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Thursday, March 18, 2010
Jonco Rated a Strong Buy!
Classic....
Tuesday, March 16, 2010
Is America Losing Interest in the Stock Market?
This caught my eye recently:
"BOSTON, March 15 (Reuters) - Investors in February pulled an estimated $3.7 billion from U.S. stock-focused mutual funds, dashing hopes of a rebound in demand for equities, while showering $19.7 billion on taxable bond funds, according to a report from Morningstar.
After investors pulled almost $26 billion from U.S. stock funds last year, analysts thought the trend might have turned around in January, when investors added a net $2.7 billion. But the one-month inflow ended in February, fund analysts at Morningstar wrote in their latest monthly report."
My Take:
As I sit here and watch another snorefest on Wall St, I think we need to ask ourselves if investors are losing interest in the stock market.
Once again, today's Fed statement was a big nothingburger. Rates remained at zero. Shocker!...Not!. There was virtually no reaction from the markets. We are now up a whopping 37 points on the DOW as I write.
As you can see in the article above, investors continue to pull money out of mutual funds and pour them into bonds. This is a very strong sign of a lack of confidence in the stock market IMO. Investors have basically been pulling money out of the markets since the market crash in 2008.
Perhaps we are beginning to see why treasuries have performed so well this year? Just a thought.
One thing is for sure:
The wizards of Wall St must be extremely concerned by the fact that this "flight to safety" has occurred during a 12 month period in which we have seen one of the largest rallies in history of Wall St.
Shouldn't money be pouring into stocks after a 60% one year move? I mean CNBC and the rest of the bulltards thet they roll out on this network everyday keep screaming that the recovery has started.
You know what folks? America doesn't buy it anymore.
Why?
Because they are losing their jobs, they are losing their homes, and they see things getting worse week after week.
Anecdotally I am now seeing it all th time. I have more and more friends and family that are struggling after losing their jobs.
The ones that still do have jobs are completely stressed out and miserable because their workloads have soared as companies cutback on their workers in an attempt to just keep the doors open.
How many of you out there have friends in this situation? My guess is many of you are seeing the same thing.
I think this chsnge in our way of life is psychologically changing American's investment habits.
Investors are no longer buying this market is because they have no confidence in it because they just don't see the recovery around them. If they can't see it then why should they believe Wall St when they say that there is a recovery?
This scenario reminds me of when Warren Buffet refused to buy tech stocks in the 1990's. He has always said he wouldn't buy something he didn't understand. I feel that way now when I look at the stock market and I believe many other people in this country share this view.
Their lack of confidence in both Wall St and the recovery is only exacerabted when you see what we are now exposed to everyday:
The mainstream news is increasingly filled with stories about the endless of fraud that has been seen on Wall St over the last 10 years. The Lehman balance sheet scandal is the latest.
Amricans are also now learning about the cover up of this Ponzi scheme which in my view is even worse than the fraud itself.
The Bank of America lawsuit should only add to this anxiety as the credibility of the Fed could easily be exposed if it's proven in court that they strong armed B of A to takeover Merill Lynch.
On top of all of this, Americans are exposed to seemingly endless economic funding crises that involve just about every state and municipality in the country(some areas are worse than others of course).
After adding this all up and then looking at their own miserable economic situations, I think many are coming to the conclusion that the risk of being "all in" in equities with a bunch of snake oil salesman from Wall St just isn't worth it.
We have seen this act before:
"BOSTON, March 15 (Reuters) - Investors in February pulled an estimated $3.7 billion from U.S. stock-focused mutual funds, dashing hopes of a rebound in demand for equities, while showering $19.7 billion on taxable bond funds, according to a report from Morningstar.
After investors pulled almost $26 billion from U.S. stock funds last year, analysts thought the trend might have turned around in January, when investors added a net $2.7 billion. But the one-month inflow ended in February, fund analysts at Morningstar wrote in their latest monthly report."
My Take:
As I sit here and watch another snorefest on Wall St, I think we need to ask ourselves if investors are losing interest in the stock market.
Once again, today's Fed statement was a big nothingburger. Rates remained at zero. Shocker!...Not!. There was virtually no reaction from the markets. We are now up a whopping 37 points on the DOW as I write.
As you can see in the article above, investors continue to pull money out of mutual funds and pour them into bonds. This is a very strong sign of a lack of confidence in the stock market IMO. Investors have basically been pulling money out of the markets since the market crash in 2008.
Perhaps we are beginning to see why treasuries have performed so well this year? Just a thought.
One thing is for sure:
The wizards of Wall St must be extremely concerned by the fact that this "flight to safety" has occurred during a 12 month period in which we have seen one of the largest rallies in history of Wall St.
Shouldn't money be pouring into stocks after a 60% one year move? I mean CNBC and the rest of the bulltards thet they roll out on this network everyday keep screaming that the recovery has started.
You know what folks? America doesn't buy it anymore.
Why?
Because they are losing their jobs, they are losing their homes, and they see things getting worse week after week.
Anecdotally I am now seeing it all th time. I have more and more friends and family that are struggling after losing their jobs.
The ones that still do have jobs are completely stressed out and miserable because their workloads have soared as companies cutback on their workers in an attempt to just keep the doors open.
How many of you out there have friends in this situation? My guess is many of you are seeing the same thing.
I think this chsnge in our way of life is psychologically changing American's investment habits.
Investors are no longer buying this market is because they have no confidence in it because they just don't see the recovery around them. If they can't see it then why should they believe Wall St when they say that there is a recovery?
This scenario reminds me of when Warren Buffet refused to buy tech stocks in the 1990's. He has always said he wouldn't buy something he didn't understand. I feel that way now when I look at the stock market and I believe many other people in this country share this view.
Their lack of confidence in both Wall St and the recovery is only exacerabted when you see what we are now exposed to everyday:
The mainstream news is increasingly filled with stories about the endless of fraud that has been seen on Wall St over the last 10 years. The Lehman balance sheet scandal is the latest.
Amricans are also now learning about the cover up of this Ponzi scheme which in my view is even worse than the fraud itself.
The Bank of America lawsuit should only add to this anxiety as the credibility of the Fed could easily be exposed if it's proven in court that they strong armed B of A to takeover Merill Lynch.
On top of all of this, Americans are exposed to seemingly endless economic funding crises that involve just about every state and municipality in the country(some areas are worse than others of course).
After adding this all up and then looking at their own miserable economic situations, I think many are coming to the conclusion that the risk of being "all in" in equities with a bunch of snake oil salesman from Wall St just isn't worth it.
We have seen this act before:
The Bottom Line:
As you can see above, the DOW basically flatlined for 16 years at around 1000 on the DOW. There was some volatility during this time which is to be expected(including a nasty recession in '74/75).
The anxieties seen back then are similar to the ones that we see today: Funding crisis, high unemployment, and soaring inflation(not here yet but its coming). Stocks went out of favor during this period as investors saw little to no returns.
In fact, I can remember an old market veteran from the 1970's telling me the stories about how many of the big players on Wall St bailed on stocks(because they went nowhere) and jumped over to bonds because that's where the money went.
Could we be seeing a repeat today? I sure think so.
The market is still creeping higher but its been a struggle for the bulls over the last 6 months. The volumes over the past month have been pathetic, and I think there is a lack of confidence that this market can move much higher.
The Fed did reconfirm today that they plan on pulling out of the MBS market at the end of the month. It will be interesting to see if Wall St has enough liquidity to replace them.
The market still seems to be filled with "funny money" so they might be able to pull it off for awhile.
One thing however is clear IMO:
Longer term, there will be a point where all of this insanity will become unsustainable because our borrowing needs in order to fund our deficit far outweigh our ability to pay for them.
The timing of when this dislocation occurs is the difficult part. The markets can stay irrational longer than you can stay solvent so a conservative strategy is the best answer at this point.
Remember:
Much of the move we have seen in the past year is a result of money that came out of treasuries and money markets(which are paying basically nothing) and into the markets in order to chase yields.
Fund managers are forced to do this because they have many customers living on fixed incomes that don't want to touch principle. Sitting in CD's, MM's, and treasuries(which many did during the crash) was a very painful experience for them.
Once the markets settled down, money managers started pouring money back into the markets.
The problem with a scenario where you have everyone out there chasing yields is you distort the actual value of both stock and bond prices. This game never ends well because eventually fundamentals matter and prices will eventually return to their actual value. Tech bubble anyone?
When this occurs: Junk bonds will then once again be worth junk instead of the inflated values we see today. Stocks like Fannie and Freddie which have become an obsession with the speculators will also eventually reflect their real value of zero.
Expect more boredom over the next few weeks until the Fed ends their QE strategy.
Until then, go find a newly painted fence and watch the paint dry. It will be more exciting than anything you will see on Wall St until April.
Disclosure: New new positions at the time of this publication.
Thursday, March 11, 2010
Wall St Celebrates while Main St Suffers
One year ago this week many were wondering if the economy was going to collapse. The market found itself at 666 on the S&P. Most investors had once again lost 50% of their life savings for the second time in less than 10 years.
I was seriously worried that we were not going to be able to break out of the economic "death spiral" that started in the fall of 2008.
The reversal
A few days after hitting the lows, the "too big to fail" bankers all came out within a week of each other in an obvious "coordinated effort" and said that things were looking better.
Sentiment then immediately changed, and Wall St hasn't looked back since. The market has now roared back over 60% from the lows without one serious pullback. The bankers saved the day!...For now. I guess this is all part of doing "gods work".
I for one am glad things came back. I wasn't looking forward to living in a country following an economic collapse.
So what's next?
I think Wall St. is asking themselves the same question. The market has basically done nothing the last few weeks. The volumes have been extremely low which is extremely concerning in my view.
Everyone knows that the economic recovery we have seen since last year has been stimulus based. The Fed basically replaced the consumer hoping that it would instill confidence in the economy.
In previous recessions, renewed confidence usually brought out the "animal spirits" from the private sector. The economy would then slowly grow out of its problems as companies and consumers began to spend again.
The huge move that we have seen since last year has basically been a large bet that we will grow out of this recession just like we have in every other recession since the early '80's.
Did it work?
Wall St isn't sure which is why the market is going nowhere IMO. There are very few signs that anything has improved. In my view there is no way it can work because the losses haven't been taken.
We will not recover from this economic nightmare as long as the fraudulent behaviour of "hiding the losses" is allowed to continue.
We didn't recover in the 1990's until the banksters were put in jail, and the losses were taken on housing using the resolutions trust which was used to auction off and liquidate the housing bubble.
Today, the only recovery we have seen is on Wall St in the form of huge banker bonuses!
So how did Main St. do following this incredible rally?
Uhh...Not so well....
As you can see above, over 11% of Main St is now on food stamps. This is the highest percentage in decades. Of course you don't hear about this part in the news.
We are constantly told that "the recession is now over!" and the "recovery" has now begun. Yeah OK: Tell that to the 11% above who can't even afford to even put food on the table.
The huge increase in the usage of food stamps is mainly because there are no jobs! Jobless claims are still running at over 400k a week which is pretty horrifying this late into a recession.
You cannot have a sustained "jobless" recovery. It's impossible!
When will the recovery really begin?
That's the million dollar question. I believe it starts when the cooked books are exposed and everyone involved in fraudulent behaviour is put in jail.
Now let's be realistic here. I don't think the criminals will ever go to jail, but i do believe that the cooked books will eventually become exposed.
As I have said before, you can cook the books for only so long before you run out of cash. Can you say Enron? Folks, once you can't make payroll the game is over.
The government may be able to indefinitely hide the losses of the "too big to fail banks" but they can't stop the bleeding everywhere.
As a result, I think you are going to start seeing signs of our hidden economic nightmare in areas of the economy that the Fed isn't involved in.
The state budgetary nightmares are a great example. Illinois, New York, and California are on the verge of financial ruin.
Kansas City announced yesterday that they plan to close 50% of their schools.
This is what happens when you run out of money. Expect to hear more and more of these types of problems as the economy continues to deteriorate.
The Bottom Line
I believe Wall St is getting a little nervous about the strength of the recovery. When volumes drop off like this you really need to be careful.
For once I am on the side of Wall St when it comes to the markets.
It's time to sit on the sidelines and see how this all plays out.
In my view it's not going to be pretty.
The next "watershed" moment for the markets will come later this month when the Fed attempts to pull out of the MBS and Treasury markets.
The volume and volatility should go through the roof once this occurs. If rates start to rise sharply because the private sector doesn't have the ability to replace the Fed then I predict we will see another sharp move to the downside.
Hang on tight folks, the ride is about to get pretty bumpy.
Disclosure: No new positions were taken at the time of publication.
I was seriously worried that we were not going to be able to break out of the economic "death spiral" that started in the fall of 2008.
The reversal
A few days after hitting the lows, the "too big to fail" bankers all came out within a week of each other in an obvious "coordinated effort" and said that things were looking better.
Sentiment then immediately changed, and Wall St hasn't looked back since. The market has now roared back over 60% from the lows without one serious pullback. The bankers saved the day!...For now. I guess this is all part of doing "gods work".
I for one am glad things came back. I wasn't looking forward to living in a country following an economic collapse.
So what's next?
I think Wall St. is asking themselves the same question. The market has basically done nothing the last few weeks. The volumes have been extremely low which is extremely concerning in my view.
Everyone knows that the economic recovery we have seen since last year has been stimulus based. The Fed basically replaced the consumer hoping that it would instill confidence in the economy.
In previous recessions, renewed confidence usually brought out the "animal spirits" from the private sector. The economy would then slowly grow out of its problems as companies and consumers began to spend again.
The huge move that we have seen since last year has basically been a large bet that we will grow out of this recession just like we have in every other recession since the early '80's.
Did it work?
Wall St isn't sure which is why the market is going nowhere IMO. There are very few signs that anything has improved. In my view there is no way it can work because the losses haven't been taken.
We will not recover from this economic nightmare as long as the fraudulent behaviour of "hiding the losses" is allowed to continue.
We didn't recover in the 1990's until the banksters were put in jail, and the losses were taken on housing using the resolutions trust which was used to auction off and liquidate the housing bubble.
Today, the only recovery we have seen is on Wall St in the form of huge banker bonuses!
So how did Main St. do following this incredible rally?
Uhh...Not so well....
As you can see above, over 11% of Main St is now on food stamps. This is the highest percentage in decades. Of course you don't hear about this part in the news.
We are constantly told that "the recession is now over!" and the "recovery" has now begun. Yeah OK: Tell that to the 11% above who can't even afford to even put food on the table.
The huge increase in the usage of food stamps is mainly because there are no jobs! Jobless claims are still running at over 400k a week which is pretty horrifying this late into a recession.
You cannot have a sustained "jobless" recovery. It's impossible!
When will the recovery really begin?
That's the million dollar question. I believe it starts when the cooked books are exposed and everyone involved in fraudulent behaviour is put in jail.
Now let's be realistic here. I don't think the criminals will ever go to jail, but i do believe that the cooked books will eventually become exposed.
As I have said before, you can cook the books for only so long before you run out of cash. Can you say Enron? Folks, once you can't make payroll the game is over.
The government may be able to indefinitely hide the losses of the "too big to fail banks" but they can't stop the bleeding everywhere.
As a result, I think you are going to start seeing signs of our hidden economic nightmare in areas of the economy that the Fed isn't involved in.
The state budgetary nightmares are a great example. Illinois, New York, and California are on the verge of financial ruin.
Kansas City announced yesterday that they plan to close 50% of their schools.
This is what happens when you run out of money. Expect to hear more and more of these types of problems as the economy continues to deteriorate.
The Bottom Line
I believe Wall St is getting a little nervous about the strength of the recovery. When volumes drop off like this you really need to be careful.
For once I am on the side of Wall St when it comes to the markets.
It's time to sit on the sidelines and see how this all plays out.
In my view it's not going to be pretty.
The next "watershed" moment for the markets will come later this month when the Fed attempts to pull out of the MBS and Treasury markets.
The volume and volatility should go through the roof once this occurs. If rates start to rise sharply because the private sector doesn't have the ability to replace the Fed then I predict we will see another sharp move to the downside.
Hang on tight folks, the ride is about to get pretty bumpy.
Disclosure: No new positions were taken at the time of publication.
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