Just a few comments. Before I start I want to say that it's a great day here in Steeler Nation as we prepare to watch our Steelers take their first step towards winning a 7th Lombardi trophy:
Getting back to the economy. Former LA Mayor Richard Riordan was recently caught doing some truth telling in an interview recently. He warns that 90% of the cities in this country will be bankrupt within 5 years thanks to unions who have corrupted the whole political system.
Let me do a quick side bar here before I continue. I am very busy with business over the next month so I might not be posting as much as I usually do. Work comes first folks because unfortunately blogging doesn't pay the bills.
Let me also add that I am disgusted at what's I am seeing on Wall St and in Washington. The muni market is showing signs of collapse. Food and gas prices are soaring. Tunisia just overthrew their government because of rising food prices and a 50% unemployment rate among the younger generation.
Despite all of this chaos, the market trades as if it doesn't have a care in the world while Rome slowly burns in the background.
The whole thing is absolutely ludicrous and I want no part of it right now. In a nutshell: Stocks are too expensive to buy at this point, and the Fed's money printing makes shorting the market too dangerous.
As a result, I sit here in cash with my thumb up my ass waiting for this absurdity to end. The way I see it, the next big event is the ending of QE2 in June. The market will start to worry about this in March/April and I expect chaos in DC as the Fed tries to figure out what to do.
Remember folks: Without this insane government spending we would be in the middle of a depression right now. The problem is the government cannot sustain this Ponzi scheme without destroying the dollar. We are broke and Moody's is talking about lowering our credit rating as a result of this stupidity.
Enjoy the interview below. It's always nice to see a smart guy who has a clue.
Saturday, January 15, 2011
Thursday, January 13, 2011
Consumer Spending Collapses in Early January
The early 2011 numbers are out for consumer spending and they are flat out ugly:
Quick Take:
The market will likely rally 500 points on the news the way it's been trading lately. Folks, I was shocked that the market didn't sell off hard after the inflation and jobs data today.
As you know, I am very skeptical about what is going on right now when it comes to stocks. Everyone keeps saying that the market can only go higher thanks to the money printing Fed via QE. I must say I agree but I think there is more to it.
I can't help but believe the HFT trading algos are also involved in helping create a floor for this market. They are creating massive amounts of liquidity as they move in and out of stocks in a matter of seconds. They now represent about 73% of the trading on Wall St.
This is very scary to me. Last year's flash crash showed us what can happen when they all decide to stop buying.
I wanted to throw up a chart of the DOW and point something out:
Quick Take:
I thought it was interesting to look at the daily market moves since early last year. As you can see, we haven't had a 200 point sell off since August 2010. On the flipside, we haven't had many 200 point moves to the upside either. I can count them on one hand.
Does anyone else find this bizarre? Here we are working our way through the most dramatic financial disaster in history and the stock market acts like it barely notices on a daily basis. Think about the stories the market has ignored over the past few months:
- The greek riots
- Ireland collapse
- European debt crisis
- Horrific housing numbers(beginning in the fall)
- Bad unemployment
- Rising interest rates
- Munincipal bond/state solvency issues
I would have expected at least a couple of large sell offs as a result of these events.
On the flip side, we never got a huge move higher as the Fed started printing money and companies started blowing out earnings. The trend is definately higher as a result of these two things but it's been a very slow methodical climb higher. It doesn't look normal too me when you compare it to the fierce rallies we saw in 2009.
The markets movement is even more strange when you compare it to the the bond and currency markets. Both have reacted violently as we work our way through our worst financial crisis since The Great Depression:
We saw the largest bond rally in history last year which was followed by a violent sell off after the Fed announced QE.
As for currencies, they were just as volatile. Take a look at the dollar over the past 12 months:
Quick Take:
These moves in the dollar are huge versus normal times.
The Bottom Line
I think the stock market has developed into nothing more than a casino parlor that's dominated by trading robots that scalp each other all day long. Any large move up or down seem to get sold into.
I guess we should expect the market to move like this when the average trade is 11 seconds. When you think about it: How in the heck can any daily rally be sustained when the quants are programmed to sell once they scalp a few points?
IMO, the market no longer represents what's going on with the economy. It now represents whatever the trading robots want to do on any particular day.
I will be keeping an eye on consumer spending moving forward. The chart above tells me that the inflationary pressures from higher oil and food are starting to have an effect on discretionary spending. If this trend continues things are going to get ugly in a hurry.
The market will likely rally 500 points on the news the way it's been trading lately. Folks, I was shocked that the market didn't sell off hard after the inflation and jobs data today.
As you know, I am very skeptical about what is going on right now when it comes to stocks. Everyone keeps saying that the market can only go higher thanks to the money printing Fed via QE. I must say I agree but I think there is more to it.
I can't help but believe the HFT trading algos are also involved in helping create a floor for this market. They are creating massive amounts of liquidity as they move in and out of stocks in a matter of seconds. They now represent about 73% of the trading on Wall St.
This is very scary to me. Last year's flash crash showed us what can happen when they all decide to stop buying.
I wanted to throw up a chart of the DOW and point something out:
Quick Take:
I thought it was interesting to look at the daily market moves since early last year. As you can see, we haven't had a 200 point sell off since August 2010. On the flipside, we haven't had many 200 point moves to the upside either. I can count them on one hand.
Does anyone else find this bizarre? Here we are working our way through the most dramatic financial disaster in history and the stock market acts like it barely notices on a daily basis. Think about the stories the market has ignored over the past few months:
- The greek riots
- Ireland collapse
- European debt crisis
- Horrific housing numbers(beginning in the fall)
- Bad unemployment
- Rising interest rates
- Munincipal bond/state solvency issues
I would have expected at least a couple of large sell offs as a result of these events.
On the flip side, we never got a huge move higher as the Fed started printing money and companies started blowing out earnings. The trend is definately higher as a result of these two things but it's been a very slow methodical climb higher. It doesn't look normal too me when you compare it to the fierce rallies we saw in 2009.
The markets movement is even more strange when you compare it to the the bond and currency markets. Both have reacted violently as we work our way through our worst financial crisis since The Great Depression:
We saw the largest bond rally in history last year which was followed by a violent sell off after the Fed announced QE.
As for currencies, they were just as volatile. Take a look at the dollar over the past 12 months:
Quick Take:
These moves in the dollar are huge versus normal times.
The Bottom Line
I think the stock market has developed into nothing more than a casino parlor that's dominated by trading robots that scalp each other all day long. Any large move up or down seem to get sold into.
I guess we should expect the market to move like this when the average trade is 11 seconds. When you think about it: How in the heck can any daily rally be sustained when the quants are programmed to sell once they scalp a few points?
IMO, the market no longer represents what's going on with the economy. It now represents whatever the trading robots want to do on any particular day.
I will be keeping an eye on consumer spending moving forward. The chart above tells me that the inflationary pressures from higher oil and food are starting to have an effect on discretionary spending. If this trend continues things are going to get ugly in a hurry.
Party On!
A few data points for you as you start your day:
"The Producer Price Index for Finished Goods rose 1.1 percent in December, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This advance followed increases of 0.8 percent in November and 0.4 percent in October and marks the sixth straight rise in finished goods prices. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved up 1.0 percent, and the crude goods index increased 4.0 percent. On an unadjusted basis, prices for finished goods advanced 4.0 percent in 2010 after climbing 4.3 percent in 2009."
Quick Take:
Ummm....Inflation anyone?
Jobless Claims:
How can I describe this....Fugly???
"In the week ending Jan. 8, the advance figure for seasonally adjusted initial claims was 445,000, an increase of 35,000 from the previous week's revised figure of 410,000. The 4-week moving average was 416,500, an increase of 5,500 from the previous week's revised average of 411,000."
Quick Take:
OK...So let me get thris straight: Prices are soaring and so are jobless claims. What a perfect combination.....NOT!
Stocks barely moved on the news. We shouldn't be surprised. Stocks are not allowed to go down anymore no matter what the news. Remember: Ben Bernanke has your back. Thanks to him, the market will ALWAYS go up no matter what the news.
Seriously folks, this is not going to end well. Please be careful with your investments.
"The Producer Price Index for Finished Goods rose 1.1 percent in December, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This advance followed increases of 0.8 percent in November and 0.4 percent in October and marks the sixth straight rise in finished goods prices. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved up 1.0 percent, and the crude goods index increased 4.0 percent. On an unadjusted basis, prices for finished goods advanced 4.0 percent in 2010 after climbing 4.3 percent in 2009."
Quick Take:
Ummm....Inflation anyone?
Jobless Claims:
How can I describe this....Fugly???
"In the week ending Jan. 8, the advance figure for seasonally adjusted initial claims was 445,000, an increase of 35,000 from the previous week's revised figure of 410,000. The 4-week moving average was 416,500, an increase of 5,500 from the previous week's revised average of 411,000."
Quick Take:
OK...So let me get thris straight: Prices are soaring and so are jobless claims. What a perfect combination.....NOT!
Stocks barely moved on the news. We shouldn't be surprised. Stocks are not allowed to go down anymore no matter what the news. Remember: Ben Bernanke has your back. Thanks to him, the market will ALWAYS go up no matter what the news.
Seriously folks, this is not going to end well. Please be careful with your investments.
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