Bill Cara’s Blog for Aug 27, 2010 [See post-close report]

Second-quarter GDP revised down to 1.6 per cent from 2.4 per cent.

Good morning.

There are no changes to report at this time.

...or things that make me chortle...

Naked Strawman...
http://tinyurl.com/22lpaxa

Dennis Miller....
http://tinyurl.com/26rvjqn

...cause we could all use a good laugh these days.

Happy trading.

It all depeneds on what Mr Ben would say today and how market will react to his words, this will be the key breaker and the pivotal point in this whole theater. Don't forget the U Michigan Consumer Sentiment is coming out at 9:55 AM too and may move the market in either directions. GLTA

short gold in the AM and long gold in the PM would prove more profitable than long only gold in the AM since 2001. rigged? hmmmmmmmmmmmmmmm

http://www.zerohedge.com/article/guest-post-100-mi...

Ten Myths - short read and interesting.
http://online.wsj.com/article/SB128000197220920621...?

ECA - Ticonderoga Initiates with a Neutral rating.

*(US) FED'S BERNANKE: FOMC IS PREPARED TO PROVIDE MORE SUPPORT IF NEEDED, WILL DO ALL IT CAN TO ENSURE RECOVERY
- FOMC has not agreed on a trigger or criteria for enaging in more market support.
- Incoming data suggests the recovery has slowed to a pace that is weaker than expected by most of the FOMC.
- Inflation has fallen to a level that is below the FOMC's preference, there is no support for raising FOMC's inflation target.
- Does not see a significant risk of deflation at this time
- Fed has avoided tightening rates by reinvesting proceeds from MBS holdings, does not rule out chaning reinvestment strategy if necessary.
- Reinvesting in US Treasuries has been most effective strategy so far, seemed to be more effective than tightening rates.

Like Dave mentioned recently, the market is working it's magic to shake both short and long week hands. I'm still holding above my stops. NTAP is going nuts today.
But, TLT is going down, this should be a leading indicator.

Who knows?
Look what is happening with UNG, 3 hurricanes coming and this is busy crashing hard. I'm glad I was stopped out a few days ago.

Per Vad's post look at the Intel chart on StockCharts. Reminds one of May 6th flash crash. All better now - huh.
http://stockcharts.com/h-sc/ui?s=INTC&p=D&st=2010-...

ALOHA!!

Bernanke said it today, but his disciples have been saying it before ...

From the CUNNING REALIST-MISMATCH published August 27, 2010 ...
Jon Hilsenrath had an important article earlier this week about dissent in the Fed's ranks:

Narayana Kocherlakota, president of the Minneapolis Fed, argued that a large part of today's unemployment problem is caused by issues the Fed can't solve, such as the mismatch between the skills of jobless workers and the skills that employers wanted. "The Fed does not have a means to transform construction workers into manufacturing workers," Mr. Kocherlakota said in a speech after the meeting.

Some larger dynamics affect the utility of the output gap as a statistic. If Detroit makes cars that consumers don’t want, leaving large parts of the automobile industry and its associated national supply chain fallow, the output gap will reflect that. So too if a U.S. company outsources manufacturing to China or India. These are long-term, structural changes in the economy, influenced by forces such as globalization, demographics, and consumer preferences. They cannot be solved through monetary policy.

In my opinion the US FED should not even exist today. What is it that the US FED does that the US Treasury cannot do? The US Treasury can hire Goldman Sachs as easy as Ben can! Prostitutes work the streets not one person! Please do not tell me the US FED is independent of politics. That argument is at best laughable even to a Chinese student!!

PLANNED CHAOS(1947) the definitive book by Mises on "intervention". Chapter One, Page 17, The Failure Of Interventionism. Remember this was written in 1947 and first published in 1961.

QUOTE ...
"Nothing is more unpopular today than the free market economy, ie Capitalism. Everything that is considered unsatisfactory in present-day conditions is charged to Capitalism ..."

That was 1947 today is 2010, sixty-three years ago. I submit that America has not had Capitalism but Interventionism for more than sixty-three years. Something I have coined for a long time as PRICE FIXING 101.

The CAT'S OUT ...

Someone asked what 'negativity' has to do with the 'rain in Juarez:'

When you're lost in the rain in Juarez
And it's Eastertime too
And your gravity fails
And negativity don't pull you through
Don't put on any airs
When you're down on Rue Morgue Avenue
They got some hungry women there
And they really make a mess outa you

I should have done it a few days ago, but was super busy at work.

Johnny- It's amazing how many references there are to Dylan in the media- a kid from Minnesota who went on to influence an entire generation of contemporaries for their entire lives.

If we accept the fact that money (as a convenience) isn't going away, which 'money' is going to be left standing after the Central Bankers ("you can't say we didn't do enough") finish?

- Precious metals
- Oil and gasoline
- Other commodities (agricultural)
- Euro (haha)
- USD
- Yen (shouldn't the PE ratio be infinity if the rate is always zero)
- Yuan
- something else

ZeroHedge raised a great question last night about what 'hyperinflation' might look like and it wasn't necessarily 'asset inflation' desired by the Bullard/Bernanke axis.

I'll argue that understanding whose 'money' holds value might be more important than any other decision. The answer? Damned if I know.

Could smart money be exiting the market quietly in this ride now that we know for certain the economy will slow down thru the end of the year and therefore earnings will be terrible for the next quarter. Remember, investors always trade on future forward outlook of the economy, not the present and not the past.

Be Cautious here, very cautious, I still expect a huge dip in the market down way down that will trigger the FEDS to use the QE tools in their hands, use tight stops for your long positions. JMO

On fire today posted recently.

FTNT

noted early morning getting bid to new highs area.
08/20/2010 - 15:26

Not I.
I am watching SLV vs ZSL.
SLV macd, RSI and Stoch heading up while daily ZSL macd, rsi and stoch are heading lower. None are overbought - over sold levels yet.
Your TBT trade is looking good, daily macd has not crossed over to the down side yet.
Bear E

Bill, I think this indicator was relevant to us only when the banks were in the danger of failing, and at that point TED spread did indeed reflect the probability of that happening and hence was important for the markets.

Right now, no big banks are going to fail in the near future because of the huge cash reserves they built up in the US and because of the IMF and the ECB support they are getting in Europe. The recent spike was due to the fear of some banks failing because of the Greek problem, but after IMF & ECB decided to kick the can down the road for a couple of years, it is only natural for the TED spread to return to levels that show no bank failures on the horizon.

The stocks, however, are going down now not because of the danger to the *financial* system (due to banks failing) but because of the problems in the *economy*. Hence, the TED spread is an irrelevant indicator now.

In trying to get a sizeable loan for an acquisition, the banks that we've been talking to want a rate that floats based on Libor - imagine that. They realize, of course, that the Tbill rate will be far more stable than Libor if there is any crisis in the future. I'm not suggesting that there will be, just that banks want every angle going their way. The taxpayers have bailed them out, the Government is pretty much giving them free money, yet they are still unwilling to lend to even the most creditworthy customers on any reasonable basis. Perhaps taxing excess reserves wouldn't be such a bad idea.

Still going and huge bid coming in.

I suppose it was just an error. My quotes never showed that low and bounced off 17.81, just like corrected chart shows. Attached is a screenshot from my quote system, as it was from the beginning

The jobless have been looking fruitlessly for 2 years, now, most of them.

Denial isn't just a river in Egypt, but its always nice to see that our leaders can still pretend things are recovering with a straight face...

by the way, i know people are bearish on big caps like INTC (and i too have some skeptical thoughts about competitive threats from Apple) but at what price are they honestly expecting to get in at? i mean we're taking about a company with $4.50 a share in cash and trading at 9 to 10 times earnings. back out cash and its trading at 6 times earnings.

The financial media usually tries to sell the obvious facts to the people, and the majority of the analysts are simply extrapolating the recent trends to predict the future. Thus, a "stable" -10% for the WLI Growth Index for the past couple of months seems to suggest that the economy is going down fast at that rate, doesn't it? Especially when every drop below -6.7% in the past led to a recession in a short order. I doubt that many pundits are predicting what will happen to the growth index based on the recent trends in the index itself. Thus, for a while longer they will be "selling" to us the fact that we have a high risk of a double dip, while the smart money is quietly accumulating stocks at these levels.

After all, haven't we all waited for a 20% drop in stocks in order to bump up our exposure during this crazy rally from March 2009 lows? Given the extreme optimism and confidence of all investors in April 2009, such a drop could not have occurred without some very convincingly looking bad news, which is what we go. But now, in the light of today's promise by Bernanke to restart large-scale asset repurchases, only crazy people will short this market, since we have already seen what happens to stocks when the Fed starts buying crap that was laying heavy on the shoulders of private investors. Jeremy Grantham wrote in early 2009 that in the past stocks were much more sensitive to bailouts and moral hazard than to the true economy, and the rally we got off the 2009 lows amply proves his point. S&P 1400+ in one year!

for 2 minutes of musical accusation and contrition:

http://www.youtube.com/watch?v=-fTh2GffJsM&featurr...

Today's commentary snatched from Jesse's Cafe. Jump on the hyperinflation train ...

"The kindest thing I can say about a stock market that rallies on the 'stronger than expected' news that annualized growth in second-quarter GDP was revised from 2.4% to just 1.6%, instead of to the expected 1.4% (keep in mind those numbers are quarterly growth rates raised to the fourth power), or that gyrates over meaningless swings in seasonally-distorted weekly new unemployment claims, is that it is irrational, unstable and terribly dangerous.

As the renewed tumbling in the U.S. economy throws off statistics suggestive of a continuing collapse in business activity, as a looming contraction in third-quarter GDP becomes increasingly evident to all except Wall Street and Administration hypesters, who professionally never admit to such news, it would be quite surprising if the financial markets did not react violently, with a massive sell-off in the U.S. dollar contributing to and coincident with massive sell-declines in both the U.S. equity and credit markets.

Recognition is growing rapidly of the re-intensifying economic downturn. Yet, little analysis so far has been put forth to public as to some of the unfortunate systemic implications of this circumstance. The problems range from extreme growth in the federal government's operating deficit, tied to reduced tax revenues and to bailout expenditures for the unemployed, bankrupt states and continuing banking industry solvency issues, to U.S. Treasury funding needs to pay for same. The latter issue promises eventual heavy Federal Reserve monetization of Treasury debt, with resulting inflation problems and eventual hyperinflation (see the Hyperinflation Special Report)."

Those are some valid points coming from the guy whose data is replacing BLS data and its penchant for big revisions.

Spooky bad.

I agree with you, Dave.

He elaborates on the major advancements in health, life extension, human physical and mental performance, and related sciences that allow him, at age 105, to boast that ‘his tennis game has never been better.’

SNAPSHOT BIO

Peter Schwartz is co-founder and current chairman of the Global Business Network (GBN), the world’s preeminent member organization focused on scenario thinking and planning, where he leads programs for corporations, governments, and non-profit institutions. His current research and scenario work encompasses energy resources and the environment, technology, life sciences, telecommunications, media and entertainment, aerospace, and national security. A prolific author, Peter’s book, Inevitable Surprises, offers a provocative look at the complex forces at play in the world today and their implications for business and society. His first book, The Art of the Long View, is considered a seminal publication on scenario planning and has been translated into multiple languages. Peter addresses many different audiences in corporate board rooms, at conferences on issues such as global warming and human life extension, and at the World Economic Forum. He led the scenario team at Royal Dutch/Shell in the 1980s, where many of the scenario tools were pioneered. He has even lent his futurist skills to Hollywood as a script consultant on such films as The Minority Report, Deep Impact, Sneakers, and War Games.

http://www.monitortalent.com/talent/Peter-Schwartz...

Another interesting:

http://www.gregvanalstyne.com/experience/index.html

more:

http://www.kschroeder.com/foresight-consulting/cri...

http://www.zerohedge.com/article/us-postal-service...

You are right David and I agree with you to some level but here are my comments/questions and feel free you and others to respond and debate them here if you wish....

1) If Mr Ben admitted before and more today that the economy has hit a soft patch and growth will slow for sure in next quarter, shouldn't stocks then underperform since investors buy stocks based on companies future earnings potential/outlook and with a slower economy, high unemployment, lack of consumer's spending, and housing crisis, shouldn't we really SHORT every Bounce here between now and the next BIG Bottom in the market?? Wouldn't any bounce in this market be short lived, say for one, 2, 3 days the most as we have seen in the last few weeks?

2) If the FEDS (Mr BEN) promised to use his QE tools to prevent the market from going into a second dip then why the hell didn't he announce some today? Could it be that he is waiting for a worse scenario than what we have today or for the actual DOWN dip in the stock market close to that of March 6, 2009 before he does??? If that's the case then no one should trust any up move in this market until an official QE decision is announced and passed thru the white house and the congress officially. Guess what, this has not happened yet. Market only started the huge move up last year in March 9, 2009 AFTER the huge bail out of $700 BILLIONS came to the Aid of the banks and stock market. This has not happened today and not expected yet for some time to come..

3) Now based on what mentioned above, I really wouldn't go long here except for a day or two (or day trading the ETF's) and I wouldn't trust to hold longer any stocks except the miners. In fact I would short every up move again and again because all signs on the terrible weakness in the economy is pointing and leading to lower stock prices. Let every one remember that as of today we are still up almost 58% on the S&P since March 9, 2009 which is huge gain considering avg rise on the indexes is usually between 10 to 20% a year ONLY. So since things didn't get any better even with the QE policy, in fact it got worse. Only the banks benefited from the bail out and tax payers money. Then we are not out of the woods yet and more damage to equities prices is yet to come.

4) we all saw the movement in GOLD and GOLD shares today and in the last few days. When equities were weaken during the last few wks and were selling off, gold shares continued to rise and you know what? I don't think they will be the last ones to leave the dance floor (sorry Bill :), in fact I strongly believe that this time they will stay high and head even higher with the price of gold heading to $2000 by mid of 2011. Look what happened today, many saying Gold and PMs are topping out and are becoming short candidates based on TA but they continue to go up and many GOLD shorts continue to get stopped out. Now with the FEDS promise today to fuel more QE into the economy to prevent a double dip, the only direction for GOLD and PM's is UP from here..

5) and finally, again what did we hear today from Mr. Ben? we heard tough talk ONLY. Haven't we heard that before over and over and over again. Did he deliver any actual substance on the ground? did he make any QE announcement today of such a $$$$ figure? NO HE DID NOT. The only thing we got from him is a promise and tough talk. Let's not forget that the FEDS and all officials were telling us every thing was OK in the economy back in MAY/2008 and that we would not head into a recession and guess what? We dived into it just few wks later in a big horrible WAY. No, never again I would believe what the FEDS would say here. Fool me once shame on you, fool me twice shame on me, right:) ??

GTLA and happy trading every body..

bobbyo - you make an excellent point, its all about timeframe. If you recall in my post I suggested its probably good short term. Your "30 minute chart" reference seems to capture my current timeframe these days. I"m not quite to Vad's timeframe yet, but its getting there.

From a macro perspective, I'm actually quite bearish overall on the economy. Double dip is a given, second leg down in housing is a given, so is a continued reduction in bank lending and consumer credit (leading directly to reduced checkbook money creation), which should lead to a continuation of more defaults, foreclosures, lower wages, and a reduction of pricing power for folks selling things (domestically). However, the timing of all this and how it affects the market and when - well, thats a much harder question.

I feel like the market is just one big show sometimes. Especially in the smaller stocks, when the big guys get in there, things move violently, and when they step back, prices drift. This happens in futures too. Sometimes I wonder if there is really any fundamental interest out there outside the big firms.

So every day I wake up and ask, "what show will they put on for us today." Next week, I suspect the show will be a rally, based on the bounce off RSI 25 on the SPX (and a similar bounce for a number of individual stocks I track). I think the current momentum is up, especially given the weakness in bonds. Bonds gave a triple RSI sell alert on Friday - although Grym sniffed this out a little earlier in the week. That man knows his bonds, I think. If this marks a trend change in bonds, where will all that money go? This makes me think: best not to be short right now. And perhaps this rally might last longer than I think.

To me its all a show, and at times it may not make sense if you look at the economics, only if you look at the money flow. Money flows in, stocks go up. Money flows out, stocks go down. A part of money flow is currencies too.

A caveat to this rally lasting longer due to an end to the massive bond rally would be a drop in the buck along with a drop in bonds, since that means money is flowing out of the US.

So right now, I'm cautiously long, and I'm watching the dollar and long bonds for clues to see where we go next.

http://ronsen.blogspot.com/2010/08/saturday-mornin...

Particularly important is the Bullard manifesto. This drives the train.

Even for folks who don't follow the markets it's like the definition of porn...

They may not be able to define it, but know it when they see it.

Here in the northern Illinois rust belt, we've been declining in jobs, city and state services, and housing sales far longer than any "officially" declared emergency.

The local paper and TV grab for any good news to spin, but...

We have empty factories staring us in the face as we drive by, an increasing number of vacant houses and tall grass, several vacant lots in the downtown where department stores and restaurants used to be. Hundreds of applicants when telecom harassment company offers a handful of openings. AND violent crime (including home invasions by armed robbers) is on the increase even in my upper middle class neighborhood.

Our city employee pensions are dragging us down and employees are being cut (fire, library, mayor's staff, teachers).

After several years "Depression" is a feeling you can almost touch.

It appears that the Fed no longer has illusions that it can cause the economic malaise to dissipate and produce a sufficient number of jobs. Bernanke has effectively conceded that all the monetary measures of the Fed have run their course and the current economic condition is as good as it gets with such measures. He provided no hint of any effective new measures that the Fed can employ, perhaps because the Fed has no new remedies.

Alan Abelson writes an article called "Stacked Deck" in this week's Barrons magazine in which he decries the takeover of American equity markets by high-frequency trading and how individual investors/traders are the prime losers in this trend since they can't keep up with a manipulated market. Abelson hints that many fund managers, financial advisors can't keep up either and are at the whim of the machinations of algorithmic trading. See article below by Abelson:

http://online.barrons.com/article/SB50001424052970...

Abelson cites an article by Harald Malmgren and Mark Stys called "The Marginalization of the Individual Investor" that goes into greater detail about the operations/effects of high-frequency traders. See link below:

http://www.international-economy.com/TIE_Su10_Malm...

Makes you wonder if it's safe to be in this American market at all. Worse, the articles suggest high-frequency trading is likely to become the norm in European/Asian equity markets in the near future. At present, SEC is way behind the curve in having technology to cope.

To get out of a depression, doesn't debt need to be written off or repaid down to where its low enough that growth can occur again?

I ask that because I don't see any movement in that direction at all, which makes me wonder if we will end up with a "lost generation, or 30 year depression" that lasts until the baby boomers die off, similar to the one Japan is in that started in the 80's.

IMO, history doesn't necessarily repeat, but it sure does rhyme.

ALOHA!!

I was over at the CIA FACTBOOK today and I looked up EXTERNAL DEBT. I decided to calculate what the per capita EXTERNAL DEBT rate would look like for various countries around the World.

Naturally the USA was at the top of the list with some $13.45TRIL owed to "non-residents". Contrast that to only four countries on the list with ZERO external debt. Those countries are Brunei, Palau, Lichtenstein and Macau.

Per capita means, in this case, what each citizen(whether man, woman, child or baby)would have to pay if they were forced to repay foreigners(non-residents).

Here are some of the PER CAPITA EXTERNAL DEBT numbers:

SWISS - $176,000
UK - $148,000
GERMANY - $63,000
USA - $44,000
AUSTRALIA - $43,000
CANADA - $25,000
JAPAN - $17,000
CHINA - $259
INDIA - $182

Who would have thought that those supposed "frugal" Swiss owe so much? Makes you wonder how it is their currency is any where close to par with a USD. Maybe the Swiss have huge savings accounts and every man, woman and child in Switzerland has $176,000. Fat chance that every citizen in America has $44,000 sitting in their savings account. I always hear statistics that the average America barely has one month of cost of living saved up, so I would suspect the top 10% of wage earners in America would have to make up for the other 90% who do not produce and hence do not have more than $44,000 in savings.

Australia is hardly any better than the USA, even with those surplus trade years. I recall when I first moved to Australia in the 1970s hardly anyone I knew owned a new car and credit seemed like a very dirty word there! Quit emulating America!

Those Canuks really are more frugal than even those Swissies. Perhaps that's why Canadians have a better lifestyle than Americans.

When I read Grym's descriptions of the Illinois rust belt which could probably be duplicated for New York and New Jersey and other parts of America it makes me wonder how we think we will have anything like what Japan has, especially since Japan only owes $17,000 per capita to foreigners. I dare say a drive around Japan would prove hard to find anything close to what you see in Detroit. Obviously Japan does not like to owe foreigners much and for such a small country they have huge exports to add to each citizens propensity for saving. Still when I read on the CIA FACTBOOK that the leading cause of death for Japanese under the age of 30(past 12 years) is "suicide" it makes me wonder about "quality of life". I believe the stat is 30,000 young Japanese per year commit suicide. That can only make the economics of an aging population way worse. Translate that grim statistic to the "entitlement centric" Americans facing a similar long term economic future. Perhaps a monetary crisis would be more merciful.

Interesting to note that the CHINDIA external debt is very low so you can see exports do matter. Yet, this is just part of the overall DEBT picture, as S&P and MOODYS rates Sovereign Debt not only based on EXTERNAL DEBT but also INTERNAL DEBT, what governments owe their citizens and consumer debt. Once again the USA would be at the top of that list in dollar terms as a lot of US Treasuries are held by US citizens for perceived monetary safety.

CIA EXTERNAL DEBT LINK: http://tinyurl.com/2auporw

Then of course there is the ever present US REVENUE DEFICITS listed every day over at the US Treasury. Hummmmm ... since we are on a "per capita" focus here then on August 26, Thursday, the US Treasury issued a total of $185BIL USD in short term Regular Series debt. That works out to be $605 for every US citizen which is more than double what China and India's per capita annual EXTERNAL DEBT rate is in ONE DAY!

How much net revenue did the US Treasury take in on Thursday to cover that debt on a per capita basis? Well, total net revenue was only $2.285BIL USD, so that means per capita the US Treasury took in $7.47 to cover $605.

What about outlays? Well the US Treasury withdrew $181.8BIL on Thursday from their Federal Reserve account. Yet you may be asking me about DEPOSITS. True enough the US Treasury deposits broke down to this ...

TAX DEPOSITS = $693MIL
DEBT ISSUE DEPOSITS = $185.7BIL

The actual line item where the US Treasury calls "debt" ... cash is this ...
PUBLIC DEBT CASH ISSUES(TABLE III-B). Then if you look at TABLE III-B it refers you to TABLE III-A, which is where I get the daily marketable DEBT ISSUES from.

So according to the US Treasury if you count "debt issues" as deposits(revenues),the same as taxes, then we had a $7.2BIL surplus. How many people here count their credit card charges as income? Over at the US Treasury then DEBT=MONEY ... if that is true then what is a US Dollar?

IT ALL WORKS UNTIL IT DOESN'T ...

Dave,

Could it be that reality is getting through in spite of all the hype and ballyhoo?

Yes, I too read that bullish sentiment is very low, but what I don't understand is that we haven't seen any mutual fund redemptions, like what usually occur when the last of retail finally give up and sell. I recall the panic of redemption exits causing the last of the 87 crash.

My mom is still stubbornly long, admittedly a bunch having been pulled off into a ladder of 1 yr CD's paying 3 to 4%, but it seems to me that there is usually some sort of retail exit panic at the bottom when they finally dump their mutual funds. I also recall in the past the tax loss selling if the market is down off highs, and that is why September has historically been a bad month, partly because of that, I think. Even though the 87 crash was in Oct, Oct is typically a good month, maybe because it follows Sept, after everyone has bailed out.

I wonder what sentiment looked like before the other crashes and major declines unfolded. I also wonder what happens to stocks if bond interest rates begin to rise. I heard recently the the CDS on US debt are getting a lot more expensive. IMO, at some point soon that should begin to affect rates.

cheapy - we have seen redemptions, as far as I know:

http://www.ici.org/research/stats/flows/flows_08_0...

That said, I'm not trying to make a case for a capitulation bottom - and I don't think the charts support that either. Maybe just a near term tradable low point in a 1020 - 1120 trading range. Looking at the daily SPX chart, I see a possible ascending triangle forming. Needs more time to develop though. We'll see if we can get back to 1120 with all the bad news that I believe is on the way.

One possible bit of good news: improved home sales. Sounds weird, but just possibly what we are seeing now is just an immediate outsized reaction to the end of home buyer bribe, and that will attenuate over time. That attenuation, along with increasingly lower prices as sellers adjust to the new conditions, might result in increasing home sales numbers, bringing forth the thought that "it can only go up from here". Surprise numbers to the upside could propel the market up quite a bit, depend on how they are spun.

Charts might support this: a double bottom in XHB around 13.80. Much as I'm a housing bear, might be a surprise buy as a trade. It might also be seriously over-shorted as well. Perhaps hold your nose, buy XHB with a stop under 14, and see how it goes?

My theory is, the big boys just love to squeeze the popularly shorted sectors using even mild unexpected events along with massive buy side volume. Some unexpected housing news would give them all the excuse they need to drive prices higher.

My timing might be a little early on this one though.

Here is a nice article by John Mauldin about what we should expect from the stock market for the next 10-20 years: http://tinyurl.com/26afkv2

Making charts from raw data, how old fashioned!

Here is a special treat for you. I haven't updated this chart since january, note that the data is already a bit old, June 30. Seems like just lately that alot more money has flowed to bonds.

Short and sweet: BONDS ARE A TRAP!

All the HBB financial adviser bullshit about portfolio re balancing, shifting your bond/equity asset allocation, etc, it just that, a bunch of bull. Bonds are a promise to pay, a paper asset.

Read this chart carefully, it's a real winner. Especially if you are holding a bunch of bonds and feeling safe.

http://oahutrading.blogspot.com/2010/08/mutual-fun...

Check out this link to an interesting 40 page review of "Retirement Assets". I think this is important because it represents 35% of all wealth. And that means it's a big target, and HBB want's it. They don't want just to control it, they want IT. I expect this to be the next big battlefield. Financial ogliarchs will craft up legislation that gives them more access to your retirement savings. Here are some ideas---they force a percent of your retirement account into safe bonds "for your own good" further blowing up the bond bubble....they sell off at the top on their own bonds and leave you hanging on to a pile of shit. Or T-bills "Support America" law...works the same as bonds, they use your money to feed a bubble, they sell off at the top, short it in fact, and leave you with a pile of shit. See how that works?

http://www.ici.org/pdf/fm-v19n3.pdf

Charts below are from the ICI report

http://oahutrading.blogspot.com/2010/08/mutual-fun...

Thanks for the post, insight, and interesting links.

Here is my dilemma, which may apply and be of interest to much of the readership:

My employer sponsored retirement plan option which I have "chosen" is with Fidelity. The funds I can choose from range from target-date funds, to sector funds etc. Noticeably absent is a "cash" option.

Given my feeling of impending doom for the stock market and economy, I have chosen to put most of my funds in a short-term bond fund...

Question is...How vulnerable is this to a bursting of the "bond-bubble?"

BONDS ARE A TRAP! More than that. Bonds are the biggest ambush since the Battle of Midway or Stalingrad.

I will grant that the U.S. Government will pay you your 1%-2.5% or 3.5%, but rest assured your principal will be paid (unless they declare your principal a perpetual with no redemption) in phoney coulored confetti that few will accept.

I well remember the Ag Secretary under Nixon bemoaning the price of wheat and at a press conference holding up a loaf of bread said 'if we don't do something, bread will cost 50 Cents a loaf!' Back then at the Wonder Bread store you could get day old 10 loaves for a buck...

One wag once said that it was not the return on your money but the return OF your money that counts. If our government has its way, we'll be paying $10 for a loaf of bread. We will go from 10 loaves for a buck in 1974 to 10 bucks for a loaf in 2014.

Back in 1970, I could buy 10 gallons of gasoline for $2.69. For the same price today I get one gallon. I could go on but whats the point. If you didn't live it, it only has meaning to you as only a piece of history.

Make no mistake and please don't be confused by the inflation/deflation talking heads debate now taking place. That's what they want. They want you to choose sides. They actually get paid fomenting controversy. The only real question is how much inflation it will take to tear your heart out!

Debt needs a severe haircut. You can get it quickly in bankruptcy or through a long slow process of purchasing power debasement. The Feds missed their window in 08-09 to meaningfully restructure unlike what the RTC did in the late 80's. Borrow and spend or print and pretend are the only avenues left.

Good luck owning debt on grossly overvalued assets. Debt must be exchanged for equity at clearing house prices. Until the markets clear, (which they won't if the FED and FASB has anything to say about it) we will continue to bleed and atrophy. I'm not predicting hyperinflation, just an annual range between 15 and 25%. It could be worse but I prefer to remain optimistic.

This stagflation will be worse than the last stagflation by 2X...

KC,

"The funds I can choose from range from target-date funds, to sector funds etc. Noticeably absent is a "cash" option."

I assume your employer contributes to the plan to some degree, so simply leaving it and setting up an independent IRA is out of the question. Although billed as a "good deal" for employees back in the early 1980s, I believe it is just another illustration of a good deal for Wall Street and corporations.

I closed out my wife's regular IRA about 8 years back in favor of a Roth.

I believe this to be worth the tax bite especially if you are young (still working age).

I'd say the short term bond fund is your best defense under your limitations.

As for a bond bubble — just be ready to jump ship. (This goes for any investment except bullion, IMO.)

What if there is NO bottom? Cycles, labels, predictions — all predicted on history as we know it. I think we are witnessing an economic Copernican Revolution and the history is yet to be written.

http://ronsen.blogspot.com/2010/08/sunday-morning-...

What's the social mood?
- Tea Party
- New music
- "I have a scheme" rally
- Chevy Volt to come out at > 40K (snickers)
- protectionism
- riots in 'austerity' countries

Does 'anger' drive good decisions?

http://danericselliottwaves.blogspot.com/2009/09/s...

http://www.ponderthis.net/category/social-mood/

http://tinyurl.com/25vwwvh

To everything there is a season. The season of the day trade has ended, at least for me. In my opinion, the odds now favor more traditional trading strategies. I've always liked Bill's AZ/DZ concept, and my plan right now is to hold everything I've accumulated in the AZ until they hit their respective distribution zones.

There probably is no 'one strategy for all seasons-' not day trading, and certainly not buy-and-hold.

The onset of seasonal change can be subtle. Other times (since I'm listening to Dylan this weekend), you stand on the watchtower and see 'two riders approaching [while] the wind begins to howl.'

Dave and other site participants, I wonder if individual investors are a factor right now. Many have exited the market already. Many have moved to bonds. Many are disguested and perhaps vocally bearish but not doing anything about it but just talking. Perhaps Inv Intel is a better measure and maybe there are others as well. For some reference here is the lastest chart from last Wed. Would enjoy any feedback!

Puts it all in perspective. Enjoyed the joke!

cheapy, they all seem to have a low maximum amount as far as I can see. FYI, I think that the FDIC insurance goes back to $100k January 1,2011.

george,

Last I heard they were going to extend the $250k limit, but I guess until they do, they didn't.

My sis setup the CD ladder for my Mom about a year ago, and I guess you are correct, the pickings are slimmer now, but I'm sure if you hunt around you can find something FDIC insured in the 2% range anyway, but yes, it might not be convenient, LOL

NO COMMENTS ...

http://online.wsj.com/article/NA_WSJ_PUB:SB1000142...

and this ...

http://online.wsj.com/article/SB100014240527487034...

and this....

http://online.wsj.com/article/SB100014240527487041...

Dave,

I agree.

Not too bad for me — except the massive taxes which are to come. Very bad for my kids.

cheapy,
you are exactly right and I just didn't do my homework. Laddered CD's at different banks can be a really good idea for many situations.

On July 21, 2010, President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law, which, in part, permanently raises the current standard maximum deposit insurance amount (SMDIA) to $250,000.

The fact that general news are so bearish now makes me contrarian. Usually it works, except for big crashes like Sept/Oct 2008 or March 2009.

I would be cautious with emerging markets right now. There has been a lot of bearishness for US stocks and lots of bullishness for emerging markets as reflected by fund inflow/outflow data . It will reverse at some point, even though there should be great future for emerging markets generally speaking.

Jack Black,
It's obvious that DOOM sells in todays enviroment. When you get guys like Tony Robbins, Prechter and other psycho nut jobs telling you that the end is neigh, it's time to take a step back and ask if they really know how to analyize a balance sheet or run a cash flow statement.

If you wanted to see real DOOM and GLOOM, go back to the spring of 1982. I'm not argueing that we are seeing a market bottom today. The 'print' bottom of the stagflation '66 to '82 bottom was in 1974. The inflation adjusted absolute bottom was in August '82. The 'print' bottom in March 09 at 667 will probably not be breached but it could be bettered on an adjusted basis during the next 6 to 8 years. In the meantime, hugomongeous swings will occur. I would not be supprised to see a skeen of up 30%, down 25% up 40% down 30% for the S%P over the next half dozen years at least.

If you want a very improbable home run asset class over the next 20 years, think income producing real estate. I'm not talking about over-hyped publicly traded REIT's but a boots on the ground tire kicking search for distressed assets. Granted that it is harder work than looking at squiggly lines on charts of the markets but the rewards can be staggering.

Trade em if you got em to eek out a return in excess of your benchmark but if you are willing to do the critical analysis in the deal markets, you might find 20% per year returns the norm.

S&P +4.50 / +0.42%
Level 1,068.20
Fair Value 1,063.43
Difference 4.77
Nasdaq +6.75 / +0.38%
Level 1,796.00
Fair Value 1,791.37
Difference 4.63
Dow +29.00 / +0.29%
Level 10,170.00

Although like Bill pointed out in caution in the WIR, the Shanghai Composite remains in a range. It remains undecided as to direction.

S&P +2.10 / +0.20%
Level 1,065.80
Fair Value 1,063.43
Difference 2.37
Nasdaq +4.75 / +0.27%
Level 1,794.00
Fair Value 1,791.37
Difference 2.63
Dow +9.00 / +0.09%
Level 10,150.00

FIAT gets a boost but other autos struggling. SOC GEN holding up but ACA.PA struggling. Mixed bag.

test

edit: no Bill, attaching files still brings about big red window and the page doesn't reload when the post is saved. Editing this comment brings its own new window - see attached screenshot.

I am using Google browser.