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Vacation Thoughts From David Rosenberg
It appears those truly concerned with the proper functioning of the market can never truly sit still (especially when, as today confirms, it merely keeps on breaking little by little until it goes poof once again as not even one quadrillion of fake stuffed quotes can keep the market up any longer). Case in point: David Rosenberg, who should be on vacation, yet posted this typically delightful breakdown of the bullshit action in stocks when juxtaposed with the ever deteriorating reality.
Deep Dish With Dave
Chicago, the city of bulls, bears and cubs — how perfect.
What hasn’t been is the weather, which calls for pinot noir at the hotel bar.
And some market and macro musings, vacation notwithstanding.
I see once again that the S&P500 is at a crossroad, but this time after a huge bounce. The market is having as much trouble now with resistance levels as it was encountering difficulty breaking below support levels just a short month ago.
Currently, the S&P 500 is a lock between 1,000 and 1,200 and we are now right at the midpoint. This range-trade pattern will break at some point and my sense is that it will be to the downside, and at that time we will see who has the cash (to put to work) and who’s left with the trash (and about to be trashed).
The level of complacency over the economic outlook is palpable and so reminiscent of the fall of 2007 when everyone believed the Fed could navigate us into a soft landing in the face of a credit collapse. Now the pundits have all but abandoned the ECRI index as a leading indicator (even the architects have) of economic activity. The ISM is dipping, but still above 50, didn’t you know. Corporate earnings were stellar in the second quarter — who cares if the results were skewed more to April than June? The savings rate has spiked to 6.4% in June, and many pundits see this as a valve for the U.S. consumer to reload the spending gun as opposed to a new secular theme of frugality.So, many market commentators and prognosticators still see this cycle as a classic post-war correction in GDP than what it really is — the aftershocks of a post-bubble credit collapse. A double-dip recession may well be averted, but the risks are not trivial and the major point here is that the statistical recovery that was underpinned by the arithmetic contributions to GDP growth from inventories and the massive support from unprecedented fiscal and monetary ease is proving to be extremely fragile. Why else would Democratic senators now be voicing opposition to allowing the Bush tax cuts to end (the ones they criticized vehemently in the 2008 election) and why else would the Fed be hinting strongly at extending its quantitative easing strategies if the consensus view of 2.75% real GDP growth, was realistic? The odds of something closer to zero are higher than many think.
After all, after yesterday’s economic data, there is almost no growth “built in” for consumer spending as far as Q3 is concerned. In Japan-like fashion, the only thing that is preventing U.S. consumer spending from contracting outright at the current time is a negative price deflator, which is helping to flatten the data in “real terms”. (As an aside, anyone notice that the yield on the 10-year JGB just dipped below 1% for the first time in seven years? Just in case you thought 3% in the U.S. and Canada was too low — they may in fact be as much a bargain today as they were at 4% earlier this year and 5% in the summer of 2007.) Consumer prices in the U.S. have now fallen three months in a row (as measured by the PCE price deflator) and the last time we had a three-peat of deflator declines was when the economy was plumbing the depths back in the opening months of 2009. It is against this deflationary backdrop that “yield themes” shine as far as investment strategies are concerned.
Moreover, the sharp and unexpected 2.6% decline in pending home sales points to a huge reversal in housing this quarter as well. Recall that the tax incentive induced housing boost in Q2 added six-tenths of a percent to that already lukewarm 2.4% GDP growth rate last quarter.
We also now have to contend with the end of the mini inventory cycle that was responsible for nearly two-thirds of the GDP rebound from last year’s depressed lows. The ISM may well be above 50, but it has still declined for three months in a row — slipping to 55.5 in July from 56.2 in June. And, out of the 18 industries polled in the ISM, only 10 reported growth, which was down from 13 in June and the lowest tally since December 2009, while 4 actually contracted. Inventories jumped to 50.2 from 45.8 and it would seem as though this sudden re-stocking looks to be unintended — after all, production and orders slid to their lowest levels since June/09. Had inventories been flat, ISM would have been down to 54.6. What really stood out was the new orders component — down 12.2 points in the last two months. The last time this happened was October 2008 and in fact is a 1-in-25 event. The 4% of the time this does occur is in or near recessions but rest assured, like the ECRI, this is nothing more than a relic… Right.
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Maybe we are all just too bearish here...
Nahhhhh...its a bitch being a realist!
Reality will bite so hard very soon.
You know it is going down, I know it is going down, even Benron knows it is going down. Still, why do they persist in buying this sucker. Maybe after the upcoming EPIC FAIL, we'll never find another Harry Wanger who is just dying to throw good money after bad.
There is a mandade from the white house. Float us until November 2010 or even November 2012.
We know that they can extend and pretend but the people are catching on. How long will the charade will last is anybody's guess. My guess is that if republicans win big, they will crash it to prove a point. "The market did not like it".
Therefore, either vote Republican and short the market a week before elections, or if you want to vote Democrat stay out of the market.
If you score big shorting the market, stay 50% in cash and 50% physical gold and silver.
See one of my other predictions that came true. It was written back in May.
#338683
Oracle, que bueno ver sus comentarios!
I have lots of cash and gold (and of course stocks & bonds).
Diversification!
ESO es porque tengo nuestra inversion en el Peru!
repeat of 2007 setting up.
Recovery "half-life" down to two years.
The next uptrend will be a death croak and this time the grand olde party will be in charge.
I can almost smell the burnt flesh from here.
Love Rosenberg, and happen to agree with him. that said, he has rarely been correct in his directional calls, and I along with him. So....are we too early in betting on the "cascade" downward? Or are hoisted on the petard of a new bull market, and soon to be blown sky-high?
Bought apple 270 calls w/ the 'better than expected' ISM numbers at 10:00, instantly got slaughtered....bastards... luckily recouped most of my losses for the day. Shoulda sold, but I couldn't get myself to do it, now i'm at the mercy of the employment #'s tomorrow :-/?
MH
You'll be ok. If ADP prints are seen as optimistic, the BLS should show out of control job growth. Market will Gap up and Apple will be at 300. It's all bullshit, but won't that feel good getting 30 pts on that call. :-)
Remember the election is now down to 90 days. Dems have to make up a lot of ground here now that they have pissed off the small business sector with 29 million small businesses that employ half the private sector with the 1099 Wallapallooza health care amendment. All they have left is the stock market and the BLS issuing fantasy league numbers.
265 is proving very hard to break through... If it fails to do so again, prepare for a brutal shank down for AAPL.
AAPL will get slaughtered some day because it's priced to over-perfection, and remember below 240=200. Can't wait to watch that.
Would love to treat Rosie to a cheddar burger and cheddar fries at the Weiner Circle on Clark while he's in town.
http://www.wienercircle.net
Another thing that bothers me about the ISM #s is that it is a survey, not hard data, subject to large range of opinion error.
ISM does not even weight the survey according to the company size. It is an overrated indicator.
If you debase the purchasing power of currency, as has been happening with extreme deliberance, it takes greater numbers of said currency to replace the asset side of the balance sheet while the liability side remains constant.
When Geithner and Barnancke get Bullard to start cheering rising lumber, copper, and all other housing input materials, you will know that the hyperinflationary move to rescue bank balance sheets will have been successful.
Everything MUST rise in price while bank debt remains constant and capped. The underlying collateral rescues the balance sheet.
This all equals higher stock prices.
I WANT YOUR AUTOGRAPH DAVID ROSENBERG!! YOU ARE A ROCK STAR!!
I'm one of the ones who's just about totally pulled out of the market. I was sucked into the stock market for the first time back in November of 2008. I'd been in cash for years, because the stock market looked insanely high. In November 2008, after the drop, I bought a bunch of stock. I did this not really knowing what was going on, just betting that there was a panic and that the smart money would be buying. In my opinion, everything would right itself in a few months to a year, the way history told me it had in the '70s and '90s.
Unfortunately for me, I then started actually paying attention to what was going on in the markets, and reading blogs like this one that scared the shit out of me. By February of 2009, I had sold off all of the cheap stock I'd bought, and was buying puts (remember how expensive they were then), convinced the S&P was going to 300.
Needless to say, my puts all evaporated over the next six months, and I was left poorer by quite a bit. Since then I've continued to educate myself about the "investing" game and become more outraged all the time.
I don't feel any less scared about the future now, but I'm not betting my precious resources on the timing of the collapse anymore. I know that whatever I think about the market -- whether I think it's going up or down -- it's because someone wants me to think it, and I'm probably wrong. Someone is making money in the "financial market," but it sure as hell isn't me.
On the bright side, I've educated myself about a lot of other financial stuff. A couple years ago, I was leveraged to the hilt thanks to years of graduate student loans, lots of credit cards, car loans, etc. Lately, I've been carefully structuring my life around deleveraging, and buying/protecting meaningful assets. I have some gold, a lot of food, a generator, a truck and a house that are fully paid for, all carefully made safe from creditors. I'm planning a bankruptcy to flush away a bunch of unsecured consumer debt, at which point I'll be set to survive in an post-consumption economy. If I lose my job, we'll be OK for quite a while.
I have a great wife and a child on the way, and my primary goal is to protect what I have, not get rich in the casino. I'm watching the ongoing process with primarily contempt, but also sadness, wishing the human race would do better.
And nothing would make me happier right now than to see the big banks utterly collapse under their own putrid weight.
Name your kid Tyler... LOL!
And while we delay joining the party or lament the nature of this so-called investing, yup, someone is out there making money aplenty. "We dance round a ring and suppose, But the secret sits in the middle and knows." (Frost)
gold and gold stocks now. The stock market may sell off briefly in the fall buy nothing big. Say Dow 8-9000 at the worst. Eventually the dow will recover as our currency will be come that of a third world nation and the dow may end up at 12-15000 maybe 30000 in two years. But how much did you gain if the dollar loses 90% in that time. Sell your gold stocks after gold revaluation. Keep physical. Remember after gold revaluation in the 30's the market rallied for 5 years. And by the way the market is now disconnected from main street. Main street will be going down and recovering for 10 years while the stock market behaves like a 3rd world currency and goes way up enventually because the dollar is the new peso.
$USD is sitting on support @ 200dma, it might go to 80, but it's oversold(rsi) and it's mostly a response to Euro strength, which has peaked. Oil and commodities have only been dollar- down trade (even though CNBS made the case we no longer have the correlation recently, now it's back!)
Gold will sell off with any market selloff.
by the way if you have credit card debt just don't pay it....they will give you at least a 60% off deal...instead of declaring bankruptcy.....or just buy 1 gold coin for each debt u want to clear. Gold is going to 12000-50000 depending on if they waive soverign debt or 1/3 currency split........
+ fofoa's $55,000!
Although I would not, me personally, renounce a just debt, maybe that's just me, paying what I have agreed to pay.
I don't love the idea of not paying back debts either and if you have credit card debt i'll tell u what everyone is doing. They are not paying for 3 months.....they call you. just disconnect the phone for that time period before they send you to collections they send out a debt forgiveness sheet. Citigroup and Discover are doing this i don't know about jpmorgan chase they are a little more tough but you agree to pay 30 cents on the dollar on their offer. Bankruptcy can mess you up for a while. The amount that is forgiven is charged on you taxes as income but its another way out. I wouldn't declare bankruptcy in any event until this thing shakes out as i said there is a possibilty that our new currency starts a new based on treasuries in both banks and money markets backed by gold and everything else is confetti anyways. Your timeline is 1 year from now you should know what golds final worldwide number is and what we are doing. Think to yourself why are these banks offering 30 cents on the dollar now......That means the Dollar and eventually the euro are zero compared to gold. Forget about the euro-dollar relationship and concentrate on gold. The Euro dollar circus is a sideshow as to whats really going on.
I appreciate the advice. Glad to see other people are thinking about this stuff too.
Gold will not sell off....this is not 2008 and that was the paper price the physical market for silver remained at 18 during that and gold 900. That was forced paper liquidation. You are not to sell any gold or silver or gold stocks. Gold stocks are not forever pare out after revaluation. Ben Bernanke can't let the dow go below 8000. After this next six month confusion the dow will only go up as we will have a 3rd world currency. Once they start talking about something on financial TV its too late. you need to find commodities at their bottoms to invest in the next 10 years. Physical gold is a keep
nice ...plenty of clear facts
AAPL, are you kidding me? Who cares about a PC maker using open source under a new gui wrapper under selling mp3 players in a market saturated with thumb drives that do the same thing for under 20 bucks. Their phones not withstanding require a lot of infrastructure upgrades which took pushing and shoving during "good times".
I doubt AAPL with have similar success convincing providers of the same tap dance during a dump cycle of the economy. I have more faith LG will sell 3 low end profitable phone this year than AAPL will in the next four years. Just as I know Dell will sell 12 profitable laptops, with professional services, server equipment and consulting services for every AAPL notebook.
Why are we pretending AAPL isn't built around the commodore Amiga model already and just give up the ghost on that dump tactular POS stock. Other than the obvious investments by MSFT to keep them alive during a time of anti-comp agreements, the profits aren't that impressive nor is the techonology far removed from $400 crummy laptops (same crap in the Apple shell as an ACER nowadays except ACER actually improves their product line).
Sick to death hearing about AAPL, 23 years in Comp Sci and Engineering, still cannot understand people that banter about the company as if self aggrandizement and outright theft of IP is innovative.
The reality distortion field is still strong, young skywalker
Rosenberg is one of the best. I saw the inventory was bumped up on the June revision, so now they're sitting on a crapload of June/July inventory build without which GDP is about 1.4% on my cocktail napkin math.
No end demand. The generational shift to "we're not buying that crap anymore" has only just begun. Just as smart money bails from the over $1mil homes, the homeowners underneath get the idea they will never break even in 20 yrs, maybe more. It takes time to sink in.
Wow, too much jin and not enough juice. Mr Rosie gets waaaay too much respect in this space. He's a smart guy and is worth listening to, but ZH (as is Rosie) is in the perma half-empty camp. I come here to see the worst of the worst - and then go long....
Well, then, be on your way, sir, and we bid you good cheer!
Interesting SP500 chart ...
http://stockmarket618.wordpress.com
There are certainly a lot of details like that to take into consideration.I read and understand the entire article and I really enjoyed it to be honest.
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