All Powerful Oz -Pay No Attention To The Men Behind The Curtain
So General Growth Properties has gone tapioca! who cares? Goldman Sachs conveniently changes it's fiscal year and vanishes a dreadful month of December from it's financials, doanworryboutit! The market is set to open higher. From what I hear fast Eddie Hyman's ISI survey of professional money managers, (both hedge funds and vanillies) shows the pros have not supported this rally to any great degree, yet the market is as overbought as it has been in a year on a 12,26 week Moving Average Convergence/Divergence (MACD) basis (View image). It may not matter. Spring is here and people who spent not a nickel in September to December are coming out of their bunkers, gassing up the SUV and getting the barbeque ready for summer. Blood flow has returned to the economy, despite the fact that TARP accepting banks are lending less. (This trend can only get worse from what I see, but that's the subject for another post). For now things feel better because they aren't getting much worse. I personally sold a little bit of stock yesterday.....which assures that this rally will continue for a while.....and why can't it? We made it through the panic zone by printing a few Trillion $, no harm no foul.
But let's beware how comfortable we become. The banking system is still broke and getting broker, and if the General Growth bankruptcy is any indication, bank extensions of loans in search of some improvement in the economy or entry of rescue capital may be a "bridge to nowhere." (also subject for a future post) The States are broke and getting broker, their new bond guarantor the Oracle of Omaha is even said to be worried about insolvencies.
How do we turn an inventory replenishment cycle into a self sustaining expansion, with enough moxie to pay off our personal, corporate, state and federal debts? Some players think we can't....period.
I'm no conspiracy theorist. Although I admit to being long some Gold, In the past I have dismissed a lot of the Gold bugs rap by arguing that there physically isn't enough of the shiny metal to actually substitute for a reserve currency, even if the world wanted off of the dollar. But now it looks like even if they can't move off the dollar some of our global business partners are looking for a way to diversify away some of their billions.
According to the Financial Chronicle of India, China and India are pushing the IMF to sell its $100B gold hoard over the next 2 - 3 years.......to help impoverished nations. That's a good one. How about? Hey IMF we want to buy all your gold so we can hold less dollars, Jay Aron is our commodities broker, let's do a trade.
I don't expect to make any money in Gold over the next few months.....but I'm a buyer on the weakness.....I think I may be in good company.
Comments (8)
I'm still very cautious about the economy and the markets -- especially the banks, anything real estate, and anything that requires discretionary income.
That said, it's funny how everyone is harping on this big bad fake bull run (i'm not saying it's real either). To be fair, I've taken a lot of profits off the table with nearly all the positions i consider to be short term in nature -- but I'm not really afraid of the longer term positions i took with companies that I considered just ridiculously good and undervalued.
Keep in mind despite the monster run up since March 9th, If you flip back to February 9th -- we're still about even from then.
i'm not sure what PE the S&P should be trading at in this economy, but i'm happy buying companies like MO and PM with PEs under 10.
Posted by RegularAnon | April 16, 2009 10:39 AM
Glad to hear your a regular and using good judgement in uncharted market territory. As long as we are trading below a significantly declining 200 day moving average, I consider it a bear market. But we could rally for quite a while....yet as you point out we are clawing back small pieces of the decline. My guess is there is still plenty of time to accumulate great stocks at great prices.
Posted by jeff | April 16, 2009 10:52 AM
Jeff - your not the first one to predict a massive re-allocation of foreign assets into gold! Ray Dalio's piece in Barrons even stated:
"The Federal Reserve is going to have to print money. The deficits will be greater than the savings. So you will see the Federal Reserve buy long-term Treasury bonds, as it did in the Great Depression. We are in a position where that will eventually create a problem for currencies and drive assets to gold. "
I still have my gold, and will hold. I fear that the spark that will send gold higher cannot be timed and when it occurs, new money will be afraid to chase it and shorts will not believe the run and get more short. Ultimately, forces will combine to power gold through highs. But who knows when this may happen. 2009? 2010? who knows.
The euphoria ALWAYS lasts longer than expected in these bear rallies, always. Let the markets run, there will be great shorting and selling opportunities in the end. And if gold drops to 675-700, its the physical stuff I would try to get my hands on.
Posted by Noah | April 16, 2009 11:13 AM
Jeff,
I have really no clue if we're going to rally for a while or not. In no way do I think we're in a Bull Market -- that's why I chose stocks for the most part with strong dividends.
My decision for jumping into the market was really trying to choose between horrible money market rates vs taking chances on great companies at great prices. For some companies the prices aren't so great anymore and it's funny b/c it's most questionable ones right now that are leading the charge back out.
It's funny the reason I'm avoiding the financial sector (long term) both short and long is that I think it's too crazy.
When Citi initially dropped to $3 i grabbed a bunch and was a lucky SOB when the government announced they would be bailed out that weekend. It ran to $9 (i sold at 6 before the run to 9). The bailout told me 2 things 1 -- the banks were in worse shape that even I thought at the time, and 2 the government is going to do everything they can to prop them up. Those 2 contrasting forces I'm just not ready to contend with that.
Posted by RegularAnon | April 16, 2009 12:04 PM
Noah, I jumped in on FAZ right now at 8.92. Go FAZ.
Posted by RegularAnon | April 16, 2009 3:25 PM
Regular - I got minor positions in EEV, FXP, SRS, MZZ all out of the money by about 7-10% right now. SEPT Calls on SKF. I think rally has legs though, so not adding more for at least 1-2 weeks. Of course I would like a bit of breathing room here with these guys, but I dont think next wave down will come until after this rally stretches out more and we get closer to mid May.
Posted by Noah | April 16, 2009 4:44 PM
No love for agriculture? I prefer soybean and wheat futures myself. The grain pits are less subject to the vagaries of DC bankers (I would say NY bankers but the financial capital of the US has since moved to Pennsylvania Avenue).
Posted by In Debt We Trust | April 16, 2009 5:56 PM
I chickened out and dumped faz (after hours) between 9.30 and 9.5
I dunno.. didn't wanna be holding it into the GE and Citigroup earnings. I expected them to both beat, but even after reading through the releases...not sure how the street is going to respond until they comment .
Posted by RegularAnon | April 17, 2009 8:24 AM