Tuesday, December 19, 2006

Beyond Good and Evil

Well, the day started off well enough. A nice initial wallop. Regrettably, the markets clawed their way back up to end in positive territory. Chalk up "Mini Asian Financial Crisis" as yet another thing the markets can shrug off as irrelevant.

Speaking of financial disasters that no one seems to care about, the Financial Report of the United States Government was issued recently. It's nearly 200 pages, but here are a couple of interesting bits:


Despite improvement in both the fiscal year 2006 reported net operating cost and the cash-based budget deficit, the U.S. government’s total reported liabilities, net social insurance commitments, and other fiscal exposures continue to grow and now total approximately $50 trillion, representing approximately four times the Nation’s total output (GDP) in fiscal year 2006, up from about $20 trillion, or two times GDP in fiscal year 2000.

and.......

Given these and other factors, it seems clear that the nation’s current fiscal path is unsustainable and that tough choices by the President and the Congress are necessary in order to address the nation’s large and growing long-term fiscal imbalance.


I found the graph about the Medicare gap particularly interesting. I don't think I've ever seen a y-axis before which measures "billions" of dollars with figures such as $16,000 (e.g. Sixteen Thousand Billion - - otherwise known as Sixteen Trillion). Umm, we are hosed, people. Wake up!


AIV is representative of many REIT stocks, all of which are softening like butter on a midsummer's day.


BAC looks like the uptrend is over.


BLUD, one of my few long suggestions, is still looking mighty purty.


BZH, another long suggestion, seems also poised for a rise.


Although I'm uncertain as to where gold is heading, GFI looks potentially bullish as well. (Wow, three bullish mentions in a row.......)


MDC is easing away from its retracement nicely.


.....as is old favorite MTH.


Many people have asked me to look at QID. I own this now. It doesn't have much of a history to it, but it's a nice double inverse play on the Nasdaq. And check out the volume!


RIMM, which will give everyone a quarterly update after the close Thursday, is starting to slip-slide away again.


And SHLD, long-watched but seldom tried, is looking mighty mushy.


It was disappointing, of course, to see how boldly the markets fought their way back today. The bulls have had a dynamite year (and the dynamite was placed directly under our paws). I guess they're just going to keep pouring salt in the wound until Dick Clark's ball drops at year's end.

22 comments:

Sanjay Sola said...

it's interesting that the Dow is making new highs but the Nasdaq is lagging. Fed Ex reports tomorrow. a good report will be good for the transports and keep the Dow rolling higher.

PB said...

This market is now certifiably insane! It really doesn't matter what the news, aside from a momentary blip, it just keeps going higher!

You would think that the worst PPI numbers in THREE DECADES might have given people the pause, but no, what happens? New high for the DOW!

Do not argue with a crazy person or short a crazy market!

Anonymous said...

I would once again like to thank all the idiot bulls out there for giving us bubbles to short!

- pepsi

Des said...

Tim,

Heard one of the very Toll Brothers on NPR ce soir, lamenting the significant drop in housing starts and predicting 10-15% layoffs among construction workers short-term, much more long-term. My thoughts turned immediately to you.

Des

Jan Allen said...

Thanks Tim for your blog

I strongly recommend against being long gold mining stocks, such as GFI which currently trades with the price of gold.

GFI, being a $HUI component, has the qualities of a derivative, that is, it performs more than the price of gold.

For example GFI was up 3.35 % while the gold based ETF GLD was up 1.25%.

The HUI Indexed Gold Mining stocks have been a great vehicle of wealth building since 2001; but now with the stock market peaking, gold mining stocks are soon going to detach from gold and follow stocks downward; when I relate this to gold bugs or those invested in gold mining stocks you should see the scowsl and hear the outbreak of laughter; its ok, I quite use to it.

The concept here is that one does not want to be long gold mining stocks at this time nor does one want to be short until such time as they detach from the price of gold and then, wow what a short for those who are looking to short.

One of the other things that is acting against gold mining stocks at this time is that silver mining stocks are part of the HUI Index; and silver is heading down big time for two reasons: it is a speculative metal and an industrial metal, it is not a precious metal.

At market turns, silver is more manic than gold; its manicity will soon be a negative on the gold mining stocks.

I recommend that one place his wealth in the vault -- BullionVault.com and not even attempt shorting because all that one ends up with is dollar denominated investments: one wants gold denominated investments as gold will soon go up dramatically as the dollar takes a tumble.

I give extensive coverage to these ideas with many graphs in my blog 'Age of Tyranny News' under the 'Wealth Preservation And Management Section': simply enter prosperingbear in the Google search engine to find this resource.

Anonymous said...

This market is never going down again. Not one down day ever again! If you see a down day, your monitor is upside down.

sftrader said...

Tim,

As a paitent bear (but not necessarily prudent), i am looking for some advice on CFC. How is this stock in the 40's? Any tips for a young, aspiring, short?

Thanks a mil for all you do,

SFT

z-stock said...

About that Medicare $16 trillion chart,
Don’t blame Medicare. Blame Macdonald’s? Here’s where some of that 16 trillion dollars is going.
Half of the population spends little or nothing on health care, while 5 percent of the population spends almost half of the total amount. 8 percent of health care expenses occurred during childhood (under age 20), 13 percent during young adulthood (20-39 years), 31 percent during middle age (40-64 years), and nearly half (49 percent) occurred after 65 years of age. Especially important is the increase in the number of people treated for conditions clinically linked to obesity. From 1987 to 2002, the proportion of the population treated increased 64 percent for diabetes (accounting for 80 percent of the increase in costs).
z-stock
And while we’re on the subject of Medicare.
I can’t figure out where to short (buy puts) Esrx. 200day MA= 72.9 Or it’s 200 day price average, =75.6.
And I’ll take my first stab at the up and coming 700 point correction. ISM reports Jan 2nd.
Under 50 again, and it’s the whole house of cards, even the Fomc spinners will go into a tail spin. Humpty dumpty's day will come.

John said...

Since I am well into retirement age, I want to take this opportunity to thank all of you younger members of society for your continued support.

Tim, please don't post any more graphs or links to such incendiary pieces. We can't have people getting too excited.

Now pass the Kool-Aid to all those under 50...

Anonymous said...

Since stumbling upon this board, I've come to think of it as support group for the rational minded. Like most of you, I'm having quite the shitstorm to end the year. I trade counter trend at times of extremes, and we have a doozy of an extreme right now. That's a euphemism for I'm losing my ass.

That said, this is one of the daffiest markets ever. Its like an invisible angel of mercy has her hand below all bids to prevent what should have occured long before now...a major kick in the head correction.

But we live in a hedge fund world. They pile into gold and it makes 25 year highs. They jump on oil and we sniff 80 bucks/ bbl. They find equities in July and use all that juicy liquidity to ramp the issues and the etf's and all the underlying components, and get the indicies to new highs. And there's no way they're giving back a nickle of that 20% performance fee in the last few days of '06. The pricks. Of course they'll put that new year cash to work as soon as January rolls around. Why not?

So I guess I'm resigned to that reality and we bears will have to manage our cash and keep our wits and wait for the inevitable day of reckoning. Whenever that is. Jeff

Anonymous said...

Been around here for awhile, but never took the time to post. I have been reading a lot of material on the inner machinations of the market internals.

A few things stand out. Corporate spreads are really, really tight. They are so tight, to the point it is forcing rational investors to walk away of many corporate bonds due to the overvalued nature.

Also, yesterday - before the market came back a gentlemen I read daily, made a comment that if Central Banks want to make a statement they would bring this market into the green by the end of the day. He literally called it.

The rally is index led, hence corporate high grade cos. There is massive buying with avg share orders of around 450 per order and there is a peculiar pattern in the trade behavior. Central banks are simply buying with no regard to P/L since they don't have one. They can simply print additional monies.

Private investors are being squeezed out and it's literally a game. When private investment is crowded out, we have a word for it....

Anonymous said...

What's the word?

Anonymous said...

f*** 12500 is as close as 7 points. now what? I have no f** clue. lost my shirt. still have my pants on I guess!!!

Anonymous said...

f*** f*** f**** market

stealthelephant said...

Not sure what the point of your last blog is Tim except to chronicle a negative note about the federal government's future obligations. So what? What is telling is more bullish charts on the post. Good for you. Being negative without a point (e.g. How does this really affect us in the here and now, pal?) is beneath you. Stop holding on to straws and giving us filler. Get back to analysis! In the meantime, here are two charts in which bottoms have been made: USPI and SMBI. Both in the beleagured healthcare facilities sector. Both charts may be too early for some of you but I see clear distribution pattern on SMBI with volume and price in late October; a not-so-clear pattern late Sep for USPI (but I will risk it). HLS is also in the sector and exhibits strong bullish trend, accumulation indicated in volumes. HLS is also encouraging because price is improving after a reverse-split, which is typically a bearish development. All three of these companies are LBO/private equity buyout candidates. I'll be early on these. Tim, what do you think?

Anonymous said...

Have patience, it is coming down. Divergences everywhere (transports, semis, qqqq, broker/dealer XBD etc etc). patience me dears! Check out my site with LIVE swing trades: http://lauristonletter.blogspot.com/

Looking like a poor close today.

Anonymous said...

The word is Communism....I believe. Government control.

Anonymous said...

semis breaking down, if they cant hold 470 on the soxx look out.


trader 2006.

Anonymous said...

11:39 i read some of your blog, instead of trading QQQQ trade QLD or QID instead.


trader 2006

TRS said...

Tim, do you plan to hold your RIMM short through the earnings release?

thanks

Anonymous said...

Wouldn't it be great to trade that chart! :)

Anonymous said...

You're right...Conmunism...or rather in reality...Socialism.