Up Goes the Dollar; Up Goes the Market
I sold all of my yen, via [[FXY]]. There is some sort of strange bullish tone spreading throughout Wall Street. It feels as if the confidence to take on risk is back and the sellers are on the heels, thanks to financial stabilization.
However, keep in mind, tight credit will permeate the economy for many months into the future. The problems we’ve seen at the banks will make its way into small business financing and industrial related names.
I realize everyone is pointing to India and China as the main catalyst to get long industrial names. But, don’t look now, China’s stock market is down 40% this year and have been under considerable inflationary pressures.
For the most part, earnings estimates of the S&P are way too high and need to come down. With the Dow only down 5% year to date, I believe there is another 2% tops of upside, while 10-15% of downside potential remains. Keep in mind, the bull case calls for the deflation of commodities, namely oil.
Well, oil and commodity related names make up more than 15% of the S&P right now, Considering how weak the financials are, do you, as a bull, really want to knee-cap the earnings of your lowest multiple/strongest group?
If so, expect the composite PE of the S&P to shoot through 20, making this market incredibly expensive.
All of that jargon is meaningless today. Right now, the market is running on increased optimism and momentum. I do not want to sell short the banks here. No yet. As a matter of fact, the only group I am comfortable with betting against is commodities, since the dollar is strong.
For now, my top picks are [[SMN]], [[DCR]] and short [[MON]].
The bearded clam is citing Andrew Mellon! He saiys he will not allow the markets to go down 10%/year and will do whatever is necessary to prevent that. THe PPP comparison says the stock market has gone down 10% every year this decade - what do you think of that, cumgoon?
April 2nd, 2008 at 11:02 amThe market is not allowed to go lower.
It’s all we have.
April 2nd, 2008 at 11:05 amSound reasoning. Game on.
April 2nd, 2008 at 11:06 amWhy is it, the most obviously crazy motherfucker in congress is also the only one who makes a damn bit of sense?
Odd, no?
April 2nd, 2008 at 11:09 amIts always makes my day to watch Ron Paul and Ben Bernanke go at it. Always sure to entertain in an otherwise dry meeting.
Update:
Oh damn, Kennedy just went apeshit on Bernanke. I almost shed a tear for poor Benny.
April 2nd, 2008 at 11:12 amWhat’s so strange about the bullish tone and renewed appetite for risk?
Leverage is what makes the magic money machine work. It certainly isn’t brains.
And, if it doesn’t work, Uncle Ben will come by to sweep up the nasty risk and take it away.
The Fed’s policy is working for now, but has anyone else wondered about the exit strategy?
April 2nd, 2008 at 11:18 amPoorOkie,
There is a fine line between crazy and genius. Unfortunately most people can assertion the difference.
April 2nd, 2008 at 11:19 amSeemed like Kennedy was getting excited, he started to fumble over his words.
April 2nd, 2008 at 11:22 amWhenever those stupid fucks in Congress get together to “do something” viz, “the Economy” on a “bipartisan basis,” I know it’s time to put my head between my legs and crouch for the blast.
That picture Bruce (? — I think it was Bruce) posted this morning of all those “bipartisan” asshats smiling together with that certifiably retarded casino goon Reid at the forefront almost caused me to lose my breakfast.
And I am “dead” serious. Those people are freaking dangerous. Dangerous!
April 2nd, 2008 at 11:24 amJust bot SKF after this post.
If you’re afraid to short banks — we’re at rock bottom.
In at 98.85
April 2nd, 2008 at 11:31 amWhat the hell is this idiot lady asking Bernanke about? She asked about “food stuff” and his “bag o’ tricks”? . . .
April 2nd, 2008 at 11:31 amMaybe, Sir Douchebag.
I prefer to buy into momentum, than catch the knife.
April 2nd, 2008 at 11:33 amWith you on that one, Jake.
There are few threats greater to the market or the economy than the efforts of a bunch of corrupt, morally inept, barely functional retards to fix a “problem.” Damn I hate politicians.
April 2nd, 2008 at 11:37 amRome continues to burn. Today I continue to see how utterly lost and clueless, with a few notable exceptions, members of Congress truly are. It is sad to watch them beg Ben for some direction as to what they should do.
April 2nd, 2008 at 11:39 amI just noticed the iBC trucker hat and logo on Bernanke’s head in the photo, too funny.
I like seeing Bernanke sweat in the hearings. At least Ron Paul brought up the lack of oversight on the Fed’s actions. What bothers me most is that he’s not an elected official and yet he has all this power over the economy and us as individuals. Creeping socialism in my view. Any predictions for what happens when all our banks belong to the Federal Government?
April 2nd, 2008 at 11:39 am“Do With it What You Will” Update.
Skiffles just spanged (this morning) off it’s 61.8% fib retrace line. And I mean hit it exactly at $97.92, and then bounced up from there. One or two more touches without a break through to the downside would be promising here. Also, the slow stochs, previously oversold, are turning up.
I may be purchasing more Skiffles as a result.
April 2nd, 2008 at 11:49 amDefinately picking up some SMN, how much longer until there’s way too much optomism and when are you going to buy more skf?
April 2nd, 2008 at 11:51 amYou can run with the bulls, but you are only going to die tired!
April 2nd, 2008 at 11:54 amReloading…Long SKF, FXP, Short LEH (spending my rebate on more puts)…please…
http://www.smartmoney.com/commonsense/index.cfm?story=20080401-lessons-of-recession
April 2nd, 2008 at 11:54 amWords of A Wise Man!!
http://www.kereport.com/DailyRadio/Daily033108.mp3
April 2nd, 2008 at 11:55 amTo Chivas, if he’s around…
Checking the $TRAN charts again, and looking at a 2 or 3 year chart, I can see a lot of resistance here in the 5000-5015 area. We also appear to be approaching overbought on all the stochs (hourly, daily, and even weekly) for this index.
April 2nd, 2008 at 11:55 amhttp://www.finalternatives.com/node/3987
April 2nd, 2008 at 11:57 amSorry, the above should be “To Chivas,” not Cuervo. For some reason the editing function is not working at this moment.
April 2nd, 2008 at 12:01 pmInteresting news from Chivas’s hedge fund news link –
Maybe BONY should be my next bank short?
April 2nd, 2008 at 12:06 pmJake,
i see the same when looking at the transports, however on the weekly the macd has a lot of room to run and the rsi is still not overbought. having said all of that, if we punch through that resistance, i think you would agree that we test the highs. i think we do punch through, although maybe after a pause, but i have a feeling that this thing is not going to give people a chance to get in.
April 2nd, 2008 at 12:26 pmReally good article by The Financial Ninja explaining some of the UBS and LEH shenanigans for you layman. Hey Fly, you don’t have him on your blogroll? He posts some good stuff.
World Recession and the Perfect Short Squeeze:
April 2nd, 2008 at 12:41 pmhttp://benbittrolff.blogspot.com/2008/04/world-recession-and-perfect-short.html
The market is spongy today. Sucks to trade, unless you want to play with those ag names.
-DT
April 2nd, 2008 at 12:47 pmThe first leg of a new bull is NEVER driven by earnings/fundamentals/valuations. The first leg is ALWAYS driven by liquidity, which fosters risk taking. If you wait for earnings to justify valuations, we’ll be 6-12 months into a new bull market and the biggest percentage gains always come in the initial advance.
Don’t look now, but swap spreads, credit spreads, and spreads between agency MBS/treasurys are all tightening. Junk bond issuance spiked last week. A couple of closed end funds I monitor that invest primarily in leveraged loans started climbing last week and went absolutely apeshit yesterday. The markit leveraged loan index is rising and like all other spread products, spreads are tightening.
http://www.markit.com/information/products/category/indices/lcdx.html
I agree earnings estimates are probably too high. But given the gigunda amount of stimulus/liquidity in the pike, I don’t think it will matter.
April 2nd, 2008 at 12:58 pmPud,
great post. i agree.
April 2nd, 2008 at 1:01 pmGet that dollar to go up NOW!!!!
April 2nd, 2008 at 1:30 pm