Another bleeder of a day. All seemed "contained" until exactly 3pm when all hell broke loose. I am still trying to get the license plate of that truck that blasted through at 2:59pm! Any guesses out there as to the catalyst or was this just more of the same long term trend? Leave ideas in the comments section.
Going In to This Market
Once again I offer my usual disclaimer about anything you read here NOT BEING INVESTMENT ADVICE. Blogs are wonderful, and I allow any and all to see inside my head with my posts. What I say or do is for me alone, you must make up your own mind. There will be no bailout if you get an idea from me and lose money, I am sure we are too small to bail!
That said, I reviewed some info, looked at some charts, and followed a gut feeling. I went into this market buying some gold shares of two miners I like. The particular ones are not that important. I did this because I think the dollar rally is not a long term thing with the piles of debt we keep adding. Even if the dollar rallies more because of the whole "safe haven" mantra (which is pure comedy) I still think gold does well as a better safe haven. In a deflationary environment, gold can do well. It can also get it's A$s handed to it. I admit I am putting money at risk in a wild market. I can also guarantee that as I enter the gold miners they will probably collapse! I am doing this with an amount I can lose. I am just offering this to let you know that this is what I am seeing right now. Sound off in the comments section.
My Problems With Technical Analysis
I mentioned above that I looked at some charts which I used to help me make a stock buying decision. I look at everything when I buy stocks. It always cracks me up when somebody says "Next stop for the XYZ is the technical resistance price of XXX" or something to that effect. As if the entire market would stop and all traders everywhere would take a minute and think about point XXX before continuing the day. My favorite is the old "oversold/overbought" oscillator types which are useless and silly.
I know many market folks make their living on this kind of stuff. I also understand that there is a certain science to the chart reading. I think it has some value in stable, normal markets. Where technical analysis breaks down is at inflection points.
I remember Cisco Systems during the tech bust being wildly "oversold" all the way down to a 90% decline. Before that I remember Red Hat being "overbought" as it climbed higher by 300% after that. Right now the "bottom is in" technical crowd at 8700 or so on the DOW are getting excited, but as I looked at the chart I saw no resistance line until 8200 myself. Who is right? Probably neither of us!
I only offer that technical alone is not good at inflection points. Fundamental analysis also has it problems with inflection. Momentum is useless as inflection points are violent with volatility. I think you get the idea.
Right now things are a bit unhinged. It could be the bottom, or it could be a bottom, or it could be just the start down. Only time will tell. What I am saying is that if you are going to be in this market you need to be careful and know what you are trying to do. You must also be ready to be wrong (very wrong) and not get all upset. As they say at Minyanville "return OF capital is more important than return ON capital" at a time like this.
Have a good night.
Showing posts with label inflection points. Show all posts
Showing posts with label inflection points. Show all posts
Thursday, October 9, 2008
Monday, October 29, 2007
Crisis of Confidence
Two things up front before tonight's missive. A while back I recommended filing out the online petition backed my Karl Denninger at Market Ticker blog. The petition is well written and covers the main areas of concern regarding the economic future of the US economy. In his post tonight, Karl shares his disappointment with how many signatures the petition has obtained:
http://market-ticker.denninger.net/2007/10/hyperinflated-monday-and-farewell-for.html
The suspension of MarketTicker's daily run down of the markets and macro banking analysis is a real loss. I ask any readers here to please go and sign the petition. One minute is not too much time. Yes, there is an email verification process, but I can vouch for the fact that absolutely no further contact is made by the host. I leave it up to you.
Second, I wanted to thank all those that voted in my current poll. 32 votes as of now, and I am very happy about that. 50% of the readers come to this blog on a daily basis, and that is very exciting. To the one guy that was looking for porn, sorry about that. Even a Google search for PFU DNA polymerase, an enzyme I use in my work, will return a porn hit! I am working on a new poll, and hope to have it up tomorrow night. Thanks to all that voted. Lets try to get some of the comments sections buzzing. I am always looking for information for new blog posts, and suggestions are very welcome.
Crisis of Confidence
Right now there is a major Economic Disconnect with regards to what is reported in the mainstream media and what the real facts on the ground in the financial world are. Slowly, ever so slowly, like molasses in wintertime, the average person on the street may be beginning to have doubts about many things. When reality is bashing you upside the head daily, it eventually will seep in if only by osmosis. I want to highlight 3 major points which should have by now caused a great wake up call for all Americans.
Iraq War and WMD
NOTE: First off, this is in no way a political blog. I would characterize myself as a fiscal ultra conservative and a social mega liberal. This means I never have anyone to vote for! I know I ask for comments, but do not start political discussions here. The point of this discussion is how the situation will relate to a crisis of confidence, and nothing more.
The US spends tons of money, and rightfully so, on maintaining a military. The government also has the CIA for gathering intelligence, space satellites up the wazoo, planes outfitted with cameras and eavesdropping equipment, and the some unknown number of analysts and staff. When those whose job it is to know believe that Iraq had a fairly developed WMD capability, you expect them to be right. I truly believe that President Bush and the upper level leadership were convinced there was an active program in Iraq. The point here is not that Bush lied or somehow outsmarted the Congress with false evidence (can he be so dumb as to outsmart the congress? What does that say about the congress?) the point is that with all the means available, the US government did not know anything concrete for certain. That is the take home point. The agencies and systems we believe are protecting us had no real idea what the heck the situation was. Add to this that it was standing US military policy to field a force sufficient o fight 2 major global theater wars at once, like in WWII. Instead we cannot even deploy 200,000 troops to Iraq without stretching the military to the breaking point! Our men and women in uniform deserve so much more than that, and the US taxpayer does too. Truly, these revelations are troubling.
Home Ownership
For years the average joe was inundated with the idea that home ownership was the path to financial freedom. It was indeed that for the longest time, but only viewed in the correct way. It has been a major tenet of Economic Disconnect that the main utility of home ownership was that it functioned as a forced savings plan for people that either cannot, or will not put money away. Only over a reasonable time frame would the equity built up be boon to the homeowner. Home ownership as a short term financial vehicle is an absolute loser, that's the fact. I will not run through all the garbage related to the current housing bust in this post, but the take away message is that home ownership was so diluted and spread to so may people looking to make a quick buck over the past few years that the very structural appeal of buying a home will be lost for the next 5-10 years if not more. With foreclosures skyrocketing and prices collapsing, the promise that was home ownership is now just a promise to lose.
The FED, the Dollar, and the Banks
The August -September time span was very illuminating to anyone that stopped to watch. The FED showed its true purpose is to save the banking industry and wall street. In an overt effort to add liquidity to a system badly in need of a major correction, the FED showed where they are focused. As the dollar has taken a beating due to the easy money of the past 4 years, even regular folks are starting to see a problem. When they travel abroad the dollar is toast in an exchange. With oil now almost at $100, the winter will be a long one for oil heat buyers. The rampant inflation at the grocery store is also impossible to miss. As the ginormous losses continue at the mortgage lenders and the big banks, the public is only now getting a look at the unbridled greed and total lack of care the banks showed in lending money to anyone that wanted it. The FED and the banks are supposed to be all powerful and smart. Instead they are increasingly looking foolish and greedy.
So what does this all mean? Today, probably nothing. I think that over this winter though the public may start to do some real thinking on what has gone on. High home heating bills are really going to shock people. A turnaround in housing will not materialize even after aggressive rate cuts. Banks will continue to lose tons of money, and yes that is your money they are losing. One way or another you will pay. Eventually confidence in a system that has produced not only the 3 major points outlined above, but many others will weigh on the trust in the system.
I realize that someone somewhere writes something just like this all the time going back 50 years. It is my belief that with the rise of the Internet and new channels to get information (like blogs) never before has the inner workings of a broken system been so exposed. Take a marketwatch headline form Friday that reads "Countrywide on the path to profitability in next quarter", if that was your only news source it sure sounds good, but go around the financial net and you will know that headline is silly at best.
When will a crisis of confidence occur? I dunno. It is very hard to pinpoint such inflection points. The weight of evidence that the average joe has been suckered is really getting hefty. It will not be long and will not take much to crash the system. I think it will be a long winter indeed.
As it is only Monday, I will try not to write too much about the monster game on Sunday between the Patriots and the Colts. On the airplane ride back to New England after the AFC title game loss last year, Bill Belicheck and Tom Brady were plotting revenge for a blown game. The plan included adding receivers that can actually catch a football, and designing an offense that can outscore the Colt modified west coast underneath pitch and catch system. Enter Randy Moss, Donte Stallworth, and Wes Welker. This is the game that the new offense was put together for. On Sunday we will see if it was the right idea.
Have a good night.
http://market-ticker.denninger.net/2007/10/hyperinflated-monday-and-farewell-for.html
The suspension of MarketTicker's daily run down of the markets and macro banking analysis is a real loss. I ask any readers here to please go and sign the petition. One minute is not too much time. Yes, there is an email verification process, but I can vouch for the fact that absolutely no further contact is made by the host. I leave it up to you.
Second, I wanted to thank all those that voted in my current poll. 32 votes as of now, and I am very happy about that. 50% of the readers come to this blog on a daily basis, and that is very exciting. To the one guy that was looking for porn, sorry about that. Even a Google search for PFU DNA polymerase, an enzyme I use in my work, will return a porn hit! I am working on a new poll, and hope to have it up tomorrow night. Thanks to all that voted. Lets try to get some of the comments sections buzzing. I am always looking for information for new blog posts, and suggestions are very welcome.
Crisis of Confidence
Right now there is a major Economic Disconnect with regards to what is reported in the mainstream media and what the real facts on the ground in the financial world are. Slowly, ever so slowly, like molasses in wintertime, the average person on the street may be beginning to have doubts about many things. When reality is bashing you upside the head daily, it eventually will seep in if only by osmosis. I want to highlight 3 major points which should have by now caused a great wake up call for all Americans.
Iraq War and WMD
NOTE: First off, this is in no way a political blog. I would characterize myself as a fiscal ultra conservative and a social mega liberal. This means I never have anyone to vote for! I know I ask for comments, but do not start political discussions here. The point of this discussion is how the situation will relate to a crisis of confidence, and nothing more.
The US spends tons of money, and rightfully so, on maintaining a military. The government also has the CIA for gathering intelligence, space satellites up the wazoo, planes outfitted with cameras and eavesdropping equipment, and the some unknown number of analysts and staff. When those whose job it is to know believe that Iraq had a fairly developed WMD capability, you expect them to be right. I truly believe that President Bush and the upper level leadership were convinced there was an active program in Iraq. The point here is not that Bush lied or somehow outsmarted the Congress with false evidence (can he be so dumb as to outsmart the congress? What does that say about the congress?) the point is that with all the means available, the US government did not know anything concrete for certain. That is the take home point. The agencies and systems we believe are protecting us had no real idea what the heck the situation was. Add to this that it was standing US military policy to field a force sufficient o fight 2 major global theater wars at once, like in WWII. Instead we cannot even deploy 200,000 troops to Iraq without stretching the military to the breaking point! Our men and women in uniform deserve so much more than that, and the US taxpayer does too. Truly, these revelations are troubling.
Home Ownership
For years the average joe was inundated with the idea that home ownership was the path to financial freedom. It was indeed that for the longest time, but only viewed in the correct way. It has been a major tenet of Economic Disconnect that the main utility of home ownership was that it functioned as a forced savings plan for people that either cannot, or will not put money away. Only over a reasonable time frame would the equity built up be boon to the homeowner. Home ownership as a short term financial vehicle is an absolute loser, that's the fact. I will not run through all the garbage related to the current housing bust in this post, but the take away message is that home ownership was so diluted and spread to so may people looking to make a quick buck over the past few years that the very structural appeal of buying a home will be lost for the next 5-10 years if not more. With foreclosures skyrocketing and prices collapsing, the promise that was home ownership is now just a promise to lose.
The FED, the Dollar, and the Banks
The August -September time span was very illuminating to anyone that stopped to watch. The FED showed its true purpose is to save the banking industry and wall street. In an overt effort to add liquidity to a system badly in need of a major correction, the FED showed where they are focused. As the dollar has taken a beating due to the easy money of the past 4 years, even regular folks are starting to see a problem. When they travel abroad the dollar is toast in an exchange. With oil now almost at $100, the winter will be a long one for oil heat buyers. The rampant inflation at the grocery store is also impossible to miss. As the ginormous losses continue at the mortgage lenders and the big banks, the public is only now getting a look at the unbridled greed and total lack of care the banks showed in lending money to anyone that wanted it. The FED and the banks are supposed to be all powerful and smart. Instead they are increasingly looking foolish and greedy.
So what does this all mean? Today, probably nothing. I think that over this winter though the public may start to do some real thinking on what has gone on. High home heating bills are really going to shock people. A turnaround in housing will not materialize even after aggressive rate cuts. Banks will continue to lose tons of money, and yes that is your money they are losing. One way or another you will pay. Eventually confidence in a system that has produced not only the 3 major points outlined above, but many others will weigh on the trust in the system.
I realize that someone somewhere writes something just like this all the time going back 50 years. It is my belief that with the rise of the Internet and new channels to get information (like blogs) never before has the inner workings of a broken system been so exposed. Take a marketwatch headline form Friday that reads "Countrywide on the path to profitability in next quarter", if that was your only news source it sure sounds good, but go around the financial net and you will know that headline is silly at best.
When will a crisis of confidence occur? I dunno. It is very hard to pinpoint such inflection points. The weight of evidence that the average joe has been suckered is really getting hefty. It will not be long and will not take much to crash the system. I think it will be a long winter indeed.
As it is only Monday, I will try not to write too much about the monster game on Sunday between the Patriots and the Colts. On the airplane ride back to New England after the AFC title game loss last year, Bill Belicheck and Tom Brady were plotting revenge for a blown game. The plan included adding receivers that can actually catch a football, and designing an offense that can outscore the Colt modified west coast underneath pitch and catch system. Enter Randy Moss, Donte Stallworth, and Wes Welker. This is the game that the new offense was put together for. On Sunday we will see if it was the right idea.
Have a good night.
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