Doug Kass asks: "Anyone notice that it took the CRB four and a half years to go from 252 to 478 but it took only four months to go from 478 to 252 !">
CRB/Jeffries Commodities Index
Crude Oil = $57
That's the first time since March 2007 that Crude has even broken $60.
Crude Oil, December Contract
Has the Market Fully Discounted the Bush Presidency ?
What is it that the market is pricing in?
While partisans try to blame the crash on one or the other candidates, here's something I have yet to hear any of the TV pundits discuss: The George W. Bush presidency.
While partisans try to blame the crash on one or the other candidates, here's something I have yet to hear any of the TV pundits discuss: Blaming it on the presidency of George W. Bush.
Currency Markets are the world's vote on US monetary policies
S&P500 2001-08, weekly
Equities: Which Sell off do you hold the occupant of the White House Responsible for: The One that began prior to his arrival, or the one that began prior to his departure?
Chart courtesy of Fusion IQ, Bloomberg
I do not believe that the 2000-03 crash was a result the markets pricing in a Bush Presidency. However, one could certainly make the case that the past few years market action has been the result of his fiscal, tax, and spending policies.
Oil Prices Respond to Energy and Military Policies
Two oil men in the White House, two wars, no conservation efforts, and no attempts to develop alternatives to Crude Oil:
Gold, 2001-08 weekly
The Gold market is a store of value in uncertain times -- what is it saying about the Bush policies?
Chart courtesy of Fusion IQ, Bloomberg
Bonds: 10 Year Treasury, 1980-2008
Chart courtesy of Fusion IQ, Bloomberg
Longstanding downward trend in rates was in effect since the Volcker Fed broke inflation in 1980 -- recent Presidents (W, Clinton, Reagan) have all benefited from this trend
What are the markets really pricing in ? Might it be the W. presidency?
Pricing in a Bush Presidency (July 08, 2008)
Just How Bad Was October 2008 ?
Not too shabby a week -- plus 11% across the major indices, with some areas even stronger. Of course, that comes from deeply oversold levels, with stocks peak trough down 27% within October. The key question going forward is whether or not this past week's snapback rally has legs. But rather than guess about that, let's look at some of the more intriguing data points from October 2008.
I picked a bad month to stop sniffing glue:
• October was the worst month for the Standard & Poor’s index of 500 stocks in 21 years — since the 1987 stock market crash. (NYT)
• The Dow dropped 14% drop over the past four weeks -- the biggest October decline since 1987, when the crash sent markets down 23% for the month. The S&P 500 was down 17%, and Nasdaq fell 18%. This ranked as the 15th worst monthly decline for the Dow Industrials since 1900.
• October 2008 was the most volatile in the 80-year history of the S.& P. 500. (see NYT chart, at right)
• We had the most down days in a single month since August 1973. (Marketwatch)
• Compare 3 recent SPX Bear Markets: -46% from October 2007; Compare that with 1973-74 down 48% over 23 months. The 2000-03 bear was 49 percent over nearly 3 years.
• The S&P 500 had the most volatile month since November 1929 (1% moves higher or lower).
• October had two days where the indices were up more than 9% -- the 10th time this has occurred over the past 80 years. (NYT)
• During an eight-day losing streak at the beginning of the month, the Dow lost 2,396 points.
• Consider days with 4% moves up or down: None from 2003 through 2007; Three throughout the 1950s and two in the 1960s. October 2008? 9 days with four percent plus or minus. That edges out September 1932's record of 8. (NYT)
• The Dow had its second-biggest point drop on record, of 733 points. The Dow posted two of it biggest point gains, climbing by 936 points (October 13th) and 889 (October 28th)
• US dollar gained 14.3% against the euro, 22.3% against the Canadian dollar, and 31.8% against the Australian dollar. This is the fourth best month on record (using data going back to 1967). March '91, November '78, and October '82 are the only three months where the US Dollar saw bigger gains. (Marketwatch)
• Perhaps the credit crisis is finally easing: Overnight Libor dropped to its lowest levels in 6 years, falling to 0.73125%, down from 5.09% on October 9th. (Bespoke)
• Copper and Crude oil had their worst one-month losses ever (Barron's)
• Crude-oil futures lost one third of their value, falling 33% during the month. This was their biggest monthly percentage drop since trading began in 1983. Average retail price for gasoline fell 31%, ($2.504 a gallon), down 14% from a year ago.
• Gold lost 18% for the month -- its worst monthly drop since 1980.
• Wheat had its largest monthly decline in 22 years; Copper and Aluminum had their largest drop in more than 20 years; Sugar for its biggest monthly fall in a decade. (WSJ)
• Emerging-market bonds popped 8% over Treasurys -- a six-year high.
• Market cap losses: Standard & Poor's global indexes lost $6.79 trillion (September's 2008 lost $3.4 trillion)
• European stocks rose 12% (Dow Jones Stoxx 600 Index) -- their biggest weekly gain since 2001. (Bloomberg)
• MSCI Emerging Markets Index fell nearly 30% -- the worst month since August 1998. Thats a loss of about ~ $900 billion. (Marketwatch)
• Japan's Nikkei 225 hit a 26-year low.
• Iceland's exchange crashed 81% for the month. (Marketwatch)
• Russia had the world's most volatile index, with 17 days with of more than four percent moves in the Micex index. For the month, the Micex lost 28.8%, but had a weekly gain of 42.5%. (NYT)
• Argentina's Merval and Brazil's Bovespa indexes were set to make their biggest one-month percentage losses since August 1998, with the Merval falling 37% and the Bovespa losing 25%.
Here Comes Da Zirp!
How likely are we to see a zero percent interest policy? Pretty likely:
"Federal Reserve Chairman Ben S. Bernanke signaled he's ready to cut interest rates to the lowest level on record should the central bank's actions fail to stem the deepening economic slump.
Policy makers said yesterday that ``downside risks to growth remain'' even after their half-point reduction in the main rate to 1 percent. The Fed dropped a reference in its statement to threats from inflation, projecting "levels consistent with price stability'' in coming quarters...
Bernanke is drawing on an academic career studying the failed efforts to prevent the Great Depression, and yesterday's shift indicates he's prepared to revisit his 2003 commitment as a governor to lower rates to zero percent if necessary. Should lending fail to revive by December, the central bank will probably cut by another half point, said former Fed Governor Lyle Gramley...
Reflecting a crisis that has reverberated throughout the global economy, the Fed's Open Market Committee yesterday said that international rate cuts should contribute by loosening credit markets. The FOMC also said slowing economies abroad will threaten the record boom in American exports, which have kept the U.S. from a deeper slump...
In a new step to increase the availability of dollars in emerging markets, the Fed yesterday agreed to provide $120 billion to four counterparts. Brazil, Mexico, South Korea and Singapore get $30 billion each by signing the so-called currency swap lines. The U.S. already has unlimited agreements with the European Central Bank and Bank of England."
Inflation from 2002-07, Deflation from 2008-09, hyper inflation from 2010-???
I could see Gold going to $3,000, by way of $300 first.
* With apologies to Flip Wilson
Fed Signals Door 'Open' for Cutting Rates to Lowest on Record
Scott Lanman and Craig Torres
Bloomberg, Oct. 30 2008
Crude Oil = $61
We were talking about deflation when Crude Oil hit $75 -- 2 weeks ago; This morning, we hit $61 and change:
Crude Oil via Barcharts
Prediction Markets Fail Again
GO FIGURE: Prediction markets -- those thinly traded games played by college kids and other traders who lack the capital to trade in deeper broader markets (equities, fixed income, commodities, currencies) -- are for shit:
"To the amazement of economists and online bettors, the answer has varied a great deal among betting Web sites.
Markets are not supposed to work that way, even online prediction markets, where bettors trade on the chances of a candidate’s winning an election in the same way that they might bet on pork bellies to go up in value.
In the last few weeks, Intrade.com, which is based in Dublin, had consistently given John McCain as much as a 10 percentage point edge in his chances to be elected president compared with other large online overseas betting sites. These include the British-based Betfair.com, as well as the Iowa Electronic Markets, a research project at the University of Iowa that allows bets of $500 on election results."
Actually, thinly traded markets such as this are supposed to work EXACTLY this way. What prevents the "real" markets from operating this way (most of the time) is the enormous amounts of money at stake, and the huge and diversified crowds of traders watching for aberrations. Little markets, small amounts of money (millions not trillions) and thin trading are prone to this sort of nonsense. (Don't say you weren't warned)
Here's, the question of the evening: How many legitimate market strategists, economists, and traders still believe in the Efficient Market Hypothesis? Anyone?
Misunderstanding Prediction Market Failures (February 14, 2007)
Why Prediction Markets Fail (January 11, 2008)
Trading Variance in Election Predictions Raises Questions
NYT, October 19, 2008
Intrade Betting is Suspicious
Five Thirty Eight , September 24, 2008
Trader Drove Up Price of McCain ‘Stock’ in Online Market
CQ Oct. 17, 2008 – 3:44 p.m.
The Week that Was: CDS Spreads, Equities, Commodities
That was quite the fascinating week, whatever your market perspective might be.
Its not very often that I get to throw up 3 charts or tables, and they tell the entire story -- but that is the case this week:
A Thaw in the Freeze
RANDALL W. FORSYTH
Barron's OCTOBER 20, 2008
Amid Pressing Problems, Threat of Deflation Looms
WSJ, OCTOBER 18, 2008
Hot or Not
WSJ, OCTOBER 18, 2008
Oil = $81
Wow! As the markets crater, Crude Oil has really gotten shellacked -- down about 40% from the peak in July.
While the SPX too a full year to lose that much, this has been 4 months:
November Crude Oil Futures
Gold Higher than the SPX
Eddie Elfenbein points out that Gold is now higher than the S&P 500.
S&P 500 at $909.
Gold at $930
This is some pretty wild stuff . . .