Thursday, October 30, 2008
Only a few more days until the highly anticipated Presidential election. Finally, the campaigning will end and we can start the process of ridding ourselves of the Bush administration.
Here are some interesting links from around the web in regards to the election:
1. McCain-Palin conflict- the McCain campaign has realized the enormous gaffe in her selection, and fighting within the ticket BEFORE the election just isn't a good sign. A new poll indicates that 59% of Americans don't feel she is ready to be V.P.
2. The battle over Florida- Obama has a slight lead
3. Even George Will, one of the most prominent conservative writers in this country, can't hold in his criticisms of McCain-Palin anymore, including McCain's decision-making capability
4. The Economist (my favorite magazine), known for its economic conservatism and support of free markets, officially supports Obama over McCain. They cite McCain's poor choice of Sarah Palin, his indecision regarding the economic crisis, and his temperament as negatives, and cite Obama's ability to learn and excellent cadre of advisers, his style and discipline as reasons to support him.
5. Racism by attendees at Palin events continues.
6. Pretty cool map of newspaper endorsements.
7. Francis Fukuyama, from the AMERICAN CONSERVATIVE, endorses Obama.
8. A poll taken in Texas shows that 20% of people still think Obama is a Muslim.
9. Tim Gunn rates the fashion of the candidates.
10. Sarkozy voices harsh criticism for Obama's stance towards Iran. That guy has got chutzpah.
11. A dynamic view of the Electoral College over time. Very cool. Just makes you wish we had another system besides all vs. none for each state (why not use the method for most of the primaries- split the delegate?) and also makes you really wish we had other strong parties besides Republicans and Democrats.
Wednesday, October 29, 2008
2. Give me a break...Joe the Plumber country musician?
3. Isaac Mizrahi, fashion guru, says the greatest fashion mistake is "bad hair". Has he looked in the mirror?
4. Speaking of fashion, maybe this is why I like the Christmas season so much!
5. These pirates off the coast of Somalia are out of control. 5 attacks in one day! Reminds me of my favorite pirate joke.
6. The numbers aren't adding up. How is Obama going to pay for everything? Doesn't anyone care about our deficit anymore?
7. Foreign accent syndrome. This wasn't in Harrison's. Incredible...watch the video. I would love a British accent or a Spanish accent like Javier Bardem's.
8. David Brooks with a great piece on perception vs. reality.
9. At 11:15 PM, Bill Clinton and Obama are campaigning together at a rally in Florida. I cannot even imagine how awkward it must be for Bill. All those months of battling him and now he has to go out on the stage and pledge his full support. Granted, it has to be done, but I'm just saying it must not be that easy to swallow the pride and do this.
10. Oh, how sad, Kim Jong Il is not doing well. I hope he recovers...he should be charged and tried for crimes against humanity.
Saturday, October 25, 2008
Sorry I've been away the past few days...last few days were jam-packed with way too many interviews and a talk I had to give, so was barely aware of the news or the stock market.
Things I missed that were funny:
1. Will Farrell reprising his role as G W Bush on the Thursday edition of SNL
2. Jon Stewart "Gaffe-in" with funny flubs by our favorite politicians on the left and the right.
1. The Fey-Palin effect on real voters: small, but negative
2. Alan Greenspan takes partial blame for the financial crisis, by admitted his mistake in allowing completely unregulated free markets in the banking system. He thought the financial institutions would have looked after the best interests of their shareholders. Listen, capitalism is great, because it allows hard-working people to prosper. However, there is a point of excess, and when billions of dollars are involved, human nature, in general, turns people into greedy and conniving individuals. It's time to watch "Wall Street" again ("Greed is good") and also "American Psycho". Also, read this parable:
Once upon a time in a village, a man appeared and announced to the
villagers that he would buy monkeys for $10 each.
The villagers seeing that there were many monkeys around, went out to
the forest, and started catching them.
The man bought thousands at $10 and as supply started to diminish, the
villagers stopped their effort. He further announced that he would
now buy at $20.
This renewed the efforts of the villagers and they started catching
Soon the supply diminished even further and people started going back
to their farms.
The offer increased to $25 each and the supply of monkeys became so
little that it was an effort to even see a monkey, let alone catch it!
The man now announced that he would buy monkeys at $50!
However, since he had to go to the city on some business, his
assistant would now buy on his behalf.
In the absence of the man, the assistant told the villagers. 'Look at
all these monkeys in the big cage that the man has collected. I will
sell them to you at $35 and when the man returns from the city, you
can sell them to him for $50 each.'
The villagers rounded up with all their savings and bought all the
Then they never saw the man nor his assistant ever again, only monkeys
Now you have a better understanding of how the stock market works.
3. The rating agencies are just as guilty in this whole financial mess. Read this story...there were memos that they would rate any deal, even if it was "structured by cows". Greed, again.
4. Farts can reduce blood pressure!! Awesome!
5. This one is for Don....a country that has socialist medicine came up with a huge medical breakthrough!!! How can it be?? (Read the story: potential cure for MS).
6. This is the most fair and objective examination I have seen regarding who is responsible for the current economic crisis. Scroll to the bottom to see the no fewer than 11 parties (including home owners themselves) who collectively share responsibility for this mess.
The stock market:
I'll keep this short. Extreme volatility in the markets again. Dow was only down 300 pts on Friday, but futures were "limit down". Vix closed at 79!!! If you understand this indicator, you realize that this is completely outrageous. Bottom line is no matter what the indicators are saying about over-sold conditions (new highs new lows, stocks below 40 day MAs, etc), it doesn't matter this time. In my opinion, there are now 2 major forces in play. First, the triangle I described last week on the 60 min chart has broken to the downside with a classic backtest and fall away.
This is clearly apparent on the daily chart as well.
Finally, we are destined to test the 2003 bear market lows. I would not be surprised to see the Dow down 1000 points (intraday) on Monday or Tuesday. Then, and only then can we start to form a good base and start to trade to the upside more rationally.
Thursday, October 23, 2008
Wednesday, October 22, 2008
1. Over the past 30 years, U.S. health care expenditures have grown 2.8% per annum faster, on average, than the rest of the economy. If this differential continues for another 30 years, health care expenditures will absorb 30% of the gross domestic product— a proportion that exceeds that of current government spending for all purposes combined.
He lists great reasons why this is occurring, but the thing I would like to point out is that the "free markets" have not contained health care costs, as so promised by Newt Gingrinch and the AMA in 1994, as they squashed "Hillary Care".
2. Advances in medicine are the main reason why health care spending has grown 2.8% per annum faster than the rest of the economy.
I agree with the author's points (not listed here- see article). To expand further, we need to incorporate COST-EFFECTIVENESS into the CMS/Medicare approved drugs, procedures, etc. All a company needs to get approval from the FDA and for reimbursement from CMS is to demonstrate efficacy (often only compared to placebo). New treatments should be compared to standard of care and be evaluated by cost-effectiveness as well.
3. Universal coverage requires subsidies for the poor and those too sick to afford insurance at an actuarially appropriate premium; it also requires compulsion for those who don't want to help pay for the subsidies or who want a "free ride," expecting that they will get care if they need it.
This point is so critical. People think that someone else is paying for their health insurance in the U.S., and that health care taxes as they have in other countries would be crazy. Money quote:
When a firm pays $3,000 to $7,000 per worker per year for health care, it can get that money in only three ways: reducing potential wage increases, increasing prices for what the firm sells (which means lower real wages for workers everywhere), or lowering profits. During the past three decades, health insurance premiums have increased about 300% (after adjustment for general inflation). Where did the money come from for higher premiums? Out of wage increases that would normally accompany growth in productivity. During these three decades, the average worker has not received any increase in inflation-adjusted wages. Corporate profits, by contrast, have increased by 232% before taxes (284% after taxes), adjusted for inflation.
The most efficient, equitable way to achieve universal coverage is to make basic health insurance available to everyone regardless of income, employment status, family circumstances, or other characteristics and to pay for it with a tax roughly proportional to income or consumption.
People, stop being fooled! You are paying just as much or more for your non-universal health care as you would if we had universal health care. Think of all of the premiums, co-pays for visits and meds, uncovered costs, and the lack of increase in wages and then you might realize it. Also, health care should not be tied to your employment affiliation! How many people do you know that are working at a job that they dislike, just "for the health care benefits". Get with the program.
1. How can you be optimistic being so far behind in the polls? (he said he's closer in some polls than others and that Bush was behind Kerry by about the same margin in 2004 at this same point in time)
2. What is up with your pick of Palin as VP, after criticism from so many prominent Republicans? (he said she was the most qualified VP candidate in recent history)
3. How can you defend her after her terrible performance in her interviews with Charlie Gibson and Katie Couric? (she did fine in those interviews, was bombarded by "gotcha" questions)
4. How could she not even name a newspaper that she reads? (she reads the news "offline")
5. How can you defend the fact that she hasn't gone on any Sunday morning talk shows, including Meet the Press, generally considered a rite of passage? (his response to this is amazing, i.e., pathetic...listen to the audio)
6. Why do you keep making a case about William Ayers and not Rev. Wright? (I forgot his response, but Imus actually points out an interesting "double standard" by Obama)
7. Why does Gov. Palin keep saying that Obama is hanging out with terrorists? (he said there are some crazy people at his rallies, but only the minority)
8. Do you think race will play a roll in the election (people who said they will vote for Obama won't, i.e., the Bradley Effect)? No, people will vote for who they believe is the best candidate
Monday, October 20, 2008
I agree with Mr. McCain here. It's a states rights issue. BTW, the CT supreme court voted to allow gay marriage last week. I don't feel strongly that gay marriages must exist (although I do strongly support equal rights and civil unions, at the very least), but the argument that gay marriage will ruin the foundation of marriage just doesn't hold water. It doesn't seem that couples with "traditional marriages" in CT are suddenly seeing their marriages collapse because of the new ruling.
Sunday, October 19, 2008
Today on "Meet the Press" (haven't forgotten about you Timmy), Retired General Colin Powell, former Secretary of State for the Bush Administration, endorsed Barack Obama over John McCain for president.
He states his decision has nothing to do with race, and instead sites Obama's style and substance, Obama's "inclusive" rather than narrow-minded policies, McCain's poor choice of Gov. Sarah Palin (as she is "unqualified" to be president), and McCain's potential to place 2 more conservatives judges in the Supreme Court court as major reasons why he is endorsing Obama. He also called Obama a transformational figure and stated that the Republican Party has moved too far to the right.
Of course, he was openly criticized by Rush Limbaugh, who feels his decision is based purely on race. Limbaugh also thinks he is not showing loyalty to Bush and the Republicans, as they are the ones who anointed him a 4-star general.
"'Secretary Powell says his endorsement is not about race,' Limbaugh wrote in an email. 'OK, fine. I am now researching his past endorsements to see if I can find all the inexperienced, very liberal, white candidates he has endorsed. I'll let you know what I come up with.'" "'I was also unaware of his dislike for John Roberts, Clarence Thomas, Samuel Alito, Anthony Kennedy and Antonin Scalia. I guess he also regrets Reagan and Bush making HIM a 4-star and Secretary of State AND appointing his son to head the FCC. Yes, let's hear it for transformational figures.'"
I say good for Colin Powell for making what seems to be a well-informed and non-hasty decision and for doing what he feels is right in his heart, and not what is "right" for his former cronies. The culture of cronyism is a phenomenon that helped turn the Bush administration into a disaster. And for anyone who thinks his decision is based on race, PLEASE watch the video of his explanation on Meet the Press. I found his explanation to be completely reasonable, very well thought out with supporting evidence behind each one of his points, and finally, it was very heart-felt.
Saturday, October 18, 2008
Another wild day on Wall Street yesterday, although this time the swing was only 500 Dow points (the lowest of the week). It seemed like the market was going to take off in the mid-afternoon, only to get stopped cold and abruptly lose 4%.
Why did this happen? A look at the 60 minute chart shows that the downtrend line from the previous highs served as major resistance. The indices are forming huge symmetrical triangles. We should expect the S&P to fall to around 880 to test the lower part of that triangle. Then, the market will either: A) bounce up from there and try to break through the top part of the triangle again, B) bounce up and come back down again, or C) just fall straight through that downtrend line on this new wave down. The break of the triangle to the downside will trigger more massive selling. For conservative investors looking out more than 1-2 days, no major moves should be made until the triangle resolves to the upside or the downside. I can't tell you which way it will break, I can only tell you that when it does, it will cause major movement in the direction of the break. One pessimistic thing from a technical standpoint is that despite the very oversold conditions via a whole host of indicators, we cannot sustain a major rally. In the past 100 years, very oversold condidtions have always led to major snapback rallies. The 14% rally we had this past Monday may have been all the bulls can truly muster up. The other bearish problem is that these types of triangle resolve to one direction or the other about 2/3rds through the triangle, so according to my drawing on the chart above, we may have 2 chances at breaking to the downside but only 1 more chance (if we bounce up again) to break through the topside. These patterns do not keep going until the points of the triangle meet.
I mentioned that I had gone "long" the S&P and NASDAQ via the SSO and QLD. As I indicated in the comments section of "Double Bottom" yesterday, I got out of these positions late in the afternoon, as a failed rally on a Friday afternoon (and the downtrend line serving as fierce resistance), did not make me keen on holding long positions going into Monday morning. I'm sure that type of mentality among traders contributed to the decline in the last 90 min yesterday...who trusts this market? Bad news of failing banks, etc. tends to come out over the weekend and Monday's market could be ugly (again).
For all of you think that this technical analysis is baloney, let me point you to an interesting article today that utilizes fundamental analysis. In short, based on valuation, stocks are still not "undervalued". Based on data from previous recessions and stock market lows, valuations might need to drop even further, and estimates by these experts put the S&P in a range of 400-600 to get into the appropriate range (yikes). These facts are confirmed by the wise folks at Comstock Partners who also suggest stocks are far too overvalued (see text posted in the comments section for this entry...it's a bit long and didn't want to clutter the board).
Also, dont' forget....Sarah Palin will be on SNL tonight!
Thursday, October 16, 2008
I did a little searching around the "internets" to see what others were saying about the debate.
Finally, fact checks:
1. MSNBC: Lots of stretching of the truth by both candidates
2. Factcheck.org: So many untruths by both candidates. It makes me sick. It seems almost everything each candidate said was untrue in some way. Yes, including the ACORN scandal.
I usually don't like to post any personal stories, but you will have to allow me this one exception. My brother and sister-in-law, Sara, had a baby girl yesterday, Isabella Josephine. She weighs 7 lbs 3 oz, and is 19 inches long.
I have a few good reasons to share this personal story:
1. Most of you know my brother, Dean
2. She's really, really, really cute!
3. I'm a new uncle
4. There is an educational piece: Dean finds that tapping the baby's bottom with his index finger while cradling her is very soothing (to both her and Dean)
Congratulations Dean and Sara (and to my parents who are grandparents for the 1st time)!!
Wednesday, October 15, 2008
The first question regarding the economy, McCain actually discussed a good populist plan by going in and helping out homeowners, and then I think won the battle regarding taxes. I have said it before and said it again, taxes CANNOT be raised in times of recession, even on really rich people. It will cause the economy to completely stall. The job losses will be staggering.
Regarding the deficit and budget, Obama gave no specific answers about what he would cut, only saying he would "use a scalpel". McCain suggests a spending freeze, and names several budget items that he would cut, including the ethanol subsidies (I agree...ethanol subsidies are foolish).
Regarding the comments by Congressman Lewis, McCain puts Obama back on his heels. McCain points out that he has repudiated some despicable comments made by people within his own party. McCain then brings up Ayers, and Obama tries to defend. He said he will not be a part of his cabinet. Then trying to defend ACORN, a brief defense, but McCain hammers back with allegations about Ayers and ACORN. Wow. These are jarring blows. Obama has not done an adequate job at separating himself from these two situations, and I agree that more investigations are necessary.
Energy policy: I will repeat, Bob Schieffer is asking the best questions. Makes Ifill and Brokaw look like puppet clowns. Bob wants to know how much we can reduce dependency on foreign oil. Earlier McCains points out how a full-force movement for energy independence will create millions of domestic jobs (he is right). McCain says we can achieve energy independence in 7-8 years. Obama says in 10 years. Obama reiterates that it is one of the most important issues (which I agree with). Obama even mentions offshore drilling as a possibility, but points out that domestic production will never equal our consumption. McCain wants to start offshore drilling immediately. Obama wants to limit free trade, McCain is strongly for it, and points out how the US has to pay to export goods to Colombia. Obama points out some the need to examine human rights along with the free trade policies. McCain has another nice zinger about Obama not willing to have free trade with Colombia (supporter of the U.S), but is willing to sit down with Hugo Chavez (non-supporter of the U.S).
Health care: Obama mentions people being able to buy in the same type of health plan as congress and mentions negotiating with pharmaceutical companies. McCain mentions a fitness initiative and the $5000 health-care tax credit. McCain asks what the fine is for not getting involved in his health insurance mandate. Obama replies, "Absolutely zero". He attacks McCains health care tax credit, and he is right that McCain will be taxing health care benefits (bad move Charlie), and that most health care policies cost more than $5000 (about $12,000). Insurance companies will cherry pick and exclude patients from coverage (true). McCain defends the status quo of the current health care system with multiple insurance systems. News flash...it hasn't worked. Premiums have skyrocketed.
Sorry was busy during the past half hour, but overall, I think I have to give this one to McCain. Obama won the first two debates and McCain won this final one. Probably won't make a difference as Obama has a 14 point lead.
"In Delaware, the largest growth in population is Indian-Americans moving
from India. You cannot go to a 7-Eleven or a Dunkin' Donuts unless you have a
slight Indian accent. I'm not joking.”
Biden has had a long history of "foot-in-mouth" gaffes over the years, including the remarks about Obama being a "clean, articulate" black man, and recently asked a paralyzed person to 'stand up' for applause at a campaign rally.
These remarks were stereotypical, but I do not think the intent behind them was derogitory. He was trying to point out how infiltrated Indians are in Delaware. And, he was not trying to say that ALL Indians work at 7-11, rather the converse, that most 7-11s have Indians working at them (which, in fact, is largely true). It is a clear fact that, as a whole, Indians are bright, hard-working, successful people. Biden is not that dumb, he just says dumb things. Of note, the Indian-American Republican council has forgiven him.
P.S. Have you noticed that many of the bottles have gone to these hourglass-shaped designs? The claim is that it reduces the amount of plastic used to make the bottle by about 30%. Nice move by the companies (financially and for the environment).
Tuesday, October 14, 2008
Good week for:
1. Scholar athletes, after a report from the NCAA revealed that the graduation rate for these student-athletes increased to 79%, an all-time high. However, only 60% of athletes in men's baseball, football and basketball are only graduating. Overall, this is encouraging, but there still needs to be a better metric. Are more graduating because of more help (i.e., getting answers to test and super easy courses)? Or, are they truly achieving more academic success? Perhaps they can examine how many progress successfully into the work-force or go on to graduate school.
2. Googlers, as researchers at UCLA found that searching the internet improves cognitive function over time. Now just don't search the internet while drinking alcohol, as this will offset the effect, as researchers at Boston University found that alcohol results in brain shrinkage.
3. AIG executives, after they partied in a luxury resort one week after the US government gave them an $85 billion bailout. This is disgusting and these people should be prosecuted to the fullest extent of the law.
Bad week for:
1. Government oversight, when a former government auditor revealed that an agency within the Department of the Interior that was supposed to help regulate the oil industry, was routinely engage in unethical practices, including bribes and sexual favors. This report is nauseating, but is blatant evidence for how the oil industry has congress and the government wrapped around their finger.
2. Adam "Pacman" Jones, who got into trouble, yet again, after he brawled with one of his bodyguards in a hotel last weekend. He was suspended for 4 games by the commissioner. This man is out of control, and he should be banned from the NFL. He has repeatedly demonstrated that he just cannot behave. A man is paralyzed because of him. He is a supreme troublemaker. Playing in the NFL is not a right, it's a privilege.
3. Not having a prenuptial agreement, after a Cambodian man literally sawed off half of his house, leaving half to his wife (see above image).
4. The "Father of Conservatism", after his son, Christopher Buckley, a writer for the National Review, officially endorsed Barack Obama over John McCain. He had many criticisms of McCain, including his changing stances on issues, his anger, negative attacks, and also his choice of VP candidate. He also praised the demeanor and intellect of Obama. That is impressive honesty. You've got to admire someone in that type of spotlight who has the courage to say those types of things rather than blindly following one party or the other.
Monday, October 13, 2008
This DOES NOT mean it is the start of a brand new bull market. The market is only back to the point it was last Wednesday. But it certainly is promising. The healthiest thing for an intermediate term rally would actually be consolidation (a pull-back) for a couple of days. Today involved panic buying (people not wanting to miss the huge rally) just as last week was manifested by panic selling. The truth will come on a pull back. Will the sellers re-emerge? Will the bulls step up and defend the recent low? Will we put in a HIGHER low, and big the classic "stair-step" upwards? Then we will see. For now, let's call it a great day, and take it one day at a time. While the price action was bullish, this rally was way overdue. On the bearish-side, extreme governmental invention was needed to stave off disaster. The fact is, we still may be facing a pretty hard recession, and company earnings will likely be less than stellar for some time to come.
Sunday, October 12, 2008
Happy trading and good luck!
The main reason the owner of the San Diego restaurant eliminated tips was because the staff was squabbling over money, including waiters angling for better shifts and tables, and the kitchen workers didn’t feel they were getting a fair share of the profits. One of waitress interviewed for the piece claims she can concentrate on the job better now because she's not focused on kissing up for good tips. The counter-argument, of course, is that by leaving the size of the tip up to the discretion of the customer, it places incentive on the waitstaff to provide the best service possible. However, a study found that there is only a 2% correlation between the quality of service and quality of tip, thus overall, the incentives may be diminished.It would have been interesting to know if the quality of service improved or declined after elimination of the tipping rules at that restaurant (or at others that have done the same thing).
How do you all feel? Do you feel that tipping gives you leverage in obtaining better service? Do you change the size of tip based on quality of service or only reserve that for only major offensive violations in quality? A lot of restaurants do have gratuity included for parties > 6...is quality of service diminished for bigger parties? In Europe, where tipping is much smaller, how does the quality of service compare on a systematic basis? (in my experience quality in Europe has been good). Do you give bigger tips at restaurants where the waitstaff are forced to memorize all of the specials of the day and recite them without notes vs. with notes? (although impressive, I don't think I have ever decreased my tip size for the restaurants in which they allowed the waitstaff to use notes).
There is an interesting quiz on insects on the Mythbusters page on Discovery.com.
What a wild day for the stock market on Friday. The Dow was down 600 pts in the first half hour and broke below 8000. This was followed by a massive rally, all the way to the area of the closing of the previous day's close. However, the bears stepped in again and produced a slow and steady decline again throughout the day back to below 8000. It would have been very ominous for Monday if we fell below that opening low. Then, around 3 PM, like like the Phoenix rising out of the ashes, the market started a 1000 point rally in a matter of less than an hour. At 3:45 the rally fizzled, and prices fell back 300 points, producing a negative close (-128 points). If one only saw the closing prices, one would conclude that it was a quiet day for the market. WRONG! An analogy for football fans out there, it was the equivalent of one of Barry Sanders famous criss-crossing spinning backcutting runs that netted a 1 yard loss. Check out the intraday chart below to see this volatility.
Thus, the major question is whether we saw the "bottom" on Friday. Some have remarked that it is very rare to make a "bottom" in the market on a Friday. However, data from the last 68 intermediate-term lows (at least 3 month low), shows that although Mondays and Tuesdays are the most likely days for the low to occur, Friday surprisingly, is the not the least common day, but instead the 3rd most common day to create an intermediate term low.
Day of Week # %
Monday 16 24%
Tuesday 20 29%
Wednesday 11 16%
Thursday 8 12%
Friday 13 19%
Check out this article from Jason Geopart at SentimentTrader.com. He provides data and accompanying charts from all previous market crashes. As you can see from history, the "low" after the crash was always challenged again. Things are not going to go straight up from here. "V" bottoms are very very rare. There is often a period of backing and filling.
Furthermore, I did some 'word on the street' investigation this weekend at the mall. I asked almost everyone I saw about the volume of customers and actual spending. Nearly every employee/worker noted a decrease in both volume of shoppers and actual spending, including those at the car wash, Bloomingdales, the men's shoes department at Nordstrom, and college students trying to raise money for kids with cancer. The only place where things were mobbed and the employees reported no decline in shopping and spending over the past several months was the women's shoe department.
So, in summary, we may have a tradable low in the market. Conditions are extremely ripe for a good relief rally given extremely oversold conditions (only 1% of stocks are above 40 day moving averag). But, let price action in the early week confirm that we saw the low on Friday. Is it going to be a final low in the bear market? Probably not. Look at this longer term chart of the Dow. It would be very unlikely to just abruptly stop the decline here and not retest the lows at around 7500 from the 2001-2003 bear market.
And, caution from an excellent technical analyst, Brian Shannon, who gives some historical bear market perspective on his blog alphatrends.net:
Dow Jones October 1929: Over a 23 day period, the Dow lost 49% of its value,
but that was just the start of the bear market during which the Dow would
eventually lose 89% of its value (386.10 to 40.56). How many people do you think
called the October 1929 low of 195 "the bottom" only to get decimated by the
continued weakness over the next 3 years? We remain in a bear market and ALL
rallies should be treated as guilty until proven innocent, meaning you need to
maintain a super strong defense. Do not be too quick to call Friday's low "the
bottom", there are serious flaws in our economic system and a lot of closets
with ugly contents are still being opened.
If you're quick and have some guts, it may be profitable to risk some capital now on the long-side, but don't go all in just yet.
Thursday, October 9, 2008
The stock market continues its extremely rapid descent. The markets are not behaving like they do, even in "regular bear markets". Typically, there are viscous snap-back rallies even in the midst of a bear market. The price declines are simply remarkable and historic. Look at the chart. I said the other night that the Dow will hit 8500 soon, but I didn't expect it would be this week. People are simply liquidating their 401Ks, and institutional investors are just not stepping in. No one wants to hold positions overnight, as there is just too much bad news that keeps cropping out overnight.
I'm extremely concerned that the market decline will lead to an even deeper recession due to decreased spending. Simply, millions of people who have been piling money into 401Ks, IRA, and standard investment accounts are going to cut their discretionary spending as they have seen their wealth shrink. I know it will cut back my spending...fewer new clothes, big screen TVs, DVDs, expensive dinners. Consumer spending accounts for 70% of GDP. Car sales are plummeting. Did you see that GM's stock is at a 58-year low? So much for buy and hold strategies, right?
People keep calling me telling me to buy stocks now because they are so cheap. Well, you could have said they were cheap 2 weeks ago, and now their 20-30% lower. Let the market show you the bottom. Feel comfortable missing the first 5% rally. It's much better than losing 10% in one day. Please.
Now, to cheer up, go to NBC.com to watch the videos from the special edition of Thursday night SNL if you haven't seen it. Go play with your kids, if you have children. Tell someone you love them. Watch this video of Dana Carvey on the Tonight Show last night doing some great impressions. He's still got the skills.
Wednesday, October 8, 2008
Otherwise, it's all doom and gloom. The economy is tanking, a coordinator world-wide rate cut fails to stimulate the plunging stock market, there's less than a month until we elect a new President. It's certainly not an enviable position (i.e., becoming POTUS). Whoever it is is going to have to deal with this economy, the credit crisis, high unemployment, 2 wars, global warming, a huge federal debt. One candidate has virtually no executive experience, and, while the other candidate may be more experienced, he is old, grumpy, uninspired, and has the equivalent of Miss Teen South Carolina as his running mate (and possible replacement President if he should fall ill).
Tuesday, October 7, 2008
I don't know. It seems like everything is falling apart at the seams in this country, but I don't know if either of them instilled confidence in the American people that they can turn this situation around. McCain has the albatross of being linked with Bush, and this disaster is happening on the Bush watch. Obama has the albatross of voting on the liberal side, which may or may not be good for some parts of the economy.
In the end, both held their own, and thus, although a solid job for McCain, Obama comes out the winner, as he has the lead in the national polls. McCain needed a home run, but I don't think he got one. Good closing comments for both. I will look at the post-debate transcripts to see if there is something big that I missed. Also, post your comments.
This is a philosophical issue between right and left, but Obama is definitely going to win points on considering health care a right, rather than a privilege. McCain said it is a responsibility. Personally, I think it is unjust that health care in this country is tied to your employment status and your specific employer. Just doesn't work efficiently and doesn't lead to good public health.
McCain: Not sure how he is defining "victory" in Iraq. What exactly does that mean?
McCain: Accuses Obama of voting for a fat bill with tons of subsidies for oil companies. Shame on you, Senator (Obama).
Obama: Good points on energy plan. McCain voted against alternative energy 23 times? Not a good move, Senator (McCain).
McCain: Tax credits (e.g., health care credits) won't do much for people in this horrible economy (lower wages, lack of jobs).
McCain: Has a nice line that Obama said he would forgo tax increases if economy was bad. McCain says, "I've got some news for you Senator, the news is bad." Nice zinger (and fundamentally correct).
Obama: I disagree with him. We cannot raise corporate taxes at this time. Curbs on CEO packages, yes, but if corporate taxes are raised as we head INTO a HUGE recession, it will mean leaner balance sheets and thus lower wages for workers and fewer jobs. Taxing companies may actually paradoxically decrease tax revenues to the government. Consumer spending accounts for 70% of GDP. We will not get out of debt by raising corporate taxes (or raising taxes on people making more than $250,000). The time to raise taxes has now passed. We need our economy to be thriving, and corporate tax increases will be like a firehose dousing out a fading campfire.
Monday, October 6, 2008
The market will still have more downside to come, and the Dow will probably hit around 8,500, however, this price retracement will likely occur after we experience a short-term rally. Why am I suddenly bullish? First, again, it is only on a short-term basis (on the order of 4-12 weeks). Second, we have hit extremes on mutiple technical and sentiment indicators which are all indicating that we are about to bounce. For example, the VIX (volatility index) hit an all-time high today (56), new 52-week lows his an all-time high, and the % of stocks above their respective 40-day moving averages is only 4%. Stochastics are showing over-sold conditions, and the markets printed a "hammer" candlestick today, which is often a good indicator of a reversal in trend.
Sunday, October 5, 2008
(Exhibit A was the government's own study that indicated that the impact on the price of oil would be negligible and that it would take 10 years for the oil to come on-line).
Let's follow Boone Pickens' plan for alternative energy.
This one of my favorite commericals for wind energy.
First, Tina Fey continued her string of remarkable impressions of Gov. Palin in a spoof of her debate showdown with Joe Biden. She has her down perfectly.
Second, a funny yet scathing look at our leaders and the handling of the economy and the bailout package. Not only are the impressions amazing (particularly the one of Barney Frank), but the portrayal of the stereotypical American citizens is dead on.
Saturday, October 4, 2008
Basically, not only has Barney Frank been deceitful, but so have many other members of congress and many execs at the financial companies. Policies enacted several years ago that allowed lending and awarding of mortgages to people that simply didn't deserve them have contributed significantly to this financial crisis. The "bailout package" that was just passed on Friday is not going to work. It's not going to stop the recession, it's not going to bring jobs back, it's not going to improve the plunging stock market. It's laden with good pork (temporary fix of AMT, tax subsidies for alternative energy) and bad pork (tax exemption for wooden areas, wool research, auto racing tracks, rum from Puerto Rico and Virgin Islands). This package is going to increase our debt and tax burden for decades to come. The country is headed for hard times ahead.
Thursday, October 2, 2008
Post-debate fact check.
10:32 PM. Palin- Will fight for America, middle-class, proud to be an American, need freedoms. Biden- most important election, last 8 years have been poor, need change in economic and foreign policy, can accomplish anything if work hard.
10:28 PM. Closing statements coming.
10:23 PM. Biden calls out "the Maverick". He points out how his positions have mimicked Bush's all along. Excellent rebuttal.
10:22 PM. She calls McCain the Maverick again!! And again a few sentences later! In reality, McCain has not been much a 'maverick' over the past several years. He has become quite predictable and partisan.
10:20 PM. Both trying to connect with American people, mentioning sitting around kitchen table.
10:13 PM. Another wink. She must have watched the Town Hall Debate Bush v. Kerry in 2004- Bush was winking at the whole crowd.
10:11 PM. "Say it ain't so Joe". She was waiting all night to use that!
10:08 PM. Palin mentions "maverick" again. That's enough, please.
10:05 PM. Palin mentions divestment of Alaskan holdings in Darfur. She avoids whether we should intervene in some manner.
10:03 PM. Palin calling out Biden for voting for the war before voting against it.
10:01 PM. 1 hour in, and I have to admit, Palin has certainly exceeded the expectations that I, and many, had going into this. The "Hustler"?
10 PM. Biden says General in Afghanistan says surge will not work in that country, right after Palin suggests this as a strategy difference.
9:55 PM. Biden calling out McCain/Palin...how will policies be different from George W. Bush....
9:54 PM. Biden recounting the mistakes of the current administration regarding policies and elections in the Middle East. Very powerful (and true).
9:48 PM. Palin with somewhat cogent arguments re: Iran.
9:46 PM. Biden making great points about where the heart of terrorism is located (not Iraq).
9:42 PM. Touche. Biden comes back with good counterpoints (re: timeline, etc).
9:41 PM. Palin making a nice point by pointing out the fact that Biden called out Obama about his votes on funding for the troops.
9:39 PM. Here comes foreign policy questions.
9:38 PM. Biden's right on with rights for same-sex couples. Palin has a pretty good answer as well. Points for both.
9:35 PM. Good for Biden going after the stupid "drill, drill, drill" mantra. Oh, gosh, then she comes back and corrects him on the mantra ("drill, baby, drill"). I'm going to puke.
9:33 PM. Circular arguments on climate change. If cyclical and not man-made, then nothing we can do. How many times is she going to say "energy independence"? Wow, she just mentioned conservation. I have to give her props for that. It's about time a politician mentions this as an option. Biden's arguments on global warming much more direct and objective.
9:25 PM. We are 25 minutes in, and Palin is holding up. Again, the expectations were so low, so it's not saying much. She is trying to pour on the charm with the repeated winks, big smile, and cute little words. She's been practicing a great deal....she's sticking to the script.
Folks, I'm back. I can't take it anymore, there is just too much to say. Wall Street is crumbling, banks are failing, congress is scurrying around to pass a "bailout package", which will only be a temporary band-aide on the overall crisis, and, oh, something else is going on.....Sarah Palin is running for Vice President!!
I just cannot believe what my eyes have seen, and more importantly, what my ears have heard. I hope you have been following her interviews with Katie Couric. What is she talking about? Her answers are incomprehensible and seem to lack the knowledge needed by someone running for the 2nd highest office in the country!
Tonight is the vice-presidential debate. From the buzz on the streets, it is the most anticipated debate of all-time. Biden should be able to clean her clock, unless he commits his achilles heel of verbal diarrhea necessitating a "foot in mouth moment" (e.g., Obama is so clean and articulate").
In preparation for tonight, please, please, please watch these videos. Why? First, you will get to laugh a little. Second, you may a chance for a good cry (realizing that she has a chance to hold the VP office). Third, you will see the preamble, the set-up for tonight. It is either one big hoax, a giant "hustle" (in the memory of the late and great Paul Newman), and she will do "well" tonight as she has set expectations sooooooo low, or it will be an absolute catastrophe. There is no middle ground with her.
Please watch these videos if you haven't seen them:
1. Her answer on the economy and the bailout
2. Trying to name one other time McCain has supported stricter regulation
3. Trying to name one newspaper she reads (hint: she can't name one!!)
4. Trying to name one other Supreme Court except Roe v. Wade (she names Roe v. Wade again!!!).
5. Palin talking about the Rick Davis case
Wow. She is in WAY OVER HER HEAD. If someone out there can defend her possibly become our VP, please post your comments, because if we thought we had fun for the past 8 years with "Bushisms", the next 4 years will provide an exponential number of "Palinisms".
But, seriously, this is sad, because it shouldn't be a joke, and McCain could legitimately die while in office. I am not trying to be mean, but anyone who looks at her performance objectively has got to admit that she simply is not a strong enough candidate.