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18 Reasons We'll Pull Back From Current Levels

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May 27, 2009 – Comments (48) | RELATED TICKERS: C , GM

18 Reasons We’ll Pull Back From Current Levels

 

I’ll never think of myself as a perma-bull or a perma-bear but I definitely think of myself as a skeptic 100% of the time. The way I see it right now, we have 18 reasons that just give me that sinking feeling….

 

1)      Unemployment rates are at their highest levels in memorable history at 9.2% and they show no signs of slowing down. This one is sort of a no-brainer as we need people to be employed in order to have money to spend to drive further economic growth. Even if we look at past recessions, the unemployment peak often comes after the recession has officially ended according to the census bureaus, so we’re still a long way off from finding the unemployment plateau. Don’t even make me get into how unemployment only factors in those looking for work over the last 12 months and not those out of work for longer than that time period still seeking work!

 

2)      Housing prices fell 19.1% for the first quarter of 2009 and represents the largest decline ever recorded in the 21 year history of measuring housing prices. It’s no secret that the record increases in housing prices that we saw over the past five years is what fueled most of the wealth production in this country. The problem here is that we still have such a huge surplus of homes on the market, and using simple supply v. demand, it’s extremely likely we haven’t seen a bottom in housing prices.

 

3)      Credit is simply not available to those who need it and new credit laws are only going to hamper the ability for those individuals to obtain credit. Sure, the new credit laws enacted by the Obama administration are going to protect individuals with decent credit scores from getting uncalled for massive rate hikes, but it’s killing any potential hope for sub 650 credit scores to obtain the financing they need to get things done. All I’ve seen from credit companies recently is a stricter tightening while lending only to those with scores of 720-750 and over. It’s not that this is a bad scheme from a lenders perspective as an excellent rating provides a better chance of receiving payment, but what I’m finding is that these high scorers are not the people looking to spend right now and excess credit to this arena isn’t doing anyone any good. You have credit being lent that isn’t being used and potential creditors not getting their fair chance to help out the economy.

 

4)      We have a massive amount of Option ARMS and ALT-A loans set to re-set, starting right about now and lasting for the next 30 months. It is absolutely insane how many billions of dollars worth of loans were generated in the mid 2004 to late 2007 time period which were subject to Adjustable Rates. If you thought the subprime mess was horrific, wait until this next set of ARM’s begins to reset. Based on figures from the housing industry, it appears the value of loans set to adjust looks to be about 25-30% higher than what we saw in the subprime arena, and you think foreclosure rates are high now?

 

5)      Historically speaking, the S&P 500 has bottomed out with fundamental earnings per share around 5 to 9. With the most recent spike downward we saw the S&P near about 12 times earnings and although I’m not saying history writes itself in stone, based on historical perspective, we are still riding a pretty pricey train. Now we do have to factor in that most of the companies in the S&P are growing at phenomenally quicker rates than they were in previous recessions of the 20th century (which is my main basis for comparison), but after our recent bounce, we’re treading around 15 times earnings and I’m simply not comfortable with that figure based on the economic information we’re receiving daily.

 

6)      Energy prices are rising at dramatic rates despite any real indications of an economic recovery. Oil, lets face it, over-corrected itself to the downside. Oil as a commodity is perfectly priced (in my opinion of course) around $57-$72 a barrel. We’ve seen petroleum refiners working more efficiently than ever. Oil doesn’t even need to rise for gasoline to see an uptick. Any sort of energy price increases are going to hamper our recovery and I clearly feel we’ve seen that base in oil. Oil should never have traded down in the $33 range and we’re likely never going to see it there again.

 

7)      Short covering has been one of the major drivers of this bear market rally. Although I don’t have any of the recent figures in front of me, it doesn’t take a rocket scientist to deduce that banks were being heavily shorted up until mid-March upon which we saw a dramatic reversal. Margin calls and massive short covering triggered a massive rally in banks which in turn churned the rest of the market higher. It’s been years since I’ve seen a short covering rally have legs that took it higher for more than 3-4 months and news for everyone, we’re on month 2½.

 

8)      Insider buying has been absolutely anemic. I wish for the life of me I could remember the online source where I read this but the figure stuck with me that insider buying has been roughly 50-55% lower than it was in the year ago period. Although we are seeing stocks down 30, 40 or even 50-60% below last years’ figures, the management of these companies are clearly not stepping up and buying their own stock. Earnings visibility is clearly not there right now and I don’t blame these leader for not buying at the moment.

 

9)      Deflation is beginning to rear its ugly head! Deflation is a nasty little bugger that gets us coming and going. Sure it drives down prices and allows for goods to appear cheaper, but it also kills company profits and tightens up the wallets of the only people who even have money because they’ll simply sit on the sidelines waiting for things to get even cheaper. The cure? Print money like mad and spend it to create inflation which will hopefully spurn jobs creation and drive company profits. The problem with this…. #10

 

10)  Dollar dilution! I know the old adage that a recession usually causes the dollar to appreciate but I don’t see this happening one bit. We have printed off so many billions of dollars during this economic crisis that I am flat out shocked the dollar is still as high as it is. We desperately need to attract investment from abroad but the only true way to do that is to have attractive interest rates in the first place. How attractive are ours? Well, let me tell you that ¼% is simply not going to get it done. This is a catch-22 situation! We either deal with the company killing effects of deflation, or we screw our dollar to hell and scare away foreign investment. I believe our government is choosing the latter and let’s just say, run away, run away!

 

11)  High debt levels! Stimulating an economy comes with a cost and the true costs here are going to be significantly higher than what the government has told us. As interest levels are raised eventually to increase foreign investment in the US, the cost of our rising debt levels is sure to sting. The actions of this stimulus package will probably take 10-15 years to pay off and that doesn’t include any debt pre-existing prior to this crisis.

 

12)  Junk bonds and high-risk stocks are leading this rally higher. I’m not saying that poor stocks cannot turn into leaders, what I am saying though is that the poorer the outlook for the company, the bigger the rebound we’ve seen. There aren’t any real earnings behind the biggest losers in the banking sector yet we are treating them like they posted a 75% earnings increase. Appetites for risky investments are oddly growing but rarely do these investments lead to sustainable results.

 

13)  Bank losses and loss provisions are not shrinking at a fast enough pace. Banks are having to issue shares at an exorbitant rate just to meet capital requirements set forth by the government. These share offerings are highly dilutive to shareholders and banks will seemingly never have enough cash to prevent themselves from a disaster. The riskiest of all banks are still allocating billions per quarter to counter high-risk loan losses. The kicker of it all, Citigroup (NYSE: C) commented that they loaned out their entire TARP funds already! I mean did they learn anything?

 

14)  I don’t care what anyone says, the impending General Motors (NYSE: GM) bankruptcy (and trust me, its impending) will send shockwaves throughout the market. Nothing is too big to fail, no matter how American it may appear. GM and its subsidiaries employ or help to employ roughly 2 million people if you consider just how far reaching their suppliers extend. People want to believe that magically GM will pull through this, but at 15-20 times debt to cash, the possibility of this happening is minute.

 

15)  From a technical perspective gold looks ready to resume its uptrend. If you look back at gold over the last seven years you’ll notice that it has a history of rising for about a year, then basing for a year. It has repeated this pattern a few times and looks ready to resume higher. As you know, gold usually has an inverse relationship with the stock market and rising gold will generally be a signal to sell stocks. To me gold looks like a sure thing to $1135 by fall.

 

16)  North Korea is shaking things up and it reminds us that foreign confrontations are still out there. Have we resolved our Iraq issues yet? No. Have we resolved our Iran issues yet? No. Now we have to deal with the possibility of North Korea demonstrating its nuclear capabilities. The markets really dislike uncertainty and we have plenty of it to worry about right now as our foreign policies really haven’t cleared anything up over the last 6-12 months.

 

17)  Although foreclosures are flattening a bit, they are still rising at a very rapid rate as compared to the past decade. A glut of foreclosed properties on the market makes it incredibly difficult if not impossible to sell new homes and causes potential buyers to steer toward foreclosed units in order to save money. The problem here is that with a lack of credit available to many consumers, these foreclosed homes remain on the market without a buyer and until these units move, new homes pretty much don’t stand a chance.

 

18)  Finally, baby boomers got screwed. I’m not saying we all didn’t feel the pinch of this economic downturn, but we are entering the baby boomer retirement period and their savings were going to be a driving force of economic growth. With many boomers losing 30-60% of their wealth in the recent downturn, its very possible that we could see an economic downturn lasting well into 2012-2013.

 

I’m not saying we re-test S&P 666, but there is little evidence to suggest that we can maintain a “V” bottom without at least retracing a few of those steps that got us 36% off of those lows in the first place. As of right now, lump me in with the bear clan!

 

Disclosure: I currently have no positions in either C or GM

 

UltraLong

48 Comments – Post Your Own

#1) On May 27, 2009 at 1:26 AM, portefeuille (99.60) wrote:

The problem here is that we still have such a huge surplus of homes on the market, and using simple supply v. demand, it’s extremely likely we haven’t seen a bottom in housing prices.

Could you elaborate on that?

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#2) On May 27, 2009 at 1:34 AM, TMFUltraLong (99.95) wrote:

Its a mixture of foreclosed homes and new homes for sale. We have many of the major US cities with huge surpluses of foreclosed homes on the market which are attracting investors at the expense of newer homes. Newer homes are simply not moving and remaining on the market (although you can blame a severe lack of available credit as one culprit here).

Simple supply and demand here. New housing prices will continue to fall until they become attractive enough to lure buyers away from foreclosed homes or provide them with a high enough risk-return to keep them away from the uncertainties of buying a foreclosed home.

I don't think we've hit any of these levels yet and I feel home prices may still be overvalued by about 15%. The rising rate of foreclosures and today's housing data simply proves this.

UltraLong

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#3) On May 27, 2009 at 1:43 AM, ozzfan1317 (79.29) wrote:

I think we have seen the bottom but I agree that we will see little if any growth for the next couple of years.

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#4) On May 27, 2009 at 1:46 AM, awallejr (81.59) wrote:

I don't see a V shape recovery either, but that doesn't mean an impending crash is in the cards.  I've been hearing this for months now.

As for your 18 reasons my response would be:

1)  Unemployment is of concern, but it really is a lagging indicator.

2)  Housing prices NEED to drop to clear out the inventory.  Most people aren't selling anyway so while it might make a person feel good that values are rising instead of declining, it still remains nothing but a paper loss.  People need HOMES.

3)  LIBOR's dramatic drop says otherwise. It's just not going into the hands that shouldn't be getting it (the ones that don't pay back).

4)  ARMS are resetting into historically low interest rates.  Bernanke has done his darnedest for that.

5)  Too many divergent calculations as to what S&P p/e is.  I will go with Value Line's since it is beyond contestation.  They had it bottom at 12.1 while last bear market was at 14.  It is currently at 14.7, still near bottom range.

6)  Oil's rise is seasonal.  It will drop after July 4.  Play the run for now tho.

7)  This has nothing to do with short covering.  Alot of stocks are rising with very little short interest in them.

8)  Insider buying is basically relevant to individual stocks.

9)  Even Dr. Gloom & Doom Marc Faber doesn't see  deflation an issue.

10)  Weak dollar is not necessarily a bad thing provided it doesn't tank hard.  Does help for exporting.

11)  Yeah high debt levels are a concern, but the fact that savings has gone up to highest point since 15 years ago and that we have paid down about 10% of credit card debt helps.

12) I still see alot of undervalued quality stocks out there paying excellent dividend yields.  BP at 7%? T or VZ or lots of energy plays.

13) You miss the point about banks.  C lending out all TARP is good because they borrow the funds for almost NOTHING, including from depositors, and are lending it out at very profitable rates.  Watch the July earnings.  Banks will outperform then.

14)  The day it happens when GM files for bankruptcy will be interesting.  It wouldn't surprise me of a down day, but the market really is expecting it anyway.

15)  I always advise people to hold some gold simply as an inflation hedge.  Why TA would urge it now I don't know, but in the long run it will always increase unless one day we learn how to transmute copper into gold.

16)  North Korea will have no serious impact on the US economy, although I am concerned about a lunatic developing nuclear weapons.

17)  Lower prices, low new housing starts, low mortgage rates, federal tax credit all will help to eventually absorbed the foreclosure inventory.  Unemployment does need to get in check tho, which hopefully it will by 2010.

18)  Baby boomer impact will prove interesting.  Highest voting block will impact politics. 

Ah the joys of prognostication and analysis heheh.  Rec to you for an interesting blog.

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#5) On May 27, 2009 at 3:34 AM, alexxlea (59.19) wrote:

Say a person  has an hour's commute to work, 120 miles a day, fuel economy of 25/miles a gallon, fuel costs go to 4 dollars/gallon, they make 10 dollars an hour, work an 8 hour day. 19.2 dollars a day for just transportation is nearing 33% of that person's income. This is obviously with really stupid example numbers, but trust me, when everyone realizes there's no oil left, you'll see prices that exist in other parts of the world. 5 dollars/litre is foreseeable.

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#6) On May 27, 2009 at 3:57 AM, kaskoosek (58.06) wrote:

Ultralong

You are missing the point here.

I know that you are a contrarian, and it might be working for you a lot of the time, but the ultimate demise of a currency could prove you wrong if politicians keep printing, equities will rise in nominal terms.

Unemployment, mass riots are not that important, because we are still pricing assets using a fundamentally flawed currency. If we were pricing using gold or silver, then that is a different issue.

I still believe that any person trying to time the market especially during an upturn is commiting suicide. Timing the  bottom is a different issue, because underpriced stocks do not stay depressed for ever. However overpriced stocks can keep increasing for a sustained period of time wiping out shorts.

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#7) On May 27, 2009 at 4:02 AM, TMFUltraLong (99.95) wrote:

http://www.nytimes.com/interactive/2008/06/09/business/20080609_GAS_GRAPHIC.html?#tab1

The above link there actually shows some particularly interesting effects of gasoline consumption based on income. Although that particular chart is outdated by nearly a year, I think the figures still hold pretty true to today.

What it shows is that areas with high public transportation options often tend to spend the least amount on gas while rural areas where little public transportation exists suffer. You can see parts of the midwest and south very frequently spending 10-16% of their income on gas. Keep in mind these areas are the most prone to the cheapest gasoline prices as the distance and pipeline infrastructure is literally right there. Ironically, its the busiest cities and the West coast that seem to exhibit the lowest gasoline costs in relation to income.

Admittedly even I was surprised when I read this.

UltraLong

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#8) On May 27, 2009 at 4:06 AM, bridgeboy0 (30.73) wrote:

Let's say oil is instead $2/gallon in your example.  This same person instead is spending 1/6th of his/her income getting to or from work.  This person really needs to live closer to where he/she works if his/her income is only going to be $80/day.

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#9) On May 27, 2009 at 5:01 AM, devilinside (72.34) wrote:

I agree on all points except one. Deflation will not be with us for long. Once the US deficet kicks in, we will be heading for a long period of high inflation. I see this coming around 2011.

As your member name suggests this shouldn't be of any concern if you are long.

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#10) On May 27, 2009 at 8:18 AM, TMFBabo (100.00) wrote:

I don't think a massive fall in house prices is a cause for concern.  With the run-up as bad as it was, it simply had to fall.  I do agree with you that supply is still much greater than demand and that prices will continue to fall, but I don't see it as a terrible thing.  We had a housing bubble of historic proportions, so the fall will likely be of historic proportions also.

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#11) On May 27, 2009 at 11:05 AM, dbjella (< 20) wrote:

4)      We have a massive amount of Option ARMS and ALT-A loans set to re-set, starting right about now and lasting for the next 30 months. It is absolutely insane how many billions of dollars worth of loans were generated in the mid 2004 to late 2007 time period which were subject to Adjustable Rates. If you thought the subprime mess was horrific, wait until this next set of ARM’s begins to reset. Based on figures from the housing industry, it appears the value of loans set to adjust looks to be about 25-30% higher than what we saw in the subprime arena, and you think foreclosure rates are high now?

The only danger of resets are people out of work or people who took an interest only option.  Otherwise I agree with earlier posts that with the LIBOR index so low, peoples' revised payment will not be materially higher.

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#12) On May 27, 2009 at 11:11 AM, portefeuille (99.60) wrote:

I have said this 1000 times over and people still argue with me, ...

How dare they!

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#13) On May 27, 2009 at 11:19 AM, portefeuille (99.60) wrote:

Comment #5 above must be among the top 10 displays of absurd argumentation I have read in the "caps" game blog section.

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#14) On May 27, 2009 at 12:21 PM, Alex1963 (28.45) wrote:

Point #4

I still say that if anyone is aware of the fragility of the future performance of these loans it's the lenders themselves. I believe they are hoping & praying Obama will bail them out somehow but in reality they themselves will simply be forced to reset these loans with people. Some of the federal programs have barely had a chance to get traction and IMO were never meant to save the whole housing market. More designed to show a viable path for lenders who thus far are still stubbornly, & stupidly, refusing to face reality. 

It's also possible the lenders had figured that some more banks might fail allowing them to pick up portfolios whose loans might boost their overall peformance. Perhaps they are now seeing that a) the admin is commited to shoring the banks up and b) as unemployment  looms greater even those "safer" loans are beginning to look shaky.

Here's a "green shoot" LOL from yesterday

"Face-Lift for Foreclosure Prevention

Federal Program For Loan Workouts Draws New Allies" 

http://www.washingtonpost.com/wp-dyn/content/article/2009/05/25/AR2009052502272.html 

And I wouldn't be at all surprised to see lenders cannabalizing each other to offer refis to the upper 50% risk tier of competitiors.

I just don't see this becoming the economy killer some people foresee.

I think a market drop is coming tho and I'm trying to postion to capitalize with a swing trade strategy using a combination bear & bear ETFs and longs in high beta stocks. Because overall I see continued volitility in both directions. I think many investors feel the same and this may help explain point #12. Plus high beta small caps historically do lead the way out of down makes as my research and reading have frequently stressed. The low beta high caps blue chips tend to lag (badly) and that has certainly been the case in my RL portfolio. (my newbie .02)

Great post rec #34 from me

Alex 

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#15) On May 27, 2009 at 12:54 PM, nottheSEC (80.13) wrote:

awallejr (43.77) puts it quite well.Given that advice Oil for a trade and I would add perhaps a couple of juniors as 10 % of your portfolio. While I am not as upbeat I believe we will be very volatile but remain slightly up for the year Credit is loosening but still tight and Alt A mortgage resets as stated by DWOT in prior articles are a major concern.

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#16) On May 27, 2009 at 1:58 PM, briyan (30.95) wrote:

For those who have commented on the extremely low LIBOR rates, I would warn you not to be too confident.  While the current low rates lessen the blow of a rate reset, the real danger in these upcoming years lies in the "recast" of the payment schedule from a negative amortization plan with interest-only teaser payments.  

Even if the interest rate stays same or even drops at recast time, those borrowers who have been scraping by on the minimum payments will see huge increases in monthly payment when the loan recasts to the full amortization payment schedule; this increase is frequently 2X or more.

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#17) On May 27, 2009 at 3:13 PM, tonylogan1 (28.12) wrote:

Also, these low interest rates are not sustainable, as can be seen in the bond market performance the last few weeks.

Without some major Fed intervention, and possibly regardless, the 10 Year will be over 5% by end of the year.

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#18) On May 27, 2009 at 3:18 PM, TMFUltraLong (99.95) wrote:

To respond to comment #12 above

My main concern with the Alt-A resets are not necessarily just the out of work people, but also those who simply lived to the excesses of their means, which unfortunately is a far greater amount than the unemployed. Even with historically low interest rates, the probability that say 20-30% of these people will not be able to meet the few hundred dollar a month increase in mortgage that they will experience is a very real possibility. 2010 is going to be a very ugly year in housing!

UltraLong

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#19) On May 27, 2009 at 4:06 PM, russiangambit (29.27) wrote:

awallejr, this "Unemployment is is a lagging indicator."  thing really makes my blood pressure jump. I am sure , I am not the only one .

As for the rest of your points, I am going to save this post and see who was right - you vs. UltraLong in a couple of months, when I calmed down a bit.  -))

All of the points raised are crucial and I am very curious have it will all play out over time.

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#20) On May 27, 2009 at 4:24 PM, tonylogan1 (28.12) wrote:

russiangambit - unemployment IS a lagging indicator...

when you become unemployed, it usually takes a while before you go broke and stop paying your mortgage and credit card bills and go on welfare.

wait.. is that not what they mean by lagging?

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#21) On May 27, 2009 at 4:36 PM, portefeuille (99.60) wrote:

awallejr, this "Unemployment is is a lagging indicator."  thing really makes my blood pressure jump. I am sure , I am not the only one .

Well, we have had this dicussion before (see here).

Some of the highlights:

 

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#2) On May 01, 2009 at 12:06 PM, russiangambit (99.29) wrote:

Don't you know all the bad news is a lagging indicator? Everything is going to be just fine by the summer, now that we got cosnumer confidence up (how did that happen, by the way? I remember it started with C and WFC good news) they will go out and start spending as usual. This is the current market premise, at least.
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#3) On May 01, 2009 at 12:17 PM, TMFDeej (99.07) wrote:

Hey russian.  I badly want to see the positive things that others are seeing in the economy...I just can't.  I am having a very difficult time understanding the current rally, but I highly doubt that it will stick.  Hopefully I'm wrong and I'm just a pessimist because I have been bearish on things for so long, but I doubt it.

All of this lagging indicator stuff is a bunch of garbage.  sometimes the bad news is just an indication of the fact that things are bad.  This is not going to be a V shaped recovery.  We will finally hit a bottom and sit there with slow to no growth for a while.

At least that's my $0.02.

Deej
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#5) On May 01, 2009 at 12:21 PM, russiangambit (99.29) wrote:

>We will finally hit a bottom and sit there with slow to no growth for a while.

Funny. I agree with you. I am just a bit irritated since I keep hearing about green shoots and laggining indicators from mainstream media . I don't know why they don't understand that by pushing half-truths they loose all the credibility sooner or later. It reminds me  USSR propaganda so much, it is not funny
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#7) On May 01, 2009 at 2:22 PM, TMFDeej (99.07) wrote:

Alsty, go away.

Deej
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#10) On May 01, 2009 at 4:59 PM, TMFDeej (99.07) wrote:

Sinch and I are friends and we've already discusses this.

Alsty, go away.

Deej
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#12) On May 01, 2009 at 7:29 PM, megank12 (67.88) wrote:

Alsty, go away.

Deej
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#14) On May 01, 2009 at 8:58 PM, alstry (99.78) wrote:

Alsty, go away.

Deej.
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#16) On May 02, 2009 at 8:16 AM, portefeuille (99.99) wrote:

All of this lagging indicator stuff is a bunch of garbage.  sometimes the bad news is just an indication of the fact that things are bad.  This is not going to be a V shaped recovery.  We will finally hit a bottom and sit there with slow to no growth for a while.

At least that's my $0.02.


Lagging indicators lag. Unemployment for example has recently been very good at lagging (for the last 2 recessions see figure 3.4 here). I don't consider them (nor mentioning that a certain indicator is lagging) garbage.
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I still like that figure 3.4 (again, see here) ...

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#22) On May 27, 2009 at 6:47 PM, awallejr (81.59) wrote:

Oh Russiangambit you know we love to be on opposite sides of an issue ;p

Great chart link there Port. Man I forgot how nasty the 1980s unemployment stats were.  Won't surprise me if we peak above it's top in 2010.  GM BK is going to give us another nasty hit I fear. 

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#23) On May 27, 2009 at 7:32 PM, bostoncelitcs (41.31) wrote:

We may not be "out of the woods" so to speak, but the failed economic policies of the Bush administration including the largest "tax cut" during a time of war of any President in history, seems to have begun slowly turning around. I would say another bull market like we had during the Clinton years may not be for another 2-5 years away.  And that would be remarkable considering!!

A good reason to invest in "defensive" stocks such as utilities!

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#24) On May 28, 2009 at 11:17 AM, darroj (31.39) wrote:

Ultralong, Thanks for posting! Your points are very well thought out and I appreciate your efforts!  On the whole, I agree with you, but I'm still trying to figure out what to do with my holdings... Ride it a little longer, sell now, or just ride it out all the way.   The GM bankruptcy is the one thing I'm not sure about. Obviously, everyone knows they are in rough shape (I will continue to blame the unions for this) but its hard to say if it will really cause that much disturbance to the market immediately.  It will certainly hurt all of the suppliers, and the trickle down effect will be huge, but I wonder if the government will allow them to go bankrupt, knowing how bad unemployment already is.

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#25) On May 28, 2009 at 3:45 PM, foolsMeThrice (99.63) wrote:

We are still feeling the forces of deflation in full swing.  I think the inflation trade is premature so I got out.  With respect to oil going higher, all markets get irrational for longer than you may expect.  We literally have millions of barrels of oil floating about at sea.  Once the liquidation starts remember this is oil sold forward to August and later, it's gonna tank sharp and fast and may even breach our February lows.  This will be due to oversupply shock in the spot market.  Also the supply of tankers to store oil at sea is dwindling.  Ever since the contango vanished, you can no longer lock in guaranteed profits, thus anything bought and stored at sea was pure speculation at that point.  The longer oil is held at sea, profits from the trade go down due to the storage costs.

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#26) On May 28, 2009 at 3:50 PM, foolsMeThrice (99.63) wrote:

GM has only 136,000 US workers.  If they went bankrupt, it would mean swat to the big picture.  The debt however is important.  They want to keep it alive so banks don't have to pay the CDS insurance.  GM share holders in total are now the proud owners of only 1% of the company as the debt holders have effectively squeezed them out via the 15% offering with a preffered offering option.

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#27) On May 28, 2009 at 5:33 PM, TigerPack1 (96.57) wrote:

One of the best posts and commentary by the rest of us I have seen in a long while - excellent job UltraLong!

I am very confused about your position and outlook, however.

You make an excellent bear market rally argument and list many reasons to sell your exposure to U.S. stocks.

But your CAPS game is still HEAVILY betting on rising prices for stocks?  Are you waiting for one last upmove to cover all your picks and go short?

I think we are going to have a breather over the summer months, with perhaps one more stab higher in June, but I remain optimistic about the U.S. stock market picture for the next 9-12 months.

Can you either elaborate about what you are looking for in stock prices the next few months, or lock-in your long picks to prove to the rest of us that you actually believe your own reasoning?  They say actions speak louder than words, and right now your CAPS activity is prepared for the exact opposite of the theme of this blog message....

I covered the vast majority of my leveraged long picks weeks ago, when I moved to a market neutral stance on equity pricing generally.

I would say you either are trying to have your cake and eat it too, by proclaiming you were right, no matter which direction the market moves, OR the CAPS player is purely an adventure in what ifs, OR your wife wrote this blog and sent it before you read it, OR you have two distinct personalities, OR rational thought is difficult to create in your head.  [I am not trying to upset you by the way, you have already demonstrated you deserve to be somewhere in the top 50 or 100 players already.] I am just trying to get where you are coming from, that's all.

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#28) On May 28, 2009 at 7:18 PM, d1david (29.22) wrote:

i second Tiger's comments.... what gives about your picks being long...not that I mind...as if you stay long on all your picks and we have this decline, i will bounce back over you in ranking ;  )

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#29) On May 28, 2009 at 9:33 PM, TMFUltraLong (99.95) wrote:

Its simple nature that I believe in long-term trends and over the long-term I expect the nature of my portfolio to appreciate. I do not anticipate a breach of the previous lows we had set on the S&P of 666 nor do I feel the need to prove my worth as a trader by opening and closing as many picks as I possibly can on CAPS. I find more value in leaving what I feel will be solid long-term picks open and allowing the compounding gains on these picks to grow. Sure I could close 117 picks and re-open them later, but the overall value of these picks remains greater over the long haul if i leave this portfolio pretty much untouched with the addition of a stock here and there when I see fit.

On a short-term basis of roughly 2-4 months I definitely see us pulling off current levels. I don't have a specific target in mind as of yet, though a few charts are telling me to look for the S&P to hit at minimum the 808 level. I don't claim to be the all-knowing on charting, but I've always enjoyed technical analysis over the years, so if i get within 1% of this figure being right, i'd be pretty satisfied.

If someone passes me on CAPS (ahem David ahem =) ) thats just fine with me. In the long-run i think I'm going to sit at #1 for quite sometime, but i'd rather be sitting #1 with the real portfolio instead, lol.

Remember, I'm never a perma-bull, i'm never a perma-bear, but I am a perma-skeptic!

UltraLong

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#30) On May 28, 2009 at 10:33 PM, TigerPack1 (96.57) wrote:

Fair enough, thanks for clarifying your position.

I guess I will have to settle for second place later in the year, with my 90%+ accuracy and 10,000+ points.  That's still my target by year-end.

If you leave Ultralong untouched you should get to at least 11,000 points and 95% accuracy with another 10%-15% rise in stock quotes from today's level by the end of December.

I am sure you will find plenty of criticism along the way for getting "lucky" by nailing the bottom in stocks and refusing to change your stance, but more power to you if you can avoid making additional picks and ruining your accuracy.

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#31) On May 29, 2009 at 1:07 AM, TMFUltraLong (99.95) wrote:

Don't look now but we got even more confirmation of just how bad the housing sector is today and naturally we rallied extensively on this news. *sarcasm*

The interesting news was not just that 12% of all US homeowners are now in some way, form, or shape delinquent on their mortgages, but that the majority of new foreclosures in the 1st quarter were from mortgage holders with good or above average credit scores. People are losing jobs, taking pay cuts and clearly it's still not enough. If this housing bubble were a baseball game, we just entered the top of the 5th inning. This crisis is nowhere near done.

UltraLong

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#32) On May 29, 2009 at 1:44 AM, portefeuille (99.60) wrote:

In the long-run i think I'm going to sit at #1 for quite sometime ...

maybe ...

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#33) On May 29, 2009 at 1:59 AM, portefeuille (99.60) wrote:

1,2,3

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#34) On May 29, 2009 at 2:00 AM, portefeuille (99.60) wrote:

4

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#35) On May 29, 2009 at 2:01 AM, portefeuille (99.60) wrote:

5

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#36) On May 29, 2009 at 2:08 AM, TMFUltraLong (99.95) wrote:

But none of those players will ever have my accuracy rating, and trust me, I know how much you value that accuracy weighting *sarcasm*

UltraLong

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#37) On May 29, 2009 at 2:16 AM, portefeuille (99.60) wrote:

But none of those players will ever have my accuracy rating, ...

Not even sure about that ...

But they might have to fight a little.

Maybe we could settle for split empires. The "overall" and the "outperform" kingdoms ...

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#38) On May 29, 2009 at 2:23 AM, TMFUltraLong (99.95) wrote:

Ha Ha... yeah! All I know is i'm not out here to trade 1200 stocks in a year, that's not my style. I'll either never make 1st, or I'll stick around there for a few months.

Now back to the impending market pullback..... =)

UltraLong

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#39) On May 29, 2009 at 6:12 AM, AnAmateur (< 20) wrote:

pullback? I just put in a week ago after selling off after losing 5% of my portfolio value. Are we do for another large sell-off?

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#40) On May 29, 2009 at 6:24 AM, devilinside (72.34) wrote:

If it quacks like a duck, walks like a duck and looks like a duck, it must be a duck. Quack Quack

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#41) On May 29, 2009 at 9:16 AM, portefeuille (99.60) wrote:

The "overall" and the "outperform" kingdoms ...

Actually you might take both crowns since all of your picks are "outperform" calls if you consider that (-1)^2 = 1.

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#42) On May 29, 2009 at 9:17 AM, portefeuille (99.60) wrote:

Now back to the impending market pullback..... =)

okay, back to business ...

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#43) On June 01, 2009 at 3:24 PM, vmh104 (< 20) wrote:

When will this friggin market listen to reason?!?

S&P 500 Sets New 2009 High

I know I'm breaking some fundamental rules of investing...er.. trading... but I'd rather be broke for the right reasons than rich for the wrong ones.

I bought more FAZ today.

 

 

 

 

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#44) On June 01, 2009 at 5:28 PM, OldEnglish (28.11) wrote:

awallejr, this "Unemployment is is a lagging indicator."  thing really makes my blood pressure jump. I am sure , I am not the only one . -RussianGambit

You're right Gambit. You're not the only one. It's nothing but a slogan.

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#45) On June 02, 2009 at 8:11 PM, TMFUltraLong (99.95) wrote:

Insanity ensues for yet another day. JP Morgan Chase and American Express both announce secondaries and survive without hardly a scratch while another company out there (coughJetbluecough) gets pummelled 8% for announcing a secondary. Apparently we're just going to make up the rules and change them for the banks as we go along. Remember, I'm not preaching damnation on the banks, but these secondaries are dilutive and the market SHOULD be responding to this!

We also have the dollar diving and driving up the so-called profits of American companies. I've seen all to often that these currency driven profits won't hold up in the long-run. I've owned a few companies that turned a solid profit this way only to be hammered in the end so I've learned my lesson there.

Oh, and lets not forget that instead of being completely in the doldrums, housing has been on the rise. Well fantastic, we'll only lose billions of dollars in this sector through 2010 instead of 10s of billions, thats much better... break out the pinata! We're countering this surge of course by printing money like mad, driving up our commodities and our inflation (despite the figures which show us in delfationary mode), and effectively killing any hopes of recovery we have.

We're going to recover, but definitely not this quickly. Where are my bear claws.....

UltraLong

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#46) On June 17, 2009 at 1:08 AM, TMFUltraLong (99.95) wrote:

Since my last post here treasury yields have risen considerably and are putting the clamp down on any housing recovery we were seeing. 808 on the S&P is still on my charts as the rough retracement point and I feel fairly confident we were at or are at a near-term top. I feel downside investments represent the best course of action at these levels.

UltraLong

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#47) On July 09, 2009 at 12:49 AM, ozzfan1317 (79.29) wrote:

Hey Man nice job you were right..Any Idea when we push higher again I'm thinking this fall.

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#48) On July 09, 2009 at 12:56 AM, TMFUltraLong (99.95) wrote:

Sell-offs tend to be more panic driven and shorter in time frame then rallies, so I wouldnt expect this downturn to last longer than 4-8 weeks. I don't expect us to exactly shoot up either. Until I start to see Q2 earnings figures and how this head and shoulders pattern plays out I'm just going to stay short-term bearish and not predict all-to-much when we start rallying.

UltraLong

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