Ander's Market Theories (AMKTH)

[AnderL]

sold a bunch of currencies for the overnight. AUDJPY AUDUSD USDJPY

[AnderL]

most of it has been interbank trading to make market, walk it up if you will. I expect that once it hits a psychological threshold retail buyers will get in at the point when the banks will start to redistribute.

[Stock]

the move has been slow, steady and still low-ish volume

this make me nervous. i'm sure many have similar feelings

[AnderL]

its double down syndrome. place bigger bets take on more risk to get your investments out of the hole.

some anecdotal information. lot of people in the office are talking that now is the time to start buying stocks. implying they have not been doing so over the past couple months.

[Stock]

I'm amused how the dow jones commercial real estate index is up nearly 50% from the March lows... in the face of some of the most negative news people can imagine about commercial RE including GGP bk, GSCO and other banks announcing commercial write-downs, other bad news...

Oh, and I think it's headed for 140, another 10% from here

[AnderL]

isn't being reflected in share price. meaning that share price is not breaking out with the reduced volatility.

[Stock]

vix below 35

[AnderL]

US Dollar is also collapsing against the Yen and all other currencies (GBP, AUD, JPY).

Yen is rallying against all other currencies.

EUR is weakening against the USD

So this is a global market turning point.

[AnderL]

if GBPUSD breaks 1.48 then expect a run on dollars which should start a run for bonds which means a correction in the US stock market. AUDUSD is already at that critical point. Seems like the weekend might be a minor cross roads.

[AnderL]

I'm sorry I might not be sure in your meaning. We all attempt to speak for ourselves but the topics have their foundations in other people's words.

I'm making a statement about trying to perceive a rational foundation for the perception of value and try to dismantle some of the common justifications for why gold should be $1000, $2000 10k etc.

[Myis]

Are you speaking for yourself and demonstrating it in the post?

[AnderL]

too many people look for cycles to appear but they think that its like a memorex commercial it has to be exact. Gold to some astronomical number, confiscation of coins? Hardly.

gold has not been a common place coinage for decades. One of the reasons FDR seized gold was to prevent its use as an alternative currency amidst the collapse in faith in the US currency during the Depression. Reference Zimbabwe today. They could have resorted to seizing all foreign currencies and left their people to use Zimbabwe Dollars. The dollar has fallen 50% off its top in 1999-2000 to its recent low and people did not panic and drop support of the dollar. I believe that inflation would have to reach 20 to 30% month over month to cause concern.

But I can see it as a trade.

[Myis]

I think you might be absolutely correct.

[AnderL]

gold backtest of 900 and now dropping. targeting 850 to 850. this decent might build up momentum into a capitulation drop. So while 855 should be reached I think there might be some momentum to extend the run further as little as 840 to a maximum of 800

[AnderL]

How to Puff Up Earnings, Goldman Sachs Style
Email this post Print this post
By Barry Ritholtz - April 14th, 2009, 8:07AM
http://www.ritholtz.com/blog/2009/04/how...

Leave it to the clever boys at Goldman Sachs to turn dross into gold: They have come up with a way to hide massive losses so clever, it requires special comment: The Orphan Month.

Yesterday, we noted that the bulk of their profits had come from AIG transfer payments — the theft from taxpayers AIG 100% payouts funded via bailout monies that saw Goldie as one of the largest recipients. Floyd Norris notes that most of the AIG effect was in December. “For the first quarter, the total A.I.G. effect on earnings was, in round numbers, zero.”

How is it possible that this occurred? Isn’t GS on a December to February calendar? Well, there is a small asterisk about that. It seems that GS is moving from a December to a quarterly calendar. Meaning their latest Q is January thru March.

But what of December, with all t he AIG monies and the comparison to the strong December 2007 and all?

In a word, Orphaned:

Goldman’s 2008 fiscal year ended Nov. 30. This year the company is switching to a calendar year. The leaves December as an orphan month, one that will be largely ignored. In Goldman’s news release, and in most of the news reports, the quarter ended March 31 is compared to the quarter last year that ending in February.

The orphan month featured — surprise — lots of writeoffs. The pre-tax loss was $1.3 billion, and the after-tax loss was $780 million.

Would the firm have had a profit if it stuck to its old calendar, and had to include December and exclude March?

Truly astounding . . . the word Chutzpah simply does not do it justice . . .

[AnderL]

gold needs to break 882 for this bounce to continue to the upside. Otherwise back to test 860-865 again.

[AnderL]

currency traders are out and about on the financial shows touting long GBP and USD against other currencies. Short JPY and EUR in those orders. Thus GBP is stronger than USD and all other currencies and EUR is stronger than JPY but are weaker against all other currencies.

[AnderL]

gold got a good bounce on that trendline touch at the low of 865. if it finds support then it should rally up to 880 I think. But IMO 843 is a magnet. A backtest of 882-890 is in over before further downside. We might not see over 900 for a while. Not until this fall-winter.

[AnderL]

this latest move is unsustainable. its parabolic against they yen. but understand that BOJ has not been issuing liquidity. it is one of the few countries that has. Japan has little room to maneuver. You should expect Yen strength, or what we are seeing is Japanese investors against dumping their savings and gold and running for leverage in carry trades and foreign markets.

We might be in a capitalization move this Monday. I won't know until just before US markets open. But I do see markets across the board, currency, bond and indexes hitting significant resistance this week. So the question is consolidation or intermediate top?

[AnderL]

So gold is on its way down to the 840-860 range but AUDUSD is breaking out. So this is not a gold run but a dollar depreciation. USDJPY is still gaining strength and carry trade lights up. I'd like to think that people would come to their senses and realize the Emperor has no clothes but we all are blinded by profits over sensibility, myself included.

[AnderL]

Per your PM. I can't do it and I refuse pay a memberships.

Natural gas hit seasonal lows in the summer months when demand picks up. They don't have the same supply glut that crude would. So the freeze up is closer to the supplier and not distributor. So distributors aren't hurt and can weather this weakness. I can't say if it will go lower or not. The bottoming out process for all commodities is a long and slow process. Copper looks to have made a big move. Its a leading indicator of most other commodities or of inflation. So I expect most commodities to start moving up macroscopically, but still based on their seasonal cycles.

So Copper and Oil have moved. Next should be Natural Gas followed by Gold once it puts in a bottom this summer.

2 or 3 year contracts? That is a tough one to call. It is very weak right now. It could go lower but over the next 2-3 years it will slowly go higher. The economy is going to take some time to recover and financials do not have the ability to leverage the way they used to. So expect low levels of profits in most markets as everything grinds up slowly over the 3-4 years. It won't be until the end of that recovery before a lot of the debts will get resolved through writedowns and rising asset prices. Then it will come to roost. All that trapped liquidity will be free to move around the markets and we should see a lot of uncontrolled inflation.

So Its say a 2 or 3 year contract bought now will be good but the best ones will be those bought in 2 years from now even thoug they will be bought at higher prices. Maybe ladder them. By 1/3 of would you need in a 3 year contract now. next year by another 1/3 for another 3 years and then another 1/3 in the 3rd year. Ladders should smooth out and price spikes. Like a moving average. That is basically what you are doing.

[AnderL]

Gold is targeting 840-860 range between now and April 15th

[AnderL]

Dollar\Yen is grinding up since the 19th. Not sure if this is the preemptive of a future carry trade coming or not. Strength in dollars vs Yen only means that there is demand for US currency. Sell Yen buy dollar. Foreign money flow coming into the US. I would think that they would be selling treasuries, but they may be supporting the Fed in their consumption of them. If the Fed is willing to buy then the BOJ should be interested in doing so as well. Supporting the Dollar means that Japanese goods become more affordable. Get the US consuming again.

This wont end well. Long Dollar until at least 103.50. If it break out there then its off to the races and the Fed will start talking up inflation.

[AnderL]

I just came here to post this...

[AnderL]

Look at the summations in the IBOX. I don't trust this move up as a major bottom. Not enough divergence. This is similar to the sideways actions we saw just a year earlier. It will be a big bounce. NYA to 6300 Nasdaq to 1800 or there abouts. But we might see it tops there and range, or even a lower low for 2009.

2002 recession took over a year to bottom. We hit the first bottom in 2001 and then went sideways off of 2002 before moving higher and running for the finish line in 03. Lot of audited reports coming out where the numbers will have to jive. that will look ugly. That might be a buy signal on financials because the next year should be better when housing recovers and asset values level off. Lots of cash inflows through bailout money coupled with leveled off valuations means a lot of extra money to put to use.

[Stock]

This stub doesn't say that. Someone should edit it.

http://en.wikipedia.org/wiki/NBER

[AnderL]

So there is a bit of a lag....

November 26, 2001 -- The NBER's Business Cycle Dating Committee has determined that a peak in business activity occurred in the U.S. economy in March 2001. A peak marks the end of an expansion and the beginning of a recession. The determination of a peak date in March is thus a determination that the expansion that began in March 1991 ended in March 2001 and a recession began. The expansion lasted exactly 10 years, the longest in the NBER's chronology

CAMBRIDGE July 17, 2003 -- The Business Cycle Dating Committee of the National Bureau of Economic Research met yesterday. At its meeting, the committee determined that a trough in business activity occurred in the U.S. economy in November 2001. The trough marks the end of the recession that began in March 2001 and the beginning of an expansion. The recession lasted 8 months, which is slightly less than average for recessions since World War II.
http://www.nber.org/cycles/july2003.html

[AnderL]

NBER says its official US is in recession. lol. Remember 2002. When did the NBER announce the recession?

NBER: December 2007 Peak in Economic Activity

by CalculatedRisk on 12/01/2008 12:14:00 PM

The National Bureau of Economic Research (NBER) has decided economic activity peaked last year and that December 2007 marks the beginning of the current U.S. recession. That means all my charts (with the recession starting in Dec '07) are correct.

From NBER: Determination of the December 2007 Peak in Economic Activity

The Business Cycle Dating Committee of the National Bureau of Economic Research met by conference call on Friday, November 28. The committee maintains a chronology of the beginning and ending dates (months and quarters) of U.S. recessions. The committee determined that a peak in economic activity occurred in the U.S. economy in December 2007. The peak marks the end of the expansion that began in November 2001 and the beginning of a recession. The expansion lasted 73 months; the previous expansion of the 1990s lasted 120 months.
...
The committee believes that the two most reliable comprehensive estimates of aggregate domestic production are normally the quarterly estimate of real Gross Domestic Product and the quarterly estimate of real Gross Domestic Income, both produced by the Bureau of Economic Analysis. In concept, the two should be the same, because sales of products generate income for producers and workers equal to the value of the sales. However, because the measurement on the product and income sides proceeds somewhat independently, the two actual measures differ by a statistical discrepancy. The product-side estimates fell slightly in 2007Q4, rose slightly in 2008Q1, rose again in 2008Q2, and fell slightly in 2008Q3. The income-side estimates reached their peak in 2007Q3, fell slightly in 2007Q4 and 2008Q1, rose slightly in 2008Q2 to a level below its peak in 2007Q3, and fell again in 2008Q3. Thus, the currently available estimates of quarterly aggregate real domestic production do not speak clearly about the date of a peak in activity.

Other series considered by the committee—including real personal income less transfer payments, real manufacturing and wholesale-retail trade sales, industrial production, and employment estimates based on the household survey—all reached peaks between November 2007 and June 2008.

There you have it - the U.S. economy has officially been in a recession for one year.

[Stock]

So, did the bond long term bull start January 2000? Or July 2007? My pitchfork is not exactly accurate, it was hand drawn. I don't have a SC subscription to use their tool on any charts more than 3 years old.

[AnderL]

well economy is nearing fair value. Problem is that those metrics could go lower. But 1949 was a good year for the start of a secular bull trend. But are we in 1949 or are we somewhere between 1930 and 1948? My guess is that if we count the Asian credit crisis as the start of all this and the start of 1999 market crash, then everything going forward has been part of a overall global contraction with Japan heralding this. That means that pre1999 credit was being supplied because there was actual demand for it.

Post 1999 the credit expansion has been due not because there was demand but to oversupply the market and make credit cheap and available to even those who do not necessarily need or understand it.

Cheap credit made more participants but increased over all risk. Global participants are unconsciously aware of this and are rebuffing the liquidity in credit. That is why the majority are ok with tax increases and reject bailouts. The mindset is returning to a preservation of capital focus. This is health activity and will support another new secular bull in 5 to 10 years. I think we are about midstream through this phase. The next 2-5 years will be truly ugly. But while the midset gets worse the actually economy will get better.

[Stock]

US ISM: Prices Index Lowest Since May 1949
Last update: 12/1/2008 10:02:43 AM

[AnderL]

interesting. I'm on watch to see it this bottoms, or confirms one, in the next week or two.

[Stock]

AnderL, I've been studying this chart off and on all week.

Not sure, but this seems to be telegraphing something (of long term importance?) to me.

Today's close.


Thursday close.


Wednesday Close.

[Stock]

The Almanac issued their fall signal "with a grain of salt"

#msg-33207692

Goldilocks, 8, Economic Pioneer, Dies 10/23/2008

Weekly Changes
DOW 8691.25 -288.01 -3.21%
S&P500 908.11 -38.32 -4.05%
NASDAQ 1603.91 -113.80 -6.63%

Goldilocks, beloved daughter of the modern economy, died peacefully at her Greenwich, CT home this morning. She is survived by her father, Alan Greenspan, and her adopted siblings the three bears. She will be best remembered for economic developments such as the “jobless recovery,” exotic derivatives and grossly irresponsible lending and borrowing. Goldie, as her closest companions referred to her, brought much joy to the lives of millions of borrowers as well as a legion of financial gurus. Moreover, she managed to completely eradicate risk on Wall Street.

Born in late 2000 in a run-down tenement in Silicon Valley to Mr. Alan Greenspan and his wife Pollyanna, Goldilocks gained notoriety in 2002 helping the domestic economy claw out of a recession using her flowing locks to cushion the fall, creating a soft landing. Prosperity followed as boardrooms across the country soon found themselves rich beyond their wildest dreams. Wiping his tears with a hundred dollar bill, a CEO of a major financial institution attending the memorial service gave a touching eulogy remembering the time that he and Goldie spent a two-week getaway in the Greek Islands aboard his yacht “SarbOx”.

Bedridden since early October, Goldilocks had been suffering from pneumonia thought to be brought on by the freezing of the credit markets. Vigorous efforts by Doctors Bernanke and Paulson, two of the economy’s eminent physicians, failed to revive the stricken little girl. Goldie’s three closest companions, the three bears are enraged. Papa bear, hot under the collar, stated at the memorial that he intends to make those responsible for the death of his darling Goldilocks pay. Mama Bear coldly stood by his side while Baby Bear stated that whatever happens to the stock market will, in his eyes, be “just right.” Rest in peace Goldilocks. We on Wall Street will remember you fondly.

In all seriousness, this morning’s testimony by Alan Greenspan marks the end of an era. Once the darling of the legislative branch, Mr. Big Stuff faced a hostile barrage of questions by Senators eager to get to the bottom of the financial fiasco. Unfortunately, there is only one answer to how we got into this mess, and the Senate refuses to acknowledge it. A noxious mixture of greed and stupidity on the parts of not only banks and Wall Street executives, but their constituents as well. The economy and the markets now find themselves in truly uncharted waters.

The truth is that they can throw another $700 billion down the rat-hole and it isn’t going to magically fix things. What needs to happen is comprehensive reform of the shadow banking system. Dub it socialism or deride it as an assault on the American Way, the truth is that the system is fundamentally broken and is in a state of disrepair that cash infusions cannot fix. Until Joe Plumber, nee six-pack, has faith that something tangible is being done and the Masters of the Universe are behaving properly, the stock market is in for a bumpy ride.

We issued a MACD buy signal, but it must be taken with a grain of salt. We are not advocating jumping whole-hog into the markets. Rather, we are monitoring developments with a bullish bent. Currently, there is blood in the street, but the sucking chest wound is not being properly treated, and until medics dress it, stocks don’t stand a chance, seasonal MACD buy signal or not.

President Bush is meeting with the leaders of the G-20 nations November 15. Although this meeting should have already happened, and waiting another month is unconscionable, it is a course of action that is likely to help. Reform the system first, and then flood it with cash; simply pumping money into it is futile.

Please Trade Carefully.
J. Taylor Brown, Director of Research

[AnderL]

that's interesting analysis about February. Kinda throws against the wind the whole 'Sell in May' theory. At least this has some logic behind it. But there have been a lot of firings in the hedge funds industry already. Its such a disaster that they are just letting everyone go as damage control. So should we wait till Feb?

[Stock]

WSJ: Ignore the Stock Market Until February

The current volatility is less about fundamentals than forced selling.

By ANDY KESSLER

OPINION

http://online.wsj.com/article/SB122714126820842751.html

Down in the morning, up in the afternoon. Or is it the other way around? The topsy-turvy stock market is tough to read.

In the last year, the Dow Jones Industrial Average has briefly been over 13,000 and below 8,000. The past month has felt like the Cyclone roller coaster on Brooklyn's Coney Island -- lots of ups and downs, the whole rickety thing feeling like it's going to crash at any minute.



Great investors are taught to listen to the market. Each tick of the tape has something to say about expectations for growth, inflation, policy changes and looming recessions. The stock market is like a giant mass of pulsing plasma doing price discovery and a game of hot potato, getting stocks into the correct hands with the right risk profile. It's way too big for any one person to manipulate, let alone touch directly. Instead, millions of us provide input with our buying and selling decisions.

When it's at its most efficient, with buyers and sellers neatly matched up at the right price, it's a pretty good predictor. The Crash of 1929 announced a recession, and the wake-up call unheeded might have caused many of the bad policies leading to the Great Depression. The Crash of 1987? Not so much.

You see, the market is a great manipulator. In September, the Dow dropped 700 points intraday after the House of Representatives voted down the Treasury's TARP bank-rescue bill. Spooked, the House passed the bill the next week. Or how about this? The Dow was up 300 points on Election Day applauding an Obama victory and then down 1,600 points since.

The market can also be a bold-faced liar. On Jan. 22, the Fed announced an emergency 75-basis-point rate cut in response to huge drops in European markets. A few days later, it came out that a rogue trader at Société Générale lost them $7 billion and the bank was unwinding his positions. Oops.

So which is it now: an efficient mechanism or a manipulating liar? Should you listen to it warning of doom or anticipating renewal? I'd say stick wax in your ears and don't listen to the market until February.

Don't get me wrong. The freezing of the credit markets is wreaking havoc on the world economy. Corporate profits are dropping. Central banks are fighting off deflation and may not turn off the spigots fast enough -- which could ignite runaway inflation. But because of the credit mess, I am convinced the stock market is at its least efficient today. Don't read too much into any move. Here are the five biggest dislocations taking place:

- Tax-loss selling: Whenever you have a loss in a stock -- and who doesn't -- it's always tax smart to sell it, take a tax loss and either buy something similar or wait 30 days and buy the original one back. December can be an ugly month of indiscriminate selling. The December effect will be huge this year.

- Mutual-fund redemptions: Mutual funds are also dumped for tax losses. When the stock market is down in the morning, it's usually because of mutual-fund redemptions.

Fidelity's giant Magellan fund, down 56%, is one of many in the $6 trillion stock-fund business having an awful year. As investors call or click to get out of these funds, Fidelity and the others have to unload shares the next morning to raise cash. This forced-selling overwhelms the system. New York Stock Exchange specialists, who are supposed to maintain an orderly market, stop buying and back away. You get huge drops, which can unnerve even more investors and cause them to redeem.

- Mutual fund cap-gain distributions: To make matters worse, in December mutual funds do capital-gains distributions. In a down year like 2008, you would think there are no taxes to pay. Think again. Legg Mason's Value Trust, run by Bill Miller, outperformed the market for 15 years by buying many "unvalue" names like Amazon. As investors redeem, he is forced to sell many of these stocks originally purchased at very low prices, triggering huge capital gains in a year his fund is down 62%. You can almost guarantee investors also will sell more of these funds to pay their unexpected tax bill.

- Hedge-fund redemptions: Instead of overnight selling like mutual funds, hedge funds typically require 45 days' notice for investors to get out of a fund. They've been furiously selling since September to raise cash to pay investors. This usually shows up as a set of stocks that just go down and down and down with no obvious explanation.

Rubbing salt in hedge-fund wounds is the fact that Lehman Brothers was a prime broker to many hedge funds, holding their shares. While Lehman's bankruptcy was not a problem in the U.S., in England the policy is to freeze accounts until the mess can be sorted out. There are billions in assets locked in this bankruptcy, and hedge funds are forced to sell positions in the U.S. and elsewhere to raise cash, exacerbating the downside here.

By the way, when hedge funds are down for the year, they work practically for free until they make up the loss. We'll see hedge funds close and stocks liquidated as -- no surprise -- hedge-fund managers like to get paid.

- Margin calls: Whenever stocks go down sharply, you quickly find who owns them with debt. We have seen spectacular margin calls, a requirement for more capital to cover share losses. Chesapeake Energy CEO Aubrey McClendon unloaded 33 million shares to cover losses. Viacom CEO Sumner Redstone had a forced sale of $400 million in Viacom and CBS shares because of a margin call on other stocks. You can bet many not-so-public margin calls are behind many huge price drops. These usually take place in the last 30 minutes of trading.

So won't January be alright once these dislocations weighing on the market are lifted? The January effect is supposed to be positive.

Well, often money managers are fired at the end of disastrous years. A new manager comes in, looks at the existing positions and dumps them all and remakes the portfolio with new stocks that he likes, thus generating more selling. My favorite Wall Street adage suggests that the stock market trades to inflict the maximum amount of pain. Remember, you can only ignore the stock market for so long. Once everyone thinks it can only go down . . . it might go up.

Mr. Kessler, a former hedge-fund manager, is the author of "How We Got Here" (Collins, 2005).

[Stock]

Jesse Lauriston Livermore - From Wikiquote

Jesse Lauriston Livermore (1877 - 1940), American financial speculator.

Attributed

"In a bull market your game is to buy and hold until you believe that the bull market is near its end."

"My dear boy," said old Partridge, in great distress "my dear boy, if I sold that stock now I'd lose my position; and then where would I be?"

"It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!"

"Men who can both be right and sit tight are uncommon."

"The market does not beat them. They beat themselves, because though they have brains they cannot sit tight."

"He really meant to tell them that the big money was not in the individual fluctuations but in the main movements that is, not in reading the tape but in sizing up the entire market and its trend."

"Obviously the thing to do was to be bullish in a bull market and bearish in a bear market."

"When your security is acting right, you can safely add to your line from then forward!"

"When I buy stocks for a rise I like to pay top prices and when I sell I must sell low or not at all."

"When this happens I sell the stock short that is, technically. In other words, I sell more stock than I actually hold."

"Experience has proved to me that real money made in speculating has been in commitments in a stock or commodity showing a profit right from the start."

"It is literally true that millions come easier to a trader after he knows how to trade, than hundreds did in the days of his ignorance."

"If my stock does not act as I anticipated, I immediately determine that the time is not yet ripe – so I close out my commitment."

"The price pattern reminds you that every movement of importance is but a repetition of similar price movements, that just as soon as you can familiarize yourself with the actions of the past, you will be able to anticipate and act correctly and profitably upon forthcoming movements."

"From my point of view, the investors are the big gamblers. They make a bet, stay with it, and if all goes wrong, they lose it all."

"A great many smashes by brilliant men can be traced directly to the swelled head — an expensive disease everywhere to everybody, but particularly in Wall Street to a speculator."

"There is only one side to the stock market; and it is not the bull side or the bear side, but the right side"

Reminiscences of a Stock Operator by Edwin Lefèvre, the source work from which most of these quotations are taken. This is a newly edited and updated version for ease of online reading, with fully restored typography conventions and author's phrasing to accurately reflect intended meaning of the original published work. Hyperlinks to external references have been introduced to help clarify unfamiliar terminology and offer background context about key personalities and events mentioned in the text.

http://en.wikiquote.org/wiki/Jesse_Lauriston_Livermore

[AnderL]

I think it was Livermore that said that he remembers when the bottom dropped out in 29 where US steel was trading for $100 and the bid dropped out. Someone wanted to dump his shares and just asked for any bid. Either he or someone else came up and bid $1 per share. Bought all the guy was holding. Stock jumped to 50 by the end of the day. Those were the days. Markets rarely get that bottom dropped out selling, just a long slow decent into oblivion.

I've come to not trust financials. Not even for a trade. I think they are all tainted and will probably need a complete collapse before anything worth investing comes out of that industry. Probably in a decade or so.