CTA Trading Desk Morning Report
[7:00am ET] Good morning. There are a great many cross-currents hitting the market this week. News stories abound that highlight the negatives or at least the perceived negatives of the People’s Bank of China tightening, Ireland in dire financial straits, inflation rearing its ugly head in many countries like China and the UK, and QE2 pitfalls.
The US equity market this morning is likely to open down about -3.5% from its cycle high set on November 5, just seven trading sessions ago. In the gold market, most of the gains made in early November have been lost, and the goldbugs are in disarray. Bond prices are collapsing as yields are skyrocketing. What next?
Judging from the equity market sell-off in Asia-Pacific and Europe today, traders are obviously concerned that a Bear market might be starting. Could that be happening?
That’s the problem with Bear markets, you don’t recognize them until they have seized your wealth. All we can do is watch the prices and make decisions, some of which are bound to be wrong.
Here are the opening snapshots of the latest equity market trading results for Europe, and futures prices plus 5-minute charts of the futures for S&P 500, 30-year US Treasury Bond, US Dollar index, Gold and Crude Oil.
| Symbol | Name | Last Trade | Change | Related Info |
|---|---|---|---|---|
| ^ATX | ATX | 2,691.04 |
 15.81 (0.58%) |
Chart, More |
| ^BFX | BEL-20 | 2,630.17 |
1.47 (0.06%) |
Components, Chart, More |
| ^FCHI | CAC 40 | 3,799.88 |
67.47 (1.74%) |
Components, Chart, More |
| ^GDAXI | DAX | 6,738.67 |
51.50 (0.76%) |
Components, Chart, More |
| ^AEX | AEX General | 341.83 |
3.00 (0.87%) |
Components, Chart, More |
| ^OSEAX | OSE All Share | 449.38 |
5.06 (1.11%) |
Components, Chart, More |
| ^SMSI | Madrid General | N/A | 0.00 (0.00%) | Chart, More |
| ^OMXSPI | Stockholm General | 344.35 |
4.17 (1.20%) |
Components, Chart, More |
| ^SSMI | Swiss Market | 6,515.89 |
1.10 (0.02%) |
Chart, More |
| ^FTSE | FTSE 100 | 5,735.14 |
85.27 (1.47%) |
Components, Chart, More |
http://finviz.com/futures.ashx
http://finviz.com/fut_chart.ashx?p=m5&t=ES
http://finviz.com/fut_chart.ashx?p=m5&t=ZB
http://finviz.com/fut_chart.ashx?p=m5&t=DX
http://finviz.com/fut_chart.ashx?p=m5&t=GC
http://finviz.com/fut_chart.ashx?p=m5&t=CL
The team will check in during the day, reporting in the Discourse when there is a new entry.
Enjoy your day.
Cara on Trends & Cycles
As I see the big picture, it is the value-oriented stocks (second chart series) that may be softening ahead of the growth-oriented stocks (first chart series). That usually doesn't happen in a Bear phase, so I think we need to wait a couple days before deciding the Bear is here for more than a whiff.
Growth indexes:
Value indexes:
Vad's Catch of the Day
Kaimu's Korner
SOUND MONEY
Stephen Wellman
November 16, 2010
A DAY AT THE TREASURY
Let’s look at one day at the US Treasury, November 10th, where no marketable debt was issued, but the withdrawals (spending) from the Federal Reserve Account continue unabated. I think I will start to express US Treasury debt issues and spending in non-USD terms, in terms we can visualize more easily and relate to more in our daily lives. In terms of true “asset value” not “mouse click value”. It’s real wealth versus false wealth … Introducing the VALUE DESTURCTION CONVERTER!
Here is a spreadsheet to express one day of spending (outlays) at the US Treasury, for November 10th. Note that these outlays are withdrawals from the US Treasury’s Federal Reserve Account. The same account where tax revenues and debt issues are deposited. Also notice I have included one day of debt issues from last Friday, November 12th.
While it took Warren Buffet 44 years to build BRK.B market cap to $198.56BIL USD it only took the US Treasury 9.56 days to destroy BRK.B market cap value based on outlays for one day. Also notice that it took the US Treasury 1.81 days (43.44 hours) to destroy the value of BRK.B with one day of debt issues.
Over at GLD it only took the US Treasury 2.74 days to spend the value of the GLD gold inventory, while one day of debt issues on Friday wiped out the value of the entire GLD gold inventories in less than 13 hours.
Then what is an average US house worth over at the US Treasury? Literally a nano-second! It may take you 30 years to pay off your mortgage, but the US Treasury does it in seconds … tic-toc … tic-toc, your house is paid! Notice that on November 12th, last Friday the amount of debt issued represented over 49MIL% of an average priced US home. Put another way the US Treasury could have issued a check for $223,000USD to over 490,000 American citizens, about half the population of Honolulu, Hawaii.
Now look how fast the average working American’s wage vaporizes at the US Treasury. Just one day of spending at the US Treasury exceeds the average American’s annual wage by 57MIL%. One day of debt issues exceeds the average American’s annual wage by 303MIL%!! Why work when we can just issue debt? With one day of spending at the US Treasury every person in America could get a check for $68. Times that by 5 days a week, times 52 weeks in a year and we could all have an annual salary of $17,680.00USD and not even have to get out of bed. Talk about some righteous STIMULUS …
The question then becomes … “Are GLD and BRK.B and XOM values too small or is the US Treasury just too USD bloated?” I would be willing to bet, and I have placed that bet, the value of the US Treasury and therefore our sovereign credit rating and the USD are way overvalued compared to real “asset value”, the kind of value Warren Buffet speaks of at every Berkshire Hathaway shareholder meeting. The US Treasury is in the demolition business using its vast supply of “Weapons of Mass Liabilities”! The US Treasury destroys value every day they open their doors for business-as-usual. This reflects on the value of foreign trade denominated in and paid for with a USD. Never forget that the US Congress manages the US Treasury and they have been diluting shares in the USD for as long as I have been alive, not just diluting, but diluting with incredible hubris.
When the US Treasury can spend the entire GLD inventory in 2.74 days what does that say about the USD? This is not US FED QE, but US TREASURY QE on a massive scale, a scale of massive mal-investment as most of those newly minted and spent USD are being poured into entitlements for citizens(riot insurance) as well as welfare for major multi-national corporations and unions. When a BRK.B is spent in 9.56 days what does that say about the World’s Reserve Currency? What does that say about the global governments who export to the USA, the same G-20 members that allow such long term fiscal abuse? It says the entire system of globalization that was designed to support trade is corrupt, because the money used in the foreign exchange for goods and services has no functional “store of value”. Goods and services traded are being exchanged for promises to pay in the form of a debt derivative, a USD.
Let me leave you with a quote from Ben Bernanke when he was being interviewed by Senator Sarbanes during his confirmation hearing, before the Senate Banking Committee, which took place almost exactly five years ago today on November 15, 2005. Senator Sarbanes asked Ben Bernanke about the potential danger of a derivatives market meltdown and even mentioned Warren Buffet’s famous description of derivatives as time bombs. Here is how Ben replied to the Senator’s concerns …
BERNANKE: "I am more sanguine about derivatives than the position you have just suggested. I think, generally speaking, they are very valuable. They provide methods by which risks can be shared, sliced, and diced, and given to those most willing to bear them. They add, I believe, to the flexibility of the financial system in many different ways. With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly. The Federal Reserve’s responsibility is to make sure that the institutions it regulates have good systems and good procedures for ensuring that their derivatives portfolios are well managed and do not create excessive risk in their institutions."
*courtesy of the Cunning Realist
Who was it that ended up being “most willing” to bear these derivative risks? Of course the US FED under Ben Bernanke failed to regulate any derivative risk at all, by design. The US banking sector operates under the motto … “It works until it doesn’t”!
Just remember that Ben Bernanke’s predecessor, Alan Greenspan, assured Congress many times that the derivatives market needed no regulation at all. Certainly both of these US FED Chairmen have been proven as incompetent under-performers for decades now, yet Obama reappoints Ben Bernanke any way because he “saved the economy”. Hummmm … but who destroyed it Mr. President? Indeed failure is undeniably rewarded in Washington DC no matter which political party is in power.
IT’S THE “DEBT”, STUPID …
CTA Trading Desk Mid-Day Report
CTA Trading Desk Post-Close Report
Good evening. Patrick here. Last Friday evening we wrote:
The markets have looked tired for several weeks but have steadfastly refused to sell off until now. It remains our feeling better entry points will be available for patient buyers so it makes sense to “let prices come to you.”
Prices dropped sharply again, indeed “coming to you”, sovereign debt concerns dominating the news today, the long-awaited correction unfolding before our eyes (S&P-1.62%). The S&P has now fallen about -4.0% from its early November peak, nearing our expectation of a pullback in the 5-8% range.
Downside points of interest are at the following levels:
– 50-day at 1165
– 1156, .382 down from the 1227 peak
– 1150, the January high
– a tight cluster near former summer top at 1130, including 1132, the 89-day moving average and 1134, the 50% retracement of the autumn advance
These are areas buyers would be expected to enter the market; traders should closely observe the price action at each level to determine whether supply or demand has the upper hand. If a price point can attract enough underlying demand at an auction area it means the price has gotten too cheap, attracting an abundance of interested buyers. Motivated buyers will then have to lift offers, pushing prices higher to purchase their preferred allotment.
Normally, the first trip back to an old resistance area (now support) will stem the tide of selling, at least temporarily; S&P 1130 would be a logical place to expect this down wave to end.
The GM IPO hits the market soon, and CNBC is breathlessly telling its viewers the IPO will be a smashing success. GM supposedly is raising the amount of shares it will sell a sign of overwhelming demand – bring out the pom-poms!
But consider this: if the biggest IPO of all time is going to be bought heavily by fully invested institutions, won’t they have to raise cash before they can commit heavily to the GM stock offering. Do you really think Government Motors is suddenly a model of efficiency, a powerhouse financial juggernaut? And if the IPO pops 10% from the issue price doesn’t that mean we the taxpayer get a raw deal since our revenue challenged government is the main owner of the company?
Keep in mind the Thanksgiving week is seasonally bullish for stocks -another reason to look for a short-term low relatively soon. Implied volatility has popped up nicely in the past few days (VIX+11.78%) and normally comes under pressure just before the Turkey Day holiday. Therefore it makes sense for options traders to use a short put position as a way to craft synthetic long stock positions.
Rallies up to the 20-day exponential moving average (1196) will draw sellers into the market, previous support now resistance.
Have a great evening.
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Comments
The Snapshot Trader- Cloudy with a chance of screwballs
So yesterday it was buy-out mania, and this morning the media wafts an Irish-Chinese spear into the headlines.
There is another definition of screwball: 'A pitched ball that curves in the direction opposite to that of a normal curve ball.' Were we to fade the media pitch we would be buying into the 'just a pullback' take that seems to be making the rounds. What if it's a screwball pitch that we should in fact turn into?
It's almost easier having no time to game it right now. I see the same RSI snapshot this morning, and plan to take a pass on trading today.
The Usual Suspects
"Activists for banks, hedge funds and other firms have logged hundreds of meetings with federal regulators since the bill was passed. Many seek exemptions from key provisions."
http://tinyurl.com/28d4msw
They say that China is crashing down
But after having gone up about 35% from its July low and almost 20% (!) from the beginning of October.
The Bombay stock index (India) and Bovespa (Brazil) are still very close to their ATHs, just like Doctor Copper. China is still 50% off its high in 2007. One could argue that we are seeing a series of double and triple tops across the board, but if those tops are taken out buyers could get very agressive, especially if copper confirms with a break-out.
Cara 100 Ratings Changes For POMO Tuesday
Good morning.
POMO Injection Scheduled Today (4-6 billion).
8:30 - PPI (O.4% vs 0.8%) - Core PPI ( -0.6% vs 0.1%)
9:15 - Industrial Production/Capacity Utilization
10:00 - NAHB Market Housing Index
Cara 100 Earnings: WMT (.90 vs .90)
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BUCY - Goes to Neutral everywhere.
CAT - PT Lifted from $92 to $98 @ RBC. Outperform
CAT - Caterpillar initiated with a Positive at Susquehanna. Target $105
CELG - Celgene initiated with a Buy at UBS. Target $69
GILD - Gilead initiated with a Buy at UBS. Target $44
JOYG - Joy Global downgraded to Neutral from Buy at Sterne Agee based on valuation. Price target raised to $82 from $77.
JOYG - PT Lifted from $77 to $88 @ RBC. Outperform
JOYG - Joy Global initiated with a Positive at Susquehanna. Target $91
KO - Coca-Cola initiated with an Outperform at Bernstein. Target $71
POT - Potash upgraded to Sector Outperformer from Sector Performer at CIBC based on improving potash pricing and strong agricultural fundamentals. Price target raised to $160 from $150.
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"All warfare is based on deception."
~ Sun Tzu
Trading Tips Allegations rock Bay St.
3 years ago I saw an investigation of Ontario Sec Commiss Czar. There were about 2 busts in the past year compared to 2500 by SEC. The guy was pulling down a $1m salary and had nothing to say,. Looks like they've since pulled up their socks with a good piece of investigative work here involving a prestigious law firm, CIBC and TD brokerage operations, and an old boy network profiting from privileged info.
Chalk up a blow for social equity.
http://www.theglobeandmail.com/report-on-business/...
Mr. Finkelstein left Davies abruptly Thursday, and his name was removed from the firm’s website, as regulators accused him of being at the centre of a large insider-trading scheme that strikes at the heart of Bay Street.
He is accused of passing on tips of pending deals to an old fraternity friend from his university days, who in turn is alleged to have traded on the information and passed it on to others.
None of the allegations announced Thursday by the Ontario Securities Commission has been proven, and Mr. Finkelstein could not be reached for comment.
LATECOMERS
ALOHA!!
I like how the latecomers to the party are always having their trades touted. Where were you in 2001 Soros & Paulson?
Soros Cuts Gold Holdings for Third Straight Quarter as Paulson Holds Bet
bloomberg
Chanyaporn Chanjaroen, On Tuesday November 16, 2010, 3:11 am EST
George Soros, who’s described gold’s surge as the “ultimate asset bubble,” cut his holdings in the SPDR Gold Trust for a third quarter, while rival fund manager John Paulson stuck with his bet by maintaining the largest stake.
Yes George, and I have described the USD, due to the expertise of the US Treasury managers(US Congress), as the "ultimate liability bubble"! Which bubble would you prefer in a monetary crisis? Since 1913 the US Treasury has been turned into a political monopoly hedge fund managed by the members of Congress. Their performance since inception, as rated by the purchasing power of a USD, has been utterly abysmal.
Cara 100 Update
JOYG - Joy Global was downgraded at Morgan Stanley to Underweight. Valuation call, based on a $71 price target.
POT - PT Lifted from $150 to $170 @ RBC. Outperform
CS asks if China Consumer or Tech has the worst EPS downgrade
Credit Suisse reports on China:
• We believe most investors would have answered Tech, which is the wrong answer. During last week's trip to Europe, we were amazed at how many investors liked the China consumer story. They suggested that our P/B versus ROE valuation methodology failed to take into account future or compound earnings growth and that we use PEG ratios instead. As earnings appear to be at the heart of the debate, we highlight that since 31 August 2010, China consumer staples have been associated with the biggest downgrade (-9%) to 2011E consensus EPS. Tech is associated with the second biggest downgrades of 6.1% over that period.
• Korean Tech priced for halving in ROE, China Consumer for more than a doubling in ROE. With Korean Tech's 71% discount, we estimate implied ROE to be 10%, half current ROE of 19.7%. In contrast, implied ROE is more than double current ROE for Hengan, Tingyi, Want Want and Belle.
• We suggest a switch from overvalued China consumer names to Tech. We suggested a switch from overvalued China consumer names to cheaper consumer names like Kia Motors and Hyundai Mobis (Any cheap consumer stocks left?, published on 6 April) which were then priced for a halving in ROE. With Kia Motors and Hyundai Mobis up 91% and 66%, respectively, since April, and the CS regional portfolio up 12.2%, we now suggest a switch to Tech. Top picks in Tech from the portfolio are HTC, TSMC, Pegatron, Samsung Electronics and LG Display.
Rosie takes a barbell approach to equities
From today's Breakfast with Dave:
Crazy market this morning
One of my stocks closed at 10.79, opened at 11.29, zoomed to 11.60 in a couple minutes, crashed to 10.82 a couple minutes later and bounced back to 11.31 for a gain on the day so far of +4.82%. We haven't finished the first half hour!
Others are doing the exact opposite.
Cara 100 Update (Final)
CAT - Caterpillar upgraded to Outperform at Raymond James (pre-open).
JCP - J.C. Penney downgraded to Fair Value from Buy at CRT Capital.
PCK-Cali Muni's-Implode
Craig sent me this chart.
http://finviz.com/quote.ashx?t=pck&ty=c&ta=1&p=d
CME Raises Gold Trading Requirements
http://tinyurl.com/2b373le
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rut roh
Euro vs British Pound
0:31:23
Euro vs British Pound (UK) UK Chancellor Osborne: UK will not join the Euro under his tenure
- The Irish situation highlights the concerns on the sovereign debt situation
- Expects Irish budget news in the coming weeks (Note budget schedule for release on Dec 7th but various Irish officials have noted it would be brought forward)
**Reminder: The UK bowed out of the EMU single currency project in Sept 1992 (Known as the day George Soros broke the back of the BOE)
Re: Crazy market this morning/ SLW
Bill- Also brutal. This shakedown feels higher on the Richter scale than the ones we've had the past couple of weeks. It may end up looking 'average' point-wise, but the price action is wild. I'm actually starting to take a look at SLW...
Chinese solar companies getting trashed
Perceived risk is being sold. The Chinese solar industry apparently is facing narrowing margins from too much competition, and the stocks are getting hammered. But, as I see it a number of these companies have excellent fundamentals and alternative energy costs are rising, so on balance I will continue to be invested in that group.
Re: Crazy market this morning/ SLW
Throw SVM into the mix, down over 7% on the tsx and over 8% in the US
EU, Euro
Headline after headline on the wires about rising tensions in EU...
10:56:59
(GR) Luxembourg Fin Min: There exists no reason to avoid paying financial assistance to Greece
- Reminder: Early Austria Fin Min noted they would be withholding their assistance to Greece
09:49:43
German 10-year Bunds (GR) Greece 5-year CDS widens over 110bps to probe the 960bps level
**Reminder: Earlier today Austria Fin Min stated that Greece had not made EU commitments regarding public finances and it would withold its Dec €190M installment of Greek bailout
10:08:05
(GE) German Fin Min Schaeuble: Affirms will not pressure Ireland to accept aid
- Greece gets alot of solidarity from Europe and Germany. but it can not be a one way street.
and a few more... looks like developments Euro is about to become a major market moving factor again.
Re: CME Raises Gold Trading Requirements
rut roh - like the Scooby-do reference. Time to sceedaddle!
Seriously, can anyone explain why CME has the silver marging requirement now at $7,250 while gold is "only" at $4,250? Is it related to volatility/#of contracts traded?
Seems backwards. Why isn't gold requirement higher than silver?
Silver will now slide down to < $24, which will help shorts cover?
Nothing but questions.
And now for something completely different: from an RSI perspective, there are many 2X short opps today. Bonds, smallcaps, S&P 500, you name it...
1180 falls on the S&P
1150 looks to be in the cross hairs. This thing is snowballing today.
Shorts may get aggressive here into options expiration.
FD: long SPXU & DZZ for a quick scalp.
CSCO @ 19.51
Feels like short-term capitulation has finally seized this stock.
Re: Chinese solar companies getting trashed
Would love it if these guys went public... Would be major competition against all ( including FSLR )...> http://www.pv-tech.org/news/_a/heliovolt_extends_c...
Re: They say that China is crashing down
Doctor Copper took a body blow, see here. This is about as confirmed a trend change as I ever see, with a nice backtest to add confidence.
just saying
Re: Chinese solar companies getting trashed
US made ( now if Congress would get off its collective ass and out of the deep money pockets, well )... http://spectrum.ieee.org/green-tech/solar/can-heli...
Re: CSCO @ 19.51/ Stopped out 19.40
Yeah, I know that seems pretty lame, but I don't like the action, and I don't need to be holding.
Cashed in Shorts
Couldn't resist. My SPY puts were up 180% so I cashed them in. Went back to the long side: Long BYD at $8.46, long ACI at $27.55, long PIR at $8.85.
My gut tells me this is all the bears get.
Guilty - Rep. Charles Rangel
Breaking News Alert: House ethics panel finds Rangel guilty of violations
November 16, 2010 11:58:16 AM washingtonpost.com
----------------------------------------
Rep. Charles Rangel (D-N.Y.) was found guilty Tuesday of breaking 11 separate congressional rules related to his personal finances and fundraising efforts for a New York college.
A House ethics subcommittee that handled the trial now sends the case to the full committee for the equivalent of sentencing.
http://tinyurl.com/2fa2c2z
J
Re: Cashed in Shorts
tof- Of course we're both just making predictions here, but I think we get closer to SPX 1150 before the selling lets up.
More on crashing muni bonds
iShares S&P National AMT-Free Muni Bd
http://finviz.com/quote.ashx?t=mub&ty=c&ta=1&p=d
Euro continues to tumble
S&P 500 future is closing in on 1170 as the Euro continues to tumble. Will 1170 hold?
... and I have a bridge to sell...
(EU) ECB's Noyer: Fed does not have a USD depreciation strategy; there is no chance for a EMU explosion; no central banks are seeking to devalue currencies
It would be funny if it weren't so sad
Re: More on crashing muni bonds
For those interested in tracking all bond ETFs: http://nexalogic.com/bonds.html, they are separated by corporate, intl, munis, and leveraged bond ETFs
Still adding some to the list. Many crashing but also many of these are still doing quite well since July and January 2010.
Re: More on crashing muni bonds
Bill,
Muni's aren't crashing. Closed -end funds are crashing. maybe an ARPS problem?? NAVs of these funds haven't changed much but they went from a premium to a 5-10% discount in a few trading days.
Volume is up big time.....so if no buyer shows up these discounts continue to blow out!
Here is a chart of a open end NY muni fund vs a NY CEF
http://finance.yahoo.com/q/bc?t=3m&s=FNYTX&l=on&z=...
other CEFs outside muniland are also crashing
DHF EAD PFL CHI
anyone hear of an ARPS problem?
http://en.wikipedia.org/wiki/Auction_rate_security
toby
thanks for the pictures.. really like the exterior arbor and patio.. today is full of rain in NC, so get to turn on the heat and do some molding work... building shutters ( 16" x 60" )from 1x6" tongue and groove ( yellow pine -spy ) today, if I have time.. take care.
I thought BEN is going to make me RICH with his POMO drugs :)
I bought tons of Calls options and went LONG big time the minute he announced the 600BIL of QE2, I believed he said he will drive stock market and inflate assets prices up to the moon :). So what happened? What went wrong there? Did I miss some thing or misunderstood him or some thing? Why I am bleeding today with the market and crying?? Shame on you Ben. Shame on you. We trusted you and put all our faith in you and you let us DOWN now big time..
FD: In case you have not realized it yet, I did the opposite of what I said above and I am a happy camper for the last few days so far. So I probably should say thank you Mr Ben, right? …NOT :)
Re: More on crashing muni bonds
Looks like munis are making a comeback. That would be good for the markets. This could be a good buying opportunity on those ETFs. Price Crash + Spike in Volume almost always equals buying opp.
Re: Cashed in Shorts
I agree, both VIX and dollar hit BB today on daily charts. I sold the reminder of EDZ. It was a good trade and I plan to reenter soon.
Still holding some UUP just in case and I did not give up on UNG yet.
My gut tells me bears will get a second chance after a multi day rebound.
See Kaimu's Korner
In the commentary at the top of the page.
how much lower, how much longer?
Euro going down thanks to PIIGS... dollar going up... as least ugly on the block. But for how long? Is this time to start intiating small positions in SPY, DIA , EEM... or just sit it out for a while?
opinions on managed accounts
Good Day Carista's
A friend is asking me what the best course of action would be in trying to retrieve funds from an RBC managed acc. Apparently they are getting much resistence from their Rep. I have never used this approach leaving me with no understandig of the pitfalls. All opinions would be appreciated.
Re: how much lower, how much longer?
If you are looking for a long term position, it's probably too early. Short term, the trade could be actually profitable, I just opened a small equity position.
buy weakness....
Bill has put some really good "nuggets" out there. One on my wall is a 1" X 1" post it note that helps me eliminate emotion...."buy weakness... sell strength"! Last week got out of a few: VWO, SPY and DIA. Now looking at "weakness" is it time?
buy weakness....
Bill has put some really good "nuggets" out there. One on my wall is a 1" X 1" post it note that helps me eliminate emotion...."buy weakness... sell strength"! Last week got out of a few: VWO, SPY and DIA. Now looking at "weakness" again is it time to buy? Indexes down near 4%+... hard to step up to the plate, but maybe soon?
More on Municipal Bonds
By Michael Connor
MIAMI, Nov 16 (Reuters) - Awash in a deluge of new debt offerings, the U.S. municipal bond market on Tuesday was caught up in the year's worst sell-off that shows no sign of ending quickly.
Tax-free bond prices slid steeply for a second straight session, taking yields up in most maturities of top-quality, debt at a double-digit pace as high as 18 basis points.
Since Nov. 5, yields on closely watched AAA-rated 10-year and 30-year maturities on Municipal Market Data's benchmark scale have shot up by at least 40 basis points, a sharper, more concentrated change than sell-offs in March and September, according to MMD analyst Domenic Vonella.
Portfolio managers, analysts and bond traders said the increase in new deals was aggravating qualms about possible U.S. tax policy shifts, the credit worthiness of some issuers and ugly relative values compared with Treasuries.
Munis are a favorite of affluent, often-retired individual investors because they provide tax-exempt interest payments and are widely regarded as stable assets. Some portfolio managers have said a sharp muni-market correction was needed to raise yields to levels needed to lure individuals back.
Inflows to muni bond mutual funds, a key indicator of demand by small investors in the $2.7 trillion market that finances roads, schools and other infrastructure, have shriveled in recent weeks.
"It's a perfect storm," Vonella said.
Signs for a quick turnaround in prices were few, according to the latest weekly MMD survey of traders and portfolio managers. Bearish sentiment for the week ahead more than doubled from 36 percent to 79 percent.
Dour expectations for the coming four to eight weeks rose to 50 percent from 27 percent, according to MMD.
New offerings flowing from cities, states and other governments were a chief concern, according to a survey.
This week's new deal calendar was forecast to nearly triple to $24.4 billion this week, although a chunk of that was taxable debt, mostly in the form of Build America Bonds. Tax-exempt supply was estimated at $8 billion to $10 billion.
Prices of AAA-rated munis tracked by MMD fell enough at midday to lift yields by as much as 18 basis points, according to MMD's preliminary reading for Tuesday. Tax-free yields jumped as much as 12 basis points on Monday.
On Monday, yields on top-rated 30-year bonds finished up 11 basis points at 4.31 percent. The 10-year closed at 2.75, up 11 basis points from Friday, according to MMD.
Meanwhile, some issuers were choosing to get out of the way of the week's huge supply as several competitive bond sales were postponed. A $380 million Wisconsin Health and Educational Facilities Authority revenue bond issue for Aurora Health Care was downsized to $142 million due to market conditions, according to a market source.
A $180 million revenue refunding bond issue for Georgia's Gwinnett County Water and Sewerage Authority was pulled after the county on Tuesday rejected all the bids it received due to market volatility, said Michael McDonald, a financial advisor at Public Financial Management.
"We were not able to achieve the required savings on the deal," he added. (Additional reporting by Caryn Trokie in New York and Karen Pierog in Chicago; Editing by Andrew Hay) ((michael.connor@thomsonreuters.com; +1-305-810-2688; Reuters Messaging: michael.connor.reuters.com@reuters.net)) Keywords: MARKETS MUNICIPALS
Re: I thought BEN is going to make me RICH with his POMO ...
Good for you. I tried to do the same and got stopped from all my trades before they became profitable.
Fortunately, I reentered some of them with good results since.
Re: More on crashing muni bonds
It seems to me munis are like anything single category — some good and some bad. I would expect California munis to be terminally ill, bu there are likely to be some which are OK. If they are packaged in a fund who knows?
Re: More on crashing muni bonds
My stepfather has been investing in munis for 20 years and pretty much exclusively for the past 10 years after he got burned by Lucent. He's always touting them to me.
Rubicon Minerals
I noticed that while most gold juniors are down, Rubicon is catching a bid. Up a nickel on TSX, down 3 cents in US. No news.
trin
Printed 2.09, yesterday 2.07, pulling back, maybe that was it's hurrah! for today. No bets on the future.
J
Fed's mandate is questioned in Senate
14:44:38
(US) Fed Spokesperson: Fed's dual mandate is appropriate, not looking to change its statutory mandate
***Reminder: On 11/16 CNBC reported that Senator Bob Corker (R-TN) urging change of Fed mandate to a single inflation-oriented mandate.
10:13:42
(US) CNBC reports Senator Bob Corker urging change of Fed mandate to a single inflation oriented mandate
- Similar to comments from Senator Ryan made on CNBC yesterday, urging that the Fed drop its other mandate of fostering full employment.
Re: More on crashing muni bonds
MilesSquare explained it well - the Muni ETFs are crashing and not the actual Munis. Or, at least more so.
Looking at Muni CEFs for New Jersey, after trading at over a 5% discount yesterday and making new 52-week lows briefly earlier today both are up 1.5%
Wondering if they have bottommed and perhaps a time to buy them. 6% tax free yield does look good.
IWM puts sold, Reloaded DGP and added RBY at 1330's gold
IWM puts sold
Went 100% long DGP and RBY at 1334-1 gold fut
Will buy 1 oz coins if we hit 1300
This, IMO, is a panic to scare American investors out of stock/commodities and into US govt debt, which I would bet is being sold to us be the rest of the world.
Anyone that panics will find themselves the proud bagholders of US debt.
toby and jobs1
picked up this just now from Yahoo... http://www.scimitarequity.com/upload/ASTM-Q1%20201...
Re: CME Raises Gold Trading Requirements
Silver is down 0.27% today. Interesting. Somebody certainly supports it on a day like this. Gold shows -1,60% which means silver could easily be down 3%, but it is not.
Re: Fed's mandate is questioned in Senate
"Too many people forget that the Primary Mission of the Fed has nothing to do with unemployment, inflation, etc. Their true reason for existence is make sure the banking system survives. If that survival is threatened, the Fed will do whatever it takes, including actions that cause double-digit unemployment or inflation." via Mind on Money
My theory what is REALLY taking place
China raises rates. This eventually will raise the yuan value, just as requested by the US Govt, but kills commodity and stock prices in US Dollars. They knew that would happen. When Americans dump their stocks, their money goes to money market funds, who invest it mostly in US Govt treasuries. China is selling us those treasuries back right now, and buying commodities and stocks via their various funds and ownership of funds with the money, thus exiting them from their US dollar positions.
Once they have exited, they will own the commodities and companies instead of US debt, then the dollar can be allowed to fall hard, with the panicked Americans as bagholders of the bonds and treasuries.
I wonder how many days of panic it would take to accomplish this?
Buy weakness....
jack... man how do you guys do it? i just picked up a little SPY and DIA and it took a few seconds to hit "enter". Took your advice for a profitable trade. Long term depends on the the days ahead, big enough bounce and I'll move on.
Being new is hard enough, but actually pulling the trigger is even harder! I have watched and read you guys for years, you are some smart dudes!
Re: More on crashing muni bonds
mSquare & TOF,
I just came back from a seminar on bonds and what I got was there are an awfully high number which are super risky, but if you do your own homework there are some which have been brought down with the crowd that are quite secure and paying better than a lot of other LT investments today.
As an Illinoisan I wouldn't touch ours for anything. Our just elected governor bought the job by adding to our already $13 B debt and most cities are in dismal condition with little chance of a pickup in jobs. Job quality is falling in number of hours, wages and benefits.
Here in my city we have high unemployment, a massive inventory of unsalable houses, a huge unfunded state pension mess and our city is laying off cops — not a good risk at any yield.
No opinion on New Jersey though.
Re: Fed's mandate is questioned in Senate
ALOHA!!
Unreal ... Who is questioning the US Senate's mandate?
Some feel good news to finish the day with
http://blogs.telegraph.co.uk/finance/ambroseevans-...
Re: Buy weakness....
Enter a stop marked order on your new shares and you don't have to worry about it. It you are right, sell on strength and win big. If you are wrong, you will get stopped out (hopefully losing only small money).
Re: Guilty - Rep. Charles Rangel
A totally useless verdict. There will be absolutely no punishment. He was reelected and will not even be made to stand in the corner. Congress is an elite society and untouchable.
We need constitutional change to bring these people back down to our level.
He walked out of the proceedings saying his "...he had no political money left to cover the cost of a legal team."
Anyone else would have to defend against the government with their own dollars and to walk out would bring charges of Contempt of Congress" (to which I must plead guilty).
gold
Gold bounced off its 50 dma today (at 1330). If the bull move in gold is still alive, this might be a good entry point. Of course if the buck continues up, I'm guessing I'll get stopped out.
FD: I re-entered UXG and got some gold today
just a while ago....
... interested to see what happens to a couple of others in same research... http://finance.yahoo.com/news/Human-Genome-Science...
Longer (Than)
No, not another song by Fogelberg. Rather, it seems to be a signature move by the Market that enables it to foil almost all entries.
Bought CSCO in the early minutes of the after-hours sell-off last Wednesday at 22.50? They take it down to 21.50 an hour later. Bought at 21.50? The stock opens at 20.50 on Thursday. Bought at 20.50 on Thursday? Closes at 20.15. Bought at 20.15? Closes Friday at 19.95. Bought at 19.95? It didn't touch 19.95 today. Bought at 19.70 this morning? Sells off to 19.50. Bought at 19.50? Sells off to 19.43. Then 19.34. Closes at 19.43.
The same dynamics apply to the indexes. How long does the sell-off last? It could end tomorrow. Or it could go on longer than we think possible.
Bankruptcy, City of Hamtramck
http://tinyurl.com/34szoa6
Found on Zero Hedge.
----------
Hamtramck seeks state permission to file for bankruptcy
Mike Wilkinson and Paul Egan / The Detroit News
Last Updated: November 16. 2010 6:02PM
The city of Hamtramck, desperate for cash, has asked the state for permission to take an unprecedented step: filing for bankruptcy.
City Manager Bill Cooper said the city of roughly 20,000 people is staring at a $3 million deficit, fueled by a dispute with Detroit. Unless Hamtramck files for bankruptcy, it won't be able to pay its nearly 100 employees or 153 retirees, he said.
From The Detroit News: http://detnews.com/article/20101116/METRO/11160411...
J
Re: Guilty - Rep. Charles Rangel
Unfortunately Grym,
I expect you are correct. These elected politicians seem to commit just about any crime and nothing much happens to them, just like the banksters and mortgage fraud criminals and the politicians who enabled them. When they are slapped on the wrist, they get to keep their cushy taxpayer pensions, just like the mayor of Baltimore City who was recently forced from office for illegal activity.
http://en.wikipedia.org/wiki/Sheila_Dixon
"On January 9, 2009, Dixon was indicted on twelve counts, including perjury, theft, and misconduct. The charges stem partly from incidents in which she allegedly misappropriated gift cards intended for the poor.[2] On December 1, 2009, the jury returned a "guilty" verdict on one misdemeanor count of fraudulent misappropriation. On January 6, 2010 Dixon announced her resignation as Mayor as part of a plea agreement, effective February 4, 2010."
J
Re: More on crashing muni bonds
In the fall of 2008 Muni Closed end funds traded with 7-8% tax free yields and 25-30% discounts to there NAV net asset value.
But that was another TOG
http://stockcharts.com/h-sc/ui?s=muj
last five days has been a Crash for this group. can we go back to those levels?
One of the greats, 2 nd/... He is missed...
http://www.youtube.com/watch?v=ZdDwm3QIwfg
Re: Bankruptcy, City of Hamtramck
Damn. I remember making the run to Hamtramck from Ann Arbor several times in 1978-79 when I drove briefly for Yellow Cab. It was usually a small package (probably a precision part of some kind manufactured in Ann Arbor), and the delivery paid well. The Chrysler assembly plant was so large the dispatcher had to make 2-3 calls to direct me to the right dock.
See the Post-Close Report
In the commentary at the top of the page.
this was always one of my favorites..
hits close to home.. something all of us have experienced in some form ( good to remember Daniel as he was )... http://www.youtube.com/watch?v=zWH_nvLK7jc&feature...
Re: this was always one of my favorites..
baz- Obviously, all I had to do was drop his name. Yeah, those songs bring back memories.
Re: Bankruptcy, City of Hamtramck
So it turns out my visits were in the waning years of the Dodge Main plant (I recall the buildings were worn, and much of the area deserted)-
http://dodgemotorcar.com/factories/hamtramck/index...
Several years later, GM built a state-of-the-art assembly plant it its place-
http://en.wikipedia.org/wiki/Detroit/Hamtramck_Ass...
Detroit is (geographically) a beautiful city, with broad avenues, elegant homes (in its heyday) and a riverfront. I hope it finds its way back.
Re: this was always one of my favorites..
nice
Re: Bankruptcy, City of Hamtramck
2nd,
I spent many years in the computer side of trucks, autos, including fleet leasing (7-8 years with PHH Baltimore County). I traveled to Detroit quite a bit, met with IT staff at all the major auto companies, mostly a whirl-wind, but we knew each other by name. Numerous stays at the Renaissance center in downtown Detroit. Been to the huge Ford Rouge plant, Buick up in Flint, MI., designed telecommunications & vehicle ordering systems for Leaseway and PHH. Days long past. I moved on in '82.
J
Re: Bankruptcy, City of Hamtramck
All,
Hamtramck!
http://en.wikipedia.org/wiki/Hamtramck,_Michigan
http://www.hamtramck.us/
Been there myself.
This is a terrific discussion. Life is Us.
Thank you.
Re: Bankruptcy, City of Hamtramck
J- The RenCen- I recall when it first opened in the late seventies. The girl I was dating (a sociology student from HK) insisted we visit. Apart from the view (which was great, of course), it was a disappointment- few tenants, deserted halls, nothing to do. I'm sure it went straight uphill from there. For some reason, I never went back.
Re: Bankruptcy, City of Hamtramck
2nd- It was rather empty at first. The very first time I visited the RenCen, my mouth fell open, I was astounded, entranced by the glass elevators, everything was gritty concrete, shiny metal and glass. From the street, it did appear as a fortress, some said to keep out the local people. Ford had offices there. Ford built the RenCen as I recall and it was convenient to stay there and not leave the building to do business. I later learned that Peach Tree Plaza in Atlanta was almost a copy and taller as well. Mrs. Ford (one of the Ford heirs) had a statue/monument erected on a nearby lot, dedicated to The People of Detroit. The local people I spoke to, didn't quite see it that way, a bit of a love/hate relationship between Ford and some of the local citizens I suppose.
I remember attending a party on Gross Point, where many of the motor company executives lived.
The tunnel to Windsor Canada was nearby (the RenCen), both different worlds; edgy, rough and bustling vs polite, clean and serene Windsor.
J
Gary Shilling- '10 buys, 12 sells for a slow-growth decade'
Paul Farrell does a good job of summarizing Gary Shilling's thought-provoking forecasts:
http://tinyurl.com/3x44ud7
Makes me wonder whether healthcare/pharmaceuticals will be one sector that leads the next bull.
Re: Bankruptcy, City of Hamtramck
Brings back memories.
Recall one day in Hamtramck in the late 1970's when my partner and I came across a Polish bakery. Of course we stopped and bought some great tasting pastries. A Polish woman, who was the owner, was appreciative and came across as down to earth, hard working.
Years later while living and working in Los Angeles, CA, came across one of our secretaries who had a I Love Hamtramck coffee cup. He was transplant. He was elated someone knew Hamtramck was a real place.
Hadn't been to the Ren Cen since 1980, when I had to visit a number of times earlier this decade 2000-2004. It's come a long way. There's even a decent hotel workout gym. However, when staying in the hotel there, just don't stand near the floor to ceiling windows on a cold winter's night. The frost on the window pane may jump out and grab you! (There's a reason why the drapes are thick and heavy).
Re: More on crashing muni bonds
SiO2, thanks for the link.
"For those interested in tracking all bond ETFs: http://nexalogic.com/bonds.html, they are separated by corporate, intl, munis, and leveraged bond ETFs"
J
Re: Longer (Than)
2nd_ave,
with all do respect, don't you think it's strange that most of us here ask the question "how long does the sell-off last?" but many of us forgot to ask the simple question during the last 2 1/2 months, "How long does this artificial buying in the extremely over, over bought zone going to last???"
Any idea why?
Re: Bankruptcy, City of Hamtramck
J- Ontario! Another world is a good way to put it. I was introduced to Point Pelee in 1979, where it's possible to watch the waves of Lake Erie wash onto pristine beaches of rock and sand for hours without running into a single stranger-
http://en.wikipedia.org/wiki/Point_Pelee_National_...
Usually on our way to the beautiful city of Toronto. On the way back we'd sometimes detour to the Canadian side of Niagara Falls.
China may raise interest rates this Friday
BEIJING | Tue Nov 16, 2010 9:26pm EST
BEIJING (Reuters) - The tendency of China's central bank to raise interest rates around the 20th day of the month makes this Friday a "sensitive window" for a rate rise, an official newspaper said on Wednesday, citing unnamed analysts.
The report in the China Securities Journal did not cite any officials and was based on a potentially flawed reading of the central bank's decision-making history.
"The central bank mostly chooses Friday or someday around the 20th of a month to announce interest rate increases, so it is possibly a sensitive window this Friday," the article said.
When China raised interest rates in October, it was the 19th of the month but a Tuesday. The five previous rate decisions were announced on the 22nd, 26th, 29th, 8th and 15th of their respective months -- and none were on a Friday.
The analysts cited in the article based their logic on the fact that banks typically settle accumulated interest on the 20th day of the month. It would be convenient for lenders to make calculations if the central bank announced interest rate increases one day ahead of the settling date, they reasoned.
Regardless of the specific timing, expectations have been building for another interest rate increase before the end of the year after consumer price inflation sped to a 25-month high in October.
The Chinese stock market has dropped about 10 percent over the past five trading days on fears of more tightening.
(Reporting by Aileen Wang and Simon Rabinovitch; Editing by Jacqueline Wong)
Re: Longer (Than)
Yes-
(a) Markets tend to move up over time, which lends credence to the 'higher ever after' perspective we all tend to develop. Sell-offs always end, even if it's at 'zero' (could it be that they keep reverse-splitting those inverse funds to keep investors from even 'thinking' zero)- whereas uptrends can continue indefinitely (or close enough to indefinitely). After all, if stock market indexes were not expected to move higher, why would anyone invest?
(b) Sell-offs are generally shorter phenomena.
(c) Actually, many bloggers did question the longevity of the rally off the August 31 low. I would guess the Market doesn't like being told what to do, and silenced most of them. Now it's free to do the same to those of us who like to call bottoms.
Re: Longer (Than)
With all due respect, analyst65, I'd venture to say that for most of us, the question of "How long does this artificial buying in the extremely over, over bought zone going to last???" was the ONLY question on our minds for, say the last 1+ month. If YOU forgot to ask that question, perhaps a reassessment of how you assimilate the daily noise and babble of these markets is in order. :)
Anyway, I sometimes wonder if many of you US investors even understand that, during these gut-wrenching pullbacks, your wealth - denominated in greenbacks - is just about the only asset class that's working. Relative to your fellow investors in backwaters like Canada, Mexico, Brazil, India, and Europe, to name a few, if you were just sitting tight today, your house and material possessions, your savings, and your pension investments, including your US stocks and bonds, became relatively more valuable than ours. You might say - yah but it lost value! If so, sorry to say, you just don't get it: Wealth is relative! Congrats on the great day, globally speaking :)
Now, why don't you take some of your new-found wealth and buy up some cheap Canadian stocks and bonds? We've got some great banks, mining, and oil companies that have dropped about 10% in price, relatively speaking, over the last week. Forget those 30-year US treasuries they are dangling in front of you with their sparkling new 4% yields - we all know that's a loser :)
Re: Longer (Than)
Mackinaw.. thanks for your comment but I think you may have misread what I intended to ask 2nd_ave there :)
In fact for the last 2 1/2 month the ONLY question I had in my mind was "How long does this artificial buying in the extremely over, over bought zone going to last???" because I never and still don't believe in its validity however I just had to go with the flow/trend even if it was contrary to many of our thinking. (Trading the TAPE as Bill say). It just makes me wonder why most would ask the question "How long does this sell-off last?" so quickly before giving a serious look and consideration to the whole picture there and what's really happening in the world around us, not just in the US.
Anyway, simply put I don't believe FEDs buying stocks thru buying treasuries and inflating assets to make us all feel good and rosy about our investments and feeling rich is going to cut it. If they think people will start spending some of the fake accumulated wealth from rising stock market and stimulate the economy to bring back growth and employment then they are WRONG. This is not going to happen. I said many months ago in my comments here that I see the experience of Japan going thru their long deep recession for 20 yrs is repeating here in the US if not worse and our politicians and the FEDs are doing all they can to make that come true. Then the only thing left for me to do is to hedge my positions against such outcome because it's not a matter of "IF this scenario happens, IT IS WHEN??"
Re: Gary Shilling- '10 buys, 12 sells for a slow-growth decade'
I've known Gary since the mid to late 70's. He is snap cracker smart and one of the nicest gentlemen you will ever meet. He was let go, or so the story was spun at the time, by White, Weld because of a paper he wrote about the coming demise of OPEC. The 1979 Iranian caused oil spike did not help his case at that time.
He successfully transitioned to the REAL world and has been successful ever since.
He called the trough in the bond market (a bit early if I recall) in 1980 but has had a successful run til now.
Gary has ALWAYS been an unwavering deflationist. For the last 35 years he has been predicting 25 cent copper. It's like he believes we are still on the gold standard and high prices correct because of high prices. Yet he has done well for his fixed income clients. One way bets like that can be very profitable if you are with the trend. He's like the debt side of Bill Miller who also was an equity buy and holder til he was destroyed in 08.
In his defence, Gary has come over to the energy side if I read him correctly.
He is an astute reader of history. I think he knows that OPEC's pricing collapse in the 80's was due more to Russia ramping up production for their Afghan sortie. No matter.
I sum it up by quoting an Iowa agronomist circa 1950 who made a long term prediction of a rise in corn prices because Iowa was subject floods, disease and hail storms. He was right for the wrong reasons.
Marc Faber's 'GLOOM BOOM DOOM' letter fascinates me from the perspective of his career in the business. The 60's and 70's were GLOOM. The 80's and 90's were BOOM, and we all know where we are today!
Ross
futures 4am - Asia selloff continues
Dow 10992.00 +8.00 +0.07%
S&P 500 1176.30 +1.60 +0.14%
Nasdaq 100 2094.25 +3.50 +0.17%
but more than one market has fallen back to support levels - i.e., the baby hasn't been thrown out with the bathwater.
Only Shanghai, which exploded higher after some delay is falling rapidly back to this earlier support level, which gives the impression that its a sort of waterfall event.
----------------
Noticed your entry prices TOF. I've yet to develop gut feelings on market movement, so I'll be watching yours - certainly caught the bottom yesterday.
Speaking of bottoms (the market kind), PCK bounced back nicely yesterday. Muni's seeing new life or dead cat bounce?
Re: Gary Shilling- '10 buys, 12 sells for a slow-growth decade'
I enjoyed listening to Gary Shilling yesterday on techticker. Interesting thoughts.
http://tinyurl.com/22nvvkg
http://tinyurl.com/26t7smv
QE2 followed by QE3 or a Fed that says "well at least we tried"
It's pretty cut and clear that QE2 ain't going to do what needs to be done, as summarised by the following economist:
http://tinyurl.com/39uxfdn
What is interesting is the thoughts from Mauldin that Bernanke rolls out $600B - if Republicans let him - and then failing that The Chopper turns around to Congress and says "hey, at least we tried. Now it's time for Congress to get its house in order".
http://www.investorsinsight.com/blogs/john_mauldin...
The deleveraging has to happen somewhere. Pump up the money supply and then bust as creditors say "No more" or this 'mild' experiment in inflation is quickly discontinued due to failed economic responses to the stimulus and the increasingly ferocious political environment domestically and internationally.
Then austerity begins.
As Churchill said "the Americans can be counted on to do the right thing, after they've exhausted all other options."
Now I do remember someone (Armstrong I think) asserting that it is a myth that gold functions best in an inflationary environment. Gold's best gains are to be found in a deflationary environment. Of course we can see for ourselves (wonderful to be part of a living experiment isn't it) that Gold loves an uncertain political and economic environment end of story. Leaves me wondering how far gold can go.
EU moving faster to avert 2nd crisis
http://finance.yahoo.com/news/Ireland-in-rescue-ta...
they're taking that irrational market a little more seriously this time.
futures 6am - Europe bounce
Dow 11025.00 +41.00 +0.37%
S&P 500 1180.90 +6.20 +0.53%
Nasdaq 100 2102.00 +11.25 +0.54%
except Greece. It's tanking. Irish contagion at play perhaps.
$POG consolidating. For another breakdown?