Tuesday, July 22, 2008

Evidential Matter

Evidential matter of the consumer is systematically being reported. Why would any be surprised by AXP's report? I'm no longer surprised by this surprise--a point of evolution in my dispelling some of my perplexions! But the market is a half-assed discounter of information--but when it gets some empiricism, it acts quickly.

I was reading Selden's Psychology of the Stock Market--yes, again. I continue to be struck by its relevancy. In one section he was discussing the general money conditions--availability of of money--and how when those conditions deteriorate, so does the market.

A source of frustration to me, is my lack of clear-sightedness regarding the effect of all of this 'stuff'. I rightly believed that the pundits who continually chirped incessantly about the the deluge of money that would flow from the Fed were misguided. It's a situation where one takes a historical precedent (increase money spigots = increase in the stock market) and MISapplies it to the current situation. Simply put: the failure to understand the difference between solvency v. liquidity.

The Fed's actions so far only help re-solve the banks so they can meet current capitalization requirements for loans they've already made. That's filling a hole--not spilling over to flood the waterways of commerce to float everyone's boat.

I'm beginning to rethink my thesis on oil services. I bought a little DIG to hedge my DUG calls. What we may witness is the market accepting a higher earnings multiple on these historically low p/e's: a sector p/e multiple shift if you will. It's something to keep in mind--particularly when you look at the technology and retail and the rather poor prospects of banking.

I'm not sure what is going on in utilities. I've a double short position (very small), but the last couple of day's, utilities have been perking up. Though they were oversold earlier.

So to keep in mind Selden's thought on the state of the money supply, personally, I don't see that picking up markedly. I think that conditions deteriorate before they get better--we'll see more defaults; more unemployment. And if things are going to get better in the latter part of year, I want someone to name some names--what sector is going to do that? If you know, chirp it up!

5 comments:

nice said...

As expected the bears attempts to immediately take the market back down after last weeks rally were foiled by another step down in oil this morning...

It was a reflex reaction by the bears to short just because we were overbought

After Paulson's speech negative Euro talk must have been prearranged and the associated drop in Oil and Gold followed.

It'll be interesting to see if the 125-126 area holds in oil - $XOI has diverged positively the past couple days

Should one play for a counter move up in oil stocks to work off the oversold - or stick with trend down in Oil?

nice

nice said...

Come to think of it...

Given everything that is at stake here - I'm confident that the Treasury, Fed (with arrangements with overseas bankers) will attempt to do whatever they can to prevent this rally from failing in the near term...

Their reputations are at stake - and the confidence of the entire US financial system.

If it involves intervention, changes in regulations, margin calls on Hedge Funds, raids on short sellers - pressure on the oil/gold market... whatever it takes...

One would expect they will pull out all the stops - after all their intentions are out in the open now...

There used to be an expression - don't fight the Fed - now it should be called - don't fight the Treasury...

If these efforts fail (which they could as markets cannot be forced to go where some entity or entities want) - then the crash which many have been calling for will probably be unpreventable (but such a crash would have the advantage of clearing out ALL excesses - including commodities)

...nice

nice said...

Lately many big name investors/managers have been going out of the way to state their case publicly - and some even retracted their previous statements...

What is going on here???


(1)
T Boone was out today with a rather vague statement that:

"I'm long oil for the long term"

and also then said
"Oil could go to $300"

pretty bizzare


(2) A little while back some analysts (including D Bove?) were lambasting the financial stocks...
Then 1 day later they mysteriously retracted their statement.

Ackerman did the same thing.

Has the Fed now got "Treasury' Police" out after anyone that says anything negative about the US financial system...


(3) Bill Gross is going out of his way to say in no uncertain terms that:
"I am enthusiastically buying FRE/FNM debt"

and earlier saying how
"We are contining to do business with Lehman"


(4) Jim Sinclair made his public bet that gold was going to $1200 or whatever by the end of the year.

In fact last night he was saying show everyone shorted gold below $960 and that if it clears $971 they will all be caught...

Well in fact not quite Jim - at least for today - as gold dropped $30 dollars from $975 spot..

==

Seems to me that this is becoming less and less a market - and more like a "3 Ring Circus" - with all the carnival barkers shouting out what they want from the public.

.. bears getting caught again this afternoon - we've been in an hourly uptrend in the S&P since late last Wednesday...

GM tomorrow I believe...

nice

nice said...

In late June and early July everyone thought the market was oversold and everyone kept calling a bottom - and the market went lower....

Now the market rallies 500 points and everyone is already calling a top...

When has calling tops and bottoms ever made anyone any money consistently?

When have arguements about whether we are in a bear or bull market ever made anyone any money consistently?

nice

Leisa said...

If commodities can truly crack, then I think that folks will feel like there's a chance and that we are not in a death spiral.

My DIG hedged against DUG was not one of the smartest things I've ever done!