The Credit Crisis Financial Stocks Short Journal

This market looks like is topping out, even though the S&P recentely made highs the economy really depend on banking(given that the shadow banks were hit), XLF havent done anything since early may and now is turning and reversing to the downside

I believe that massive move on fed rate hike concerns will go down in history as the top of the green shoot madness
 
Tiger Woods was a 2-1 dog yesterday to win the US open in a online betting site, that just seems silly. I dont think anyone living can be this big of a favorite, maybe a robot from skynet, so I faded him a bit
 
It seems that rosenberg is backing a bit down from the deflation `that the fed cant reverse theme` is coming. Just had this exchange with him

Sent: Thursday, June 18, 2009 10:40 AM
To: David Rosenberg
Subject: Deflation

If you are right this is a liquidity trap that is almost impossible to
get out of, then why is this a bad thing?
All the fed needs to do is to pay for health care, food, energy and
entertainment for every man woman and child in the US financed by the
printing press and everything will be great forever, if prices wouldn`t
rise, then whats wrong with the fed paying down 100% of all consumer and
corporate debt overnight, overnight delevering of the entire private
sector. If there are no inflationary consequences then the liquidity
trap is actually a blessing

Bernanke has made clear that he will go to those plans if necessary, so
far it has not been necessary, but if the bears are right, then he will
go there and how on earth he will he lose given that he will never stop
with plans that the japanese never tried?
====
Sounds like a great idea ... how simple .. why not just do it now ? why
do we have to work?



David Rosenberg
Gluskin Sheff + Associates Inc.
Brookfield Place, 181 Bay Street, Suite 4600
Toronto, Ontario, Canada M5J 2T3
416.681.8919 (Tel.)
416.681.6062 (Fax)
drosenberg@gluskinsheff.com
www.gluskinsheff.com

===
daal:
because the fed lags and they are looking at the core CPI and PCE which
are still reasonably in their comfort zone
do you have any doubts that bernanke wont finance gov stimulus if
deflation hits the core rates?
bernanke begged the japanese do to that back in 2003
http://www.federalreserve.gov/BoardDocs/Speeches/2003/20030531/default.htm
====
david:
Bernanke is capable of anything to keep summers away from his job. . I think the coming decade is going to be far worse in the USA than it ever was in Japan.
====
daal:
Would you agree that if Bernanke were to fund a widely spending federal
government forever this would reverse the deflation at some point?
====
david:
It would probably destabilize the financial system and the economy but u could be right. This is all very experimental and bernanke is likely playing with fire. The fed has gone far beyond its mandate. There will be repercussions.
===== end

I would actually agree with him on that, if the US authorities fail it will be because they didnt allowed/gave enough authority to the fed. However, a government that doesnt want monetization of spending seems unlikely to emerge, specially in the US(no hyperinflation history)
 
I'm not sure why the market saw a green shoot on the Philly Fed survey, prices paid -13 prices received -16.6, more margin contraction and yet new orders is still negative at -4.8
According to the perma green shooters when they start to give their output free of charge we will see the survey post the mother of all green shoots
 
Quote from Daal:

Tiger Woods was a 2-1 dog yesterday to win the US open in a online betting site, that just seems silly. I dont think anyone living can be this big of a favorite, maybe a robot from skynet, so I faded him a bit
More...

Which exchange/betting site do you use for this kind of stuff?
 
Quote from Daal:

Since the great depression most countries in the world have had fiat currencies untied to gold, almost all of them have produced inflation, the only fiat currency to my knowledge that has failed to depreciate is the Yen.
If there was something inbuilt in capitalism that made persistent deflation inevitable 'no matter what the government does' by randomness alone its likely there would be other examples of currencies like that. The fact that there isn't shows that there could be other reasons behind the japanese dilema, specially considering that housing crisis and banking crisis have happened multiple times in the last century

Japan also has a declining population(cuts aggregate demand overtime) and a 'avoid losing face' ideology, which makes the government less effective to try new plans and get reform in place.

So, I accept that it COULD be that sometimes capitalistic societies build such big bubbles that a rare unbeatable deflation becames a reality, the evidence would be japan and the sample would be a vast amount of fiat currencies(with many crisis and bubbles happening in them) against it, so even if that is true it it still looks like an unlikely outcome
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Wouldn't productivity create deflation? E.g. the tech industry. If one day you have 1 million widgets, and the next day you have 500 trillion, the price of widgets will go down if the money supply stays the same.

IMO deflation has not persisted over the truly long-term because i) some currencies get abolished ii) credit-creation in a fiat system exceeds productivity growth. This also fits with the Japan experience - low credit creation (conservative banks hobbled with bad-debt) and low productivity growth.
 
Quote from Daal:

Has this rally shaken my belief that trading without a hard price stop is a viable way to get returns?I'm not so sure, you see I'm of that belief that stops are inherently irrational a lot of the time
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To hold a position you need to be highly confident you have an edge, and sure that you can maintain the position long enough for it to be realised. Any open position not meeting both criteria should immediately be liquidated. Whether you call that liquidation process "discretion" or "a hard stop" is just semantics IMO.
 
Quote from Daal:

Sometimes I wonder if I should short the GBP or buy the 10y US note or short the hungary fronit or do other exotic trades, in the end I dont think it matters. Correlations are so high it seems that everything moves based on one thing, the US stock market and the economy.
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IMO that's a mistake. Even with correlated positions, some are better than others and will have better risk/reward ratios and higher win rates. The best approach is to pick the best position or positions out of the bunch, and stick with those. Just as some stocks and currencies were great shorts last year and some were only average shorts, or not shorts at all, so the same is true now.
 
Quote from ralph00:

I'll say it right now ... recovery will be weak and greenshooters are idiots. As I've said before on this thread, I mostly agree w/yoy regarding these macro issues. That doesn't mean we're going back to conditions of last fall and winter EVER AGAIN. That was a once in a lifetime thing. If you missed or played GBP/JPY going from 200 to 120 in a space of a few months, or COF (to name one crap fin'l) going from 34 to 8 over several weeks, you're not getting that chance again.
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Sure you are - check out Eastern Europe buddy, that is going to make Q4 2008 look like a village tea party.
 
Roubini has made a similar point that I made, that the $4T value the stock market put on the 2nd derivative was partly justified but likely too high($4T was roughly the rise in the Wilshire 5000 market cap from the march lows)

"The recent recovery of asset prices from their March lows is in part justified by fundamentals, as the risks of global financial meltdown and depression have fallen and confidence has improved.

But much of the rise is not justified, as it is driven by excessively optimistic expectations of a rapid recovery of growth toward its potential level and by a liquidity bubble that is raising oil prices and equities too fast too soon. A negative oil shock, together with rising government-bond yields — could clip the recovery’s wings and lead to a significant further downturn in asset prices and in the real economy."

I hate to pull a buylow and try to give the impression markets can only go one way but this green shoot rally of 2009 looks like one of the easiests fades in a long time. Also the 'great' employment report of 350K that failed to produce a rally looks like one of the most obvious warning signals one can possibly find. We will see by year end whos right and whos wrong
 
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