Financial topics

[jwfid]

I liked Joe Kernan back in the day when I believed in the economy/stock market. Too bad he can't see it coming.

I was just talking about the economic crisis at work today. Everyone seems to be blind. It's like were all babes-in-the-woods. Sometimes I think of the ostrich with his head in the sand.

Joe

[aedens]

Mad Hedge:
The best and least risky trades were in the early part of the year. Now, there’s a lot more risk in all markets. I’m neutral right now. If stocks dropped from here, I might be a buyer, but only in energy, commodities, and technology, and of course in emerging markets like Brazil, India, China, Korea, and Vietnam. Gold, silver and commodities have all had huge runs. My inner wimp has me in cash, waiting for better opportunities. I haven’t been playing the short side, because it’s a nightmare trying to short a liquidity driven market with interest rates at zero. There is no return on low risk investments now. Capital always moves to risky assets when interest rates are zero. Just look at Japan in the 1980s. There PE multiples soared from 10 to 100 purely driven by liquidity. For the last three years of that run the fundamental analysts were left twisting slowly in the wind. Artificially low interest rates boost asset prices to artificially high prices. It always ends in tears, but can play out for a while. You want to have an asymmetric risk reward metric in your favor, as we did in March of this year. Now, we don’t have that.

The next downward move in the markets will more likely be due to disappointing economic data, earning misses, etc., not due to a total collapse of the system. We may sell off, but I don’t think it will be to new lows. It’s hard to see new lows with interest rates at zero. Instead, I see the “square root” recovery scenario mentioned earlier. The market may start drifting lower as people start seeing this possibility. That might set up a trading range for the S&P 500 which could last for years, something like 800-1,200. During the nineties, Japan peaked at ¥39,000, then traded in a ¥20,000-¥25,000 range for five years, before the final collapse to ¥7,000. That’s one scenario for the US.

[abs]

Aedens -

I've been reading about the possibility of a new carry trade developing with the US dollar due to the ZIRP policies of the Fed. Any thoughts on how an individual trader could capitalize on something like that or is this exclusively available to the big investment companies and banks who have access to the Fed window?

Andrew

[abs]

Here's a nice chart of the Nikkei to provide a "picture" to go along with Aeden's comments. Some may believe that the US markets are following a similar wave pattern and are now near the reflation rally peak shown on this chart ending after 7 months in March of 1991. Many bears believe that we will soon begin (if not already begun) a downward trend into a new low as shown on this chart ending around August of 92. It can be clearly seen that the Japanese market had major swings over a period of many years from '92-2000 before crashing even further to new lows in 2003. Even though inflation was for the most part relatively low in Japan over the last 17 years, the real rate of return in their markets was terrible. Those who moved into bonds prior to the initial crash or those who were really good at timing and trading this market probably did the best of all. To John's repeated point, in major bear markets like these capital preservation is paramount.

nikkei-225.png (126.03 KiB) Viewed 8430 times

[aedens]

Aedens -

I've been reading about the possibility of a new carry trade developing with the US dollar due to the ZIRP policies of the Fed. Any thoughts on how an individual trader could capitalize on something like that or is this exclusively available to the big investment companies and banks who have access to the Fed window?
Andrew

There is no political will in the United States. Health care is a red herring period.
Chris Martenson http://www.chrismartenson.com/crashcour ... ee-beliefs has a must do program on his web site and Mr. Dent also has a web site which has clarity to the simple realism we face today and has been mentioned numerous times. As for a carry trade this depends on your avenue of escape. Namely ask this question to lucid completion. Where are you going to retire and why? If you can answer that you are on your way to core focus. We clearly understand the GD issues and the tipping point. Dollar Down, Stock up. Earning's releases, market sideways for now. Numerous times many here run to TBills. I am hedged tax free vehicles and Equity and Bond ladder and as the Chineses walk slowly out the door on this current 14 trillion economy. When all else failed equity survived and metals. Very smart men convey 20 to 30 percent metals. I am not in metals until gold back to $770.00 which may be some time as such. I think other Currency plays, Equity is the carry off the day. The market is in rollover to quality on EBIT numbers. I have 20 percent in equity only so you can see my confidence in the overall market. There are so many vehicles to lock gains no comment is needed. Just remember that demand is supply and know the stock better than your wife. Also tune into the ratio of inside sales and what sector are viable to date. You can buy any currency to hedge
update: http://www.bloomberg.com/apps/news?pid= ... 3nriKmIAeY but the dollar will recover. Given the volume of TBills I avoid them. http://www.finviz.com/
Mad Hedge: Is a old time manager and a few paragraph's were forwarded. I do think very much like him. As me and Higgy were trading data points we were close on dates. Also in forums I will survey in february, as I collect and observe data. http://www.finviz.com/insidertrading.ashx Focus on backbone sectors. http://www.finviz.com/insidertrading.ashx?tc=1 and why.
Monday the bears got skinned in retail shorts from thu and fri but they knew that friday.

http://dianchu.blogspot.com/

[zabrisk1]

Re Confusion and the Principle of Maximum Ruin reign in the stock markets

John,

I think you have nailed it this time. Geithner, Beranke, none of them are stupid. Even in our crazy world they would not be where they are if they were. Put yourself in their position. You see the entire planet spinning off its axis as a systemic meltdown of the entire financial system takes place before your eyes. How could you possibly have stood back and said - "Well, the recession must run its course. Deleveraging is a necessary part of the cleansing process. If we do nothing, it will be very bad, but less bad than if we just let the markets prevail." You might be very clever, but you are not suicidal, and you do not climb to the top of the greasy pole without a strong sense of self preservation.Even in China, not renowned for listening to the "Voice of the People", the authorities felt compelled to provide bail outs and stimulus for fear of what the alternative might be.

So once you have gone down that road, you have absolutely no alternative but to keep telling anybody who will listen that your policies are working, and that recovery is just round the corner. To say otherwise would be gross folly, and you might find yourself being an ex central banker faster than you planned. Thus we can give no credence to what anybody says other than those who impartially analyse the data and draw conclusions from the facts on the ground, if any such people exist.

[aedens]

The problem we are seeing they know how to game the system. Even in 2005 and much earlier we trended this disaster from Senate testamony to our neighbor's next door. Just because the majority did not care to see this coming stating a few did not is a straw man mentality.
The only thing going on is many will not play the equity side now and the smart money as they say that got burned are in bonds. I have moved some money out of bonds into some equity since it is in my opinion bonds are oversold for the time being. Some of us like John stick our butt out there because we do care and did see this Governmental enable the circus and spin out of control. In the forums we have had very pointed and candid discussions and data points and the basis's we see is the lack off contract and as Seneca stated so goes the morals so goes the Nation. Some of us still work Corporate and we see where this going since 1995 and earlier to trends most Americans cannot even fathom which just underscores the fact that all are experts in a few areas but limited to to there well being in the scope overall. Some of us have kept up with reality since we supply it as many have longer than most have been alive. If you go back in the forums we wish to be proven wrong. We stated a very long time ago we anticipated a 40 percent lagging drop. Yea it is there, and once again thanks to all and also John go to the pub and grab a beer. We anticipate sideways movement for a few more weeks and the data suggest, with the resets et. al. In many regions upcoming is the back wall of the hurricane. This was preventable, but we are in concurrent bubbles since Keynesians and Austrians see things different since Liberty is a attribute to one and not the other so look carefully.

As a consideration when America gets sick and tired of the Senate's current miscue and the World's so called opinion I hope they enjoy there purgatory as much as I will enjoy ignoring them. I blame the voter up to the office and we reap what we sow if you like it or not. We know when and why, but the rest of these poor souls will always learn the hard way in there so called tempered ways. It is not that they do not listen, it is just a contextual issue that many got disconnected from simple avarice and I challenge many to read the federalist papers to this gambit we see today unfold to perverse conclusion of civility and discourse to the lack of contract. I just do not see the backbone needed to pull us out of this entitlement moral vacuum in may area's to linger in who's interest other than our commom wealth dilute. These forums and many other sites for that matter have as much credibility and purpose than the blather that we are subject to above press and governed whit. To further pursue the things we are subject to is largess of the lack of print and dialog that they cannot atest to in there inane idological master we atest to as ruin. I have been seeing more mention what are we going to do when the productive people simply utilize there fungible skills elsewhere as we simmer in our discord. To date i have seen no dialog to avert the logical closure of this epic disconnect to reason and a zeal to ignore blatant reality. The moderate elements in other spheres of influence will no longer wait for our honorable senate to sort these affairs and will pursue there legal status and moral gravity they may or may not pocess to insist on SDR which as of late the United States did pay into again a short time ago. I seen mainstream media query the status of reform to Wall Street which was metered back as yes we are releasing some measures to be discerned soon. As a citizen and taxpayer discerning many branches of interest as many interpet this as we have to since the checks and balances we rely on are suspect given the actual landscape we see in a measure we linger in since we feel to many did to little for such a obvious reason. To kill the letter given in providence they sparsley fear. Plan they must since the mode to earthy vision is 75 urban to 25 non is times of peak and also keep in mind that there are at least four million jobs in retail, financial, construction and manufacturing jobs lost this cycle that are likely not coming back. In fact, the number of unemployed who were let go for permanent reasons as opposed to temporary layoff rose by more than five million this cycle. This compares to the 1.2 million increase in the 2001 tech-led recession and in the 1990-91 housing-led recession. And you wonder why this is so? Sad you query when all is before your eyes.
http://mises.org/pdf/humanaction/pdf/ha_03.pdf
It is a fact that people in the pursuit of their selfish interests try to use doctrines more or less universally accepted by public opinion. Moreover, they are eager to invent and to propagate doctrines which they could possibly use for furthering their own interests. But this does not explain why such doctrines, favoring the interests of a minority and contrary to the interests of the rest of the people, are endorsed by public opinion. No matter whether such “ideological” doctrines are the product of a “false consciousness,” forcing a man to think unwittingly in a manner that serves the interests of his class, or whether they are the product of a purposeful distortion of truth.

http://www.tavakolistructuredfinance.com/TSF41.html explaining the corrosive atmosphere that allowed the largest Ponzi scheme in the history of the capital markets to flourish.

http://fraser.stlouisfed.org/docs/meltzer/whereg95.pdf Original "insured" moral hazard with other peoples money. Basically do apply in mind and fact as to hold them in healthy suspicion if not down right contempt with your money in any generation. With Uncle Ben and TBTF credit intermediation the new masters of the universe needed a litmus. You dear taxpayer...

This world that we have made as a result of the level of thinking we have done thus far creates problems which cannot be solved by the same level of thinking in which they were created.
– Albert Einstein

[mannfm11]

IN the 1970's, they invented expectations economics. Inflation expectations was confused with excessive taxation and responding pay raises. Bernanke and company are attempting to create artifical optimism, expecting it to defeat a situation where there is no mathematical solution. The entire system depends on inflation to create the basis of deflation. it needs bulls to create big bears. There is nothing more unusual than a market for something that isn't consumed and eventually ends up at zero. The more people that come to believe in it, the bigger the failure. When all have piled in, who is there left to sell to? Buy and hold has been a devastating strategy in stocks because the entire rational behind it was flawed, based much on the same model as securitization and other failed ideas. So, we are at buy and hold until it is time to get out. The theatre is packed and the fire starts at the climax of the show. People are attempting to sneak in the back door as the place begins to burn.

Even my mother is aching to buy. We are sitting on about $1 million in cash and of course the interest won't pay the utility and gasoline bills. Mr. Bernanke has destroyed the capacity to remain liquid, while at the same time enforcing it through his policy. One need only look at Japan to maybe realize that bankruptcy cannot be avoided, maybe put off, but not avoided. Yet, we make the same mistakes. Mom asked me if I wanted the stock market to go down, which I said yes. It couldn't be bought as an investment at these prices. She still brings up the day Ford was between $1 and $2 and how she missed it. We needed to go to the lawyers office instead and decided to wait another day. We will probably get another opportunity, but it will be a good idea to pass. Real estate is our gig, but I would venture we already have too much.

[aedens]

IN the 1970's, they invented expectations economics. Inflation expectations was confused with excessive taxation and responding pay raises. Bernanke and company are attempting to create artifical optimism, expecting it to defeat a situation where there is no mathematical solution. The entire system depends on inflation to create the basis of deflation. it needs bulls to create big bears. There is nothing more unusual than a market for something that isn't consumed and eventually ends up at zero. The more people that come to believe in it, the bigger the failure. When all have piled in, who is there left to sell to? Buy and hold has been a devastating strategy in stocks because the entire rational behind it was flawed, based much on the same model as securitization and other failed ideas. So, we are at buy and hold until it is time to get out. The theatre is packed and the fire starts at the climax of the show. People are attempting to sneak in the back door as the place begins to burn.

Even my mother is aching to buy. We are sitting on about $1 million in cash and of course the interest won't pay the utility and gasoline bills. Mr. Bernanke has destroyed the capacity to remain liquid, while at the same time enforcing it through his policy. One need only look at Japan to maybe realize that bankruptcy cannot be avoided, maybe put off, but not avoided. Yet, we make the same mistakes. Mom asked me if I wanted the stock market to go down, which I said yes. It couldn't be bought as an investment at these prices. She still brings up the day Ford was between $1 and $2 and how she missed it. We needed to go to the lawyers office instead and decided to wait another day. We will probably get another opportunity, but it will be a good idea to pass. Real estate is our gig, but I would venture we already have too much.

http://www.marketwatch.com/story/us-con ... 2009-09-08
U.S. consumers reduced their credit burden by a record amount in July, the Federal Reserve reported Tuesday. Total seasonally adjusted consumer debt fell $21.55 billion, or at a 10.4% annual rate, in July to $2.47 trillion. This is the sixth straight monthly drop in consumer credit.

Be carefull to extreme caution. February is my look around scenario as stated in forums. I have picked up a equity "left side of the curve" play given its core purposes only. I have been asked to look at some real estate also. I firmly cautioned on why and said when the snow melts on this topic we can talk.
http://www.debtdeflation.com/blogs/2009 ... rick-road/
Smarter people than me noted where not at mark down curve on equity or regional housing issues yet. I will stick with clever for now and
look at technicals more than fundamentals since the latter has been murdered in a few areas. I feel consolidation "roll over" has enabled by degree
of discipline over conviction has leveled off some for demand side reality which is yea - older news.
Aussies will play the carry now which may be the prick to cascade there elavated segment and Americans are rather narrow to linkages in which I mean given our sickly dollar demeanor this may give the dollar a tick up so Mr. Market will ensue up since a new new carry is that so it is that no?

[aedens]

TD: Yet of course, this is merely just another pretext for the SEC to deflect allegations about its utter uselessness, with claims that "lack of such information hampered its efforts to investigate potential fraud and market manipulation in the over-the-counter (OTC) derivatives
http://www.zerohedge.com/article/sec-be ... nalmarkets during last fall’s financial crisis." Well, duh. The SEC is finally realizing that the credit market is, oh, about 10 times bigger than equities, and that virtually everyone trades CDS now over cash products.

Reduce Levels of Outstanding Trades via Portfolio Compression. Market participants continue to reduce the number of outstanding CDS trades through multilateral trade terminations (tear-ups) which lowers outstanding notional amounts, reducing counterparty credit exposures and operational risk. Regulators have instructed firms to maximize the efficiency of trade terminations in CDS tear-ups and have begun monitoring the detailed results to ensure the fullest participation. <--markit data strips
Yours Sincerely from the Senior Managements of: http://www.newyorkfed.org/newsevents/ne ... 81031.html
Bank of America, N.A. HSBC Group
Barclays Capital JP Morgan Chase
BNP Paribas Merrill Lynch & Co.
Citigroup Morgan Stanley
Credit Suisse The Royal Bank of Scotland Group
Deutsche Bank AG Société Générale
Dresdner Kleinwort UBS AG
Goldman, Sachs & Co. Wachovia Bank, N.A.

After they get whatever they deserve life can go on and the Credit markets can function. This may thaw some money to SBA and real funding that is needed. Given the coruption that still needs to removed I kind of doubt it.
You just can't make this stuff up how far behind the SEC is.
http://economicedge.blogspot.com/2009/1 ... pires.html Listen carefully
The only cost is the destruction of its own society