Open Thread
As suggested by readers a few weekends ago, why not have an pen thread when there's not much else happening?
I assume know you good folks have something to say.
Well, here's your forum: What are you thinking -- what theme will take over in the coming weeks? Is there more donwside ? Is the Fed nearly finished? How cold will Real Estate get?
What say ye?
Saturday, July 29, 2006 | 05:55 PM | Permalink
| Comments (74)
| TrackBack (0)
add to de.li.cious | 
digg this! | 
add to technorati | 
email this post
TrackBack
TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8341c52a953ef00d834dc1b8d69e2
Listed below are links to weblogs that reference Open Thread:
Comments
Beware the soon Double Bottom on the DOW. Overbought on daily, but a very real possibility. Technically speaking of course. Also, don't forget about our neighbors to the north. The TSX is looking very good. Could get helped out by that Inverese Head and Shoulders pattern that is getting executed.
Good luck to all!
Best,
LB
Posted by: LB | Jul 29, 2006 6:00:09 PM
The Fed is finished, and will be cutting rates by the end of the year.
The situation in the Middle East will soon subside, returning to its usual wretched state.
Once both of these burdens are lifted, the market will be free to go..... lower.
Because the main story going forward for the next year(s) wil be the ongoing collapse of the housing bubble, and all of the jobs/consumption/debt that went with it.
Posted by: speedlet | Jul 29, 2006 6:03:21 PM
TSX broke it's trend line a while back. Does the volume confirm an inverse head and shoulders? I don't use this pattern but it looks like it doesn't.
Posted by: khare | Jul 29, 2006 6:11:37 PM
Even though I am short at the moment -- volume decreased Wed to Thus to Fri and so I put 'em out at the close -- I suspect there is an August rally out there -- presumably from lower levels
Posted by: Barry Ritholtz | Jul 29, 2006 6:14:47 PM
Lots of comments lately about housing. Seems like a no brainer that as an asset class it has gone bonkers. What took it there, good bad or indefferent seems irrelevant at this point.
Looking forward, it seems to me that we have had a series of asset classes that have gone bonkers since roughly 1995. It also seems that as one started to find its upper limit and start to collapse, the next one came along to prop up the general sense of a strong economy. The only gap of course was the end of the tech bubble. It took about two years for the next asset class bubble to form.
So, I ask myself, is there another asset class that is going to keep the process going now that the latest has peaked.
I can't see one. Any one got any ideas?
Posted by: advsys | Jul 29, 2006 6:23:36 PM
I've seen some interesting moves in biotechs. They're perennially liable to blowoffs, though quite honestly I don't see it here.
Posted by: wcw | Jul 29, 2006 6:39:24 PM
RE: advsys' question --
The next bubble has already begun, just as the foundations of the housing bubble were laid before the tech bubble even peaked.
The next bubble? Energy.
After that? Precious metals.
Posted by: speedlet | Jul 29, 2006 6:49:15 PM
I have been amazed for years at the volume of opinions about the Fed. I just don't get it. Not at all.
The bevy of folks who don't even have close to enough brains or credentials to even be considered for this job who think they are qualified to call the current seat holder an idiot is beyond my imagination.
How anyone could possibly think that they have a better handle on all of the data, economic expertise, financial savvy etc then a team of folks who do this as a full time job is just ludicrous. I am talking about plain old amatuer stock traders like myself as well as professionals, and certainly also include members of congress.
All of this jibber jabbering seems much more about a manifestation of each persons own perception of how a change in interest rates will affect their own portfolio. That is also ludicrous. Since none of us can set rates, wouldn't it be smarter to adjust your trades to match whatever policies are being set? (I think this also relates to a general belief that low rates will keep an economy growing forever. Probably not true. )
For something like the last 15 of Greenspans fed meetings, he would tell us way in advance what he planned to do. (raise .25 for those who have been asleep for a while) Yet each time, there was pundit after pundit who would get on CNBC or write a column that would attempt to guess at when he would change policies and why etc.
Bernanke is actually very clear right now as well. He is not going to make up his mind until he sees the last bits of data right up until probably the day before each meeting. He is going to look at a lot of data. From all kinds of sources. More than you are looking at!
Then factor in that he also has political pressures from a dozen sources, plus he is not the only decision maker. There are other members that vote.
He is also pretty clear about the fact that he is not going to do anything drastic. So, expect nothing or a .25 point move at the next meeting. Dont' try and guess what that will be until the day before. Get it!!!
Also probably a false notion is that the Fed is the sole source of causation of a recession. If you don't think that the current govt. debt levels, the govt's current foreign policies, the policies of at least the BRIC nations if not many more and a slew of other factors don't have an affect on causation, you are the very dum dum that you think the Fed chief is.
Which leads to my last point. It is probably not at all a safe assumption to make that if the Fed stops at the next meeting that this will in any way avoid a recession. There is a recession coming. You should know that. The only thing that Fed action may do is to push back the arrival date. That would also debunk the myth that the Fed always overshoots.
Glad I could get all that off of my chest. Hope it means something to some of you. If I sound angry it is only for the purposes of providing emphasis for my points.
Posted by: advsys | Jul 29, 2006 6:59:33 PM
The next week could reveal a lot, IMO. As I wrote in a previous comment, many indicies/sectors are very close to running into resistance levels and/or trendlines, yet are setting up some short term positive divergences.
Some technicals of particular note: The 30Y has recently broken a 22 YEAR trend line and run back up to test it. SP100 big cap to SP600 small cap ratio has recently broken a 6 YEAR downtrend line, but is running out of steam and looks to run back down to test the trendline.
Compelling market to watch, very exciting in alot of ways, but I'm not placing any large bets until we get some clarity.
Posted by: Alaskan Pete | Jul 29, 2006 7:01:04 PM
Speedlet.
Precious metals makes some sense. Thanks for bringing that up.
Help me out on Energy? Does it not have as big a downward drag on the economy as it may have on the upside? So, how would it keep the economy afloat?
Thanks
Posted by: advsys | Jul 29, 2006 7:02:57 PM
Well, I guess this is as good a time as any to lay out my thoughts. I'd love some feedback on this and if this idea takes hold let it be known here and now that this is the first place I've seen it.
I have been coming to a bit of an epiphany of late but I am searching for more confirmations to really see that we are moving in that direction. It has to do with the "inflation ex-inflation" debate that has been surfacing and has cropped up on this board. This is my take on what might be happening at the fed and in the federal government. The question is whether this is conscious or subconscious on their part.
What I'm seeing with all this ex-ing out of items that affect the government inflation measures is effectively the government moving from a managed system back to a free market system.
Because we have been so conditioned by the fed to expect them to adjust money rates up or down this is coming as a shock to us but if they are now removing items from the inflation basket are they not saying that they would rather have the free market price those items?
If they no longer are willing to move the rates up and down for housing or fuel, etc. then, in time, the free market will price those things again at fair market value as long as it has the understanding that the Fed won't be jimmying the rates every time things get too expensive or too cheap. What do you think?
This to me is a great opportunity for the free market and ultimately what I have been hoping for since I first learned about the fed. I would better have liked to abolish them all together but if they are going to move to a less market oriented role and leaving that job to traders I am all for that. I guess the real question is if they are willing to ignore prices on the rise will they do the same when prices are falling? There is the real test.
If so the question then is what will be the Fed's role? Will it just be to protect the value of the US dollar?
Posted by: DavidB | Jul 29, 2006 7:18:35 PM
How anyone could possibly think that they have a better handle on all of the data, economic expertise, financial savvy etc then a team of folks who do this as a full time job is just ludicrous. I am talking about plain old amatuer stock traders like myself as well as professionals, and certainly also include members of congress.
Most of the people who think the Fed isn't doing a good job think Mr. Market, not a different person, can do a better job of handling the interest rates than helicopter Ben.
Posted by: DavidB | Jul 29, 2006 8:18:49 PM
advsys --
If anything, the still-nascent energy bubble seems further along than the precious metals bubble.
Witness the "story stocks" that have been sprouting up all over the place -- solar energy plays, Canadian oil sands plays, uranium plays, ethanol. The stocks of corn producers are jumping based on a tangential connection to the oil price. Tune in to Jim Cramer's Mad Money and the callers have finally given up on JDSU -- they all want to hear about Encana!
My thesis (not a particularly original one, I'll admit) is that we are currently re-living the '70's, when paper assets stagnated and hard assets outperformed. The '70's witnessed an energy bubble, followed in turn by a precious metals bubble. When the metals bubble crescendoed and collapsed in 1980, stocks were selling at single-digit multiples once more and a new bull market in equities began. I suspect we're reliving the same cycle this time around.
Toqueville's John Hathaway observed a few years ago that Technology and Gold occupy two opposing ends of the sentiment spectrum -- unbridled optimism and unbridled pessimism. We are currently moving slowly from one pole to the other. Then the cycle will begin again.
Posted by: speedlet | Jul 29, 2006 8:22:16 PM
per DavidB:
"What I'm seeing with all this ex-ing out of items that affect the government inflation measures is effectively the government moving from a managed system back to a free market system."
We see things thru different eyes, my friend. I consider the manipulation of metrics to be simply disingenuous Enron accounting. You could certainly conclude that they have just given up when a measurement is changed (which is what happened with GDP and unemployment), but I am not sure why you would equate that with an intention to abandon control. The last thing that an oligarchial corporate state would like to see is 8000 hedge funds determining short rates who simply follow each other around every day. You cannot maintain an empire with that kind of volatility.
It's easy to forget that the Fed exists mainly because the big bankers wanted it to exist and they are neither unhappy with it nor interested in losing the control that it provides. It's also easy to forget that the short rate is only one small piece of the monetary picture- the most direct tool that the Fed has for tightening or loosening credit is the reserve requirements for member banks and you hardly ever hear anything about that. It's also easy to forget that fiscal policy is more important over the longer term and ours is completely broken.
The real power of short rates is in impacting USD and you can be pretty sure that it is going to be sacrificed as needed to maintain an illusion of prosperity. That's what has been going on for a generation now and is what is about to gear up again. My guesstimate is that we get another bump the week after next, but then Pause! until after the elections which will tank the dollar. After that, who knows, but my current thinking is that rates reverse in January and take USD down with them.
Posted by: whipsaw | Jul 29, 2006 8:35:39 PM
The thing about housing is that it will affect so many people that it will be a much larger hit to the economy than other assets.
Most of the growth in the GDP in the last 4 years has been housing and Gov. spending. Both debt driven.
In reality we have been in or near recession and borrowed to stay afloat.
While investors may find another bubbling asset class to buy into, the average consumer will find himself in a house which is worth less than he owes, unfordable gas and a bleak job outlook.
I do not think another asset bubble will save the economy this time.
Posted by: edhopper | Jul 29, 2006 8:40:54 PM
"The next week could reveal a lot, IMO. As I wrote in a previous comment, many indicies/sectors are very close to running into resistance levels and/or trendlines, yet are setting up some short term positive divergences."
Adding to this overhead resistance is the seasonal factors that are also at play. There is significant historical weakness in the first trading day and in the first 1-2 weeks of August. Can the Bulls pull the markets through it? This will be an interesting week to watch.
Posted by: Mr. Bubbles | Jul 29, 2006 8:42:22 PM
Weekend nugget to ponder for all the "it's just like '87, or '73 or heads and shoulders or double bottoms" crowd et al.:
"History does not repeat its self, it rhymes"
M Twain
Posted by: HT | Jul 29, 2006 8:44:26 PM
Wanna see footage from one of the most famous rock concerts ever? Wanna see the handwork of one of the most talented people to ever pick up a guitar? Wanna spend nine minutes at the original (e.g., '69) Woodstock on this hot summer evening? The internet is AWESOME!
http://video.google.com/videoplay?docid=4980626658551413306&q=Star+Spangled+Banner
Posted by: S | Jul 29, 2006 8:50:26 PM
per advsys:
"For something like the last 15 of Greenspans fed meetings, he would tell us way in advance what he planned to do. (raise .25 for those who have been asleep for a while) Yet each time, there was pundit after pundit who would get on CNBC or write a column that would attempt to guess at when he would change policies and why etc."
This is the most worthwhile portion of your rant, mainly because it reflects on the Cult of Personality that the financial media constructed in order to get people to watch.
The remainder seems dangerously naive to me. Do you really think that because these bureaucrats have the time and resources to stare at a lot of data, they are wise or necessarily acting in the collective best interest? Most of the people who post here are rather sophisticated investors and can offer reasonably articulate opinions about monetary policy, agree with them or not. The notion that we should blindly trust in the Great Brains of Economics and Finance sounds like the background for the failure of LTCM.
Beyond that, the Fed is a public body expending public resources and anyone is fully entitled to critique what they do whether they know what they are talking about or not (otherwise Members of Congress would have to fall silent before most others). Given the political dynamics and economic consequences, trusting these guys "to do the right thing" flies in the face of risk management.
Posted by: whipsaw | Jul 29, 2006 8:55:29 PM
per LB:
"Beware the soon Double Bottom on the DOW."
Thanks for the heads up. And now what should we do about the double tops in $SPX and $RUT? :)
~
BR: speaking of double tops, look at the Dow Trannies . . .
Posted by: whipsaw | Jul 29, 2006 9:00:31 PM
whipsaw:
you said:
We see things thru different eyes, my friend. I consider the manipulation of metrics to be simply disingenuous Enron accounting. You could certainly conclude that they have just given up when a measurement is changed (which is what happened with GDP and unemployment), but I am not sure why you would equate that with an intention to abandon control.
I did add the caveat that it may be conscious or subconscious. If it is conscious it could be a move by those who believe in the free market exerting a somewhat silent coup in the halls of economic power. If it is subconscious then maybe all our free market ranting on the web is making sense in the back of their brains and they are backing themselves into that corner with Adam Smith's invisible hand pushing them there.
I agree with you about their covert ability to play with the reserves and they may just be taking everything behind the curtain where they can manipulate to a greater degree without them telling us. They did stop reporting MZM recently so that is another possibility but HAVE FAITH. The Austrians may have performed a coup and twenty years down the road they'll get the courage to tell us about it when they have consolidated power. (;
Posted by: DavidB | Jul 29, 2006 9:12:30 PM
per DavidB:
If it is subconscious then maybe all our free market ranting on the web is making sense in the back of their brains and they are backing themselves into that corner with Adam Smith's invisible hand pushing them there.
If ranting on the web made any difference, there would be people hanging from lamp posts in DC. I think that we are going to have to agree to disagree about invisible hands.
I agree with you about their covert ability to play with the reserves and they may just be taking everything behind the curtain where they can manipulate to a greater degree without them telling us. They did stop reporting MZM recently so that is another possibility but HAVE FAITH. The Austrians may have performed a coup and twenty years down the road they'll get the courage to tell us about it when they have consolidated power. (;
Being more of a Keynesian myself, again we will have to agree to disagree. I'd say that there is more chance of followers of Mao announcing a power consolidation in 20 years. But in the interim, you might enjoy reading this.
Posted by: whipsaw | Jul 29, 2006 9:33:24 PM
Hey Whipsaw,
"And now what should we do about the double tops in $SPX and $RUT? :)"
Question: I've been wondering about the $SPX. To my still-untrained eye, it kinda looks like an inverse Head & Shoulders starting May 16. Are there rules that say the shoulders can't be broken into short rallies like they are? The neck is sliced, but the volume is not there, so maybe it means nothing? Haven't your double-tops become broken, too?
I'm still bearish, overall. I just think people are jumping the gun these days. Look at the Tel Aviv market when rumors came out that Israel might back-off almost two weeks ago. As the Israeli government was going on TV stating (to paraphrase), "Huh? We don't have our soldiers back, so we're not stopping! What 'you been smokin?" And the TASE-100 (or $TA100, since we use StockCharts.com around here) is already moving back on its 3-month down-tend.
It seems everyone is trying to outmanoeuvre everyone else. My guess is it's the Hedge Funds trying to get there first. How else do you explain when the pre-bell news says "GDP Lower, Economy Going Down Toilet" and the traders scream, "BUY! BUY! BUY!" out of the gate?
If it all just didn't make sense, I might actually turn Bullish. Speaking of which, where's that ss-guy?
Posted by: FliteTime | Jul 29, 2006 10:01:52 PM
per FliteTime:
Hey Whipsaw,
"And now what should we do about the double tops in $SPX and $RUT? :)"
Question: I've been wondering about the $SPX. To my still-untrained eye, it kinda looks like an inverse Head & Shoulders starting May 16. Are there rules that say the shoulders can't be broken into short rallies like they are? The neck is sliced, but the volume is not there, so maybe it means nothing? Haven't your double-tops become broken, too?
I was being sarcastic. This is a crazy market dominated by untalented hedge fund managers who will go either way from one day to the other in a herd. Daily TA & Sentiment analysis means almost nothing and fundamentals mean less then nothing.
IMO, Mr. Stagflation is already here... he's that guy over in the corner drinking up your whisky that nobody seems to recall inviting. But the invited guests continue to rattle on about their kids and vacations while he just looks on. Pretty soon, he's gonna stand up, pull a Remington riot gun out from under his unseasonal topcoat and bark "On the floor or die!"
After holding everybody hostage for a year, he'll be found dead by the hostages with a she python named Ms. Deflation around his neck who has just watched her offspring hatch out and head into the walls of the fortress, Chilling adventures are forthcoming.
Posted by: whipsaw | Jul 29, 2006 10:29:28 PM
Can anyone provide a bit more clarity on yesterday's post from Barry (GDP: 2.5%):
"The Fed is now likely to do something very different on August 8th compared with their prior actions: They are now likely to either hold rates steady – or raise ¼ but change the statement significantly. Either way, this tightening cycle is now entering a different phase.
Maybe it finally is the 8th inning. "
The way I see it, growth is slowing more than expected and inflation is up sharply. The logic out there seems to be that the Fed will favor growth and not fight inflation. Sound about right?
Posted by: jm | Jul 29, 2006 10:34:57 PM
