Dow was down by 23 points to 8299. Market action in past few days shows continuous deterioration in fundamentals, i suggest to sell 75% of your holding, I will start selling my holding in couple of days.
Here is the reason why i belive so....
We saw 90% down-days on June 15 and June 22. Normally, following a 90% down-day there will be a rally lasting 2 to 7 days. But we've seen nothing impressive following the two June 90% down-days. The latest 90% down-day which occurred on June 22 saw a labored rise in the internals of the market, even though yesterday the Dow actually closed lower as the market lifted feebly higher.
Every day the market does "something." The public always wants to know WHY the market did this or that. Newspapers survive by serving and interesting their readers -- for this reason newspapers feel pressured to supply the "reason" for each day's market move. Of course, this is utter nonsense. We almost never know the real reason for the market's daily movements, and if we try to zero in on the reason, the reason we choose is invariably wrong.
Therefore it is best to forget the "why" of any market movement. For instance, the market may decline on rotten housing news, but the decline had nothing to do with housing news, actually the reason for the decline was a break in the bonds as interest rates pushed higher.
In the end, it is best to treat the market and the news of the day as two totally separate items. The only study of the market that is worth anything is the study of the action of the market itself. The best study of the news is via Bloomberg or Barron's or the Financial Times. But it's always best to keep the two studies totally separate. Or as Keynes put it, "The market can remain irrational longer than you can stay solvent." Of course, an "irrational market" is a market that you don't understand.
Thursday, June 25, 2009
Monday, June 22, 2009
Market bouncing up and down like a cat on a hot tin roof
The Dow and the S&P 500 moved higher today breaking a three day losing steak. The Dow ended higher by .70% and the S&P 500 plus .84%. The modest gains can be attributed to a better than expected Index of Leading Economic report showing the strongest gains since 2004 and unemployment claims falling unexpectedly.
The chart below shows the percentage of NYSE stocks that are holding above their 50-day MA. Although the major stock averages are trading near their bear market rally highs, the percentage of stocks holding above their 50-day MA is declining. As of yesterday, the percentage was only 67.7%. This tells us that the main body of stocks are lagging behind the leading stock averages, not a good indication.
This confused market is bouncing up one day and down the next -- like the cat on a hot tin roof.August gold was up 1.60 and continues to creep higher. Creeping slowly higher is bull market action. Sharp and violent corrections are also typical of bull markets.
The chart below shows the percentage of NYSE stocks that are holding above their 50-day MA. Although the major stock averages are trading near their bear market rally highs, the percentage of stocks holding above their 50-day MA is declining. As of yesterday, the percentage was only 67.7%. This tells us that the main body of stocks are lagging behind the leading stock averages, not a good indication.
This confused market is bouncing up one day and down the next -- like the cat on a hot tin roof.August gold was up 1.60 and continues to creep higher. Creeping slowly higher is bull market action. Sharp and violent corrections are also typical of bull markets.
Sunday, May 24, 2009
Dollar down, gold up - Trouble ahead
After hard work of 2.5 years, finally I will be graduating end of this month. I have learned alot during my MBA, and hope to write more about finance and Economy in coming months.
The Dow was down 14.81 to 8277.32.
Today dollar down, bonds down, gold up, it all fits together -- trouble ahead.
It appears that the rally that started from the March 9 low has gathered too many bullish followers and the talk of those ridiculous but unseen "green shoots" is now repeated everywhere.A true bear market bottom usually requires many weeks or even months before the crowd turns bullish. Not so, this time. In a matter of a few weeks, a large contingent of the public and many pros turned optimistic, then outright bullish. Two months after the lows, even such famed stalwarts as Jeremy Grantham and Warren Buffett announced that stocks were a buy.
There's only one "expert" that I take seriously, and that's the stock market. What you hear from the so-called "oracles" costs you nothing, which may be what their advice is worth. But to truly understand the language of the market may take years or even a lifetime. Which, of course, is the fascination of this business.
We may be seeing the end of the US auto industry. Chrysler has filed for bankruptcy. GM is now being run by the United Auto Workers and the US government, hardly an exciting combination. The deal. Let’s say you own $220,000 of the old GM bonds. The government is “offering” to give 80% of the face value of your bonds to the UAW while giving you 45,000 shares of stock. At the same time, the government is offering stock to enough other people to dilute the value of those shares to about ten cents on the dollar or $4,500. By owning stock instead of bonds, you end up further back in the line for repayment in case GM files for bankruptcy.
The two paragraphs below are from “Daily Reckoning” site. Bill Bonner wrote the paragraphs. Bill thinks the government’s “help” in its efforts to ward off the bear market will ultimately turn this recession into a depression.
“In the recession of 1973, Brookings Institution economist George Perry told Congress that ‘we should be pulling out all the stops’ to fix it. The resulting fiscal and monetary stimulus program cost the U.S. 4% of GDP, according to an estimate by Jim Grant. Future generations of Fed governors and Treasury secretaries found more stops...and of course, pulled them out too. In the micro recession of 2001, for example, the combined fiscal and monetary boost amounted to 7.2% of GDP, according to Grant.”
“The deceptions of the Bubble Epoque, 2001-2007, were enormous. The correction has been enormous too. And here are the same economists who mismanaged the economy, offering advice to governments who mismanaged their regulatory roles, about how to keep mismanaged companies alive, so that bondholders who mismanaged their investments might not go broke. That this will result in more misery is a foregone conclusion - at least, here at The Daily Reckoning. The measure of that misery, if our iron law holds, is how adamantly governments fight to keep their mismanagement going. Just looking at the numbers, the toll will be monstrous. All over the world, interest rates have been cut and budgets padded. France’s deficit is running at 8% of GDP. England is running a deficit of more than 12% of GDP. And the U.S. is mobilizing as if it had been attacked by Martians. On the credit side, the feds have cut rates more than ever before, for a monetary boost equivalent to 18% of GDP, according to Grant. As to spending, $13 trillion has been pledged...an amount equivalent to a full year’s annual output of the United States of America. This response is 3 times more (adjusted to today’s dollars) than the U.S. spent to fight WWII. It is 12 times more (relative to GDP) than the total committed to fight the Great Depression.” (courtesy Bill Bonner).
Nouriel Roubini is a professor at NYU, so I’m a natural fan of his. Nouriel was one of the first to warn about the recession — he’s one smart economist. Below is part of a very interesting interview with Nouriel by Lally Weymouth of Newsweek.
Weymouth: How about the deficit the banks are building up?
Nouriel Roubini: In the short term I am supportive of it, because if we didn’t have these fiscal deficits, the recession would become a depression. On the other side, I do agree that this is not a free lunch. We are going to add trillions of dollars to our public debt, which is going to go from 40 to 80 percent of the GDP. There are only a few ways in which you can finance that extra public debt. If you rule out default and a capital levy on wealth, you either have the “inflation tax” or you have to painfully cut spending or raise taxes, and either one is not going to be politically palatable.
Weymouth: What is going to fuel the next growth cycle?
Nouriel Roubini: That is a difficult question. The periods of high growth in the United States in the last 25 years have been characterized by an asset and credit bubble. Whatever the future growth is going to be, this time around it needs to be sustainable and not bubble-prone because we are running out of bubbles to create. We had the real-estate [bubble], tech bubble, housing bubble, hedge-fund bubble, private-equity bubble, commodities bubble, even the art bubble-and they are all bursting.
Weymouth: What makes you different from the other economists?
Nouriel Roubini: We think usually that crowds-on average-can be wiser than individuals. In this case, most people got it wrong because whenever we are in an irrational, exuberant bubble, people fail to think correctly.
Weymouth: Do you believe this is a bear-market rally or do you think it is the market anticipating an economic recovery?
Nouriel Roubini: As we reach newer lows, we may be closer to a level of the market that is fundamentally right. A year ago we were not as close to a true bottom. Today we are closer to it. As we become closer to the bottom of the economy, the stock market looks ahead and sees the light at the end of the tunnel and rallies. In spite of these caveats, I would argue that even the latest market rally is a bear-market rally.
Weymouth: Do you worry about China getting tired of holding our bonds?
Nouriel Roubini: In the short run, China has no option but to accumulate more reserves and dollar reserves. Why? Because if they stop doing that, their currency would appreciate sharply while their exports are plunging. So in the short run, they are going to keep on accumulating. But I have seen a huge number of new initiatives in the last month that suggest [the Chinese] are pushing for the yuan to become an international currency and a reserve currency. They are doing bilateral deals with countries like Argentina and half a dozen others in yuan, not in dollars.
Weymouth: They are moving away from the dollar?
Nouriel Roubini: Yes, slowly they will. First they have to establish their own currency as an international currency. That will take years, but already in a month they have done more than in the last 10 years.
The Dow was down 14.81 to 8277.32.
Today dollar down, bonds down, gold up, it all fits together -- trouble ahead.
It appears that the rally that started from the March 9 low has gathered too many bullish followers and the talk of those ridiculous but unseen "green shoots" is now repeated everywhere.A true bear market bottom usually requires many weeks or even months before the crowd turns bullish. Not so, this time. In a matter of a few weeks, a large contingent of the public and many pros turned optimistic, then outright bullish. Two months after the lows, even such famed stalwarts as Jeremy Grantham and Warren Buffett announced that stocks were a buy.
There's only one "expert" that I take seriously, and that's the stock market. What you hear from the so-called "oracles" costs you nothing, which may be what their advice is worth. But to truly understand the language of the market may take years or even a lifetime. Which, of course, is the fascination of this business.
We may be seeing the end of the US auto industry. Chrysler has filed for bankruptcy. GM is now being run by the United Auto Workers and the US government, hardly an exciting combination. The deal. Let’s say you own $220,000 of the old GM bonds. The government is “offering” to give 80% of the face value of your bonds to the UAW while giving you 45,000 shares of stock. At the same time, the government is offering stock to enough other people to dilute the value of those shares to about ten cents on the dollar or $4,500. By owning stock instead of bonds, you end up further back in the line for repayment in case GM files for bankruptcy.
The two paragraphs below are from “Daily Reckoning” site. Bill Bonner wrote the paragraphs. Bill thinks the government’s “help” in its efforts to ward off the bear market will ultimately turn this recession into a depression.
“In the recession of 1973, Brookings Institution economist George Perry told Congress that ‘we should be pulling out all the stops’ to fix it. The resulting fiscal and monetary stimulus program cost the U.S. 4% of GDP, according to an estimate by Jim Grant. Future generations of Fed governors and Treasury secretaries found more stops...and of course, pulled them out too. In the micro recession of 2001, for example, the combined fiscal and monetary boost amounted to 7.2% of GDP, according to Grant.”
“The deceptions of the Bubble Epoque, 2001-2007, were enormous. The correction has been enormous too. And here are the same economists who mismanaged the economy, offering advice to governments who mismanaged their regulatory roles, about how to keep mismanaged companies alive, so that bondholders who mismanaged their investments might not go broke. That this will result in more misery is a foregone conclusion - at least, here at The Daily Reckoning. The measure of that misery, if our iron law holds, is how adamantly governments fight to keep their mismanagement going. Just looking at the numbers, the toll will be monstrous. All over the world, interest rates have been cut and budgets padded. France’s deficit is running at 8% of GDP. England is running a deficit of more than 12% of GDP. And the U.S. is mobilizing as if it had been attacked by Martians. On the credit side, the feds have cut rates more than ever before, for a monetary boost equivalent to 18% of GDP, according to Grant. As to spending, $13 trillion has been pledged...an amount equivalent to a full year’s annual output of the United States of America. This response is 3 times more (adjusted to today’s dollars) than the U.S. spent to fight WWII. It is 12 times more (relative to GDP) than the total committed to fight the Great Depression.” (courtesy Bill Bonner).
Nouriel Roubini is a professor at NYU, so I’m a natural fan of his. Nouriel was one of the first to warn about the recession — he’s one smart economist. Below is part of a very interesting interview with Nouriel by Lally Weymouth of Newsweek.
Weymouth: How about the deficit the banks are building up?
Nouriel Roubini: In the short term I am supportive of it, because if we didn’t have these fiscal deficits, the recession would become a depression. On the other side, I do agree that this is not a free lunch. We are going to add trillions of dollars to our public debt, which is going to go from 40 to 80 percent of the GDP. There are only a few ways in which you can finance that extra public debt. If you rule out default and a capital levy on wealth, you either have the “inflation tax” or you have to painfully cut spending or raise taxes, and either one is not going to be politically palatable.
Weymouth: What is going to fuel the next growth cycle?
Nouriel Roubini: That is a difficult question. The periods of high growth in the United States in the last 25 years have been characterized by an asset and credit bubble. Whatever the future growth is going to be, this time around it needs to be sustainable and not bubble-prone because we are running out of bubbles to create. We had the real-estate [bubble], tech bubble, housing bubble, hedge-fund bubble, private-equity bubble, commodities bubble, even the art bubble-and they are all bursting.
Weymouth: What makes you different from the other economists?
Nouriel Roubini: We think usually that crowds-on average-can be wiser than individuals. In this case, most people got it wrong because whenever we are in an irrational, exuberant bubble, people fail to think correctly.
Weymouth: Do you believe this is a bear-market rally or do you think it is the market anticipating an economic recovery?
Nouriel Roubini: As we reach newer lows, we may be closer to a level of the market that is fundamentally right. A year ago we were not as close to a true bottom. Today we are closer to it. As we become closer to the bottom of the economy, the stock market looks ahead and sees the light at the end of the tunnel and rallies. In spite of these caveats, I would argue that even the latest market rally is a bear-market rally.
Weymouth: Do you worry about China getting tired of holding our bonds?
Nouriel Roubini: In the short run, China has no option but to accumulate more reserves and dollar reserves. Why? Because if they stop doing that, their currency would appreciate sharply while their exports are plunging. So in the short run, they are going to keep on accumulating. But I have seen a huge number of new initiatives in the last month that suggest [the Chinese] are pushing for the yuan to become an international currency and a reserve currency. They are doing bilateral deals with countries like Argentina and half a dozen others in yuan, not in dollars.
Weymouth: They are moving away from the dollar?
Nouriel Roubini: Yes, slowly they will. First they have to establish their own currency as an international currency. That will take years, but already in a month they have done more than in the last 10 years.
Thursday, May 21, 2009
One of the most memorable week of my life
In market action dow was down 52 points to 8422.The current advance took the Industrials to 8574.65 on May 8.It also took the Transports to 3351.17 on the same day. Next, we witnessed a four-day decline.I would like to quote the phrase of one of legends of market,"Follow the money." For that's all markets are -- movements of money. Follow the markets (the money), and you'll know what to expect, where to live and where to put your assets. The basis of the uncanny wisdom of the markets rests on one concept - "Everybody knows more than any one man or any group of men."
Hamilton's famous rule -- "One of the shortest ways of going wrong is to accept an indication by one average which has not been clearly confirmed by the other."
I have found the stock market to be a relentless teacher. The market will zero in on your weaknesses and it will cost you. If you are fearful, the market will find your weakness and it will cost you, if you are overly bold, if you are lazy, if you are impatient, the market will find that weakness and it will cost you. The market is a brutal teacher, but an excellent one.
My investment in Citi is up by 37 %, this return is not bad, considering it only less than 3 months. Moving forward, rally looks tired, as many great investors has said sell in may and buy in oct.
Sunday, May 3, 2009
Are we in bull or bear market..?
I was not able to write my blog last week as I was too busy with my dissertation project, sleeping every day at 4 am and going to work by 7 30 am and over the weekend I was catching up with my sleep. I almost done with my dissertation.
Are we in bull or bear market? Its a million dollar question and only time will tell us. I have been following few most respected wallstreet investors , they also seems to be divided on their opinion .
Here is the reason why................
Technical action of the market tells us that we are in bull market.A/D ratio , advancing stocks led declining stocks by a ratio of 2 to 1 over a ten-day period,
gave a buy signal on 23 march , the market’s prospects over the intermediate term are favourable.The A/D Ratio has only flashed 12 buy signals since 1949. They are almost as rare as triple-crown winners. The last buy signal occurred all the way back on February 5, 1991. Prior to that you have to go back to 1987 and then back to
1982.The Dow gained an average of 7.92% over the next three months following an A/D Ratio buy signal. Six months later, the Dow was ahead 14.91% and a year later 18.55%.
Another survey that has long-term bullish implications is the monthly asset allocation poll that AAII conducts. At the peak of the dot-com bubble, the asset allocation was 77% stocks, 8%bonds, and 15% cash. This is how it should be.This is exactly the type of reading one would expect near the tail-end of a lengthy bull market.Everyone was loaded up with stocks, and the last thing they wanted to be was in cash. At the conclusion of the most recent poll, the asset allocation was 41% stocks, 14% bonds, and 45%cash. The cash allocation represents the fuel for the next bull market.
According to dow theory: the primary trend of the market cannot be manipulated.
Most bear markets take the form of a major decline, then a major upward correction, and finally an extended and destructive decline to final lows.my belief is that this bear market will continue to its destination, regardless of all that the Fed and the Treasury have done to end it prematurely. In other words, I believe this bear market will fully express itself, no matter what.
Now, finally, my view is we are in bull market ,I am invested in the market , I have 50% of my cash in the market now.
Are we in bull or bear market? Its a million dollar question and only time will tell us. I have been following few most respected wallstreet investors , they also seems to be divided on their opinion .
Here is the reason why................
Technical action of the market tells us that we are in bull market.A/D ratio , advancing stocks led declining stocks by a ratio of 2 to 1 over a ten-day period,
gave a buy signal on 23 march , the market’s prospects over the intermediate term are favourable.The A/D Ratio has only flashed 12 buy signals since 1949. They are almost as rare as triple-crown winners. The last buy signal occurred all the way back on February 5, 1991. Prior to that you have to go back to 1987 and then back to
1982.The Dow gained an average of 7.92% over the next three months following an A/D Ratio buy signal. Six months later, the Dow was ahead 14.91% and a year later 18.55%.
Another survey that has long-term bullish implications is the monthly asset allocation poll that AAII conducts. At the peak of the dot-com bubble, the asset allocation was 77% stocks, 8%bonds, and 15% cash. This is how it should be.This is exactly the type of reading one would expect near the tail-end of a lengthy bull market.Everyone was loaded up with stocks, and the last thing they wanted to be was in cash. At the conclusion of the most recent poll, the asset allocation was 41% stocks, 14% bonds, and 45%cash. The cash allocation represents the fuel for the next bull market.
According to dow theory: the primary trend of the market cannot be manipulated.
Most bear markets take the form of a major decline, then a major upward correction, and finally an extended and destructive decline to final lows.my belief is that this bear market will continue to its destination, regardless of all that the Fed and the Treasury have done to end it prematurely. In other words, I believe this bear market will fully express itself, no matter what.
Now, finally, my view is we are in bull market ,I am invested in the market , I have 50% of my cash in the market now.
Saturday, April 18, 2009
China and India wants to sell gold
Financial Chronical reports, India and China may press for the sale of the entire gold reserves of the International Monetary Fund (IMF) to raise money for the least developed countries.
The IMF holds 103.4 million ounces (3,217 tonnes) of gold that, if sold, can fetch about $100 billion.
Both prime minister Manmohan Singh and Chinese president Hu Jintao will have to clear the proposal before the representatives of the two countries can take it up at the IMF spring meeting in June in Washington.
The G20 heads of state meeting in London earlier this month agreed to sell a part of the IMF gold to raise $6 billion for poor countries during 2009-11.
This is interesting devlopment,lets see the impact on Gold price in coming weeks.
Sir Harry the Schultz writes this in his latest mailing,"The history of reserve currencies reveals that the position of a country as a superpower (whose currency acts as a reserve currency) tends to rotate in a natural cycle of around 100 years. Will history repeat? From 1450 to 1530 it was Portuguese (80 years). From 1530 to 1640 (110 years) it was Spanish. From 1640 to 1720 (80 years) it was Dutch. From 1720 to 1815 (95 years) it was French. From 1815 to 1920 (105 years) it was British. And then the US dollar gradually dominated the scene until 2009 of a period of 89 years.
The United States dollar is the most widely-held reserve currency in the world today. Throughout the last decade, an average of two thirds of the total allocated foreign exchange reserves of countries have been in U.S. dollars. For this reason, the U.S. dollar is said to have “reserve-currency status”, making it somewhat easier for the United States to run higher trade deficits with greatly postponed economic impact.
On stock market front ,Citigroup swung to a $1.59 billion first-quarter profit from a $5 billion loss a year earlier. Loss Per Share of $0.18 , valueline was expecting loss on .90 in 1Q. I consider it to be very good performance but most of the earning coming from trading relating activity, for credit card loss in coming months picture is still gloomy. Net credit losses are $7.2b.Tier 1 capital ratio was approximately 11.8% versus 7.7% in the first quarter 2008.
Market looking tired. The Dow was up over 50 today but sold off at the close.
Have a nice weekend.
The IMF holds 103.4 million ounces (3,217 tonnes) of gold that, if sold, can fetch about $100 billion.
Both prime minister Manmohan Singh and Chinese president Hu Jintao will have to clear the proposal before the representatives of the two countries can take it up at the IMF spring meeting in June in Washington.
The G20 heads of state meeting in London earlier this month agreed to sell a part of the IMF gold to raise $6 billion for poor countries during 2009-11.
This is interesting devlopment,lets see the impact on Gold price in coming weeks.
Sir Harry the Schultz writes this in his latest mailing,"The history of reserve currencies reveals that the position of a country as a superpower (whose currency acts as a reserve currency) tends to rotate in a natural cycle of around 100 years. Will history repeat? From 1450 to 1530 it was Portuguese (80 years). From 1530 to 1640 (110 years) it was Spanish. From 1640 to 1720 (80 years) it was Dutch. From 1720 to 1815 (95 years) it was French. From 1815 to 1920 (105 years) it was British. And then the US dollar gradually dominated the scene until 2009 of a period of 89 years.
The United States dollar is the most widely-held reserve currency in the world today. Throughout the last decade, an average of two thirds of the total allocated foreign exchange reserves of countries have been in U.S. dollars. For this reason, the U.S. dollar is said to have “reserve-currency status”, making it somewhat easier for the United States to run higher trade deficits with greatly postponed economic impact.
On stock market front ,Citigroup swung to a $1.59 billion first-quarter profit from a $5 billion loss a year earlier. Loss Per Share of $0.18 , valueline was expecting loss on .90 in 1Q. I consider it to be very good performance but most of the earning coming from trading relating activity, for credit card loss in coming months picture is still gloomy. Net credit losses are $7.2b.Tier 1 capital ratio was approximately 11.8% versus 7.7% in the first quarter 2008.
Market looking tired. The Dow was up over 50 today but sold off at the close.
Have a nice weekend.
Wednesday, April 15, 2009
MACD gave a right signal and we are seeing pullback
I was rather busy over last two days. As I posted in my previous blog MACD gave sell signal and we are seeing pull back. I still insist we are in bear rally.
Treasury Secretary Timothy Geithner intends to expand the Federal Reserve’s new $1 trillion Term Asset-Backed Securities Loan Facility to buy frozen assets, according to people familiar with the proposal. The revamped Fed program will sit alongside the Treasury’s planned public-private investment funds, while the Federal Deposit Insurance Corp.’s role will probably involve buying distressed loans, the people said.
Over the past seven months, the Fed has pumped in roughly $800 billion of new money into the financial system, and last week the Fed said another trillion dollars or more could be created in the months ahead. Fed is doing whatever it can to fight deflation.Inflation is a lot easier to deal with than deflation.
We didnt have obivious bear market bottom yet, values have not appeared yet,though much of the damage has been done. This rally may still go higher too 200 moving day average ( 9000), but still primary trend is down. I will putting some interesting charts over the weekend, so hang on....
Treasury Secretary Timothy Geithner intends to expand the Federal Reserve’s new $1 trillion Term Asset-Backed Securities Loan Facility to buy frozen assets, according to people familiar with the proposal. The revamped Fed program will sit alongside the Treasury’s planned public-private investment funds, while the Federal Deposit Insurance Corp.’s role will probably involve buying distressed loans, the people said.
Over the past seven months, the Fed has pumped in roughly $800 billion of new money into the financial system, and last week the Fed said another trillion dollars or more could be created in the months ahead. Fed is doing whatever it can to fight deflation.Inflation is a lot easier to deal with than deflation.
We didnt have obivious bear market bottom yet, values have not appeared yet,though much of the damage has been done. This rally may still go higher too 200 moving day average ( 9000), but still primary trend is down. I will putting some interesting charts over the weekend, so hang on....
Subscribe to:
Posts (Atom)
