The Credit Crisis Financial Stocks Short Journal

[Daal]

"The stock market has risen 18 percent on an annualized basis when earnings expectations are below 5 percent. When expectations rise above 15 percent, annualized total returns fall to -12 percent. Stocks are more vulnerable when robust earnings growth is already assumed by investors."

http://www.hussmanfunds.com/rsi/earnecondiverge.htm

Investors have been warned

 

[ralph00]

I thought earnings growth has been ratcheted down quite a bit over the past few weeks. It seems like the surprises this quarter will be more likely to the upside.

 

[ralph00]

I find it interesting that reports are surfacing all over the media about how well the Canadian and Australian economies are doing and about how their governments "get it".

I've got news for everyone ... no government "gets it". These guys do not have a better pot to piss in. When CNBC starts doing all day specials about the glories of the Canadian and Australian economies, its time to fade. I remain long Oz 90 day bill futures.

 

[ralph00]

Michael Petis' latest ...

http://mpettis.com/2010/07/the-capital-tsunami-is-a-bigger-threat-than-the-nuclear-option/

He does a good job exploding the shibbloleth of China's nuclear option i.e. that they can just decide to sell of their US$ holdings, with disastorous consequences for the US. The truth is that it would be far worse for them to sell of their US treasuries. Its irrelevant anyway, because its not going to happen.

The more worrying issue is that all of these trade surplus countries want to return to the ways of the last several decades and continue to rack up large trade surpluses while the US again becomes the "buyer of last resort" In the short term this will have the soothing effect of propping up US asset markets (stocks go up, up , up). In the longer term, it means that US fiscal stimulus becomes nothing more than a jobs program for big exporting countries and has little effect on employment in the States. At some point, Congress will have to act by imposing trade restrictions, tariffs, whatever, and this will have negative consequences for the world economy.

 

[Daal]

Grant finally makes a prediction that makes any sense. But its funny, what kind of V shaped recovery needs another massive jolt of monetary stimulus
http://www.zerohedge.com/article/jim-grant-confident-qe-20-just-around-corner

 

[Daal]

I've cut down my gold position by 50% and bought CAD,CHF to hedge my USD exposure. I'm quite concerned about a further decline in commodity prices and all the hysteria and optimism towards gold. I'm not sure the deflation fears that are likely to emerge(starting by yesterdays mention of deflation in the FOMC minutes) will be supportive of gold, that is until the Fed mentions QE2.0, and it looks like its going to take it a while for them to fireup the printing presses as more stimulus is only gradually getting support

 

[Debaser82]

Quote from Daal:

I'm quite concerned about a further decline in commodity prices and all the hysteria and optimism towards gold.

Daal, could you shed some light on your methodology in assessing whether bullishness on a certain asset is out of control and unrealistic?

Are it poll numbers? Hedge fund exposure? John Q mindset? media coverage?

As far as gold itself and it's prospects goes, Marc Faber pointed out correctly recently during the seventies for instance gold crashed 50% before it moved upwards 800%.

If you want to stay along for the ride leverage should be kept to apropriate levels really and that is a point of view I'd rather agree with.

 

[Daal]

Quote from Debaser82:

Daal, could you shed some light on your methodology in assessing whether bullishness on a certain asset is out of control and unrealistic?

Are it poll numbers? Hedge fund exposure? John Q mindset? media coverage?

As far as gold itself and it's prospects goes, Marc Faber pointed out correctly recently during the seventies for instance gold crashed 50% before it moved upwards 800%.

If you want to stay along for the ride leverage should be kept to apropriate levels really and that is a point of view I'd rather agree with.

I have no specific data, its just a gutfeel type thing based on news headlines(so I dont claim this is scientific) but since I'm bearish in commodities short-term I'm already supposed to be lighter on them. I just find it amazing how gold can keep going and going without the Fed or Congress significantly backing any sort of stimulus expansion, doesnt seem sustainable. In any event, I will come back to it when I sniff out a QE2 based on Fed speeches or minutes.

I understand the 70's correction thing, I'm trying to beat the market by trying to time it, maybes thats a bad idea but I believe I got the odds behind me here

 

[Daal]

ECRI now at -9.8%, which historically has lead to a recession everytime. But I'm sure Barry Ritholzs or whatever his name is will continue to claim how there is no evidence of a double dip

http://www.hussmanfunds.com/wmc/wmc100719.htm

 

[ammo]

http://www.hoisingtonmgt.com/pdf/HIM2010Q2NP.pdf