Wednesday, September 5, 2007

Hungry Bears

As expected, we're seeing the bears attack overnight in Japan and in the early futures here.

The WSJ has a planted story about debt conduits for asset backed commercial paper related to Citibank. The writers really don't understand those assets. If the commercial paper can't be sold due to a liquidity crunch, the line of credit funds it, But the assets backing the CP are then just rolled off to repay it and no new assets are added. Since the assets are high quality, short term receivables with good credit cushions, there really isn't a risk to the liquidity lines.

[skeptics: yes, I know about planted stories - I did a few of them myself many moons ago.]

Some terror alerts, too, in Europe.

I think the ADP jobs number might be significant this morning. A very low number or a negative number would both encourage the bears and provide more support for a Fed ease.

A WSJ story shows how female & minority goups can be paid off, too: they oppose taxing their own hedge fund managers' pay as compensation. Sheesh. A old cleaning lady pays taxes at 45% including social security taxes and the rich woman beefer manager wants to be taxed at 15%. Despicable. [You can substitute "black" for "woman" in the above comment if you wish.]

LIBOR [aka London Interbank Offered Rate] has a high spread over the US fed funds overnight rate and short term Treasury bill rates. There is a shortage of Eurodollars in Europe. What is causing it? I think that perhaps OPEC or Russia and other oil producing nations might be pulling petrodollars out, or maybe China is not lending in the Eurodollar market, out of concern over European banks.

The S&P cash chart looks like a fine inverse H&S with two closes over the neckline break. I'd have preferred more volume. The beefers will probably hit it. Wait for dips to buy if you need to get invested.

The Russell 2000 looks like a W bottom and a small bullish cup & handle. Another close over 800 is needed to confirm.

Buffet's BNI is cheap. If I wasn't so loaded up and saving my last buying power for more big cap fins, I'd buy some.

The Nazz 100 is still moving after breaking the neckline of its inverse H&S a few days ago. Looks a bit extended, but those stocks can do that awhile. My big cap techs are AAPL, GOOG, ORCL and CSCO in order of position size.

The Nazz comp has the same pattern: recent break of neckline of an inverse H&S. Ditto Dow Jones Industrials.

I'll borrow from Churchill regarding this correction and "subprime" "crisis": It's not the end or even the beginning of the end, but it's probably the end of the beginning.

The markets look ahead. So when the "end" of the "crisis" can be foreseen, that will be the end of the correction. I think it's close. As mentioned before, many people have recent experience in the commercial real estate and mortgage crisis of the early 1990s so know how to do this residential subprime restructuring. Plenty of bottom-fishers are lurking to grab cheap assets.

So it's still a bull market. Buy dips. Hold longs for the next big move up.

PS: High levels of job cuts in Challenger, Gray report for August. Many cuts in financials.

PPS: low ADP jobs number, only 38,000 jobs in August. The Fed must cut NOW!

38 comments:

Bud said...

ADP number shows a recession looming.

Bud said...

Let's see if the real buyers are interested today.

mfl59 said...

I don't quite understand the logic of cutting interest rates to fend off a recession...aren't recessions part of the natural cycle of business?

Bunkerman said...

The Fed's legal mandate is maximum employment with stable prices. Since the core PCE is now "stable", they must cut rates.

Why should artificially high interest rates "cause" the recession. If they are artificially high as now, then that's not a "natural" part of the business cycle.

Bunkerman said...

I don't think a recession is a necessary consequence yet, as periods of slow growth are not always followed by recession.

Bunkerman said...

A "natural" fed funds rate would be down at 4.5% or so where the ST Treasury bill rates are. Interest rates are being kept high simply by the Fed's tigh money policy.

Frosty said...

Bunkerman...is this the end of the fed rate cut rally...it should be more than discounted at this point...certainly it won't be large enough for the cry baby bulls...help me help me I've taken to much risk...makes me sick.

Frosty said...

GS hearing they have gutted enough of there own to save their number...we shall see...LH the one to attack on the darkside...someone must have skipped a baet or two.

Bunkerman said...

there are plenty of nonbelievers in the Fed rate cut. Plus beefer bears.

Frosty said...

Bud...where's the list

Bunkerman said...

I wonder why anyone was surprised that home sales were down a good bit in July, and that employment growth was weak?

Maybe this is just bears?

mfl59 said...

Bunkerman what does a rate cute do for your bullish thesis going forward?

Frosty said...

what's up with friday...ben jumps the bears with the discount rate into a melting tape then this past friday W and ben back liars and cheaters and pledge free condos....what happened to free markets.

Bunkerman said...

A vigorous rate cut keeps my bullish thesis intact. A wimpy one or none ... guts it.

Bunkerman said...

Let me make it clear - I've been looking for the Fed to cut rates this fall since the spring. I think the current situation should give them the justification to do the right thing.

The Fed has had tight money for too long - maybe about three months too long.

maverick said...

It is a new sport frosty....called Cheaters and Cover up... usually no winners though.

Bud said...

Bman ..thank you for 'makin it clear'. I wasn't sure what you though fed shud do.

Bud said...

Lmaooooooo....gutted their own

mfl59 said...

does vigourous mean at least 50 bps?

Bud said...

I really screwed up today. I shud have hit this open hard. Beefers did. Instead i sat here tappin my feet.......sort of like larry craig.

Bud said...

Lemme answer that. Vigorous means keep cutting till S and p blasts thru all time highs. It's all about gettin stox higher. 'the common man'.....pfffffffft

Bunkerman said...

I think at least 25 with a clear shatement that more to come can be OK - not great. I'd prefer 50 plus a discount rate cut to make it equal the overnight rate.

I wanted to "make it clear" since I'm not panicking or even racting to this data, but this is something that's been needed ahile and the economic trajectory I look for requires it. This data is no surprise. Months of overly tight money has forced it to happen.

Bunkerman said...

If the Fed fools had been paying attention and not being delusional about their models and their vacations in Nantucket & Jackson Hole junkets on their government paychecks, they would have taken off the inflation bias in June, cut in August and be cutting in September, too.

Bunkerman said...

Uh ... in even simpler terms, the Fed should do what I tell it to do. :-))

Frosty said...

YHOO...I can sense spinny putting out this obvious take over canidate...shorts tossed the towel on rumors...that gap at 22.80 way to tempting...the common man would be best to stay out of his way.

Frosty said...

Bud...strike one, no fair going high and tight while I recover from vacation "tappen my feet"...lol

Frosty said...

Bunkerman...little brown book not screaming rate cut...you would think it should if the fed were way behind the curve...no doubt it will be spun into a cry for help...perhaps this firday the goverment will implement an adopt a beefer program to save the common man.

mfl59 said...

Wall St comprised of some of the biggest whiners and babies I've ever seen....its quite nauseating listen to people piss and moan about the equity markets when we have gone straight up for 4 years running...

Bunkerman said...

lol mfl I just want the Fed to do wht's good for the common man!

Bunkerman said...

The bears are playing the "good is bad" and "bad is bad" game. I doubt it can last for long.

I think the brown book works for a rate cut. Why have tight money is economy is just moderate or slow?

maverick said...

Do we allow anyone to suffer anymore? The common man smart enough to make his own bed and sleep in it if he chooses. Pay for it and move on.

Bunkerman said...

lolol we should allow beefer managers to suffer ;-)))

Bud said...

Yes Bman. Some beefers are gettin clocked (sufferin). They are the ones cryin for a rate cut. The real buyers are all in profits.....they so smart.

lmaoooooooooooooooooooo

Bud said...

Is SIGM a gap filler? Spin?

Frosty said...

Bud...I have a spare copy of the spinny gappa handbook...say "long live the king, W rocks" and I will fed x it to you free of charge.

Spin-em said...

http://www.gasbuddy.com/gb_gastemperaturemap.aspx

Why is the corn belt paying the most in the country?..Big Oillll beefers punishing the common man corn farmer?

Spin-em said...

GS gappa 171.38...Quint..what do you think?..lol

Bunkerman said...

that's strange, spin re the gas prices.

Last time I was in central SE Ohio (late June), the prices were 10 cents or more cheaper than in Massachusetts or CT or NY.