Friday, October 23, 2009

TGIF

The market filled in Wednesday's closing crater yesterday. I suppose one could say that "real buyers" snapped up bargains. Or that "real buyers" saw good earnings on companies such as MMM and put more money to work. Or perhaps shorts put on Wednesday were covered. Or that Galleon liquidation selling pressure eased, allowing stocks to rise from light buying. Or underperforming beefers are trying frantically to catch up. Or perhaps all of these together.

My thinking on the cause of this long, grinding run is the combination of (A) the kindling - a slow recognition by more and more investors that the economy is recovering and will return to a reasonable level of activity in 2010, plus (B) the heavy fuel - insurance companies who sold variable annuities with floor guarantees distributed around S&P 1000 to 1300 are slowly being forced to re-buy stocks. I had written once not too long ago that the stunning selling panic of September and October 2008 was likely partly caused by the selling of such holdings as annuity floor guarantees were being hit. This is quite like the "portfolio insurance" debacle on the Crash of 1987. In 2008, the selling was spread over a much longer time than one day as the distribution of guaranteed minimums was broader in "price space". The reversal re-buying will necessarily be spread over more prices, too. Such is what we have seen in this long, grinding run.

From the monthly S&P chart and assuming a seven year maturity, the bulk the guarantees must have been written in the S&P 1100 to 1300 range, with somewhat less in the range of 1000 to 1100.

What does this mean for the future ?

This annuity re-buying pressure can continue but will peak around S&P 1200 - maybe 1150 to 1250 - a range in price space. After that, the economy must have recovered to normal conditions to provide not only earnings but also good prospects for earnings growth in 2011.

Also, it means that unless the economy DOES improve sufficiently to attract other buying support (beefers, mutual funds, etc), that a wave of selling could re-emerge if prices start going lower again.

For now, I'll ride the bull elephant to the next water hole.

As for new money, it's going into my cash account. I don't see any "screaming buys" now. And I don't have strong new ideas ... yet. I'm, beginning to noodle over where to look for that new water hole.

PS: I mentioned something to Mrs. B yesterday about her stocks in Sky Fund. Many of the big companies whose shares she owns are within easy striking distance of all time highs. One example is MMM. To me, many indices are deceptively negative, as their heavy weights to financials misses strength in big industrial and consumer products names.

PPS: I suppose you can guess that I think such guaranteed floors on stock investments should be prohibited, whether in variable annuities or in any other derivative contract, except via true stock options.

Word of the Day

"Ethotic" - adjective [$10]
Ethotic means of, relating to of characterized by ethos (from Greek - nature, disposition). An ethotic argument is one that attacks the character of the opponent. It's a specific form of argumentum ad hominem.
Sentence: Why does so much American political speech descend instantly to ethotic arguments ? Perhaps there is little ability in the ruling classes to generate true solutions. Or few of the noble virtues in them . Or both.

78 comments:

mfl59 said...

A terrific run Sal....even Wayne Allyn Root loses a bet from time to time...

Have a raspberry vanilla chai lite latte on me...

Bunkerman said...

yes, a great run ... hope you weren't pyramiding / parlaying the bets.

Bud said...

good morning Bman !!!!



raspberry vanilla chai latte.............never had one of those...........that sounds delicous !!!!

Bud said...

does steve wynn read this blog ?? ( or more accurately.....does he read the comments section of this blog )



'a falling dollar will destroy the economic future of this country '

Bud said...

i don't know what a 'real buyer' is..........but for arguments sake..........lets say they exist............i like the Bman's first paragraph today..........prolly all of those factors moved stock prices


that's called a perfectly functioning market in my book.......people with different opinions on the market meet and force 'price discovery'............aka....an efficient market

Bud said...

Bman is BLK a 'real buyer' or a 'beefer' ??

Bud said...

F wayne allan root


he can't carry my jockstrap

Bud said...

yes that was definitely painful last nite



'punched in the gut'

Bud said...

pyramiding/parlaying.............yes i was.............am........will.....you gotta press while you're hot...........only way to make 'safety deposit box' money


i'm trying to knock these guys out........instead........i got.......uhhhhh



'punched in the gut'

mfl59 said...

Yes a reverse always adds some excitement...kind of like a call option Bunkerman....

Bud said...

interesting analysis Bman.........insurance companies and variabe annuities makes sorta sense


i find it quite odd that the Bman makes no mention of the collapsing greenback...........a potential tsunami comin...........and he completely ignores it......data mining indeed


'whisltin by the graveyard'

Bunkerman said...

it's really simple re the dollar - the dollar has been overvalued for decades with resepct to many, many currencies. So many nations in the third world and Europe wanted an over alued dollar so they could export to the US - and beat out US competition. All that is happening is the dollar is going to its true value.

Let it find its true value.

Bunkerman said...

i. e. a level where the trade and funds flows balance.

It's getting there for some like the Euro - not quite yet.

And for some currencies, it's still way overvalued.

Frosty said...

good news boyz...have the keg chilled and the six ft sub ordered...Sal got his sack stomped party tonight...all systems go.

Bunkerman said...

One stock that is a screaming sell is AMZN, but it's a bit strange.

Why would anyone pay over 50x past peak earnings for it ?

But stocks like that hit a plateau and then stick for a decade.

On bad news it goes to 30. Till then, who knows.

Bunkerman said...

I'm annoyed I didn't buy it much lower in my Internet package; but I thought it was overvalued at 60.

Bud said...

sack stomped party


lmaoooooooooooooooooooooooooo



what a f'ng douchebag you are

Frosty said...

Bunky...did you sell BA yet...guess I'll just keep pounding it until you tap out.

IYT gapped 10-14, closed at the high of the day and has proven to be a wall...exhaustion gappa...sure getting narrow Bunky.

Bunkerman said...

Hmmm COF was a recent LT buy in Fido Fund.

good earnings. popping.

will hold out for 80 - I think they take market share from the greedy big banks that overcharge fees, etc..

;)

Bunkerman said...

no, I did not sell the BA calls - I rolled them into Jan.

Expecting a successful Dreamliner test flight, then stock jumps UP a lot.

with that plane working their earnigns visibility increases bigtime.

Bunkerman said...

BLK (Blackrock) is a fund manager. One has to assign "beefer" status fund by fund.

Some are, some aren't

Frosty said...

"with that plane working their earnigns visibility increases bigtime."...do tell...that order book has more hair on it than one of your working girls...as stale as those MRE's...did you see their book refi A+ negative, what a rating agency gift.

Bud said...

Bman..............is this just beefers tryin to create 'panic' this morning ???

Bunkerman said...

frosty - please knock BA to 45; then I can double up on the calls.

Bunkerman said...

huh ... the Dow is down 28 and you're talking about panic ?

Bud said...

lmaoooooooooooo the dow


i didn't even know the dow was down 28...............i been playin ping-pong ...........uhhhhh......trading the e-minis off the open...............they got pounded..........i nailed them !!!!!!!





" look at me bob..........i am the greatest trader of all time.............i am the best...........i cannot lose.........i love me some me"

Spin-em said...

always happens..as soon as you get paid from book...the sweet cushion is gone....confidence??well..(insert toilet flush)bet scared

pass that sammy frosty..lool

mfl59 said...

who wants to do a keg stand with me?

Frosty said...

"Don't Try to Short This Market
10/23/2009 6:45 AM"...thx jim

Spin-em said...

CANNNOOOOOON BAAAAALLLLLLLL!!!!

mfl59 said...

So what are we shorting now Bunkerman?

Bunkerman said...

no shorts .. too early.

S&P 1200 beckons.

Bunkerman said...

btw, re shorts, I'm not a trader so I don't even look for ST shorts.

mfl59 said...

"I'm not a trader"

those were some fine investments in the options mkt Bunky....

Bud said...

well put ace.............Bman is a f'ng trader..............no doubt about that



nic nie robię my ass

Bud said...

i am workin on my strategy for this weekends baseball

i am already loaded on the newyorkyankees for the series...........can they lose 3 in a row ??? no chance................they will definitely win either game6 or game 7....guaranteed..........so i'm gonna bet newyorkyankees -190 for game6 tomorrow nite............full size



and if it goes to game7...............1/2 size bet on the newyorkyankees...........no f'ng way do i go back to my safety deposit box and return my 'windfall'




"will this damn kid ever..........uhhhhhhhh.........welll..............

mfl59 said...

Uhhh sir recall a few years back when the Red Sox came back from down 3-0 againts your boys....I believe I won a dinner at Peter Lugers in that series....best steak in the city boys.....

Bunkerman said...

not investments ... speculations.

;)

mfl59 said...

Those option trades were terrific indeed...however, your idol John Bogle would certainly not approve...

Bud said...

'your boys'


lmaooooooooooooooooooooooooooooo



shut the F up ace !!!!! they aren't my f'ng boys...........i will never root for the child molester (jeter) and fags ( A-fraud and texeira ).....never !!!!


lemme repeat............yankee fans are all lowlife scumbag douchebags.........and their wives/girfriends/sisters/daughters/aunts/coousins/mistresses/grandmothers/granddaughters are all gonnorhea infected whores






PS.............nick swisher..........what a f'ng duchebag.....fastball down the middle.........i guess he didn't take an HGH injection in the ass like A-fraud does every game..........btw.........A-fraud also takes ccsabathia's 'injection' in his ass...........ya'know..........since he likes large black men...f'ng faggot

Bunkerman said...

Bogle would agree with about 2/3 of Krypto Fund.

The other 1/3 nope.

But David Swensen (Yale) would like that 1/3.

mfl59 said...

I know I didnt go to Iowa State, so perhaps I'm not that smart...however...how does one bet thousands of $$$ on a team and not root for them to win? seems a bit masochistic to me...

Spin-em said...

15 year gambling "career"

lmaooooooooooooooooooooooo

all the kids liked the yankees(and they didnt like me)so I hate the yankees

spennd a 40 timer ...goto tellers shrink
..cry a lil...you'll feel better about yourself

mfl59 said...

"spennd a 40 timer ...goto tellers shrink
..cry a lil..."


lmaoooooooooooooooooooooooooooooooo

Bunkerman said...

To bet bigtime on & not root for ...

well, it seems Bud has bifurcated [$10] his brain ...

;)

Spin-em said...

i know for a fact that guys are riding me."

tell Dr Melfi bout that Freudian parapraxis($20)aswell

lmaooooooooooooooooooooooooooo

Spin-em said...

the key to winning an online tussle?????

short and sweet...like ur cupids boyfiend


lmaooooooooooooooooooooooooooo

Frosty said...

"Bud has bifurcated [$10] his brain ..."...an old hindu trick bunky...put an extra tight wrap on the turban...gives the illusion that ones carpet can fly.

Spin-em said...

PS......go fuck a goat




"sorry" Mrs B

Bunkerman said...

hmmm "parapraxis" - a good one, gotta look it up.

Frosty said...

what a trading team we could have had...just like johnny quest....a superstar line up.

Dr Benton Quest (MFL59)
Race Bannon (frosty)
Jonny Quest (Spin)
Bandit (bunky)
Hadji (aazzhead)

head shake..uugghh...멀리서,
내가 당신의 눈물이 떨어지는 것을 느꼈다
나는 당신께 내 어깨를 빌리고 싶어*,
당신 곁에서 눈물을 닦고 싶어
절대로 떠나지 않는 사람처처럼,
그런데 어떻게 할까?

나는 천사라면 당신이
안전하시도록 노력하겠어
당신은 절대로 혼자 있지 않을 거야
당신은 절대로 슬프지 않을 거야
나는 당신의 천사, 천사, 그대의 천사

Bunkerman said...

Sun boy gets the gold star for wordsmithing ...

parapraxis is a $100 word !

Coming soon to "Word of the Day" with due credit of course.

Spin-em said...

loooooooooooooooooooooooooooool

Bud said...

GDP (Gross Domestic Product) is defined as Consumption (C) plus Investment (I) plus Government Spending (G) plus [Exports (E) minus Imports (I)] or:

GDP = C + I + G + (E-I)

(For the wonks out there, GDP is usually termed "Y".)

You can calculate national savings as GDP minus consumption and government spending. That means that investment equals savings plus net exports. If there are no net exports, then money must come back into the US from outside the country to finance investments, along with savings.

This equation is known as an identity. An identity is an equality that remains true regardless of the values of any variables that appear within it. That means it is not a guess or an approximation. It is simple reality.

Thus, if there is a government deficit, there must be savings by both consumers and businesses, plus capital flows from outside the country, to offset that deficit in order for there to be any money left over for investments.

In the short run, an increase in government spending can offset a decline in consumption (a recession), but absent savings a government deficit crowds out investment in the long run. There must be savings in order for there to be investment. And without investment, you do not get job growth or economic growth.







--well said by john mauldin

Bud said...

Bman are you in favor of further quantitative easing by the Fed ??
......... it appears that qe is havin zero impact on the UK economy............they still in recession



PS............i beleive we are still in a recession too...........but that's another story

mfl59 said...

just post the link son...we'll decide if we want to read it...okay yankee clipper?

Spin-em said...

lmaooooooooooooooooooooooooooooooo

the yankee clipper dunks in his raspberry vanilla chai lite latte

Bunkerman said...

uh Bud ... reconcile "quantitative easing" to that maudlin post.

He only gave you 1/2 the picture.

Bunkerman said...

All the bears bitch about "quantitative easing" and the Fed's balance sheet from one side of their mouth and then moan and groan about lack of lending by private sector from the other.

I wonder why they can't (won't)make the connection ...

I suppose it won't sell books or pay for speeches or for newsletters.

Bunkerman said...

for example, doesn't the Fed's balance sheet make up for lots of those "capital flows" in the "short run..

Sheesh ...

And then those bears whine about the dollar endlessly, too, when its steady decline is helping cure the trade deficits.

Bunkerman said...

except for oil the US runs a traed surplus.

If Obama wasn't so much in a hurry to bed down with those greenies, taht problem could solved with nuclear power and US coal and natural gas in now time.

Bud said...

ummmmm................i haven't heard any bears complaining about private lending


what i have heard the bears complain about..............why is obama and geithner and bernanke destroying the dollar ???

Bud said...

US runs a trade surplus excluding oil???


where are you gettin your facts from Bman.........the Onion???

Bud said...

Bman did you see this poll from Pew this week?? less and less people are believing in the climate change fairy tale


http://news.aol.com/article/pew-poll-americans-cooler-on-global/731614





PS.......perhaps more people read this blog than we imagine ?

Bud said...

is the dollars decline helping with the trade deficit ???


i believe the jury is still out on that one


btw...........jury still deliberating on the tanking greenback will create jobs in america

Frosty said...

Sal why are you in such a hurry to bury the USA jihadstyledollar...bury us face down so the world can kissouraazzz...ROW can bitch, but they have nonono choice...we always win, always have, always will.

Bunkerman said...

uh Bud, I looked up the numbers and did some simple arithmetic.

Bunkerman said...

last year I did it

Bunkerman said...

the last time the dollar bears were screeching.

Bunkerman said...

true re this blog ...

"very influential"

;)

Bunkerman said...

ove rtime, yes, it helps.

Like the opposite destroyed US exports in the 1980s when Volcker killed US manufacturing and the MidWest.

Bunkerman said...

btw...........jury still deliberating on the tanking greenback will create jobs in america


grade - F

Mrs. B's Merc SUV made in Alabama proved that one a few years ago.

Ditto those Toyota plants.

Bud said...

it's really shocking and very confusing to me that frosty finds humor in 2 mammtoh tsunami's headed our direction...............the destruction of the dollar and the trader tax ............they will put me in soup lines........excuse me but i can't laugh


why does bob call it the 'wing tax' anyway ?? i don't get that one

Spin-em said...

'urbanization"

ohhh sure...Ive seen it a 1000 times.....one minute ur "dating" the darkmeat..the next ur daughters knocked up and there's one in the white house...in the mean time...why dont you do urself a favor and buy a quality part from me?

Bunkerman said...

what to do now ... sort survival gear or clean guns ... ??

another reason the dollar doesn't bother me

;)

Bunkerman said...

have a good weekend.

stock up on that French & Italian wine now, it's going up ...

Bud said...

that explains it Bman...........the fallin dollar guarantees a currency crisis guarantees armageddon........ which you are prepared for



have a great weekend Bman!!!!

Spin-em said...

Have a great weekend "ALL"...including the douche