Morning Call: We Made New Low - But Skeptical
June 27, 2008 10:17 AM
We made a new low and reverse, so theoretically we could close positive today and signal a possible reversal. However, to say that I am skeptical is an understatement. Take out the lows and then the next day make a new important low? Very unlikely, IMO. In addition, we barely cleared yesterday’s low. I do not consider this a real test of a low which would give me confidence.
Market View Recap: Unfortunately My Views Have Proved Correct
June 27, 2008 12:57 AM
I have probably made dozens of posts on here that the market was wrong, the economists were wrong, the Talking heads were wrong, the fed was wrong, everyone was dead wrong - the economy was going to get far worse. I normally do not like to make macro calls as i have mentioned, because the market can be wrong for a very long time, and you will be bankrupt trading it far before you are proven correct.
But the evidence has been so overwhelming it could not be ignored. The economy has been a “false economy” for at least 10 years, I suspect longer. it has been built on paper, nothing more. First, we had the stock bubble that created fake wealth. It was not real, it was paper. Then we had the housing bubble that also created fake wealth that was not supported by incomes. Then the game ended and there were no other options to contunue the fake economy. We are now seeing the “real” economy without the paper to support it. It isn’t pretty.
I have said for probably a year that I believed we would likely see the worst recession of our lifetime this time because I saw no other assets to leverage to falsely support the economy. I still believe this is the correct view, unfortunately. Economies cannot grow long term unless real incomes increase. Real incomes cannot increase unless countries are buying our goods rather than us buying theirs. I believe it really is as simple as that. Money has to flow in, not out. Like any business or family, if you have far more money going out than in, it will one day prove disastrous. It is a simple matter of when.
This is why I have been harshly critical of “long term” holder strategy for the markets. I am 100% convinced this strategy ONLY works if real incomes rise over time. This increases consumption over time, and increases profits, over time. If those incomes do not increase, then it is a false premise.
Bad Data Questions
June 27, 2008 12:12 AM
I am getting grossly different lows in the market depending on where I look. Does anyone know a reason for this? I have tried to determine if there is an official site with official data before, with no luck. Yahoo finance is showing the 52 week low on the Dow at 11,431.90. BigCharts is showing it at 11,508. Why in the world would this be? I have noticed far different opening price data before, but this is extreme. It is impossible to call direction without correct data.
Here is a what i am seeing on Yahoo Finance right now and the low totally seems wrong:
DOW JONES INDUSTRIAL AVERAGE
(DJI: ^DJI)
| Index Value: | 11,453.42 |
| Trade Time: | Jun 26 |
| Change: |  358.41 (3.03%) |
| Prev Close: | 11,811.83 |
| Open: | 11,808.57 |
| Day’s Range: | 11453.42 - 11808.73 |
| 52wk Range: | 11,431.90 - 14,280.00 |
A low of 11,431.90? When? What day? This makes no sense.
Market Plunge, Now What
June 26, 2008 11:39 PM
The market got crushed as has been my “feeling” after the Fed was over with. There were reasons for this, but mostly it was two reasons. i did not see any rejections of a low and I felt the shorts would try and take the market apart because the longs could no longer count on a rate cut to support the market. This is why I posted Tuesday that I “smelled the hammer”.
Ok, that is all history, now what to do is all that matters. Should you “buy cheap” as all the Talking Heads will be saying? One word, NO. Wait for a FIRM rejection of a low here. I would say the odds of this being over is slim and almost zero. Anything is always possible, but it is extremely unlikely. I would guess that the probability of going higher and not clearing today’s low eventually is far less than 1%, but just a guess. Be careful long unless you are scalping. A market collapse is not entirely out of the question but if that was going to come, it should have happened today, most likely. So I believe that is somewhat unlikely.
30’s Depression Talk: Is It Possible?
June 26, 2008 11:25 PM
There has been a lot of talk for the last 6 months that we may enter a 1930’s type depression. Is this a real possibilty? While I have been extraordinarily negative on the economy since last year (far more than most anyone not named Peter Schiff), I do not believe this is possible for two reasons. One we have pensions today to support the economy to some extent while they did not have any backdrop then. Second, corporations are global now and even if the U.S suffers severely they will likely not go under.
The only possibility I see of a 1930’s type depression is a total and complete collapse in the dollar. With the current policies this is not a complete impossibility. We have massive inflation that is not reported in the new inflation formula. We have trade deficits that the world has never seen before. We have likely trillions in government pension deficits on the state and federal level not being reported. This all bodes very, very poorly for the dollar long term unless we take drastic action and now.
The problem with taking drastic action regarding trade is that is one of the reasons for the original depression - protectionism. But I believe this is far different. This is not a matter of not wanting to trade to save jobs or protect rights, it is a matter of fair trade and trading with equals. We are trading with so called third world countries that make pennies an hour. The only way we can compete is to also make pennies and hour, less the differential in shipping. This is not good and I see zero benefit in trading this way. It is a massive net negative for the U.S long term, and who are we supposed to be looking out for? Last I checked, we elect people to look out for our welfare, supposedly.
RIMM Shows Who Holds The Risk In The Market
June 26, 2008 10:23 PM
I have mentioned before that the people that hold the risk in the market are the “long term holders” of stocks. The brokerage firms that trade do not bear that risk as they do not own large positions, unlike individuals. If I had to take a wild guess, the big firms made money today shorting the stock while Joe Public lost big. I believe it HAD to hold $127.63 today. Once that cleared the rout was on again. I am not sure where this will stop. It most likely will stop the same time the market reverses. So we will have to wait and see.
But do not think this makes the case for “valuation” investors or traders, it doesn’t at all. I do not recall when it was, but a friend of a friend shorted RIMM before earnings a while back because he was convinced that the company was “grossly overvalued”. The stock skyrocketed after earnings and he supposedly lost everything he had. I just see no reason to take that risk, what is the point unless you like to gamble and put it all on black. Let earnings come out, see the reaction and then react, when appropriate.
News changes supply and demand and you have to understand what is going on when there are gaps lower like today on RIMM. If you do not understand the gap reaction and what was below, buying today was more than foolish, it was donating.
Market View: Tuesday’s View Of “I Smell The Hammer” Proves Correct
June 26, 2008 10:14 PM
I have repeatedly warned that I wanted a new rejection of a low to have any confidence in the market. Well, we got a new low in a big way. I am a little suprised it only fell 350 to be honest. I have also long warned and OFTEN that I believed the market was 100% wrong about the economy and 100% wrong about the housing and credit issues. Like I have said, this is a fundamental problem, not a cyclical one as people believe. This is not easily going to be fixed. But one thing is certain, we have to make a drastic change in course in trade policy or this is going to get far worse long term.
Anyhow, back to the market. We still have to see a strong rejection of a new low for me to have any belief on ANY level we can hold a level. I find it very unlikely we will see a reversal tomorrow. Possible, I just find it unlikely. I want a total and complete panic washout and a rejection of a low. If we get that we “may” make a bottom, at least for now.
GM: Yikes, 1953 Low
June 26, 2008 10:34 AM
GM is getting crushed yet again. Rumors are swirling that there there will be a Chapter 13 on an auto company because of oil. That would not surprise me as U.S auto manufacturers make their margins on trucks and SUV’s. They sell cars, well a few, but they do not have any margin. If they cannot figure out how to make small cars profitably, they could be in big, big trouble.
Market Today: The Close Is All That Matters
June 26, 2008 10:20 AM
I have been skeptical of the markets for a while now as I have mentioned. I am not sure where we are going today. We have the March lows in the Dow below, so trading today is risky I believe. This should get very, very volatile into the close, IMO. Unfortunately today may be all about oil and March lows, so this could be very difficult.
Watch The Gap and 1305.25 Early
June 26, 2008 9:35 AM
Mondays low was 1305.25? I believe. Be careful in that area early. I need to see how this gap reacts to have an idea of the market is going to get crushed today. It looks like this is going to be about the dollar/oil today. If oil clears the high, panic will likely come as oil would likely skyrocket.
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