2008.09.18
Posted in Econ at 02:08 by requiem
This has certainly been an exciting week in the markets, and I’m going to need more popcorn. At times like this, people start asking questions that can generally be answered with “it’s a little too late to do anything about it”. In short, lacking a feel for the market, people tend to buy and sell at the worst possible times. What follows is my personal take on likely outcomes.
First, my price targets for the S&P 500 remain unchanged; 1070 intermediate, final bottom around 850. (The final number has a good deal of wiggle room; we could easily reach the 700s.) We should reach the final bottom in one to two years. What is most likely over the next month or two
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2008.08.27
Posted in Econ at 22:57 by requiem
This has been making the rounds on Wall Street:
Breaking News: Lehman To Be Acquired by Tooth Fairy
The market responded with enthusiasm to reports that the Tooth Fairy has agreed to acquire Lehman. The purchase price has not yet been determined and will be set by Dick Fuld wishing upon a star, clicking his heels three times, and being transported back to that magical place where Lehman still sells for over $70 per share.
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2008.07.07
Posted in Personal, Econ at 12:14 by requiem
This is another station-keeping post. Energy prices (oil, coal, etc.) have been going parabolic, a phenomenon that almost always ends in a relatively quick collapse. Will oil go back down to 70, or stay over 100? That I don’t know, but demand destruction is the tried and true fix for high prices, and it’s something a recession is great at doing. The peak might have been a few trading days ago, or it might be in the next few weeks. Either way, like the bear market rally we saw, I think this run is due to end. As to the broader market, remember, bear market rules still apply: Don’t buy the dips, do sell the rallies, and if you can’t trade, sit things out in cash.
I recently bought a Nikon D40 (digital SLR). I have a few decent lenses for it, Nikkor 50mm f/1.8 and 18-200mm f/3.5-5.6. I’d also like to get the Tokina 11-16mm f/2.8 for an ultrawide, but I may hold off a bit. Thanks to the Safari Bookshelf I’ve worked my way through Scott Kelby’s The Digital Photography Book (both volumes) and Joe McNally’s The Moment It Clicks. Ken Rockwell’s web site is also very helpful, as were a few articles on photo.net. How do I know I’ve been reading too much? When I glance at the screen saver on the iMac next to me and instead of my brain going “ooh.. what a pretty picture of water droplets on an autumn leaf”, it thinks “oh, the photographer was using a ring flash”.
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2008.05.19
Posted in Personal, Econ at 12:51 by requiem
A quick lunchtime update, since I have a few posts marinating in draft form. My reading list has ballooned; I’m trying to finish The Omnivore’s Dilemma whilst simultaneously working my way through the last of the Honor Harrington books and starting on Robert Greene’s works.
This rally in the markets has been running for almost two months now; I’ve been staying mostly clear of it, but did dip my toes in at a few points before being stopped out. For the S&P 500, I’m looking for it to spend a little time above the 200 MA and for the RSI to match the highs of last October. It feels almost played out, and if that’s the case, the turn should be in the next few weeks.
The fundamentals continue to deteriorate. It was only last week I saw a Financial Times article suggesting the ECB is starting to suspect banks are using them as a dumping ground for toxic securities. The Fed (in concert with the ECB and the Swiss) is now accepting auto loans and credit card debt as collateral. This buys only three or four more months before the Fed runs out of balance sheet.
My Mandarin classes finished up earlier this month, and that frees up some time for reading and other projects. I haven’t seen much in the way of summer classes (in any field) that appealed to me, so I’ll likely find something to study on my own. Travel also remains likely.
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2008.02.22
Posted in Econ at 00:56 by requiem
Markets run on trust. Trust that contracts will be honored, trust that a company’s financials are reasonably accurate, and trust that the government will maintain accountability and a level playing field. Take that trust away and the lifeblood of the economy will drain out in an instant. I will not invest in such a climate; I’ll take cold hard cash and short the market all the way down.
It didn’t have to be this way.
Quite frankly, if more investors and politicians had listened to Gary Shilling’s pronouncements on the housing industry, Nouriel Roubini’s dire analysis of the world’s credit system, Pershing Square’s William Ackman’s comprehensive admonition of the monoline insurers or, even back in time, Kynikos’ Jim Chanos’ keen analysis of the shady accounting at Enron, billions of dollars in losses could have been avoided, and public policy solutions to systemic problems would have been encouraged before it was too late.
- Doug Kass, 2008.02.15
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2008.01.27
Posted in Econ at 23:37 by requiem
I have been asked why I disdain the traditional media. My answer is usually some variation on themes of inaccuracy and obsolescence. A perfect example of the latter is today’s coverage by 60 Minutes of the ongoing housing troubles; an exposé they could have done six months ago about a crisis obvious a few years ago. Fret not, I cite this coverage for an altogether different reason.
60 Minutes is an investigative news-zine that will be 40 years old this autumn. Their audience is the salt of the earth, the older generations that vote regularly and know what a savings bond is. In House of Cards, the ideas presented are thus:
- People otherwise able to pay their mortgages will not, simply because their house is not what it was. Defaulting as a business tactic was heretofore limited to the likes of businesses and Donald Trump, now it’s for everyone.
- The scale of the problem; the proper unit to use is “trillion with a t” and the presence of now worthless securities lurking in banks and pension funds.
As a commenter on Calculated Risk put it,
“60 Minutes” is at best middle-of-the-road investigative reporting. It’s not Uncle Walter. But it does have a certain credibility with Middle America. If “60 Minutes” carries the story — well, could be something of an Uncle Walter moment. A tipping point, at least in the mindset of a good portion of Middle America that wasn’t paying attention.
- Bob Dobbs, on Calculated Risk
(And if you don’t know who Uncle Walter is, ask your parents!)
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2008.01.04
Posted in Econ at 23:54 by requiem
In the past few days the indices have completed multiple bearish patterns and broken through significant levels of support. The ISM and jobs figures were poor. The commercials are now net short. These are not surprising new developments, but rather part of a long-awaited convergence.
… If you’re long equities, and unhedged, you’re likely to get an ocular penetration experience not seen since 2000.
- Karl Denninger, 2008-01-04
The party is about to begin, and oh yes, did I mention it’s going to be spectacular?
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2007.12.06
Posted in Style, Econ at 12:16 by requiem
I’ve been very impressed with what Portfolio has done with visuals. (Someone over there has been reading Tufte. ) Last night I ran across a rather pretty demonstration of how a CDO works.
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2007.11.30
Posted in Econ, Politics at 21:49 by requiem
It’s a petition. Like attending a protest, every so often it’s appropriate to make a statement. I say that even though I’ve told the lightbulb[0] joke and only attended one protest “in earnest”. We stand on the precipice of what is likely the greatest financial crisis in generations. The multi-billion dollar losses you may have heard about on the news? That’s the sound of cracks forming. The actual collapse will be truly spectacular.
You can find it at http://financialpetition.org. It calls on Congress to restore responsible lending practices, ban off-balance-sheet vehicles, restore the recently-gutted remnants of Depression-era banking regulation, and most importantly, to allow failure. Realize that at this point, scary as it may be, you are the adult in the room. So step up.
[0] “How many protesters does it take to change a lightbulb?”
“None, protesters can’t change anything.”
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2007.11.09
Posted in Econ at 23:16 by requiem
Wow… This past week has been full of exciting news. Some smart cookie has finally realized that maybe it would be worth revisiting the credit ratings of bond insurers. (At this point, I sincerely hope that no-one reading this is foolish enough to have given any credence to those ratings.) M-LEC, a sort of financial Superfund site, appears dead at birth, and FASB’s rule 157 will soon take effect to force more mark-to-market of dubiously-valued assets. Citigroup, just like Merrill Lynch a few weeks before, tossed its CEO and wrote down ~$11 billion in assets.
While I’d love to rant about the abomination that was M-LEC, I’m going to instead provide a quick introduction to two phrases: “counterparty default” and “acceleration event”. I think we’ll be seeing much more of them in news articles over the coming months.
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