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Tomorrow, and Tomorrow, and Tomorrow
Via Peter Tchir of TF Market Advisors
As Macbeth said, It is a tale told by an idiot, full of sound and fury signifying nothing.
Fading the "Grand Plan" rally worked very well. There was a couple days of pain and then generally the market followed a nice path lower. Last week the market had felt oversold and was looking for a reason to rally. I thought that Monday was overdone, and that Wednesday was extremely overdone, but I started cutting shorts yesterday, and am now getting long.
This is the first time I have been long at these levels, and it scares me, but unlike the "Grand Plan" rally, I am not sure what I am fighting here, other than bad positioning.
Everyone seems to understand that the "globally coordinated rate cut" plan was not a big deal in of itself, yet the market didn't give up any of the gains. Even some of the perma bulls downplayed the move. I think the move was meant to be more pre-emptive than a strong show of future support, but Ben is not dumb, and he has seen the outsized impact such a simple move had.
He may be tempted now to follow up, even if he hadn't been. I could see him building a case that this is the opportunity to push the market and economy over the edge in the right way. QE1 and QE2 were launched when things were weak. Maybe he will push to launch a mortgage based QE3 when the market as a whole isn't bad? Maybe he will try and build on the momentum. It would certainly help European banks deleverage.
Yesterday's headlines seemed marginal at best. It felt to me that the market should have been disappointed. The data was only okay, yet the market hung in.
Merkel gave a speech today that should have caused the markets to sell-off, instead they held onto gains.
Too many moves like that indicate that maybe someone knows something. There are way too many government agencies involved for someone not to know something. If the market isn't making sense, then that is a logical conclusion.
Unlike EFSF, which was easy to see that it was a flawed plan from the start, it is hard to find a flaw with the "current" plan. That is because there is no current plan. Every time a plan is floated and is found lacking, another one is put up. There are too many potential options, and although none may work, the market is clearly looking for an excuse to rise.
Finally too we have seen follow through in the assets that should benefit - Italian 5 year bonds are up 4 points in the past 2 days. Back to levels last seen in early November. Even the basis swap improved by 36 bps over 2 days, so it picked up a good portion of the 50 bp cut made by the central banks.
As I wrote this, the IMF came up with some plan to work on central bank loans.
I don't believe this is going to work long term, but right now, the market seems too short and the politicians and central bankers seem to sense it and are finally throwing some fuel onto the fire.
Maybe now China will even throw the EU a bone and promise a hundred billion or so. The weakness in their own economy might prompt them to get involved finally, especially now that it seems minimal amounts might generate a big move.
Since I don't think this actually fixes anything this isn't a big global recovery rally trade. This is a massive short covering rally trade. Look for the ugliest, most beaten up names. JEF, Citi, and JPM are prime candidates. BAC and MS could run, especially if the Fed pushes ahead with a mortgage based QE3.
HY could do well, but even there it feels like time to close your eyes, and plug your nose, and but the dodgiest of credits because in a week someone else will buy it from you much higher. HYG and JNK should do well. I think JNK has higher beta right now, so could outperform briefly, but at these levels I like the fact that HYG does a better job forcing the portfolio to be less concentrated and to match the index better.
I don't like LQD outright. I think IG spreads can tighten here, but would prefer bank bonds on a yield basis, and corporate credit on a spread basis, but again, leaning more towards the BBB credits as the high quality names have been picked over and this feels like a rush to risk is in the works near term.
I still like Italian bonds. They could squeeze even further. People who shorted 5 and 10 year bonds are now experiencing the pain of big mark to market losses and are thinking about the cost of carrying the position at these yields, especially if the actions are going to buy a month or two before the next obvious problems arise.
Could the treaty talks next week fail? Sure, but won't they just come up some new plan? It just seems that right now there are too many alternatives and the market is too short to fight them all. If we get a good payroll number, 1300 seems easy for SPX. We have the seasonality, etc., and underperforming hedge funds seem much happier to push on markets to the upside than they do to the downside. We may finally get a rally in the big cap stocks that everyone complains have been lagging. If I am correct and we get a pop in the beaten down stocks, the big caps might be where funds go to next to put capital to work quickly.
As the market is moving up, we will here story after story about how well the consumer is doing, how the seasonality is great for stocks, how hedge funds and mutual funds are chasing performance, how stocks are CHEAP by any measure, and that Europe really isn't so bad, that Italy is running a primary surplus, etc. Every month without a default gives the banks more coupon income. I don't believe anything is really fixed, but this feels too much like post Bear Stearns to ignore. I haven't been long stocks above 1200 on SPX or HYG above 85 since July (and then only briefly). It still feels strange, though the IMF announcement makes me feel better about the position.
Cracks will appear in this rally, and we will ultimately figure out the problem with the current attempts to fix Europe, but right now it is too vague to fight, positioning has been too extreme, and Bernanke and Draghi have to see the opportunity to push things forward while the market is behaving positively.
It would also help, in my opinion, if they took the opportunity to get banks to spend the month of December reducing derivative notionals. Any attempt by the regulators to regulate (rather than just print money) would be met with cheers by the market. A concentrated effort to reduce gross notionals in all derivatives would not hurt bank profitability and would allow investors to become a little more calm on systematic risk. They may have created a window to do this, and since banks don't seem to be trading much as it is, and volumes will be even lower in December, they have the time to do it. This doesn't replace real regulation or moving towards clearing but would do a lot to calm the markets.
And yes, this may be a tale told by an idiot, but that doesn't mean it's wrong. I do wish I had managed to send this out before the IMF announcement.
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idiot. still short until we close above 200 dsma. Add my back if we go below.
Today will probably go well for the bulls... But as far as I'm concerned it ain't worth it.
I'll be remaining short as well. Look at the pace of this rally, the way it has powered past resistance in the middle of the night. The pace is utterly false. What does a rally of this pace and magnatude imply about how far the market will go upward? Can you see it going to 1400? I can't. I can't even see it being sustained for another week. Mabey I'll get hammered on it, but I am running very small bets.
I'm staying short too. VIX hasn't come down enough IMO to warrant going long.
All i'm gonna say is, Fuck the politicians and fuck the central bankers! At some point this game of lowering rates and printing money blows us all up.
All true Fonz. However, most of what I'm hearing was also true in October, and yet the market rallied on vapor all month long. After ramping the markets on Nov. 30 to help the hedge fund managers make their month, and ramping it in October to create some gain to give up in the face of the coming Euro crisis, can we really dismiss the idea that the markets will be ramped on vapor in December so the yearly numbers look better? Didn't we just see laughable four std deviation economic numbers released? Won't they lie about how good this shopping season is? Isn't GM channel stuffing like there's no tomorrow? Isn't the dollar at the top of its channel with plenty of room to be driven down, thereby driving up stocks? (probably a coincidence, right?)
I would not stand in the way of this make believe market based on the fact that it's a make believe market. You will be crushed.
All of these arguments are well made, and well received!
There is one critical factor that is causing me to remain short, that is different than October. When the US decided to invade Iran the currency war accelerated, China eased. The I don't think global concensus is going to be formed. I don't think there will be any positive resolution by Dec 9th. I could be wrong of course.
I have something to add with regard to the "window dressing" idea, I would like to expand upon it. What if you were the central banks of the world, major banks were about to crash due to collateral problems in liquidity. If you didn't have enough cash couldn't you extract it from the market with leaked info at the end of the month? What if the banks NEEDED to allow a quick booking of highly leveraged bets by the banks to help them get through the next few weeks? Wouldn't that make loans easier for them? It struck me how basically people with the leaked info moved these market very violently over night and basically sold to everyone during the day. I mean Monday was a 30pt night move and a 10pt day move, Tues a 5pt day move, and weds a 40pt move at night and 10 during the day. Of the last 95pts in the S&P only 25 was availible to ordinary traders. That screams distribution to me. Truthfully I am a long way in the hole on these bets but I still believe in them. Mabey I get pasted, but I feel I will not.
<straps on the brass balls and smiles confidently>
It took me a couple of months to realize Peter is either a complete idiot or a shill. He's good at verisimilitude--underneath the veneer of perspicacity all his thoughts are totally pedestrian. (Lot of scrabble lately.)
Its becoming more obvious Peter is RoboTarder.
/applause/
Lol, open your eyes.
Everyone here LOVES Schiff and his brilliant credit trade ideas (not that anyone backpacks along them as everyone here only trades NFLX, GMCR, and pennystocks) and then as soon as he goes medium term bullish (in a bear market, as he constantly says, not that anyone bothers to read past the first paragraph) the hatred towards him starts.
Ummm... the Peter in question is Tchir...Thanks for playing though
Pete, remember that poker rule? You know, when you sit down at the table and you look around and cant tell who the sucker is....its YOU?
Be careful, gamblin man.
remember that market rule, when you sit down at the table and find a sucker mark on your neck? your in a game with a vampire squid! /cash in and get home to the wife/
I guess everyone realizes that the market moves have everything to do with intervention of this or that and the next intervention, and market . Fuck that, let me buy a tunnel toll in Hong-Kong at 25% IRR duration of license 5 years totally adjusted to inflation (can raise toll by 150% before reaching limit), in a strong currency HKD not subject to international pricing. Too illiquid for the robot traders of the world, thank God, let me sit on it and buy Hong-Kong dollar calls on top of that.... and some Gold as my cash.
Did Robo write this?
That is so damn funny, I was thinking the exact same thing as I read it.
'Merkel gave a speech today that should have caused the markets to sell-off, instead they held onto gains.'
Uhm, no. Eurobonds are out, so having the Squid crash markets won't change that. Germany 1 Squid 0... still.
seriously? You're actually long?
That's awesome.
Love seeing people who are extremely articulate on the Bear side showing the ability to turn around and go long as well. Shows you're not just yet another one of those one-dimensional "sky is falling, buy gold" guys who is perma-bearish.
Show's you're a TRADER!
Good luck.
How can you trade anything when futures just gap one way or the other in an unpredictable manner? Just go long today from the open with uber leverage? Good luck with that.
You assume that anyone is actually teling the truth or revealing everything they know. While we have always been very explicit about some things, such as products and technology we develop, I have personally found it better to not always be completely honest about any particular position I take, its my business to know and not that of anyone elses. I have dealt with the Chinese on a number of fronts and this is one thing that they are very consistent about, they always want to know about your technology, but will never reveal anything about theirs. Don't be stupid, when someone questions you about what you know, this is the biggest "tell" that they don't know shit. I also find it good to always be somewhat underestimated when entering into business negociations.
Two things about gold and silver. They are not investment vehicles unless you are buying low and selling high (fucking duh), but for well over 2000 years these metals have been the safest store of value, hands down.
One final thing, the talking heads (and Tyler for that matter) keeps rambling on about a "liquidity" problem. This is bullshit, the world is fucking broke, what we have hear is a solvency problem and a failure to cummunicate that the growth model is DEAD and the debt (which is mostly fraudulent) will NEVER be repaid.
Bazinga!
I warned you guys back in August that an intermediate low was in.
I also warned you guys that we could be coming out of a long, difficult consolidation period similar to 1994.
I have been warning you guys for weeks about the world record 62 day streak of -1000 TICK days, which was undoubtedly going to lead to a rally that would shock even the bulls.
How else can you explain why the market has been so strong during the worst news in a generation?
How else can you explain Dow stocks which have been dead for years creeping to new 3-year highs while nobody is noticing?
The only explanation is that the market may finally be ready to make new highs sometime next year.
NFLX. nuff said.
Lol. Robo out in full force today. Only to disappear when things start going south.
Must be a major top on the cards with RT this vocal. He has always been a good reverse indicator.
your like a motivational speaker, positive energy out of every orifice,, hahahahahah
How else can you explain why the market has been so strong during the worst news in a generation?
Misguided hope and fear
How else can you explain Dow stocks which have been dead for years creeping to new 3-year highs while nobody is noticing?
The fleeing money from the usual suspects (financial) has to go somewhere. It's just mini bubbles in individual stocks.
The only explanation is that the market may finally be ready to make new highs sometime next year.
That's the ONLY explanation??
That is the worst reasoning and conclusion I have ever seen - anywhere. You cite some dubious events and then conclude a positive outcome (for yourself) - almost at random!
How about this explanation.
The Governments announced a coordinated bailout of the banks by allow them to buy dollars cheaper. This in light of the whole credit system freezing. Off the back of this the long-tards realise that this will boost the market for a while (especially financials) and therefore a quick turnaround will produce a profit.
When the bailout is digested, and the markets realise that it wasn't a fix, just an adrenaline boost which has a short llife - they will come down further and faster than ever before. Worse still there is a now a 'deadline' by Ollie Rehn of December 9th - which is possibly the worst thing you could have announced in such a situation.
What you're seeing Robo is speculation - pure and simple - the classic 'picking up nickels in front of the steamroller' - the stakes are high and the winnings are low and usually carried out by people who have convinced themselves they are 'smarter than the market' - like yourself perhaps.
This rally will be over soon - it's a profit taker - that's all.
It's just like all the other rallies you have pointed at in the last 3 years and said "this is it" - and it wasn't of course.
The fundamentals point to a long period of deleveraging - this means lower stock prices - there is no way around it.
The only choice is a long, slow decline, or a short sharp drop....but one way or another there will be deleveraging.
Hey RoboPeter...nice article. Well not really.
Where can I find this book that keeps up with all of the world records that you keep spouting are broken. Does Guiness do that one too? Do these world records consist of the modern era or do they go all the way back to when markets just started. Is their another TICK day reading somewhere in the world? APPL? NFLX? LULU?
The same guy a few weeks ago who said Becky Quick needs to strip to have bulltards buy a stock. Whatever.
this inspired me to load up on more index puts as a contrarian play (well sorta)
cannot explain the bad news = market tear. i guess stock trading has become reckless gambling if it was ever anything else.
if i make $ i will buy you a coke :)
Gold/silver hitting recent highs and just in time for the NFP to be released.
Good work, Peter
You're a very wise fool om
Ha! I love how somebody decided that my "praise" for your trading style is worthy of a minus sign!
Whatsamatter....feel betrayed? Just want someone to cheerlead for you short position?
Don't worry, this will be a rally which, longer term, is a selling opportunity....so Tyler will soon (no doubt) be back to pointing out all the HUGE negatives out there and being short again. And yes, I know...he's not saying the negatives have gone away, he's just pointing out how the winds have shifted & how super short the market is. And THAT is what I'm praising...as opposed to all the rest of the super-bears who stubbornly hang on & get pummelled senseless. It's all about living to fight another day!
Thank you for the post, really like to get your insights.
Agree about Italian bonds. Why are you leaving out OEs? However, in HY, I think one really needs to reject relative value strategies in favor of longer term absolute return strategies. I guess that means I don't really see why you are down on HG.
If you want a bounce cross-asset, bank equity has been a knock-out.
AbsRet is good, i just think theres more potential for getting hurt if shit doesnt go the way as planned (higher). And recently, its always seemed to be the case (bear market! oh wait, october rally! ok wait, were in a depression again.. etc etc).
Loving some depressed US bank debt right now. Don't dabble in equity myself, but a bounce there would be a magnitude of the higher debt price, maybe theres a pair trade in there!
Good point. The problem I'm working with is the volatility. Fair value is hard to determine even for really solid banks like HSBC because the book value of assets is tough to figure.
I do think US bank debt is really cheap to balance sheet even if you discount asset quality a lot.
If you really think there's more intervention to come then you'll want to aim at high beta european bank stocks that have been crushed lately. Not BAC. Aim for BARC, GLE, etc.
Everybodys long even if they dont understand why -----» pre-sell-off scenario?
I caught most of this bounce but now neutral unless they can move SPY above that 11/11/11 11:00 am high (hourly line chart) they may even push above it briefly but unless they close the hourly (12:00pm line chart) above it then I'll stay on the side line and look to short if it starts to roll over.
This smells like the kind of bait GS would cast, bring the retail client back in to squeeze that last bit out before dropping the hammer on the poor or soon to be, poor bastards.
This is off topic, but why bother trying to write anything after Shakespeare? What can anyone say that he did not say a thousand times better? A thing of absolute beauty, that Macbeth quote.
With all the nonsense we face every waking day, I hope we take a moment to appreciate and savor what those who came before us have said and done.
Now back to your regularly scheduled programming.
Euro "Crisis" is over! ECB promised early this week that this year will buy $1 Trillion of European PIIGS bonds that they are not supposed to buy. Note how yields are dropping and stocks are going full retard upwards! Where does ECB get the money to buy the bonds? They "create" it with magical electronic register inputs and thus can deny that they are "printing" money (in that old fashioned way with smelly ink and fancy paper).
Those "created" but not "printed" Euro's are plenty enough to keep the PIIGS afloat. Merkel lying to the world that she won't allow "printing" Euro's even as she knows that ECB "creating" Euro's. (Bernanke uses the same "printing"/"creating" obfuscation).
All potential politicians or central bankers should have their mouths Super Glue'd shut at birth!
Rally ending soon ...
This is one of the smart Tylers I'd say.
Hope you are wrong. I just got short again. Hoping that the ignorant masses will finally realize the macro picture. I know. I know. (hopium)
Wait for Weidmann before buying into the idea that the ECB is prepared to print. It is only going to take a few comments by the Bundesbank president reiterating his position against ECB printing to stall this rally.
Peter- 'Gee, Bernank put the 'free booze' sign up again over the Bankers Bar, I wonder why theyre all so drunk'?
Peter, dont be a Dick.
Pete is a lost trader that is in constant need to find the"reasons" behind market moves - dood its Decemeber - there are IPOs and deals to close to wring out the last remaining revenue to be raped from the sheep for the bonus pool - BUY EM!!!!
And as my log-in's namesake also wrote in the Scotish play: "If it were done when 't is done, then 't were well It were done quickly ...".
Infusing more debt doesn't deleverage anything. All that is accomplished is that the illusion of money is maintained. Compared to admitting that their "money" is no good, the explosion in liquidity looks like a good deal, from the central banks' perspective.
http://georgesblogforum.wordpress.com/2011/11/02/the-daily-climb-2/
Here is a good one from Karl Denninger. Cheers Robo !
I know, I know, and I'm as bearish as anyone (and more so than most) intermediate-term.I'm just putting this out there for you to think about: The Fed is not going to leave the discount rate for US banks (75 bips) above the swap line rate (50 bips)
That simply isn't going to remain that way.And while the discount rate is mostly symbolic, the relationship (Discount Rate > Fed Funds) can be maintained by cutting the discount rate by 25 bips.Expect it to happen, and expect the heroin junkies in the equity markets to react to it.
If people are thinking that a print is imminent then why are commodity prices sitting still? Even oil isn't really moving anymore. Aren't commodities going to benefit from a print rally?
Go long now ? What a dipshit. His posts are almost painful these days.
I don't think the Fed will do more ... from the guy with the line to Bernanke
http://online.wsj.com/article/SB1000142405297020439770457707273187958774...
Regarding Italian Bonds: per IMF projections, Italian debt/GDP is the only out of all troubled Eurozone countries that is expected to start sharp decline as soon as the next year. source: Bloomberg
What prevents exponential growth from going to infinity is the same thing that moderates a free fall of the market : volatility
And it currently being used as a primary policy tools far better than the printing presses, money may induce a change of faith, volatility induce change of faiths three time a day
Stock market is advertising for the American Way. It has to go it, it simply has to ...
The market players are all banks they can fund themselves at will. They simply need moral hazard reassurnaces every now and then, which they received a few days ago from the central banks.
It's a liar's market, one with a terrible context, that is 'oversold' at 11,000+ on the Dow, with phantom earnings.
With the elections upcoming the entire Washington/Wall Street enterprise will be pushing the 'Happy Ending' buttons. Neither the GOP or the Dems want a crash. They also fixate on $4 gas. They are in a squeeze; can they keep the balls in the air until November in a gale.
Hard to say but everyone is going to try ...
Central Banks act. Markets react. Wag the dog.
just a thought about "tomorrow's",... morrow -
quote:
"The Three Unlucky Omens" [c.1946___ chinese wit & humor by george kao]
"Prince Ching went ahunting and encountered a tiger in the mountains and a snake in the swamps. Upon his return he summoned Yentze and asked him, saying, 'today in the hunt we went up the mountain and saw a tiger, then we descended to the swamps and what did we find there but a snake! Are those not what you would call unlucky omens?'
'There are three unlucky omens in the land,' Yentze answered, 'but these are not among them. The first unlucky omen is when you have good men and you do not know them. The second unlucky omen is when you know that there are good men and do not use them. The third unlucky omen is when you use them and do not trust them. These are the so-called unlucky omens for a country. As to finding a tiger in the mountains, you ought to know that it is the tiger's natural abode. When you go down to the swamps and find a snake, that's the snake's own home. What's so unlucky about the tiger's being in his natural abode and the snake's being in his own home?"
the moral of this,... 'choose your own instincts wisely upon first encounter'