Posted on 11/04/2002 5:34:24 PM PST by rohry
Market WrapUp for the Week Week in Graphs Storm Watch Geopolitical News Energy Precious Metals Raw Materials Monday, November 4, 2002 Johnny, It's Technicals, NOT Fundamentals October will be the fourth consecutive month that equity funds experienced monthly outflows. The momentum behind this rally has been lacking with fewer new highs, declining volume, and lagging momentum. Nonetheless, prices have risen. Volatility levels are now heading down rapidly showing that fear is being replaced by complacency. The spin coming from Wall Street doesnt jive with what CEOs are saying about future revenues and earnings. That doesnt stop The Street from calling a bottom to the longest running bear market since the 1930s. Everything about this rally has a false sense to it including its breakout, its continuation, and the way that actual news is being reported. Troubling events are overlooked; while the most superfluous events are overemphasized. A company such as IBM reports lower earnings and the earnings news is spun around to look better by emphasizing that the company beat moving lower targets. The companys warnings over future pension costs eating into this and next years earnings are glossed over. The story instead is that companies are beating estimates, which makes for a better story. No Illusions or Delusions Here
What is and What isn't SPEs: Blue Chip Skeletons The fact that the SEC is now proposing that companies report this off balance sheet debt and disclose the difference between what they report as pro forma earnings and their real earnings will paint an entirely different picture than what is widely reported today. A move in this direction, along with major contributions to pension plans next year, will not bode well for earnings. The current hype or hyperbole in this rally, which ignores actual earnings and the deterioration in the economy, reminds me of last year at this time when a strong rally emerged in the final quarter of the year. The rally was based on assumptions about earnings and economic growth that never materialized. When that reality set in during January, the result was a plunging stock market. Noteworthy to Watch: Falling Dollar, Rising CRB Index & Rising Interest Rates It is key for investors to keep their eyes on these charts of the dollar, gold, the CRB, and rising long-term interest rates. If this trend persists, we are headed for big trouble. The one missing element in this latest bear market rally has been the absence of a bond market rally. Bonds and stocks have begun to diverge. Unlike the late summer rally when both stocks and bonds rose in tandem, this time bonds have begun to sink. This means interest rates are going up. The dollars chart is looking weak; while the chart of commodity prices looks like it just broke a long-term resistance level. It's The Big Boys - Not the Little Guys The bottom line is that we are still in a bear market and this is nothing more than a bear market rally. If you are very knowledgeable in technical analysis and are adept at trading, this has been another opportunity to profit from volatility. If you look at the last two weeks of trading and count the wide swings from losses to gains, a measure of how unstable this market has become should be most prominent. Once again, if you are good at technical trading, then trade and profit from it, and hope that a ten-sigma event doesnt catch you off guard. There are plenty of potential candidates out there that could produce a rogue event that no one expects. Derivatives, terrorism, and war are three quick examples that come to mind. Unless you are knowledgeable and adept at trading with tight stops, this has become a very unstable and dangerous market to sail. An investor might do better adhering to or following the primary trend of the market, owning gold, defense stocks, and energy. If Buffett is buying natural gas, pipelines and silver, there is a reason. For those who are skeptical of the smartest investor of the 20th Century, he is still the second richest man in the world and his shares of Berkshire Hathaway have out-performed the stock market even though they are down slightly over the last few years. Today's Market Wall Street is still hoping they can draw the little guy back into the markets, but it hasnt happened so far. Fund flows were neutral as of the end of last week. Most of the little guys money is going into bonds just at the time that the bond market appears that it has topped. The preliminary report for October indicates that $9.5 billion flew out of stock funds last month making it the fourth consecutive month of outflows. Wall Streets new calendar of IPOs is also heating up, so the spin machine is likely to get louder. The ducks are quacking like they usually do, so the BS is going to get louder. Tomorrow the Fed will meet in Washington where it is widely expected that they will cut interest rates a quarter of a point. The 25 basis point cut has already been priced into the market. The Fed last cut interest rates in December of 2001. Tomorrow is also Election Day. The fate of the Senate and the future course of economic policy could very well be decided on Tuesday. The Republicans favor tax cuts, increasing national security and tax reform. The Democrats are in favor of targeted tax cuts, more spending, and expansion of unemployment benefits. The elections tomorrow will determine economic policy that will be drafted in response to what is looking more like a double-dip recession. Eyes Open, John Q Overseas Markets Asian stocks rose on expectations the U.S. Federal Reserve will lower interest rates this week to boost economic growth. Samsung Electronics Co. had its biggest gain in nine months. Hong Kong's Hang Seng Index climbed 3.3%, its biggest advance in three weeks. Markets in Japan, Singapore, Malaysia and India were closed today for public holidays. Bond Market Copyright © Jim Puplava |
Bradley Bliss
Intriguing talk at my sports club: former FedReserve employee beginning to believe this club has connected people. First the JPMorgan fraud rumor, now this guy. I had just finished a nice 3-mile run, entering a hot tub one man sat in the large soothing tub, my reward. I usually start up even some chatty conversation after talk of our workouts, this time I used some lame line like "strange times at work these days, things are slowing down." The guy sounded unusually bright and informed so I mentioned signs of deflation and inflation at the same time he bit, confirming I talked about goony CPI data, questionable USGovt data generally. He said something like "most treated govt data is very suspect" I told him I used to do Staples forecasting, Being in charge of seasonality, which I know to be a main source of deception, if used dishonestly. He nodded. I mentioned something deeper, citing the Median CPI put out by the Cleveland Fed is a much more reliable and accurate measure of price inflation, but might serve as a future indicator rather than a current reading. He agreed, acknowledging awareness, I showed enthusiasm, then asked his line of work He said, my name is RayH, and I work in a Forensic Financial Investigation unit ...we work in investigations of white collar crime to reveal evidence hidden in databases and email. For instance I used to work as an analyst in the Cleveland Federal Reserve for 20 years it was a valuable experience for me, one I would not trade now I am enjoying this forensic work much more, and it pays better. I was indeed impressed, nodded, and introduced myself. I said I have been watching the Fed from both a monetary/economic view, and a statistical view, having some friends in the past who were in Bureau Labor Stats, and now one in Office Mgmt Budget. I mentioned that I find a great deal of fallacious reliance upon heretical assumptions for economic policy, echoed by Fed statements like inflation producing levels of economic growth that fails to factor in Mexican labor he agreed completely. I told him about how the USGovt comes out with productivity numbers that defy all logic, due to absurd multipliers. He said, "let me tell you something about the Fed the Cleveland Fed has ALL of the quantitative analysis expertise inside the Federal Reserve system with 68 PhD's in all. The Fed Board has almost zero understanding of technology, nor its consequent productivity influence. An intense rivalry exists internally, between the Cleveland Fed and the others, especially the Board Chairman. They hardly ever yield to Cleveland on anything, and offer poorer analysis as a result. The lead analysts throughout the Fed dont even employ emails. ANYTHING GREENSPAN OR THE FED SAYS ABOUT PRODUCTIVITY IS TOTAL NONSENSE, BASED UPON NO UNDERSTANDING, MAINLY SPOKEN FOR POLITICAL REASONS. THEIR PRODUCTIVITY DATA IS TO BE TOTALLY DISMISSED. I said I read of their use of 18x multipliers to adjust for faster PC processors, faster computer servers, faster access of stored data, faster response of internet requests. He agreed it was total crap. I cited economist Roach who alerted me to the 18x multiplier he said "Roach is real real good people." I told him I didnt trust seasonal adjustments of Durable Goods, Jobs, or much else. Then I turned to JPMorgan. I told him of the rumor I heard from a friend who had a college chum in NYCity FannyMae, who claims a large-scale fraud investigation is underway against JPMorgan by US and NY Attorneys General. The fraud amount could be between $20 and $50 billion. He said "I would not be surprised, they are into all kinds of shady stuff." I asked if he were aware personally of the investigation? he said no, but did say this, JPMorgan would very easily commit fraud to hide their past deeper crimes, involvement with Enron and Anderson... so failing to set aside $20-50 Billion into loan loss reserves would fit right in... let me say this clearly, JPMorgan is not bigger than the system... if they warrant destruction, then nothing will prevent it. I told him of my following gold and currency and JPM's involvement with large short gold futures and derivative contracts. I told him of my expectation of a serious dollar crisis, and possibly a banking system crisis. he said "you should short JPM shares." I told him I would rather deal with the gold shares. He said "that will work also, clearly something very serious is underway, and will not resolve itself quickly or easily." I asked him if he thought a blur existed between JPM and the Federal Reserve itself, such as assumption of derivative books or foreign sovereign debt exposure? He said, "no, that is not possible, take my word." I asked if the "too big to fail" argument were real, or whether the "too big to bail" argument were more appropriate? He said "JPM will live or die according to their decisions and management of risk. But be sure to know that their mgmt know precise details of those Argentina, Russia, WorldCom loans and their performance." I said that JPMorgan may not be bigger than the system, but I wonder what you regard the system to be? He said the "US Government." I said I believe a system was larger than the USGovt. He asked what? I said "the Foreign Currency Exchange -- the FOREX" he nodded in agreement. I said I thought the USGovt and US System might receive a repudiation and slap across the face soon in the FOREX markets. He said "we just might." I said we have abused the monetary system for a long long time. He said "yes we have, unfortunately." I hope to bump into this guy again. He said he had belonged to my club for 30 yrs. I will run and soak in the hottub next week, same time.
Richard W.
This from the James Joyce Table:
The following comes from a friend of mine, whom I know to be reliable.
Bradley Bliss
Intriguing talk at my sports club:
former FedReserve employee beginning to believe this club has connected people. First the JPMorgan fraud rumor, now this guy. I had just finished a nice 3-mile run, entering a hot tub one man sat in the large soothing tub, my reward. I usually start up even some chatty conversation after talk of our workouts, this time I used some lame line like "strange times at work these days, things are slowing down."
The guy sounded unusually bright and informed so I mentioned signs of deflation and inflation at the same time he bit, confirming I talked about goony CPI data, questionable USGovt data generally. He said something like "most treated govt data is very suspect" I told him I used to do Staples forecasting, Being in charge of seasonality, which I know to be a main source of deception, if used dishonestly. He nodded. I mentioned something deeper, citing the Median CPI put out by the Cleveland Fed is a much more reliable and accurate measure of price inflation, but might serve as a future indicator rather than a current reading. He agreed, acknowledging awareness, I showed enthusiasm, then asked his line of work He said, my name is RayH, and I work in a Forensic Financial Investigation unit ...we work in investigations of white collar crime to reveal evidence hidden in databases and email.
For instance I used to work as an analyst in the Cleveland Federal Reserve for 20 years it was a valuable experience for me, one I would not trade now I am enjoying this forensic work much more, and it pays better. I was indeed impressed, nodded, and introduced myself. I said I have been watching the Fed from both a monetary/economic view, and a statistical view, having some friends in the past who were in Bureau Labor Stats, and now one in Office Mgmt Budget.
I mentioned that I find a great deal of fallacious reliance upon heretical assumptions for economic policy, echoed by Fed statements like inflation producing levels of economic growth that fails to factor in Mexican labor he agreed completely. I told him about how the USGovt comes out with productivity numbers that defy all logic, due to absurd multipliers. He said, "let me tell you something about the Fed the Cleveland Fed has ALL of the quantitative analysis expertise inside the Federal Reserve system with 68 PhD's in all. The Fed Board has almost zero understanding of technology, nor its consequent productivity influence.
An intense rivalry exists internally, between the Cleveland Fed and the others, especially the Board Chairman. They hardly ever yield to Cleveland on anything, and offer poorer analysis as a result. The lead analysts throughout the Fed dont even employ emails. ANYTHING GREENSPAN OR THE FED SAYS ABOUT PRODUCTIVITY IS TOTAL NONSENSE, BASED UPON NO UNDERSTANDING, MAINLY SPOKEN FOR POLITICAL REASONS. THEIR PRODUCTIVITY DATA IS TO BE TOTALLY DISMISSED. I said I read of their use of 18x multipliers to adjust for faster PC processors, faster computer servers, faster access of stored data, faster response of internet requests. He agreed it was total crap. I cited economist Roach who alerted me to the 18x multiplier he said "Roach is real real good people." I told him I didnt trust seasonal adjustments of Durable Goods, Jobs, or much else.
Then I turned to JPMorgan. I told him of the rumor I heard from a friend who had a college chum in NYCity FannyMae, who claims a large-scale fraud investigation is underway against JPMorgan by US and NY Attorneys General. The fraud amount could be between $20 and $50 billion. He said "I would not be surprised, they are into all kinds of shady stuff." I asked if he were aware personally of the investigation? he said no, but did say this, JPMorgan would very easily commit fraud to hide their past deeper crimes, involvement with Enron and Anderson... so failing to set aside $20-50 Billion into loan loss reserves would fit right in... let me say this clearly, JPMorgan is not bigger than the system... if they warrant destruction, then nothing will prevent it.
I told him of my following gold and currency and JPM's involvement with large short gold futures and derivative contracts. I told him of my expectation of a serious dollar crisis, and possibly a banking system crisis. he said "you should short JPM shares." I told him I would rather deal with the gold shares. He said "that will work also, clearly something very serious is underway, and will not resolve itself quickly or easily." I asked him if he thought a blur existed between JPM and the Federal Reserve itself, such as assumption of derivative books or foreign sovereign debt exposure? He said, "no, that is not possible, take my word." I asked if the "too big to fail" argument were real, or whether the "too big to bail" argument were more appropriate? He said "JPM will live or die according to their decisions and management of risk. But be sure to know that their mgmt know precise details of those Argentina, Russia, WorldCom loans and their performance."
I said that JPMorgan may not be bigger than the system, but I wonder what you regard the system to be? He said the "US Government." I said I believe a system was larger than the USGovt. He asked what? I said "the Foreign Currency Exchange -- the FOREX" he nodded in agreement. I said I thought the USGovt and US System might receive a repudiation and slap across the face soon in the FOREX markets. He said "we just might." I said we have abused the monetary system for a long long time. He said "yes we have, unfortunately." I hope to bump into this guy again. He said he had belonged to my club for 30 yrs. I will run and soak in the hottub next week, same time.
The Fed's productivity numbers make sense. Considering that our GDP has remained flat, and the considerable numbers of layoffs, that would account for the increase in productivity. What we need is some considerable economic growth to go along with it.
The whole oracle in the bathtub thing looks like desperation on the part of the bears to me. About the only hope they have is another very large terrorist attack.
Strictly seasonal...buy now, cash out last trading day of April 2003, stuff the loot in a matress/Gov't short maturity bond fund, etc.
Buy back in the first trading day in November og 2003.
Enjoy!!
Have you been reading any reports on slowing sales, layoffs, increasing private and public debt and high P/E's with declining profits lately? It is not a question of if the market is going south, only when.
Richard W.
I suppose that you consider Bernie Ebbers as just another capitalist victimized by the government. Here, read this and enlighten yourself:
WorldCom Fraud May Exceed $7.68B
Richard W.
The report also said the relationship between WorldCom and its primary investment banker, Salomon Smith Barney, was problematic. In particular, it cited evidence that a former Salomon analyst, Jack Grubman, told WorldCom in advance what questions he would ask in conference calls between securities analysts and WorldCom management.
Why is it that in every fraud investigation, Citigroup's and JPM's hands are all over it?
Richard W.
Such hubris from one so frail.
Whom the market gods humble they first make proud.
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