Investment

» BoltonCT - The rally is gathering steam.

The New Spiral and New MACD confirmed a buying opportunity late last week.

While there is little doubt that the stock market bubble is burst, it appears the market last week made the decision that it will bounce rather than immediately collapse again. It would appear that a one-to-three month bounce is in order until the hedge funds start to have problems. Remember, many of them make their money now by betting against the market and they will panic when the market starts to rise so much of the rise could be in the form of a short covering panic which could destroy a few funds.

The dollar strengthened versus the yen and euro on positive news about the U.S. financial sector, boosted investor confidence. Reports that a rescue for troubled bond insurer Ambac Financial Group may be announced early this week helped soothe concerns about the health of the U.S. financial sector.

European markets were broadly up this morning by about 1.2% in average and now seem to be waiting to see if American markets have a good day too.

Asian markets (outside of China) were up over 1% too but Shanghai was down 4%. Fresh signs that the U.S. economy may be in recession hurts China the most. Japan started down but recovered and was up 3% by the end of the day. China's market should catch some of the American stock buying fever soon.

The hedge funds love a consistent trend and are quite vulnerable, because of their size, to whipsawing stocks and markets. The old spiral and old MACD should be hazardous now as they whipsaw. Many of the stocks Jimmy Creamer and the motley fools have pumped and dumped will ultimately plummet when investors realize just how unstable the hedge funds have made them.

Ultimately "the Creamer" will have to go off the air as all his highly bloated stocks (like his past favorite Sears) get creamed. People who always tell others to buy high priced stocks are slow to realize that does not work once a bubble has burst.

-- posted by BoltonCT

» BoltonCT - Rally spreads to Asia

Under normal circumstances the use of two kinds of indicators would mean a buying or selling opportunity between when the first indicator was triggered and when the second indicator confirmed the first. Last week though the gap was only two days. The earliest a sell signal could come is in six days. If it passes that test the advance will be good for another 14 days based on current conditions. But conditions after six days could change

The Asian markets today joined the American technical rally.

-- posted by BoltonCT

» BoltonCT - Markets head higher and towards Hedge Fund short covering.

The Asian markets were mostly up over night.

Japanese stocks however gave up early gains and closed lower, dragged into the red by mobile carrier KDDI Corp on a ratings downgrade. The Nikkei average. N225 fell 0.7 percent, after jumping more than 3 percent and posting a six-week closing high on Monday. China's markets were up about 1.5%.

European markets are up over 1% at this hour. Spanish Infrastructure Company Ferrovial was the biggest percentage gainer, jumping 7.9 percent, even after the company's quarterly results fell short of expectations. The stock had been lingering around three-year lows. Shares in Standard Chartered jumped 6.3 percent, making it one of the biggest gainers on the London index, after the Asia-focused bank beat expectations with a 27 percent rise in annual profit and said it is confident of a strong 2008.

Futures for the S&P 500 are up as U.S. as inflation, fuelled by rising oil and commodity prices, will finally decide whether the FED's rate cutting would come to an intelligent conclusion, even as economic growth slows. The FED is getting smarter and may be putting Americans ahead of Wall Street. Producer prices at will be the key piece of macroeconomic data, after the Fed cut rates substantially while longer term bonds actually rose overcorrecting the yield curve and indicating inflation is now the primary concern.

At this site we have repeatedly pointed out that when the bubble burst in 2000, only job growth slowed, and unemployment never became a problem in the U.S. other than to the few who are always politically squabbling in the American Congress. This time will be much the same as U.S. outsourcing will outsource the unemployment to India and the manufacturing recession to China. American stocks are poised to rally and to trigger hedge fund short covering before this rally ends. Our indicators indicate the rally will most probably last up to three months. We will reassess the situation continually along the way.

The Democratic squabbling in Congress caused many bills to be held up and could elect a Republican President by accident. The Clinton campaign seems intent on taking every Democrat down with her ship as she out-Republicans the Republicans. Ralph Nader entered the fray again too. The Republican candidate, what's ? his name, now is looking more like a martyr of the vindictive NY Times and could win. The continuos shrill voice of the Democrat leadership in Congress and elsewhere is so annoying and may just backfire. It is like a catfight in the alley at night and everyone now wants to throw their shoes at them. Rush Limbaugh's biased remarks are the only thing making the Democrats look good at this point. That is why Obama is so strong. People want change. Change to Americans means fewer catfights and less Wall Street (more real businessmen not financial con men) control of the economy.

-- posted by BoltonCT

» BoltonCT - Google advertising is plummeting

Google income growth has been decelerating. A loss is now a distinct possibility.

Web Ads May Be Vulnerable to Slowdown
By Kevin J. Delaney
Companies Featured in This Article: Google
Internet advertising may be showing itself more vulnerable to a consumer slowdown than many in the industry had hoped, according to new search-ad data released this week.

The report from research firm comScore Inc. showing a decline in the number of consumer clicks on Google Inc. search ads in January amplified existing concerns about the effect of a broader economic slowdown on the Internet.

-- posted by BoltonCT

» BoltonCT - WS recognizes a market bottom

This was the bad news yesterday while the DJI was up almost 1% and the S&P was up 0.7%.
Home price plunge accelerates
Stocks set back at the open
Wholesale prices surge in January
Crude futures rise to near trading record
The dollar sank to a record low against the euro
Home Depot issues bleak outlook
Bond insurer MBIA wants tax relief
Target's profit hit by slowing sales
Wall Street wakes up to fresh nightmare
U.S. consumer confidence fell to the lowest level in five years
Wholesale inflation picked up, limiting the Federal Reserve's room to maneuver as it tries to avert a recession

Bad reported news like this shows the news media is on the bandwagon again. Just as we only were told the good news when the market was at its peak, now we hear only the bad news at its relative bottom. So we can be quite sure the funds are about 60-40 net shorting the current market and 60-40 is about as extreme as they ever get. That means we are in for a good run-up in prices as they are forced to cover or several will possibly face insolvency. The WS crowd states the news so it biased to favor their position. Fools fall for the trick and bought at the high and are now supporting the hedge funds by shorting. So the fools right now are the ones who are continuing to short. The smart short investors who shorted near the highs are taking profits where they can.

Now it is apparent we are due for a significant advance. Astute investors on Wall Street see signs of a bottom.

Bad news Tuesday didn't upset investors, adding to bets that the worst for stocks may be over - for now. By Alexandra Twin, CNNMoney.com senior writer, February 27 2008: 3:37 AM EST

The only bad WS news today is that Bernanke will be opening his mouth again. That usually results in panic just from the fear and bewilderment he projects. However if this is indeed a strong rally the market will advance again today.

Asian markets are up dollar averaging well over 1.5%. European markets are down dollar averaging about 0.5% but are waiting to see if the American market rallies after an expected lower American opening.

Big secret, "Google advertising is not that good"
Internet advertising is not paying and is vulnerable to the slowdown according to new search-ad data. Everyone knew that but motley and the creamer. Google is awash with cash because their stock price is so inflated they can use their overpriced stock to buy low PE companies and inflate their apparent income the way that the "conglomerates" did it. That lasted until LTV taught the world that it was an accounting trick not anything good about LTV itself in the 1970s.

The report from research firm comScore Inc. showing a decline in the number of consumer clicks on Google Inc. search ads in January amplified existing concerns about the effect of a broader economic slowdown on the Internet. Google's income increases have decelerated over the past year and their first big loss is now on the radar screen.

-- posted by BoltonCT

» BoltonCT - The advance is still in place

Asian markets declined almost last night and European markets appear close behind down now about 1%. The benchmark Shanghai Composite Index closed down 0.80. The Nikkei closed down 0.8 %. But the South Korea Kospi closed up 0.9 percent. Both the Nikkei and the Kospi seem to have mad double bottoms. Asian markets appear poised to advance.

Gold is setting new records, as finally stagflation (which we talked about months ago) is not being recognized as the real threat. But we were there before and President Reagan went to supply side economics to get energy prices down and solve that problem. Soon people will realize that may not be possible this time as we finally are running out of oil reserves. There could be a burst of hyperinflation before the real problem is recognized.

You know the real problem. They are the people causing the crisis by protesting every fast clean nuclear reactor plant. President Reagan just brushed aside the folk who were negatively advising Jimmy Carter. If we do not go nuclear soon our environment will have to endure a burst of new drilling off shore and in Alaska to get us out of the coming energy crisis and hyperinflation. Safe nuclear energy self-sufficiency has a long lead-time.

Today the market may retreat today, but hedge fund shorting seldom goes beyond 60/40 so we will see the market rally resume as short covering gets frantic. And the hedge funds pass through 50/50 and possibly to a long position. That is the real force behind this rally.

Remember the historians who were saying there was too much bearish sentiment for the last decline? Now they are saying there is too much bad news for the market to advance. Essentially they are consistent in being wrong both times. The "Good Season" some predicted for three months now is already here. Enjoy it quickly, as it may not be here long.

-- posted by BoltonCT

» BoltonCT - Third ascending low about to be set.

Stock futures tumbled early Friday as AIG dropped after reporting a $5.29 billion loss, the biggest in 89-Year History American International Group Inc., the world's largest insurer. Sprint lost something like $26 billion buying out Nextel. That is how PE ratio is distorted. PE is based on reported earnings and ignores the write-offs. True the write-off may be 10% overall but it is several hundred percent for the high fliers.

The dollar fell to the lowest versus the euro for a fourth straight day on growing signs the U.S. economy is slipping into a recession.

Light, sweet crude for April delivery briefly exceeded $103 a barrel for the first time in electronic trading.

U.S. municipal bonds are headed for their worst month after collapsing demand for securities sent debt costs for states, cities and hospitals as high as 20 percent. How absurd? Perhaps it will instill some fiscal responsibility. NYC wants to run a $4billion deficit this year. Bloomberg better think again.

Once again Asian markets declined almost 1.5% last night and European markets appear close behind down now about 1.3%. The Nikkei closed down 2.32 %. But the South Korea Kospi closed up 0.9 percent. Both the Nikkei and the Kospi seem to have mad double bottoms and are ready to advance. Asian markets appear poised to advance in the near future.

Gold is setting new records ($967.7/oz), as finally stagflation (which we talked about months ago) is now being recognized as the real threat. None of the candidates for US president seem to have a clue as to how to solve the energy crisis (nuclear) or if there is any crisis at all. They all want to throw more money into medical entitlements as the US fiscal deficits begin to climb back. See:

http://www.tfc-charts.w2d.com/chart/ZG/48

The latest news says the sky is falling so this may be the last opportunity to buy stocks before it is too late for this rally. We appear to be making the third ascending bottom in this technical rally. Short covering has hardly begun yet so this rally could go up another two months.

But after that, since the bubble has burst, the bear probably will be back. This is no time for the timid to invest.

-- posted by BoltonCT

» Normxxx - Third ascending low about to be set.

In response to Third ascending low about to be set. posted by BoltonCT:

Yes. In perusing Sy's summer "out of the market time", all I see is a black hole!

-- posted by Normxxx

» BoltonCT - Hedge funds begin to self destruct.

Peloton Blames Wall Street Lending Crackdown
By Pierre Paulden and Caroline Salas

Feb. 29 (Bloomberg) -- Peloton Partners LLP, the London- based hedge-fund manager being forced to liquidate a $1.8 billion asset-backed fund, said it's a victim of the lending drought on Wall Street.

Peloton co-founders Ron Beller and Geoff Grant said in a letter yesterday to clients: ``Credit providers have been severely tightening terms without regard to the creditworthiness or track record of individual firms, which has compounded our difficulties and made it impossible to meet margin calls,' (This is the beginning of the short squeeze that will eventually end the technical rally at this time)

Peloton joins Thornburg Mortgage Inc. and Sailfish Capital Partners LLC on the growing list of funds and companies that have had to sell securities or shut down after banks restricted how much they could borrow, or demanded more collateral as values of securities backed by mortgages slumped. The world's biggest financial institutions are cutting off lines of credit to
hedge funds after at least $163 billion of asset write downs and market losses.

``More hedge funds will blow up this year than ever before,' said Michael Hennessy, who helps oversee $10 billion of hedge fund investments at Morgan Creek Capital Management in Chapel Hill, North Carolina. ``Financing is much harder to get. The bubble has burst.' (As they blow up investors will see that the funds are insolvent because their assets are not falsely valued,
not market value).

Freeze on Redemptions
Peloton said yesterday in a separate letter to investors that it froze customer redemptions from its $1.6 billion Multi- Strategy Fund, which has a ``very large position' in the ABS fund. (When they are insolvent they must freeze the assets and perhaps the investors will get 60 cents on the dollar).

Beller and Grant, who founded their firm in 2005, are seeking buyers for mortgage securities held by the ABS fund. Beller said in a Jan. 25 telephone interview that the firm bought securities backed by mortgages that are safer than subprime. The price of top-rated Alt-A securities, which rank above subprime, dropped 10 percent to 15 percent this month, according
to Thornburg Mortgage, the Santa Fe, New Mexico-based finance company which yesterday said it may sell securities to meet further margin calls, after burning through cash.

Sailfish Fund
Sailfish's Multi-Strat Fixed Income fund, which had $1.9 billion in July, collapsed as credit bets went sour and the Stamford, Connecticut-based firm unwound positions into a declining market. The average price of an actively traded high-yield, high- risk loan tumbled this month to a record low of 86.28 cents on the dollar from 100 cents last July.

Margin Calls
Morgan Stanley predicts that the ``substantial and sharp moves in the credit markets' will lead to the closures of several credit hedge funds, which could put further pressure on prices of mortgage-related securities and derivatives.

Particularly at risk of further credit losses is UBS, which has so far written down $19 billion, according to Huw Van Steenis, a Morgan Stanley analyst in London.

``We feel that UBS has been consistently behind the curve in marks and, worryingly, the worst may not be over,' he wrote in a report yesterday.

UBS needs to reduce its balance sheet from 2.3 trillion francs ($2.2 trillion) to less than 1.7 trillion francs, and reducing ties to hedge funds is a likely lever, Van Steenis wrote in an e-mail today. An increase in margin calls may drive prices even lower, RBS's Hackel said.

``I feel like so many shoes have already dropped, the shoe store should be empty by now,' he said. ``I'd like to think we're pretty close to the end of the game, but I can't say that with any degree of confidence.' (Hedge funds are 60-40 short and that is dangerous in a short squeeze. Margin calls will drive Hedge funds towards a neutral 50-50 position or even to a long position. That is just starting and will feed this technical rally we are now just beginning to see.)

(The next shoe to fly out of this bursting bubble will be the mass withdrawal of investors from hedge funds and then retirement funds. Motley Fool is starting to discuss a cash position. That will cause the short covering rally to end abruptly within two months, possibly a whole lot sooner.) It most likely will begin at the end of the month but have a two-week delay. It was probably too early for most people start to get out of their 401's in February since they were pleased to see the market rally begin.)

-- posted by BoltonCT

» BoltonCT - Secular Bears

I disagree with this being a secular bear market. I believe Bob Brinker was also wrong when he originally said we were in one. I believe the bubbles the FED has been producing can overpower any secular market, are destabilizing the U.S. economy and ultimately could lead to a complete loss of confidence in all financial instruments. I believe the bubbles cause bull and bear markets and we are in a normal 1 to 2 year bear market at this point. But ultimately the destabilization could lead to a "D" word economy.

See:
http://www.hussman.net/wmc/wmc080225.htm

"Secular Bears
John P. Hussman, Ph.D.

The total return of the S&P 500 is now a few weeks shy of having lagged riskless Treasury bills for a decade. Against this backdrop, I was asked by a journalist last week whether I believed that stocks were in a "secular bear market." Though I tend not to think in terms of "bull" or "bear" markets (being more concerned with conditions that can be identified using fully observable data rather than hindsight), my immediate response was that a secular bear is self-evident. It's difficult to imagine how the market could be characterized any other way when, despite recent bull market highs, the S&P 500 has lagged Treasury bills for a decade.

Thinking about it more carefully, my impression is that investors are averse to the idea of a "secular bear market" because it implies something about the future. For stocks to be priced to deliver disappointing future returns, after already suffering a decade of disappointing returns, seems too extraordinary to consider.

But that's exactly what we should expect. "

-- posted by BoltonCT