End of day WTF?! Post

Things that make you go Hmmmmmmmmm:

Except for all the losses, U.S. Banks were wildly profitable last year (Bloomberg)

Who’s to blame for the market rout? Da Bears! (Infectious Greed)

Today was the Biggest Rate Cut in Quarter Century  (Portfolio)

• Goldman Sachs’ Abby Joseph Cohen chief U.S. portfolio strategist continues to forecast a Dow return of 11% by year-end. She sees the Dow at 14,750 by year-end (Briefing.com)

•  Our Fed post this morning was titled Whiff of panic. The phrase pinged around a bit, from the Economist to the blogosphere

This morning’s gap down led to a surge in the VIX to 37.57   (VIX & More)

• Speaking of Contrary Indicators: Blog Traffic the past two days has been through the roof — and since then, we see the market has been trying to recover. Buying signal or not? You decide:
12208_345_traffic_2

(1.18.08 as of 3:45pm EST)

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What's been said:

Discussions found on the web:
  1. BB commented on Jan 22

    I have only been trading for 3 years now, and dont really pay any attention to analysts, economists… but this Abbey Joseph Cohen dude, always seems to be wrong. So he says 14750 for dow end of year… so that means 9800 dow? anyone know more about this fool than I?

  2. Eclectic commented on Jan 22

    Seems like a good place to ask a question. Barringo, I don’t remember you posting any topics directly related to ethics, but I have one.

    I hope to get many responses.

    Here’s the question:

    Is it conceivably possible for an analyst to discern the capacity of a firm he follows to effect a mere 1/2% change in earnings for all of 2008?

    In other words, were the earnings to have been expected to be $1.00, he might now determine them to be just 99.5 cents, or in the case of $2.00, merely a 1 penny change, or for $4.00, just 2 cents.

    Are any of these changes to estimates worthy of an announcement of the change?

    Can an analyst perceive or maintain a capacity to discern so little a change?

    Would an announcement of such a change be ethical, moral… and would it skirt the fringes of legality? (at least the spirit of laws governing security analysts?)

    Any opinions?

    It is my contention that no such accuracy could exist, and then announcements of changes in such insignificant amounts is for the purpose of self-dealing.

    Does anyone agree?

  3. Justin commented on Jan 22

    I want to see a 45+ on the VIX…

  4. mhm commented on Jan 22

    “ECB WATCH: ECB Reps Stick Firmly To Anti-Inflation Bias”

    A serious hmmmm: the Dollar will have to ride it alone…

  5. Shnaps Parlor commented on Jan 22

    Abbey Joseph Cohen is not a dude, dude.

  6. Marcus Aurelius commented on Jan 22

    Despite the relatively large cut, the market closed down 125 pts. Now we celebrate? Get ready for the one-shot hangover.

  7. michael schumacher commented on Jan 22

    of course GS sees it all ending well…..after they have profited by selling long ABX products to you and then shorting the hell out of it.

    WTF is more appropriate for today. Now the question is , having shot it’s wad today, WTF do they do in, say, three months when all that inventory from the peak of the reset cycle is added to an already bloated inventory?

    Panic is the word of the day….by the Fed

    Ciao
    MS

  8. michael schumacher commented on Jan 22

    whole-heartedly Eclectic…..especially when they couldn’t see any of the current “issues” until January 2nd of this year.

    Where are you taking this???

    Ciao
    MS

  9. Eclectic commented on Jan 22

    Ciao,

    I’m not speaking of grand swaths of earnings estimates that go bad for any number of reasons. I’m talking about a specific analyst (or his firm) who might decide to give a news release to a financial reporter or blogger and in that release alone change his estimate on a company’s earnings for all of 2008… of just 1/2 of 1 percent.

    Is it possible to be so accurate, Ciao?

    Where I’m taking it is to illustrate my original contention. It is beyond my rational, logical ability to believe that so little a change is worthy of a notice, release, news item, etc.

    And I further repeat my contention that such firm’s analyst or the firm itself is merely doing it for the purpose of moving markets for its own self-interest.

    Do you agree?…. Is there anyone else out there that also agrees with me?

  10. scorpio commented on Jan 22

    there’s a worm in my AAPL

  11. Eclectic commented on Jan 22

    Another way of asking this is:

    Is manipulation the objective for changing a company’s earnings forecasts by just 1/2 of one tiny percent?

    Personally, I could not face myself in the mirror were I an analyst and I changed a forecast of, say, $4.00 to $3.98, or to change $1.00 to so little a difference as to effect a meaningless rounding error of 1/2 penny.

    Does anyone agree with me?

    I wonder, does the SEC agree with me?

  12. John Borchers commented on Jan 22

    Hopeful Uncle Ben can give us another 75 BPS because Apple just warned after hours and the stock is getting taken to the woodshed.

  13. George Bush commented on Jan 22

    If you don’t go out and buy an iphone or an ipod touch from BBY on your way home, then you are not a patriot and you hate America.

  14. Ross commented on Jan 22

    One of the 4 horse puckies just took a lance through its breast. One down, three to go.

  15. Short Man commented on Jan 22

    A big Cramer booyah for my Apple puts. Missed out on selling them at the open as I was busy unloading my SPY puts and FXP’s, guess that turned out to be fortuitous.

    Now let’s see if Big Ben has another slug left in his six-shooter to fire before the markets open tomorrow…

  16. craig commented on Jan 22

    what say you commenter’s. we have much lower fed rates and probably even lower in 10 days.

    Do the lower rates materially and positively impact consumers and companies, leading to better econ conditions in 6-12 months and the market begins to price in that positive info starting now???

    or are the rate cuts too little too late and even with low rates banks still won’t loan, consumers won’t rebound spending, house prices still decrease, company margins compress and earnings fall, companies lower cap-ex, less hiring, more firings, etc. mkt rebound from lows today mainly short covering and short term optimism that winds up just plain wrong???

    can the white house fiscal and monetary policy action revive the economy, company earnings, growth, etc. to the point that we avoid major market declines from here? or is the intervention all for naught.

    i’d love to hear comments on that. i’m only about 20% net-long right now and while i lean towards thinking markets are 5-15% lower in 6-12 months, i’d prefer not to go net-short in the face of some serious govt intervention that could work (i’m not an economist and don’t have huge conviction the plan works or not)

    tahnks for any comments.

  17. John Borchers commented on Jan 22

    Craig according to what I heard on Bloomberg this afternoon an emergency cut hasn’t been done since 2001.

  18. Francois commented on Jan 22

    “Except for all the losses, U.S. Banks were wildly profitable last year.”

    Except for all the items that goes up in price, there is no inflation.

    Except for all the (recurrent) one-time charges on our balance sheet, we are oh! so profitable.

    Except for all the mistakes I’ve made in the past, my life is perfect and everyone should strive to emulate such a great guy.

    Had enough?

  19. LFC commented on Jan 22

    That Bloomberg article was … amazing. Basically, yeah we burned up all our kitchen cabinets, but look how nicely this roast turned out! (Or “other than that, Mrs. Lincoln, how did you enjoy the show?”)

    He spent a lot of time giving answers to a question nobody cares about. Who really cares if the banks’ other lines of business didn’t crater? I never saw any expectation that they would. Of course if those lines also cratered, that would be news.

    “It’s the bad loan write-offs, stupid!”

  20. techy2468 commented on Jan 22

    craig..

    it all depends now on jan 30 FOMC meeting..

    if they give another 25-50 pt rate cut, great for longs particularly financials.

    but if we dont get anything…..i would tilt towards short on that day…

    tomorrow we will get some retails sales…what if it is bad news??

  21. Suge Knight commented on Jan 22

    Rumor on the street is that Bernanke will be buying AAPL shares at the open tomorrow and will also cut rates by 25bps to make it an even 100bps in 2 days. You heard it here first folks!!

    Suge

  22. Short Man commented on Jan 22

    Craig- IMHO certainly the cuts will have some effect compared to doing nothing or regular 25bp cuts every meeting. However, I personally think the weight of the credit contraction, falling real wages, falling home prices and cloudy employment outlook will all weigh more heavily on the consumer than a 2% drop in prime. Fundamentally, it will not slow the decline in house prices. And that’s those are just the problems the consumer is facing – the ultimate unwinding/failure of credit derivative structures is still in the early stages with unknown effects for the key financial players.

    Add to this the fact that the recent moves will worsen the inflation picture 6-12 months out with a weaker dollar and continued high commodity prices and I have a hard time landing on the bullish side of the argument. Stagflation looks more and more to be the default scenario at this pace.

  23. John Borchers commented on Jan 22

    “Don’t Fight The Fed”

    Common this is rediculous! Listen to CNBC and you will surely lose your ass.

    Last time the Fed has emergency meeting 2001

    Look at XLF over 2001? Did that go up?

    Last time the Fed had lowered the rate this far this fast 2000.

    Look at XLF over 2000? Did that go up?

    Look banks and everyone else make more money in higher interest rate environments. Sure in lower interest rate environments you make more loans but it doesn’t make up the difference.

    Otherwise why did banks do these teaser rates in the first place if all they needed was just more loans?

  24. George Bush commented on Jan 22

    I don’t know what you guys are freaking out about…the US economy is strong. Did you see the rest of the world crashing the past two days? We held up strong, based primarily on the strength of our banks, and especially our monoline insurers. Oh, did I mention that we’ve had 52 months of consecutive job growth? And barely any inflation at all!

    Oh, by the way….don’t forget to pick up your APPL ipod on the way home. I would recommend BBY. I mean, you love America, right?

  25. Pat Gorup commented on Jan 22

    The last hour on the DOW saw it gaining about -7 pts. Big deal. The Fed spent alot of its ammunition today and what’s the difference if the DOW averages -150 pt losses over the next two weeks? It would still add up to the same loss. Metals were down today because lots of traders peddling stuff (quickly) to meet margin calls. Speaking about peddling, I saw a post that said something to the effect that the FED was a whore to the market. I’d suggest their the pimp & the American consumer is the whore. Proof: let’s see how much the rest of the worlds markets are up tomorrow now that the pimp has given the whore a fix.

  26. Thomas Pindelski commented on Jan 22

    Just wait for eBay to join AAPL in the woodshed tomorrow. You thing Auntie Meg is quitting because earnings expectations are rising?

  27. kurt commented on Jan 22

    if apple ‘missed’ the whisper number, imagine how the others are going to do in retail? Apple stores were packed all season long, and they still only managed 22 million ipods, 2.3 million iphones and 2.3 million computers, quite a lot less than what anyone was expecting (25, 3.5 and 2.5)…. gains of one year, gone in 30 seconds (well, feels like)

  28. Chairman Wen Jiabao commented on Jan 22

    I don’t know what you guys are freaking out about…the US economy is strong. Did you see the rest of the world crashing the past two days? We held up strong, based primarily on the strength of our banks, and especially our monoline insurers. Oh, did I mention that we’ve had 52 months of consecutive job growth? And barely any inflation at all!

    Oh, by the way….don’t forget to pick up your APPL ipod on the way home. I would recommend BBY. I mean, you love America, right?

    Posted by: George Bush | Jan 22, 2008 5:12:52 PM
    __________________________

    Please listen to what my good comrade Mr. Bush is saying here now please. As you can see, buying more Ipods is key to maintaining peace and prosperity for all:

    http://www.macworld.co.uk/news/index.cfm?NewsID=14915

    At least until the most perfect summer Olympics in the historic city of Beijing is complete.

    Wen

  29. Auto Mechanic Guy commented on Jan 22

    Abbey Joseph Cohen was on with Dylan Ratsmacker this afternoon and I think (it looked like she) actually had to swallow hard when she had to reiterate her 14750 call to him.

    As you’ve probably read in that Bloomberg article by now (about GS shorting subprime), they have a two tiered system there. It doesn’t matter what she says, if Lloyd and a couple of guys at the top think differently they will short the market and not tell her.

  30. Suge Knight commented on Jan 22

    Bernanke just went long Apple stock.

  31. michael schumacher commented on Jan 22

    Remove one group of hopeless perma-bulls from the feeding trough.

    All those people who “thought” they were going to get rich off Apple stock (that hit 200 not too long ago IMO) now have quite a decision to make……….

    Don’t they….!?

    Imagine what Apple would have had to do to satisfy that group of people. Since they already have the Jesus phone….Devine intervention was already used.

    Ciao
    MS

  32. michael schumacher commented on Jan 22

    BTW you know it’s sad when a 32% profit margin (projected for q2) causes the stock to sell-off over 12%….

    Greedy Pigs….

    Ciao
    MS

  33. ken h commented on Jan 22

    I’m disgusted. Benny is bending over and taking with no KY.

    Now that asscramer and asswanna are crying about the taxpayer bailing their buddes out.
    No other way? Ya there is, jump off a F’ing building! They were men back in the thirties!
    A big FU. How about taking some of Orangilos fortune? Payback in hell is going to be a bitch!

    I really hope these turds get treated by Karma like a child molester in general pop prison!

    Sorry for the language, but I’m pissed!

    Anyway, Craig, A bailout is baked in, so plan accordingly.

  34. Brett commented on Jan 22

    What I don’t understand is what they (the FED) thought they would really accomplish with the rate cut. If I am not mistaken (and I often often often am) the rate cut was designed to improve/increase liquidity or the willingness of the banks to loan $$$. I think I read it likened to “putting more gasoline into the pipeline/system that is the economy or engine and it’s up to us the consumer or potential loan taker-outer to ‘press the accelerator'”

    If that is any where near accurate…who in their right mind is going to go take out a loan to apply in an economy where growth has so obviously out-stripped demand (meaning there is an increasing amount of vacant retail/commercial all over the country). Who wants to be that guy? In a car that has crashed through the railing on “DeadMan’s Curve” and now hangs dangerously over the edge, who wants to press the gas pedal with it still in drive? Are YOU gonna go take out that small business loan this week?

    Having tried reverse (with the fed cuts) and still having to listen to the tires slip towards the edge, the prudent passenger has long since left the vehicle.

    The world’s other economies appeared to have pulled their foot off the brake yesterday and are waiting for us to join the pile up at the bottom of the cliff before the re-building can begin. But we just can’t accept the fact that we’re about to take a nasty ride off a cliff can we. WHY ARE WE DELAYING THE INEVITABLE??? How does this end well?

  35. BB commented on Jan 22

    Auto mech guy,

    thanks, and now i have her gender right. I told you I dont listen to any of them.

  36. BB commented on Jan 22

    Auto mech guy,

    thanks, and now i have her gender right. I told you I dont listen to any of them.

  37. Hal commented on Jan 22

    Re: Abby Joseph Cohen et al.

    In sports everything is about personal stats and accomplishments.

    How cool would it be if stats would be developed for the Abby Joseph Cohen types on tv to show her stats in a bug below her name while she was interviewed.

    IE–=her wonderful 2000 buy on dips calls.

    Even the ponies have a handicap sheet you use before you place your bets–why not for the analysts.

  38. Suge Knight commented on Jan 22

    Apple guided lower, time for a 50bps cut at the open Ben!!

  39. dhukka commented on Jan 22

    You missed one Bary from the ever optimistic Brian Westbury on CNBC today;

    “There is no real evidence that the economy has turned over.”

    Classic stuff

  40. Dirk van Dijk commented on Jan 22

    Analysts do fine tune their estimates, although it is doubtful that any finacial reporter would pay much attention to it. Usually a small number like that would be done for 2007 right now as 3/4 of the year is in and a $0.02 difference for the quarter on a $4 for the year stock is possible to figure out. The SEC would not care, it is a core function of analysts to make and change earnings estimates. More often what you see is a consensus estimate moving by that $0.02, but that is because two of the ten analysts following the stock raised or cut by $0.10.

    Another way of asking this is:

    Is manipulation the objective for changing a company’s earnings forecasts by just 1/2 of one tiny percent?

    Personally, I could not face myself in the mirror were I an analyst and I changed a forecast of, say, $4.00 to $3.98, or to change $1.00 to so little a difference as to effect a meaningless rounding error of 1/2 penny.

    Does anyone agree with me?

    I wonder, does the SEC agree with me?

  41. Brett commented on Jan 22

    Hal,

    GREAT IDEA!! I’ve often thought the same thing about pundits, reporters, and politicians. Some sort of accountability to keep them from talking out their ass which is what a large percentage do. Has any one ever seen anything like that out there? A sort of “scorecard” or ranking system for these people?

    I’ve noticed that Barry is actually pretty good at calling people out for blown or BS calls. Don’t know how he does it but it’s always nice to see a recent current event with a series of links to all the people who said: “(insert current event here) will never ever happen!!” I just would like to see that ‘loss of credibility’ stay visible to others.

  42. New Yorker commented on Jan 22

    Just a quick note.
    Today’s NYSE volume: 6.5 billion shares.
    Downs accounted for only 56% of that so perhaps we have turned a corner, but the massive movement the past week is quite impressive 5.4, 5.5, 6.0 and 6.5 billion shares.

  43. John Borchers commented on Jan 22

    What are we always told about the markets.

    ~~~ Don’t Time The Markets ~~~

    What did the Fed do?

    They timed the market.

    Interestly enough Austrailia is now up 6% completely removing yesterdays 6% loss. I have to figure some guy sold yesterday at 6% loss and now he’s putting in at 6% gain. It won’t take long for their little guys to go broke that way. (That is if it isn’t the bottom, there is always that chance).

  44. John Borchers commented on Jan 22

    Hong Kong just lowered its interest rate to make our currencies match and to prevent market termoil.

    Great. Now inflation will pick up like crazy! No one let the market correct, let’s make it go even higher than 2000. Stupid people!

  45. Owner Earnings commented on Jan 22

    Anyone buying puts with the VIX at 35 is as crazy as the reporter from Bloomberg who doesn’t care about his priciple investment when he buys bank stocks and only cares about the interest.

  46. John Borchers commented on Jan 22

    Hong Kong lowered it’s Fed Rate by 75 BPS. Following the US and to ease the markets. Love how they always go 1:1 with us.

    I never would have expected this. I didn’t think we were going to have stagflation but if China market does this and they don’t have inflation under control what’s going to happen?

  47. Dr N commented on Jan 22

    Eclectic,

    I agree with you that the purpose in publishing minute changes in earning estimates such as what you describe can only be to manipulate, and not to communicate an honest change in analyst opinion. But it is not clear to me how such a report could be used to effect self-dealing. You must have some examples in mind.

  48. PFT commented on Jan 22

    China’s currency is not freely traded, Hong Kongs is, so they will not need to cut, while Hong Kong and other currencies who want to stay pegged and that are freely traded have no choice, even if they have huge reserves.

    Besides, China’s inflation is a result of strong growth, salaries are increasing 20 percent per year with 10% inflation, but our inflation is largely a result of a diminishing dollar and cartel pricing practices in banking, energy, insurance, education, agribusiness, health care, etc and is higher than real income growth relative to real inflation (and not the lie that is our CPI). Going to be some hurtin in 2008.

    Today marked the end of the dollar. It was going to come anyways, but now we are on the bullet train. Shouldn’t be long now.

    The PPT is something though. Over a long weekend, they bring down gold and oil 5%, crash the international equity markets, bring up the Euro against the dollar 3%, and then after the Fed cuts get announced, everything likely bounces back to close to where they started. Impressive market rigging. Must have worked some serious OT in the Cayman Islands.

  49. Pat Gorup commented on Jan 22

    “No matter what you think about inflation, for Benanke, that signpost up ahead reads: D-E-F-L-A-T-I-O-N.”

    That’s right!! And he’s been wrong all along hasn’t he?

  50. Eclectic commented on Jan 22

    To responders: Ciao, Dirk, Dr. N (and any others I missed)

    Thanks for your replies and opinions.

    Dr. N – I’m glad you agree with me. I think most reasonable people would agree. I won’t identify the exact analyst or company, but I still contend that it’s not within human intellectual capacity to differentiate a 0.5% earnings estimate correction over a 1-year period.

    Thus, Dirk, an attempt to release such a change to the public must have some motivation other than to pinpoint a level of accuracy that is not humanly possible. The only motivation I can come up with is that the analyst’s company must use this tactic to manipulate it’s cost of acquiring market-maker inventory, or to manipulate its price for distribution.

    I fully realize that when 3 quarters of a company’s annual earnings are in the book and known that it’s far more reasonable to expect that the accuracy of the final quarter’s estimate combined with the 3 known quarters makes for a better argument for such accuracy. However, still, it would mean, for example if the annual earnings estimate was for $1.00 and 75 cents was already booked, that the last quarter’s estimate of 25 cents would itself have to carry a maximum correction error of 0.5 cents or .5/25 or just 2%, and to my mind even 2% accuracy within a quarter is not humanly possible.

    In other words, the only place there is a Chinese Wall… is in China.

    Why it is that the financial media permits itself to be used in this type of dissemination without questioning it or challenging the analyis for its scope and claimed accuracy is simply beyond me.

  51. Winston Munn commented on Jan 22

    Pat Gorup,

    I wrote: “for Bernanke, that signpost up ahead reads: D-E-F-L-A-T-I-O-N.”

    I said nothing about what he has seen in his rearview mirror.

    You wrote, “That’s right!! And he’s been wrong all along hasn’t he?”

    Weird part of this is, if he was right but his maneuvers work, we’ll never know that he was right – it is only if the actions do not work that deflation would occur.

    I am not applauding the actions or defending the Fed – I’m simply pointing out what must be their great fear.

    Makes me want to know just what those Fed models were predecting.

  52. Pat Gorup commented on Jan 23

    “I am not applauding the actions or defending the Fed – I’m simply pointing out what must be their great fear.”

    Quite frankly Winston I’m not worried about the FED’s greatest fear. I’m more worried about mine; inflation which is going to be the result of their “loose monetary” policy.

Read this next.

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