Past week I mentioned that what unnerved me about the stock market was the giddy assumption that because we are not going to default the market was going to go up. It didn't.
It fell around 5% in a week due to the bullishness that still permeated around waiting for big brother or even dad coming to the rescue, that kind of emotional certaintiy tends to increase the chance to get fleeced, in the short term, even though the rationality of the argument looks solid.
No final agreement yet but the wheels in Washington started turning again to solve one big problem so the first hint of some kind of accord would have set the market rallying.
Astrology at this point tells me that things don't look that easy.
Anyway the first chance for a turning point albeit small was Saturday 30th.Of course with the market closed I checked Sunday and yesterday and no meaningfull reversal.
So what now?
Probably a bottoming process. Maybe we have a fake move up a couple days and a turn back down sounding like crap is going to hit the fan and by August 9-12th we are rescued and we have a rally.
This is my preferred view right now. I doubt a multimonth continuation to the downside right now.
Of course the second option lurking is that we don't do anything meaningfull for an entire week and then big drop ensues. It very well could be the case but still I don't see that a multimonth top is already in.I think we need to get first to a point of luring a lot more people that everything is this time seriously going to go fine; at that point chances of a bigger drop will be more solid in my view. But to convince people things have to improve noticeably, and is not too probable now.
Is a conundrum.
Right now Obama just won.So the debt solution is going to spur the market maybe after the 9th.
Why I did say Obama won? Am I crazy? Such weak display from the president "throwing under the bus" a lot of cherished programs for the middle class and the poor can be seen as a victory? Why not say the Tea Partiers won through persistence about their approach to solve the debt problem?
Because our dear leader ended up aligned with 72% of the population, who in one of the last polls supported tax increases (or restored the historical mean 18% of GDP) and everything solved.
Instead, and regrettably he couldn't regaled us with a better feast for the eyes because he unfortunately got against the ropes and even though he fought bravely for America's main street interests, sweating heavily in trying to conquer what this 72% of the population wanted withouth pause, he unfortunately got subdued and defeated by a group of radicals with the help of some Republicans that don't want tax increases for the rich.
What this means?
That in order to win you have to know how to lose, or more accurately, don't being too narcisistic in any lose. Now the 72% of the population will have to avenge this threat to remove the safety net and yes we can, we can win in one and one way only, in just 15 months we can restart our way to prosperity because we got the numbers, we got the power of our votes, yayyy!!!...about the rest I think you get the picture.
He ended up with the 72% and radicals ended up with 1% (the rich guys) and above all, wanting to hurt the 72% for the fun of it and reckless about collapse.
For that reason I think he won. People are going to be very occupied trying to prevent benefits being cut or denied, to pay attention to some other Democrat contender. So he probably averted a Democrat challenger.
Will see what happen.
Dan
Thanks for your thoughts, Dastro. Good reinforcement for me to play the short side for awhile.
ReplyDeleteUS Consumer spending dropped in June. Over 60% of Pfizer's revenues are overseas.
Hmmmm.
@Rock: I believe that over 60% of Apple's revs are overseas as well, correct?
ReplyDeleteMeanwhile, thank you to all of those "bond vigilantes" who've been shorting treasuries. Appreciate it. Will send you holiday cards all around.
ReplyDeleteGood post, Dan, although I disagree with you about Obama. I think Taibbi better nails it to be honest. This is all pure theater with the Dems continually playing their role perfectly as the foil (or weakling who get sand kicked in his face at the beach by the tougher foe), but all by design. The WWF, excuse me, WWE, would be proud of this performance. It's very "Duke of Dorchester-esque".
ReplyDeletehttp://www.rollingstone.com/politics/blogs/taibblog/debt-ceiling-deal-the-democrats-take-a-dive-20110801
A hard-hitting piece by Nocera at the Times on "Tea Party Terrorists". Fantastic stuff.
ReplyDeletehttp://www.nytimes.com/2011/08/02/opinion/the-tea-partys-war-on-america.html?_r=1&hp
@Mannwich:
ReplyDeleteRight.
And APPL's and PFE's stock goes upp and upp.....
And I think taibbi's got it wrong. I read the 79 pages of the bill last night and, like the TARP bill, this permits business as usual. There's a provision to permit us to borrow more money "if we need it". Like a natural disaster, or in the name of national defense.
Phew. I was worried there for a minute that something would change.
But once again, it's business as usual on top of or fter) a 2-ring circus event. That event may have meaning only for election time, as Dastro says above.
RVBD is on my trading radar. Look at it go!
ReplyDeleteAnd my motto these days is "sell the rip".
What does that tell you, Rock? It tells me that the U.S. is quickly becoming no longer as necessary as it used to be relative to everyone else in the global markets, so that multi-national corporations should be the ticket going forward on the stock renting front. The world is moving on from the U.S.
ReplyDelete@Rock: As someone who's shorting Dell, are you buying this article about them?
ReplyDeletehttp://www.fastcompany.com/welcome.html?destination=http://www.fastcompany.com/1768894/dell-reinvention-update
Dan - Great post today! Couldn't agree more! Let's hope that 72% gets off their lazy butts and gets out to vote next year! Another good quote I saw yesterday (Petey from TBP I think).
ReplyDeleteWe got the government we deserve.
Now it's time we tell ourselves we deserve better.
Manny - if the thinly concealed desperation of all our account people at Dell the last year is any indication, Dell has a long way to go. . .
ReplyDeleteProbably true, Thor, but you must remember, a company's stock price can quite often become uhinged from the actual reality inside those companies (and often while they rot from within) for a long time before the two converge at some point.
ReplyDeleteAnd that effective PR, like the Fast Company article, can bring some good momentum for the underlying stock if investors buy whatever "story" they are telling. It's all a sales job.
ReplyDeleteMannwich (10:22) – When I was growing up, every Saturday after cartoons were over they would have “Ring Side Wrestling” where they had the Good guys against the Bad guys and every week it was the same thing the Good guys would be loosing to the Bad guys until the crowed started to get into it, then the Good guys would find super human strength and obliterate the bad guys.
ReplyDeleteOh the fun.
But as the years progressed wresting started to get more nationalized and the local “Ring Side Wresting” started to get swallowed up by the big name wrestling companies and the line between the Good guys and Bad guys started to get blurred, to the point it was hard to tell who was good and who was bad, all you knew is you could trust no one.
Oh the fun.
I don’t know for sure how you see it, but it sure seems like our national politics have gotten to the same level. Who stands for what? Who is the good guy? Who is bad? What makes them bad?
If we cut social programs, bad things will happen to good people, if you do not cut the social programs good people will do bad things – Aghghghg.
If we tax the rich we will have more tax revenue, which is good, but if we tax the rich they will leave the country and that will be bad – Aghghghghgh
And the higher up the players get on the national level, the more grey they become, what I am getting at is for the most part, this is just great theater, it is predictable, sad and going to hurt a lot of people.
Oh the fun…….Or not……
Mangy Mutt
Ha Mutt! I remember those days with wrestling on every Saturday morning before it got to be the WWE behemoth. Funny stuff.
ReplyDeleteA VERY good post on the seeming housing bubbles in Australia and Canada that have yet to burst (but will at some point, I'm sure). Yikes.
http://www.ritholtz.com/blog/2011/08/us-vs-canada-vs-australia-vs-uk-realty-bubble/
Thor (11:24) – I believe most of our politicians are bought and paid for and the higher up they get in the political circle the more moneyed their sponsorship becomes.
ReplyDeleteKind of like a professional athlete, when they are on the local level, they may get a few dollars here or there to help with training costs, if they break into the regional level, there are more sponsors for them, but if they break into the national level they can gain the support of multi-national corporations.
But once they take the money, they become the property of their sponsors.
Corporations know who makes the law and they know the more money they put into their candidate the more influence over the laws they (Corporations) will gain.
To say “We have the government we deserve” is kind of like saying, your only choice for eating out is McDonalds, sure you have a choice of different burgers, different sodas and hell you could even order a salad from time to time – But is it really a choice?
I don’t, you don’t, Rock don’t – NONE of us deserves a government where “We the people” have no representation. And our kids and grand kids sure don’t deserve something they have no control over.
No this is not the government we deserve, but it is the government that we got rammed down our throats.
Mutt
Mutt - wise words my friend
ReplyDeleteTLT about to hit 100. Wow. Equities looking FUGLY.
ReplyDeleteLong term interest rates may go to depths we've never seen before at this rate, while going untapped by private and public sectors with decreasing demand everywhere. But we KNOW that inflation and the bond vigilantes are just around the corner.
ReplyDeleteManny,
ReplyDeleteI sold my TLT at 97 and change a few weeks ago and bought UUP- big mistake!
mike
Mike – Sorry to hear that trade did not work out so well for you. And not to speak for Mannwich, but he has been open enough about his trading that I don’t think it is unfair to say, he has been in the same boat.
ReplyDeleteSo has Thor, Rock, Dan, Emmanuel and myself along with many others (That I do not mean to leave out) Each person has their own style and risk level that works for them and you obviously saw something that made UUP seem like the place to be.
In the end we can only make the educated that works best for us, hopefully you learned and will make a better choice the next time.
But as Emmanuel117 said yesterday “Passing by the Caves of Trader's Regret.” And that is something we have all done.
Better luck next time.
Mangy Mutt
The bond vigilantes are trapped in the Dungeon of Margincall.
ReplyDelete(casts ashes into the air)
ReplyDeleteI added more TLT at 95ish. Happy so far. Of course, it's one of the few things I've gotten right in the past couple of years but I'm happy to take what I can get. LOL.
ReplyDeleteWhere for are thou bond vigilantes?
Wow, once again this has shades of '08 written all over it. Am still too afraid to get short here, which means that it's going lower. MUCH lower. LOL.
ReplyDeleteEmmy - Would those be the same bond vigilantes who have been all over Japan for the last 20 years? :-P
ReplyDeleteWhoa - sheesh, when's the last time we fell 265 points? Anyone remember?
ReplyDeleteK - just a quick comment on this.
ReplyDeleteWages rise, wallets tighten
U.S. workers' incomes rise slightly, but, unmoved by falling prices, data show they're spending less.
Falling prices? Wasn't it just a month ago the MSM was going on about inflation?
Chart of the day. Health care cost comparison by country. Simply amazing. I'd like to see higher education cost comparisons as well.
ReplyDeletehttp://www.bloomberg.com/news/2011-08-01/americans-pay-more-for-health-care-get-less-chart-of-the-day.html
LOL Thor. Unreal, isn't it? The Idiocracy is upon us. Isn't that crystal clear by now?
ReplyDelete@Thor: That's a great question. Maybe it was '09?
ReplyDelete@Thor
ReplyDelete"U.S. workers' incomes rise slightly, but, unmoved by falling prices, data show they're spending less."
Maybe US workers are worried about the...uncertainty...in the economy.
Emmie - I know this US worker is!
ReplyDelete@Thor, your 4:27 post.
ReplyDeletehttp://www.thesunsfinancialdiary.com/investing/10-largest-drops-of-dow-jones/
Puts 265 in perspective. In comparison, it's almost like we were up today.
Greg - got it. Sure are a lot of 2008's in that list.
ReplyDeleteInvestors Made a Fortune on U.S. Treasuries in July
ReplyDeleteSomeday, they'll find the bond vigilantes...
Manny
ReplyDeleteYou are probably right, politics is not my strong suit.
I'll just see it as a matter of perception.
In people's mind when the time to vote comes it will probably appear the image of Obama getting kicked with 72% of the population and all those bad guys working only in protecting the very rich, and not caring about the nation.
I'm not saying is something close to the truth, but if this narrative prevails could mean that people has to avenge this bill, kicking out only the tea partiers and NOT the democrats and republicans.
It's just a matter of perception to get people fired up and vote. Emotionally charged avenging an injustice that can destroy the nation (like start solving the debt bomb, and awake the nation to the idea that living above our GDP means is not really a wise thing).
Of course the shortcoming is that the big guns are more and more skipping their tax contribution (tax cuts extended more and more until become permanent).
It didn't produce any impulse in the economic activity just financial gains, since last decade.
Something that happened in pre-nazi Germany. A massive amount of debt suffocating the population and the elite started avoiding taxes more and more.
So what the logical conclusion with such a debt burden and no investment to increase the GDP is going to be?
Because financial betting doesn't really improve the lives of very big numbers of people in a nation, it's just a financial club giving work probably to a few new thousands every year.
One probable outcome doesn't look rosy at all.
Dan
Good thoughts, Dan. You might be right as well. Anything can happen next year. We shall see. Based on recent experience though, I have very little confidence that the Dems really stand for anything other than playing the foil for the GOP in this game of "protect and serve their elite masters at all costs to the Sheeple". Time will tell the story.
ReplyDeleteA REALLY good post by BR here. Very telling. This is a train wreck in progress.
ReplyDeletehttp://www.ritholtz.com/blog/2011/08/not-too-stimulative/
That post was by Invictus-FYI.
ReplyDeleteThe Teahadists in the GOP strike again. This is getting a little surreal.
ReplyDeletehttp://www.huffingtonpost.com/2011/08/02/faa-furlough-congress-reauthorization_n_916322.html
Dan
ReplyDeleteI'm not saying is something close to the truth, but if this narrative prevails could mean that people has to avenge this bill, kicking out only the tea partiers and NOT the democrats and republicans.
If we're thinking this, and I have been thinking about this a lot lately, as have most of my friends, my bet is a lot of people out there might be thinking the same thing.
The idea of the Tea Party is a good one. If it weren't for the fact that it was bought, lock, stock, and barrel, by the corporate/wealthy of this country today.
Thor
ReplyDeleteYes a third party regardless their philosophy if they galvanize the moderates and a little from each party means that the pie is going to shrink for dems and rep.
They both will try to prevent something like that, pushing any new authentic option to make stands that ostracized them, in the fringes just in case.
Not that I consider the Tea Party as an option as of now, it was more a response of outrage from big guns about paying more taxes an they exploited that moment.
But in this environment could easily appear a third alternative.
Dan