RANDOM THOUGHTS BY TPC
9 September 2009 by Cullen Roche
10 Comments
- I find myself asking this question just about every day now: “is there any chance that the Goldman Sachs target price of 1060 doesn’t get reached before year-end?”
- I find myself answering the above question with a resounding “no”.
- Is the dollar collapse trade the most overcrowded and overhyped trade of the century or what?
- Is the Nasdaq finally on the way to recovering from the Tech Bubble?
- If the market is so in love with the risk trade then why am I so in love with the anti-risk trade?
- The Vix remains curiously resilient despite new market highs.
- Why do I have this nagging sense that the market is about to break big in one direction or the other?
A bit off topic, I have noticed that every up day is on very light volume while every down day is on high/normal volume. I have heard guys like Jeff DeGraaf (technical analyst at ISI Group) say that volume does not need to follow the trend. Do you think that volume needs to follow the trend? It seems that you could almost make a living by buying the SPY everyday at 3:00 when volume is around a 100mil and selling it into the close.
Something just feels really eery about this whole thing. I think the fact that almost nobody really believes the real economy is recovering, yet markets are still rising and rising is scary and unlike anything we have ever seen before. Every time there is a big rally in markets, the mood changes about the economy among investors/traders. But nobody really, truly believes we are onto bigger and better things. I think everyone from consumer to investor to government official really, truly believes that the future is not more prosperous. Yet the markets still goes up. Something is just very strange about this whole thing. It is smoke and mirrors…and everyone knows it.
Is this fundamentally anything different from the banks having access to nearly unlimited free cash, and being eager to put at least some of it into equities? Especially that the Fed is buying up toxic loans in exchange for cash….
James
I hear ya. I have just about the exact same thoughts. I think the bulls are interpreting this to mean they are just being contrarian and that the market will prove to be prescient about an improving economy. But I think they’re misreading it. Also there are some other strange dynamics at play that are baffling and aren’t the normal market dynamics. Related to currency plays and the inflation/deflation battle raging just beneath the surface.
With all these crooks of Wall Street and free money from the FED, this is going to be a tough market. Nothing is what it seems anymore. I’d bet that the banks will come out winning. Came across this article
http://cnnmoney.printthis.clickability.com/pt/cpt?action=cpt&title=BofA%2C+SEC+seek+end+to+Merrill+bonus+debate+-+Sep.+9%2C+2009&expire=-1&urlID=410289042&fb=Y&url=http%3A%2F%2Fmoney.cnn.com%2F2009%2F09%2F09%2Fnews%2Fcompanies%2Fbofa_sec%2Findex.htm&partnerID=2200
In two separate court filings made Wednesday, both the Charlotte, N.C.-based bank and the Securities and Exchange Commission defended the proposed settlement the pair struck in early August.
The settlement followed an SEC investigation into bonus payments made to Merrill executives earlier this year. BofA announced it was buying Merrill on the day that Lehman Brothers collapsed last September. The deal was completed in January.
Regulators have claimed that BofA had said in its proxy statement that it would not pay out bonuses to Merrill employees in fiscal year 2008, when, in fact, the bank authorized bonus payments of as much as $5.8 billion. Of that allowance, $3.6 billion was paid out in 2008 to more than 39,000 Merrill employees
and
“The proposed $33 million penalty in this case strikes that balance,” the agency said
——–
Let me get this right…They propose 33 Million fine for 5.8 BILLIONS stealing? SEC are just full of crooks too. Where do I sign up??
Typical government stupidity. They tried to sweep this thing under the rug with a 33M settlement and they couldn’t get the case into a courtroom with a judge who would go along? BofA is dangerously close to getting a criminal trial for its executives on this. Neither the Bank of America statement nor the SEC statement answered Rakoff’s demands. Plus, they were entirely contradictory of each other. Now Cuomo’s getting involved, big trouble if you ask me. Something tells me Ken Lewis will be more forthcoming on the stand in a court room than he was in front of Congress a couple of months ago.
1066 or not is largely irrelevant since typical volatility could “explain” this move in <month. There could be "irrational" upside on hope for years if credit is loose enough. I would look for sideways moves with a slight positive bias from momentum and gradual recovery. Regardless of how bad the average consumer is, a large percentage will still drive the economy, but rewind 10 years in inflation adjusted GDP and growth expectations. From that perspective, 900+/-X is the right range for SPY. But if the G20 don't follow through on their stimulus promises or there are tax hikes etc. and private credit (ex-financials and ex-MBS and ex-CMBS) continues to contracts even at <2% annualized, then watch out below. On the long side, if credit expands gradually watch for a good 1 year trade, but we're not there yet. I've been debating whether some base metals overweight is warranted at the next Obama dissapointment or stick with waiting for 2010 Q2 to see if global governments will really stick with the inflation bias.
TPC
Don’t worry bout the Dollar its doing just fine and keeping this market floating up–
With the consumer reducing their credit levels and spending–who’s gonna make up this Short Fall in Demand–JMK ?–That be the govnment–
Who you gonna call?–”BubbleBusters”
Hip Hip Horay for the Dollar!
This is one tough market and the dynamics are definitely strange. The thought of going long makes me want to puke and going short is a great way to loss money. Of course with the inflation trade going full bast this week my cash losses more and more each day. So I’m not doing anything…
We often get lost trying to predict market moves … and miss big moves in stocks. Plenty of names with earnings upside