Wednesday, April 11, 2007

The Fed Gives Honesty a Try

Well, even the rah-rah bull cheerleaders of Ben Bernanke and company are starting to acknowledge that the economy is weakening. The Dow is off about a hundred points now, although there's 90 minutes left in the market day and who knows where it'll wind up.

The other good thing happening right now is that it's finally snowing outside. So I'm heading to the slopes for a bit. Just wanted to say hello and let you know a post will be coming later this evening.

I imagine the bulls who read this blog figure this is a rare opportunity for us bears to get out with our skin intact before the next 5,000 point rally. Whatever.

11 comments:

Anonymous said...

Enjoy the rare opportunity to get out with our skin intact before the next 5,000 point rally.
:-))

Ravi said...

So, it does turn out that people like Tim getting worried is a contrarian indicator!

Enjoyable day out there in the market..Hope we get more of these. Prefer slow and steady bleeding than the multihundred points downleg followed by painful retracing :)

TradeitLikeitIs said...

Chalk one up for the bears today - but they did have some help - the market was 'talked' down.

I won't go short until the market falls on its own weight - and selling begets selling - AND after the insiders have distributed.

Until then I see this as a trading market - buy the dips and sell break outs.

I wouldn't be surprised to see the market trade sideways during earnings - and a break down now in oil and metals stocks (though I think they still have another month to go) would be positive for the market.

The insiders like to short when few others are short - so if there was to be a big down move - they will squeeze every bear as hard as they can - distribute and then take it down.

Of course I could be wrong - particularly if the selling comes from overseas - however a weak Yen seems to be being 'manufactured' at the moment.

good trading

TradeitLikeitIs

shiftpoint said...

You can hold me to this. Next several days are all going to be down, like today. Won't see a 500 pt move, but we'll see a string of pretty large down days to make new lows.

Anonymous said...

Shiftpoint - I'll take the other side of your call. After 8 straight up closes, haven't even managed a single day of triple digit down close - yet. Highly doubt the bears have it in 'em to accomplish more than 1 in a row. Dip buyers have been in charge lately.

Leisa said...

I don't pretend to have a clue about what the market will do. I will say that there was nothing in the the FED minutes today that should have surprised any who follow this stuff. However, I think that the market needs to be hit on a head with a shovel a couple of times before it succumbs. Here's what I see as potential catalysts:

A. Earnings misses and pukey forward guidance.

B. The financials starting to reflect some of the housing slowdown in their numbers in terms of (1) reduced fee income; (2) increase loan losses; (3)losses on investments.

And to be fair, if there are no negatives, then the market can continue to bump along. But the excuses that the global economy and cap ex (which I've pooh-poohed publicly for the last year) will bail us out are falling like like D. Imus show sponsors.

TradeitLikeitIs said...

Yes... today was just profit taking and the last of those who didn't get out during the past 3 weeks runup into earnings. Obviously pros sell before earnings - especially those that are expected to be lacklustre.

Also learn to watch the tape:
What was the reaction in the 'real markets' (ie:currency and bond) as opposed to the play makets (ie: stocks) to the FED statement??
It was nothing - the dollar and bond yields hardly moved - this was old news.

The real problem is rising oil and metals prices - no one will buy US blue chips anymore when these materials are rising. The 'All Boats Can Rise' trade is over.

I think there is also one more 'shoe to drop' - and that is a few bad announcements from some big banks - the BKX is just too weak - its waiting.

So the market will go sideways with a few dips as these forces battle it out. It will probably take a month or so. Figure out which is going to lose - and then short that then after thats taken out go long the other.

I would be interested to hear from anyone else (other than perma bears or perma bulls) regarind their thoughts are on the markets.

good trading

TradeitLikeitIs said...

Say Leisa - just saw your post...

You seem pretty well informed
regarding the housing slowdown, debt troubles etc...

I'm mostly a trader - so I'm not too versed on fundamentals.

I was wondering if you have any thoughts on which stocks in the Banking Index or maybe even the Brokers have the most exposure to this subprime Alt-A mess?

When the sh*t hits the fan on these stocks I'm thinking of buying a few.

Thanks..

TradeitLikeitIs

JakeGint said...

DSL on the banking side...

And the Bear (ironically) BSC, on the broker's side.

Golden Slacks should take a well deserved hit as well, the King of all Hedge Funds. (GS)

________________________

the secret word is "kbyiygwi"

Anonymous said...

Hmmm. The Nikkei after opening flat to little up is now off almost 200

Leisa said...

Tradeitlikeitis: I don't really know much. I had some puts on MTG, but I closed them (for a gain) because it was holding up so well. They report tomorrow. My gut tells me that the news probability is 75% bad v. 25% good; but my gut and how the market chooses to react are syncopated in a way that gets my toes stepped and takes money out of my pocket. Though I've seen just recently some press saying that investors have over-reacted and MTG should fare better. Maybe they are smarter than I; maybe not. I did take my money and ran! I've learned to take my profits early on puts! I'm sure that I left money on the table.

At-risk banks: WB--they bought Golden West, and GW had LOTs of ARMS. WFC--subprime and 20% exposure to mortgage loans. I have OCT 35 puts on them. Of course, I expected these issues to mature sooner. Hell I had puts on WFC and BAC back in Sept/Nov 06 and somebody in Jan. I should learn that waiting for problems to come to fruition is like being a wine master. You have to let the vinification process unfold. (I've decided that it is categorically false that the market can see these things with any prescience. They need a shovel (f adjective omitted).)

I still think that LEND has some problems. They bought Aames, and Aames had a bunch of these loans as well. There have been no 4th quarter reports with Aames and Lend together--and of course, that small matter of the auditors resigning (though it has been filled now).

Here's my greatest problem--to me these issues seem so apparent, and if it were true that the 'market' reflects all known info (and I do NOT believe that it does) then these stocks ought not fall any lower. Personally, I do not think that the market has a clue--which is why AHM dropped like a rock.

Now...keep in mind AXA and HIG all have been involved in these issuances as well. Haven't heard about that in the press have ya? So look for insurance companies (remember, they are hungry for yield) to have some surprises from the credit spreads widening. Also of interest, HIG as of their last filing had investments in 2x as many hedge funds as they did last report (2006 v 2005). So think about how cozy all of the financial institutions (banks, brokers, insurance companies) are with hedge funds. We may end up with something that rhymes with muster duck. I have some HIG puts, but they are making me cry.

Richard Suttemeier has been steadfast in his warnings about banks. See, the topic du juour is
these mortgage loans. What's going to happen to these local (even national) contractors? Who do you think is holding some contractor loans that are going to not find a seat when the music stops?

And if some bankruptcy judge in New Century case yanks the loans 'sold' to the respective REITs out [go read one of those bond prospectus--very clear warning in all of them that this can happen, though to my knowledge I'm the only person (amateur at that) yammerin about it] then the bond market is going to either explode or implode; I'm not sure which.

So, if we are to treat this like vinification: we have picked the grapes and squished them between our toes and are in the fermentation process. We still have a long way to go before we see what actually gets put in the barrel. We all have a front row seat.

But, these are some things to keep in mind. Sorry to be so long winded!