Wednesday, September 19, 2007

Back in the Saddle

Fed move:
I'm happy that Ben Bernanke reads my blog to get a daily dose of reality [ hehe joke ;-) ]. Here's the clue from the FOMC statement: "The Committee will continue to assess the effects of [the credit crunch] on economic growth prospects and will act as needed to foster price stability and sustainable economic growth." [my emphasis]. That's right out of their statutory mandate and it's about time that was recognized - it's been missing since May 2006.

This 50 bps cut corrects for two past Fed mistakes, viz., the 25 bps increase caused by Ben's tryst with Maria, and the error in August standing pat. So the Fed is playing catchup ball, BUT is still 25 bps behind. They need to cut 25 bps in October, too, to get the overnight rate to 4.5%. With core PCE inflation under 2%, an overnight rate over 4.5% is not justified and is still tight monetary policy.

Stocks:
The inverse H&S bottom pattern in the cash S&P that I've discussed awhile here is confirmed now with yesterday's volume move up through the flatish neckline around 1490. The Nazz comp shows a pattern of higher lows and higher highs. Ditto the Nazz 100. The Russell 2000 shows a volume break up out of an ascending triangle pattern.

The XLE shows an all time high print close. The XLF shows a break up on volume out of a ragged "W" or triangle consolidation pattern.

In all these cases, we really need today's close to confirm these patterns for two reasons. First, since beefer short covering might have caused the breaks and volume. Second, since the day after a Fed decision shows decisive big money actions most of the time.

Commodities:
Gold and oil are moving well. Oil's move is just recognition that the world economy is doing fine and oil supply is limited, so slow demand rationing is necessary. Gold is moving for two reasons: (a) beefers playing the dollar weakness, and (b) real long term physical demand and lower mining supply. I prefer playing oil with the stocks since the the commodity carrying costs can be substantial. Ditto gold, but for now I do have some long gold futures to lock in the price of the physical gold I'm planning to buy with new money in October.

The World:
European press shows a bit of a panic over the "subprime" business. They put on pictures of homes for sale in FL and thinks that's representative of the whole US. I think they are a bit surprised, though, that some of their banks buy US mortgage securities in big amounts. That's a reasonable concern.

Scotland:
We had a very enjoyable trip. I'll write more later. But the fried eggs I had in Scotland were the best that I've every had anywhere - super flavor. And the Aberdeen Angus beef was just wonderful, too.

PS: Nothing was mentioned in the FOMC statement about the dollar - the Fed has no statutory authority to consider the dollar. All those talking heads saying the Fed will or won't do something because of the dollar are just delusional eisegetes or are "talking their book".

PPS: The August CPI comes out this morning. A flat number or downtick in the year-over-year core CPI is good. An uptick will give the bears ammo to hit this move.

P^3S: Incredible. Babblevision puts on that fool Peter Beutel who was recently talking about oil collapsing, and now he's talking about higher prices. What a knave!

P^4S: Year-over-year core CPI was 2.1%, a downtick from 2.2% last month. Good news. Inflation is on life support for awhile. Good for the forces of light and goodness; bad for the dark side and the beefer bears.

P^5S: LIBOR fixed under 5% today - more good news. The world economic trajectory is on a fine path. It's a bull market.

36 comments:

Spin-em said...

Welcome home Bunk......glad to see you could repair the damage Euromern caused in the markets.......

Did you spot Nessie??..lol

Bunkerman said...

haha, yeah, Euromern spread fear panic all over Europe, I think.

I took a boatride on a Loch - not Ness - no monsters - lolol.

I had lots of great single malts and bought some to be shipped here. Crossing my fingers on those XX

Frosty said...

Bunkerman...good to see you made your way back to the bunker safe and sound...50-50 fed a shock? where do they go from here....another 100 bps before the end of the year?....the common wall street man needs his bonus uknow.

Frosty said...

did you notice they put back in the inflation speak....that was gone from the 8/17 statement.

Bunkerman said...

well, I thought they "should" do 50. I wasn't too confident they would have, so it was a "bit" of a surprise.

There were several references to inflation risk in the August 8 statement. I don't think August 17 was a true "statement" just a reason for the discount rate cut.

Bunkerman said...

I think the data dependency is great. I don't expect the economy to get much worse, so I'd look for just another 25 or 50 more. I'm happy with 4.5% overnight rate; but if inflation drops to 1.75% core yoy, then 4.25% or 4.0% is warranted. That's about it unless the economy really gets bad, which I DO NOT expect.

The core yoy PCE is already 1.9% so that's pretty low. About 2 or 2.25% real return is all that is reasonable for overnight money in a normal environment (not tight or loose money).

That's my thinking re my trajetory.

Frosty said...

Bud...you must luv how W continues to bring home the guns and the butta...breeze past the housing bubble into 08', what an economic guru....hildog's steal from big oil and the private investor to provide the cheese rap not going to get ya' home. what a game changer...snap

mfl59 said...

welcome back bunkerman...are you sure you weren't in Jackson Hole drinking highballs with Ben and his crew, advising them on policy?

Frosty said...

KMX huting for certain....used cars ppfftt...who cares now that 0% and rebates are back in full force. F GM, free cars for all, we'll make it up in volume.

Frosty said...

MRVL...there is always a bear market some where.

Frosty said...

NTRI...diets are for bear markets...let's get fat and happy...RIP NTRI.

Bunkerman said...

no wonder you like salmon fishng, frosty. Big grizzly bears love salmon lolol

Frosty said...

OSTK...darkside 26.40...green seven in a row....bears cooked...let's see if the real buyers come in.

Frosty said...

grizzly....that hurts...thought we were on the same team...u know the BAC-CFC team :)

mfl59 said...

is this a sucker rally here? Frosty, your thoughts sir....

Spin-em said...

come on KBH..give us that farley finger

mfl59 said...

Bunkerman are you a buyer of homebuilding/real estate related stocks? I know you have REIT exposure in your Swensen-like long term acct...I am talking for a trade...ty

Frosty said...

the fed has sucker punched the tape three times....so hard to be the big gizz...but I doubt these were Bukerman's real buyers this morning...we will test the metal of the dip buyers, until then just being virtual.

Bunkerman said...

I'm not playing the homies for ST or IT trades. Not for any particular reason, but I have plenty of exposure in stuff I like LT.

I suppose I might be missing something, but I guess they might be recovering for a long time.

I also don't like companies with big holders like most of them.

Frosty said...

index futures gaps are always filled...the sooner the better for the bulls....the Spin-em handbook.

Bunkerman said...

I agree with frosty, these are probably beefers chasing and they'll flip it soon.

Real buyers will wait for a dip.

mfl59 said...

Frosty a wise man once said gaps are meaningless....no disrespect spinny...

Frosty said...

MLF...index futures gaps always fill...always....perhaps this is the break away that never fills, but odds are far less than 1%....who ever said that to spin is a complete ass.

mfl59 said...

I am just passing along advice given to the common man Frosty....I am a big believer in gaps myself...

Spin-em said...

rofl frosty...easy big fella

Bunkerman said...

hmmm, I hope that wasn't me re gaps. They do work a lot. I just don't play them.

mfl59 said...

no that wasnt you bunkerman....Spin knows whom I am talking about...He might even be a reader of this blog...

Frosty said...

$ndx all filled up....flipper...don't mess with the spin.

Frosty said...

Bunkerman...did you hear Bud is on the lamb from his bookie...some think he's swimming with the fishes.

mfl59 said...

wonder if GS conference call will mention how they gutted their own beefer....

Frosty said...

$ndx...now flipper again...spinny handbook good for 40 pts...a master..gaps indeed.

Bunkerman said...

well, Bud is so anti-gun, he's a bit vulnerable to pressure.

Bunkerman said...

Maybe Bud is on a golfing vacation at some rich man's resort hehe

Bud said...

Shut up frosty

Hasselback hands the ball of to alexander.......fummmmmmmmmmmmmmmmmmmmmmmmbbbbbbbbbbbblllllllllllllleeeeeeeeeeeeeeeeeeeee!!!!!!!!! lmaoooooooooo


thank you sea-bitches.

Bunkerman said...

strong day - I guess from the big mutual fund inflows that Babblevision mentioned. That's real buying from the public. We haven't seen that for a long time.

Let's see how long that lasts. It could give Ms. Market the energy for another romp hehe.

Spin-em said...

Q's..July high 50.66
...todays high 50.59

plenty of farley's giving frosty the fingerKBH,XHB,SMH,WB

Im just sayin.....