OPEN THREAD….
15 October 2009 by TPC
40 Comments
Have at it….Ask a question. Express your anger about the rally or brag about how much money you’ve made since March (don’t mention how much you lost in ‘08 though!). Talk strategy and what you like right now. Talk about what you like about the site or hate about the site. Whatever is on your mind. Use the comments section.
Whats your current outlook for the market? Still bullish?
TPC Reply:
October 15th, 2009 at 5:53 PM
Still bullish thru earnings season, but after the big move of the last few days I’ve thrown some hedges on. Consider me the equivalent of 60% equities right now.
You should have laid into salmon. That guy sounds like a dick.
TPC Reply:
October 15th, 2009 at 6:32 PM
I’m sure he’s a fine guy. He’s generalizing with regards to the article though. I mean, I mentioned three super safe ETF’s and 5 well diversified funds. How can you paint with such a broad brush and proclaim that all of these toxic related products are bad for investors? He’s just a little too quick to jump to conclusions.
MDTerp Reply:
October 15th, 2009 at 6:38 PM
I totally disagree TPC. He seems like a jerk. He constantly trashes people. Having a blog and an internet connection does not give you the right to act like a total jerk all the time. He is over the top in the same way that a 13 year girl is. Reuters should put a muzzle on him.
TPC Reply:
October 15th, 2009 at 6:49 PM
Well, for Felix’s sake I hope the two of you never meet. I have a feeling it wouldn’t end well for him.
How do you feel about emerging markets?
TPC Reply:
October 15th, 2009 at 6:48 PM
I like them better than most domestic equities, but would I be buying them up here? No. I would prefer to buy them on a pullback. If I were buying them up here I would likely hedge them in some manner via calls or other instruments.
Do you think the unrealness of the recent rally (mid-July to October) encompassing 210 SnP points (880 to 1090) without so much as a noteworthy correction is the result of the Ibanks using their free gov’t cash to pump up the futures markets (usually in overnight surges)? Because it can’t be the retail investor (most of his cash went to bond funds), nor insiders (selling like crazy), nor institutional investors like pension and endowment funds (still wounded from illiquid bets that crashed last fall), nor mutual funds (as they are mostly closet indexers and don’t move the market as they just sit on their prior held positions).
TPC Reply:
October 15th, 2009 at 8:46 PM
It’s nearly impossible to prove such a thing, but the banks are using the cash for something other than lending and earnings interest on it…..
TPC, what’s your experience/view about technical analysis? Do you have any preferences (EW/osc/MA etc) if you do use them?
TPC Reply:
October 15th, 2009 at 8:48 PM
Depends on what you mean. I only use charts to gauge perspective. I don’t use a lot of indicators such as MACD. I find charts incredibly useful for setting price targets for buys and sells, but don’t use them for much else. They compliment my FA, but I don’t use them exclusively to make decisions.
TPC, considering more and more of us are getting mobile content, might I suggest a mobile version of your blog, something like m.pragcap.com (or something that automatically loads a mobile version of the site upon detecting a mobile browser)?
Thanks as always for the great work!
-Exertia.
Naa Reply:
October 16th, 2009 at 10:22 AM
If you use iPhone – download the free RSS application from the App store and then add the website.
You may be aware that iPhone doesn’t support Flash Video’s – only drawback !
Exertia, I’ll look into it. Are you on a Blackberry?
Exertia Reply:
October 16th, 2009 at 10:08 AM
No TPC, I’m still unfortunately on Windows Mobile
TPC Reply:
October 16th, 2009 at 10:32 AM
I’ll see if there is something I can work out.
Hey TPC, Phallus Salmon can bring us Brits down too much sometimes – he’s made snide remarks on me before thy just made laugh…
As far as the outlook, I am seeing some trends: longer dated new issuance and HY demand clearly shows a reach for yield among desparate buy-siders (this feels like a tipping point), credit has been dramatically underperforming stocks since the start of Oct – even HY has not seen such a crazy bid, index rolls and curves are stalling – starting to decompress and flatten a little, single-name CDS are under-performing, oh yeah and finally equity is trading at bananas valuations (this is a technical term!).
Anyone have any thoughts on why credit is underperforming equity? I don’t see too much in the way of flow technicals impacting CDS currently so seems much more a cognitive dissonance issue. We’ve said in the past that credit anticipates and equity confirms and I this case, credit is well off it’s best levels as equity makes new highs.
On VIX, OPEX is smashing it in this week but the wings are definitely steep and protection seems to have been instrument of choice recently – worries me that we are building up some
seriously convex ‘portfolio-insurance’ type positions that will end up unwinding en force if we gap down for whatever reason (read any 1987 crash theory).
On a bright note, short- dated libor will stay low for years thanks to govt intermediation which while keeping some in their homes will do nothing for Mods on unemployed homes-
a recent poll we did saw large buy-side Investors looking at the following inicators for evidence of recovery:
Unemployment 25%
Equity Indices 10%
Credit Spreads 14%
Consumer Spending 20%
Housing Market Indicators 30%
cheers
TPC Reply:
October 15th, 2009 at 10:07 PM
CreditTrader,
This rally has been so odd in terms of credit vs equities. There is a massive disconnect between high quality equities and high quality credit. Credit markets have been rallying on the backs of high quality names while equities have been rallying in spite of them.
I am generally in favor of siding with the credit markets in such instances, but the message I’ve been relying on that mentality for 3 months now and it’s persisting. Very odd. For now, the earnings season is simply too strong to stop this bull. There is no selling catalyst on the horizon. This could set-up for a nice short position though in about 4-5 weeks….
We’ll probably go up a little more from here above 1100 snp, go down from there a little, and then rally into 1200snp pretty quickly. But I would sell that…This is the first time during this whole rally that I am getting slightly bearish…I have been uncertain many times, but not bearish. But like I said, I don’t think we come crashing down tomorrow or anything. Besides, at 1100snp, 1200 is less than 10% away. Pretty remarkable!
Don’t know where to start I could rant and rave about so many things.
Rep. Melissa Bean is an outrage if you ask me, completely in Wall Street’s pocket.
Hertz suing Audit Integrity for libel for merely publishing an accurate report of their financials.
and that’s just today’s outrages
So instead on boring anyone any further I’ll just say thanks TPC. I find your blog to be the best of the couple hundred different financial ones I read/skim everyday. You’ve got a fact based opportunistic approach and a level head. A rare commodity lately.
TPC I’ve noticed a huge number of Chinese stocks IPOing lately and even more undergoing reverse mergers on the pinks and OTC in the hopes of uplisting (many with surprisingly semi decent financials). Might be worth a look for you as long as you stay somewhat bullish.
That is if you think the Chinese RE market can continue to hold up.
TPC Reply:
October 15th, 2009 at 11:42 PM
Thanks Tasty,
That’s very kind of you. I used to do quite a bit of work on the reverse IPO’s for Chinese firms in the USA. If you have some tickers or want to discuss further maybe shoot me an email. I would be interested in your ideas.
Thank again!
James Reply:
October 15th, 2009 at 11:53 PM
TPC maybe you can post about YOUR ideas on tastylunch’s ideas. I am sure your devoted readers are always looking for something to long that is new and fresh and doesn’t cost a lot…
First,
Thanks a bunch for your blog. Truly one of the best.
What is your outlook for the dollar/commodities? Despite the fact that you seem to join the rant about money printing in US, I am not sure Europe/Japan is any better in terms of debt ratios, etc.
With much of the “cash on the sidelines” going into long commodity funds, and little if nothing into domestic equity, do you see a bubble in the commodity space? Do you have any insight as to what could cause it to pop, or when?
Thanks again
TPC Reply:
October 16th, 2009 at 10:15 AM
It’s hard to be bullish on the dollar with the policy that is in effect right now, but I would not feel good about being short the dollar into 2010. Investors are going to begin discounting rate increases sooner or later….
Is money market fund no longer a safe place to park cash? What’s the better alternative?
TPC Reply:
October 16th, 2009 at 10:16 AM
Look into laddering some bonds if you want income. Cash is an opportunity cost at this point.
babeling about how much we made? what about my Fucked Up Trading/Investing/Retirement Story
2008 – I always like the “big bad stories”, so being already peak oilist and “half gold bug” i added “short the banks” theme at end of 2007 to my investment strategy,
The first half of 2008 was my best trading/investing period ever as long oil equities/short banks was sucesfull strategy for the first half of year. If I sold my portfolio during summer i could retire – i was a bit sceptical to the high oil prices, but the main problem was US dollar, seeing a 30% decline yoy against our currency (and 75% decline in a eight years) – i refused to sell it, because i was afraid of staying in cash nor i didnt want to add to my shorts and put options since the profits were only slightly higher then decrease of USD against our currency and i already belived that we were in period of “extend and pretend” – only to be surprised by the fall of LEH and consequent period of deleveraging.
I didnt sell my oil equities, but with the huge profits from put positions i rather bought gold equities during gold lows in november, when many companies were priced for BK.
2009 – closing rest of my put positions and with profits going heavily into oil equities, when oil was 35-40 usd and many companies were priced for BK again.
I didnt belived much in “deflation” story as i was rather in camp of “deflation in things you dont need, inflation in things you need”, only to become finally conviced with TNX raising over 4.00 during June Top on SPY around 950, that FED QE doesnt work as intended. At that time, it looked that “bondzilla is finally advancing into the town” – selling most of my oil and gold equities as i was thinking that another episode of deleveraging is coming. also i didnt belive that is the “liquidity crises” but “solvency crises”, therefore throwing some money after the problem wont solve the problem. also gold has usually weak season in summer and oil usually tops for the year somewhere around 4th July – got beaten already several times in “summer slow season” i didnt want to repeat same mistakes of past.
So I went short like never before, only to get my ass beaten up like never before. I do still hold few oil and gold companies, while feeling like to be “walking naked in the street” with a lot of cash in depreciating USD and holding a lof of unprofitable put options (spy 1000 6-12/2010), while my lovely gold and oil equities are running from me “to da moon”.
shoulda, woulda, coulda…. if i held everything i owned by the end of march up until today or september and sold it – i could be retired again (most of equities I bought during end of 2008- beggining 2009 are now at least 200% baggers and more), instead of it I lost everything I made during recent three years. three years of investing/trading for nothing, a lot of time lost, some more hair on my head has disappeared, some lost nerves and so on…
probably my biggest problem is/was “cut the loosers, let the winners run” and staying “inflationista” during deflation period after LEH, only to convert into “deflationista” (with yields on TNX over 4.00) during current “inflation” theme – i really didnt expect this liquidity trade to go so far…
so the lesson learned, if market thinks we are in inflation, trade accordingly, if markets thinks we are in deflation, trade accordingly and “cut the loosers, let the winners run”, even if you suck big time when it comes to the trading.
TPC Reply:
October 16th, 2009 at 10:18 AM
You and millions of others. Just have a look at Peter Thiel’s second half of 2008. Sounds like you got caught in the same storm. There was nowhere to hide except cash. Crazy. Thanks for sharing!
matty Reply:
October 16th, 2009 at 10:47 AM
Educational story, with good self-reflection. I like how you frame the inflation/deflation in relation to let the winners run. Thanks. And sorry!
so as i wrote being “half gold bug” and full “peakoilist” i sold most of my basis portfolio during “reflation trade” and it was for me biggest disgrace and humiliaton on the stock market i have experienced it. the macro outlook means more then ever….and i was unfortunately wrong in this important moment.
What can stop this market advance? my best guesses…
1. disorderly dollar crash
2. unemployment not budging
3. housing rolls over again because the shadow inventory finally surfaces
4. commercial real estate shoe drops
5. further rise in oil due to dollar weakness
6. overoptimistic earnings estimates for future quarters and market finally starts caring about the lack of top-line revenue growth
7. credit losses overwhelm banks
All of those are good candidates as correction catalysts. However, at the end of the day I don’t think anything can stop this mini bubble from reinflating except Bernake. only until he turns off the QE and free money morphine drip will we see a real correction. Until then, we can keep kicking the can down the road. Hopefully, we’ll all be smart enough to be in cash at the end of the road.
8. rising yields on bonds.
currently bondholders are happy with printing, declining dollar and delicining yields…they say bondholders are “smartest guy in the room”, but so far they look like fools and me too as i bet “the farm on them” with TNX over 4.00 and SPY on 950 at the beggining of June.
I originally thought that QE will be met with rising yields on long term bonds as i wrote in previous post here, therefore the effects of QE could be deleted with higher yields – “the more you print, the higher interest rate” was my idea.
Jack Reply:
October 16th, 2009 at 6:39 AM
obviously, money printing is causing worrisome asset price inflation, but seems like the bond market is unconcerned about QE and money printing because velocity of money and consumer inflation is so low. govt reported inflation may be low now, but you have to figure that at some point, the weak dollar will start pushing up consumer inflation up via higher import and energy prices. too many mixed signals. Despite team Obama’s best efforts to destroy the dollar and indebt the nation past the point of no return, there’s still time to trade the trend before it all ends badly as usual.
What happens if the market does make new lows?
I’m not saying this will happen and at this point it sure seems unlikely, but what happens? What will the government do for a round two of stimulus? How can you lower rates from zero? Can we as a country take much more dollar devaluation?
About TPC: “The research and market methodology is based on cognitive science and the theory of chaos.”
It would be interesting to hear your thoughts about how an average investor could use some techniques. Thanks.
TPC Reply:
October 16th, 2009 at 10:19 AM
You don’t want to hear my philosophy of the market….Trust me, it’s very boring.
Thought that :
Rants were the fertilizer of Zero Hedge
Carl Futia blog the tutor of long only
TPC had found a balanced and subdued fundamental approach for nursing Pavlov and the syndrom of Stokolm alltogather.
Hobbs Nietzsche did not need asylum in a unidemensional world of finance.
TPC Reply:
October 16th, 2009 at 10:20 AM
I might be crazier than you think!
It’s not a question of if the market makes new lows, but when. This whole thing is being held together by duct tape and bailing wire. It’s like a bicycle tire with a hole in it…the Fed keeps trying to pump it up but the air keeps draining. For a short time, the air coming in makes it look like the tire is inflated, but as soon as the pumping stops, the truth will come out. Money printing and government hand-outs can’t stop this deleveraging train. when the macro economy unravels, there will be talk of bank bailouts, round 2, but I predict an overwhelming public backlash. the democrats are already on track for a rude awakening during midterm elections, and obama has spent all his political capital protecting wall street. when the final wash-out comes, i think the Fed will be left twisitng in the wind, powerless to stop it. hopefully, the public will wake up and say no more to bailouts, money printing, deficits, dollar devaluation, and central bank mismanagement of the economy. In order to avoid the same fate as Japan, we need to step back and let the system self-correct without Washington trying to change the outcome and making it worse. it will be painful and hard, but it’s the only way back to prosperity.
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