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Thank you. Today's housing report is analagous to the "green shoots" stories from early 2009. If it's the beginning of sustained increasing gains in housing starts, it's meaningful. If it's just a 9.3% rebound from absolutely godawful levels, then it's meaningless.
I would agree with what Eric said. AA is a solid company. Your risks in owning AA are 1) China goes into recession and 2) we revisit the liquidity crisis of 2008. I'm bearish on the world economy, but neither scenario is likely at this point. I think there's value in AA at today's prices.
Would I rather buy AA at 8 than 8.50? Of course, but I'd rather own silver at 25 than 28 and yet I'm still interested at 28.
Let me put it this way, I'd rather own AA at 8.50 than BAC at 4. I'd rather own GE at 17 than GS at 75. I'd rather own SLV at 28 than MS at 12. At least I could sleep at night.
If it makes you feel any better I'm getting interested in buying AA and I'm uber bearish.
BAC finally fell below $5. Currently $4.93. Bob Pisani was on CNBC talking about the lack of data on how many funds have by-laws forcing them to sell stocks that fall below $5.
I'm getting a kick out of pundit comments today. Essentially they're all saying that the market doesn't like the details of the EU agreement. That implies that no one read the details on Friday. Why not just admit that traders are playing the momentum game?
There was no deal Thursday and sentiment was negative, so they sold off. New deal on Friday, short covered and traders pushed the market higher. Nothing to support a rally Monday so the market sells off. It's a momentum game.
On an unrelated subject, CNBC put up a chart of gold in Euros at noon. All I saw was "Gold" and a price of 1260 and I froze like a deer caught in headlights. I tried to think of a reason for a $500 drop. Then I noticed the "in Euros" description and realized gold was only down $50 on the day. Most trading floors play CNBC on mute so I'm sure a few traders' hearts to skip a beat when they saw that chart.
Brutal day to be short financials. I'm sticking to my guns but I know regret not taking profits when I was up 20%.
Not "4", "4 handle". 4.99 is a 4 handle and that's only 1.5% away from the current price. But I'll be a little bolder than that and say I think it will hit 4.50 once it breaks below 5. That's just a function of the resistance at 5 and the sell order that will be triggered once it breaks through the $5 barrier.
BAC is underperforming against other financials which in themselves are underperforming the market. I wouldn't be surprised to see a 4 handle in BAC's stock price by the end of the weak. If anyone is still holding BAC, I recommend getting out now.
Just want to point out that banks have consistently underperformed the market the past three weeks. My biggest fear was the impact of strong Black Friday sales and that storm has passed. Now it's all about Europe, the Euro and QE3. I think Europe is fucked, the Euro is in danger and QE3 will be non-event if it even happens. I also think the surge in oil is going to suck the life out of the US consumer.
Interesting. Looking at today's rally in financials I guess European sovereign debt downgrades and increased borrowing costs for Eurozone members are a good thing.
Yeah, I guess I am. I also remember Chernobyl, the Challenger explosion and the AOL Time Warner merger. I'll let you decide which was the biggest disaster.
I'm reminded of the 2004 election where political pundits suggested that if the race were between "Bush" and "Not Bush", "Not Bush" would have won in a landslide. But it was a race between Bush and Kerry and voters weren't impressed with Kerry.
I think that's what we'll see in 2012. If it was "Obama" vs "Not Obama", "Not Obama" would win easily. But when you substitute Romney or Gingrich or anyone else, the math changes in Obama's favor.
Romney has been the most consistent and bankable of the group, so I think he'll be the 2012 Republican nominee. Conservatives aren't happy with him so he's going to have a pick a conservative running mate to have any chance of winning the general election. And that's where the risk is. If Republicans run too far to the right, they'll turn off swing voters and Obama will win.
SKF is having its moment in the sun, but it's still a horrible long term trading vehicle. All of the levered ETFs are because of embedded optionality and time decay. I just hope I hit my target before sentiment turns bullish again. Realistically, I probably should have used FAZ since it's just as flawed as SKF but with 50% more leverage.
FDR was re-elected three times despite unemployment rates well above 8%, but BHO is no FDR.
A lot of very smart people are short EUR / long USD. And until today the EUR has been remarkably resilient. On CNBC today one of the guests remarked that he covered his Euro short simply because the trade was so crowded and it wasn't working. Obviously he wasn't very happy about today's drop.
I don't know where the EUR is headed, but I can remember a time when the EUR was at parity to the USD. I can even remember when it only took .85 USD to buy 1 EUR.
I agree. BAC is in a death spiral. I can't get over how much the news flow is turning against financials in general. The German bond auction flop was quite a surprise. It seems investors are shying away from Euro-zone sovereign debt regardless of which country it is.
Yes, it has. Also the details on the IMF plan aren't what the market expected. It's funny, I'm up about 20% in two weeks on my SKF trade and normally I'd take the money and run. However, so many factors are aligning in my favor that I'm going to let it run for a while before I put in a stop.
The IMF is creating a $500B line of liquidity to break 'chains of contagion.' The market rallied tepidly on the news but we're still in negative territory across the board. A month ago the market would have rallied 100 pts on this kind of news but now it's almost a non-event.
BAC is now 5.36 and approaching the critical $5 level. Sub-$5 stocks are not margin eligible and many funds have policies restricting ownership of sub-$5 stocks as well. So if anyone is a BAC holder, be aware that it could drop like a knife once it breaks through $5.
I think the over/under is -275 on the Dow. I'll go out on a limb and call -350. I would be shocked if we closed even.
I was certain the super committee would fail. Recent elections have polarized the legislature and the looming election will likely punish centrists and compromisers. The best strategic move for many congressman is to refuse to compromise and blame the other party for not reaching a deal. And that's the fundamental problem with the political landscape right now: it's better to harm the country and get re-elected than help the country and lose.
I agree. I've been surprised how some pundits have casually mentioned the possibility of $5 gas. I remember when I drove from Houston to Kansas City in May 2008. The average price was something like $4.30/gas during that trip. Every time I filled up it was $50-$60. And I filled up 4 times that day!
I still rememeber the stories in my area of mass trade ins of SUVs for more fuel efficient cars. Consequently, I don't understand why the rise in oil prices isn't tempering the bullish sentiment of the guests on CNBC. It's almost as if they live in the same mythical world as the Fed where food and energy prices don't factor into cost of living.
It's a sea of red: equities, oil, gold, silver. As usual financials are particularly weak. I'll be interested to see what happens tomorrow. CNBC has been talking about the importance of 1215 on the S&P 500 as a key technical level. Obviously I'm hoping we close below 1215 and take another leg down Friday.
Window dressing is a quarter end phenomenom which benefits winners and hurts losers. Investment managers are usually under the 60/40 rule not the wash trade rule which governs small investors. Despite efforts to level the playing field, institutions drive stock prices, not individual investors.
My point is that I think the movements in banking stocks aren't the result of quarter end window dressing, but symptomatic of underlying weakness in core business lines and exposure to European sovereign debt.
In the interest of transparency, my limit sell on my most recent acquisition of SKF is 90. That price represents a 50% premium from my purchase price and I expect to hit it within 6 months. Normally I would think making 50% on a position in 1/2 a year was insane, but that's how pessimistic I am on major financials.
The risk is that US economic data will be bullish in the short term. Even though I'm more exposured to European issues, I don't think we'll see upside surprises from the European continent. I think the odds are in favor of negative news from Europe but that can be negated by positive news from US consumer spending. I'm bearish on US holiday sales but analysts are expectations are low so even a modest uptick could trigger a short covering rally.
And even though I'm not making bets on retailing, financials are highly dependent on consumer sentiment and perception of the stength of the US economy. Consequently, my biggest threat is bullish US retail data, not bullish European data.
Like I said, my sell target is 90 on SKF. I may modify it based on market conditions, but I absolutely hate financials right now.
Speaking of financials, they're consistently underperforming the market. I'll be interested to see what happens when we have a sharp move lower in the broader averages. And I'm not talking about a puny 160 point move like we're seeing today on the Dow.
That would require Buffet to value unbias honesty above his political views. That's not going to happen. And I don't mean that as a slam against Buffet's character. I'm just pointing out that he's made a calculated decision to advance his political views on taxation at the expense of full transparency.
I have no doubt that he pays a lower income tax rate than his secretary. But that is because his income is primarily dividends and capital gains while his secretary's income is primarily wages. Buffet believes that the rich should be taxed at a higher rate on their wage income and he phrases his comments to further that objective.
Buffet knows that sound bites are more influential than nuanced arguments. And the fact that he's going to be largely unaffected by increases in tax rate on wage income makes it easier for him to advance that argument. While his statements are misleading and somewhat disingenuous, they're consistent with his political objectives.
Examples like this are one of the many reasons I've become jaded with politics over the years. I've seen people manipulate statistics and facts to advance a political view that isn't supported by an unbiased assessment of empirical evidence. And yet these partisan hacks are able to sway public opinion because the average person doesn't do any due diligence. They hear a sound bite supported by a misleading statistic and they believe it. It's infuriating but it happens every day.
And even though I'm very Republican leaning in my politcal views, I see the same thing happening in my own party. Every few years I see a resurgence in the flat tax idea. While I favor a simplification of the US tax code, it is not possible to enact a revenue neutral flat tax without increasing the real rate paid by lower income earners. And while I believe that the current system is insanely skewed to advance social objectives, I do believe that progressive taxation rates are a net benefit to society.
Hey Alex, I have a free account so I can't respond to either of your PMs but they are absolutely hilarious. Would you mind if I posted them for the forum's amusement?
Alex, you're a pseudo intellectual who couldn't seriously debate me if your life depended on it. The articles you post are intellectually dishonest partisan crap and pop culture drivel. I've seen better political commentary scrawled on bathroom walls. In short, the content of your posts is unpersuasive and unimpressive.
Even if I ignore the content and simply judge you on style, your rhetorical skills are severely lacking. "Poor dear" is something an 80 year old woman would say. Your sarcasm is juvenile, uninspired and reveals you to be an angry little man with a room temperature IQ. It is clear from your posts that you are someone who is undeserving of serious consideration.
Oh, and I invite you to PM me your contact information if you would like to 'discuss' what I've said in person. I live in Houston.
And I'm sure you would display the same condescending bravado if we were face to face.
That's why Nick posted "OT" in front of the Paterno question. And even if he hadn't, it's his board and the overwhelming majority of his posts are investment related. He goes out of his way to educate members and provide actionable information. That's a helluvalot more than anyone could say about you.
I doubt the impact on the team/students was given serious consideration. This was a political decision calculated to reduce potential monetary damages when/if the University is sued.
I think Paterno and others at PennState should have informed police. Some indescretions can be handled internally, but not child molestation. I cannot understand how police were not informed.
As far as the firing, what bothers me is the dichotomy between the way questions regarding Paterno's firing and the child molestation allegations are being handled. The University is taking a "the buck stops here" stance with regard to Paterno and "we are not commenting on an ongoing investigation" stance with regard to the allegations. So, apparently, the observation of child molestation and failure to report it to police are not in dispute, but whether Sandusky is guilty of child molestation is not. Can someone explain that to me?
I don't think the tax code will be revised to eliminate the muni bond interest exemption. Doing so would have a disasterous effect on muni yields at a time when state governments are experience severe budget shortfalls. Any gains in short term federal tax revenues related to muni bond interest would be more than offset by trickle down loses in state/local spending and resulting job losses. I just don't see that happening, especially with Obama in office.
Yeah, unfortunately I don't own any rose colored glasses so I tend to see reality in a harsher light than the pundits/Fed. The good news is that the markets are no longer care about Greece. The bad news is they're not worried about Greece because Italy's 10 year bond yield is over 7%.
So we've moved from being concerned about a relatively small, containable sovereign debt crisis to a potential large, uncontainable sovereign debt crisis and yet we're a good 1000 points abover where we were when the only thing people were worried about was Greece.
Call me a bear, but I'm up 6.5% after 1 day on my latest SKF position and I'm just going to let it run.
Added to SKF @ 60. I absolutely hate financials in this environment.
Eric, have you herd any industry gossip regarding the reason for the abrupt departure of First Solar's CEO?
The US isn't in the same boat as the PIGS. US companies may default, but the US Government won't. What could happen is that political and economic realities will user in a painful wave of austerity measures that will plunge us into deep recession.
Allow me to translate the bolded part of the news release I just posted. Because UBS' debt is trading at a discount in the market, UBS could theoretically retire its debt for less than book value. That highly improbable theoretical scenario allows them to book a gain. This is an unintended (and absurd) consequence of FAS 157 and mark to market accounting. Taken to an extreme a company on the verge of bankruptcy could book gains on the declining value of its bonds up until the moment it declared bankruptcy.
If Greece was allowed to record GDP the way UBS records earnings, there wouldn't be a European debt crisis.
UBS said Tuesday it will report a third-quarter net profit despite $2.3 billion in losses stemming from a trading scandal and hefty restructuring charges.
The bank, which had previously warned that the loss from the unauthorized-trading incident that hit the bank last month could result in a group-wide net loss, also said its wealth-management business has attracted fresh funds that should "be broadly similar to the second quarter of 2011."
Although UBS said it will also book restructuring charges of about 400 million Swiss francs, or $435 million, the bank said that widening credit spreads of UBS's debt will boost its earnings by around 1.5 billion francs. UBS also said it will report a gain on the sale of treasury-related investments of approximately 700 million francs in its Wealth Management & Swiss Bank division.
"UBS's capital position remains strong and its capital base at the end of the third quarter of 2011 is expected to remain broadly in line with the balance at the end of the previous quarter, including the loss associated with the unauthorized trading incident," the bank said.
Yeah, I'm not a fan of FAS but with the huge intraweek volatility in banks there's definitely money to be made on the levered financial ETFs. I remember joking with people in 2008 that October was a good year. I don't know if we'll routinely see 5-10% intraday moves in the Dow like we did in 08, but vol is definitely going to increase.