Category: mr market

U.S. Homeownership and Stock Market Participation Rates

Just a quick post of some interesting date from the U.S. Census Bureau. As shown on the chart above (click for larger image), the percentage of Americans who own their own homes is declining. No surprise there, but it does beg a few questions, such as:

What (and when) was the peak and how far (and how long) will the rate fall?

To consider these questions, I hopped over to this page at U.S. Census Bureau website,  downloaded this spreadsheet and quickly crunched a few numbers in this spreadsheet.

What I found was that…

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Chuck Norris on the Credit Crisis

Via email from my friend Steve. Not sure of original source, but hat tip to whoever it was. If you know, please add to comments. Thanks.

Chuck Norris on the Credit Crisis

  • Chuck Norris has killed black swans with his bare hands.
  • Chuck Norris rubs the VIX into his chest.
  • Chuck Norris continues to short the Aussie market.

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Article: Europe on Brink of Currency Crisis Meltdown

Ok, this answers my question from a few weeks ago about “what about the ROW (‘rest of world’) subprime mess? Where is it?? It’s not mortgages, it’s this (see article). And it’s [probably] going to make USA subprime look like a walk in the park:

Europe on the brink of currency crisis meltdown
The crisis in Hungary recalls the heady days of the UK’s expulsion from the ERM.

By Ambrose Evans-Pritchard
2008-10-26
telegraph.co.uk

The financial crisis spreading like wildfire across the former Soviet bloc threatens to set off a second and more dangerous banking crisis in Western Europe, tipping the whole Continent into a fully-fledged economic slump.

Currency pegs are being tested to destruction on the fringes of Europe’s monetary union in a traumatic upheaval that recalls the collapse of the Exchange Rate Mechanism in 1992.

“This is the biggest currency crisis the world has ever seen,” said Neil Mellor, a strategist at Bank of New York Mellon.

Experts fear the mayhem may soon trigger a chain reaction within the eurozone itself. The risk is a surge in capital flight from Austria – the country, as it happens, that set off the global banking collapse of May 1931 when Credit-Anstalt went down – and from a string of Club Med countries that rely on foreign funding to cover huge current account deficits.

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Web 2.0 Expo Next Week, First Doing Market Update

Susanne and I just got back from a great 4-day trip to Berlin for the Web 2.0 Expo. Met a lot of interesting people and startups there and will report on it next week. First, however, a quick market update.

The reprieve rally I blogged about here is over, with new lows being set Thursday. See the 18 comments I added to that blog post for a number of interesting articles. Also see Nouriel Roubini’s video from yesterday in London: “It’s going to be a financial and economic wreak.”

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The Reprieve Rally Continues

2008-10-14 UPDATE: See comments section for article excerpts, links, and comments.

Why do I say continue, because as noted in Friday’s blog, it started from Friday morning’s low. From there to Friday’s high the DJIA rallied 12.9%. It is now up 25.4% from Friday’s low and 11.1% from Friday’s close.

Compare and contrast the front-page of today’s MarketWatch.com (above) and Friday’s (below):

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Sentiment Extremes Everywhere + Biggest Weekly Drop Ever & Biggest Daily Range


Just a quick post to cap the week. Sentiment extremes where everywhere you looked, even on Twitter.  Images and a few comments below.  Also some links to outside articles.

Bottom line:

  1. A rally is imminent: All but one of the elements were in place by Friday morning (2008-10-10) and Friday’s intraday reversal might have been that last element. We won’t know until next week, but I did buy late in the day.
  2. Regardless of when the tradable rally develops, based on current information and thinking, we are likely at least halfway to the bear market low (in terms of time and price), but less than halfway through the recession.
  3. While sentiment reached an extreme Friday morning, it doesn’t mean it reached the extreme of this cycle.

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The Dog That Didn’t Bark

Just quick post to note the failure of the rally attempt that started intraday yesterday.  See yesterday’s blog and last week’s “Bailout “Hope Rally” = Eye of the Storm.”

Volume declined, too, which indicates that some people are still holding on (the masochists!).  A sustainable rally attempt is not likely until the pain becomes too great and they give up.  That will show up in both the price and volume.  Government action or other “big news” could also spark something (“October surprise,” anyone?!).

Regarding my personal trades (see yesterday’s blog): Within five minutes of today’s open, I closed out all of the positions I put on yesterday (GOOG and QQQQ), as the lack of a big up open was “the dog that didn’t bark.”  Those are often gives the best signals, certainly some of my favorites, because they are subtle, in fact invisible to most people, who don’t know that a dog should be barking but isn’t.

Overall, I’ve been out (i.e. not long) since this blog post in the beginning of August, when the July mini-rally was showing fatigue (and I was going on vacation to Gotland).  Only very quick hits ventures to the long side in a bear market.  Of course, it is generally best to be sidelines or short bear-market rally failures.

PS: Here are today’s market summary stats from Yahoo Finance.

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Quick Market Update – Intraday Reversal – Day 1 Rally Attempt

Just a quick post to note today’s big reversal, which formed a hammer candle, which is the most classic reversal candle. Volume appears to be a question mark, but I’ve not had time to do a thorough analysis of that yet and maybe this chart of the NASDAQ 100 Index ETF is an anomaly.

As I noted on Twitter (original tweet here, copied below), I opened a small long position during the day (a little before noon NYC time):

Some panicy tweet crossing the wires… VIX over 50… Etrade fail whale: http://twitpic.com/evcz. Was enough for me to take a nibble.

I’m generally more of an end-of-day trader, but was away for the close so did not get a chance to buy more. VIX spiked to 58 intraday, which is extreme panic, then reversed (see chart, below).

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What Bank Run? See This Google Search Trends Chart

True it’s only anecdotal evidence, but I’m pretty sure people search Google about FDIC insurance when they’re worried about their bank going bust.

What you see on this chart is a bank run precursor, the starting gun getting cocked.  All someone has to do now is blink and the run is on.  Doesn’t matter if it’s a false start or not once a run starts, the outcome becomes inevitable.

As discussed for months by Nouriel Roubini (see here for some of his articles and references on my blog and see here for a Bloogberg radio interview with him last week).

Note, there are solutions to this problem, as discussed by Roubini. It starts with the government increasing FDIC insurance immediately (a temporary increase to $250,000 FDIC insurance was signed into law on Friday) and also recapitalizing banks (more than buying bad assets).

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Bailout “Hope Rally” = Eye of the Storm

(just time for a quick, somewhat unpolished update)

What I mean by “hope rally” is the rally off a (bear-market) low that is driven by the hope that some specified thing (the Bailout legislation in this case) is going to make everything all better. That is never the case, of course, otherwise it would be called the start of a new bull market.  Also, in the current situation, it’s almost certainly (effectively certainly) too early (time and price) in the bear market for a new bull market to start.

That’s why I make the eye of the hurricane analogy, because any “Bailout Reprieve” will (almost certainly) be only temporary.

Last week’s…

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Market Update – The Day After

Just a quick follow up to yesterday’s events (blog here).

Today did see buying come in, but as shown on the Google chart above, and on the market stats links that follow, there was an intaday reversal.  Notice how GOOG peaked around $425 and closed around $400.  See the shape of that candle?  Gap up open, rally to new high, then close back down near the open?  That’s a warning.

Updated charts of the securities I showed yesterday are displayed below.

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Nouriel Roubini’s Latest – Must Read

(NOTE: There are many more NR articles on this blog, going back to 2006, just use the search box at the top of the right-hand sidebar (or click here).  Here’s one from January.  I have been writing about the coming crisis myself since 2004, when I sold my co-op in DC and started renting, and also started liquidating my other real estate investments.  The asset and credit bubbles were obvious to all who had their eyes open and thought for themselves.  Sadly, most people do not think for themselves, maybe that’s why we have the term sheeple.)

The US and global financial crisis is becoming much more severe in spite of the Treasury rescue plan. The risk of a total systemic meltdown is now as high as ever

The next step of this panic could become the mother of all bank runs…

By Nouriel Roubini
2008-9-29

It is obvious that the current financial crisis is becoming more severe in spite of the Treasury rescue plan (or maybe because of it as this plan it totally flawed). The severe strains in financial markets (money markets, credit markets, stock markets, CDS and derivative markets) are becoming more severe rather than less severe in spite of the nuclear option (after the Fannie and Freddie $200 billion bazooka bailout failed to restore confidence) of a $700 billion package: interbank spreads are widening (TED spread, swap spreads, Libo-OIS spread) and are at level never seen before; credit spreads (such as junk bond yield spreads relative to Treasuries are widening to new peaks; short-term Treasury yields are going back to near zero levels as there is flight to safety; CDS spread for financial institutions are rising to extreme levels (Morgan Stanley ones at 1200 last week) as the ban on shorting of financial stock has moved the pressures on financial firms to the CDS market; and stock markets around the world have reacted very negatively to this rescue package (US market are down about 3% this morning at their opening).

Let me explain now in more detail why we are now back to the risk of a total systemic financial meltdown…

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Ask Yourself One Question: Who Benefits?

  1. Who benefits from a “failed” (delayed) bill?
  2. Who benefits from getting to buy assets at lower prices?

The answer is not “nobody.”

Maybe that sounds like conspiracy theory, but make a big change in any direction in (pretty much) anything and some people benefit and some people don’t.  It’s just the nature of big changes.  The inflating and deflating of a bubble is no exception.

So who benefits from this parade of falling dominos?  Who wins, who loses?  The answer is known the same way it (pretty much) always is: Follow the money (and power): Those with it, are going to gather more of it.  The rest of us… not so much!

Cheers,
Chris

PS: As readers of this blog know…

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USA Bailout: So, How Much Is $700+ Billion, Anyway? And What Would Sweden Do?

UPDATE #1: See the comments to this post for updated numbers and links.

UPDATE #2: See updates and articles on my 2009-2-12 blog post. Also see this New York Times graphic: The tab is now $8.8 trillion, equivalent to the second largest economy in the world, behind USA at $13+ trillion.

The chart above shows the world’s largest economies (measured by GDP), ranked by size.  Assuming the US bailout is only $700 billion, the bailout is larger than all the economies highlighted in yellow.

Note: The bailout is actually already well over $950 billion if you count $150 billion stimulus package (checks to individual tax payers this spring), Bear Stearns, FannieMae, FreddieMac, and AIG.  If you add in the cost to bail out insured bank depositors and all the others who are lining up, it’s going to be well over $1 trillion. But let’s just call it $700-$800 billion for now.  How much is that?

As shown on the chart above (Wikipedia page here), it’s about the size of the Dutch economy, the 15th largest economy in the world (it shows as #16 on the list because the list counts the EU as #1). That’s a lot of “coffee”!

Remember, GDP (the “economy”) is the total value of ALL goods and services produced by ALL people and entities in a country in a year. All that money, down the drain.  Well, not actually down the drain, but into the pockets of those who profited on the way up (privatize the profits) and will profit and/or not lose as much on the way down (socialize the losses).  Nice.  Ok, I better nip that rant in the bud ’cause I gotta hop in a minute.

Real quick, lets say the bailout cost climbs to $1 trillion, how much is that? Larger than Mexican, Australian, and South Korean economies, getting close to the size of Inda’s and not far from Rusia, Brazil, and Canada.

Yeah, it’s that big…

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Quick Updates: Stock Market, London, BuzzPal, Nouriel Roubini

2008-9-24 UPDATE: See here for pics and a complete debrief of me week in London.

Some interesting events since my most recent post (“The End of an Era“) and market update, when I said “it’s time to allocate some [brain] CPU and bandwidth, primarily for the purpose of monitoring the sentiment as it works towards its next extreme (and reversal).”

This is exactly what happened.  Unfortunately (for my trading), BuzzPal and I were in London for Seedcamp week, where we went to events, held meetings, and co-sponsored the first-ever TechCrunch Tech Talk, which was a smashing success and a great party, including after hours with some people you might recognize (see pic, below).

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