If you are expecting global warming stuff, it’s here:
Canonical in reverse date order:
https://chiefio.wordpress.com/category/agw-and-gistemp-issues/
Intro page with favorites:
https://chiefio.wordpress.com/gistemp/.
Input Data Issues:
https://chiefio.wordpress.com/category/ncdc-ghcn-issues/
This posting is about the other thing I do, looking at investment markets. Prior postings in this series are available here.
The charts in this posting are live charts, so my comments will describe how it is now, but in a week it will be showing new data and a new week. Since I think it’s more important to be in touch with what the market is doing NOW than to preserve the historical chart, this is, IMHO, a reasonble choice. Just don’t be surprised if the chart I describe is not the one you see a few weeks from now! If you would like to see the historical chart, you may enter custom date ranges on the charting tool at http://www.bigcharts.com
Daily Notes
UPDATE: February 4, 2010. We had our short rally Monday / Tuesday. Then… Well, that was quite a drop. The Greek Government might default and a newspaper article was discussing an added $40 Billon Euro debt that is hidden ‘off the books’. Spain is being rumored to be up to it’s eyeballs in Greek credit default swaps (an unbacked ‘asset’ that has no real collateral behind it, at the core of the financial melt down of the last couple of years). So it’s ‘melt down’ all over again.
That “sit in cash” decision of late last year is looking better and better… Dollar rising against Euro and other currencies too.
But a nice “crash day” means it is time to start watching for an ‘entry’: RSI down at 20, price far from the SMA stack. MACD about to cross over. Slow Stochastic will cross over first as a ‘set the trigger’ signal.
But with that 10 year chart looking “toppy” you want to be very careful about holding a long position in a falling market. We’re still in the short choppy trades zone. So it’s sit in cash, and only make fast short trades. Falling markets are very fast and very choppy.
Watch things that have been heavily shorted to tell you when the shorts are covering. If coppers, like FCX, or major financials, like GS or BAC, show a jump, that’s a clue… But wait for it… wait for it…
Wall Street Week – Friday, January 28, 2010
Well. So much going on and nothing happening!
Greece is threatening a default on their Government Bonds, but the French are saying “No Problem” about Greek bonds… Short rates have jumped up for Gilts (as, for some reason, Greece and the UK are seen as involved with each other. Probably because of the large English financial markets.)
The TOTUS gave a nice little Fate of the Union Speech. That didn’t set any new directions for the USA, but left the markets tanking for a couple of days. Obama continues his push to nationalize the healthcare industry, break our energy infrastructure, damage the banks, and generally destroy wealth. There was a clear direction set to raise revenues and lock in his recent budget hikes for preferred agencies via a ‘1/2 Budget Freeze’. Oh, and spend a few dozen more $Billions on the Chinese Credit Card. Not good.
So Congress raised the debt limit by another $1.9 Trillion. That ought to hold them for a few months….
Ok, what does all this mean… It means, for now, holding selected cash is a reasonable thing, and longer term, holding cash is really dumb. It means holding bonds is a very bad idea (US or European) as the Sovereign Debt issues get worked out. (Nervousness makes rates rise, driving bond prices down…)
And it means we are still in a “race to the bottom” on what currency will be worth holding.
Oh, and China raised bank rates (causing nervousness in their markets) and worries about inflation in China. The Chinese currency is “sort of pegged” to the US $, and the US Government seems intent on ruinous currency policies so that China will get such bad inflation they will have to break the peg. Just because that will bust the buck first, hey, no worries… Unless you think you might want a dollar that was worth something…
So sometime China may let the Yuan move up just a smidgeon more against the US Dollar. The last time the bank tightened like this it was followed by a peg adjustment. But you will have no idea “when” and only a poor idea of “how much” if at all. Not very useful.
The reasonable thing would be to invest in other countries; except if China is tightening, Europe is threatening Financial Crisis Part Deux, and the USA is being incredibly stupid, the odds are not very good for everyone else to have a good day either…
So my best idea so far is a slow entry into inflation protection plays along with basic resources that pay high dividends. I’m sniffing around PBR Petrobras, PCU and FCX in copper, and maybe some Real Estate via REITS. But the 10 year chart is “not good” and the 1 year chart is looking like a “correction” setup… So mostly it’s just time for ‘nervous cash’.
SIgh. “Battleground markets” are such a pain. One chart time frame going one way, another as a counter current. (10 year calling a top, 1 year was headed up in December, now rolled over.) It will take a while for the new direction to stabilize and trend following to work. For now it’s a treacherous mix of conflicting currents where you can’t ‘trend trade’. Short term and day trades based on fast predictive indicators (like RSI and Slow Stochastic) rather than longer term trend following. And “When in doubt, be out! -E.M.Smith” (or the more pointed and polite form: “Think in Cash. -E.M.Smith” Basically, if you need to think about things, or don’t know exactly what’s up, bug out to cash. (Though which cash is still an interesting question…)
We also have the World Economic Summit in Davos going on. Lots of opportunities for a “Ministry of Stupidity Speaks” moment. Sigh. Maybe I’ll just buy a bunch of TEVA pharmaceutical and sell generic aspirin… it looks like a lot will be needed…
OK, enough of my pondering, what do the charts and trends have to say? Roughly the thing I said we were having and would continue to have last posting (about a month ago). The SPY is about exactly where it was 3 months ago. You could trade one week runs in the ripples, but that’s about it. We’re roughly where we were a month ago:
Well, we’ve been in a roughly sideways choppy market since about the time, last month, that I said we would be in a roughly sideways choppy market. What? You expected something more interesting? Sometimes ‘the hard bit’ in trading is the boredom. “Nothing happened” can happen for a fairly long time. OK, yes, some toppy markets have had a bit of a tumble (like gold). Yes, the dollar has had a bit of a rally. But I did say to ‘hold dollars’ and after you have ‘gone to cash’ it is just, well, boring. OK, you could have bought the ‘dollar up’ UUP ticker or the “short gold” ticker. But those are slightly exotic instruments for the average Joe or Jane sixpack. If you want to trade them, you probably don’t need me telling you about them.
Well, that about sums it all up… Still. You could have made a bit of money in the “We’re not dead yet” trades. Gambling, car parts, home construction, airlines. All things that are terrible industries right now, but not as dead as they had been expecting. Hardly a ‘safe investment’. If you’d known that Toyota was going to stop selling cars, you could have made 9% in US auto makers. Of which Ford is the only one worth owning. ( I have a small position in the Ford Preferred.) But most of these moved all of 3 to 5 percent ranges on the month. Time an entry or exit wrong on one day and you make nothing…
10 Best Performing Industries Industry Name Percent Change (over time selected) DJ US Automobiles Index 9.99% DJ US Consumer Electronics Index 6.02% DJ US Gambling Index 5.70% DJ US Airlines Index 5.43% DJ US Automobiles & Parts Index 5.42% DJ US Recreational Services Index 4.42% DJ US Home Construction Index 3.88% DJ US Diversified Industrials Index 3.30% DJ US Pipelines Index 3.18% DJ US Biotechnology Index 3.07%
So small electronic toys, Ford actually making a profit for the first time in a few years, and some “not dead yet” plays. Murfpt.
And if you hit the WRONG sectors?
10 Worst Performing Industries Industry Name Percent Change (over time selected) DJ US Platinum & Precious Metals In... -22.10% DJ US Aluminum Index -17.25% DJ US Forestry & Paper Index -12.84% DJ US Paper Index -12.84% DJ US Nonferrous Metals Index -12.24% DJ US Travel & Tourism Index -12.16% DJ U.S. Industrial Metals & Mining... -12.05% DJ US Internet Index -11.11% DJ U.S. Iron & Steel Index -9.97% DJ US Fixed Line Telecommunications... -9.66%
You got killed. Metals, mining, travel, internet. Heck, even telcos.
And I can repeat the same thing now I’ve been saying for two months:
So I’m mostly on the sidelines right now. Same as a month ago. You can do some small day trades. You can hold some large dividend payers (I still have my CEL that is paying well along with TGP that is a high dividend LNG tanker company, for example) along with the very long term investments (like Birkshire Hathaway BRKA / BRKB ). But there isn’t much ‘action’ in holding them. And I’m still holding my “oil trusts” as a high dividend hedge on my personal fuel consumption (like PWE) . Again, not a lot of “action” in saying “hold the core holdings”…
Though we did have the surprise of BRKA / BRKB being added to the S&P 500 giving it a nice bump up of about 5% on one day and another 5% a few days later.
The Long Term Context
A month or so ago I explained this particular chart. Since it takes such a long time for a 10 year weekly chart to show changes, I’m going to do another ‘change up’ different indicators from last time just to keep it interesting. You can hit the “WSW” category on the right edge and look back at the last posting to see the other indicators.
I’m still going to do both the NYSE and SPY for variety as well. I’m also changing to a 5 year chart so the crossovers will be a bit easier to see.
OK, we see Slow Stochastic with the “mouth” pointed down and blue on top, saying ‘be out” and we see MACD with an early shallow crossover to the downside. Another weak ‘be out” along with DMI showing a low trend (DMI under 25) and with red / blue approximating and showing ‘not much’ happening. The prices have dropped to the first Simple Moving Average Line and threaten to drop on through. A weak ‘be in or be ready to be in”, but with the flat trend and the other indicators being on “be out” the bigger risk is a drop, so I’d not act on this “buy on touching the SMA lines” The SPY chart is almost exactly the same, so well look at other indicators on it.
5 years, NYSE
When we look at the SPY, I’ve added the Williams%R indicator. It’s a lot like the MAC, but you get a big line movement instead of a little cross over. So you can see that the blue line plunged during the drop. In a rising market, those plunges are a “time to buy” and this market is still technically a rising market. We will likely have a short “relief rally” in the next week or two. Then it will resolve, up or down, for a longer term trend. I’m expecting it to resolve downward, but we’ve got a couple of weeks of news to get through first. Earnings reports have been good, but stocks have not moved much. So we’re “news driven” not “earnings driven” and the news has not been good (but could change). So I’m presuming well be headed down until some really good news changes the market sentiment.
RSI says that we’ve been rolling between about 50 an 70 for a few months. On this ‘return to 50’ it would be a buy signal (but we have those negative…) so again it argues for a brief ‘relief rally’ then a flat or drop.
Finally, that ROC Rate Of Change has faded down to just a smidg below zero. Not good. No momentum and what there is has a negative sign.
Last posting I’d said:
I’d expect a tiny “Christmas Rally” into Dec 25, but some kind of drop after that until a new trend sets up in January.
While that is roughly what we got, I was a bit too pessimistic about how fast it would start the drop. OK, a bit early on “be out” is a good thing. “Late in, early out. -E.M.Smith” So we might have a relief rally, wait for it to start to get in, then be ready to be out fast if / when it fades. And, “When in doubt, be out.” Use a 1 year daily chart to be better timed on the trade, but remember that there now is no trend on the 10 year or 5 year weekly chart.
5 years, SPY
What Is Our Context
Let’s look at the S&P 500 largest stocks in America compared with some other kinds of assets; a couple of month maturity bond fund, oil, gold, Yen.
Asset Class Recent Race
SPY The S&P 500 ETF GLD Gold ETF USO Oil ETF FXY Japanese Yen currency fund SHY 1 to 3 year U.S. Treasury Bond fund FXE Euro currency ETF SLV Silver fund BZF Brazilian currency ETF EWA Austria ETF WOOD A wood and paper products fund
Well, that’s pretty ugly. About the only thing that ‘won’ against the $Dollar was the Yen. OK, cash is king, but maybe not the US Dollar as cash… Well need to check out the Currencies Race for currencies and double check who is winning the most. BZF headed down shows a lot of money leaving Brazil. Probably from stock sales. Glad we stepped out of Brazil back when they had their “Ministry of Stupidity Speaks” moment a couple of months back? I am ;-)
SPY is clearly saying “be out” with MAC headed down, red on top, and crossed over zero into negative land. DMI has ‘red on top’, another ‘be out’. RSI has crossed through 50, but not reached 20 yet. Still ‘be out’. So that ‘relief rally’ is not happening now (and maybe not for a while longer…). Maybe Monday or Tuesday…
What about Brazil? A Closer Look.
We stepped out of Brazil when they had a “Ministry of Stupidity Speaks” moment a couple of months back. We ought to keep an eye on them, though. But for now it is still a “watch but don’t touch” market.
With RSI nearing 20 and an inflection in the red line on the DMI chart, we could expect a ‘reversion to the mean’ with Brazil moving back up to the Simple Moving Average stack from the bottom. But when it touches that SMA stack, sell. Trading ‘up’ in a ‘down’ market is a hard fast trade…
Brazil ETF vs Currency Race
EWZ - Brazil BZF - Brazilian Real currency FXI - China EWA - Australia EPI - India - WIsdom Tree fund EWC - Canada EWW - Mexico GUR - Middle East Fund
OK, so “the middle east” is holding up. I can work with that. (Though watch for a ‘slow entry into the fall’. Some times the strongest ones just take longer to join the flood… so it’s especially bad to, oh, “ride Brazil down” then swap to The Middle East just in time to ride it down too… You do want double dips to the upside, hopping on laggards after a run. But you want to be very cautious about that in down markets.
In a special posting October 20th, I had said to bail from Brazil as their President had started talking about special taxes on foreign stock trades. Now you can see why I said that.
Running ETFs
I have a new tool that searches chart patterns and finds those that I describe to it as “interesting”. For this section, “interesting” is those that have price over 25 day Simple Moving Average over 50 SMA over 75 SMA. Basically, those that are in a steady up run.
This is most likely to continue, but will at some point each ticker will hit a “dip” and fall off this search, only to return at the next rise. So a high number is good, until it fails, and a low number can mean time for a second bite at the apple. Being ON the list can be as important as rank on the list. Races tell you how to rank them. Realize that these have not been filtered in any way for the quality of the fund, nor for the volume traded, nor for what they hold. Each ticker must be looked at for those qualities before buying anything. This is just a way to find “things of interest” to explore. So what is on the top of the list?
These are not in yet
Basic straight runs: Price > 25 > 50 > 75 ===============================
And running Tickers of all kinds:
Basic straight runs:
OOTUS – Out Of The U.S.
See the racing stocks tab for currencies and for foreign emerging stock markets for the latest moves.
The currencies are all generally dropping against the US Dollar with the traditional exceptions of the Yen and the Swiss Franc. FXY and FXF. Even gold has been dropping. I don’t expect that to hold. A ‘trade in’ to gold may be ‘soon’… The ‘rocket ride’ up is over for a while, but some ‘flat wobble’ trades ought to be available.
Indonesia Fund 1 Year Chart
This chart compares FXI – China 25 big stocks, EWZ – Brazil, EWO – Austria, EPI – Wisdom Tree India fund, and the Indonesia fund.
Everything but Indonesia dropping. So how did I call this one last time?
The “Emerging Market” trades have gone flat or are dropping. Time to be in cash or elsewhere in “watchful waiting”.
Nice. Very nice. ;-) There was a small trade in that ‘bump’ up in IDX, but unless you were trading it actively and watching it each day you would have missed that trade. Easier to just be on the sidelines. I’d trade in on a fast basis during these choppy markets, but not on a ‘buy and hold’ basis.
VIX the Volatility Index
Volatility Index and Related
VIX - Volatility Index (not a ticker, you can't trade it) VXX - Short term VIX futures ETN (a ticker you can trade) VXZ - Medium term VIX futures ETN (a ticker you can trade) FXY - Japanese Yen SH - "Short" sell of SPY SPY - S&P 500 benchmark IYT - Transports, a leading sector XHB - Homebuilders, a leading sector and "canary" XRT - Retail
OK, we had a spike up. That would be a buy signal on a ‘few days or week’ trade basis. It’s also a time to sell options ( you pay for volatility in options, so you want to buy them when vol is low and sell them when the price and vol are high…)
Things are flat or less across the board. Even the “leading indicator” transports.
The Dollar
I’ve to turned this chart around from the older version. This is now a ‘US Dollar UP” trade chart of UUP instead of UDN.
Dollar Trade -UP
Clearly saying “the bottom is in, own Dollars”. Not an intuitive or fundamentals based trade, but the chart says be in dollars, so that’s where I am. As they say about Quantum Mechanics: If you don’t like what it says: “Shut up and calculate”…
Notice we have crossed the SMA stack to the top side. DMI is rising strongly headed for 25 with ADX+ (blue) on top. For now, it’s US Dollar time. Remember that this kind of rollover to the topside will return to the SMA stack and that the SMA stack must ‘invert’ or roll over to confirm the run ‘has legs’. While it’s done that inversion, it’s still in the ‘flat weave’ and will need a few more weeks to show a full trend. MACD is also “blue on top” and is above zero. Again, a bullish call on the US Dollar.
Ideas of the Week
Hold dollars, look for individual situations that have had a nice price drop and look ready for a rebound. Watch the news and see if there is any news flow driven events to mess things up (like, oh, Greece defaulting or Cap and Trade passing).
What does the 10 day hourly chart say is happening now?
Here’s a 10 day houly chart of the Dow 30 Industrials (DIA), the S&P 500 (SPY), the Nasdaq tech companies (QQQQ), the Russel 2000 (RUT), and both a Brazil fund (EWZ) and an Australia fund (EWA). It also has a ‘short fund’ (SH) on the chart so you can see what being short this market is doing right now. We also have EWO, an emerging Europe Austria fund, EWW for Mexico and IIF for India.
10 Day Hourly Interval Broad Market
Pretty darned grim. Shorting was about all you could do to make some money. Or buy put options (though the dropping vix would have eaten a lot of the profit). Selling calls against the stocks you hold would have been a good strategy. Probably a bit late for that now.
Other Asset Classes
The 6 month asset class race:
Asset Class Race
SPY S & P 500 US stocks GLD Gold EEM Emerging Markets FXY Japanese Yen JJC Copper SHY Short term bonds 1-3 year USO U.S. Oil DBA Agricultural basket SLV Silver WOOD Wood / Timber
Pretty grim here, too. FXY Yen is about it.
So what happened in the Tech Market relative to world markets?
Tech is not a refuge. Cash. Cash is good…
Tech vs Other Markets
QQQQ Nasdaq 100 mostly Tech companies DIA Dow Jones 30 Industrials SPY S & P 500 largest companies in the U.S.A. MDY Midcap (Middle sized in terms of market capitalization) RUT Russel 2000 - a collection of 2000 companies from small to large. EWZ Brazil fund EWA Australia fund EWO Austria fund EWW Mexico fund
Were Bonds a good idea?
OK, lets take a peak at the Bonds Race but with TBT (the “long term bonds” short sell ETN – that is, the thing that “shorts bonds”) as the main ticker symbol:
Bonds - TBT to Short Them
Clearly, bonds were not a good place to be, especially long term bonds. The “short sell bonds” trade, while not exciting, had a tradable bump, but now has gone flat. But watch for a new entry call on a new trade.
What sectors won this week?
This is the best and worst from last Friday. It looks like the “economic recovery play” is continuing to run. Basic minerals and oils / energy. I need to do more analysis of this, but so far that’s what it looks like in a ‘first blush”.
10 Best Performing Industries Industry Name Percent Change (over time selected) DJ US Recreational Products Index 2.85% DJ US Nondurable Household Products... 2.44% DJ US Aerospace & Defense Index 2.44% DJ US Electricity Index 1.52% DJ US Publishing Index 1.51% DJ U.S. Household Goods & Home Cons... 1.40% DJ US Recreational Services Index 0.82% DJ US Biotechnology Index 0.80% DJ US Automobiles Index 0.50% DJ US Specialty Finance Index 0.49% 10 Worst Performing Industries Industry Name Percent Change (over time selected) DJ U.S. Iron & Steel Index -10.62% DJ U.S. Industrial Metals & Mining... -9.99% DJ US Nonferrous Metals Index -9.55% DJ US Aluminum Index -9.32% DJ US Telecommunications Equipment... -8.21% DJ US Platinum & Precious Metals In... -8.07% DJ US Internet Index -7.60% DJ US Commercial Vehicles & Trucks... -7.52% DJ US Consumer Finance Index -7.28% DJ US Forestry & Paper Index -6.62%
Not much to work with, and the ‘recovery stocks’ that were up a month ago where down the hardest this week. Toothpast and defense companies were up. “Electricity” is a flight to safety dividend play. “Recreational” was largely driven by a big spike in a flakey penny stock and “National Golf”. Not exactly stellar stuff to work with.
OK,so “grim is grim”. We stay in ‘duck and cover’ mode until there is a clear change.
What About Oils?
XOM Exxon Mobil - Largest, U.S. / Global COP Conoco Philips - U.S. with Russian exposure CVX Chevron Texaco - U.S. PBR Petrobras - Brazil PCZ Petro Canada HAS NOW MERGED WITH SU SUNCOR BP British Petroleum STO Norway E Eni Italy TOT Total - France RDSA Royal Dutch Shell IMO Imperial Oil - Canada Oil and Oil Sands SU Suncor - Canadian Oil Sands SSL Sasol - South African Synthetic Oil Company
Dropping like rocks. PBR has a ‘entry near’ with RSI approaching 20. But it’s in a bear market context (under SMA stack, MACD below zero, etc.)
Some Near Oil and Oil Related Comparisions
.
Sugar moving up, if in fits and starts, is the interesting thing here. COW looks like it is making a nice bottom, and with JJG “grains” down, COW feed is cheaper.
SEA - A Boatload of Boats ETF
Transports in general are a good early indicator. Boats, rail, maybe even some trucking. FDX looks ‘toppy’ and UPS too maybe, though the UPS chart is nice, if not spectacular.
The REITS race – Real Estate Investment Trusts
REITS Race
PEI Pennsylvania Real Estate - Mall REIT VTR Ventas - sr. care, nursing homes, hospitals PSA Public Storage - junk storage units BXP Boston Properties - office REIT on BosWash corridor HCN Health Care REIT - extended care, senior care, medical offices HCP Health Care Properties - ex. care, senior living, Dr. offices PCL Plum Creek Timber - lumber and trees REIT SPY S & P 500 broad stock market benchmark RPT Ramco Mall REIT PLD Prologis - logistics
The mall REITS did best. Clearly the move to selected real estate beat the pants of stocks this last month.
Conclusions and Likely Actions
Holding cash and big dividend paying positions in well capilalized companies (like LNG tankers and oil trusts). Picking up a little realestate cheap. Watching for the “sector rotation” and doing ‘watchful waiting’. Eying PBR… and sugar.
Stock Indicators – what and how
If all this talk of indicators is leaving you wondering what the heck I’m talking about, hit the link in the heading of this section and there is a bit of an explanation.
Click for Disclaimers, Disclosures, and Where To Get Charts
Remember that on any stock or ticker I say I’m looking at, you don’t just go buy it. You wait for a stock entry indication to get the best possible entry into the position.
Musings from the Chiefio 
Keep your eyes pealed on this re: metals prices
http://www.ecnmag.com/Blogs/2010/01/new-elements-from-old.aspx
and this re: copper
http://flognewsservice.blogspot.com/2009/12/why-arent-we-pouring-more-efforts-into.html
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Well, we’re getting close to a ‘correction’. But wait for it…
I’ve put an update at the top. You want to be neutral in this market or doing fast trades swapping from long to short as the cycles roll.
US Dollar and Treasures will bump on a ‘run to safety’, but in the long term they are not a place to leave your money for years. Days, weeks, yes. Years, no. So I’m sticking with dollars, and not shorting treasuries. Gold is flat. Their is some kind of toppy issue there.
Chiefio, you might be interested in GWO, and the article I wrote on it here:
http://sowellslawblog.blogspot.com/2010/02/is-global-warming-good-investment.html
GWO is an index of 50 stocks, worldwide, each with a stake in global warming.
Roger
Could global warming cause the extinction of the species ‘thermometer’?
Looking for a place to leave information below as you work on the next WSW– this seemed the most appropriate. Caveat — I’m not sure any of this info is relevant to your assessment of global markets.
1. Nyinvestingmeetup.blogspot.com, the 3/12/10 post, discussed the Commerce Department’s rosey reports on February retail sales and January inventories and business sales. Mainstream media also happy with the results. (Retail sales important because they were 72% of U.S. GDP before the Credit Crisis.) D. Montgomery claims that the government’s retail sales numbers are not adjusted for inflation.
It is like the hockey sticks of AGW notoriety and fraudulently adjusted data. “Inventories were reported as flat in January, but business sales were up 0.6%….[However, the UNADJUSTED change in Sales and Inventories] “from December 2009 to Januarty 2010 state that total sales were DOWN 13/3%….Sales for retailers were DOWN 22.9% before adjustment. They were UP 0.2% after….” The discussion centers on the remaining serious economic difficulties of the U.S. that few are paying attention to.
2. Karl Denninger of market-ticker.denninger.net, whom I have mentioned to you before, discusses Jenner and Block’s Lehman Bros. Chapter 11 Proceedings Examiner’s Report and the start of the 2009 collapse (3/14). (He has great charts, too — 3/13). Denninger says the report shows that not only were Lehman principals and their accountants guilty of fraud, but it looks like Timothy Geithner and NYFed knew about the dealings too (debt masquerading as assets — temporarily shuffling $50 billion of debt off the books) but looked the other way.
The Daily Caller reports on Naked Capitalism’s claims:” It also emerges that the NY Fed, and thus Timothy Geithner, were at a minimum massively derelict in the performance of their duties, and may well be culpable in aiding and abetting Lehman in accounting fraud and Sarbox violations.
Karl Denninger claims: a) blatant violations of the Federal Reserve Act; b) “this paper appears to set forth several prima-facie cases of violations of Securities Laws, both on a civil and criminal level”; c) “The paper also makes a prima-facie case that both FRBNY and these other banks were fully-aware of what Lehman was up to and intentionally looked the other way…;” d) “Literal[ly] trillions of dollars were lost due to this malfeasance and misfeasance, along with millions of jobs.” He concludes: “Timmy Must Be Fired, Or Obama Must Be Impeached.”
My question regarding economic hockey sticks and fraudulent financiers and regulators is: Are these important enough issues to crash or move global markets in a major way — or are these matters limited to internal U.S. crises? I know I am not asking very much!
@Pyromancer76:
Yeah, the “prior WSW” thread is the best place until such time as there is a new one. I’m running the update of my stock program now, but it having not been run in a while is needing to re-scrape most all the data… I think it will likely take all night to run, so expect the next WSW to be a day or two out yet.
I’ll put some comments below about the market right now as show in the live graphs in this posting. But first, your quesions / comments:
1) Markets move because of how people feel. Bad news about key large players, like heads of agencies can easily crash markets. However Lehman is “Old News”. It’s yesterdays fish. As folks do a ‘perp walk’ not much will happen that persists for more than a couple of days. IMHO, of course.
2) Much more important is the question of broader impact. How many others have done the same things and NOT gone under? And we just don’t know. The basic problems was the Fanny and Freddie at the behest of the Democrats pushing mortgages for anyone with a pulse. You even had banks punished for not making bad loans (i.e. don’t “redline”… ) so the banks were somewhat forced into doing something to move the bad paper. And despite trillions of $$$ of government intervention, the stuff is still looking for a fan to land on. And it’s all over the world. (Buggered the Icelandic economy, sent Irish banking down a dark slide, caused some other continental European banks to blush and hide their books ;-) and we won’t talk about England and what the Pound is doing… worse than the dollar in many ways.) Even the Japanese banks are being demure about how much of the Japanese retirement system is tied up in US Mortgages… We are not out of this thing and won’t be for years.
3) The jobless rate in the USA is NOT getting better and the absolute numbers are hideous in some places. (Central Valley California, for example, is about 25%. Think about it… It is NOT unique and NOT the highest in the nation.) THE basic problem is that the government is sucking all the oxygen out of the economic process and China is poisoning any production recovery here with their economic policies and cheep Yuan. We don’t get ‘better’ until a currency realignment happens (or all job growth will continue to go to China) AND the Federal Government (with the help of the state governments) stops sucking all the cash out of every corner they can find; and even spending what they don’t have on future unfundable white elephants like the “Health Care Mandate”. (No, this is not a statement about the benefit of “health care for all”, it is only recognizing that when 16%+ of the economy is about to be socialized and the bucks run through the DC Laundromat, the result will inevitably be less money in the economy and more stagnation.
4) In that context nobody with a clue is going to build new factories in the USA (go to China), invest in new medical related industries or even build a hospital ( no idea what to put in the ROI models… or even on the loan application), or buy any new plant or equipment for existing factories and medical facilities as long as things are “up in the air”. Further, even non-factory businesses are not going out expanding things as long as there are clouds on the horizon. And a 25% unemployment is a pretty big cloud… So you think Stockton will be building any new homes soon (was a big boom town during the ’80s an ’90s in the Central Valley of Calif.) ? And do you think the malls there will be adding more hiring? How about car sales, think they will be doing well? Right on down the line…. Which leads to:
5) Retail was priced for bankruptcy, so I bought a bunch. Prior years were crappy, so Year over Year will look OK. Made some money. Now it’s ‘double or nothing’ time. If we get even a tiny recovery, the dismal profit becomes a huge percentage growth. (Going from 0.01% profit to 0.1% is a 10 fold increase or 1000% profit growth…) and you can get a big gain. However, it’s easy to have a 0.01% profit turn to a 0.01% loss over night… You must watch the numbers very closely and pick the real winners. The ones who will make that profit, somehow. Visit malls. Count bags in hands. Look for who has lines at the registers. Yes, Go Shopping! (but just don’t buy much or you will spend all your trade profits ;-) But be very careful. The books can be cooked in many ways, and inflated prices is only one of them…
6) Speaking of inflation: The only way I see for the Government(s) to avoid bankruptcy is to bugger the currency and inflate away the debts. Expect it. Also expect it to be completely denied at all times even when blatantly obvious. China has figured this out and dumped about 25% of it’s massive US Treasury holdings already. They are running for the exits… but trying to do it in a way that does not spook everyone else. The only real good news here is that other countries are doing it even more than we are… and have higher debt loads. Oh, and big things take a very long time to move, so this could take a decade or two to finish unfolding. The Chinese Credit Card will not be available to the Federal Government to fund all their Porkulus, so the only choice is print and spend. (Yeah, “not spend”, is a choice, but it will never happen until we’re broke and inflation is killing everything…) I’d give it about 2 years to be clearly happening. About 1 if the health care bill passes.
7) We’re in a post crash “bounce and rebound” phase. We’ve had a big rise, now were wobbling sideways. We can resolve to the downside (like the ’29 crash returned in about ’32 IIRC) or we can recover like a decade ago. Until that’s sorted out, we wobble sideways as a ‘roller’. Short trades, not investments… until inflation is clear then you run to inflation hedge plays. (A LOT of my money is in oil and gas trusts paying out fat dividends that will inflation adjust – as long as governments don’t tax it all away… and some is in overseas places with high dividends too. I’m not putting it in places like, oh, GM stock or Citibank or Pfizer stock. You just don’t know what our Government is going to do TO you or TO them. And that’s the problem. We don’t have a sound economy as long as congress is cutting $Trillion Checks OUR butts can’t cash. So until that’ s resolved, it’s “Stuff gold in the mattress or oil trusts in the vault” time… and watch for good very short term trades in things like retail or Pfizer as the political news swings back and forth… if you like fast trades… and high stakes poker. Oh, and keep some small percentage of money in overseas investments as the charts indicate…
8) None of these shenanigans is new. Everything from cooked books to crooks in government to buggering currencies to socialism hiding in plain site as government programs to help needy people. It’s all be around before. What’s saved the USA from it (more or less) until now was the limited role of the Federal Government mandated by the constitution. Unfortunately, since about 1950 that’s been steadily eroded to where we basically ignore the constitution. The ere of limited government is now long gone. Were before we could have at most about 10% screwed by stupidity and graft, we know have nearly 50% available for various kinds of pilfering. That’s the level where economies and countries collapse. (NOT my opinion, it’s just what happens…) So we’re at a crossroads. We continue down the Progressive path to an FDR world, and collapse into a Workers Paradise like Cuba (we’ll all have a job and healthcare, we just won’t be able to buy anything or survive the treatments…) or we’ll have a Reaganesque “Come to Jesus Moment” and get back on a path to limited government and capitalism. Place your bets… (Again, this is not about my biases, it’s about what we see in economic history. EVERYONE wants to play with The Socialism Shiny Thing, and EVERY time it collapses. Democracies fast, Republics more slowly.
—General Comments—
The basic fact is this:
A job digging a hole that someone else fills in does not create wealth. Focusing on JOBS is WRONG.
“Free” healthcare for all is not FREE. Someone has to pay for it. Giving it to everyone does not make more of it nor does it make it cost less. It just reduces the wealth creation elsewhere in the economy.
Continue right on down the line of “feel good but does bad” progressive, liberal, or socialist agenda items. They all ignore that the fundamental thing that makes more “stuff” for everyone is “Wealth Creation” and that is not something that governments can do nor mandate; but they can destroy it…
So until we’re done with this cycle of wealth destruction, the economy gets worse, not better. Once it’s completely broken, it can recover. It’s very unlikely to happen before that point unless a Reagan Revolution event happens. (Realize that a John F. Kennedy would be such a R.R. if running today… he, too, was for lower taxes and wealth creation by businesses…) this isn’t about Democrat vs Republican: It’s about eating your seed corn and burning your furniture to keep warm vs planting a crop and making a lathe to build furniture.
And the place where that is happening today is China and to some extent India and Brazil. So move your money to places that have growth and where the Socialism Shiny Thing was tried (and maybe still has some large parts of the economy in thrall) but where the trend is away from it and toward wealth creation.
–Trade Craft–
OK, with all that a said, the 10 year weekly is showing MACD more or less going sideways (but with the red on top…) and RSI is approaching 80 (a trade out after this recovery run of the last few weeks). It’s more time to step away than put more in. We need to test and break through that prior high level and I’d rather wait for that to be over than buying in now. We buy when RSI is at a bottom 20 (like it was a few weeks ago) and there is a failure to advance to the downside. We sell when it’s at 80 and there is a failure to advance to the upside. (Same as for yearly charts… just on a longer time fuse…) So I don’t see a compelling story to trade in now. I do see a case for avoiding the risk by standing aside for a but to see if we ‘break out up’ or ‘break down’. And I’m just not seeing a lot of good news here. I’d expect mostly ‘rolling sideways’ with about a 2 month period for a while.
Oh, and most likely things like COW to start doing well as the stocks are down… Basically, look at what Joe and Jane sixpack are buying with their limited dollars, and buy those companies or commodities. Then look at what China is buying and buy those companies and commodities. Then look at what industries are in the US Government sights and run screaming away from them.
Thanks for the response — you have assured me that you sleep and I am glad. With the work you are doing on the Great Drop Out and associated “oddities” of corruption, with a few who deserve a “get-out-of-jail-free card” (or “guilt-free”), I imagine the brain power is getting quite a work out. Please publish.
A few tidbits for your leisure moments (and if the following material is not of interest, please delete this post). On the WUWT thread re carbon market corruption/collapse, these comments seemed interesting. Wondered about your take on this sordid mess.
18 03 2010 — KimW (20:41:35) :
But but, this is about the planet. Who would dare endanger it by attempting to make money at the expense of the whole human race by falsifying these permits. I am shocked, shocked, I tell you. It’s worse than we thought.
The people who thought up the – trading in the equivalent of fluffy bunnies and Unicorns – have no idea about the real world and the con men and ’sharp’ businessmen that are out there. Trading an intangible – the Dutch Tulip Craze all over again – at 12 euro a ton. At least you can eat fluffy bunnies.
18 03 2010 — James Sexton (22:04:45) :
Sadly, I’m too drunk to comment much. I don’t think it has much to do with Hungary. I think the skiddish weasels are using them as an excuse. Consider, the weight of Hungary’s Carbon credits compared to the rest of the EU. If Hungary totally collapsed then we should have seen a reduction of what?? 1/20th of the total value of “carbon credits”? That’s a 5% loss.
Yes, I know what traders do. They scare at a shadow. But the loss is because they don’t know how much traction the debacle and debunking of the AGW science is going to get. When people bought into it, they thought the cat was in the bag, now they’re doubting.
People that feed off of someone’s perceived misery(investors in carbon trading)…….carpetbaggers.
18 03 2010 — pft (23:14:46) :
“James Sexton (22:50:15) :
What I meant to say, was, THERE IS NO VALUE TO CARBON1111 There is only a perceived value, but nothing intrinsic”
You can say the same thing about the dollar. Carbon credits are simply a currency manufactured out of thin air, like the dollar.
19 03 2010 — Mike Haseler (01:54:31) :
An anti-capitalists inspired capital market trading thin air on the basis of temperature data from three incompetent people in the CRU.
Sure sounds like a recipe for success!
19 03 2010 — David Alan Evans (02:32:44) :
KimW (20:41:35) :
“The people who thought up the – trading in the equivalent of fluffy bunnies and Unicorns – have no idea about the real world and the con men and ’sharp’ businessmen that are out there. Trading an intangible – the Dutch Tulip Craze all over again – at 12 euro a ton. At least you can eat fluffy bunnies.”
The people who thought up this scheme are the con men and ’sharp’ businessmen that are out there.
19 03 2010 — Jimbo (04:18:51) :
Speculative bubbles:
“Although each of these episodes is well documented, this book examines the monetary interventions that engendered each of these events showing that not only the Mississippi Bubble and the South Sea Bubble were caused by government meddling, but Tulipmania as well.”
“Although these episodes occurred centuries ago, readers will find the events eerily similar to today’s bubbles and busts: low interest rates, easy credit terms, widespread public participation, bankrupt governments, price inflation, frantic attempts by government to keep the booms going, and government bailouts of companies after the crash.”
http://mises.org/store/Early-Speculative-Bubbles-P578.aspx
Well, first off, no one ought to eat a Fluffy Bunny, EVER. (My pet Mini-Rex / Dutch hybrid has assured me of that in no uncertain terms…) and they are not to be ‘traded’, they are to be ‘provided suitable accommodations’. Sheesh, the things you have to teach people ;-)
One of my favorite books is “Memoirs of Extraordinary Popular Delusions and the Madness of Crowds”. Every so often I post a pointer to it on some site or another. The whole “Carbon offset” market is just another such bubble:
http://en.wikipedia.org/wiki/Extraordinary_Popular_Delusions_and_the_Madness_of_Crowds
(Though it really is titled “Memoirs of Extraordinary…” and is one of the best reads you will ever find. Much of human folly becomes clear as well as the fact that we have always been incredibly silly as a species.)
You can get a free download from:
http://www.gutenberg.org/etext/24518
Or, in audio format:
http://librivox.org/memoirs-of-extraordinary-popular-delusions-and-the-madness-of-crowds-volume-i-by-charles-mackay/
So any time you make a market “out of thin air” (figuratively, or in this case literally) you get bubbles. Heck, stabilizing markets in physically constrained physical goods is hard enough (look at the volatility of gold and oil…) when the supply is subject to creation by anyone and the demand is uncertain and the regulatory milieu is volatile: you have no hope.
The more unphysical the product and the more it is a ‘derivative’ instead of a final good (like an option instead of a stock ownership / contract) the more volatile and the more subject to spontaneous melt down. Basically, when the “value” is all perceptual, perceptions can change. Fast.
I would be willing to TRADE a carbon market on a weekly time scale, but I’d never leave money in it over the weekend…
Think of it as a lotto ticket, but one where the “value” can evaporate over the weekend with one Political Ruling somewhere if if The Ministry of Stupidity Speaks somewhere else… (Like, oh, China announcing ‘not going to play’…)
The Chinese bubble has yet to pop.
BTW the liquidation of US Treasuries by China may not be part of a rush to the exits. It may be they are spending the money to prop up their economy. At minimum $600 bn. And they have cities no one lives in, malls that no one shops at, and empty commercial real estate.
We can stand considerable decline and still live like kings.
The Chinese are not so fortunate.
M. Simon ‘….We can stand considerable decline and still live like kings’.
Perhaps you are correct.
I would however add that JK Galbraith quoted some similar sounding statements in his book about ’29.
Tony,
In 1929 Millions was a big number for a rich man. Now it is billions. And even accounting for a 95% reduction in the dollar we are about 4X as rich as we were in 1929.