There was bullish news out of China last night. Frankly, it serves no use repeating it, since it’s a fucking lie. Nonetheless, expect Chinese related and basic resources names to sprint higher.
I am sick of keeping my balls in a box underneath my desk. I am prepared to allocate as much as 50% of capital to long positions, in an effort to bulk up on current longs or add new ones.
I will not initiate any longs in financials, no matter how tempting it is.
Bottom line: We should enjoy a signficant rally today. Let’s see if the assholes who trade stocks have the balls to stick a pen knife in the eyes of some bears today.
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Funny story about Dollar yen
We had a billionaire client that lost around $4 billion with the gang on the street trading Dollar yen from the long side during the Asian crisis. He had huge yen positions during the days Dollar yen fell from 145 too 111.80 in about 72 hours which he covered at the bottom. His margin account was $500 positive before this started went 450 million negative and he made the margin call.
I think he was a little early on the trade… in 1997(?). He should have waited 12 years before it put the trade on.
Ned Reilly is a perma-douche.
Brian F. Reynolds, CFA
Chief Market Strategist
Tuesday March 3, 2009
Some Progress, But Just A Little
Summary
-The economy has made a little progress in trimming inventories
-However, there is a lot of cutting left to do
-While stocks have come to reflect this reality a little more after the recent drop, and while there is likely to be an oversold bounce in the next few weeks, stocks still do not fully reflect the weak economic outlook.
It was just 2 months ago that 2009 began, bringing with it hope for investors, as a New Year always does. Investors were hoping that a new Administration would bring change and a solution to the credit crisis, and analysts were talking of a second half rebound, as is often the case after a tough year.
However, we pointed out that the credit bears intended to return, not caring who was in the White House, and they did. In addition, we pointed out that, instead of a second half rebound, the economy was likely to get worse over the coming year. We came to that conclusion by putting consumption, production, and inventory trends together and illustrating that, despite the massive cutbacks we’ve already seen in production, more cuts would have to be made because inventories were still rising.
Now, 2 months after we ran that chart comparing consumption, production, and inventories, we thought it would be a good time to revisit it and see if any progress has been made. We’re happy to report that companies have made some progress in getting to where they need to be. Unfortunately, that progress has only been slight, and supports our view that the economy is likely to continue to worsen until sometime in 2010.
In assessing the situation, we’ll re-run our consumption, production and inventory chart updated with 2 more months of data from when we ran it in January (that means the data for consumption and production is through January, and the data for inventories, which has a one-month lag, is through December) and start with a look at consumption.
Consumption went negative in December on a year-over-year basis (which shouldn’t be a shock given the weak Christmas), and then we had a slight uptick for January announced yesterday, which improved the year-over-year number very slightly. However, this improvement was in non-durables, and we think is a statistical aberration, as the seasonals imply a drop from December to January, but the plunge in December spending meant there wasn’t so much of a falloff into January. No matter how you slice it, though, consumption is horrible and has worsened in recent months, necessitating further cutbacks in inventories.
However, the silver lining of good news is that companies have recognized that fact, and have accelerated production cuts. So, the best thing we can say about the economy is that firms know that we’re in a tough environment and are taking the steps to cope as best they can.
These additional production cuts have caused the trend in inventories to decelerate further, and that is progress. However, as of December, inventories were still rising on a year-over-year basis despite the deceleration! Given what production and consumption did in January, we estimate that the deceleration in inventories continued last month, and may actually have gone slightly negative.
That trend in inventories is progress, but only slight progress. The number one use of short-term financing is for inventories. In a credit crisis, that is the easiest way for firms to cut their credit needs. Unfortunately, for inventories to repeat the drop seen in the last credit crisis in ’01-’02, we continue to believe it will take another 9-15 months to get there. We’re getting there, but an economic bottom is still likely to be a 2010 event.
Circling back to consumption, the drop in spending intrigued us, so we pulled down nearly 50 years worth of data on it. This is the only time in those 50 years that spending has gone negative. The only time there was a similar downdraft in the data was in 1961, but that was because there was a spike in spending in 1960 that wasn’t repeated. This cycle is different: it is just a flat-out drop in spending, and we think this chart puts the whole thing into perspective.
What is even more astounding is that a number of major retailers have had blowout going-out-of-business sales, yet overall spending has plunged. And, even though those sales have taken inventories at those retailers down to 0, inventories for the economy as a whole continued to rise through December. That illustrates how bad this economy is.
Conclusion
So, we’ve made some progress in getting to an economic bottom, but only a little. Our conclusions thus remain the same as 2 months ago.
The economy is likely to worsen this year because of the need to cut inventories because of the drop in consumption. As so much of our consumption was derived from imports, countries that export to the U.S. remain at greater risk than the U.S.
Another piece of “good” news is that stocks are now pricing in a little more of that reality after their recent drop, and we know that an oversold bounce is likely in the next few weeks. But, the credit market continues to imply a fair value for the S&P of 600, and stocks are still not fully priced for the likelihood of a worsening economy over the next year.
Short balls, aka testicles – BLL.
About to get deBaLLed.
If you’re into pears:
go long MOS, short IPI, SQM, ADM
The Zombie was disappointed when he realized the Fly’s current post (“The Ultimate Bottom”) had nothing to do with the Chippendale’s.
Jed with a zinger right out of the gate at 7:53am.
Almost time to short oil. No one looked at my chart yesterday. Like I said smart lazy fucks. If you ask someone for advice you are the herd. The skim pot of the market. It is ok to analyize other peoples ideas but to ask a trader what to do is suicide. Most you people drive me nuts.
Here is a pair (not sure of a trade, though): Siegfried and Roy.
Blow Up, are the people you want to look at your charts the same ones that drive you nuts?
anyone take my short DTO fm yesterday? schweet 8)
Rally to S&P 832 by mid March.
Fly-
Krull gave you a funny shout out yesterday. Good stuff.
http://www.youtube.com/watch?v=9-I4BSPxTD4&feature=channel_page
the point of this blog is not (hopefully) to get trading ideas, but to get a general sense of what ppl are thinking. i would not trade based on someone’s specific ideas (including Fly) because everyone has different goals or motives for putting on trades even tho often times they are good looks. further, most people exaggerate what it is thay are actually doing as we rarely see anyone posting about their losses. i often times have difficulty reconciling ppl’s positions w/ what actually traded on the tape when they say they traded, etc.
A high level Chinese offical made comments that they should use dollar reserves to buy materials/commodities while prices are low. They’re also expected to announce another stimuls plan tomrrow. Plus, their PMI is up 3 months in a row. Copper is ripping again.
Anything materials/commdities is going to work. FCX is the easy play, but I’m going to buy some UYM also, and will add to CLF that presumably the fuckers at Harbinger have destroyed the past few weeks.
DEVILDOG has lost his way to armaggedon 🙁
Silly DevilDog, we can’t rally without GE…
GE looking sooo strong again!
bought a little BIDU at 152.2754 at the open for a longer term acct.
Yep, GE radiates ominous signs again.
TradeGal;
I could care less about anyone looking at my charts. That chart was just for fun. In fact I am a member of the MTA and most of them drive me nuts. If you are a total Technician you are also part of the herd. The market is a complex social orgasm. Most of the time it can get it up but when it can’t get its hard on it goes into castration mode. To win in the market is a personal thing. Having the balls to learn from your faults and the guts to stick it out. Money and Risk management helps.
Doubtful but ok I will play along as long as my DXO rocks. I also like EXC for a trade here. TNA is long on losses and short on gains for some reason.
What the fuck, just bought a little FXI.
While GE takes the entire market down with it.
j
gorillia’s with clown suits playing with GE
How does it feel to be in a recession down under?
Sir ready to stick pens in eyes sir!
Sir my balls are not even close to being protected sir!
LETS GET EM!!!!!!!!!
TNA is a sick fuck for sure.
Out WNR @ 12.25 with 5% gain-it’s now @12.50- oh well. Took a Divi on WRI and got out even @ 10.55. High cash position albeit with continued pain in UYG
Communist China, who just announced a “so called second stimulus” can and most likely is lying thru their teeth.
How can anyone follow the money?
Fact is China can say anything they want to prop up its markets.
China is building a bigger Navy right now, for all we know the “stimulus” is mearly a way to announce “money” being spent in one direction but funneled into another direction….the direction of military build up, and that does not help the general population, except job security for the few who work at the boat yard.
I am not buying into it. It’s Oscar Mayer……(full of shit)
By the way you faggots, mullets, and block heads that have been selling my LZR down like it was worthless. They just reported they are not!
FUCK YOU! I BANK COIN!!!!
Rally over let the nut cutting commence. Fuckfaces.
BOT UYM @ 8.89
BOT CLF @ 13.88
Holding off on FCX
Mrkbill
The place doesn’t know what’s going to hit it yet. We’re 12 months behind you guys.
Can’t believe the complacency. Consumer debt higher than the US about 150% of GDP, Real estate more expensive that the US at it’s peak. Debt in every corner of the economy.
Federal government had no debt though thanks to the previous conservative gov that spent 11 years paying it off after the left was thrown out of power. Now we have the left back in and are about to fuck things up again.
The banking system has a sidewinder aimed at it with the potential real estate failures coming. Only difference here and there is that the banks can go after all your assets and not just the keys to your house so mortgage laws aren’t pussified here.
J and MrKbill, so what you are saying is the word for the day is: Kangaroo?
Sold WNR
mrkcbill wears “floaties” when he swims in giant bowls of chocolate soup
Juicey Juice, huh… Balls, I say.