Sucker Bet?

A quick media round up:

Yesterday Morning’s RR&A commentary was picked up by the WSJ — with Jim Bianco and David Rosenberg — that’s some pretty good company. (It also turned out that the advice was pretty good):

Sucker Bet?

As the market starts to digest the Federal Reserve’s post-meeting minutes9 from late June, released a few minutes ago, some analysts are warning of yesterday’s Ben Bernanke-aided rally: be afraid. The post-Bernanke re-think hasn’t amounted to much of a selloff, save for technology stocks, which are ostensibly getting hurt more because of disappointing earnings from chip behemoth Intel.

"To us, this has all the appearances of an oversold bounce. Historically, these huge one day lifts — especially coming after a sharp downward stretch — are not very reliable buy signals," wrote Barry Ritholtz of Ritholtz Capital Markets, in an afternoon comment today. "We know from history that the most vicious rallies take place in bear markets."

James Bianco of Bianco Research said the same thing in commentary today, pointing out that the "incontrovertible evidence is thrice in a three-month period Bernanke has unleashed a violent short-covering rally simply by hinting the Federal Reserve will someday cease and desist in its rate-hike campaign. These rallies have been short-lived affairs."

Mr. Bianco pointed out that on April 26, the day before the first such rally, the S&P 500 was at 1305.41, and today, it is around 1259. The bearish Mr. Ritholtz concurs, saying that the "One and Done crowd may have finally gotten their wish. This Ship of Fools have been behind nearly every failed rally of recent vintage … as history has shown us more often that not, when the Fed finally stops it is because growth has slowed to the point where inflation has been tamed, but at a cost of setting the economy to the point of contraction."

David Rosenberg, chief North American economist at Merrill Lynch, added: "The equity market is too caught up in the ‘pause’ — it’s repeatedly treating it as an ‘ease’."

See also in the media Thursday/Friday:

U.S. stock futures rise after Microsoft, Google (Reuters)

Consumer prices fan inflation fears (Atlanta Journal-Constitution.)

A rocky road lies ahead for U.S. equities  (MarketWatch)

Lookahead: No Satisfaction (WSJ)

>

Source:
Sucker Bet?
David A. Gaffen
WSJ, July 20, 2007, 2:19 p.m.
http://online.wsj.com/article/SB115339787737012304.html

Consumer prices fan inflation fears
MICHAEL E. KANELL
Atlanta Journal-Constitution, Thursday, July 20, 2006
http://tinyurl.com/ptqmf

US stock futures rise after Microsoft, Google
Caroline Valetkevitch
Fri Jul 21, 2006 7:08am ET
http://tinyurl.com/zmp2z

A rocky road lies ahead for U.S. equities
Carla Mozee
MarketWatch, Friday July 21, 7:50 pm ET
http://tinyurl.com/hhya8

Lookahead: No Satisfaction
MARK GONGLOFF
WSJ, July 21, 2006 9:27 p.m.
http://online.wsj.com/article/SB115349484008113656.html

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What's been said:

Discussions found on the web:
  1. jim commented on Jul 21

    Did anyone catch all of the Barron’s top 10 picks mentioned on CNBC a few minutes ago?

  2. peter beck commented on Jul 21

    I don’t like to be treated as a sucker!
    That is pretty insulting!
    I got a call today betting on a 3% rise in the next days to come. And I don’t feel like a gull.

    I guess these people who got short at last high will feel like double chumps when the market will turn up next week, not to speak about the jerks who got short at the end of today.

    Sucker’s rally. F.Y!

    There are two things that moves the market lately:
    – First, Geopolitic.
    – Second, growth.

    Rice is on her way to the middle east.
    South Lebanon will be a lot quieter with less civilians around; more troops at the border.
    Like usual, it settles down gently before dragging on into daily molasses. (mission “almost” accomplished for the moment – sounds familiar?).
    PLUS,
    Amedijedan (whatever his name!) is a good little tricky pragmatic funny dude. He has played oil lately (a nice 10% down move when he made it clear three days ago that he would not use oil as a weapon against the world). The sheik is ok! – loaded and happy.
    Talk of the day in Iran!!
    Now, Oil is a bit up – However, there is nothing to make out of that. Too sloooooooow!
    Smarty will wait that things cool off a bit and then, he will step in again; this time on the way up.
    Some bloody news that will make the oil market wet their pants again.
    For now; things are cooling off; making their way in the head of the Street folks for a new fiesta!

    Growth will be next week talk; I mean speeding growth! The rising of the Tech from Scheol.
    Something like that! You know!
    Any bloody positive news will vellicate their little rump hole.
    And the little butt yaps who perorate nastily about the Bulls will feel like pinhead!

    This is not sucker bet; this is stupid bearish pride!
    I’m bearish!

  3. clunk commented on Jul 21

    Cramer predicts October rate cut. Can you believe this halfwit?

  4. whipsaw commented on Jul 21

    Oh my, I have no idea of what Mr. Beck was attempting to say, but regarding an October rate cut, that actually is on my spectrum of risk factors.

    Why? Because we live in strange times that are dominated by a Dark Menace that will do anything to be re-elected and it is reasonably apparent that a “pause” in September (or even in August) is not going to make the slightest bit of difference in the markets for more than a couple of days given the trajectory of the economy. The liquidity game is over globally, but that doesn’t that the screws won’t be turned down here for a couple of months just to help out a few friends.

    Of course, that would be followed by a complete reversal in December as foreign investment dries up and the dollar crashes. But I’ve got March puts, so it doesn’t matter too much to me.

  5. Cherry commented on Jul 22

    I actually believe Bernanke’s comments were intended to shore up the market, if only for a second, for the ‘dark menace’ lol. He can cut rates all he wants, the damage has already been done. It is like blaming a “tight” FED for the great depression, the damage was ALREADY done. Mercy.

    If Bernanke is going to play politics, he is in for some trouble and a shorter time on the job than that guy between Burns and Volcker.

  6. peter beck commented on Jul 22

    What Mr. Beck was attempting to say is the following:

    Street journalists, economists, so called gurus and other wanabee prognosticators, have always used that term sucker (sucker’s bet – sucker’s rally, and so on) to either cover their own failure at investing other’s money, predicting the market’s trend or just to make a good title that sells!

    So Mr. Beck is irritated.

    Now, all these people are implying that this market is bearish.
    And they are all wrong!
    The Financial market is BULLISH.
    By essence.
    In the long run, the Market grows.
    And, believe it or not, we are still on a hudge bullish trend.

    So, what bearish means?
    What time span should you consider to call a market Bullish or Bearish?

    Certainly, it is wise to see the market on a decade, yearly, monthly, daily and intraday level.
    And each of these time span have their own bullishness or bearishness working all together.
    By that, I mean that if the market goes down for 2 years, it is still inside the hudge bullish trend that I was talking about.

    Going deeper and deeper at the micro level helps you understand better what the shorter trend will be; keeping the big picture ALWAYS in mind.

    Now if someone tells you: Big rallies usually happen in bear market; this is the most inaccurate assumption.
    If the monthly and weekly trend are full speed downward and the daily trend makes a move northward, you can be sure that the rally will not last very long.
    So, in a way, it is not so stupid to say that big rallies happens in “bear” market because they are driven by the formidable impulse of the hudge “all time” bullish trend; however, these people should precise how the different trends are working together at that particular moment.
    I mean, so not to assert so scornfully that it will not last!

    So where are we now?

    We are still up on a monthly basis and topping out on a weekly basis (with a bit of momentum left – I mean still a bit of upward move to go).

    Now, daily being on the rise and weekly getting into its last upward momentum; If I were you, I would not go for a “sucker’s” rally on this one. There is enough momentum upward for several weeks.

    These “sucker’s” rallies when at the top like this can last. Despite what “smart” people say (not suckers, I guess).

    Now,if you don’t have the time to study the trend of the different time spans, find yourself a good honest worker with a low pay and ask him what he thinks about the economic situation. You will have far more chance to get the market trend for the mid-term. Because they are no suckers. I bet they do not even use that word. Put your money for the next two years where these fine people think the economy is going.
    That is no “sucker’s bet”, bet on it!

    So what I am asking these inflated “gurus” is to have a bit of respect for those who are investing their hard earned money in the market.
    It might look “cool” on the street to speak like that; however, I think that it should be circumscribed to the tiny world of bad speculators and mediocre journalists.

  7. zong ren commented on Jul 22

    What if the guys in the Middle East are heavy into the stockmarkets, and then us their advance knowledge to create long or short profits by creating news. Just like what NYSE members “used to do”.

  8. whipsaw commented on Jul 23

    Mr. Beck, from what I make of your reasoning, it is perfectly valid if you have a 200 year life expectancy, otherwise it sounds like you bought the so-called rally last week and are closing your eyes real tight. There is a bullish bias over all time, but that did not make any difference to most people in the various crashes of the 19th century or the bears of the 20th century.

    The current one is no different except that if you did indeed find a “good honest worker with a low pay and ask him what he thinks about the economic situation” he would tell you that he has been raped for six years and is concerned about what happens next. He would not understand this perpetual bull market that you are talking about, but would understand how much of his income is wasted on gasoline and how much more it costs to feed the household now than it did a year ago. And then he might ask you how your lotto numbers are doing?

    I understand that you have personalized the sucker in “sucker’s rally” to refer to yourself, but am at a loss to understand why you would care if you actually have any confidence in your decisions? Maybe you will get your predicted 3% bump and can brag about it? Or maybe you will lose 30% of your capital in a month?

    What I do know is that once people like you who are apparently travelling on some kind of Wish It Was strategy have gone silent, then the bottom will be in and it will be time to look at going long again. Until then, you have a valuable role to play in the market and I appreciate your participation because I could not continue to make 160% annualized returns over 3 months without the help of your fellow bulls. Thank you, good luck and happy trading.