U.S. vs. Global Sectors

A friend of mine just handed me Panzer’s book last week. I thought I was bearish. He’s just plain depressing. I will say that most international markets are going to take it much worse than we are. Think we have a credit bubble……….

This rally is a very, very thinly traded one both in volume and participation. To be this close to another top with so little participation means we are open to a swift move down.

does anyone notice that this move is the mirror opposite of the capituation low in august. i think we’ll see a blowoff towards 3 then tomorrow the floor falls out.

The market is not going to go down when you have the two biggest brokers reporting.

LEH: when you tank estimates and then meet them what does that really say
MS: wrote down how much??? $1.2 b and that’s just what they report

I can only imagine what GS and BSC will say

The Fed has caved to the brokers but that did not stop the auctioning off of excess tax receipts today (treasurey) and yet another repo by Ben.

Did’nt they get enough yesterday

Ciao
MS

Absolutely. I see large cap tech outperforming for the next year or so (especially those with a good size export business).

Anyone still in denial about inflation needs to read the headline at Kroger’s today:

DJ Kroger’s Profits Help Ease worries about Food Inflation

Classic denial and indicative of where we are headed as a country……

“it’s all ok as long as corp. profits are up”

Kroger’s Profits Help Ease Worries About Food Inflation
Last update: 9/19/2007 2:05:59 PM

By James Covert
Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)–Pumped-up fears about food inflation just got deflated.
That’s how some investors are interpreting better-than-expected second-quarter earnings at Kroger Co. (KR), the nation’s largest supermarket chain.
Earlier in the summer, disappointing quarterly reports from Kroger and other big grocers had stoked fears that surging food costs might squeeze profits for the rest of the year. But in the just-ended fiscal second quarter, “market conditions allowed for a general pass-through of cost increases,” Kroger Vice Chairman Rodney McMullen said on a Tuesday conference call.
Kroger said profit jumped 28% on a better-than-expected sales gain of 6.6%. Gross margins widened for the first time in more than five years, and executives said price increases at competitors were a help. That settled concerns among many investors about how quickly grocers will be able to raise prices amid soaring wholesale costs for everything from meat to dairy products to cereal. While some analysts still caution that consumer spending this fall is vulnerable to higher energy prices and a downturn in the jobs market, most breathed easier following Kroger’s news.
“Kroger effectively put to bed the concern over food inflation being a long-term margin issue,” Bear Stearns analyst Robert Summers said in a research note. He expects the supermarket industry will “regain some of its defensive investment characteristics on the heels of this report.”
Indeed, Kroger shares on Tuesday rose 7.7% to close at $29.09. Shares of Safeway Inc. (SWY) rose 4.6% to $33.76, while Supervalu Inc. (SVU), which owns the Albertson’s chain, rose 1.3% to $40.22.
Summers notes that a government index tracking food manufacturers’ prices has been moderating through August. He said that’s a signal that “we are further working through the inflation cycle.” But there are still reasons to believe that this year’s unusually steep gains in wholesale food prices – driven by harsh weather that has damaged produce as well as soaring demand for corn-based ethanol for use as a gasoline additive – might be too much for shoppers to absorb amid the recent economic slowdown.
Andrew Wolf, an analyst at BB&T Capital Markets, notes that Kroger’s sales slowed by some measures from this spring’s pace, and he blames rising prices on the shelves. “Consumers en masse will stretch their food dollars in various ways, including buying and wasting less and/or trading down,” Wolf said.
Stephanie Intagliata, a 32-year-old mother of two in Wichita, Kan., said prices during the past few months have risen for milk, eggs, bread, fruit and just about everything else at her corner supermarket, Dillon’s, part of a regional chain operated by Kroger. While green peppers had been four for a dollar this spring, they’re 79 cents each now. “God help you if you want to buy anything organic,” she adds.
Intagliata notes that while she sometimes shops for groceries at Wal-Mart Stores Inc. (WMT) and Target Corp. (TGT), the food prices there aren’t always lower. In response, she’s shopping less frequently at the big chains and making more weekend trips to farmer’s markets and butcher shops, where quality can be found at lower prices.
If food and energy prices continue to climb this fall, “we’ll start having to cut back in other areas like entertainment,” Intagliata said.
Grocers’ margins are typically squeezed at the start of an inflationary period, as grocers absorb spikes in commodity items to protect shoppers from “sticker shock” that might cause them to cut spending or defect to cheaper venues. And when wholesale prices begin to ease, grocers typically delay lowering their retail prices, thus recovering from earlier margin losses.
The delays at the tail end of the cycles can actually help supermarkets boost long-term profits, as margin hits taken early are outweighed by benefits later on. Still, some fret that the severity of the current cycle could make that more difficult to achieve.
Earlier in the summer, Kroger was among the most non-committal in its outlook for passing on prices, and some analysts still note that margins could suffer if Wal-Mart decides to mount a big fall blitz on groceries. But other chains have sounded more upbeat notes. Earlier this month at a conference hosted by Goldman Sachs, Safeway Chief Executive Steven Burd told investors that the current inflation cycle is “a pretty manageable event” and that, contrary to investor sentiment, it wasn’t a long-term negative for the business.
“And I don’t expect this rate of inflation to continue; I expect it to plateau and then maybe soften a little bit,” Burd added. “But again, I’m basing that on 14 years of almost none and then six months of some.”

Oh, come on, who prints money anymore?

90% of our transactions are electronic – we don’t “print” money – but M3 shows the massive inflation of the credit market.

I emailed Mish about that article and, more importantly the chart he refers to.

I have to laugh since he claims that it’s about at 2% when the chart he displays clearly shows alot more.

His response was to drop a name of someone inflation person that agrees with him and that I need an economics course…….

It’s his chart that shows it is MUCH higher however I see how he neglected to mention the action in it before his reconstruction….

I’m sure I’m not the only person who saw that.

Ciao
MS

donna….

printing money is just a way of saying…increasing supply.

i dont know much about monetory systems….does below statement means you disagree with mish?

**money – but M3 shows the massive inflation of the credit market.**

Deals will get done….it’s just that those deals were in danger of costing the participants quite a bit more in borrowing costs. Go figure…..that they have to subjected to the same rules that we do

LEH said it best yesterday before the Fed supplied it’s juice:

“We see no further writedowns unless spreads widen”

Which means we will be losing more of your money if we don’t get a rate cut.

Yesterday was all about protecting the profit margins on those deals……

Too bad the perma bulls can’t or won’t see that.

Ciao
MS

Donna – who needs the fed printing press when you have derivatives ontopof derivatives ontopof derivatives Fictitious Capital

it helps to have great buying rates to put FC to work tho

like what is it? free money after 3 transfers?

Fred said:
“I see large cap tech outperforming for the next year or so (especially those with a good size export business).”

I would expect spending to decline globally during that time, but I think that you are right about that nonetheless. The NDX was quite resilient during the meltdown and is not directly burdened by the bankers. I also like large cap offshore.

I was fairly astounded by the half point cut, but that’s what it was and it is suicidal to bet against this dealer. I was going to sit on the sidelines until mid-October but I am hearing more chatter about fund manager performance anxiety and I know what that means. So I went ahead and bought a few QQQQ calls today, mainly because all of the indicators that I use have rolled over to buy now. I would like to see somewhat more absolute volume, but that’s where the performance anxiety comment comes in- it will appear in due course.

I’ll keep nibbling on calls as events warrant, but am not going to join the crowd in exploring ways to short the dollar at this point- that is affected by too many things besides interest rates and I don’t have the time to trade it directly in a forex account any more. My general outlook is that stocks are good until January and at that point a rotation into some species of long dollar vehicle will be preferred.

==whipsaw==

I wish not to pick a fight but I guess thats what I’m doing

imh naive opinion

1> #s in accounts provide buying power
2> banks hold real assets as collateral
3> derivative accounts in a space like wall street hold psychological $s
4> #s in accounts provide buying power

my fight as a naive is I must balance daily

are you telling me to play the game and accept that $250K offer I got on the phone last week? give its use a try? grease this wheel? Only thing – I’ve kinda gotta put up a 50×150 foot primary plot up as collateral.