Morning Audibles 9.2.10 - Secret Sauce

So we had a big "long white candle" day yesterday... Bulls are out again right... And there are blogs (and opinionaters) all over the web to explain why... Some will even tell you they FORECAST the move... Apparently these are individuals who possess some kind of "SECRET SAUCE" which we all want a dollop of... Right? RIGHT?


We'll get to that later... First I want to to get to the long white candle (from yesterday)... Here's what it looked like...




Actually, it looks to me like there have been a whole bunch of these since the April highs... They're not so uncommon after all... But, I can't say either they happen all that frequently (if you consider the aggregate number of candles)... The records will tell you that they RARELY happen in "bull markets"... More troubling is the fact that despite the fact that PRICES RISE when they appear out of nowhere, the "net sum" of prices has gone down... If you look closely, they seem to disappear altogether as they either reach, or peek over the red and blue lines (which are "moving averages", and other indicators that market TECHNICIANS put to use)... 


But TECHNICAL ANALYSIS is for sissies... How can one determine whether or not any form of technical analysis is valid? Who's the "Validation CZAR" in this country? What CV has found is that there are some around who are the first in line to "criticize" EWI theory, and as a substitute, grandstand around with their own genius ideas about how markets will behave... Here - I'll show you an example... I present to you "Thing 1 & Thing 2"...



Here comes that SECRET SAUCE I was promising, so get your pens & notebooks handy boys & girls...Thing 1 says...




Thing 2 (who operates in a perpetual state of agreement - as long as you're not a bully) says... I agree because that's what I do... When I'm not agreeing, I run around making sure everyone else agrees, and when that doesn't work I mesmerize everyone with cute puppy & kitten pictures until they soften up...




CV says... Hmmm... "ELECTIONS"... (or as an Asian might pronounce it... "E*ECTIONS" - no - we were doing Asian accents on yesterdays thread)... OK, so we've turned the calendar to September... We're in the final sprint to the November elections... So I guess this is the point where the GOVERNMENT MANIPULATORS (who - of course - always have their hand on the wheel and all things are firmly in their capable grasp) can just put the thing into cruise control... Capital Markets? Piece of Cake!...




We're on OTTOPILOT (as Thing 1 & Thing 2 point out), until election day... Otto the pilot will take it from here...


Since we have national elections every 2 years in this country (for now)... I decided to examine just HOW, on "ottopilot", things have been lately on this glide path & final approach...


2008 - Nothing to say but...DOH!


Meh... Must have been an abberation... Let's keep digging

2006 - Now that DUBYA knew how to "control" things... Right?

2004 - Hell yeah! That's what I call an ERECTION!

2002 - Eddie Munster's Hairdo?

2000 - Must have been all that missing WH China

1998 - Was LTCM running for Congress?

1996 - Al Gore "invented" control, right?

1994 - Holy Smokes - The Charlie Brown Shirt Pattern

1992 - It's the ECONOMY Stupid!

1990 - Grunge Never Looked So Good

1986 - "What the...?"

1984 - Only Walter Mondale to beat and that's the best you could do?


1980 - Get Carter

Y'all can do whatever you want... The only thing apparent to me (over the past 30 years since I've been a registered voter), is that if one attempts to attach a GOVERNMENT MANIPULATION theme to CAPITAL MARKETS in the run-up to an election... and sees CORRELATION, or CAUSATION... Well to me, it has about as much correlation as this...




Or they might be smoking this...




Which, I suppose is OK if you're anonymous trader (using practice money)... But I'd think that someone who manages large chunks of OTHER PEOPLES MONEY (and accepts a certain responsibility for doing so)... Comes prepared with some better tools (instead of just coming "AS" a tool because the time period coincides with that of Halloween)...


Or there's always the nifty GLADIATOR outfit as well...




ROCKS


254 comments:

«Oldest   ‹Older   1 – 200 of 254   Newer›   Newest»
mcHAPPY said...

Great thread, CV. A little passage along the same lines from Mr. RP from EWP page 97:

"Despite all your knowledge and skill, however, absolutely nothing can prepare you fully fro the ordeal or risking your own money in the market. Paper trading won't do it. Watching others won't do it. Simulation games won't do it. Once you have con-quered the essential task of applying a method expertly, you have done little more than gather tools for the job. When you act oin that mehotd, you encouter the real work - battling your own emotions. This is why analysis and making money are tow different skills. There is no way to understand that battle off the field. Only financial speculation prepares you for financial speculation."

mcHAPPY said...

My financial speculation for the day is we hit 1090's and drop fairly hard - whether it is part of a larger correction or impulse is to be determined. A quick drop below 1039.7 would lead me to think impulsive.

mcHAPPY said...

I don't think the drop below 1039.7 will happen today but I didn't think we'd hit 1080 in one day either - ROR.

Anonymous said...

I liked your quote from RP, McHappy.
I didn't understand that issue until I heard Nic's interview explaining that just identifying good trading setups won't make you money.
Since then I have been very comfy leaving it all to the pros.
Bertie

Anonymous said...

Oh yes and another nice post CV.
B.

Bruce in Tennessee said...

http://money.cnn.com/2010/09/02/news/economy/jobs_recovery/index.htm

Strongest jobs recovery in decades. Seriously

NEW YORK (CNNMoney.com) -- A jobless recovery? Hardly.

By historical standards, the labor market is recovering nicely -- job growth has started earlier than in past recessions.

"Sustained, positive job formation began earlier in this recovery than in the prior two recoveries," said Lakshman Achuthan, managing director of Economic Cycle Research Institute.

...Ah, yes. Too bad as an economic writer we overlook a few things like, er, the census. But other than that we have written our term paper, and we got it in on time too!

Bruce in Tennessee said...

Well, I guess the only thing about the initial claims I see today is that the 470-500k area is not a fluke. That this higher level will persist for some time...

Bruce in Tennessee said...

http://www.consumerindexes.com/

"There probably hasn't been two separate recessions in three years, simply one that has evolved in significant ways. But if this really is a "double dip" recession, then our data indicates that the "Great Recession" of 2008 was merely the precursor, and not the main event. It is this current dip that we should be really concerned about; the current contraction in consumer demand is about structural changes in consumer behavior, whereas the "first dip" was about short term loss of consumer confidence."

CV said...

How about this for logic?

http://www.bloomberg.com/news/2010-09-01/economy-seen-avoiding-recession-relapse-as-u-s-data-can-t-get-much-worse.html

The U.S. economy is so bad that the chance of avoiding a double dip back into recession may actually be pretty good.

The sectors of the economy that traditionally drive it into recession are already so depressed it’s difficult to see them getting a lot worse, said Ethan Harris, head of developed markets economics research at BofA Merrill Lynch Global

"Research in New York. Inventories are near record lows in proportion to sales, residential construction is less than half the level of the housing boom and vehicle sales are more than 40 percent below five years ago."

“It doesn’t rule out a recession,” Harris said. “It just makes it less likely than otherwise.”

The Standard & Poor’s 500 Index might increase to about 1,300, while the yield on the 10-year Treasury note would rise toward 4 percent during the next six months or so if the U.S. steers clear of another decline, said James Paulsen, chief investment strategist at Minneapolis-based Wells Capital Management, which manages $342 billion.

“We could have a really violent move,” Paulsen said. “The markets have a lot of double dip priced in,” he added.

Bernanke said...

We have all the TOOLS we need...

CV said...

You sure do!

karen said...

good morning! this post of yours is too good, CV.. have to get back on it!

AmenRa said...

When was the last time you've seen a $2 range on the SPX in the first 15 minutes?

Nic said...

I love this secret sauce post CV.
We are indeed on auto-pilot until the elections.

Nic said...

Thanks Bertie :)
So much for the Aussie collapsing with election paralysis huh!!

CV said...

@Amen (9:47)

Must be the otto pilot

Nic said...

Here is a great read ...

How to make money with the Roubini sentiment indicators

CV said...

Into the first gap fill...

Need to work on the 2nd...

karen said...

remember 1088 ?

CV said...

@karen

Any TOPSTEP tweets?

CV said...

@karen

1088? refresh my memory...

karen said...

there were a bunch earlier but this is the last one:

mrtopstep

$ED_F #opptions [08:38:43 AM]: edz0 9987.5 calls trade cab 50k times cube buys, thinkin short cover
24 minutes ago via TweetDeck

karen said...

topstep also posted this:
http://money.cnn.com/2010/09/01/news/companies/august_auto_sales/

karen said...

wasn't 1088 one of 18's 18 numbers???

karen said...

i cannot even read this !!!

http://www.housingwire.com/2010/09/02/bernanke-says-stopping-housing-bubble-was-not-an-option

if reminds me of greenspan not raising margin requirements during the dot.com

AmenRa said...

The gap on TLT is coming into view.

CV said...

JJC is at a 78.6% retrace of its most recent high...

3P&ADH?

CV said...

18 is Peyton Manning's number...

Bruce will tell ya!

CV said...

972 = 9+7+2=18

karen said...

JJC.. all i see is a sloppy H&S on the weekly..

karen said...

this story is picking up momentum:

http://www.americanbankingnews.com/2010/09/02/wells-fargo-co-nyse-wfc-abused-tax-break-relating-to-wachovia-issue-fcic-says/

CV said...

JJC is still at a 78.6% retrace... No denying that...

CV said...

and bucky isn't rolling over and playing dead... yet...

AmenRa said...

1+8=9 QED

CV said...

Watch... They're going to start digging up all kinds of crap against BAC & WFC...

Why?

Next link in the food chain of getting the whole mess to only be JPM & GS...

karen said...

something for the goldbug in us:

http://www.safehaven.com/article/18018/gold-stocks-the-long-term-perspective

karen said...

"I have posited that the 2008 bursting of the mortgage/Wall Street finance Bubble unleashed an even bigger ("mother of all...") Bubble throughout global fixed-income marketplaces. I trace today's Bubble back at least to the Greenspan Fed's 1987 post-crash systemic reliquefication. Resulting late-eighties' excess led to severe early-90's banking system impairment; followed by an another aggressive monetary policy response; the 1992/93 bond market Bubble; the 1994 bond bust and Mexican crisis; expanded monetary largess; the South East Asian Bubbles and collapses; additional policy accommodation; the Russian and LTCM fiascos; more extreme monetary stimulus; the resulting technology Bubble; and historic monetary stimulus and reliquefication leading to the mortgage/Wall Street Bubble. Recent history of monetary disorder fueling serial boom and bust cycles is unequivocal.
From my analytical perspective, we're in the midst of history's greatest and most perilous financial Bubble. And I am beside myself that nobody in a position of influence seems to care. We've witnessed momentous analytical and policy errors over the years - and these blunders are allowed to repeat themselves without thorough analysis and review. All this talk about fighting deflation and helping Main Street misses the point - and only feeds the Bubble. I'm fed up with ideology trumping sound analysis."

Noland is in the bond bubble camp:

http://www.safehaven.com/article/17910/lets-change-the-debate

Leftback said...

This looks like a good day not to trade.

Chops again, Nic ?

karen said...

wild... is 4% coming??? BreakingNews

Mortgage rates fall to lowest level in decades for tenth time in 11 weeks to 4.32 percent http://bit.ly/9qefuE

CV said...

@karen

I'll wait to lock in the 1% in about 18 months...

Peyton said...

If you are going to make me wait on a referee, then give me a skinny one who can move!

Leftback said...

Rates will stay low until the Option ARM bulge has passed through the python.

CV said...

@Peyton

x2

CV said...

@LB

Leave it to you to conjure the image of bulging pythons...

CV said...

RELEASE THE KRACKEN!

Jennifer said...

Friend went on Safari...saw a python eat a baby wild boar. Took hours just to choke the thing down. Mother boar fought valiently for a long time but to no avail.

CV said...

@Bruce (7:48)

http://money.cnn.com/2010/09/02/news/economy/jobs_recovery/index.htm

Strongest jobs recovery in decades. Seriously


---

Ummm... Those who believe in ottopilots must work for CNN...

http://a.imageshack.us/img401/3217/employmwnttospx.png

Mannwich said...

Agreed, lb. They have to in order for that storm to pass.

CV said...

@Jennifer

Those damn wild boars used to come out of the woods and tear up my lawn in Italy all the time...

I wish I'd have had a python handy...

Leftback said...

Python = The Big Banks
Baby Wild Boar = Our Economic Recovery

Leftback said...

We might get that nice combination of falling home prices and low low rates... the window will be open for a while.

karen said...

Inside Job.. Trailer: http://www.youtube.com/watch?v=X2DRm5ES-uA

CV said...

@Manny @LB

I "sort of" agree with the interpretation...

But really... What difference does it make... So we're going to make economic decisions, NOW, on a bunch of arms that are going through a python...

So we have to keep rates low until that magical time expires?

Look - Half the people are defaulting on loans as we speak, the other half couldn't even qualify for that rate on a RE-FI...

Prices are still to high... unemployment is probably going up... and the stock market is doing it's best BOJANGLES act not to crash...

---

With all these headwinds, the FED (who controls everyything from here to Pluto), is going to "normalize" rates when ARMS pass?

What about the government debt that's being piled on? What about tax revenues which are no longer an offset to expenditures?

Fed leads here? Default City for the USS of A...

CV said...

Fed doesn't SET interest rate policy... It FOLLOWS it...

Mannwich said...

@CV: You don't think that all these manipulations by the Fed and Treasury has had ANY impact on interest rates?

If that's the case, then why are those super low rates almost impossible to get from the non-TBTF banks?

CV said...

See what effect one white candle has?

http://www.aaii.com/sentimentsurvey

Nic said...

Chops and slow for lunch (again)

Nic said...

CV
Mrtopsteps sidekick posted a video last night:
http://www.hedgeaccording.ly/2010/09/mr-top-step-charts-for-tonight-top-step.html

karen said...

mrtopstep

hearing chatter of 11:12:32 *COAST GUARD SAYS THERE WAS RIG EXPLOSION IN GULF OF MEXIC

mcHAPPY said...

Get your skis shined up and grab a stick of Juicy Fruit.

Impulsive or corrective, as always, that is the question.

CV said...

@Manny

What I'm SAYING is something totally different...

Rates are a CANARD to mesmerize people into thinking the FED is this "benevolent" entity that out there to keep things "on the lite" for those poor struggling citizens and homeowners...

St. Bernanke

REALITY?

The whole financial system, right now is so levered up and tangled, that we've gotten to the point of being on the precipice of worldwide sovereign defaults...

The only purpose... ANYMORE... Is for the BANKING entity, to loan the GOVERNMENT ENTITY money at low rates...

Why?

Because the GOVERNMENTS have the power of taxation (so I suppose they can "kinda sorta" be guaranteed to pay the money back - UNLIKE J6P who used to work in the private sector, but is now out of a job, and is too RISKY of a bet to be counted on to pay anything back)...

So what? Do you think THE FED, is going to essentially CUT OFF the one entity it still can make money off by raising rates?

Yeah sure... As soon as those OPTION ARMS pass thru the snake, we'll be back up to "normalized rates"...

---

"Permit me to issue and control the money of a nation, and I care not who makes its laws."

Mayer Amschel Rothschild

Mannwich said...

Gotcha, cv.

Nic said...

Breaking:
Rig owned by ME (Mariner Energy) explodes in Gulf of Mexico

karen said...

mrtopstep

RT @StockTwits @Street_Insider RT @Street_Insider: Rig owned by Mariner Energy, Inc. $ME exploded

Leftback said...

Yeah sure... As soon as those OPTION ARMS pass thru the snake, we'll be back up to "normalized rates"...

Yup. But if we normalize rates, then high end home prices will do

THE CLAVADISTA DE CASA...™

Leftback said...

Nice work by the energy industry... pressurized methane is not stuff people should muck around with.

CV said...

@Manny

And oh by the way... RE: THIS

The only purpose... ANYMORE... Is for the BANKING entity, to loan the GOVERNMENT ENTITY money at low rates...

Why?

Because the GOVERNMENTS have the power of taxation


In 2008, they managed to find the perfect "stooges" to set this into operation...

And Americans took the bait hook, line, & sinker... You too can be dumber than a box of rocks...

karen said...

Bernanke: Only Way To Save Lehman Was `To Break The Law'
11:20 AM ET 9/2/10 By Michael R. Crittenden
WASHINGTON (Dow Jones)--U.S. policy makers scrambling to deal with Lehman Brothers Holdings Inc. (LEHMQ) at the height of the financial crisis would have had to "break the law" to effectively rescue the firm, Federal Reserve Chairman Ben Bernanke said Thursday.

Bernanke, appearing before the Financial Crisis Inquiry Commission on Capitol Hill, said the firm's bankruptcy was "not preordained" but that regulators were severely limited in what they could do to help the company.

"We could not find a way to do it," Bernanke said, adding that he's willing to be "creative" but "I'm not prepared to go beyond my legal authoriti

CV said...

@LB

There happens to be an abundant supply of "pressurized methane" in Washington DC...

What the hell do we need to go digging in the GOM for?

karen said...

Crisis Panel Chair: Politics May Have Doomed Lehman
http://www.cnbc.com/id/38959935

CV said...

@Nic

Chop... And "small chop" at that...

AmenRa said...

http://noir.bloomberg.com/apps/news?pid=20601087&sid=a.gmsMHV46ik&pos=5

VIX May Retreat Below 20 After Jobs Report Tomorrow, MKM Says



By Jeff Kearns

Sept. 2 (Bloomberg) -- The benchmark for U.S. stock options may fall below 20 for the first time in four months even after a “lackluster” report tomorrow that may show that the labor market is “recovering sluggishly,” MKM Partners LP said.

The VIX, as the Chicago Board Options Exchange Volatility Index is known, is likely to drop below its 20.4 average from the past two decades, Stamford, Connecticut-based options strategist Jim Strugger wrote in a note to clients today. The gauge has fallen by almost half since this year’s peak in May.

“Equity markets may finally have the necessary mindset to look beyond the double-dip concerns and begin to price in what we believe is the more likely outcome of a moderate economic recovery,” he wrote. “We continue to expect spot VIX to descend through its long-term mean just above 20, which would mark the end of the current aftershock.”

The Standard & Poor’s 500 Index surged the most since July yesterday after reports showed U.S. and Chinese manufacturing expanded faster than economists forecast, alleviating concern among investors that the global recovery is sputtering. U.S. private payrolls that exclude government agencies rose by 42,000 this month after a 71,000 July gain, while the unemployment rate rose to 9.6 percent, according to the median estimate of economists surveyed by Bloomberg News before tomorrow’s report.

The VIX rose less than 0.1 percent to 23.90 at 10:18 a.m. New York time. The index measures the cost of using options as insurance against declines in the S&P 500, which climbed 0.2 percent.

“If we move through 20, that ends this aftershock, meaning that we move toward the long-term trough in the 15 to 18 range over the next couple months,” Strugger said in an interview.


hook, line and sinker BWAHAHAHA

CV said...

Can't tell if this is...

a Tonga Death Grip, the Koji Clutch, or a garden variety Sleeper Hold...

CV said...

@Amen

"the long-term trough in the 15 to 18 range"

---

Please define "long term"... Since when, pray tell, has the VIX been used as a measure?

CV said...

Here...

I'll help you out with that...

http://upload.wikimedia.org/wikipedia/commons/thumb/4/42/Vix_Oct08.png/700px-Vix_Oct08.png

---

So "long term" means the entire 90's, and the 2003-2007 home equity extraction period...

72bat said...

Bernocchio said, "I'm not prepared to go beyond my legal authority"
WTF!?@!?
yeah, right.

CV said...

What were RATES back in 1990?

What are they today?

More important...

WHERE TF DO THEY FIND THESE PEOPLE?

Nic said...

79% of Gulf shelf operations are natural gas - natgas is burned, shrimp don't breathe it and it doesn't stick to birds so this shouldn't be a natural disaster though probably a human one

karen said...

please watch this!!

http://www.fundmymutualfund.com/2010/09/video-omg-i-want-my-salesforcecom-crm.html

Forrest Gump said...

Shrimpin' is hard!

CV said...

@karen (11:51)

OMG - ROR!

karen said...

Moody's Places Banc Of America Commcl Mortgage CMBs On Review due to Higher than Expected Losses 11:56 AM ET | Dow Jones

Moody's Downgrades Of GMAC CMBs Due To Higher Expected Losses for Pool 11:50 AM ET | Dow Jones

CV said...

@karen

Let me TWEAK that video some...

Thing 1: "The indices are still more than 9% off their April 2010 highs, and have been consolidating between that, and a .1457 fibo extension of that for the past 3 months"

Thing 2: "I don't care"

Thing 1: "Election cycles, for the past 30 years, show no distinguishable correlative characteristics with respect to equity prices in the Sept thru elections timeframe"

Thing 2: "I don't care"

CV said...

@karen (11:59)

HA!... first your (10:14), now this...

Same answer... MY (10:17)... I'm "psychic" I tell you...

CV said...

@LB

So what's the deal? Pavement too hot in Gotham there, and so your bretheren are "scootering" on off to the Hamptons early?

karen said...

announcements:

http://www.zerohedge.com/article/biggest-loser-mariner-explosion-10-million-shares-john-paulson

i am bored out of my mind, off to play dress-up for a while : )

oh, please sext me if anything happens..

Bruce in Tennessee said...

interesting term I hadn't seen before on ZH in regards to government manipulation of the economy:

Economic martial law.

CV said...

@Bruce

I know you like the Colts & Peyton...

(I like PEYTON... Colts? Not so much [used to tho when they were in "Charm City"])...

Anyway... Do you ever do any "action" on football games?

Leftback said...

Karen,

Your icon development continues to arouse interest.... we await further developments with bated breath.

LB thinks this is a boring day, and will do nothing until the close.

CV said...

@LB

I think there's a small chance that we could see a dip, followed by a recovery sometime today...

But it's feeling that this may remain mostly buoyant for the next couple of days...

CV said...

Oh - this ought to solve everything...

Bernanke Meets Buffett in Role Conceived to Protect Markets

http://www.bloomberg.com/news/2010-09-02/bernanke-meets-buffett-in-new-role-conceived-to-protect-markets.html

---

Relax people... St. Warren (and the assets he wants to protect) will guide us thru...

Leftback said...

C.

I like the idea of a FLIGHT TO QUANTITY into the 3 day weekend (buying of Treasuries on a FLACCID jobs report). Then BOOM, MOMO Tuesday.

LB is remaining BOUYANT while KAREN prepares her next icon.

CV said...

CV more anticipates THIS... Which is is why he's recently taken to "growing his own"...

Russian Panic Buying Fuels Food Price Speculation

http://www.bloomberg.com/news/2010-09-02/russians-hoard-food-amid-worst-drought-in-50-years-sparking-price-gouging.html

CV said...

@LB

I'm not against that idea...

But if we're going to get a MOMO Tuesday like you describe, I think we need a DOJI candle first...

Today ain't no DOJI thus far...

CV said...

@Amen

Here... we're pretty much "sitting on" the 61.8% between 1110 and 1041...

Leftback said...

Today is a waste if space between ADP and NFP.

Where's Karen?

CV said...

@LB

karen is bored today...

Frankly - so am I... But "someone has to steer the ship"...

OTTOPILOT is one thing I don't have the luxury of doing...

I don't sit at a desk and get paid all day just to blog...

karen said...

topnotch.. http://www.youtube.com/watch?v=mcRQAjmRroI&feature=player_embedded

love that guy!!

CV said...

@Bruce

Already tweaking the rule... (just so Peyton can stay happy)...

---

INDIANAPOLIS (AP)—The NFL will move umpires back to their old spots during the final five minutes of Thursday’s preseason games.

Previously they were in the old spot for only the final two minutes of each half.

NFL spokesman Corry Rush confirmed the adjustment Wednesday.

League officials decided to move umpires from the old spot, in the middle of the defense, to behind the deepest running back for safety reasons. But Peyton Manning(notes) complained about the switch after being called twice for illegal snaps when the umpire couldn’t get into position quickly enough last week at Green Bay.

The NFL will again re-evaluate the new policy after this week’s preseason finales. The change could become permanent when the regular season starts.

CV said...

From ZH...(Rosie)

What Is A Depression Anyway, And Why We Continue To Be In It?

You will pardon us for posting two excerpts from David Rosenberg today, but this one is a must read, and explains more clearly than anything written on the matter why America is currently, and without doubt, in a depression, due primarily to ongoing secular changes in consumer and investor behaviour, something not experienced during mere recessions. As such any intraday or short-term bounces in the stock market that merely confirm that there was a liquidity injection by one player or another, or a successful short squeeze engineered by the wily folks at the custodian firms or due to simple headfakes, are completely irrelevant (especially with record implied correlations), as the long-term trend has only one way to go in the long-run. Down. Of course, those who believe they can time the moment when the last lingering support pillar collapses and everything tumbles down, are more than welcome to keep trying their top-ticking. We are confident that when the mass exodus begins, the HFT liquidity "support" of the market will be alive and well, and provide everyone with a perfectly acceptable exit price level...

CV said...

(2)

WHAT IS A DEPRESSION ANYWAY?

A depression, put simply, is a very long period of economic malaise. A series of rolling recessions and modest recoveries over a multi-year period of general economic stagnation as the excesses from the prior asset and credit bubble are completely wrung out of the system. In baseball parlance, we are in the third inning of this current debt deleveraging ball game.

You know you’re in a depression when interest rates go to zero and there is no revival in credit-sensitive spending.

The economy is in a depression when the banks are sitting on $1.3 trillion of cash and yet there is no lending going on to the private sector. It's otherwise known as a liquidity trap.

Depressions usually are caused by a bursting of an asset bubble and a contraction in credit, whereas plain-vanilla recessions are typically caused by inflation and excessive manufacturing inventories. You tell me which fits the bill today.

When almost half of the ranks of the unemployed have been looking for a job fruitlessly for at least six months, you know you are in something much deeper than a garden-variety recession. True, we can’t see the soup lines; the soup lines are in the mail — 99 weeks of unemployment cheques for over 10 million jobless Americans. Don’t be lulled into the view that we are into anything remotely close to a normal economic cycle.

Basically, in a depression, secular changes take place. Attitudes towards debt, discretionary spending and homeownership are altered for many years, or at least until the scars from the traumatic experience with defaults and delinquencies fade away. That is why, as per last week’s data releases, we saw existing home sales slide to 15-year lows and new home sales to record lows despite the fact that mortgage rates have tumbled to their lowest levels in modern history. There is no economic model that would tell you that declining mortgage rates should lead to lower home sales.

CV said...

(3)

In a depression, radical changes occur in terms of social norms and spending behaviour. In recessions, people don't cancel their life insurance policies - as one example. But in a depression, tragically, that is what happens - almost 35 million Americans now have no such coverage, up from 24 million five years ago. This reflects the focus by households to pay down their debts at all costs and how companies have bolstered profits - by eliminating benefits.

More fundamentally, in a recession, the economy is revived by government stimulus. In depressions, the economy is sustained by government stimulus. There is a very big difference between those two states.

After all, we are now in a situation where every 1-in-6 Americans is now receiving some form of government assistance — more than 50 million Americans, from food stamps, to Medicaid, to extended jobless benefits, are on one or more taxpayer-supported programs. That transcends the definition of a recession.

In a recession, everything would be back to a new high 33 months after the initial decline. This time around, everything from organic personal income to employment to real GDP to home prices to corporate earnings to outstanding bank credit are still all below, to varying degrees, the levels prevailing in December 2007.

Let’s be clear: After all the monetary, fiscal and bailout stimulus, the economy should be roaring ahead, as would be the case if the economy were coming out of a normal garden-variety recession. The fact that there has been no sustained response to all these efforts by the government to turn things around is a testament to the view that this is not actually a traditional recession at all, but something closely resembling a depression. That, my friends, is exactly what the bond market is signaling, with Treasury yields rapidly approaching Japanese levels.

CV said...

(4)

For all the chatter about whether the recession that started in December 2007 ended sometime last year, here is what you should know about the historical record. The 1930s depression was not marked by declining quarterly GDP data every single quarter. In fact, the technical recessionary aspect to the initial period following the asset and credit shock goes from the third quarter of 1929 to the first quarter of 1933.

What is important to know is this; in that initial four-year economic downturn, from 1929 to 1933, there were no fewer than six — six! - quarterly bounces in GDP data. The average gain in these up-quarters was 8% at an annual rate! But because they proved not to be sustainable, the National Bureau of Economic Research (NBER) refused to declare that the recession officially ended, even though the stock market rallied 50% in the opening months of 1930 on the belief that the downturn was about to end. False premise. And guess what? We may well be reliving history here. If you’re keeping score, we have recorded four quarterly advances in real GDP, and the average is only 3%.

I can understand how emotional the debate can get over whether or not we have actually just stumbled along some post-recession recovery path or whether or not this is actually a depression in the sense of a downward trend in economic activity merely punctuated with noise that is influenced by recurring rounds of government intervention. The reality is that the Fed cut the funds rate to zero, as was the case in Japan, to little avail. Then the Fed tripled the size of its balance sheet - again with little sustained impetus to a broken financial system. Government deficits of nearly 10% relative to GDP, or double what FDR ever ran during the 1930s, have obviously fallen flat in terms of providing and lasting impact to the economy.

CV said...

(5)

This is going to sound like a broken record but it took a decade of parabolic credit growth to get the U.S. economy into this deleveraging mess and there is clearly no painless “quick fix” towards bringing household debt into historical realignment with the level of assets and income to support the prevailing level of liabilities. We are talking about $6 trillion of excess debt that has to be extinguished either by paying it down or by walking away from it (or having it socialized). Look, we can understand the need to be optimistic, but it is essential that we recognize the type of market and economic backdrop we are in.

The markets are telling us something valuable when (after a period of unprecedented government bailouts, incursions and stimulus programs) we had a 2-year note auction that saw the yield dragged to new record low of 0.46%. Instead of lamenting over how attractively priced equities must be in this environment, market strategists and commentators would bring a lot more to the table if they tried to decipher what the macro message is from this price action in the Treasury market. Conducting stock market valuation analysis based on unrealistic consensus earnings assumptions does nobody any good, especially when these estimates are in the process of being cut.

If the Treasury market is correct in its implicit assumption of a renewed contraction in the economy, then we could well be talking about corporate earnings being closer to $60 or $65 in the coming year as opposed to the current consensus view of almost $90. In other words, we may wake up to find out a year from now that whoever was buying the market today under an illusion of a forward multiple of 12x was actually buying the market with a 17x multiple.

How’s that for a reality check?

---

I think TODAY is a "day" of MALAISE...

It should be expected, right?

What happened to all that "bullishness" from yesterday? Where are the BUYERS taking us to S&P 1300 today? You'd think we'd be in a rush to get there, for all the RIGHT reasons... Such as...

- Double Dip has been "priced in"
- Market has found SUPPORT
- We're on autopilot because of the ELECTIONS
- Governments CONTROL all prices

Nic said...

From twitter LOL:
Just a few big banks and hedges fighting between themselves in this illiquid market and JPM you are such DEAD MEAT...i mean that too

Bruce in Tennessee said...

As long as Peyton is happy, I am happy.

Going to spend several days in the Smokies this weekend. I'll try to take some good pics.

CV said...

@Bruce

Have a nice time... I'm jealous...

Bruce in Tennessee said...

If a bear eats me (actually, I can run faster than my wife......) then I leave all my blogging insight to Leftback so that he may live knowing, without even trying, the next move of Bodacious Ben...

karen said...

Nic @1:44.. thanks for that.. i'm nearly comatose. CV.. you expected my eyes wouldn't glaze over ??

karen said...

a tweet for thot

"I left for an hour and a half and the same dance is going on here, making me wonder whether the news tom. is largely irrelevant $$"

CV said...

@karen

I hear ya...

Today is a veritable snoozer... I'm "counting the minutes" until 4PM...

Hoping for a bite on the line (that may never come)...

But as they say...

"A BAD DAY FISHING BEATS A GOOD DAY WORKING"...

CV said...

You never know...

Something might get "stirred up" in the last hour based on some hokey leak of the inevitable...

MOST IMPORTANT NFP number IN HISTORY!

karen said...

CV, despite your fantastic attitude, this day is moving into the s*ck category for me : )

karen said...

hey! just about any vowel will work in my 2:19, laughing. and vxx making a new low on the day.. it figures!

CV said...

@karen

The thing I see mostly is the 1 and 2 minute RSI & MACD waves...

Yesterday's run-up was so fierce that the amplitudes of those waves needs to get wiped past memory before the market decides to budge...

If you know what I mean... It could take another hour for the 1040 amplitude to erode...

That would probably need to make an attempt to create another wave balance...

Vanna White said...

I'll buy a vowel

CV said...

CV also 'knows' Vanna White...

I was a contestant on WHEEL OF FORTUNE back in the "dalmation" days...

Leftback said...

Karen,

sack? LB could go for that.
secks?
suck?

You probably should show some skin, Karen,
- or bring back the lingerie. We are struggling here.

Nic said...

Have a wonderful weekend Bruce

Leftback said...

C,

Did you hit the JACKPOT?
Or did Vanna make you MISS A TURN?

Nic said...

The natives on twitter are getting restless:
Quote:
"Fuck your Hindenburg Omen. It's NAGASAKI NOW for shorts!!"

Leftback said...

Nic

I can't think of one interesting thing to say about this market.
Actually I am feeling slightly bearish about tomorrow.

Nic said...

wavers need to tell us ...
I see 5 waves up on the dow, so maybe we go down tomorrow

Leftback said...

The bond market is comatose as well.

karen said...

yes, wavers, do tell.. and get it right please! LOL

Nic said...

Well I am selling crude off 75 for a sneaky short (I think it will go higher next week).
What are profits for if not to give back

karen said...

Chris Martin - Sing Wedding Bells - live at Apple keynote

http://www.youtube.com/watch?v=6yeDMc4odYc&feature=player_embedded

Leftback said...

LB might short a low volume ramp job into the close.

But that never happens in this market, right?

Nic said...

"crude contango reversing a bit as refining margins improve $VLO - when contango abates $USO outperforms $USL"

CV said...

@LB

I won 2 puzzles...

The first one, I still remember the phrase... It was "ONWARD & UPWARD"...

I don't remember the 2nd one...

The 3rd puzzle was some "megalithic" phrase that I had right from the beginning... I was about to WIN IT ALL, but the "spinners" in front of me kept pulling spins & vowels out of their asses...

You can tell by the way they're playing that they didn't know the PHRASE, but their "guesses" kept them in it...

Finally, the light bulb came on and they guessed it correctly...

They beat me out SLIGHTLY on the points total so even tho I won 2 out of the 3 puzzles, I didn't go to the finals...

I did win a SCOOTER and a JUICER tho... And eventually CRASHED the scooter when I wiped out on the slick streets of West Hollywood, CA on a rainy day after 6 months of drought...

And the beat goes on...

Stories from yesteryear...

Nic said...

Normally you would expect it to drop as longs cover and take a long holiday weekend but as most of the pit were caught on the wrong side of this upmove you are prolly right LB

karen said...

Nic, The Cautionary Tale, Chapter 2

http://celebslam.celebuzz.com/2010/09/paris-chanel-purse.php

CV said...

@LB

In addition to that story... I ALSO qualified for "Jeopardy"... The rules were though that you could only go on ONE SHOW (Jeopardy & WOF were both Merv Griffin Enteprises shows)...

I figured I stood a better chance of winning something on WOF...

I didn't want to chance it against all those smartycats and geniuses that made it to Jeopardy... They're all so smart I think they got into the blogging business later on...

MERV (Griffin) himself used to call me all the time after that (whenever he had a new "game show" to pitch to the networks)...

Apparently he had taken a liking to my ASSets as a contestant...

karen said...

LB, i bet you can carry a tune better than Chris Martin..

karen said...

Great stories, CV! I've got one or two on you myself : )

Nic said...

Haha thats so funny Karen thx

karen said...

you do not want to know about this: BreakingNews

4-year-old NYC girl weighing just 15 pounds found dead, tied to crib - NY Post http://bit.ly/btRgUm

CV said...

@karen

I can imagine...

Funny life I've lived... Always make me chuckle when I look back on things...

That's why I adore FAMILY & SIMPLICITY these days

CV said...

@karen (2:49)

Grrrrrrrrrrrrrrrr...

karen said...

CV, as a matter of fact.. Carolyn and I are dining together tonight..

karen said...

I don't want this subject dropped: FCIC's Georgiou Says Fed Had `Options' With Lehman

http://www.youtube.com/watch?v=81xpGG7Fa4Y

CV said...

@LB

Oh... and as for Vanna White...

She was actually very UNDERSTATED in real life...

She actually impressed me with the way she handled her celebrity (which was IMMENSE for a long period)...

I was amazed at the way she happened to stay relatively under the radar that gobbled up so many others...

Pretty much just a down home "South Carolina" girl... Very polite & understated... A veritable "sweetheart" IMO...

CV said...

@karen (2:51)

One of those "less than 10" that you managed to actually organize schedules with, right?

CV said...

@karen

and you'd have to give me a "timeframe" on that...

My life tends to run in "ERA's"

karen said...

i <3 her !

http://www.knitsimplemag.com/node/131

karen said...

CV, not millennia?? and yes, but there will be 3 including me if they show.. a miraculous accomplishment.

karen said...

i've been waiting for this last hour but i am not sure i am ready for it..

CV said...

@karen

VANNA... Sweetheart thru & thru

karen said...

carleygarner
11 weeks Pre-flash crash public puts 27 bil into stock funds, they have since pulled 65 bil

mrtopstep
$ES_F #futures [10:03:16 AM]: 200 day MA on the 240 minute chart comes in at 1088 area
2 minutes ago via web

Leftback said...

....there will be 3 including me

Bet you are the fairest of them all..

karen said...

Hmm, maybe John Q. isn't so dumb after all?!

AmenRa said...

This boring trading range is pushing the VIX lower. AND THEY KNOW THIS! Shady I tell ya'.

Nic said...

From @mparent77772

Paris Hilton gets 15 years for unweighable amount of crack. Oops, I mean black male gets 15 years http://bit.ly/ak3r04

CV said...

@karen

"Milennia"???

Perhaps... I do believe in the re-incarnation of souls...

Although I don't particularly boast that I was Shakespeare, Charlemagne, or Pope Clement IV...

Most likely I was just a dishwasher, or abandoned orphan...

karen said...

LB, that is absurd.. anyway, just dinner at this tiny place in town.

http://villagemediterraneanrim.com/index.html

CV said...

@karen

Now that looks good...

CV is definitely a "foodie"...

72bat said...

cv -
what years were you in w. hollywood?
used to hang with a friend who lived on larrabee street just off wwest sunset blvd.

CV said...

@72

I lived in So. Cal. from 1979 til about 1993...

Moved around...

LA
Northridge
back to LA (Miracle Mile district)
back to valley (Calabassas)
Santa Monica

The WH I describe was about 1986 - 1991... The "MM" time... I lived on Detroit St. (a few blocks from Wilshire)... But I worked at a fitness studio on Melrose (next to Fairfax High)...

72bat said...

k -
if it pares with your dinner (rack of lamb or moussaka?), try the Davis bynum, pinot noir 05, Russian river. believe i still have a bottle of their p. noir ca. early 70s

CV said...

@72

I should actually say that the fitness studio I worked at closed it's doors in 1987... The owners weren't paying their taxes...

But I still lived there until '91...

Actually... from 1987-1991 I basically lived at the Los Angeles International Airport because I was mostly traveling around the world for 40 out of 52 weeks per year...

I only came home to do my laundry... :-)

karen said...

thank you, bat! I took note of it.. i've been into spain lately so that would be a good switch..

CV said...

Bucky ain't exactly "givin' it up" today...

CV said...

@72

You are quite the wine man sir...

72bat said...

cv -
lived in sf and sonoma but traveled socal from '71 - '81 when i left ca altogether

karen said...

bucky needs to make up for yesterday..

72bat said...

if it's ramped up to wanger's magic # 1097 into the close, i probabluy couldn't resist getting on some shorts

72bat said...

cv -
when i departed california, my buddy drove the u-haul full of everything else, while i drove the saab turbo chock full of my "cellar" 'cos the saab had ac to keep it at cellar temp across the desert. just a few bottles left now, probably all gone past.

karen said...

yay!! 1088! we knew it could do it LOL..

CV said...

@72

I'm ever so slightly positioned on the wrong side of the trade at the moment...

But I'm not fretting that it will last that long...

My timeframe here is not "minutes", or " holiday weekends"...

Leftback said...

@bat

LB loves Davis Bynum PN, has even been there to the winery.
Nectar, but hard to find in the East.

LB really fancies an overnight short to take home as a hedge.

LB fancies going home with Karen a lot more, but....

CV said...

@72

This is... after all... just a KIND OF play money...

If the IDIOTS and MANIPULATORS actually do succeed in doing their job... Then my SIGNIFICANTLY MORE VALUABLE (&unencumbered) real estate, gold, & raw goods holdings will do very nicely...

karen said...

CV @ 3:39.. ditto!

CV said...

@LB

It's coming up on 8 days (& 21 hours) since the major RSI waves were hit on the S&P...

Odds call for a dip to occur sometime in the next 3-4 trading hours...

So if not today, perhaps tomorrow AM sometime...

Cold Steel said...

I'm baaaacckkk....

Leftback said...

OH p*ss off, Cold Steel, we're trying to hedge here...

CV said...

@karen (3:41)

I kno right?

I have no doubt that you go to sleep every night and somewhere in the back of your mind you think...

"Screw stocks... DOUBLE my gold and REAL ESTATE values & I'll be a happy camper"...

karen said...

not to rain on the spx parade but the 65 ema has proved a turnaround quite a few times..

72bat said...

leaving in about 45 minutes for a 4-day weekend in phoenix, cousin's son's wedding at the arizona biltmore. will try not to even look at the market tomorrow.

lb -
ditto - frequented the d bynum tasting room/winery when living in apple country on the west side of sonoma co just outside of sebastopol

cv -
got the real estate covered, not so much the gold (late to the party), and yes, you can bust my chops o ver not (yet) stocked up in the raw goods pantry

karen said...

bat! try not to have too much fun and hurt yourself!! remember moderation!! and don't forget your summer suit!!

karen said...

shoes.. socks.. toothbrush.. oh, and belt : )

Leftback said...

"apple country on the west side of sonoma"

close to Heaven... if there is one.

CV said...

@72

4 x 50 pound bags of rice as a starter kit and you're good as gold bro...

Have a nice time in PHX...

Leftback said...

Karen,

LB feels like JOHNNY might be buying into an ambush here...

CV said...

Oh... & btw...

CV's grape arbor is producing it's first crop as we speak...

I ought to be able to produce a nice batch of "rock gut" for starters...

72bat said...

k -
all packed last night (a first).
gonna to stay away from the red & stick to the bubbly just in case of spills.

karen said...

wish i hadn't looked.. drv made a new 52 week low today..

Leftback said...

uh-oh, parabolic move on low volume in light holiday trade....

You really have to short this.

karen said...

my hot money stock is red today.. CAGC.. very odd.

Jennifer said...

Looking at the charts, I would expect at least a small pull back to the 50 DMA to let the big guys buy in at a better price. Karen -- I still remember a post at SOH that showed DRN up 100% in the month following the last major pull back. I got in yesterday at 44.80 and out today at 47.80. Not 100% but I'll take it.

CV said...

@LB

If some of the wavers (the ones who called it that way) are correct in calling the first 1040 brush, the wave low... We may have just a few points to go to get to a "C" top...

It's so close to that S&P gap (above) that it seems destined to go there...

karen said...

This is sicker than that.. it is not even a melt up..

CV said...

@Jennifer (3:54)

I'd tend to agree...

JPM was a big buyer of IWM on last Fridays move...

I'm imagining that most of this action is "distribution" to the 401k MOMOS on the 1st & 2nd day of the month...

As soon as they're finished offloading, a correction should ensue...

Kinda boring actually...

karen said...

Jennifer.. dndn is another one.. : )

CV said...

@karen

The "pattern" I kind of describe there is if you look at a 10 day 5 min. chart...

CV said...

@karen

Does this "carolyn" know me?

72bat said...

just envisioning cv's grapes crushed under karen's lovely feet - should make for a lovely, rustic vintage

72bat said...

picked up a small piece of spxu @ 31.50. couldn't resist.

CV said...

@Amen

I feel sorry if you have to WRAP this BS...

Feel free to take the night off... I wouldn't hold it against you...

Leftback said...

LB hedged into the close.

Too many effing longs for now to GO NAKED.
There is plenty of evidence of a weak jobs picture.

Interesting thing would be reaction to a GOLDILOCKS number.

Leftback said...

Today was that CARRY OVER day, it was the CRAMERICAN momentum buyers brought in by watching CNBC's SPECIAL last night....

LB never ever ever ever buys at the end of an up day. Step into the bloody waterfall, catch a falling knife, but NEVER buy at the end of a momo.

«Oldest ‹Older   1 – 200 of 254   Newer› Newest»

Post a Comment

Disclosure/Warning

This blog should not be interpreted as investment advice of any kind. The authors are NOT representing themselves CTAs or CFAs or Investment/Trading Advisor of any kind. The authors may or may not trade in the markets discussed. The authors may hold positions opposite of what may by inferred by this blog.The information contained in this blog is taken from sources the authors believes to be reliable, but it is not guaranteed by the authors as to the accuracy or completeness thereof and is presented here for information purposes only. Commodity trading involves risk and is not for everyone.