If you remember this show you are either a geek or a pop culture maven.Visa's IPO couldn't have been timed any better for the sellers. The issue priced above the high end of the range which of course is positive in that it shows demand for equities might be pretty good, it is a negative in that they are bringing $17 billion in supply to counter some of that demand. For now I guess the positive outweighs the negative.
The rally yesterday was very impressive, just as impressive as the one last Tuesday. There were a couple of comments from readers (one of whom I know is bearish and one whom I suppose is bearish) that introspectively questioned their bearish bias--4% days will do that because of course they feel so good (as in feel good rallies).
There is nothing wrong if you doubt your position or feel some emotion either way. The point I try to make here is to not continually give into your emotion. The emotion isn't wrong but actions stemming from emotion might be.
One thing about the rally that nags at me is the lack of skepticism. Other than Doug Kass (who has been bearish) the other day and Tobias Levkovich (who is calling for SPX 1165 but based on what I know about him I can't imagine he will be correct) , it seems like everyone who was bullish before still is and anyone who was bearish still is. If the entire housing/credit/whatever this is event is anywhere near as important as people make it out to be I would think the bear market would have to be longer and cause a larger drop. Further I would expect that when we are at the bottom and there is a big day it would be viewed skeptically by more people.
If that is wrong, so be it.
For all the ragging on the Fed (me included) I actually think the combo of the action and the statement was a net positive (regardless of what stock prices do). They continued what has been aggressive and innovative action. They would have needed to do less had they recognized the problem earlier and started earlier but I do believe the action of the last couple of months has been aggressive.
They managed to put in a big cut, keep expectations of a future cut alive, not derail the stock market and reverse the dollar decline, even if just temporarily, against quite a few currencies. My thoughts on this are not original but this fits for now.
Part of being in the market and having opinions should be the understanding that things change eventually. Always being bullish or always being bearish makes no sense to me. I have been expecting a normal bear market, have not changed my mind, talked about feel good rallies before the bear started but an up 4% day is a good reason to explore the thought process.
A quick update on China after I posted about it last week; In that post I noted my old holding, Sinopec (SNP), was at $96 after being as high as $178. After that post SNP dropped as low as $78 intraday Monday and closed up a lot yesterday at $86.
To reiterate a point I made in the post last week. The Shanghai Composite is now down 39% from its high and still there has not been the attention paid to this that I would have expected. For now I am not a buyer but if your time horizon (emotionally speaking) is long term, buying into a market that is down 35-40% is not the worst thing in the world--this is not to say that this market can't go down another 20% however.
20 comments:
Not only is there lack of skepticism, but there's no sense of despair on the part of individual investors, no hand wringing. Anecdotally, I don't hear anyone talking about not being able to retire now or not wanting to ever own another stock. With all the Fed action, maybe we'll never reach that point, but it feels different on the cocktail party circuit than other bear markets so far.
I still do not believe stocks will do well, but gold does not look good and the dollar may stop sliding for a while.
I think volatility will continue to get worse and therefore emotions will be a continuous problem so I think your post will help many people.
seg
Everyone's too busy trying to pick the bottom to be skeptical. I keep seeing brackets, with the final four being heros until the next cycle. I guess Abby didn't make the dance, though.
Your constant online traders will have made some money from yesterday's brief rally and they and the strategists will both see the market 'coitus interuptus' this morning as proof that their disciplined approach is superior. Professionals like you and the online guys are in it for income. However, for the rest of us, it's a little like trying to read the tea leaves on the side of the cup; that's where your insights into market trends become important.
Willy
...unless i go on a wicked cold streak.
thanks Willy.
http://tinyurl.com/2wvy3a
Looks like a 75 bps cut just will not be sufficient. It has not put a dent in the TED spread as it just seems to keep on growing.
seg
i have been a TED spread fan since 1993 (when I read an article in the old Bloomberg Professional mag) but I thought it had grown somewhat obsolete because of the creation of the single currency?
Is it the old TED spread or is there a new combo to create the spread?
"The TED spread is the difference between the interest rate banks charge each other on 3-month loans (3-month LIBOR) and the interest rate on 3-month U.S. Treasury bills."
Above is quoted from NYT. I found the link on calculatedrisk.blogspot.com/
BTW the spread seems to be getting worse as the day progresses
seg
Hey, Roger, a question for you -
Every day this week, there has been a distinct uptick on the Dow occuring at 2:30pm EDT. Why? and Who?
c.morris
Ogden, UT
short answer I don't know.
i think we can rule out tuesday because of Fed news.
there are theories about margin clerks ( covering short because a margin clerk said so would come at this time) but i do not know if it is conincidence, soemthing with options week, a conspiracy (just kidding) or something else.
Let me speak up for the hand wringers. I'm one, despairing over declining capital, necessary to generate income for my ongoing retirement. I too read this blog & Roger's Real$ posts for trends, ideas alongwith those of contributors because they're more sophisticated & even-handed than other hand wringers like me (or are not bombastic one-noters.) I can despair and still count myself fortunate that I'm only down 3.5%, but that capital was to have gone to property taxes; I've already changed my medical policy to increase substantially the deductible; so I guess it's cabbage soup 2x/wk next. (Humor attempt.) Bea
For those who think there's a bottom, these are excellent charts to look at.
http://www.bigtrends.com/document.jsp?documentid=117
Regarding the last link, Roger will love it. The wrap up was a reference to the power of the 200 DMA. Thanks for the link. Pretty interesting stuff, reinforcing the thesis of this blog"This time is no different than the past"
Sam
Spotted a sharp and goodlooking Chinese Professor on Bloomberg tonght and I felt her views cut right to the chase, this is all caused by financial instruments (Buffet koolaid), all rallies are simply short covering,the shorts and the feds are bailing the banks so they'll get paid and the fed sole reponsibilty is to bail out poorly run banks.
Regardless of whether tomorrow is up 400 or down 300, I (like many others who read this blog consistently) am heeding (or trying to heed) Roger's advice, and not worrying too much about my ability to "outthink" this thing.
Having spoken with a friend who's running a hedge fund, I"m hearing the deeper (hand-wringing) fears. He suggests we are in the area of the unknowable: even if you've got it wired and in fact are logically/historically/technically/fundamentally "right", something can come out of the blue and blow it all up.
If ever there was a time to keep some powder dry, I suppose this is it.
For those interested in justifying the "bear market rally is underway" thesis, check out Authers at FT (Short View). Here's a link:
http://www.ft.com/cms/bfba2c48-5588-11dc-b971-0000779fd2ac.html?_i_referralObject=689245732&_i_referrer=rss
H
back from dinner, with all the college hoops coming our way i needed to do something with my wife...
thanks for the kind words and the links.
i will say if you have an inkling of what might be coming and you prepare a little mentally it does make it a little easier.
Roger,
Is it me or does the Fed need to try to fix the TED spread or the A2/P2 30 day commercial paper spread.
They may eventually fail and we turn japanese but as long as they have some bullets left aren't they obligated to use them?
Shouldn't this affect the indices and gold prices from falling if they do?
I said all that to say you can try to predict the markets in the short run but good luck being successful at it.
In the long run it looks like we are headed lower.
seg
I may not know enough about TED to answer the question but TED is a relationship between two instruments that each trade in the market, BTW each market is bigger size wise than the Fed.
I do not believe there is a way for the Fed to do anything that could have any lasting impact and anything they might try would likely have an unintended consequence. According to Randy Forsyth the LIBOR went up after the Fed cut yest offsetting the benefit of the cut.
One last point I only know this as a sentiment gage, like AUDCHF, and so i am not sure why the fed would need to do anything but again i may not know enough about it.
Just read about WIP and your take at Index Universe. Seems like a timely tool.
My understanding is the exsesive spreads like the TED spread are due to either a lack of liquidity or a lack of solvency that increase the cost of borrowing.
The Fed and ECB can address liquidity issues and IMO are obligated to address these. If it is a solvency issue then we are screwed. This is why I say we are turning japanese.
But I could be wrong things could be better than that. However we will not know if sufficient liquidity is not provided to at least try to bring these spreads down.
This is the third wave since august in high spreads and there maybe more to come, but you just can not ignore them IMO
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