Market Cheat Sheet: Responding to new data

The majority of the big money is buying as shown by the commitment of traders report = stocks rally. That’s all you need to know really. When the big boys start selling then it will be time to cash in the chips. No selling yet. The report comes out today. I’ll post if anything changes over at the SMT.

Barry, I think your previous post said it all: Stocks fall = Fed shovels out more liquidity, stocks rally.

The Big Boys must have there heads up their ?????, if their buying. Or perhaps they know something I don’t? Tech has been a joke, who the hell is feeding that monster? And is there a possibility of collusion amongst the media outlets as to there timing of economic releases and their slantings? Everything just seems so orchestrated

Healthy bull markets have a healthy amount of skepticism, are an up 3 days, down 2 days a week proposition, and don’t track higher when quarterly earnings turn negative. None of the above applies right now. Right now the marginal buyer is a price insensitive second tier central bank or monetary authority diversifying into equities, joined by record corporate buyback cash sitting on the bid. Earnings or economy driven – LOL. It may be turn out to be the ultimate stupid money trade, but it has a lot of firepower.

“just a bull market”

Over inflated and needing yet another fix of cheap money so that it can continue to allow the brokers to pull in those 2/20 fee’s

Yes it’s “just a normal bull market”

Needed a good laugh…….

There is nothing “normal” about it at all..

Ciao
MS

I’m somewhat amazed that since the core PPI was tame, all was good, even though the headline rate was very hot and remains consistently above the core rate.

The rational thought would be to say:

1) if producers can push through the PPI headline increase to prices, the core rate will also be under pressure in the future forcing a more hawkish tone from the Fed, or

2) producers eat most/all of the cost of the PPI increase, resulting in lower future corporate profits.

Either way, you would think that valuations should be adjusted lower, not higher.

I smell fizzle going into the close. I don’t think a lot of people want to stay waaaay long going into next week. It looks like the internals are already weakening.

Ya’all have a good one…I’m off to have a few “Miller High Life’s,” put this stupid week behind me…cheers! lol I’m buying!

Justin, Michael, et. al

My comment about it being just a bull market is appropriate. I did not say that it was rational, fundamental, or whatever. The fact of the matter is that it is a bull market. Accepting that fact means that one will typically behave in a certain way during such a market. Again, that doesn’t mean the behavior will be rational, or based on any fundamental basis.

Again, there is a disconnect here between traders and economists. Traders know not to fight the tape. Economists say the tape is wrong. Both are correct, but it is a lot easier to make money when not fighting the tape.

Does it matter if it is the Chinese who are buying? I’ve said before and I’ll say it again, if people are so sure they have it all figured out (the chinese are buying, the fed is massaging numbers, etc) then go all in, because as BR’s post shows, the market will keep going up forever.

if the big boys are doing the buying who’s doing the selling?
for that matter who was doing the selling yesterday afternoon?
do the big boys do something else on thursday afternoon’s in NY?
which big boy posts the big futures contracts
each morning?
do the big boys have a substitution situation like the s&p?
if a big boy makes the cover of business week is it then all over?
rgds pcm

BTW which big boy has a wife who’s fat and has a great singing voice?
rgds pcm

How about:

US still a great country = stocks go up

Woody-

The markets have not had anything resembling a normal cycle, ala a meaningful pullback, in how long???? Says enough just with that..

and I too realize that it eventually will have it because the market is bigger than any one thing or entity that attempts to control it……..however never has it had as much assistance and overt mis-information (thank you commerce dept.!!) thrown at it. And yet it still goes up….funny thing though…..IF that SPX bid EVER gets removed (it never does) we might get a pullback, but I would’nt count on that bid being removed until about the end of next summer…..nudge,nudge,wink,wink…..LOL

Add that the Fed is now acting just like another hedge fund and that it’s trying to “forestall” a recession…..forestall it to when?? November 8th, 2008?—LOL

I hate to say this but if the dots are ever connected to this administration (with all the overt conflicts of interest that are allowed to continue)it would make Watergate look like a church picnic. How long did Cheney get to keep his stock before he was told to “sell” it??? If it was Clinton he would have been shot and made an example of-just like Martha.

Ciao
MS

That was for You RT!!!!

The rational thought would be to say:

1) if producers can push through the PPI headline increase to prices, the core rate will also be under pressure in the future forcing a more hawkish tone from the Fed, or

2) producers eat most/all of the cost of the PPI increase, resulting in lower future corporate profits.
———————————————–
BLS doesn’t just exclude crude oil prices from the core producer price index. Don’t they also subtract the change in the price of oil in products that have crude oil as inputs? It wouldn’t surprise me if they’ve extended this methodology to all finished goods and the raw materials that go into their production.

Michael Schumacher,

If you are looking for shady dealings and hidden injections, here lies the real liquidity injection and the secret coded password ring to the elite’s inner sanctum:

“(The Fed is handing out) exceptions to its regulation 23A, which normally mandates 10% reserves for such conduit entities. The exceptions “temporarily” suspend these reserve requirements. They are open-ended.”

I bet no more than a handful of folks know about or understand the significance of this little news tidbit. At least 6 big banks I know of have been granted this exemption.

Let me rephrase something I’ve said before – the biggest tool the Federal Reserve has at its disposal to adjust monetary supply is reserve requirements.

Here is what is happening. Some of the biggest banks, Citigroup, Lehman, Duetche Bank, ect., have been granted exemptions from the 10% reserve rule for conduits!

What does that do? First, these conduits are off-balance, so the poor investing world has no clue how much money is in the conduit. Let’s guess $50B, just to use a number. Before, the banks had to hold $5B in reserves, or leverage of 10-1 for the conduit. Let’s say the Fed cut that from 10% to 1%. Look what happens.

First, losses in conduits are not forced sales, as reserve requirements have been lowered, thus the conduits can be held longer without coming back onto the balance sheets.

Second, the extra reserve from changing the 10% rule to a 1% rule just created $4.5B in excess reserves, which can then be fractionally reserved to create $45B in new money.

So there you have it – by waiving this 10% rule the Fed has not only granted these banks a cushion against their conduits, but have also surrepticiously added money to the system, and because it is done with off-balance sheet conduit reserve, we, the investors, have no idea how much new money this created.

Now there is an agenda worthy of some scorn.

Wunsacon,

http://www.federalreserve.gov/boarddocs/legalint/FederalReserveAct/2007/

Karl,

Good stuff.

Another reality that is presently held in conscious misperception is that the Fed can contol monetary policy with the Fed Funds rate, when, in fact, securization has effectively eliminated reserve requirements.

The misperception that the Fed can control monetary policy is flawed, as banks can first lend against reserve requirements but then sell those loans in a securitization process thus freeing reserves – it’s really only one step removed from zero reserve requirements.

This securitization process takes on a party atmosphere of lending and selling, lending and selling, and because so much money is being made with fees and such the lending requirements grow looser and looser until suddenly there is no further market for loans – like shoving a stick into the spokes of a spinning bicycle wheel. Without securitization, we are back to banks holding loans that are then capped by reserve requirements.

This is the credit crunch, and it’s not so much that loans are not available but the comparative amount of loans available versus what is needed to sustain a credit bubble – this amount cannot be provided by the amount of bank reserves.

I believe this is the reason for the change coming in October 2011 – a safety valve for the Fed if the securitization market again falters; if so, reserve requirements can be dropped to zero and the party never loses a beat.

Of course, all those safeguards built up over time after 1929 will be gone, but, hey, it’s different this time and we know how to avoid depression – our Fed chair is an expert in that field.

Of course, Irving Fisher was an expert, too, and following his advice didn’t turn out so hot.

the market is the market. for the guys who got out because the internals were bad two words: trailing stops!