As you waste your weekend away, gawking at dumbtube and internet porn, “The Fly” is reading research reports. See pal, THAT’S the difference between a person such as yourself and me. I will opine on Green Mountain Coffee Roasters Inc. [[GMCR]] Sunday or Monday, dependent on how futures are looking. Good stuff.
A lot of you are worried about losing money and some of you are happy as pigs in shit, due to your short positions rising in value. For the most part, the unwashed masses on this site are being rather polite, with regards to my recent set backs. Perhaps it’s a sign of maturity, or the fact that I have imprisoned over 200 neerdowells throughout the years. Nevertheless, I appreciate the sentiment.
Some of you are asking about my breaking point, the line in the sand if you will. I opt to give my answer in the form of a simple mathematics exercise.
Joe Blow starts off 2009 with 100k. At the end of 2009, due to market gains, Joe Blow has 190k. During the first week of 2010, Joe Blow extends his gains by another 12%, sending his account value up to about 212k. MUCH TO HIS CHAGRIN, in ghoulish fashion, the market staggers him in the subsequent weeks after his great start, effectively erasing all of his 2012 gains.
His account stands at 190k.
Now ask yourself, is Joe Blow hurting?
My line in the sand is the proverbial “180k.”
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Call me Joe blow and i will destroy you.
Actually I a frolicking in lederhosen right now to Mahler’s 5th as I abhor all forms of mainstream media.
However, I did unfortunately catch that State of the Ego address earlier this week. Given time, I should make a full recovery.
Fly, you need to hear me out on this. Honestly, I believe the market is done going up for several months. My reasoning is clear and makes logical sense…. at least in my own mind. I have changed my strategy due to this sea change….
The problem that got the US and world into the mess of 2008 was too much leverage. Everyone and their brother was able to make money long real-estate for several years, and this was due to assenine easing by the fed and a lack of fiscal responsibility by everyone.
As everyone experienced, the market got fucked in the great fall of 2008, and didn’t turn back until March of 09. Since that clear bottom, the market has rallied quite nicely….
Now consider what the current situation is….
We had leverage that fucked us… We kept the leverage around to get the market to come back as much as possible…. Well, now that the supposed turn-around in the economy that was expected in Q4/09 didn’t happen, the market is no longer moving up.
What are policy makers to do?
I’ll tell you what they do… They SHUT THE FUCKING LEVERAGE OFF!!!! Thus preventing the use of leverage to make the market plunge faster than they can handle.
0% Interest rates are a problem, but 0% + 40:1 leverage is insane! So, they are stopping the leverage game. This is clearly what is happening, and with that, many positions are being forced to sell.
This is also why the bullshit names that are fucking worthless when you take into account their debt, will be absolutely slaughtered this time.
The government needs to cut back on leverage to prevent this bubble from turning into yet another bubble on the other end.
Basically, my strategy is to short shitty names on any strength, and hold them for months.
The economic turn-around HAS happened in Q4 under Obama.
From negative 6% growth in January 2009, with 700,000 JOB LOSSES every month,
to PLUS 5.7% GROWTH now – almost a 12% turnaround. With jobs
being ADDED now rather than lost.
The only reason the market will stall some here is we went up
too fast – 65% in nine months – and we need a 20% correction.
We are halfway there.
No chance in hell. The use of leverage in our economy has destroyed the wealth of the average population. They bought houses that were too expensive, cars that they couldn’t afford, sent their children to college only to find there are no jobs that will pay back the loan. The average Joe CAN NEVER pay back their leveraged debt. And without that ability, this economy will never recover.
The government is trying desperately to come up with some magic bullet as though “this time is different.”
It isn’t different, and it will end badly.
For the time being, the market is gonna get raped. The top was clear, just as the bottom was clear in March 09. A 20% haircut will be nice, and I plan on profiting on the way down. However, I will not be buying at a 20% price slash unless there are some clear signs from the fed/gov’t that it’s a bottom.
here is you answer by looking into the past
http://video.google.com/videoplay?docid=-9016886482738598023#
I think we should do some ethnic cleansing of the “average population”. I don’t have one red cent of debt to my name. Fuck all of them that bought all their useless crap on credit.
Funny, very funny
Jobs being added??????????
LOL, I was thinking the same thing. The job market has gone from dead to a vegetative state, and he’s cheering it as a recovery. I expect a 20% drop and more. The fed is not going to get a chance to raise rates like they were hoping because this entire market is only up due to free money. Most new investment is going to consolidation via mergers and off-shoring operations.
There is no recovery. The only question now is will the economic bottom fall out all at once or by chain reaction
Which 911 troofer site did that come from, Moe?
here’s some shitty names: Clarence, Bruce, D’Artagnan, Fanny, Humperdink, , Anil, Pantsaroff, Euphrates… cheers!
D’Artagnan??
Au contraire Madame Buffon!!
How about JB?
How about “Blow”? Could mean many thnings.
My three trend following tools told me to get out last Friday, which got me out at the close of Monday with the s&p at 1096.78. As I’m sure everyone knows, trend followers don’t get out on exact tops or exact bottoms, so I got hammered about 56 s&p points before I got out plus I was leveraged 1.5 x s&p, so that hurt.
In case anyone would like to know, these tools have not told me to short yet!!!
Nevertheless, I am concerned because: (a) of the heavy volume distribution days near the highs of the market, (b) the Dow, S&P 500, Nasdaq, and Nasdaq 100 have broken moving averages on high volume, (c) these indices almost never run more than eighty percent without an intermediate correction, (d) most of the leading stocks have broken below their multiweek moving averages on heavy volume, (e) the financial stocks have come under heavy distribution (Hornstein, 2010), and (f) as FIG said I’m wondering just how much more leverage is available.
If or when my trend following tools tell me to short the s&p, I will post this.
Good luck everyone and let’s bankcoin at the next opportunity!!
If you were a chartist, you would not buy this market. The S&P blew through the 50 day and 100 day. The next level of support is about 1020. But even worse than the charts? The fact that good news did nothing to spark this market. GDP and earnings should have sent this market higher. We might have a bounce on Monday or Tuesday but that might just be a head fake. I am laying low and waiting for a clear indication either way. I will be watching for your post, Hawaii.
Very interesting read regardless of your politics:
http://trueslant.com/matttaibbi/
I suppose you meant 2010 not 2012. Or was that a psychic slip?
Who is this… the janitor? Vincencio [sic] is Fly making you work this weekend for spilling sauce in the servers this week? I know Fly ain’t working on Saturday. He’s probably having his feet and nails done.
Lynny[sic] Dykstra IBC Quote OF The Day: “too many dollars chasing too few goods.”
Kaiser the Dog summed this up the other day, SKETCHY…..There is something sketchy going on in the markets and it has a different feel to it. Greece imploding, looking to the French and Germans to assist..and China isn’t buying Greece’s high yielding bonds…
China, the largest financer of the worlds debt, plumb with cash has to tame its own growth…. wouldn’t it be nice if they could elevate their society members with enough income to move into those empty cities….and then,,they talk about floating their currency to let it increase in value…
Barney Frank and others in Davos today….a Saturday/Friday night yielding the expectations of reregulation and new regulation coming to a Morgan Stanley near you…..hmmmmm
FIG above there may have a point…Debt Destruction….the little guys have all been bent over last year, maybe it will require taking some ass out of the big banks to achieve a more acceptable level of leverage…..if that happens, the little guys haven’t seen anything yet.
SKETCHY
Not only am I a brilliant analyst but I can also add and get through the spam protection.
Now go get me a nice steak for dinner.
Just for you Kaiser, even if it means I have to go out into the 6+ inches and more snow coming down outside…so much for this being a Southern Winter event.
I noticed something on the $SPX chart. Since March, at or near the start of the month there tends to be a big upwards thrust. Sometimes the thrust comes after a scary down move. Its not perfect, because sometimes it takes a few days after the month starts for it come. If there is going to be an upwards thrust then it will most likely happen at some point next week if the most recent history is any guide.
Here is a chart which demonstrates what I am seeing:
http://bit.ly/afZuig
We’ll see if your higher lows hold up soon enough.
Lots of people with a crystal blow today
there is no more money left in the world
http://video.google.com/videoplay?docid=-9016886482738598023#
We bounce next week GUARANTEED!… The real PPT is gonna pump the futures up sky high Sunday night.
I thought the Chinese would be the first to start this shit.
http://www.ft.com/cms/s/0/ffd950c4-0d0a-11df-a2dc-00144feabdc0.html?nclick_check=1
The trailer for Wall Street 2 was posted earlier. Here is the trailer for Floored- a documentary starring some CNBC types about the Floor Biz going away to electronics.
http://www.babelgum.com/4022597/floored-official-trailer.html
And here is Pee-wee getting an iPad.
http://www.funnyordie.com/videos/f7a03edbd7/pee-wee-gets-an-ipad
think longer term.
i recently thought we would sustain our rally through earnings before a reload (selloff) occurred so my opinion is already suspect. whatever, whether this thing rallies near term and then fails big into feb or continues selling off from now through end-feb, once this big selloff is over, we are looking at another straight line up through at least november.
gardens always need tending. weeds need removal. the fed’s enemies are not convinced of recovery just yet but are increasingly looking like wasted old men being maneuvered toward open manholes.
man up. take your losses into last year’s gains. your losses fuel the prior trendline.
Everyone’s panicking. We’re all fucking pussies. Stop it.
The GDP result last week was a wonderful stat. The revision is also likely to be up too as most GDP revisions of late (not all) have been up rather than down.
PMI was fine and the component of Leading Indicators has been going higher since late last year and most recently also up for the regional surveys.
The US is doing okay and clawing its way out of recession.
Here are the questions in my mind.
Is the fed going to start removing the punch bowl through the year.?
Yes. But they will only do so as they see the economy improving and the employment situation doing a lot better.
Is the economy going to continue improving?
Yes. You don’t build that sort of head of steam and expect it to evaporate immediately. The monetary infusion of the early 90’s is the thing to look at going forward.
Is the rest of of the world going to be OKay?
I think so. The real issue in my mind in terms of what’s causing this is that Europe and Japan are not easy enough on the monetary side. I think it will become apparent through the year that Japan will QE and Europe will leave their interest rates alone and we’ll see regional pick up there.
The yen and Euro have to weaken.
This is a market that never seems happy. If the dollar weakens we have all these pussies coming out and suggesting we’re seeing the destruction of the dollar. If it strengthens people harken back to those bouts dollar strength of 2008/ 2009 when the market was also crashing.
China will tighten some more but their growth rate will still be outstanding for the year.
The US budget position will also look to improve as the government begins to take in more money as a result of the economy doing better, people getting off the dole and going into jobs. The budget won’t be a fantastic improvement but it won’t appear be a calamity in the short term.
The other thing that’s happening on the monetary side is that money supply is working its way through to increasing velocity
See here for a better pic.
http://seekingalpha.com/article/185516-money-velocity-demand-and-gdp?source=article_lb_articles
As far as money supply goes the important thing to look at is not the recent falls we’ve been seeing but the fund flows and whether there is new lending. The recent falls have been the result of the previous leverage still working itself off the banks books while the banks are continuing to lend to consumers in new transactions. See here:
Here’s Barron’s economics editor putting the kabosh on that crap.
IF CONSUMER CREDIT IS DEAD, why doesn’t it lie down? The stock of consumer credit declined in November for the 10th straight month. Data due out Friday will no doubt confirm another decline in December. But then, why have recent months shown an increase in the sale of such big-ticket items as cars, furniture and jewelry?
Consumers could hardly be acquiring these durables on an all-cash basis, a neat trick when cash is short. But the decline in the stock of credit has been taken as self-evident proof that credit can’t be flowing. As already explained in his space, however (see “Economic Beat,” Dec. 14, for the latest review of the “bathtub analogy”), this confuses stock with flow. The retirement of old debt from the relative boom of a few years ago has been causing an unusual amount of credit to flow out. This factor has mainly driven the decline in the stock of consumer credit. And that’s hardly evidence that consumers are starved for credit, even though it’s been used as such.
But now that the sale of durables has been showing signs of life, purveyors of the credit-crunch myth should start asking themselves a challenging question: If consumers are starved for credit, why aren’t we seeing weakness in the sale of consumer durables?
In fact, we are seeing a certain amount of strength. The stock of consumer credit in fourth quarter ‘09 was noticeably below the same quarter a year ago. If that truly was evidence of a decline in new extensions of credit, we’d expect to see a decline in the purchase of consumer durables over the same period. But according to the fourth-quarter GDP report, consumer spending on “durable goods” was up 2.9% from the same quarter a year ago in nominal dollars. Similarly, economist Jason Benderly tracks consumer spending on durable goods that adds to the estimate both the full value of used-car sales and the retail purchase of building materials for home improvement. Given the steady decline in consumer credit through the second half of last year, you’d expect to find a decline in spending on consumer durables. But instead Benderly finds a 6.1% annual increase through the second half.
When the December figure on consumer credit gets released Friday, might lamentations finally cease about a credit crunch on consumers? Don’t hold your breath.
Mr Fly,
I am a long time reader and, once I overcame my initial suspicions of your style, have concluded you are a brilliant stockpicker and even a better writer. One questions that lingers for me is whether, and if so how, you use options. At the very least covered call options or basic spreads to make plays. I, for example, took a bet on GMCR earnings with a long call spread. Nice return, completely manageable risk. So, do you use options ever? Why or why not?
I’ve found the magic method for making our economic woe’s just disappear in the US.
Let’s stage a recovery.
http://img444.imageshack.us/img444/1033/ua93crashingmk2.gif
Macro fundamental bullshit – good for entertainment but that’s all.
There were tons of reasons to be negative in 2009 and the market just kept going up.
Stocks go down because there are more sellers than buyers.
Play your strategy and stick to your rules, everything else is a waste of time.
“Play your strategy and stick to your rules, everything else is a waste of time”
Here Here!!!
macro is important, TA.
Fly,
You are great. You do a fine service by putting your trades out there and trying to teach the commoners. Although there are many retards who post on this blog in an atempt to feel bright, I always enjoy reading. Keep up the good work.
welcome, Craig, now you have called yourself a retard. Good job. Being a retard is kinda fun. gl trading.
Good quote from Taleb:
It is particularly shocking that people do what is called “stress tests” by taking the worst possible past deviation as an anchor event to project the worst possible future deviation, not thinking that they would have failed to account for such deviation had they used the same method on the day before that past anchor event
Fig,
I rarely post, but I have been reading this blog for entertainment value since it was flyonwallstreet.blogspot.com
Good luck to you as well.
I am also entertained by the blog, however, I also use Fly’s rants for my trade ideas. In my opinion, he’s a very smart guy. Hence my name of FIG. He’s a trading god in my eyes.
Moe:
Taleb is a loud mouth. He tried to prove that one can earn money by betting on freight trains hitting you in the dark and ended up losing money and closing his fund down. That’s before he became a “teacher”.
If he’s so smart at picking them perhaps he can explain why he lost money buying deep out of the money options betting on freight trains hitting the market.
One can’t quantify risk in the future and although he’s criticizing others for doing so, he’s also prepared to do that himself.
I actually just spent 24 hours homeless on skid row. Way more exciting than the dumbtube and internet porn.
Its all about the jobs numbers this week period. There is nothing else to it. All charts and moving average analysis and all that bullshit are just for self justification of what ever side of the trade you want to play. You can make a chart look however the f*** you want. And on the side note.. yes de leveraging is obviously bad but there is still plenty of money on the sidelines that can move this market up in a hurry if the valuations are attractive. This is not a market that calls for liquidation.
The government’s top bailout cop said Sunday that more than a year after the financial crisis hit, many of the goals of Washington’s $700 billion bank rescue program remain unmet and that policymakers still have not addressed fundamental problems that triggered the crisis, leaving the financial system vulnerable to another collapse.
Barofsky warned that in his view, little had changed to head off another financial crisis:
• “To the extent that huge, interconnected, ‘too big to fail’ institutions contributed to the crisis, those institutions are now even larger, in part because of the substantial subsidies provided by TARP and other bailout programs.”
•” To the extent that institutions were previously incentivized to take reckless risks through a ‘heads, I win; tails, the Government will bail me out’ mentality, the market is more convinced than ever that the Government will step in as necessary to save systemically significant institutions. This perception was reinforced when TARP was extended until October 3, 2010, thus permitting Treasury to maintain a war chest of potential rescue funding at the same time that banks that have shown questionable ability to return to profitability (and in some cases are posting multi-billion-dollar losses) are exiting TARP programs.”
• “To the extent that large institutions’ risky behavior resulted from the desire to justify ever-greater bonuses — and indeed, the race appears to be on for TARP recipients to exit the program in order to avoid its pay restrictions — the current bonus season demonstrates that although there have been some improvements in the form that bonus compensation takes for some executives, there has been
little fundamental change in the excessive compensation culture on Wall Street.”
• “To the extent that the crisis was fueled by a ‘bubble’ in the housing market, the federal government’s concerted efforts to support home prices…risk re-inflating that bubble in light of the government’s effective takeover of the housing market through purchases and guarantees, either direct or implicit, of nearly all of the residential mortgage market.” (Fannie Mae, Freddie Mac, the Federal Housing Administration and other government agencies now insure more than 90% of all mortgages from the risk of nonpayment.)
Barofsky also said that TARP goals to increase bank lending and prevent home foreclosures “have simply not been met” – “lending continues to decrease, month after month” and “foreclosures remain at record levels (and) the TARP foreclosure prevention program has only permanently modified a small fraction of eligible mortgages.
“To the extent that the government had leverage through its status as a significant preferred shareholder to influence the largest TARP recipients to carry out such policy goals, it was lost with their exit from TARP,” he added.
Hey Moe:
I thought you said the government lied about everything and now you’re putting up comments by Barofsky. So to understand your line of reasoning now the government only lies about things you don’t like to hear? Am I getting this right?
J,
The question you bring up deserves serious investigation. Barofsky could be lying about everything. People lie about things all the time, and they do so in order to change their audience’s view of the subject they are referring to. Please tell me why Barofsky would lie? I’m interested in your point of view.
No Fig, I’m not suggesting he’s lying or telling the truth. I’m merely indirectly bringing up Moe’s point that the government lies about everything and pointing out that if this is the case why cherry pick this guy’s evidence.
Good site for people betting on Economic predictions such is monthly US unemployment. In some ways it’s better then the economists predictions as people are actually putting money on it.
http://www.intrade.com/index.jsp?request_operation=trade&request_type=action&selConID=708228
Interesting… Do they show trade volume on that site. If the volume is in the millions of dollars, I’d definitely consider using intrade in my research. However, if there are a few kids sitting at their computer betting $5 on the unemployment rate, I honestly don’t give a shit.
Love the comments:
Not a single one discussing fair value — just a lot of chart mumbo jumbo.
I can understand why value investing outperforms all other forms of investing consistently requiring less actual time involved investing/trading. People freak out on chart talk and sell dollars for fifty cents thinking they are avoiding the correction of a lifetime, instead of realizing what the stock they sold is worth, and ending up buying higher when things “look good”. Stocks are good when everyone is panicking. They are significantly worse when everyone’s rushing to buy them regardless of value.
But most investors will continue to chase price and sell value. All you have to do is understand what value is and the secret is no longer a mystery.
When The Fly’s portfolio hits ‘180k’ – he too will sell value. But I don’t really agree the stocks he owns have much value… so it would be wise to sell before they truly approach fair value.
Don’t you have a railroad deal to close, Warren?
_____________
Perhaps I’m early in the play But I want to add to my long posi over the next week. The reason is that I like what’s happening overall and I think the market is fucking up on this one by panicking.
Gold has gone lower against the US Dollar while GDP has registered a pretty decent increase in addition to other important stats like PMI. The TIPS market is also well behaved and despite all the punditry talk about the huge inflation that is going to visit us TIPS bonds simply aren’t showing this as they aren’t terribly skewed against the 30 year.
Gold going lower, bonds being well behaved and a stronger dollar could be seen as some pretty good propellant for further upside in stocks as it is a mark of confidence.
This to me suggests that the inflation bogey isn’t the problem that people think it is, which is and always was the big concern. Even commodity prices falling is good for stocks as cost input adds to the bottom line.
If Greece doesn’t turn out to be a problem and sovereign debt settles down the risk in stocks is to the upside.
Those concerned about China tightening can rest easy. China needs to tightening as it has interests rates below 2% in an economy that growing over 10%.
Unless there’s something I’m missing here, there’s nothing I see or understand that ought to be driving stocks lower other than a mini panic by idiots that don’t understand the big picture dynamics.
Of course we can’t discount the idiocy of this administration but overall I think they’re scared shitless in terms of causing some real panic. Even Barney Frank got stuck into the administration for coming out with a silly populists message the other day when they tried to bash the banks.
I think the market is fucking up here big time. I’m not about to go all in, however I will be adding a few chips into the game on this one.
The only thing you are missing is the ability to correctly interpret the data. What you have described in the first half of the comment is textbook deflation. What does the textbook say about stocks in deflation? It says that PE ratios fall below 10:1 and average dividends increase more than double where they are at now. That is the process we are witnessing.
Not sure how you see sovereign debt “settling down”. The market is waking up to the fact that these outrageously high debts are going to be defaulted on and the creditors will thereby be wiped out. Greece is a nothing: watch what happens when Japan starts imploding.
What deflation?
Check out this article out about the Bancor, which is being discussed in some financial news media as the possible new world reserve currency to replace the US dollar –
http://www.marketoracle.co.uk/Article16870.html (bottom of page)
Able to comment from ibc iphone app
Able to comment from ibc iphone app
November Gap on Qs at 42.65 filled…should produce a bounce.
what does that mean?
Unfilled index gaps are extemely rare. That looming Nov 30 gap was waiting and the S&P pretty much filled it.
The ONLY thing that matters is liquidity. As long as there is money sloshing around and the FED happy to print it out of thin air this market is going up. Fundamentals and technicals don’t matter as long as the printing press is on.
Hey Fly, did you hear about this when it happened?
Midwood, Represent!
__________
Man I grew up in the wrong era 🙁
Let’s hope Fly has the pictures and video. Those are some hot teachers.
AAPL Apple CEO Jobs talks about Google, Adobe and more at internal town hall meeting — Wired
There are various anonymous reports of what CEO Jobs told Apple employees during a town hall meeting following the iPad launch including from Wired and MacRumors. The town halls are events where Mr. Jobs takes questions from employees.
* In relation to Google, he said that Apple did not enter the search market but Google entered the phone market. Google is trying to kill the iPhone but Apple would not let them.
o MacRumors: Apple will deliver aggressive iPhone updates and Google will not be able to keep up.
o MacRumors: Jobs calls the next iPhone an A+ update.
* Concerning Adobe and Flash. The iPhone has not had flash support since its inception (This weekend Apple removed marketing materials from its website that depicted Flash content loading on the iPad saying those were artistic depictions and not meant to show actual Flash support.) and the iPad did not load Flash content during Mr. Jobs demonstration last week. Mr. Jobs said Adobe was lazy and blamed it for a buggy implementation of Flash on the Mac saying that is one of the reasons Apple won’t support it. He said that no one is using Flash and that the world is moving to HTML5.
Nikkei opens in the green.
I am bullish on the market based on the number of T MOE comments in this thread. Always a sure sign that piker beartards are about to get their asses kicked yet again. Roger Riney is gassing up the margin copter.
Had to hand out an ASS HAT award on my blog.
http://ibankcoin.com/henry_fool/2010/01/31/jesse-livermore-bull-market-lesson/#comment-932