The Credit Crisis Financial Stocks Short Journal

Yeah the thing that I really like about the gold breakout is that it was basing for 18 months from March 2008 to last week. The saying "the longer they base, the higher they race" comes to mind.

On the other hand, it's all the same risk-taking trade: equities, gold, oil, EUR, GBP, CHF, AUD, NZD. However of these, gold has looked the strongest when equities / oil / EUR / GBP / CHF / AUD / NZD have been weak.


Quote from Daal:

Check out Bruve Kovner interview on Market Wizards 1. He talks about breakouts for 'no reason', although the USD has responsible for the $1000 and on march. Gold went from $950 or so to $990 for no reason, broke out of a triangle type pattern
More...
 
Tks all for helping getting my account reinstated
The admin told me
"Sorry about that, it was a glitch. Your user name has been
reactivated. Also earlier today we got a complaint about you using
Market Surfers name at the bottom of your posts. Please stop.

Thanks,
Joe"

I'm sure Ivanovich had NOTHING to do with either of those issues, LOL
 
Quote from Daal:

The IMF study on financial crisis shows GDP growth in the first year of recovery of financial crisis is on average 2%, 3.5% in synchronized recessions.
We have both and in a mature economy(which grows less). 1-2% sounds like a likely for 2010
More...

This might turn out to be optimistic. Digging a bit deeper in the details the IMF study only included developed economies, while the Rogoff study included the worst crisis regardless of a country's size. The severity of the US crisis does put some doubts in the argument 'US is not Argentina', since the financial system was shown to be garbage in 2007. So I'm not into the IMF camp of rich countries saying 'we are different, we are better'

The Rogoff study shows GDP contracts for 2 years but it doesnt give numbers so its hard to estimate things. The thing is, there has been so much stimulus(the largest stimulus package in peacetime history) its possible the performance will be better than the Rogoff averages. We should get some government manufacturing(There is a booming sector) of a GDP bounce now and this should help employment

Still the Rogoff numbers are so brutal(Suggest 11-12% UR, stock market in a range till 2011, home prices taking until 2011/2012 to bounce) that it seems one has some margin of safety by betting they will happen to some extent
 
I find it quite concerning this developed countries crackdown on offshore havens.
I use them for some of my banking needs, I of course report all my bank accounts to the tax authorities in my country. The domestic banks I have wont make international wires without piles of paperwork and even then they will look at you as if you are a criminal so I have no choice but to go offshore. And now one of the countries which I bank is trying to fight the OECD. They might very well get shutdown of the international USD wire system if they dont comply, although this make take time

That guy who runs Clarium, Thiel says these efforts to coordinate a global big government will fail because globalization and global competition wont allow them to. I'm want to believe thats true but I'm not sure it will be simple, there is a global big government that coordinated sanctions against terrorism, anyone who does anything wrong gets shutdown of the global trade and financial system. The same could be occuring with bank secrecy
 
Junk bonds through the FINRA/Bloomberg High Yield U.S. Corporate Bond Index are yielding 11% on a 3y duration.

If you look at bearish defaults forecasts they are higher than that yield and likely to remain high(and recoveries are said to be one of lowest in this cycle), the forecasts that justify that exuberant yield are based on V recoveries and that involve a lot of credit expansion either by banks or the market.

Gradually the market will see reality, this is why I'm still confident the stock market is headed for a 20% correction or more(and this might be conservative). I find it hard to believe stocks PE ratios would expand with rising junk bond yields so if the V recovery doesnt come, the 'forward PE' market participants are thinking exists will be proven incorrect and this should lead to a correction(otherwise PEs would expand), its possible that the market would allow the PE to expand by not tanking stocks but with rising junk bond yields that seem unlikely due

-Their correlation
-They compete against each other in risk taking portfolios
-Junk bonds would offer better returns with less risk than stocks
-Secular bear market in stocks and PE expansions are the exception

However I'm still waiting for that 980 to be broken before risking more funds
 
The reason a 20% correction could be conservative is because people seem to shift from euphoria to panic quite easily, we saw that in Mar to May

There wont be a shortage of bearish points that people might look at to freak out about what earnings/defaults going forward will be. examples
-Highly levered US consumer
-Weak consumer spending growth
-Tight credit
-Worries about higher taxes(such as Bush tax cuts expiring)
-NFP figures continue to disapoint(consensus is for a little above 10% as the peak, I argued on why its like to be 11%, so there is a lot of misses not priced in)
-Weak corporate investment(after all cost cutting is going strong and CRE investment will tank, residential housing is not about to start a boom anytime soon even if it is stabilizing)

While the average SPY shareholder is on crack, those worries passes them by.
The problem is, moods change. When we see that happen(probably through worse than expected economic news as analysts are becoming too confident and complacent) there will be a TON of stuff to be worried about.
After all the total leverage in the system(as % of GDP) has never been higher
 
So this FOMC voter says, confirming my speculation, that the Fed will only raise fed rates with rising inflation
http://blogs.wsj.com/economics/2009/09/09/feds-evans-rate-hikes-some-time-down-the-road/

Probably only with sustainable inflation which might take 5-10 months of inflationary pressures to find out. Anyone knows the UR lags the economy, according to the last 2 recessions, inflation lags the UR so when we will the US see this sustainable inflationary pressure?In 2011 but maybe not even then.(I remember a guy from the Fed on CNBC saying inflation tends to fall in the first year of recovery, probably due the UR)

Labor costs are supposed to be a bigger share of total costs to business than commodities and imports(weak dollar), labor costs are plunging and will keep going down till the UR starts to drift down significantly and this labor glut goes away

Meanwhile the Beige book shows people dont want loans and banks dont want to lend. There was only one district that reported a bit better credit conditions(Chicago), everyone else was flat or worse
 
Rents are also likely to stay under pressure(due all the overbuilding during the bubble) and they are a huge component of the CPIs(more than food and transportation individually).
The 'shelter' component of CPI(essentially rents and other housing costs) is up 0.9% yoy and the owner equivalent rent section started to fall(its up 1.7% yoy)
OER is a risk here, it could be just a dip in a rising trend or it could turn negative or stay flat, time will tell
http://www.bloomberg.com/apps/quote?ticker=CPSHOEQR:IND

In any event whatever gains in OER(if they occur) will probably be weak and possibly bellow 2% yoy which contributes for both the CPI and core CPI be bellow the Fed's target
 
Even though the equity market is trying has been on viagra for a few weeks now, the interest rate markets has been far more bearish

Both long-term yields and short-term rates have been trending down.
http://charts3.barchart.com/chart.a...divd=Y&evnt=adv&grid=Y&code=BSTK&org=stk&fix=
http://charts3.barchart.com/chart.a...divd=Y&evnt=adv&grid=Y&code=BSTK&org=stk&fix=
http://charts3.barchart.com
http://charts3.barchart.com/chart.a...divd=Y&evnt=adv&grid=Y&code=BSTK&org=stk&fix=

This resembles the period from 2007 where dip buying and 'global liquidity' was driving the stock market higher and higher yet treasuries kept rallying, the divergence was the bond market betting that housing would weaken the economy, bring down inflation and get the fed to ease. Meanwhile the equity guys continued to ignore subprime, then ignored bear sterns funds going bust, then ignored MER lying about size of writedowns. All the way to new highs back in Oct 2007, at the point the financial concerns were getting so ridiculous it was hard to rally further
 
You must log in or register to reply here.
Back
Top