The WSJ on gross domestic product and initial jobless claims:
"Stocks fell Thursday after weaker-than-expected economic readings and
earnings reports underscored the potential for a recession."
Weaker than expected? WTF?
I keep hearing people talk about this "negativity bubble" — but from where I sit, the media, traders, analysts are still too optimistic — perhaps way too optimistic.
We have had 4 rallies over the past few weeks of nearly 200 Dow points in a given day. That doesn’t sound like excessive pessimism to me.
Ask yourself this: Is the greater fear getting stuck with stocks that move lower — or missing any rally?
Its easy to make an argument that speculative fervor lives; that the steep yield curve has emboldened traders, and that the lower prices are attractive; and that most of the bad news is already priced in.
But consider the following headlines:
Eight Reasons There Won’t Be a Recession
Blue chips are signaling recession can be avoided
Stocks in U.S. Tumble After GDP Trails Economists’ Forecasts
Eisenbeis Says Concerns of U.S. Recession `Overblown’
U.S. Economy Grew 0.6% in Q4, Less Than Economists Estimated
Despite write-downs, it looks like the bottom is near for stocks
Do these reek of hope or of despair?
I am working on a column describing exactly what the bottom of a Bear market looks like. Sorry to tell you kids, but this ain’t it.
Source:
Fourth-Quarter GDP Unrevised at 0.6%
JEFF BATER
WSJ, February 28, 2008 8:48 a.m.
http://online.wsj.com/article/SB120420491942899787.html
No doubt about it. There has been some very bad economic news in the last week, but the market rallies on rumors of bailouts (?).
If you only follow the WSJ and major media sources you will get a very muddled picture. I was pretty much doing that in 1999-2001 and remember being very frustrated. It was very obvious that there were problems, but upbeat news generally outweighed the cautionary.
I remember a Smart Money piece just before the big turn talking about how, if the economy kept going at the then current pace stocks were undervalued.
Well just a couple of days ago, the WSJ put a cheerful face on the latest housing news (burying the ominous the year over year numbers in the text). I am not sure if a few years back that I would have known enough about those numbers to question the article’s headlines.
It is all collective Psyche – trying to mark things up at the end of the month! Jan-08 S&P close 1378.50 and they all want it to badly close there! But alas! the weight of the incoming data is so bad, that perhaps they have started bailing out of supporting it, till tomorrow!
Watch out next week! a few big down days on the way – my guess.
Earnings disappointments from Bayer and Rhodia is offsetting the better than expected German jobs # (unemployment rate the lowest since Nov ’92) and rise above 50 for the 1st time since Sept in the Feb euro zone retail sales # in driving European stocks as they are lower and is influencing the S&Ps. Weaker than expected Japanese Jan Industrial Production weighed on the Nikkei. The Chinese Yuan rallied to a fresh record high since the revaluation in a sharp move on Chinese comments that inflation will remain around 7%. The $ index though is up slightly after the UAE said they will keep their currency peg to the $ for now. Jobless Claims are expected to total 350k, little changed with last week but 8% above the one yr avg. Q4 GDP is expected to be revised to .8% from .6%.
Barry, you’re exactly right. I’ve traded commodity futures for several years and I’ve seen plenty of bear and bull markets in the last several years. The S&P500 is in a bear market right now and we are nowhere near a bottom. Although, I must say Larry Kudlow is starting to sound more skittish about the real issue we’re facing: inflation. When Larry Kudlow turns full blown “concerned” and Dennis “I know nothing” Kneale throws in the towel on AAPL at $100 bucks and Google at $400 bucks…then we’ll be close to an “intermediate” term bottom. From a techinal perspective, the 1397-1406 remains important resistance zone. Wave analysis still suggests a move to 1225 is in the offing unless we can take out 1406 first.
I think the stock market would actually bottom and rally if Bernanke were to ever show some manhood and just say to the world: “I’m not slashing rates any more. I’m worried about the inflation picture. There’s plenty of liquidity in the world. All you people who took on shitty paper need to work it out. Good luck”
It is all collective Psyche – trying to mark things up at the end of the month! Jan-08 S&P close 1378.50 and they all want it to badly close there! But alas! the weight of the incoming data is so bad, that perhaps they have started bailing out of supporting it, till tomorrow!
Watch out next week! a few big down days on the way – my guess.
Economic pessimism/optimism point has merit. However, I think WSJ quote may be something else: journalists have to concoct explanations for sometimes inexplicable market moves.
and on cue Schwab puts out it’s monthly newsletter and the very first “article” is titled:
“How to game the recovery”…….
Again the media is trying to get us from stage 1 to stage 5 in one fell swoop.
and stage 5 is still acceptance but it’s being presented as acceptance that it’s over.
Nothing could be further from the truth…
Thanks “Chuck”
Ciao
MS
BR says:”Following the dot com implosion, my predecessor at the Fed slashed rates to a generational low of 1%; the FOMC then kept rates at 1% for over a year.
While that re-inflated the economy, it also set off a shock wave of inflation unseen since the 1970s. Houses doubled in price, Oil is up 5 fold, food stuffs have tripled, and the dollar has collapsed. Gold is at multi-decade highs.”
But Dennis Kneale just said on CNBC that Fed Funds rate was 1% without any major rise in inflation.
I’d love to see a debate betwen Barry and Dennis.
Barry,
You better hope the Fed doesn’t start a rendition program. You and Kass will be the first ones on the plane to Egypt for some “economic re-education!”
The only thing I’m sick of hearing more than the dreaded “unexpected” and “surprised” reactions, is all the absolute bunk about bottom and/or top indicators like magazine covers and bobblehead commentators and levels of fear or euphoria. It’s like one big ass game of chicken in all directions, but none of the chicken bodies have feathers or heads. Has anybody ever contemplated just how many chickens get executed a day to feed the global population? Huh, huh, huh, has anybody!?!
The ultimate contrarian play is when CNBC falls into a negativity bubble. That will mark the bottom. Unemployment will probably be 9 percent.
Shrek
Quote of the day:
“Why do rogue traders always loose money?”
Jim Chanos
I want to know that too…….
Ciao
MS
Barry,
I couldn’t agree more. I personally believe that all those (both within and outside of the media) who argue that sentiment is overly negative are falling prey to one of the most common – and most painful – mistakes made by traders and investors: they are inventing rationales with which to talk themselves into taking a certain stance.
I personally feel that sentiment is still remarkably complacent. This is one reason why I believe that the nasty selling has yet to occur; the market has not yet reached what Robert Prechter terms, “the point of recognition”.
The fundamental data is obviously bad – and getting worse. We are now beginning to finally see an acceleration of negative data. I believe that, as has been said by many, “We ain’t seen nothin’ yet.”
From a technical standpoint, the rally of the 1/23 lows appears to be nothing more than a bear market rally. The momentum of this rally has been fairly tepid, in comparison to the sharp selloffs that preceded it. In fact, since the 10/11/07 top, the selloffs have been markedly sharper than the rallies – in all timeframes.
I have many other technical reasons why I believe that this rally will fail and will probably do so within the next couple of weeks. I think it is very likely that we will retest – and then take out – the 1/23 lows.
You’re also right that market bottoms do not look like this. At a true bear market bottom, we will not be hearing every yahoo on CNBC telling us how cheap everything is and that it is now time to buy. Instead, we will be hearing how the end is nowhere in sight, how we should sell everything now and how we’re all pretty much completely screwed. CNBC is, if nothing else, a great contrary indicator. The fact that they apparently don’t know this makes it even funnier.
Selloffs like we’ve seen do not make V-bottoms and go back up. I 1/23 was truly THE bottom (even though it isn’t), it will be retested at least one more time.
I have no problem with this rally, because I think it makes for a great short setup. As I’ve said before, “Buckle your chinstraps, and keep your hands and feet inside the ride at all times.”
Again I have to point out that we are laboring under a faulty reference point; i.e. the dollar. I know we can’t just use whoppers or snow tires or whatever to measure whether we are gaining or losing. Pride also get’s in the way of logical thinking. Let’s assume that you control the money supply in the U.S. What would YOU do now? If you are part of the current psycho-babble reptilian brain, ego is everything, me first, perception management equals the rabble’s truth set, you inflate like crazy so the stock market keeps going up in dollar terms. You also get the PBGC (you know ,the one that got stuck with all the pensions the corporations didn’t want to pay) to nearly double their “investment” in stocks by getting a quick and dirty law passed. Now you’ve got more juice for the PPT. Don’t believe me? Read Jubak on MSN.
I think that it is a good time to be very optimistic – long-term behavior of SP 500 is consistent and demonstrates upward movement despite alarmists. There is no indication of bear market except those which failed so many times already that can not be played another time.
February should end around 1380-1400 and then a rally will bring us to 1500 or higher in end April-May.
You have to consider that all that could happen did happen. So, this unfortunate past is almost over and the market demonstrates this. No b-a-a-a-d news really affected it.
MS,
My take…If they traded
A)and lost money they are a “rogue” trader.
B)and made money they are genius
C)and broke even…they are an analyst….. :)
please feel free to add D-Z
When Cramer and all the house-flipping shows are pulled off the air we might be near a bottom.
When nobody cares what bail-out or Buffett rumor CNBC breaks during the day we might be near a bottom.
can’t add to that…my feelings exactly…
I guess I should have said that in the disclosures it seems they only loose money….
Ciao
MS
Cramer getting cancelled is a pre-requisite for a bottom. Last night though, he was a guest on Jimmy Kimmel Live, so we must be far from a bottom.
Rogue traders LOSE money. The Fed gives us LOOSE money. One O makes a lot of difference. ;)
I think you might be confusing the need for writers to earn their paychecks, the need for periodicals to sell whatever they are peddling, the need for networks to fill air time, and the need for pundits to sound smart with actual FACTS!
People feel the need to ‘understand what is going on’ and they seek out ‘those who can explain things’. At that point it becomes an exercise in credibility and ‘sounding reasonable’. Truth is not necessarily, or even partially, required.
This human fallibility is the basis for network and publishing empires. Simply put, most people need to be told what to think. And they join in groups with those who reinforce their personal view of reality.
You will never see a headline ‘Stocks Fall For God Know What Reason’. Posturing is a REQUIREMENT in the publishing business, news business, and pundit business. Probably 95% of everything published, announced, punditized, or creatively vomited in one way or another is fiction or outright lying intentionally made to sound POSSIBLE OR REASONABLE.
The world would be in absolute chaos if bullshit ceased to exist.
In other words, if one person says everything is OK and the other says it isn’t, one is wrong and the other is lying.
However, factions will arise on all sides of the issue and explain to everyone else, ad nauseum. Feel free to pick your truth.
“Who Are These People Surprised by Economic Data?”
Only the non-believers who are either not intelligent or due diligent enough to arrive at their own conclusions. Instead, they allow the talking heads to do their thinking for them.
Cramer reduces the understanding of the financial markets to flashing lights, sounds effects, sight-gags, merchandising, cross-promotion and clowning.
Personally I consider it dangerous to seek financial advice from a Jerry Lewis character.
The only reason he survived the dot-com implosion was because he didn’t have his own branded show. It was probably also a sign that the real bottom wasn’t hit.
Can someone answer me this question? When was Erin Burnett appointed the chief cheerleader of Business Television? Why does she feel compelled to alway present or point out the “silver lining” or “glass half full.” She just interviewed the Chairman of Fluor. He basically said that his oil and gas business was doing great. So, EB concludes that “Well, it so glad to hear some good news that you see the economy is doing well. And you’re even hiring.”
Thanks Erin. You found a CEO with heavy exposure to the oil and gas industry who had some upbeat comments.
The ultimate reality is always today’s market. That is the price. Everything else is just opinion and assumption. What is…is. The trading/investing world is littered with folks who thought their analysis mattered…it doesn’t (is there anyone who doesn’t know real estate is weak etc..etc) . Trade what you see…control risk (stops)and position-size correctly. 95% of the analysis you read everyday is worthless.
When Larry Kudlow weeps like a little girl then we’ll have the “all Clear” to buy stocks. But Goldilocks, crack whore that she is, needs some detox first
and Prez Bush sez no recession—uh ohhhh! deep doo doo. Bottom will be here when Prez Obama sez we have nothing to fear but fear itself. I guess….
“You have to consider that all that could happen did happen.”
The middle class is starting to hear that commodities ETFs are the safe new place to put their money while the real estate and equities markets stabilize. At least some of them are probably using leverage. I’d say that’s a pretty big something that could happen that didn’t happen yet.
Dear PPT,
I humbly request that you refrain from any market activities (Gasparino this goes for you too) during the last 20 minutes or so of today’s trading session. My shorts are working quite nicely for the first time in what seems like forever. I think you could agree that given the recent data it is to be expected that the market stay in the red all day (at least once this month). Thanks for you cooperation in advance.
Respectfully,
Bonghiteric
“weaker-than-expected” was a misquote, they actually said “weaker-than-hoped-for”…
Good posts Cinefoz! Well stated. Now you just need to join the dark side and your powers will be complete. ;-)
I remember in October of 2002 buying Cisco at 9, Intel at around 11 etc. and being scared to death.
That’s what the bottom of a bear market looks like.
“The economy is in turmoil, yet President Bush and Federal Reserve chief Ben Bernanke say the country will weather the storm. Neither sees a recession on the horizon.”
Bush also assured the nation that the Iraq war will pay for itself, Hurricane Katrina will not make landfall, the Patriots are a lock to win the Super Bowl, and the Titanic is unsinkable.
No one cares about your political view..take your politics and shove it.
Add our genius President to the list. Reminds me of a cute t-shirt on a little baby that I saw the other day: “I am already smarter than my President.”
The government and media talks to the masses like they are 5 years old …
Bluestatedon #1, don’t listen to bluestatedon #2. He’s probably suffering from commitment bias.
“take your politics and shove it.”
If you don’t think that politics and economics are deeply intertwined, especially with this administration, you’re entitled to your fantasies.
If you don’t think we’re in the beginning stages of a recession, you’re entitled to that delusion as well.
ok, so you’re saying that you know a bear market bottom, and this ain’t it. what if this ain’t a bear market? then does this resemble something? like a bull market consolidation, does it resemble that?
-][
Word of the day from the tinfoil hatter:
PSYOPS.
If that makes no sense to you Google “Operation Paperclip.”
The longer the public continues to be deluded the more money the corporate fat cats make. It gives them all the more time to sell high, convert their currencies, etc. Can you say “ENRON?” The same clowns are in charge of our financial system, and this time the effect will be felt worldwide.