Investment
BoltonCT's Respiral
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» BoltonCT - The bleeding continues
Bob Brinker always claimed that rising oil prices would not be inflationary but rather equivalent to a tax increase. To the extent it is an end product and not an ingredient as it is for plastics manufacturing, Bob is right. The Bush administration's tax rebates won't stop the economy from stagnating in the second quarter because soaring food and fuel bills consume the rebate to the consumers.
USA stock market futures are down ever so slightly even as financial institutions indicate that the bleeding losses continue. That is the trouble with the FED low interest policy. Negative real interest rates thin the blood of the economy. It doesn't clot up around and stop the incompetent and irresponsible executives. It flows continuously through their hands and into their pockets and down their legs into the sewers of our society. It rewards the inept of the filthy rich, the old club, the con men, the pushers, the good old Wall Street boys and makes their stealing a legitimate enterprise. It institutionalizes greed, misrepresentation, fraud, deception, and incompetence.
The Asian market decline is accelerating and becoming more prevalent with the average decline over 1% last night.
The European markets are dropping faster now than the Asian markets last night. France is now down 2.35%, Germany down 1.33% and Britain is down 1.37% at the moment.
Will this be another buying opportunity or will it signal a further decline. For one thing I see that corporations are finally being confronted with their dead products that are carried on the books that are a burden on future product growth. The write-offs and the great "Corporate Bath" has only just begun.
-- posted by BoltonCT
» BoltonCT - Market bottoming?
Thanks Norm for the great references.
U.S. stock-index futures gained, indicating the Standard & Poor's 500 Index may hold its own from last weeks drop, on speculation earnings reports this week may not show as many write downs of losses. Wal-Mart is becoming a favorite of Wal-Mart as it toes the WS analysts line. WS is busy as analysts powder and put lipstick on the pigs that help them achieve their bonuses. But bonuses are a long way off and if they start in the summer there may be no bonuses by year's end. Perhaps that is why the market historically declines this time of the year. Futures gains are narrowing now.
The New Spiral Indicator would need about three weeks of bad news to say stop cherry picking into the market. The New MACD would need more than a month of good news to confirm a market bottom is in place. While they are bullish, the next month will determine the outcome. Sy Harding's theory would say we will wish we were not invested now as this is the period to be out of the market altogether. So will the New Spiral Indicator's bullishness be wrong and the MACD still be correct and bearish? One month of testing should tell.
The balance of trade did not get worse last month indicating that the dollar is now falling at a rate fast enough to match U.S. inflation. But that is not stability. Stability will occur when the dollar falls enough to slow the inflation rate by increasing U.S. exports and cutting U.S. imports closer to a balance. When that happens the other world economies will slow down. Therefore we can expect our trade partners to support the dollar periodically even though the situation is deteriorating. That will bring oil prices down for a while. We expect to see those temporary benefits begin soon (within two or three weeks).
Asian markets were mixed last night with most up factions but Chinas and South Korea down over a point. European markets are mostly up slightly at the moment.
Word is out Google people are leaving. The writing is on the wall. The bloom is off the company.
May 12, 2008
Round Two - Home Price Erosion
John P. Hussman, Ph.D.
See:
http://www.hussman.net/wmc/wmc080512.htm
With the U.S. stock market still relatively overbought in an unfavorable Market Climate, there is continued risk of substantial and possibly abrupt weakness.
We observed some initial weakness late last week, but we remain braced for more significant trouble.
At the same time, we have to recognize that the rebound through early last week brought market internals not far from the point that would begin to feed purely speculative "trend chasing." So while we're defensive here, you can think of us as having something of a "stop" at which we would cover part of our short-call option hedges (leaving the defensive puts in place) - effectively trading some risk of time delay in return for a modest exposure to rising prices in the event that investors become resolutely speculative.
Last week, CNBC aired an extremely useful and informed interview with Martin Feldstein, the president of the National Bureau of Economic Research ...
Among Feldstein's comments was the observation.... "If you compare where the economy was at the end of March with where the economy was at the beginning of the year, there's no question the economy is down by just about every measure."
More important were his remarks about economic prospects, and the risk of placing too much faith in the Federal Reserve to manage those risks. These comments are important, and should not be missed:
"To me, the big question is what happens as more and more homes move into negative equity - as more and more people see that the value of their mortgages exceeds the value of their homes. If we see a big increase in defaults, ultimately in foreclosures, that's going to push us definitely into a significant recession.
See: http://www.hussman.net/wmc/wmc080512.htm for details
-- posted by BoltonCT
» BoltonCT - Waiting for a confirmed Hindenberg Omen
U.S. stocks rose the most in a week yesterday as retailer stocks rallied on planted rumors of better-than-estimated earnings. Yet economists said today before the actual report that sales at U.S. retailers probably fell in April as the biggest housing recession in a quarter century and record gasoline prices prompted consumers to put off buying autos and appliances. Wall Street makes its money on volatility not truth. That is why as soon a reliable indicator is found they try to break it.
At the present moment US market futures are declining indicating the market will likely start lower.
Stocks in Japan and Hong Kong rallied more than 1.5%, but China stocks sank 1.8% after a major earthquake there. European stocks started fractionally higher but sank and are fractionally lower this morning. London is presently down 0.92%.
http://www.themoneyblogs.com/amateurinve...
May 21 is the day by which the unconfirmed Hindenberg Omen Signal of Tuesday April 15th needs confirmation.
Presently the New Spiral indicator still says cherry pick into the market while the New MACD indicator has yet to confirm a market bottom. Those using the old MACD are still on the sidelines and those using the old Spiral (Parabolic SAR) are being whipsawed by Wall Street volatility and are currently out of the market as well.
Short covering is likely what has caused this rally as the community had gotten quite negative last month that many shorts have now covered giving the market its recent strength.
While the world bubble has burst there is unprecedented FED cash everywhere which is igniting inflation and that will offset apparent losses but not inflation adjusted losses. This cash will likely result in new moral hazards and Japan's type of malaise that could last a decade.
-- posted by BoltonCT
» Normxxx - Waiting for a confirmed Hindenberg Omen
In response to Waiting for a confirmed Hindenberg Omen posted by BoltonCT:- Waiting for a confirmed Hindenberg Omen
I have given up on the Hindenberg. Over the last couple of years, we have had many Hindenbergs with no crashes. I believe this 'Omen' has had it; remember, it really signals abnormally high volatility, but with prices this high overall (compared to when it was concocted) and the high volatility of the markets since the uptick rule was abolished, I doubt it has much significance anymore.
- While the world bubble has burst there is unprecedented FED cash everywhere which is igniting inflation and that will offset apparent losses but not inflation adjusted losses.
However; the huge runup in liquidity was mainly fueled by the derivative/debt IOU explosion (at about 10x fiat 'money') being used in lieu of money. But derivatives are now contracting way faster than the world CBs are adding fiat money! Still, I expect inflation is selected areas- say, energy, food and other commodities, and raw materials. Continuing (relative) DEflation in labor (but NOT services, e.g., medical costs, etc.), manufactured goods, etc.
-- posted by Normxxx
» BoltonCT - Banana Republic Economy
of the USA
Federal Reserve Chairman Ben S. Bernanke and fellow policy makers said the central bank is challenged by unacceptably high inflation. U.S. consumer's prices rose significantly again last month, led by gains in food and fuel costs indicating inflation isn't cooling as growth slows. Government report due today.
Report says U.S. foreclosure filings climbed 65 percent and bank seizures more than doubled in April from a year earlier as vacated homes added to a glut of unsold homes.
BNP Paribas SA, France's largest bank, ING Group NV, the biggest Dutch financial-services company, and Dexia SA, reported lower earnings as loan default losses increase.
Investigations beginning. It is better for corporations to take their bath early than be destroyed like Krispy Crème (remember them) when the fraud investigations begin. WellCare Health Plans Inc. the U.S. managed-care provider is now being investigated over possible fraud and said it may record a net loss in the first quarter because of legal and consulting fees and higher costs for drug plans. That is how it starts and when it is over the dirty company is down 90% instead of 50% had they cleaned up their company themselves.
A nationwide strike by farmers seeking higher wages in Argentina has left traders at the nation's biggest agricultural exchanges with little or nothing to do.
Bank of England says inflation will accelerate, overshooting government limit.
Mexico's rates rising with accelerating inflation.
Asian markets were up well over 1% last night. European markets are slowly drifting into fractional negative territory. US market futures are bouncing undecided but down slightly now as worldwide inflation is becoming the issue.
It is exhilarating to stimulate growth this way but America in doing so joins the world Banana Republic Economies.
-- posted by BoltonCT
» BoltonCT - An equities market bottom appears to have been completed
After slipping to record lows, down about 10% against other currencies in April, the greenback has recovered in recent weeks, helped in part by expectations that the Federal Reserve's aggressive rate-cutting campaign may be over. The $Dollar is now down only about 6% since the beginning of 2008.
Asian markets were mixed last night but generally a fraction higher. European markets are rallying this morning perhaps expecting the worst is over. US market futures are up modestly this AM. The new indicator we are testing now says the market bottom was completed.
Frederic Mishkin (who wrote one of my class textbooks) said yesterday in remarks at the Wharton School at the University of Pennsylvania in Philadelphia:
"It falls to regulatory policies and supervisory practices to help strengthen the financial system and reduce its vulnerability to both booms and busts in asset prices,'
Central banks should recognize that trying to prick asset bubbles using monetary policy is likely to do more harm than good,'
The Bush fiscal and the FED monetary policies started the bubble that just popped when the market fell in 2000. Mishkin is worried now about the bubble now being fed by the current FED policies in the current housing collapse. I predict that Mishkin will be the next FED chairman and he will be much better than all the previous chairmen.
Both the old S&P Spiral and the old MACD are now bullish. They started turning bullish about March 31 but the old Spiral kept whipsawing bearish.
The NEW Spiral indicator also turned bullish March 31 indicating an opportunity to begin cherry picking into the market. The New MACD now says the market completed its bottom and it is time to hold long in the market.
I have to admit this technical indicator testing creates anxious moments for me because I still see very dismal fundamental problems with the economy. I have not put my money where my mouth is and I am still net short equities. So I am starting to hurt and hope this new indicator fails this time.
If it does not fail I can already see more ways to even improve it.
If it fails it could possibly be made into a successful shorter term indicator say for four or five signals a year rather than the present one or two.
-- posted by BoltonCT
» Normxxx - An equities market bottom appears to have been completed
In response to An equities market bottom appears to have been completed posted by BoltonCT:- I have to admit this technical indicator testing creates anxious moments for me because I still see very dismal fundamental problems with the economy. I have not put my money where my mouth is and I am still net short equities. So I am starting to hurt and hope this new indicator fails this time.
That's an ideal time to hedge. When in doubt... stay out, or hedge. Lots of opportunities. I would cherry pick those really depressed securities which are bound to recover in a couple of years, anyways; preferably paying a rising or, at least secure, dividend, and relatively immune to a long (shallow?) downturn. GE, maybe? I am also accumulating gold here; NOT PMs in general or collectables, just gold.
I would hedge by shorting the more volatile areas of the market: small stock averages. And, I think financials still have a long ways down to go; it may be years before they are again a good investment. But, if a few building majors go belly up this summer, I would begin picking up shares of XHB.
Remember, everyone is deleveraging- so stay away from anything highly leveraged or with lots of debt.
-- posted by Normxxx
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