This page has been archived and commenting is disabled.
The Storm That Wasn't?
Over the weekend, Michael Santoli of Barron's wrote an article, The Storm that Wasn't:
Last
Monday was the slowest trading session of the year, as measured by
turnover in the stocks that make up the S&P 500, which in turn
captures most of the give-and-take involving the stocks that matter to
most investors.
The good folks at Bespoke Investment Group, at Barron's request,
point out that Columbus Day is not, routinely, the sleepiest day of
the year's first 10 months. By their lights, Columbus Day has, since
1993, often been an uneventful day, but never has it been the quietest
day of the year to this point on the calendar.
At the risk of
extrapolating too terribly much from this modest sampling of market
history, the most logical explanation for the extreme "uneventfulness"
of the equity market last Monday is that the bond market was closed, as
it typically is on official holidays.
Stocks
are now a neglected asset class, slave to the bond and currency
markets. The fact that the Treasury market wasn't open for business
Monday—and therefore that the largest pool of investment assets on the
planet wasn't out there twitching to every hint and whisper of future
central-bank action–deprived equity traders of their principal cue.
This
might have marked the peak of stocks' slavish relationship with the
macro forces that manifest themselves first through currency and bond
markets. For months, the correlation among stocks has been so high as
to mock active fund managers who attempt to pick winners and shun
losers, but this all-or-nothing dynamic has faded as the market rally
since early September has matured.
Not
unrelated is the bounce in 10-year Treasury yields last week, from
2.38% all the way to 2.57%. The bond market is, hesitantly,
transmitting the notion that even if the Fed does embark on a new
asset-purchase campaign, perhaps the markets have already discounted it.
In
the short term, the general neglect of equities is a headwind for the
market, yet over a longer span it's a benefit. As long as stocks
continue to act as nothing but the tail being wagged by the dog of the
macro data driving the dollar and bonds, the less likely equities will
become captive to any public mania and get overvalued and therefore
vulnerable to another bruising downturn.
The
folks who remain attentive to what's happening in the stock market are
perhaps getting a bit too comfortable with the idea that the market
can continue melting up. The weekly tally of those members of the
American Association of Individual Investors who respond to the group's
poll has remained above the historical average level of bullishness for
six straight weeks.
That doesn't imply the best buying
opportunity is at hand. And yet, the public has been a net seller of
stocks for five straight months, according to the Investment Company
Institute. The future returns following prior such streaks of public
liquidation of equity funds have been far better than average, as BNY
Convergex recently noted.
This is
pretty much the salient market theme right now– investors are a bit
overconfident and complacent in the very short term and yet in a
broader sense are more cautious and skeptical than the economic data and
market action warrant.
Here we are, halfway through October,
and three-quarters of the way through the notoriously treacherous
September-October period, and the much-hyped volatility storm has yet
to arrive. Now that we live in a market where it's quite easy to bet on
future volatility through futures on the CBOE Volatility Index (VIX),
traders have bid up expectations of impending jumpiness to an alarming
degree.Often this has proved a harbinger of tumult to come, but
given how widely anticipated the unsettled market weather is, perhaps
we're inoculated from its nastiest implications.
On
some level the market is simply reflecting the less-reported signs of
healing in the economy. Retail sales just re-attained the level right
before Lehman Brothers' failure. Nominal gross domestic product is at a
record high. Mergers and acquisitions look poised to accelerate. The
market has held up despite the stark underperformance of financial
stocks, just as it did in 2004 in the face of stagnant semiconductor
stocks (then considered a bellwether).
It's
not a novel thought to offer that stocks seem ripe to pull back or at
least flatten out for a bit. Whatever the salutary effects of a
Republican rout on Nov. 2, they seem already more than discounted. Yet
there's enough skepticism there, that any stiff pullback would likely
be a reason to buy, and not to panic.
Mr. Santoli was interviewed on Yahoo Tech Ticker (see video below) stating that bulls were "caught offside" by China Rate Hike, BofA Woes:
Stocks
slumped Tuesday following a surprise rate hike by China's central bank
and a "sell-the-news" reaction to earnings from tech giants IBM and
Apple. The selloff picked up steam mid-afternoon on reports Pimco,
Blackrock and the NY Fed want Bank of America to repurchase $47 billion of mortgage-backed securities they claim were improperly serviced by its Countrywide unit.
"This is the tip of the iceberg," writes market-timer Thomas Kee, president and CEO of Stock Traders Daily. "This is the beginning of [sic] PUT BACKS. It will be a long legal haul, and another added weight on banks."
Even
excluding the latest worry about financials, several factors conspired
to drag stocks down Tuesday, Barron's columnist Mike Santoli tells Dan
Gross and I in the accompanying clip.
After
a 12% rally in the past six weeks, the market was technically
overbought and the short dollar/long financial assets trade had become
"very crowded," Santoli says. "A lot of people were caught offside" by
China's rate hike and irrationally exuberant about prospects for more
quantitative easing by the Fed. (Indeed, commodities and other "risk
assets" joined stocks in retreat Tuesday as the dollar posted its
biggest one-day rally since August.)
A Headwind for the Market
These
"hair-trigger moves" are contributing to investors' mistrust of the
market, Santoli says, as evinced by the steady outflows from equity
mutual funds - despite the market's strength prior to Tuesday's tumble.
"There's
definitely been a context shift" since the ‘Flash Crash' in May, he
says. "It's not as if people are panicking out of stocks. They're
steadily selling [and] diversifying out of stocks. It's going to be a
headwind for the market for a while."Despite their short-term
bullishness, professional investors also have an eye on the exits,
Santoli says, noting a "steady bid" for futures predicting a rise in
volatility over the next six months. Investors have a "muscle memory" of
2008 and think "something could upend the market anytime." (Something like, say, an unexpected rate hike by China.)
But
if sentiment is really a contrarian indicator, this underlying
skepticism "tells me this is not a market that's getting overheated or a
market that's going to a valuation extreme," Santoli says, building on
the theme from his most- recent column: The Storm that Wasn't.
My take on today's action? It's just another day in the wolf market
where the wolves were busy stealing shares from retail suckers and
institutions that dumped because they panicked/ cut risk. Nothing has
changed. The mortgage mess isn't going to kill banks, and smart money is
still betting on the Bernanke put.
Importantly,
top hedge funds are using these pullbacks to build on their positions,
especially in energy and commodities. And what about pension funds?
Some, like the Caisse, are prepping for the next big move,
and mark my words, the next leg up is going to be huge. A lot of asset
managers are underperforming their indexes, so they'll use any pullback
to juice their portfolio with high beta stocks.
Speaking of high beta stocks, my beloved Chinese solar stocks got killed today, led by my number one pick, LDK Solar (LDK), down 14% on very high volume.
In fact, volume was extremely high in the solar sector today, telling
me that the wolves were up to their crooked ways, naked short selling
and buying more shares on the cheap.
Watch this and other
sectors very closely and use these pullbacks to accumulate more shares.
As more Fed officials come out to state that quantitative easing has to be big,
all the makings for a massive bubble are on their way. My big bet
remains with alternative energy but others prefer gold, commodities and
energy. It doesn't really matter, because all I know is that once the
bubble sectors take off, they're not coming back to these levels. That
much I can guarantee you.
»
- advertisements -
Gigantic QE2 is a pipedream, Leo. We've made a deal with the Chinese that you and your "top hedgies" know nothing about.
Thanks to many of you who have such a colorful way of expressing yourselves. Aside from some of the lazy profanity (a sprinkling is all that's really required) many of y'all have very picaresque language, metphors, anal-orgies, and profuse alliterative expression.
The tete-a-tete with Leo is exciting to read, but, frankly I still don't know which way to bet today.
Once all the cogent remarks are considered in their entirety, i am left stunned and unable to make a move.
Why can't just one of you be right enough to bet the ranch on, let me cash out and pursue my true avocation of playing the guitar like Django Rhinehart on some idyllic island like what's his name, that artist that moved to the South Seas, after an argument with his tailor.
exactly, ive noticed a growing nervousness...or should i say panic, among these guys.
my guess and its all a guessing game, is that when ~1185 is taken out on s&p mid/late november there will be a nice move into year end.
the question is.. if the commercials will need balance sheet firepower for the putbacks, will the POMO results find their way to the stock-market?
While on the other hand, will the continuation of POMO just by itself inflate asset prices?
Tuesday was a non pomo day ... market down ... pomo day Wednesday, market up
Yes
ASX closes down 0.66%, oooh, what a huge fall!
Leo's right, at some point the nervous nellies will get greedy & start buying & central banks will "knock it up a notch", just like they did from 2003 or thereabouts.
You can't start down the path of currency inflation & turn back, impossible.
Well there are some bright spots out there for sure. See this?
Reuters reports that the American Institute of Architects’ Architecture Billings Index increased to 50.4 in September from 48.2 in August. Any reading above 50 indicates expansion.
That's a pretty strong move. Economic indicators have been muted to positive and earnings pretty decent. With the Fed backing this, I gotta agree with Leo on this one. Higher we go.
Nice bounce tomorrow. Commods are already being gobbled up at these prices.
Fact is, nobody wants more USD or trusts Washington with monetary policy anymore than they absolutely have to. As long as USD is reserve currency, you gotta have some. But as investment, the USD is dead as a door nail.
Plus another short squeeze. Could get interesting.
You all got caught in the QEII is coming bull trap. We move a lot lower from here until they drive the markets higher again to "wash, rinse & repeat"
Hilarious.
When market was down a few months ago, your articles 'warned' of upcoming volatility. Which, by the way, did not occurr. Your prediction was perfect hindsight. Vix went smoothly down, markets went up unabated.
Now that market is up, you tell us about the "storm that never was". Umm, hello?!
Little disservice. Little....little leaaeeaaatle.
I admit I bashed Leo over the course of the last year or so.
I was wrong, he had better foresight.
This market is chasing yield. Nothing but fucking yield. It gets tighter and has less volume at the top and market had priced in QE2. The announcements were not all that confident BUT there is an economy outside of the crapper economy that has befallen the USA.
The rest of the world is growing and consumers outside of the US (and inside the US for that matter) are still having an appetite for crap, kitsch and status symbols.
The world is not falling apart. There's a reset and there's going to be pain for Americans but that's punishment for living above and beyond their means for decades.
With a little luck, the BRIC and Europe are going to pull America forward.
End of story.
don't think so, mate. thats the second shoe that is dropping as we speak. There is not much productive coming out of Europe for some time. Brace yourself.
Huh? Volkswagen is selling more cars than ever in this supposedly worst economy since the GD. The economy is bad in the US but outside the US, things are just chugging along fine. Sure, the US market is big and it will have many side effects when things go sideways further here but it will eventually be priced in. The world doesn't end when Washington runs out of other nation's money again.
So goes Volkswagen, so goes Europe?
thats funny. oh well, I tried to reason with you. take care.
Doin' not too bad up North...
From: http://www.statcan.gc.ca/subjects-sujets/labour-travail/lfs-epa/lfs-epa-eng.htm
"Since September 2009, overall employment has risen by 349,000 (+2.1%).
In September, the part-time employment decline of 44,000 was mostly offset by an increase of 37,000 in full time. Over the past year, however, part-time employment has grown by 4.6% (+146,000), a faster pace than the 1.5% growth in full time (+203,000)."
Cough. Laugh. Puke. Laugh some more. Leeeeetlllllllleeeee leo.
leo knows better. no. leo. no.
I wish the "with a little luck" line was earlier in the post, I would have wasted less time reading the rest of it
Little leo. Little plastic loving leo. Leo. With a K I might add. Leo. Leo........
Disservice. That is all.
Cammy,
You can come back in a year and kiss my ass. Till then, respect the name Leo, which is short for Leonidas. Nothing little in my name!
Plastic again! I do give you respect even tho I give you shit mother fucker. But Plastic again. That shit is gay plastic.
For the love of God please stop using the "wolf market" phrase, we all read the article it was originally used in, NO ONE else has adopted it. Every damn time you post you use that stupid fucking phrase.
But I do appreciate your viewpoint.
"we all read the article it was originally used..."
I would disagree because Leo's website is an amalgamation of nothingness.
Where's your website? I need some mental masturbation after YouPorn...-)
Any idiot can have a website as you have clearly shown - $5 / month via Go Daddy and you are in business. I'm not sure why people think having a website brings legitimacy.
Don't go postal again, Leo, he spoke the truth. A lot of "cut & paste" from you but very little original and critical thinking.
Or on the other hand, may be you are just not capable of that.
Leo who let you out of the nursing home!!! I'll have to talk to the RPN to make sure you stop posting nonsense. And yes, please feed the new BreX of solar, the Chinese so well known for their honest paper work in terms of production are willing to help a fool part with his money.
Save your cash, go buy farmland and set up your fiefdom. Or is that beyond you fat man? At least think of your own family. Stop chasing this crap and put an anchor in the ground before all you have left is an expensive obit in the TorStar.
CPL,
Will you still be around in a year to tell me how wrong I was for recommending to buy the dips, especially dips on solar? If so, please come back so I can tell you what I think of your opinion.
Again. Farmland. Go buy some your big-smoke snowflake cornfed ass and lease it. DO NOT GROW FOOD ON IT. There is zero money in feeding people. Just in the promise in feeding them.
Just seed. Stores easy and you can tell the brokers to eat a dick and wait for your price. When a business works with other businesses it's called price fixing. When a pub of farmers do it, you pay royally to eat because our government has no dominion outside of Ottawa and the civil servants they overpay.
See how that works. Seed here is also sold as feed overseas. You force the broker to pay for shipment and further increase the profit if you have a cabal of farmers.
Get off your fatass and get moving punk.
So far between your prediction from 2007 on the "trend" you are down a lot. Between a blurbs in the G&M I'm still solvent, capitalized and not knocking around for a buck a post. If you got in early for First Solar I'm so sorry man.
I understand what a stop loss is, where as you are forcing yourself through some diligent ritual of flogging yourself chasing a dragon. Understand that trading is just as much about loss and it is about gain. The longer you hold, the more you lose. It isn't investing in the future at this point, it's chasing the worst type of reality, empty and bleak.
Solar will not change a thing you see around you and assuming that the paper will be worth anything in a year is silly. The infrastructure changes alone would be insane. Canada made it's first fatal flaw of being cheap in the 60's by saving a grand total of 5 million dollars to carry the grid on iron, instead of what any sensible sub-tundra country would do which is bury it. We live on the Canadian shield for christs sake. Why was it built over ground. Because of optics. "look timmy daddy is up on the wire.". A 50 year old solution with a population of 7 million people seems like nothing. But like ripples in a pond, the problem spreads, hits the shore line and reflects back causing no end of grief to an asshole engineer like me. So why solar is useless.
First; I looked around at solar tech in 2003, all I found were the same morons that brought us the dot.com boom. Seriously do back checks, nothing runs that well with thieves running the place.
Second; We would have to cover practically 70% of all arable land to meet current power requirements. Even if solar improved to 100% efficiency btw. Since people have a habit of fucking and making more people and we import other people's problems I don't see the human habit of shitting in the sandbox stopping anytime soon. And this is just Canada, 33 million people. Last I understood in my basic physics course, you cannot manufacture more energy from less energy. If you think the technology can improve it won't. Best bang for our buck we have is nuclear, but we (collectively) don't have enough energy to produce the facilities because of hippy fucknuts in the 70's stopping the work being now.
So why. It's called Entropy, eternal rot, whatever you want to call it is a constant. Entropy isn't a theory, it's like Newton, it's physical law. Laws can be bent a little, but never broken. Unless you understand some principles of engineering I missed during the continious education all Canuck engineers are required to do to maintain their engineering status and wear the iron ring I would love to hear it.
Third; if we cover the landscape with sun power what are you going to eat, or any one in your family? Who would give up their farm land to have metal posts to maneuver around in a tractor. If you say government regulation, I counter with solar panel knocked off it's crop with a tractor tap.
Fourth; Economics also has it's entropy as in deminishing returns. Solar is garbage. It's a gadget like iPads, iPods, Aztecs (remember those, ugly fucking cars), betamax. It's easy to hype, hard to standardize and fucking impossible to make a profit off of in a market where commodities are bipolar. Mainly because the solar isn't about the power it makes, it's about the commodities it sells. If it's unaffordable for the return, who buys it. Nobody. Just because Canadian tire sells some shitty panel, an inverter and a over priced deep cycle battery doesn't mean the future is now.
You just bought the beta of badly designed software from dot.com scum buckets and I'm going to guess...again.
"Third; if we cover the landscape with sun power what are you going to eat, or any one in your family? Who would give up their farm land to have metal posts to maneuver around in a tractor."
You may be drunk, but that is a stupid thing to say as a reason why solar can't work. I suppose you are forgetting places like Nevada and Arizona and all the other desert and barren sandy and hot places all around the US? You don't generally see much farmland on deserts!??
The only thing stopping solar is oil's vested interests. Plaster the USA's deserts in solar and flick the bird at the people importing and using treasonous foreign oil!
Google "Seville solar tower" for another way of reducing your imports of A-rab oil...
CPL, +1.
you muddled through some pretty god-damned good points there. no big deal.
thanks for the education.
I'm hammered, I'm surprised I spelled anything correctly.
I'm off to fall down in bed.
+1
anyone cheering for more rally is a fucktard needing to be tazered
entire market structure has been debauched
the whole thing is just a big fucking joke now
Just go look at the volume. It was one HFT versus another. Humans aren't in that pit.
I'm with Leo. Buy the pull backs or get trapped in another short squeeze.
We've seen it now for what? 18 months or so? The BAC scare, the AAPL pullback, the Chinese interest rate hike, the gold correction.. etc etc ..
Germany's economy for example is in "dire straits". They have too few talented engineers to fill the gap of retiring qualified workers. China and India are growing for years to come. They are using the resources we all desperately need.
So America's real estate is a drag on an otherwise robust global economy. Who cares? If neccessary, the USD will be replaced. Again, who cares?
That robust global economy you speak of was created to sell to the consumption addicted American consumer. THAT consumer is now bust, so I would think twice about your illusionary "robust global economy" if I were you.
Who cares? One word answer for you: EVERYONE !!!!!
this idiot is right all too often
I hear Maiden in the background
http://www.youtube.com/watch?v=JKHku19fQck
Hit it!
I guess this just proves once again that any chucklehead can be a "contributor" to ZH. It would be easy to improve the overall quality of the work presented by contributors by simply eliminating the bottom 5% on an annual basis.
Whydya bother to read, think and comment on his pieces then?
P.S Not everything your golf pro says is true either, but if one of those tip helps....
ZH is one of the best sites for value-added information. Why dilute the quality with this clap-trap? I don't think people come here looking for "tips".
This is for you, Leo. We are going to approximately 1125 before we have a bounce that is worthy of something more than a day trade. We may trade below that number by a few points, and if we do the top is in. If we hold that area then there is a decent chance that the market makes a higher high into early November. But either way, the real selling will commence next month.
The Fed says a lot of things, and from both corners of their mouth. Why believe in the Bernanke put? How does smart monie follow Bernanke? Now that is a visual! Tiny Tim carrying Ben's emerald green cape. Next leg up may be a hyperinflationary one. You better be careful what you wish for Leo.
"...because all I know is that once the bubble sectors take off, they're not coming back to these levels. That much I can guarantee you."
...Guarantee? Really? What do we get "if" you're wrong?
Yeah--Lets all party like its the Nasdaq in 1999. Still only down 50% but who needs numbers when you have hopium.
funny. thank you, Jesus!