So... I woke up this morning and I heard an argument about how some of the people in Europe wish they had done capital investment instead of nationalizing with the banks.
I just endured 10 minutes of fast money argument about how somehow there is Deflation and Inflation.... After that bit of irony... Mackie said "everyone needed to calm down" After one of them told mackie that he would be bummed when the market rallied in q4 2009.
Then a reminder "One year ago "socgen"... be careful people.."..
apparently some idiot trader who lasted for a Year... by miracle somehow lasted till now, and has a 1 billion dollar losing position that will have to be unwound...
Friday, January 16, 2009
Macro
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5 comments:
How healthy can any mini-rally be when the financials are so dismal; XLF down >20% YTD.
Seems like the XLF can lag the market, but giiez, this is miserable.
Interesting post that attempts to answer my last query:
From Bespoke
http://bespokeinvest.typepad.com/bespoke/2009/01/percentage-of-stocks-above-50day-moving-averages.html
"The fact that the overall declines have been limited to a smaller area of the market is a positive for those hoping that the lows will hold."
All the nationlization talk, scares the shit out of me.(sound like a bottom?)
Hopefully the new (powers that be) realized that if we nationalize the banks, we will never get private capital involved in banks.
This also struck me, the other day as a classic Bear run.
We are or were only 500 pts off the bottom.
This is nice action +/- 200 pts, to end Flat to up...
We just need the Regionals to come out and be "OK"
So a reasonable thesis is that regionals give okay earnings and guidance with unfreezing of credit occurring. Then the market goes up in a graded fashion, making higher highs and higher lows for several months.
The recent bear run is just another higher low in the process.
What are your econometrics to objectively gauge sentiment? Barry's quant site lists it as "bullish" right now for the first time in it's 6 month history, but they don't go into the metrics sinces it's pretty much a proprietary measure.
that is all one hell of a question.
Part of trading the sentiment cycle is trading the news flow.
The question is when is the "Apex" of the news.
The reason the "Sell the news" cycle works, is that Like with AAPL, the news cycle needed to get "Better" than the Jesus phone.
So in the bank stocks, When is the News flow going to be "Worst". Mathematically, if all banks have problems, when 50% of the banks have reported, that should be the "Worst of the news".
So, if we base that on Market Cap. most the market cap is in C, JPM, WFC, The rest of the financial market cap Are regional banks.
Worst case, when the regionals show earnings on tuesday, that will be the Apex.
But "leaders in the market Lead"... So, before that Apex, the Leaders should bottom, then followed by some of the laggards(why I figure JPM and WFC are a good trade.) Also because I saw them being crushed on Friday. Let me add that they had traded sideways for a day or 2.... Which creates what chart pattern? (spike low.... AKA wave 4 into wave 5)
So say... FITB will have nasty earnings on Monday, and the day traders will sell it at the bell... Probably sell it till 11am, then they will just Cover, take their profits and get out of the way... Move on to the next stock the next day... or even go long based on "buy/sell the news".
Say there is a surprise, and NAL beats earnings... Well then they will have to cover all the shorts in the name.. and it will gap up, and all the shorts will have to cover.
Ok... Business cycle, the business cycle is a long held economic trend.. First the banks get hit, then retail/tech, Then Industrial, Then materials.
There is a reason for this, As the Austrian economists note, Credit exacerbates the cycle. With no Credit, even the best business go broke, Retail borrows money to build inventories for christmas, Telco has to borrow to lay cable for new neighborhoods... ETC... so if the banks can't lend there is a lag in what other business can do.
So, Circuit city can't borrow, or their borrowing costs go from 5% to 6%, suddenly the struggling business goes out of business. The only good business' are the ones that have NO DEBT, and have enough cash to last for the length of the contraction or can lower costs to stay in the black.
We have seen 3 or 4 major retailers go bankrupt... But just as we saw with mortgage brokers, this is just the start... There will be MORE.. and the Retailers will "Bottom" when Less retailers go broke.
If retailers can't buy "More" goods from Manufacturers/industrials then their earnings will decline until retail can buy "More"...
If Manufacturers can't sell goods to Retailers, then they can't buy Materials from the Mining companies....
This is all basic economic theory.. and thinking that somehow it's going to be different.. is foolish... In a way we always think it's different this time, and it's not.
What happens is that each sector becomes oversold, then it bounces, but it's all Bear market rallies until financials can get traction, Then retail/tech can bottom.. ETC.
Once Retail/tech can bottom.. 50% of the market cap will be able to bottom, and so will the market.
It's fine to play oversold bounces, Especially because quarter to quarter We need to make money.
But Don't get married to them.
I think we can get a nice bounce from here through May. maybe even sept.
Half Our economy is Retail, Half of retail earnings are at Christmas, The strongest earnings in those names comes in the 4q, Then sales fall off.. But overall that means that the market is strongest from end of October-May. Then with summer there is a fall off in economic activity...
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