off on an ongoing basis. The results of these auctions are available on the FDIC website. Non-performing mortgages typically sell in these auctions at prices in the vicinity of 30 cents on the dollar."
http://hussmanfunds.com/wmc/wmc100412.htm
Ramp Job XLF
Amazing pump well over the + Bollinger band. Who is going to buy this junk when the winds change? Blow off-top? How can one be euphoric owning a bank stock?
a worthless stock can be worth something if . . .
(no comment necessary I think.)
Company With "No Equity Value" Is Most Actively Traded Stock In The Market, Cramer Recommends You Buy It Now, "Likes Worthlessness"
http://www.zerohedge.com/article/company-no-equity...
In case you still haven't figured out how to trade this market, find the most bankrupt companies and load up. You can't go wrong. Obama and Bernanke said so.
. . .
the !@#$% animal spirits have it going, and a worthless stock can be worth something if it moves up that much and starts offering equity or bonds against it.
Again, I hate these situations. But they are real. They are happening. They have happened. And this is one of them that I feel is destined to happen again.
Re: it was all a dream
davefairtex,
Actually, many banks still hold their mortgage loans. A percentage of portfolio loans are held by most local banks and credit unions. In fact, many national banks do this as well. They keep the good ones and sell off the questionable ones to an unsuspecting government sponsored enterprise. Enter the 'vulture capitalist': crafty investors who buying troubled assets for pennies on the dollar (FDIC is selling theirs at $.22 tody). The FDIC not only gifts them 78% of these properties (failed condo development in Nevada, anyone?)for a fraction of their cost to build/acquire but then they will offer to fund the balance loan at very attractive terms. Great work if you have the stomach for it!
Almost done with inverses
Topped off TZA 5.98 and TYP 6.95. Faz at 11.03
Wish me luck even if you don't like me! :)
I need it.
Re: it was all a dream
loannetter - are these new loans the banks are holding? I recall reading a statistic that 90% of all new loans made today go into the maw of freddie/fannie. Not true?
Re: Almost done with inverses
Bolus,
Why not wait until you see some evidence of the market turning over?
Re: it was all a dream
davefairtex,
HARD to quantify. Many banks sell to Fann/Fred and then service themselves so it takes a bit of skullduggery to find out who owns your loan these days. But I do know a number of banks, including US Bank and local Banks who have portfolio divisions. What percentage of total US loans are GSE owned right now (given all the bank closures and sell offs) is a good question.
Re: Almost done with inverses
I do see evidence of topping (5 of 5) now, and I have some dry powder for when momentum materializes. However my trading since the FED pump in Feb has not been good.
I suspect there is a lot of naked shorting of the inverses by the PPT and permitted by the SEC. Somehow I feel better sleeping with some short positions knowing the Ponzi cannot go on forever.
Over the longer term, I think we have a significant pull back and then another run at the near-term highs. If that next cycle fails, it will cap the entire move out of March last year.
I also think the FED will have the wind at their faces for the remainder of the year, and they will not be able to handle the next crisis with political will against them, having failed the first time, and being exposed for a smoke and mirrors attempt to hide the truth. IMHO.
Re: it was all a dream
Dave,
More amazing then HD rise is the break out that construction material stocks are having. Like they are really going to start building new houses again. Look at USG today. How much demand do renovations have for Dry Wall? That business is almost totaly new construction. Lucky for me I have completely given up on logical thought and fundementals in my trading. I caught the $18 break in USG and I am now trailing a stop.
Bob
Re: Almost done with inverses
"I suspect there is a lot of naked shorting of the inverses by the PPT and permitted by the SEC."
Come on, man...do you really suspect this? I wouldn't let conspiracy theories get in the way of making money.
SRS Green
Despite rediculios XLF pump. PPT snoozing.
Re: SRS Green
They swap back and forth between pumping REIT one day and other sectors the next.
I have to say, the spike in XLF today is pretty darned dramatic. I guess folks are thinking JPM's earnings somehow indicate a general return to profitability in banking. Of course most of their profits came from their trading arm and IB activities - I think it was like 75%. Gee, I wonder why bond trading is so profitable these days. Buy from the Treasury at the auction, sell to the Fed a few days later at a nice markup. Rinse, repeat. And lever up on those treasuries, with money borrowed at 0%. Collect the spread.
Must be nice.
Here is the "Stability" the government has attempted
They are now over-extended/broke beyond all measures, and at serious risk of collapse.
http://tinyurl.com/y6tp89y
Do you really want to add to your 401(k) here? Or buy a house?
Intel is not going to reach where it traded last night...
hmmm..
SPXU
Readying the trade. Be vigilant. 1215 my first layer, at least of today's thinking.
Re: Intel is not going to reach where it traded last night...
damn close though, it maintained the vast majority of it's gap up on the announcement
Re: Intel Done
Did you think they would report earnings "less than expected"?
Same Joke, different Clown. Same ol'.
SECTOR ROTATION
Tech and Fins are about done. The entire market is abiut done.
Watch cash flows.
The only people buying Tech are the Managers with a clueless
clientelle.
Bill says the miners are the last off the dance floor.
It's an indication that there is no longer any hope anywhere.
Got Hope? :)
Is market overbought?
From the article in SF Chronicle:
Current Valuation
We can obtain earnings information from Standard and Poor's, and as of the end of March 2010, we have the following estimated earnings per share for the index:
Estimated Reported Earnings for 2011 - $72.20 per share
Estimated Reported Earnings for 2010 - $62.09 per share
Estimated Operating Earnings for 2010 - $78.12 per share
Using the closing price of the S&P 500 on April 7, 2010 of 1182.45, the price to earnings ratio of the market is:
PE Ratio (Estimated Reported Earnings for 2011) - 16.38
PE Ratio (Estimated Reported Earnings for 2010) - 19.04
PE Ratio (Estimated Operating Earnings for 2010) - 15.14
http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2...
Glad the PPT reads - Sugar High?
SRS. We must rebel against these forces or our freedom will be lost forever.
Re: Is market overbought?
Maybe I'm simplistic, but I always ask where else can you put your money: Bonds? Stocks? Commodities? Real Estate? cash? Number 1 and 5 are a bit iffy, 4 is good but doesn't get you anything, so outside of a "normal" pullback, or a blackswan, where else you gonna' put it.
Rebel lets go, I'm thinking
Rebel lets go, I'm thinking we short all to ultrashorts and then use the proceeds to overthrow the government commie socio fascists that are in league with the Nigerians crypto neo fascists....WTF
WTF
I ask that question every day.
party hats once more
Well based on what I saw today, its time for some more party hats. We blew through 1200 and never really looked back. For those who are counting, that's 150 S&P points since Feb 8th, slightly less than a 15% move in 2 months. RSI D/W/M = 85/83/73.
For many industries, the crash never happened. For some, we're hitting all time highs. How that can happen when 20% of americans don't have work or are wal-mart greeters, 10% of us aren't making mortgage payments, and 25% of us are underwater, is really hard to fathom, but there it is. Can it continue like this? It sure doesn't seem reasonable, but then again neither did the market in 2000.
And our friend INTC today didn't sell off on the good news - speaking of which, it too is back to 2007 levels.
Trading at:
new highs: consumer staples, retail
2007 levels: healthcare, consumer discretionary
2008 pre-crash: semis, industrials, technology, REIT
not recovered: homebuilders, financials, basic materials, energy, utilities
Re: Rebel lets go, I'm thinking
this is a forum for TRADERS not tea party members.
there are no conspiracy theories, only what is happening in the market. there is no PPT.
those buying ultra shorts need to stop trading a market that happened two years ago.
Re: Is market overbought?
"where else you gonna' put it."
Ain't that the question.
IF the USD/USA is insolvent, why pile into the US
stock market?
Beats me, as I see all the US obligations as worthless.
Shorting stocks and buying physical Gold/Silver/Pt/Pd
And evev Cu, makes sense to me over the long term.
Re: Is market overbought?
YOU see US obligations as worthless. pensions managing trillions of dollars do not.
there's still PLENTY of value out there, especially in small-mid cap energy names. and corporate bonds. and big blue chip names that pay steady dividends.
why can some only see the allure of gold when there is so much better value out there?
Re: Is market overbought?
If the only reason for the market to go up is: "There is no other place to put it." or " There is a lot of money on the sidelines." that is when I start preparing my list of stocks to short. Surprisingly, My list of stocks to short is the same list of stocks that I'm currently long.
I believe in the old adage, that the market goes up and down on two things, interest rates and earnings. Lately, I have added dollar valuation. I base my market direction thoughts on those three things. Everything else is just noise or rationalizations IMHO.
Bob
Re: Is market overbought?
I agree mcgro2. It's hard to see why people just ignore everything that is going on around them and say the world is going to hell in a handbasket. I guess it helps balance out the market and fuels more upside growth.
As far as values go I have a list of small cap companies that are still trading at nice values relative to total cash on their balance sheets and cash flow and that's where I will/have be(en) investing my money.
Re: Is market overbought?
TOF I guess it's a matter of what you look at to assess "how well things are going." I too find things to buy, but they're usually things that tend to be out of favor. Like my unfortunate foray into utility stocks, for instance. :) Ah well at least I get my 5% dividend. Its tough for me to buy into sectors that have a triple RSI > 70 and whose valuations approach or exceed pre-crash levels while 20% of us are out of work, 10% aren't paying mortgages, property values are down 30%, and 25% of us are underwater and unable to move.
I avoided the whole dotcom boom too, because it just didn't seem reasonable. If the macro situation doesn't seem to be reflected in current prices, its really hard for me to buy.
TOF are you still in ACMR, I
TOF are you still in ACMR, I decided to ride this one out, I am looking at the chinese stocks, CELM,SOKF.ob,ONP,CHME,NEWN.ob. These guys seem to have real earnings and discount to their P/E is due to uncertainty about Chinese investment law but it seems to be true value to me. Also in PRGN,REDF,CRIS. I like your thought process, are you using screens to get your ideas or just through reading, Thanks
Re: TOF are you still in ACMR, I
ebelog - great move sticking with ACMR. Funny you should mention it because I have some cash right now in my 401k that I'm going to be considering putting into the following: ACMR, NLS, REDF, and a few others. REDF is the only one I am holding right now. I actually just finished printing off the 10k's on NLS and ACMR and will be going through those tonight. I'll let you know if I find any diamonds somewhere in that rough.
Buy!
Buy!!! What a joke. Please buy some more! I will take the other side any day.
BUY!!!
Hey bolus your are entitled
Hey bolus your are entitled to your opinion and certainly I am hedged a bit but being a permabear is going to get you nowhere
addicted to oil
'What CAN people do?' to live without oil is the next question. People powered bicycles running your television are just examples of existing medium tech responses that will probably end obesity as well! For those who doubt the degree to which we are addicted to cheap oil, check out the Engergy Bulletin from the Post Carbon Institute for some intrigueing articles: http://www.energybulletin.net
Re: Hey bolus your are entitled
He/She is the first person I have actually had to put on ignore here. Not because I don't want to hear negative people...just that his/her posts are pretty much useless.
NLS
I took another look at NLS's chart...looks like its clearly using the 50 DMA as support.
http://stockcharts.com/h-sc/ui
Re: Is market overbought?
bobbyo,
"I believe in the old adage, that the market goes up and down on two things, interest rates and earnings. I believe in the old adage, that the market goes up and down on two things, interest rates and earnings."
No, the market goes up and down and a whole variety of things — currency fluctuations, hype, government numbers, momentum, and for some the alignment of the planets.
All of the 1990s the tech boom was totally irrational. The biggest gainers had 3-digit PEs.
If you try to use rational, accurate economic info only when trading you should stop and park in bonds until a trend is established.
Anything else will be pure frustration.
Just one guy's opinion.
Re: Is market overbought?
"Just one guy's opinion"
Make it two.
Interest rates and earnings, as two reasons for market movement - I will have to disagree here...
There is just one reason for any price change - imbalance between willing buyers and sellers. If you accept this, then your next step is inevitably: what influences their decisions? You will immediately see that there are way more factors than those two - reasonable and not so much, logical and emotional, right and wrong, economy based, chart based, mood based, personal financial circumstances based and whatnot. Just as in life itself, the universe of factors influencing decision-making process is endless. By extension, being a conglomerate of human beings' decision-making process, the market is as rational as the human beings themselves are - and we all know about that.
Major principle, however, remains unchanged: if you want to profit from price change, you are going to have to read the footprints of market participants that move the price by creating that imbalance. Whatever reasons they, participants, have is immaterial; trying to predict those reasons and how they change their intentions is a surefire way to losses and frustration. Reading the manifestations of their intentions as they appear on the tape - that would qualify as speaking the market language.
Get Shorty
http://www.youtube.com/watch?v=8RHBOfM9CFQ&NR=1
If you've been short, you can identify with Harry Zimm/Gene Hackman.
And if you opened shorts today during the spike up, you can probably identify with Ronnie Wingate/Jon Gries.
Don't mess with Ray Barboni, man.
Having said that, I have no problem starting to play the short side tomorrow. But only a day at a time.
Re: Is market overbought?
"There is just one reason for any price change - imbalance between willing buyers and sellers."
For whatever reason, this statement made me think about algorithmic trading. I guess it's still true that it's an imbalance between the buyer and the seller when talking about automated trading systems and their affect on the market, but it's hard to imagine that these systems have many factors other than pattern recognition. Of course "pattern recognition" includes a lot of inputs in itself like bid volume, ask volume, price, etc. Maybe I'm completely wrong though. Maybe there is a human component to these systems where the operator can set them to a certain mode.
The more I think about it the more convinced I am that there is a human input to these systems. Otherwise, the boss couldn't say "we just got word from corporate that we are switching our strategy and no longer pursuing short positions in X." So now I'm curious. Does anyone have any insight into how the prop trading employees interact with the algo trading systems? That would be useful in understanding the modern market dynamics.
Re: WTF
If it makes you feel any better, you have sentiment on your side:
http://www.sentimentrader.com/
Re: Is market overbought?
in terms of algo human input "dial" sentiment I'll refer to quotes from Jim Simons (Rentech, one of the originators of high frequency trading)
"You have to keep coming up with new things because the market is against us. If you don't keep getting better, you're going to do worse. Our models change weekly."
"It’s about discovering something new, something that wasn’t known before. And you don’t find that out by reading books or looking in the library. You need creativity, and you need ideas."
it's behavioral, and it's evolutionary. thus i would imagine there is a large human input, even if it's HAL pushing the buttons.
UPS doing well means they are delivering lots of "STUFF"
And that means someone else is SELLING that stuff, IMO.
Do I think the market is getting too happy, YES, but things have to get silly before its safe to short again, I think. To the point where the shorts are cleaned out and beaten to a pulp, like by options expiration, when tops or bottoms seem to be pretty common, or maybe by the Fed meeting, if options expiration doesn't end it, would be my guesses.
"We are doing the work of God" - Blankfein
Re: Is market overbought?
mcgro2 (sheesh, try to say that three times quickly),
thank you for this post. There are so many myths, most of them on the verge of grotesque, about program trading that I am happy to see this calm and reasonable post. Program trading is very far from what many think, and very close to what you described. Human input is constant and plays huge role. Not only programs keep changing to discover and utilize micro-inefficiencies - there is also human input in selecting which program to run out of several available at any time, depending on market conditions. In this sense, those programs are just one of classes so to speak of the market participants.
I know a guy, great trader, who set on a path of designing a trading program for himself many years ago - and succeeded. Now, get this. He started with idea of going to the beach while his program makes money for him. His eventual result as he described to me laughing: oh, it works, alright - but I have to work along with it, and I am as far from going to the beach while it trades as I was at the very beginning. The difference of course is in something completely different - speed, number of open trades, recognition and utilizing of inefficiencies that appear and go away too fast, not getting tired etc. But his program is in fact him trading, his understanding materialized in the program.
Vad... I Found it... Important Clue...
( re: ' Big Money's Footprints ' )... http://sunwalked.files.wordpress.com/2009/07/big-f...
CTA Q1
ALOHA!!
Its right at three months(Q1)since the CTA CONFERENCE 2010. The four resource TSX listed stocks I picked to present on are as follows:
RED BACK MINING(RBI)- 38%+
MEDUSA(MLL)- 27%+
CENTERRA(CG)- 8.5%+
EXETER(XRC)- 7.5%+
Re: Vad... I Found it... Important Clue...
There you go!
Re: Is market overbought?
Yes, overbought! That statement and $1 may get you a good cup of coffee, if you know where to shop.
Yes, behavioral! Humans do the analysis and programing. Whether they are PH'Ds in math (as was the case in LTCM a decade ago) seems to matter little.
Evolutionary? Now that's a tough one because, well, it can evolve. "Models change weekly" seems too fast for model change, IMO, unless including changes by Microsoft to Windows (LOL).
Sadleb, the only insight I have to algorithmic trading during the last six months is through my subscription to stopsandtargets.com. It's not designed for the VST or intraday. I have been told and believe that it was designed for mutual funds: ST, IT and LT. (I know, most MF's lag the market.) What I am liking with this platform is that it shows me, without emotion, what is the gain to risk ratio for a trade on the major indices (which is my level of subscription so far).
Presently it appears to be unfavorable.
Trader Blows Whistle On Gold & Silver Price Manipulation
In case you missed it:
"if 100 clients requested their bullion bars be delivered, the exchange could only give one client the precious metal."
from the NY Post :
http://tinyurl.com/y7byq27
Re: Is market overbought?
"Major principle, however, remains unchanged: if you want to profit from price change, you are going to have to read the footprints of market participants that move the price by creating that imbalance."
Vad Sheesh,
"Market participants that move the price." In other words the smart money. Well you tell me the interest rate or the earnings beforehand and I will not have to follow the prints I will already be there. What does the smart money want? The stars aligned; an Elliot gamma ray 4; a sleeping, cross-eyed, retarded doji; a sell side guy saying there is great value out there; Nemo saying all other investments suck might as well get robbed in the market. No I don't think so. The smart money wants a liquid environment and earnings growth. Right?
Of coarse, Dear Sensei since I don't have the prior knowledge I am going to try and follow the footprints. I have been very disciplined lately.
Your Humble Pupil,
Bob
Re: Is market overbought?
"Well you tell me the interest rate or the earnings beforehand and I will not have to follow the prints I will already be there."
Really? :)
How long do you think it's going to take me to dig out an example of a drop on good earnings? :)
And anyway, the point is - you can't know in advance none of those two you mentioned or zillion others of equal importance. So, how else do you profit from the market but by reading the footprints, a.k.a. tape a.k.a. chart.
japan turning up the heat
Japan’s ruling party has called for drastic monetary easing to devalue the yen by 30pc and halt the slide into deflation, putting it on a collision course with the Bank of Japan.
http://www.telegraph.co.uk/finance/financetopics/f...
All I have to say is wow. Japan is opening up a can of serious whup-ass on its own currency. A 30% devaluation? One wonders what this will lead to. I'm guessing it's generally positive for commodities...
If JAPan's people think's
If JAPan's people think's this is true we will have a buyer of our debt and a race to the bottom of the toilet bowl will begin. T note positive, not sure about commodities priced in americano though. Reduced 30% relative to what US$
Bob
Re: japan turning up the heat
The Bank of Japan’s governor, Masaaki Shirakawa, told lawmakers that it would illegal to fund state spending by printing money. “History has proven that central banks directly buying government securities caused severe inflation and dealt a blow to the economy."
Mmmh ... What did the Fed do? But wait, I think, this time itäs different.
The Economic Teddy Ruxpin
http://ronsen.blogspot.com/2010/04/economic-teddy-...
- The economic Teddy Ruxpin
- The next Term Auction plan?
- New mission statement from the Fed?
- SOS
Re: Buy!
bolus,
Word of advice, which I hope you appreciate.
By continuously showing bias without substance, whether that bias is bearish or bullish, you are quickly putting yourself into a position where independently minded people here are tuning you out.
So, if you care to make yourself relevant as a participant, I recommend you tell us the essential reasons behind the statements you are making. The upside will be that you join a discourse where you'll get to share the insights and analysis of others, which is invaluable, and the others won't just hit the 'ignore' button.
Thanks.
Re: japan turning up the heat
davefairtex,
This is an interesting situation that puts the spotlight on the dynamics between politicians and central bankers. What the central bankers are saying here is that any government as large as Japan can go to currency war but there will be other governments that fight back, and ultimately the only winner is global inflation where all people lose except those who control commodities that are in limited supply (e.g., consumables like crude oil and agricultural products as well as precious metals).
For years I have been saying that governments and central bankers of the world need to work out a new General Agreement on Currencies. Either that or stop all international trade and investment flow to and from the countries that purposefully upset the economic balance.
Re: Vad... I Found it... Important Clue...
LOL!!!
Follow the BIG MONEY!
Cara 100 Ratings Changes
CVX - Credit Suisse Resumes Coverage with an Outperform. PT Raised from $80 to $93
LLTC - PT Raised from $23 to $26 @ Auriga U.S.A. Sell
NKE - PT Raised from $80 to $86 @ Citigroup. Buy
XOM - Credit Suisse Resumes Coverage with a Neutral. PT = $75