The New Reality: Four 20 inch monitors

In the end of November, (at the premium site) we did an analysis on the Dow Transports (you can see it here). Classic Dow theory states that when the Dow hits new highs, but the Transports fail to join them, it is a worrisome sign.

Since then, several Truckers have warned that their quarters will be considerable worse than expected, due to "sluggish freight demand."  Black & Decker (BDK)? They slashed earnings to $1.30 to $1.35 in Q4, an average forecast $1.85 a share (but there is no slow down). Home Depot (HD)? Lowes (LOW)? Best Buy (BBY)? All company specific.

Deutsche Bank analyst Jordan Alliger noted the disconnect between strong retail numbers, the soft landing scenario, and the realityon the ground from the Transports:

"Peak season volume trends continue to track below what we think is required to boost productivity enough to meet our fourth-quarter earnings-per-share forecasts . . . Should the peak season volume malaise extend deeper into 2007 and call into question the so-called ‘soft-landing’ economic scenario, we could yet prove far too conservative with our newly revised down forecasts."

If your reality is determined by what is going on in the markets, than this is all irrelevant. As we noted earlier this morning, none of this real world stuff matters a whit.

As one of the commenters noted earlier today, the market is saying all is well. There is a new reality show in town, and its called the  "Four 20 inch monitors." I guess I better start getting used to it.


YRC Worldwide Lowers Guidance
Thursday December 14, 4:37 pm ET

Sector Snap: Trucking Stocks Trade Lower
Wednesday December 13, 2:52 pm ET
Trucking Stocks Slide on More News of Weak Freight Demand, Growing Pessimism Among Analysts

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What's been said:

Discussions found on the web:
  1. Michael C. commented on Dec 15

    New reality? I call it always reality.

    When anyone decides to hit the buy/sell button, what you see is what you get.

    I don’t think the keyboard gives a shit about my IQ or any supportive arguments.

    At least that’s the lesson that has been beaten into me the past month.

  2. GS commented on Dec 15

    From Trading in the Zone, by Mark Douglas

    Page 121

    Five fundamental truths:

    1. Anything can happen.

    2. You don’t need to know what is going to happen next in order to make money.

    3. There is a random distribution between wins and losses for any given set of variables that define an edge.

    4. An edge is nothing more than an indication of a higher probability of one thing happening over another.

    5. Every moment in the market is unique.


    In my opinion, those five fundamental truths are the ONLY constant REALITY.

    Everything you think about the market and money is an image formed by your biased self important ego thinking it can out think the market and that it knows what is right and wrong.

    In order to be the best investor / trader you can be and have any chance of out performing the market and your peers is to FOCUS on what the market is doing NOW and not whether you think what it is doing is right or wrong, good or bad, moral or immoral.

    The bottom line in this game, like any game, is performance. Nothing else matters. The only way, in my opinion, to perform consistently well year after year is to eliminate the ego, focus on the trend and tightly manage losses.

    Good investing / trading to all.

  3. jmf commented on Dec 15

    here is the take from greenberg

    Is it brains or a bull market?

    To repeat what I said on Kudlow & Co. Thursday night: “It’s said you should never argue with a crazy person. I’ll add that you should never argue about a crazy market

    suggest to read the full

  4. saltwater commented on Dec 15

    Stock Trader’s Almanac has climbed off the fence w/ a buy recommendation and today a WSJ Online article stated first time home buyers are coming back to the market in Fla…..
    I swear….. the more I learn the less I know.

  5. matt m. commented on Dec 15

    The “new reality” comment is way off. It is and has always been the only reality in trading. Your performance is the only reality. Everything else is nonsense. I can tell that GS is locked in and has “an insane focus” on the markets. That is what is needed to consistently trade at the top level. The phrase is taped to my screen. Bonus points to anyone who knows who used that term to identify successful traders!

  6. RW commented on Dec 15

    Amen to that saltwater.

    Regardless I’m not going to remove my equity hedges: In any given market that’s building momentum, the value-oriented trader is going to lag, but that’s the discipline and that’s the way the cookie crumbles; I’m making some of it up in bonds and select shorts. As for the rest, boo hoo; maybe I’ll feel better when momentum inevitably reverses, maybe I won’t, right now I’m too busy.

    “Half the failures of this world arise from pulling in one’s horse as he is leaping.” –
    Julius and Augustus Hare

  7. TP commented on Dec 15

    This comment addresses two things, these comments, and the comments from earlier in the week about polling. I think posters should qualify their comments for validity with two metrics. Lifetime compounding returns and year to date returns. Subjective realities are only good ones, if they produce consistent, high, returns over a long period.

  8. Gary commented on Dec 15

    A momentum fueled parabolic rise sure makes one feel good while its going. However parabolic rises are almost always followed by extreme waterfall declines. Look at gold and natural gas. So the question is will all the traders who have performed great so far, be able to get out in time to keep their gains? The big boys are selling like mad in the futures market. That tells me that the smart money wants to keep their profits while the little guys are busy bragging about it. If the big money is selling I don’t see how the market is going to keep rising for too much longer. Now if the smart money was buying I’d be a lot more inclined to be long. As it is I think I’ll stay out from in front of the big boys because when the tide turns I have a feeling it won’t be pretty.

  9. Peter commented on Dec 15

    In response to a comment earlier with respect to commodities ex food and energy which was reported lower in today’s Nov CPI, the Journal of Commerce index measure of 18 industrial materials, includes cotton, polyster, steel, copper, etc…, is at a record high right now and was up 1.7% in November alone.

  10. ECONOMISTA NON GRATA commented on Dec 15

    “Four 20 inch monitors.” I guess I better start getting used to it.”

    It sounds like Deja Vu all over again.


  11. Michael C. commented on Dec 15

    Maybe it’s the M2 Reality. It’s noted that M2 has increased at a 10% pace, double the pace seen at the start of last year.

  12. MarkM commented on Dec 15

    Lot of Peacocks in here flashing colors today. I’m with Gary on this one. Pretty damned amusing. Seen this before folks.

  13. bodanker commented on Dec 15

    For those who are interested, median CPI increased 0.2% MOM and 3.7% YOY in November. YOY change in median CPI has increased from 3.2% in June to 3.7% in November. You can see the report on the Cleveland Fed’s website.

  14. Mike_in_FL commented on Dec 15

    Just something else on the inflation/interest rate front (thanks for pointing out the median CPI stats bodanker) … anyone notice that BDK whiffed bad on earnings — and didn’t bounce back from the ugly open print? Every home builer/construction supplier, etc. that has whiffed on profits in the past few months rallied right back after the bad news. Look at ASD’s action on 10/17 as an example.

    I don’t know if this is significant or not, but BDK dropped and has kept on dropping. Coupled with the action in the bonds, I wonder if the market isn’t speaking here, and saying the interest rate drop will at least level off, if not reverse. Again, just throwing my hat into the debate/ring here.

  15. Richard commented on Dec 15

    you’d be silly not to be in the market. it’s a great place to protect against inflation.

  16. sport commented on Dec 15

    Mike in Fla-

    I was short BDK and covered about an hour into trading, thinking it would rebound. I was also surprised that it stuck.

  17. Eclectic commented on Dec 15

    Here is the current reality as I see it:

    You’ve just been put in a jail cell with a guy named Ben Dover; he’s about 6’6”, 265 lbs, and he’s got green teeth and a tatoo on one shoulder with a heart drippin’ blood and a dagger stuck in it. Below the dagger/heart there’s another tatoo that says: “Born to Raise Hell,” and on the opposite shoulder there’s another tatoo with a heart and it’s inset with the world: “Mom” and below that one is another little tatoo that says: “I Luv NY.”

    On his chest is a huge tatoo takin’ up all the available skin and it says: “BULL!”

    That’s his nickname and you’ll get to know it well over the next few weeks as you and he get well aquainted.

  18. Eclectic commented on Dec 15

    …and BTW, lest I forget:

    You can pass along to Barron’s that my prior post was a good example of an:

    “Eclectic post… well worth it.”

    Thank you one and all, and good night.

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