Meanwhile on Wall Street . . .
January 11, 2008 2:30pm by Barry Ritholtz
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How ’bout the latest US trade deficit and record China surplus?
All your bases are belong to us!
so the bears are jumping?
damn, so no sellers of Wheat and beans….
No, no inflation!!!!!
I loved one day when Kudlow said “for inflation, what you need are to many buyers and not enough supply.”
I was like…. But larry that is what we have!!!!
“all your base are belong to us”
to be correct!!
Eric, 300 acres for sale in my parts of N TX. Already planted in winter wheat.
Farm land prices are starting up in a big way. Grains up up and away. Meat prices to follow.
Angus, the new black gold.
Texas T-Bone
Damn it “Schumacher” I thought you were gonna let us in on the PPT’s next day at the beach! When will they return, do you have any idea?
Only if you ask nicely…….LOL
most likely at the August lows YET AGAIN….
But I guess with the just released fundamental news (to go with the fabulous news we already had-LOL) you would be ready and willing to help them out. Since the news is worse than that last pathetic attempt at a rally I’m sure you’re to be out buying with both fists.
I’m sensing just a bit of location jealousy from you. And where does the Big richard live???
I would guess but you’d most likely lie to me if I got it correct anyhow.
Ciao
MS
“Don’t Panic”
“But if you do Panic, Panic first”
Back in 2001, I was at company HQ discussing the markets with the firm’s chief economist, and I asked him whether or not the Naz Bubble was big enough to cause the US to experience a repeat of the Japan debacle (which, at that time, had been going on for over twelve years).
He didn’t think so, and his explanation was two fold: 1)the US had not experienced a property bubble, and; 2)the financial industry was much more transparent here, whereas in Japan the big banks were engaged in all sorts of shenanigans to hide their faulty loans.
Npw, almost seven years later, we’ve got the same ingredients necessary for a Nikkei-style collapse across all markets. Granted, the land beneath Time’s Square isn’t worth more than Honshu (the corollary being that the land beneath the Emperor’s Palace was worth more than California in the late 80’s), but a property bubble and some major shenanigans by the big banks are majorly in evidence.
I really thought we’d see some follow through this AM, but with today taking out most of Wednesday and Thursday’s gains, it’ll be interesting to see if Monday doesn’t elicit the panic selling that would mark at least a temporary bottom.
“Farm land prices are starting up in a big way. Grains up up and away. Meat prices to follow.”
I’d like to say its a bubble, but with a populace demanding hysterically to put food in their gas tanks I think not.
Ken Lewis of BAC may not be the absolute next guy to lose his job for having absolutely no grip on the enormity of the financial mess inside his own house, or the house next door, but he will lose his job over this deal. funny how everyone (Liesman on CNBC) loves finding a bottom in every mis-begotten deal these loons pull out of their — well, hat.
I see a lot of people trying different ways to gauge the market: Charts, Technicals, Sentiment, Etc.
I like to use facts to determine the future:
Fact –
Last time the market corrected to 1300’s the consumer confidence was high and only a few banks looked like they had minor issues.
Only one thing matters to equities: earnings. And we all know that S&P earnings growth will be negative by close to 10% y/y for the next few reporting periods.
Just keep following the earnings revisions…and steer clear of the indices until the earnings picture turns the corner.
http://www.cxoadvisory.com/earnings/
Actually boomdotbust, earnings don’t matter a scintilla to the overall stock market in the short term. The correlation between equity prices and earnings is nearly zero over anything less than a three year time horizon.
Not to mention, there is absolutely no correlation with earnings growth/deceleration and market index performance.
Earnings matter to individual stocks, but the S&P 500 couldn’t care less about what earnings are doing at the moment.
Hah. Nice find BR. I almost chuckled out loud to myself on that one.
Is that Larry Kudlow standing on the ledge? Or is he the guy climbing through the window?
Byno – the S&P500 is highly correlated to earnings using inflation as a discounting mechanism. Take a look around the CXO site – particularly their REY model. It contradicts your earlier statement in spades.
Not a scintilla? Correlation nearly zero? Not quite.
Sorrow – Pink Floyd
http://youtube.com/watch?v=QtyPvjj24bM
The sweet smell of a great sorrow lies over the land
Plumes of smoke rise and merge into the leaden sky
A man lies and dreams of green fields and rivers,
But awakes to a morning with no reason for waking
He’s haunted by the memory of a lost paradise
In his youth or a dream, he can’t be precise
He’s chained forever to a world that’s departed
It’s not enough, it’s not enough
His blood has frozen & curdled with fright
His knees have trembled & given way in the night
His hand has weakened at the moment of truth
His step has faltered
One world, one soul
Time pass, the river rolls
It’s not enough it’s not enough
His hand has faltered
…. …. ……
And he talks to the river of lost love and dedication
And silent replies that swirl invitation
Flow dark and troubled to an oily sea
A grim intimation of what is to be
There’s an unceasing wind that blows through this night
And there’s dust in my eyes, that blinds my sight
And silence that speaks so much louder than words,
Of promises broken….
Those bear farts smell like Goldilocks.
Another sexy week for my portfolio. Thanks Perma-Bulls for setting this up, and making it real easy for me.
OH … and what a day:
AMEX says “delinquencies up” & “spending down”
Tiffany’s says big spenders “rolling over”
Merrill Lynch doubles write-down to “15 million” WTF?
Fed gov. says “Stop Obsessing” over rate cuts
Excuse me … that’s 15 BILLION on ML!
Wouldn’t it be funny if these large institutions were buying each other out in order to avoid having to reveal some unpleasant truths . . . only to have some crack reporter dig up the dirt through FOIA after the FTC reviews the merger. A guy can dream, can’t he?
I misspoke: it’s not that earnings and the S&P aren’t correlated, it’s that earnings have very, very, very little predictive power concerning future returns. the 1970’s as an entire decade are a perfect example. To use another, S&P returns are almost 96% correlated with inflation and GDP growth, but neither are worth a damn in predicting the S&P 500 six months or six years from now.
Reading through that post, I did come off as disagreeable, and I’m only respectfully disagreeing.
I smile but I also think it is in poor taste to make a joke out of suicide.
and let’s not forget how bullish it is that the airlines are merging. now with less competition we can start to overpay for lousy service (sort of like Microsoft!).
REcessions are great times to build up monopolies and reduce competition because the govnm is just so relieved the big uncompetitive corps don’t roll over and die.
looks like dinosaurs mating to me.
I don’t think we will ever see any waterfall-type market meltdown. Considering all the things that have already happened since last August, it convinces me that the Market Protection Committee is alive and well. There is no other way to explain why we have not seen a drop on any single day of a more than a few hundred points. That’s really nothing when you get up into the 14,000 range. It will always be Chinese water torture going forward from here. There will never be a market meltdown because the people running the show will not allow it.
In addition to putting a floor under the market, CEOs are now being rewarded for destroying the companies they are supposed to be managing. I get a sense we will see a time very soon when getting money will be (again) unbelievably easy; but the money won’t buy you anything. Remember the picture of the guy with a wheel barrow of cash? We are only a few years away from that. The FED and the politicians will never admit to it; but, you will know it when you see it.
One last tidbit, it is becoming ever more expensive to live. My property tax is expected to increase over 50% this year. Local governments are grabbing additional revenue anywhere they can get it. I am afraid this thing is going to end badly before too long. This new-wave financing by Wall Street and Federal, State and local governments is about to crack. The numbers just don’t work. At the bottom rung, you are talking jobs, wages, taxes and bills. It’s not imagined. It real. The numbers of every household must reconcile at least form time-to-time. There is no funny business down here. There are a lot of people who apparently have forgotten this basic tenet. The trickle down and the bubble up doesn’t work anymore.
Byno – thanks for clearing that up. As for the 1970s, it’s actually a perfect example of what happens when the discounting mechanism trumps E/P. Earnings matter, but the discounting mechanism matters equally.
As for backward looking indicators like past inflation and growth – you’re on the ball, and that was never my contention.
Look at what’s happening with the market averages since our last market highs. Earnings forecasts are down about 10%, the market is down about 11%, and the inflation forecast (the discounting mechanism) is muted (see CXO for their forward looking inflation forecasting).
Operating earnings growth is forecast at around -10% for the next reporting period. I’d say the market is pricing things appropriately based on forecast earnings and inflation.
While things aren’t always that cut and dry, they do tend to be when the direction of earnings growth is in reversal, which is precisely the case now. That was the meat of my first comment.
Good trading.
The TIF announcement was very important. Another permabull argument is that the upper-middle and upper classes have somehow disconnected from the rest of the economy and can keep the economy rolling. Although there is a certain uberclass that on some level transcends the economic experiences of the remainder, we cannot forget that each segment of the socio-economic spectrum levered up and, therefore, even the highest end businesses received an artificial boost of action (e.g., the millionaires who started living like deca-millionaires, etc.). Part of US culture is to go bigger and better whenever possible, and we are now closing the window on “possible” for an overwhelming majority of our residents …
Looks like Citigroup is now ChinaAlwaleedGroup.
http://online.wsj.com/article/SB120009118772584777.html
Does anyone know if education debt is included in the debt service stats in the Weekend WSJ cover story “Consumer Woes Start to Damp US Economy”?
http://online.wsj.com/article/SB120003317754883551.html?mod=todays_us_page_one
Thanks!
“She’s Real Fine, My 409”
First cross of SPY EMA(50) below EMA(150) since the 2000 top (and 1998 before that).
Action at EMA(409) will be crucial here IMO.
High Bollinger Band width suggests market bottom?
See page 7 via link at my name.
Slow changes allow maintenance of control, change at too fast a rate risks social and/or political upheaval. With the collapse of housing collapse of the stock market or the the banking system of payments can not be allowed or the entire system could disintegrate. Nobody is better off exchanging today for the “stone age”. The question is, is the pace of the stock market fall fast enough to allow profits on puts or is just carefully selling short the way?