Is the Balloon About To Pop?

[jefftheshark]

No doubt about it, the rally from the March lows has been great, but is it time to jump off the ship?

I think so, and I've been moving out of my longs into various short ETF's like SRS & SKF. So far over the last several days, so good. I'm also adding a small position in VXX, as I'm thinking the VIX "fear" gauge is showing things as being far too complacent.

Is anyone else trading the market this way, and if I'm wrong, does anybody have some cogent reasoning for me to change my mind?

JTS

 

[DWKB]

I too think the rally might be losing steam, but I have no idea where I would move my money too right now.

Bonds? Ha
Real Estate? Ha again
Commodities? Not gold.

Basically I can head over to a non-existent interest rate on a money market or savings fund and count my non-losses as wins? I don't see a nice solution.

 

[Gaddabout]

No doubt about it, the rally from the March lows has been great, but is it time to jump off the ship?

I think so, and I've been moving out of my longs into various short ETF's like SRS & SKF. So far over the last several days, so good. I'm also adding a small position in VXX, as I'm thinking the VIX "fear" gauge is showing things as being far too complacent.

Is anyone else trading the market this way, and if I'm wrong, does anybody have some cogent reasoning for me to change my mind?

JTS

I think three macroeconomic concerns point to your wise decision:

- Jobs still suffering

- Banks still not lending (in fact they're holding their money while cranking up the money-tree shaker known as fees and charges)

- Stimulus money not received, not being spent, or just pissed away in areas that have no impact where the greatest amount of people live.

You look at these and you have to scratch your head how the recession can be over. Who are the people with jobs who are going to ratchet up the spending to get production back on line? It's non-existent, and the economists calling this recession over should be tarred and feathered. If there's no money to spend on junk, and people have no will to spend on junk, how in the world are the widget makers going to get the capital to make the junk and employ people to do it?

It's macroeconomic malarkey and the so-called rally was entirely inspired by political maneuvering and public faith salesmanship.

 

[jefftheshark]

I think three macroeconomic concerns point to your wise decision:

- Jobs still suffering

- Banks still not lending (in fact they're holding their money while cranking up the money-tree shaker known as fees and charges)

- Stimulus money not received, not being spent, or just pissed away in areas that have no impact where the greatest amount of people live.

You look at these and you have to scratch your head how the recession can be over. Who are the people with jobs who are going to ratchet up the spending to get production back on line? It's non-existent, and the economists calling this recession over should be tarred and feathered. If there's no money to spend on junk, and people have no will to spend on junk, how in the world are the widget makers going to get the capital to make the junk and employ people to do it?

It's macroeconomic malarkey and the so-called rally was entirely inspired by political maneuvering and public faith salesmanship.

It's funny that according to the so-called "80% of leading economists" the recession is over and they point to rising stock markets and housing, and yet once you dig into the numbers, the news is so unrelentingly bad that you just have to shake your head.

However, when you read the financial press, outside of the CNBC shills of the world, you see an almost 100% conviction that the market is going to correct at least 20% to 50%, but it never does.

Perhaps a watched pot never does boil.

There is something rotten in Denmark, I think. But the situation was basically rotten all summer long and yet the market just keeps chuggin' along.

Perhaps it's just the "big lie" theory in action.

When the 3rd quarter GDP figures are announced, I think anything less than 3.4% to the plus side is going to trigger a move down. But I have no faith that even if the true number is lower than 3.4%, that the PTB won't just lie to us and then "correct" the number in a month or two when nobody's watching, just like they do with the unemployment numbers.

JTS

 

[82CardsGrad]

IMHO, the market lost its' connection to reality months ago... I can find not other justification for the sharp rise in the market other than the weak dollar. And now that the dollar has strengthened - albeit ever so slightly - over the last few days, what do ya know... the market has dropped.
Take a very close look at the earnings reports. Yes, companies have produced profits... but the vast majority have done so NOT by growing the top line, but rather drastically cutting their expense lines... No top line growth means no capital expenditure... no investment back into the company... and alas, no hiring...

We've discussed this before... it's sad and beyond scary that the only way our country can produce growth is by de-valuing the dollar... What a collossal MESS!!!!!

 

[conraddobler]

The stock market is not an indicator of the health of the average American's finances.

Zimbabwe has the best returns of any market in the world, that's not worked out well for it's citizens.

Real wealth is earned and created through productive efforts of people, that are valued best in the arena of an open and honest free market, not by a policy wonk in DC, and not by the manipulations of Wall Street, at every turn this government is shunning our free market ideas that built this country and replacing them with Marxist policies, and this started BEFORE Obama but has since been put into high gear.

The people who control the world don't care what name you give to the control, and are in fact much happier with concentrated power rather than diffuse power.

They are equating Wall Streets actions with the free market, ie see we told you it's broken, but it never was broken it was mismanged sure, not broken.

Socialist agendas are handy for concentrating the power and thus the control.

Learn this or regret it for the rest of your life and avoid unecessary explanations to your impoverished grand children.

 

[DWKB]

This thread is awfully close to P&R level. I thought it was going to be about where to put your money, but the ******* and moaners have since invaded it and given no worthwhile information.

 

[jefftheshark]

This thread is awfully close to P&R level. I thought it was going to be about where to put your money, but the ******* and moaners have since invaded it and given no worthwhile information.

SKF, VXX & SRS are up on average about 4.5% today above what you could could have bought them for at the opening bell.

So that's some information you could have used.

Goldman issued a sneak peek at the GDP numbers that will be announced tomorrow at 8:30 EDT, before the market opens, and they are saying that the number will come in at 2.7%, which could cause a big tumble. Of course they could be doing this to dampen the surprise a bit, and spread out the losses over the next few sessions.

JTS

 

[DWKB]

SKF, VXX & SRS are up on average about 4.5% today above what you could could have bought them for at the opening bell.

So that's some information you could have used.

Goldman issued a sneak peek at the GDP numbers that will be announced tomorrow at 8:30 EDT, before the market opens, and they are saying that the number will come in at 2.7%, which could cause a big tumble. Of course they could be doing this to dampen the surprise a bit, and spread out the losses over the next few sessions.

JTS

Ultrashorts are impractical to me personally. I'm not a short term trader. I need long term ideas.

 

[Russ Smith]

I nearly put a lot more of my IRA in cash this morning but I'm holding off. After I read the story that the ex AMD CEO is one of the people involved in giving insider trading tips to Galleon I thought we might see a huge drop today. I guess I worry a lot more about that stuff than the market as a whole does because while the markets are down, not very much and not related to that story more about housing and fear the GDP numbers won't be as good as expected.

To me the Galleon story is huge, we literally have a CEO in the middle of a huge deal (Abu Dhabi financing for AMD) leaking information to a hedge fund. I mean if that doesn't send a signal that the markets aren't being played on a level playing field what does?

It does look this quarters earnings are not good enough and we're heading down a bit. Also pointed out by some guy on CNBC today, with the coming legislation in healthcare and finance, why would anybody invest in stocks in those markets? You can't know what Obama is going to do in advance so it's a huge gamble. Financial stocks were a big factor in driving the markets forward. Combine that with tech stocks struggling to come through on earnings and 2 of the big movers of the markets have stalled.

 

[conraddobler]

This thread is awfully close to P&R level. I thought it was going to be about where to put your money, but the ******* and moaners have since invaded it and given no worthwhile information.

If I knew what to do and I do.

I wouldn't tell you

 

[conraddobler]

SKF, VXX & SRS are up on average about 4.5% today above what you could could have bought them for at the opening bell.

So that's some information you could have used.

Goldman issued a sneak peek at the GDP numbers that will be announced tomorrow at 8:30 EDT, before the market opens, and they are saying that the number will come in at 2.7%, which could cause a big tumble. Of course they could be doing this to dampen the surprise a bit, and spread out the losses over the next few sessions.

JTS

Ah Goldman, the paradox, to believe anything they say or not, btw they are smart, they mix it up enough you have no idea what their angle is at any point in time.

Sometimes their information is a headfake, sometimes dead on, who's to know?

Only the shadow knows....

 

[conraddobler]

All kidding aside and properly labled as not investment advice I have the following opinions:

I was talking to a host of commercial lenders yesterday trying to get financing for a bed and breakfast.....

The theme I got back was that what's hot to finance now is warehouse distribution centers and medical facilities period... end of story as in that's about all they want to really get excited about, most definitely NOT bed and breakfasts.

So long term I would look into the medical field for long term investments, UHC has beaten down that sector to an extent but it's more recession proof than most IMO.

The problem with giving any ideas here is there is a fundamental question to answer yet that sheds a lot of light upon what you'd do long term going forward.

The inflation / deflation debate.

It's a doozy btw but if I was going to invest long term I'd have to answer that one first before I made too many moves.

http://www.financialsense.com/fsn/2009.html

Follow that link, scroll down, there is a whole series on the inflation / deflation debate with some of the biggest proponents of each, very interesting.

Settles nothing btw in terms of what to do right now.

I happen to believe ultimately the US will repudiate it's debt, revalue it's currency or simply technically default.

The problem is of course timing that, good luck on that.

 

[Gaddabout]

No one's going to end their demand for energy or oil any time soon. Everytime I hear both are at their ceilings, the next generation cranks up demand and profits continue to roll in. It's not cheap to get into, but for long-term solutions, it's hard to beat performance.

 

[conraddobler]

As a sidenote there's one good indicator I watch all the time.

Most major selloffs occur after 3 to 4 down days in a row, seems to be a negative momentum thing.

The FED actually watches this closely and over the last few years just as things were going off a cliff they would jumpstart the market with some out of the blue BS.

Well nowdays they have to save the bond market.

So all is quiet on that front and we've had 4 down days in a row all timed to coincide with the GDP announcement tomorrow.

So hang on, could be wild.

 

[jefftheshark]

As a sidenote there's one good indicator I watch all the time.

Most major selloffs occur after 3 to 4 down days in a row, seems to be a negative momentum thing.

The FED actually watches this closely and over the last few years just as things were going off a cliff they would jumpstart the market with some out of the blue BS.

Well nowdays they have to save the bond market.

So all is quiet on that front and we've had 4 down days in a row all timed to coincide with the GDP announcement tomorrow.

So hang on, could be wild.

So you have the whole kitchen sink thrown at the economy and all you get is a 2.7% rise (and negative employment growth to boot!)?

Perhaps it's time for the Fed to save the dollar, which will feed the deflationary spiral.

Damned if they do, damned if they don't. But the VIX had it biggest day since March today, and that should be screaming something at us.

JTS

 

[82CardsGrad]

So you have the whole kitchen sink thrown at the economy and all you get is a 2.7% rise (and negative employment growth to boot!)?

The cries of worry over inflation are comical... 2.7% with everything AND the kitchen sink tossed in, screams of retraction from every corner. A.K.A. no demand. The Fed can do a lot of things - most bad, but try as they might, they simply can't create demand. The entire world, sans China and a few other smaller Asian countries, are in full-blown deleveraging mode. BOTH companies and individuals. The 4th qtr and Q1 2010 GDP #'s promise to be more of the same. Coupled with what is clearly shaping up to be a protracted unemployment battle, and it's clear we are very far from being anywhere near out of the woods...

Perhaps it's time for the Fed to save the dollar, which will feed the deflationary spiral.

Damned if they do, damned if they don't. But the VIX had it biggest day since March today, and that should be screaming something at us.

JTS

Save the dollar.... hmmm... should be interesting to see how this plays out. Saving the dollar would mean higher interest rates, which would be designed to slow down spending. However, a depressed dollar directly correlates to higher comodity prices, namely oil. Which itself acts as a governor on spending... So, do they really need to "save the dollar"?? I just don't know...
The VIX is perhaps one the best indicators of all regarding future performance of the stock markets. And based on what transpired today, I would say we are on the precipice of a fairly large downward dive...

 

[jefftheshark]

Ah Goldman, the paradox, to believe anything they say or not, btw they are smart, they mix it up enough you have no idea what their angle is at any point in time.

Sometimes their information is a headfake, sometimes dead on, who's to know?

Only the shadow knows....

3.5! Darth Sachs strikes again!

I bet when the dust settles we'll see a huge bump from the cash for clunkers program, but I'm sure I'll be stopped out on most of my shorts this morning.

Buying opportunity in the pm?

JTS

 

[DWKB]

3.5! Darth Sachs strikes again!

I bet when the dust settles we'll see a huge bump from the cash for clunkers program, but I'm sure I'll be stopped out on most of my shorts this morning.

Buying opportunity in the pm?

JTS

This chart I posted in one of the stimulus threads seems appropriate here:

You must be registered for see images attach

 

[conraddobler]

3.5! Darth Sachs strikes again!

I bet when the dust settles we'll see a huge bump from the cash for clunkers program, but I'm sure I'll be stopped out on most of my shorts this morning.

Buying opportunity in the pm?

JTS

Ahahahahaha.

I can't ever figure out why anyone would want to be a client of theirs, because it's like one long nightmare where you wait for them to remind you that you don't matter the most.

JMO...

 

[Russ Smith]

3.5! Darth Sachs strikes again!

I bet when the dust settles we'll see a huge bump from the cash for clunkers program, but I'm sure I'll be stopped out on most of my shorts this morning.

Buying opportunity in the pm?

JTS

Yes I think cash for clunkers and the new home tax rebate were probably largely responsible for the GDP jump.

They were saying yesterday when the housing numbers were lower they thought it would continue if they don't reinstate the tax credit so I think that means they know that is padding the number.

 

[82CardsGrad]

Yes I think cash for clunkers and the new home tax rebate were probably largely responsible for the GDP jump.

They were saying yesterday when the housing numbers were lower they thought it would continue if they don't reinstate the tax credit so I think that means they know that is padding the number.

The general consensus on CNBC this morning was that government programs comprised apprioximately 50%-60% of the 3.5% GDP figure...

In the end, are companies growing their top lines? Is that 3.5% even remotely sustainable? And most importantly, will companies begin hiring anytime soon?

I am very skeptical relative to all of those questions...

 

[Russ Smith]

The general consensus on CNBC this morning was that government programs comprised apprioximately 50%-60% of the 3.5% GDP figure...

In the end, are companies growing their top lines? Is that 3.5% even remotely sustainable? And most importantly, will companies begin hiring anytime soon?

I am very skeptical relative to all of those questions...

Yep you'll get no debate from me there. I actually wouldn't be surprised if the percentage is as high as 75%. Anybody who's looking for a job knows that the recovery is being overstated. If companies were doing as well as some people think, those companies would be hiring.

 

[jefftheshark]

The general consensus on CNBC this morning was that government programs comprised apprioximately 50%-60% of the 3.5% GDP figure...

In the end, are companies growing their top lines? Is that 3.5% even remotely sustainable? And most importantly, will companies begin hiring anytime soon?

I am very skeptical relative to all of those questions...

This is from Karl Denninger (and while Karl makes Conrad look like Mary Poppins on the doom and gloom scale, he's made a fairly concise analysis of the GDP report here:
GDP Is..... Better Than Expected? Link


Here is an excerpt:

Oh what a tangled web we weave....

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 3.5 percent in the third quarter of 2009, (that is, from the second quarter to the third quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP decreased 0.7 percent.​

​

​

Looks good, right?

Hmmmm.... or is it?
​

Motor vehicle output added 1.66 percentage points to the third-quarter change in real GDP after adding 0.19 percentage point to the second-quarter change.
​

....
Real federal government consumption expenditures and gross investment increased 7.9 percent in the third quarter, compared with an increase of 11.4 percent in the second.​

(you can read the rest if you are interested)​

But here is the scary part:​

Disposable personal income decreased $20.4 billion (0.7 percent) in the third quarter, in contrast to an increase of $138.2 billion (5.2 percent) in the second. Real disposable personal income decreased 3.4 percent, in contrast to an increase of 3.8 percent.​

*******************************************​

Anyway, suffice it to say, the balloon is safe for another day or two. But there are certainly more than a few band-aids it as well. ​

JTS​

​

 

[Gaddabout]

Jeff, not only does that capture what's really going on, it captures the insanity of short-sighted Wall Street. Wall Street likes companies that downsize in tough economic times. Great. But when EVERYONE downsizes, it downsizes the economy, meaning surpluses collect and production is cut and more companies downsize and the cycle just goes on and on.

It's why raw capitalism is a broke *** ho. When everyone is doing what's in their best interest right now, eventually everyone takes their money and goes home.

What's really scary is corporate raiding in the 80s greatly diminished family- and strong privately-owned companies that would have been stalwarts in this kind of economy. Everyone went public, so everyone is playing by the same rules. At some point someone's going to have to reward a company for finding ways to maintain some profits without minimizing payroll or it's going to accelerate the U.S. economy into a tar pit our dinosaur of an economic system can't crawl out of.