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goldminingXpert (29.76)

I'm Sorry--I Underestimated The Stupidity Of Mankind``

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June 01, 2009 – Comments (78)

Two things are infinite: the universe and human stupidity; and I'm not sure about the universe.--Albert Einstein

 I sit here dumbfounded.I cannot believe we are within 3S&P points of a new yearly high. The economy has been utterly collapsing since January, earnings have dissappeared into the mists, and yet people keep buying. Today, we have the ultimate in bad news--a century-old American institution is bankrupt; no second chances, no "one last bailout" and more importantly--no shot for suppliers to get paid. Dozens of GM suppliers large and small will go bust, already some like Metaldyne have folded. Hundreds of thousands of auto related jobs will soon be lost as dealerships continue to shutter, steel mills cease and suppliers vanish.

If that wasn't bad enough, the mortgage market is again collapsing this morning as the bond market has nary a bid. The Chinese are asking Uncle Benny for the "arithmetic" of how buying our crappy bonds will not be a disaster for them. As the Fed is incapable of even basic math, the Chinese will be disappointed and the selling of our bonds will continue. As I've explained, lower bond prices equals higher yields equals more foreclosures equals falling housing market equals worsening economy and man--you really don't want to look at a chart of MBS today--the mortgage-back securities are taking a beat down.

I could go on--California having to shut down 80% of their parks because their tax base has collapsed but why bother? Morons will keep buying again like its 1999. The fact that GM which is CLEARLY AND UTTERLY BANKRUPT BEYOND ANY SHADOW OF A DOUBT still trades at 50 cents is a testament to people's abject stupidity. Why oh why oh why are you paying 50 cents for something that is INARGUABLY WORTH ZERO?

The good news is that the madness will end soon. The bulls have to overcome 943, 1000 and then a whole range of resistance points just over 1,000. To get there, they have to ignore the collapsing bond market. The government has to sell new long-duration bonds this week. Ho ho ho, good luck with that Benny. People are also going to turn bearish when their mortgage applications start getting denied. As Mr. Mortgage said, even at 5.5% rates on 30-year bonds, the ever-so-slightly recovering housing market will again dry up.

Whatever. I don't honestly care. I got stopped out of most of my positions so I will see no further pain if we keep rising. In fact, my long positions in JAG and NXG are doing quite well as the unjustified fears of inflation return. It just makes me sad that so many amateurs are going to get their heads handed to them when the stock market plunges another 40% from these levels.

I invite people with a rational response to reply in the comments. I expect this to get flooded by trolls who have the time horizon of my ADD cat but whatever, I'm ignoring you trolls and I ask all you reading this with an IQ over 75 to ignore them too.

Enjoy the delusional bubble and sell some stocks before they plunge.

GMX.

78 Comments – Post Your Own

#1) On June 01, 2009 at 10:29 AM, jesusfreakinco (29.12) wrote:

GMX,

Anyone saying they predicted this madness in equities is fooling themselves.  We all know they eventually will get creamed.  The PPT and the Fed have given a gift to those that didn't get out earlier this year.  I have advised my friends and family to take advantage of it.

Unfortunately, at the pace of decline of the dollar, their hard-earned, newly protected dollars will be worth less and less.

Frustrating, no doubt, when fundies aren't being considered.

JFC

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#2) On June 01, 2009 at 10:30 AM, russiangambit (29.49) wrote:

My hands are itching to go all long , but this is probably the exactly wrong thing to do. When the bears give up, the market runs out of fuel. But since we have free money poring into the market through bailouts of our financial institutions , this market can continue going higher  until the  free money stops flowing.

So, I decided to wait until tomorrow afternoon and see. If the market is truly going to 1000, there is plenty of time to get long.

Today is also a day fpr all the 401K purchases, so this might be obscuring the picture somewhat too. 

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#3) On June 01, 2009 at 10:33 AM, goldminingXpert (29.76) wrote:

If 943 holds, we get a double top and go down. If it breaks, we probably are going to 1,000 as fundamentally unjustified as that sounds. I wouldn't short anything here, but at either <930 or at 1,000, we're going to get a heck of a shorting opportunity (if we close under 930--the bulls lose significant firepower.) If we break 943, we probably go to 1,000 which is roughly equivalent to Nasdaq 5,000 valuation insanity,

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#4) On June 01, 2009 at 10:42 AM, DeerHunter73 (72.47) wrote:

You originally called for a top of 930. Then you said at 879 we would have one last push up to 900, with a close and fall back under 879 in the same week. Now your saying if we break 943 we will prrobably goto 1000. I dont know where you top will end but when this was started and from other posts i've beeen on, i've said for 3 months this was going to 950. With the S&P in the 800s i changed that to 1000. Ive said the S&P will close out the year at or above 1000. Maybe were getting our facts from different places. I dont know but what I am reading and listening to my call of 1000 is still low. Some have said we would close above 1100. I personally need to see a few more things before i would agree at closing at 1100 or above. But i still hold firm on 1000 for the year.

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#5) On June 01, 2009 at 10:43 AM, ati2ud (26.63) wrote:

what if anything does technology have to do with the way the market is reacting to news now vs historically?  For instance, in the 20's there were like 4 to 5 million shares traded, late 80's 150 million, all the way to now where we are in the billions.  (my numbers might be off I quickly looked through NYSE stats).  So the share volume goes up and up and people have access to there shares like never before.  To the point that we are at now where everyone has broadband and a trading account and you can instantly buy or sell.  How does the ability of everyday guy/gal being able to do that effect the market now vs the lst time we were in a recession?

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#6) On June 01, 2009 at 10:43 AM, MrSucrose (< 20) wrote:

Gawd, I agree this is crazy.  I have treaded very carefully in real money the last few weeks and done very well in commodities (natural gas and silver).  My caps score on the other hand is going to be completely destroyed.

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#7) On June 01, 2009 at 10:44 AM, goldminingXpert (29.76) wrote:

Thanks troll for pointing out the glaringly obvious. I said I was sorry in the title thread. I'm sorry A) that I was wrong and B) that you have such a shallow understanding of the market that you will get clobbered when the market again collapses.

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#8) On June 01, 2009 at 10:44 AM, outoffocus (23.59) wrote:

Well I'm flabbergasted.  Who knew that market manipulation could be so powerful?  Oddly enough my score hasn't suffered.  Its actually been increasing in leaps and bounds since we called the top last month. (which I also consider odd since I've got so many bearish calls I've earned the "skeptic" charm). I think that is mostly due to my bearishness on the dollar which also seems to be playing out right now.  Commodities are skyrocketing, which of course is going to cripple the already paralyzed consumer. Another benefit of the collapsing dollar is overseas stocks are soaring. Some of my highest scoring picks are commodities and/or foreign stocks. Which also confirms to me that foreign equities are the way to go while domestic stocks (for the most part, save consumer staples like Walmart) are doomed.

But as long as the stock market is going up, retail investors will continue to pay no attention to the men behind the curtain.

I'm still bearish on banks, consumer "luxury" items, and any domestic company with either a debt to equity of 3+ or negative equity.

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#9) On June 01, 2009 at 10:48 AM, mas113m (< 20) wrote:

I agree that the markets' increases are not backed up by fundamentals, but why are fears of inflation  wrong?

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#10) On June 01, 2009 at 10:52 AM, outoffocus (23.59) wrote:

Speaking of underestimating the stupidity of mankind, can someone tell me why GM is selling at 92 cents at the moment?

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#11) On June 01, 2009 at 10:55 AM, goldminingXpert (29.76) wrote:

there will eventually be inflation, but not until the depression is ending.

I have no frickin clue why GM is up today. Goes back to my Einstein quote... infinite human stupidity.

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#12) On June 01, 2009 at 10:59 AM, DeerHunter73 (72.47) wrote:

#10

The mystery surrounding General Motors (GM) shares Friday isn’t that the stock has traded down 30% to as low as 78 cents a share as the company marched inexorably toward bankruptcy.

The mystery is that it isn’t trading at zero. That’s what the common is worth. Goosegg. Nadda. Zip. Zilch. Nothing.

So why’s it holding above 78 cents?

It’s still in indexes. It’s still in the S&P 500. And will be so until Standard & Poor’s reacts to the bankruptcy filing and replaces the stock with that of a viable company.

And until then, index funds have to own the stock.

Some of the biggest remaining shareholders are State Street, Vanguard and Barclays. Basically, the indexers. And while they’ve reduced their positions to reflect the reduced composition in the index, they’re still holding. And until they sell, the stock can’t go to zero.

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#13) On June 01, 2009 at 11:02 AM, theMovement (88.77) wrote:

Let's see..... People going long on undervalued stocks are making a ton of money right now because many stocks have been beaten down too far.  Is it stupid that the oil and gas sector stocks are rising?  You don't think that that is sustainable?  Maybe what is stupid is ignoring the fact that over the past 100 years we've had a ton of recessions and a ton of recoveries.  Please find a better alternative to US bonds........  China can't, that's why they keep buying them.  Find the value out there and invest in it.  If you don't you'll be kicking yourself all the way until the next recession that gives us more value opportunities.

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#14) On June 01, 2009 at 11:03 AM, TMFBabo (100.00) wrote:

Never heard that quote before, but I love it.  I believe you are correct on the fundamentals, but yes, you underestimated human stupidity.  I personally believe that we could go way up or way down and either one wouldn't surprise me.  Irrationality and poor fundamentals can sway the markets one way or another in a big way, yes?

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#15) On June 01, 2009 at 11:06 AM, WeenTang (53.02) wrote:

Guys, when you get a chance to pay 92 cents for something that is worthless, you have to take it.

This is the most glaring and obvious example of overwhelming market manipulation.

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#16) On June 01, 2009 at 11:10 AM, goldminingXpert (29.76) wrote:

More GM talk here.

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#17) On June 01, 2009 at 11:14 AM, jatt22 (55.32) wrote:

on gm shares , any body wth brain or may be i say even littl brain should be one galaxy away if not less . but as u say  human stupidty  might  still over come dat distance too .   + rec

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#18) On June 01, 2009 at 11:16 AM, kaskoosek (92.46) wrote:

GMX

 

I love your post, but I think you are wrong.

 

You are discounting hyperinflation. That my freind is gong to be your demise.

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#19) On June 01, 2009 at 11:16 AM, bigpeach (31.51) wrote:

A lot of references to "obvious market manipulation." It's not obvious to me who is manipulating the market. Would someone care to explain?

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#20) On June 01, 2009 at 11:51 AM, ralphmachio (23.67) wrote:

Big peach-

about 100 years ago, A man named JP morgan Owned banks, and newspapers. He rumored in his newspapers that his competitors were insolvent, and everyone tried to take their money out at once. He then bought his competitors at a discount, and started some new rumors about the banks insolvency being not so bad. The banks went up, JP morgan got even more stinking rich. 

Now, who owns what is obscured. 100 years ago there was no FED. Because you do not realize the tail wags the dog, and that that is only the beginning of 'the rabbit hole', it is not obvious to you. The mind is complex, to say the least. For 'normal' people, the cracks in our reality are overlooked for survival purposes. We see what we expect to see. The cracks in reality are ALL some people see, and they train their mind to analyze the very structure of the framework that the veneer is tacked up on.

The investment banks are manipulating the markets through shell corporations fueled by money that previously did not exist, 'printed' by the FED, for that express purpose, on their command. The real question is, who owns the FED? Why can't we audit the FED? Does the FED run the Government, for the express purpose of extracting man hours from the entire population of this country, and do the same people have a similar racket in other countries?

Take 1 dollar from everyone in the world, and you are rich. Take thousands from everyone, and you control the very thoughts that people have, and their perception of their own value as beings.

there I said it. Have fun.  

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#21) On June 01, 2009 at 11:51 AM, rexlove (99.36) wrote:

Trying to time the market is always a mistake. Maybe you can luck out every now and then but this is very difficult to do.

Stick with high value companies. I actually think there are a lot of good buys in the market despite some doom and gloom forecasts by GMX and other bears. You need to realize the market has priced in this bad news to come. The market is forward looking and seeing improvement 6 months down the line. That's why the market has been going up.

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#22) On June 01, 2009 at 11:54 AM, ciahomia (< 20) wrote:

GMX, I am totally agree with you, today, is suppose to be one of the american scariest day, since GM, goes bankrupt, and as you've mentioned Hundreds of thousands of auto related jobs will soon be lost.

but even last night, when I first read about the bankruptcy news to become real this morning, I was in doubt that it will affect the market much.

just so you know, I was very very bearish on the market since april, and pretty much agree to most of the blogs that you've been posted, even until today.

when I was given a doubt, I came across to a blog posted yesterday re: the market manipulation, not that I first read something like this, I've been, but the one posted yesteday, did changed how I looked at the market, at least a bit and need more confirmation today.

And it is confirm in the morning, I didn't affect the market at all.  fyi, I pay close attention to the market tick everyday and that's been a while, what usually happened is, ~given a rally on the premarket, and couple minutes when the market open, the shorts will enter and the market will have a correction, within the first half hour since open~ but that is not the case, today. the rally has been crazy since open.

I totally agree with outfocus on comment # 8, "who knows the market manipulation is so powerful," whether the fool community realize it or not, the whole news about this bankruptcy is out for a while, the goverment leak the news on purpose, so that when the actual happening does happen it won't affect the market much. I've been curious and thought about this for a while, what I don't realize is that ~it is that powerful.~

My conclusion is giving a bearishness on dollar, and current oil price, and goverment intervention I highly doubt the bulls will lose it grips, at least for now.

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#23) On June 01, 2009 at 11:58 AM, StopLaughing (< 20) wrote:

At least you had guts enough to post today. I respect that.

The market is just returning to sanity in the short run. It is obvious that Asia is recovering. The US seems to be bottoming. In the longer run (maybe years) the Obama/Dem policies will destroy the market but that is in the longer run.

Most stocks are held by institutions and most institutions do not hold stocks very long.  Institutions are focused on short term trading profits and money is returning from the bond markets (were driven by doom hysteria) and new 401 K money is being deployed. 

The market is slowly moving up as new buying power is moving in. There is some early fear of inflation but mostly it is new buying power.

You are focused on lagging indicators. The global market is pulling out of a severe recession. That trend will continue for months (maybe years) before the Obama policies drag it down. By then the Reps will probably capture the house and the Market will rebound.

Your timing is off. The government has (limited) power to manipulate the market. They can manipulate interest rates, taxes, deficits, and the strenght of the $ for a while. That is enough to avert depression for now.

McCain would be President if the Bush Adm had enough power to hold the market up another couple of months. Blame the Fed for not bailing out Lehman and handing the election to Obama.

We are not stupid. We have seen this scenario before. The US has problems and "some" Obama/Dem policies will add to those problems. However, right now the effect is mostly monetary policy. Most of the Obama effects will show up in Oct or later (some will be positive and some negative).

I am planning on going to cash at some time in the future but I am going to let the market tell me it is thru running first. 

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#24) On June 01, 2009 at 12:03 PM, starbucks4ever (98.98) wrote:

GMX,

the market has nothing to do with rationality. I thought you alrerady realized this when it tanked to 666 

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#25) On June 01, 2009 at 12:04 PM, ciahomia (< 20) wrote:

the S&P just hit 944.44

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#26) On June 01, 2009 at 12:05 PM, DeerHunter73 (72.47) wrote:

Well said # 21

 

The main reason GM going under hasnt effected the market today, it was priced in already.Everyone knew it was comming and it was like LEH or bsc etc which were shockers.

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#27) On June 01, 2009 at 12:08 PM, madmoney151 (29.70) wrote:

I could see a dramatic pull back, but do you think we are really going to dash back or through the March lows?  To be honest, looking at all the little pull backs, the market seems to regain some strenth with even 4-6% dip.  Also, back in march you were a complete fool to own stocks.  My dad who has been pushing stocks like a crack dealer for the last 25 years looked at me like i was an idiot when i said i was still long some equities.  I know that's just annecdotal, but i think that was a pretty common sentiment among even die hard equity investors.

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#28) On June 01, 2009 at 12:09 PM, ciahomia (< 20) wrote:

sorry, I meant S&P just hit 944.14

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#29) On June 01, 2009 at 12:11 PM, goldminingXpert (29.76) wrote:

I love how none of the bulls have addressed the argument raised in the text of this blog. Mortgage rates will be the cause of us going back to 666. Those aren't a lagging indicator--they're an indicator that is occuring RIGHT NOW!

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#30) On June 01, 2009 at 12:13 PM, goldminingXpert (29.76) wrote:

By the way, Trollhunter, Bankrate is showing 30-fixed up a quarter of a point. Nice work using outdated data. They'll be up at least another 1/8th after today's MBS drubbing.

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#31) On June 01, 2009 at 12:16 PM, angusthermopylae (40.04) wrote:

ralphmachio @#20 makes me wonder if I should have taken the red pill.

 

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#32) On June 01, 2009 at 12:21 PM, DeerHunter73 (72.47) wrote:

30yr fixed 5.24, 4,401, 5.250 15yr fixed 4.75, 564, 4.6251st number was yesterdays price2nd number is the vol today in thousands applying for mortgage or refi3rd is current LIVE rate being offered. Thats not bankrate thats MLS sites and other tools i have whenever needed. Dont forget I own a business what i do is none of yours. 

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#33) On June 01, 2009 at 12:21 PM, JakilaTheHun (99.94) wrote:

The market was priced for a severe depression.  Hence, the market has gone up as a result of the market's new belief that this will only be a severe recession/minor depression.  This is not surprising to me.  Admittedly, I didn't expect the bullishness to continue unabetted for so many consecutive weeks, but I've been heavily long since November. 

You are correct in pointing out that things are bad.  But valuation is key --- if it's already priced in, then anything less-than-severe-depression brings the market up.  I'd still keep away from a lot of junk out there, but I've bought in heavily on commodity stocks, oil stocks, well-managed REITs, some beaten-down financials, basic material stocks, and some manufacturers. 

I haven't shorted all that much other than for-profit education, restaurants (post-run up), PALM (most overpriced stock on the market --- at least of the legit stocks), and a handful of other stuff.  The further the market rises, however, the more tempted I'll get. 

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#34) On June 01, 2009 at 12:31 PM, leohaas (35.73) wrote:

Sure, this is all due to stupidity and market manipulation.

Or maybe the vocal minority of doomsayers on CAPS is wrong.

I don't know yet which of the two it is...

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#35) On June 01, 2009 at 12:35 PM, DeerHunter73 (72.47) wrote:

Current Stats.

 goldminingXpertScore: 9,099.54 (-457.63)

A week ago was around 10700 Keep up the steady decline.

" GREAT WORK" Even better at predictions. Kinda of like those of  Nostradamus.......If your inclined to believe his to.

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#36) On June 01, 2009 at 12:37 PM, ralphmachio (23.67) wrote:

The red pill, the purple Jesus and the orange sunshine, all at once during a grateful dead show where MSG turned into a giant snail shell-space ship is what it took to get me to this realm. the blue pill may be easier to swallow... 

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#37) On June 01, 2009 at 12:44 PM, uclayoda87 (29.51) wrote:

GM is now up to $0.89 (+17%), did they find gold on their property or what?

This almost reminds me of the spike up in prices before the NASDAQ fell.

Is the US dollar falling this fast to account for this rise in equity and commodity prices?

Maybe the market is just celebrating the death of GM?

Whatever the reason for this madness, I don't really care.  My real money is going up, which compensates me for more points lost in my CAPS rating.

I suspect that we may be reliving 2008 and another fall crash.

 

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#38) On June 01, 2009 at 12:45 PM, bothisellhigher (29.13) wrote:

If the market closes above 935 resistance today-and it looks like it will-the next resistance level is 1005.  As absurd as it seems, the way to make money is "long"...the way to amuse yourself is to ponder the reasons for stupidity.   I say it's great to be amused with things and intellectually satisfying to be able to add 2 and 2...but it is much greater to make money.  Follow the trends up and when the patterns break, close out...sooner or later we'll make money when the market reverses...but right now....ride the stupid bull cowboys and cowgirls.

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#39) On June 01, 2009 at 12:48 PM, ShockTrader (25.95) wrote:

In the last year we've seen so many things that make no sense, today just underscores that point.

 Fundamentals are broken, the Economy is broken.

 Speculation and fear are rampant, the forces moving the market are unknown.

 Despite all the stats involved, stock trading is an emotional game, and with every trade each party believes in the future direction of that stock though only one can ever be right. The value of a stock rests purely in an abstract valuation of these two.

 I have faith, GM will go to zero. Sanity will return, forced upon us by the difference between hope, p/e ratio's, manipulation and the cold iron locks on GM's closed plants.

 

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#40) On June 01, 2009 at 12:50 PM, drummnutt (< 20) wrote:

Hi GMX,

Do you like my restraint?

Good luck.

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#41) On June 01, 2009 at 12:52 PM, masterN17 (< 20) wrote:

The bearish viewpoint is always the most rational.

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#42) On June 01, 2009 at 12:53 PM, FreundInvesting (29.60) wrote:

I have no doubt whatsoever that longs will be crushed in the near term. GMX, I'm with ya buddy.

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#43) On June 01, 2009 at 12:53 PM, goldminingXpert (29.76) wrote:

Hi GMX,

Do you like my restraint?

Good luck.

I do actually. You're not being a jackass like Trollhunter.

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#44) On June 01, 2009 at 12:58 PM, goldminingXpert (29.76) wrote:

Bonds Collapsing! LOOK OUT!

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#45) On June 01, 2009 at 12:59 PM, DeerHunter73 (72.47) wrote:

I started out being nice making factual statements and comments. When you started in with your BS, thats when i stated my thougts. So deal with it. " I'm Sorry--I Underestimated The Stupidity Of Mankind`` Least your correct on one thing, Since your included in that.

Quit being a Jackass and we wont have this problem.

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#46) On June 01, 2009 at 1:13 PM, goldminingXpert (29.76) wrote:

This is shaping up to be a repeat of Wednesday when bonds collapsed originally taking the Dow down 200 in a flash. If we get a repeat--which it appears we are as we have high volume selling now--we would close flat, and set up a double top and a failed breakout attempt over 200DMA. Sometimes it really is darkest just before the dawn.

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#47) On June 01, 2009 at 1:18 PM, portefeuille (99.56) wrote:

Two things are infinite: the universe and human stupidity; and I'm not sure about the universe.--Albert Einstein

Just in case anyone wonders: The universe is finite.

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#48) On June 01, 2009 at 1:19 PM, portefeuille (99.56) wrote:

Just in case anyone wonders: The universe is finite.

At least this one ...

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#49) On June 01, 2009 at 1:23 PM, goldminingXpert (29.76) wrote:

Lol, nice one portefeuille

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#50) On June 01, 2009 at 1:25 PM, portefeuille (99.56) wrote:

And now for something completely different.

Still riding the 20 DMA (see here) and now also the 200 DMA: the DAX.

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#51) On June 01, 2009 at 1:31 PM, outoffocus (23.59) wrote:

Per this link, GM shares are up due to massive short covering.

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#52) On June 01, 2009 at 1:38 PM, portefeuille (99.56) wrote:

Just in case anyone wonders: The universe is finite.

okay, maybe have a look at this if you really care. "it depends" might be a better answer ...

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#53) On June 01, 2009 at 1:41 PM, DeerHunter73 (72.47) wrote:

The S&P crossed its 200 day moving avg last friday.

http://www.marketwatch.com/investing/index/SPX/charts?submitted=true&intflavor=advanced&origurl=%2Ftools%2Fquotes%2Fintchart.asp&time=7&freq=1&comp=Enter%20Symbol(s)%3A&compidx=aaaaa~0&compind=aaaaa~0&uf=7168&ma=1&maval=200&lf=1&lf2=4&lf3=0&type=2&size=1&optstyle=1013

 

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#54) On June 01, 2009 at 1:55 PM, hhasia (62.43) wrote:

Nice post goldmining.

Call me simple:   This situation looks out of whack.

Earnings.... drying up. Even for companies who low balled estimates will get creamed. This makes the price look more expensive,result.... price falls. Like I said I'm simple.

unemployment rising...ie retailers get smashed, hence the malls are empty, real estate developers have no retailers to lease the space... ( this is not rocket science)

Economic cycles in general have a life span of 7 years.

In this one, we had 4  years up... an over extended bull. ( built on funny money) . What has the Fed spooked? They know that pumping in money counter ballances the funny money fall. Without that, the fall would be beyond acceptable.  But here's the rub: the pumping will wind down, and with it the true fall will hit.  Happy landings!

HH

 

 

 

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#55) On June 01, 2009 at 1:58 PM, goldminingXpert (29.76) wrote:

Reality be damned everyone, keep buying. Dow +200 just isn't enough on a day when GM went bankrupt and the mortgage market is imploding.

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#56) On June 01, 2009 at 2:23 PM, portefeuille (99.56) wrote:

PMI: all-time low on March 10: $0.26

PMI currently: ca. $2.49

background: (see this)

-----------------------------

"This revolving credit agreement provides additional financial flexibility for PMI's holding company through its scheduled maturity in October, 2011," Chief Financial Officer Donald Lofe said.

Mortgage insurers like PMI and rivals Radian Group Inc (RDN.N) and MGIC Investment Corp (MTG.N) have suffered huge losses from backing subprime bonds and mortgages that saw a surge in defaults as U.S. credit and housing markets worsened.

 

-----------------------------

 

("outperform" call by "the list" on March 26 at $0.66 (see comment #328 here) ... just had to mention that ...))

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#57) On June 01, 2009 at 2:25 PM, portefeuille (99.56) wrote:

that was just meant to be an example of how little things (amended credit agreement) can help ...

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#58) On June 01, 2009 at 2:28 PM, Alex1963 (28.90) wrote:

GMX,

Could partly be the hedge funds reinvesting as well. Besides as you point out if bonds are becoming scary and I believe they are, then where do you go if you're a wealth preservationist? Or if you're a fund trying to keep up with the Jones'? Cash while the market keeps angling up? I think this is a combination of institutional, very debatably "smart" money and individual investors all trying to grab the quarters before the bull dozes and the bears return. My take is that's why markets, commopdities gold etc are all simultaneously up trending. Bull and bear money is coming back in and since their is no consensus or whether the market is really strong or soft, inflation or deflation is iminent, domestic vs foreign markets will prevail etc people are racing around from whatever seems to be uptrending then pulling out and racing to the next. To me you're only analytical error is looking for rationality at all. Your FA of the conditions is flawless I'm sure. But like you said it's the people, and people drive the market and are frquently and totally irrational or at least bi-polar like Graham used to say. Mr Market is fickle and a poor short term judge of intrinsic value only now, if I were a psychiatrist, I'd diagnose that his his bi-polar condition is now rapid cycling LOL 

No offense to anyone here but professing certainty of either bull or bear, defaltion or inflation (Repblicans back in power in 2012!? I doubt it) or any other big picture view is, quite bluntly, deluded. As sane people you're trying to predict the future actions of a crazed market and the consequences of unprecedented global political & fiscal policies. Sure someone will be more right but I personally wouldn't bet the store on any one scenario for the time being. What I have observed is that most of the better players here have had trends play out as they thought and then others trends that didn't or haven't yet. Past performance in this case is definitely not predictive of future infallibility or at least not deserving of excessive ridicule for those who have differing views.

Maybe it's easier for me to live with this uncertainty. I have no enviable reputation of years of being right to defend (like GMX), no track record of being wrong to be defensive about (like so many really shrill voices I see in Caps & even this blog) just my RL portfolio to defend. So far swing trading with a bull outlook but with bear hedges is working OK. Nothing stellar but I'm ready to change my strategy whenever circumstances warrant. Or get back to sitting on mostly cash if need be to ride out a slide. I ate enough humble pie in 10/08 thank you and I'm struggling hard to keep my preconceptions and ego out of the way. I apologize if this sounds like a lecture-particularly from a relative newbie. Just my opinion for what it's worth.

Alex 

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#59) On June 01, 2009 at 2:32 PM, semper77 (33.58) wrote:

This is all about the dollar falling. With every drop, the perception is that American goods will become more desirable overseas, thus raising the expectations built into stocks.

Nevermind reality, we all know that expectations is governs markets in the short term. 

This rally could have legs to 1000 or even 1100, but it will do so without me.

In my view, the easy money's already been made, anyone pushing forward is risking the Whammy here, to use an 80's game show metaphor.

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#60) On June 01, 2009 at 2:34 PM, mikecart1 (99.21) wrote:

Hey GMX what you think about the financial sector?  I am an MBA student with 1 year left and all my professors don't know whats up.  I am even taking Commercial Banking currently and learning a lot about banks. 

:)

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#61) On June 01, 2009 at 2:35 PM, portefeuille (99.56) wrote:

("outperform" call by "the list" on March 26 at $0.66 (see comment #328 here) ... just had to mention that ...))

("outperform" call by "the list" on March 26 at $0.66 (see comment #328 here) ... just had to mention that ...)

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#62) On June 01, 2009 at 2:45 PM, portefeuille (99.56) wrote:

With every drop, the perception is that American goods will become more desirable overseas, thus raising the expectations built into stocks.

not just goods. stocks too. see this chart of the S&P 500 index "calculated in EUR": 1

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#63) On June 01, 2009 at 3:21 PM, floridabuilder2 (99.34) wrote:

GMX,

How come you always respond to people attacking you but never to me?  After all you dedicated a blog to me ;-)

I used to be a top down investor looking mainly at macro data and that didn't exactly result in great results.  That is why I only focus on one part of the economy now when it comes to investing in the market or in hard assets.  You challenged my ability to see value in an area that everyone else says has no value.

The fact of the matter is I got tired of debating bears, there is a ton of action right now in the distressed market and the people who are going to come out smelling like roses 5-7 years from now have been placing bets the last 2 months.

Interestingly enough it was IMPOSSIBLE to raise private equity from May 2008 to Mar 2009 to fund real estate deals.  When the market started to take off after hitting 666, all of a sudden every PE shop that shunned us wanted to do a deal and put money to work.  that is why I am deadly silent right now and have been.

Even if the market pulls back, the big money in hedge funds and PE shops and private wealth all want to put money to work and that puts a floor on valuations. 

In any event, I'm not wrong on MTH even if you think the stock market will pull all the way back.  A number of public builders are bidding on finished lots at 25% of what they paid during the bubble and these lots generate 20% gross margins and take into account future pricing drops. 

Anyways, just because your macro data says one thing means you are utilizing one tool.  I have always stated on my blog I don't offer opinions I offer facts and those facts are based on what major funds and bond traders are doing.  My group talks to 20-50 funds a month... easily....  they tell us what they are putting money into (normally its not real estate) and guess what.... those happen to be the areas of strength in reality whether it be corporate bonds, commodities, real estate, equities, etc....  I've learned through working in the capacity of raising capital that when a number of the big funds are putting money to work in an area, others follow and you have a sustainable rally in that area.

Good luck with your future shorts.... I mainly have short ETFs and commodity stocks right now

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#64) On June 01, 2009 at 3:25 PM, DeerHunter73 (72.47) wrote:

HAHA!!!
----- Original Message -----
From: "MATTHEW MILLER, BLOOMBERG/ NEWSROOM:"
To:

Sent: Monday, June 01, 2009 3:22 PM
Subject: Re:GM


>i may use this one on air!
>
> but i think i know the answer, at least partially: a) short covering and
> b) -- and this is not a joke -- wall dressing, artwork, keepsakes
>
> ----- Original Message -----
> From:

> To: MATTHEW MILLER (BLOOMBERG/ NEWSROOM:)
> At:  6/01 15:19:35
>
> Hey Matt,
>
> Here's a good question. We all know gm is filing bankruptcy this is old
> news. However with them being delisted tomorrow doesn't that make there
> shares equal to toilet paper? If so, why are they up?

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#65) On June 01, 2009 at 3:50 PM, portefeuille (99.56) wrote:

the current "caps" game "leader board"

Member Name,Score

BravoBevo,18289.68
fransgeraedts,14512.32
translator999,11580.43
chk999,11458.97
portefeuille,11390.99
mgiv,11378.57
abitare,11303.1
SpecBear,10991.48
Andreylikes,MTL10806.1
StatsGeek,10541.25
EverydayInvestor,10527.92
hdgf2,10295.61
kdakota630,10002.61
UltraLong,10001.15
MLGtrader,9896.71
foolsMeThrice,9889.36
hdgf1,9847.28
tenmiles,9691.35
d1david,9679.53
vanamonde,9516.88

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#66) On June 01, 2009 at 4:05 PM, goldminingXpert (29.76) wrote:

Florida, I don't doubt your sources, but I highly doubt the housing market has bottomed. That's my only contention. Check out the MBS market today:

 

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#67) On June 01, 2009 at 4:40 PM, floridabuilder2 (99.34) wrote:

GMX,

Thanks for acknowledging me.  I have never blogged YET.  That housing has bottomed, I simply changed my tune from 100% bear to divergence.  Divergence meaning that the top 5% of public/privates are going to see profits next year (and probably be flushing through old asset write downs) and the other 95% will continue to show stress or go bankrupt. 

There are various bottoms that the eye cannot see... let me explain.

Has housing bottomed - no, otherwise I wouldn't still be modeling deals (as well as others) with future price declines.

Has the finished lot land market bottomed - yes, it is in a bottoming process right now.  It may drops some or go up some, but it will remain sideways for quite some time, but it has bottomed.  This is important because finished lots are what most builders are buying now not raw land that they want to develop.  Builders who are raising capital, have cash or can raise debt are taking advantage of buying lots at or below develoment cost.

Have homebuilders stocks bottomed - Yes and no.... for my green thumbs they have bottomed (go look at what the 52 week low is for my green thumbs and I will guarantee that most of them won't touch that number again).  for my red thumbs they potentially haven't bottomed and could go bankrupt.

Has the residential capital raise market bottomed - Yes.... last year we went through the following periods (May 08 to Sep 08) you could not raise capital because no one wanted to get in the space.... from (Sep 08 to Mar 09) you could not raise capital because no one in private equity was lending to anyone and private equity couldn't raise new money....  From Mar 09 through today, the bravest equity firms are willing to money to work in this space....  this could change and we could go back to them not wanting to loan in this space, but I highly doubt we will be back in the situation where capital cannot be raised by anyone period for anything.

have bankruptcies in housing companies private and public bottomed - No, the bankruptcies will accelerate

has raw land prices bottomed - yes, raw land is trading at zero so unless a lender is willing to pay you which they aren't you can negotiate free raw land with the purchase of other partially to fully developed assets.  The residual value on a lot of raw land is less than zero due to carry, etc...

has new homebuilding bottomed - no, housing starts should continue to decline through next year... however, housing starts for the remaining builders still building will actually start to stabilize and improve.  That is because the pie is getting smaller but the people eating the pie is getting smaller faster.

You are looking at the big macro picture, I am looking at all the different angles within one slice of that macro picture... and its looking at all those slices that tell me whether or not specific builders will do well or not and that doesn't include actually talking to employees of the companies I follow

I would think about each of thoughts I am providing above... people who ignored my warnings and thought all builders would go to zero have been burned badly especially if they doubled down.  You made a point that bulls should beware, but how many bears were so crippled in their shorts this latest rally that they barely have the ability to short the market when it does correct?

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#68) On June 01, 2009 at 4:44 PM, walt373 (99.75) wrote:

#58 Alex1963, well said.

Anyone preaching their views about one side of a macro debate (bear, bull, inflation, deflation, etc.) without conceding that they might be totally wrong, is either a very overconfident or a friggin genius. Common sense says that most people fall into the former category... so for most investors it's probably wise to not blindly follow the "gurus," and position their portfolios so that no outcome will wipe them out.

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#69) On June 01, 2009 at 5:17 PM, vasplieon (< 20) wrote:

Lunacy, nothing but. The majority of this is unsubstantiated speculation that is going to really burn a lot of people sometime soon. The economy is still contracting. Beware.

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#70) On June 01, 2009 at 5:19 PM, goldminingXpert (29.76) wrote:

#67 All fair points. I still am convinced with every bone in my body that MTH is going bankrupt, but other than that unshakeable belief, I am willing to acknowledge that you are probably correct on many of those points. Glad to hear you haven't called bottom on the market as a whole yet.

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#71) On June 01, 2009 at 5:45 PM, floridabuilder2 (99.34) wrote:

GMX, If you look at my profile you will see two short ETFs and they coincide with when I bought them with real money, so I agree this is a fairy rally.

I was shouted down by a few bears for not being doom and gloom enough.  I've learned over the years that when all of the strongest most vigilant opinions come from one side of the spectrum then it is time to join the other side.  That is what I did last Sept.

You'll never see make future predictions on macros, but I am working on all cylinders to take advantage of asset prices that went through a massive deflationary cycle.  It doesn't matter if I am early or not, because the deflationary cycle will end and when it does you want to be invested in hard assets like real estate, commodities, and PGMs or those that produce/manage hard assets.

When I start blogging again full force it means I have put my money to work in this space and not other people's money.  I am choosing residential land real estate vs. commodities because it is what I know.  However, contrary to bears who think commodities will outperform other asset classes like residential RE, they are wrong because they don't understand the detailed dynamics of what is going to occur.

Good luck GMX

 

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#72) On June 01, 2009 at 5:47 PM, goldminingXpert (29.76) wrote:

New Post--please move along to that one as this comment thread is getting lengthy.

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#73) On June 01, 2009 at 6:46 PM, bostoncelitcs (59.34) wrote:

You're not serious about the "underestimation" are you????........We elected Dubya to office twice......Do you need any further proof!!!!

But hey.....that deregulation of Wall St. did wonders for our  economy didn't it!!

I

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#74) On June 01, 2009 at 8:46 PM, ChrisGraley (30.25) wrote:

There it is folks! Bear capitulation!

Sell! Sell! Sell!

 

Just kidding GMX.

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#75) On June 01, 2009 at 9:34 PM, Barebonez (93.96) wrote:

 This is the best explanation i read
   Nothing To Fear, But Fear ItselfPublished: Monday, 1 Jun 2009 | 4:59 PM ET Text Size By: Maxwell Meyers
Senior Producer

The stock market had a banner day today, despite the fact that General Motors cnbc_comboQuoteMove('popup_gm_ID1EYCAC15839609');[GM  0.75  ---  UNCH  (0)   ] cnbc_quoteComponent_init_getData("gm","WSODQ_COMPONENT_GM_ID1EYCAC15839609","WSODQ","true","ID1EYCAC15839609","off","false","inLineQuote"); - one of America's most storied corporate icons - officially filed for Bankruptcy.

A couple key positive economic data points and it was off to the races.

But a curious thing happened on the way to Market Nirvana - the VIX actually rose. Usually on such up-days, the Volatility index tends to drop, as fear seeps out of the market. But today, despite the stock euphoria, the VIX actually rose, and according to one member of our show, it was again driven by fear, but this time of a different sort: the fear of missing the rally.

According to Brian Stutland, "Options Action" star, and as President of Stutland Equities, a "VIX Merchant Extraordinaire," the gains in the VIX today were driven by options traders who were buying out-of-the-money calls in the hopes of catching-up to this massive rally.

"The VIX has maintained upward pressure due to the significant call buying today in which traders are beginning to fear they are missing the rally and need leverage to get into the game. Because call buying in the S&P 500 equates to premium buying of options, the price of the VIX remains elevated as it reads the price of premiums people are willing to pay on the next 30-days worth of options in the S&P 500 index," said Stutland.

In the end, much like cholesterol, I suppose there is good fear and bad fear.

We Trolls try not to OVER Analysis   everything

RULE 1: "The stock market is always right"

Warren buffet says "There are only two rules of investing: #1

Dont lose money ....   2# Dont forget rule #1

Dont fight it just work with it, i made 2210.05 today

not too bad for a old troll

ok ok thats just my 2 cents

barebonez

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#76) On June 01, 2009 at 10:02 PM, mstachowsky (96.92) wrote:

Just out of an admittedly naive curiosity, if people really do run the market (and not the fundamentals that we should be paying attention to), then wouldn't it make sense that people run the economy as well?

 By this I mean, the engine that runs the global economy has stopped*.  It needs to get going again.  Wouldn't it make sense that if people (stupidly) feel it's going to get better, then those people will start doing all the things that they used to do, just a little bit, and in effect spurring on the recovery that they were hoping for?

 

Does any of that make sense?

 

Also, how do you know where the resistance levels are?  Calls for resistance at about $1005 are a little to specific to be guesses, right?

 

MIKE

 

 

*For the astute readers, that wasn't an Ayn Rand reference :-)

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#77) On June 02, 2009 at 12:20 AM, KamranatUCLA (29.20) wrote:

Stupid people deserve it, so why are you getting angry. In 2006 when I said that Dow will be below 8000 in matter of months people laughed at me. in 2007 when I said Dow will go below 7500 people told me that if that were going to happen that would be the end of the world. Now for several months I have been saying that Dow will be below 4000 and again people laugh.

Any reasonable person can see that the market is overvalued, with no relief in sight. Just look around you and see what people do for living, how much they make, and how much they spend.

The American people have no savings, have to pay back taxes, have to pay student loans, have to pay high taxes (sales tax, income tax, property tax with no health insurance. In Europe taxes are higher than the U.S. but healthcare is free, universities are free, and so on), and meanwhile the government is slow and people are still not over Bush and how he screwed us for decades to come. With all these problems we are still in Iraq and paying high prices for it with absolutly no return, financially or otherwise. American soldiers rape 12 year old iraqi girls, kill people at will, and we will never an unwinable, stupid war like that...and we are still there!!! Stupid Obama said we will be out fast, and thats why many voted for that idiot...and now what??? He is slow and stupid as a cow.

But hey, look at it this way...maybe our biggest asset these days are stupid people!

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#78) On June 02, 2009 at 2:05 AM, goldminingXpert (29.76) wrote:

Resistance levels are formed at areas where the market has previously stalled and turned plus levels where retraces often end such as at 50% of a previous move. A comination of potential retraces and prior reversals indicates their is a high probability that the area between 990 and 1020 would be a difficult area for the bulls to surmount should we escape the shadow of 930. However, with JPM diluting itself and the rest of the banks to follow, the S&P futures are falling and I wouldn't be surprised if we close under 930 tomorrow making 1,000 a moot point.

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