Riggin' & Exiting

“'I don’t think it’s a time to make money -- this is a time to rig for survival,' said Charles Stevenson, 64, president of hedge fund Navigator Group Inc. and head of the co-op board at 740 Park Ave. The building, home to Blackstone Group LP Chairman Stephen Schwarzman and CIT Group Inc. Chief Executive Officer John Thain, was among those picketed by protesters yesterday. 'The future is not going to be like a past we knew,' he said. 'There’s no exit from this morass.'"

Source: Bloomberg

Another Steep Sandpile?

This sandpile sure is looking steep to me.  I compiled these on 2/10/11.

How's The Slope Of The Sand Pile?

The SP400 hit an all time record yesterday.  How's that sand pile looking to you?

SP400 (Source: Chartoftheday.com)

A Current Pulse On The Puzzle Pieces

This blogger summarizes the current state in 12 Ominous Signs For World Financial Markets:

#1 Corporate insiders are getting out of the U.S. stock market at an absolutely blinding pace. It is being reported that the ratio of corporate insider selling to corporate insider buying last week was 1,411 to 1, and this week the ratio has soared even higher and is at 2,341 to 1.
#2 Many of the world's wealthiest people are buying absolutely massive quantities of gold right now.
#3 It is being reported that J.P. Morgan is gobbling up the rights to as much physical gold as it possibly can.
#4 The United States Mint has announced that it has run out of 1-ounce, 24-karat American Buffalo gold bullion coins and that it will not be selling any more of them in 2010.
#5 It is becoming increasingly difficult to explain the unusually high option volume that we are witnessing right now.
#6 Some very large investors are making massive bets that the S&P 500 is going to take a serious tumble during the month of October.
#7 On Tuesday, the Bank of Japan shocked world financial markets by cutting interest rates even closer to zero and by setting up a 5 trillion yen quantitative easing fund.
#8 The president of the Federal Reserve Bank of New York and the president of the Federal Reserve Bank of Chicago are both publicly urging the Fed to do much more to stimulate the U.S. economy, including beginning a new round of quantitative easing, even if it means a significant rise in the U.S. inflation rate.
#9 Nobel Prize-winning economist Joseph Stiglitz told reporters on Tuesday that the loose monetary policies of the Federal Reserve and the European Central Bank are throwing the world into "chaos".
#10 At the end of September, federal regulators announced a $30 billion bailout of the U.S. wholesale credit union system.
#11 Bank of America, JPMorgan Chase and GMAC Mortgage have all suspended foreclosures in many U.S. states due to serious concerns about foreclosure procedures. Now, Texas Attorney General Greg Abbott is actually demanding that all mortgage servicing companies in the state of Texas immediately suspend all foreclosures, the selling of foreclosed properties and the eviction of people living in foreclosed properties until they have completed a review of their foreclosure procedures.
#12 Not only that, but Nancy Pelosi and 30 other members of Congress are requesting a federal investigation of the foreclosure practices of U.S. mortgage lenders. Needless to say, this controversy has the potential to turn the entire U.S. mortgage industry into an absolute quagmire.


So are dark days ahead for world financial markets?  Well, yeah, but it is incredibly hard to predict exactly when things are going to fall apart.  The truth is that there are going to be a whole lot more "crashes" and "collapses" in the years ahead.  The important thing, as discussed yesterday, is to keep your eye on the long-term trends.  The U.S. economy is undeniably in decline. The only thing keeping the economy going at this point is a rapidly growing sea of red ink. Debt is literally everywhere. It is what our entire financial system is based on in 2010. In the months and years to come, the major players are going to try very hard to keep all the balls in the air and to continue the massive shell game that is going on, but in the end the whole thing is going to collapse like a house of cards.  Unfortunately, we have been destroying the U.S. economy for decades and there is simply not going to be a happy ending to this story.

The entire post:
http://theeconomiccollapseblog.com/archives/12-ominous-signs-for-world-financial-markets

Bear Market Rally Comparison

A nice historical comparison from ChartoftheDay.com

Battling The Bands Part 2

In my July 14 post, "Battling The Bands", I presented the DJIA annotated with two downward trending bands indicating a future downward trend in prices.  Below is an update.  We've slightly penetrated the upward band.  Are we breaking out or peaking and heading towards the bottom band?  I'm still thinking the latter. Here's an updated chart with conflicting bands.  One points up, the other down. We'll see. The run up to the elections will be full of excitement.

Dow Jones Industrial Average



The Journal Discovers The Swan

"After a decade-long bear market and two years of turmoil that saw the stock market plunge by 57%, investors are betting on still more financial pain in the months ahead.  Bond yields are near record lows. Gold continues to soar. And stocks are whipsawing as traders try to predict the direction of an economy that remains, in the words of Federal Reserve Chairman Ben Bernanke, 'unusually uncertain.' But not every investor is trembling with anxiety over the next financial blowup. Some are embracing the market's volatility—and constructing portfolios to profit from it.  A growing number of money managers and financial firms are rolling out investment products designed to exploit big declines known as 'black swan' events. Most of the products are geared toward institutional investors such as pension funds, endowments and high-net-worth families—but black-swan strategies are trickling down to Main Street as well. The term black swan was popularized in a 2007 best-selling book by author and investor Nassim Nicholas Taleb. It derives from the ancient belief, once widespread in the West, that all swans are white—a notion that was proven false when European explorers discovered black swans in Australia. The gist: Anything is possible. In fact, big surprises are more common than people think. In financial terms, a black swan usually results in drastic moves in the market—events such as the 1990 Iraqi invasion of Kuwait, the Sept. 11, 2001, terrorist attacks and the recent financial crisis. Statisticians call these events 'fat tails' (because they occur on the fringes, or tails, of a bell curve), while professional investors try to manage their 'tail risk.' The basic idea behind Mr. Taleb's black-swan strategy is to keep most of your money ultrasafe, and to bet a small portion—say 10%—on options contracts or other speculative bets whose prices will soar during a market panic."

"'The Black Swan' continues to be a hot 'buzzword' for the unpredictable rogue wave lurking out in the future."Random Roving, May 18, 2009

It Only Takes Two To Contango

"People seem to take for granted that financial values can be created endlessly seemingly out of nowhere and pile up to the moon. Turn the direction around and mention that financial values can disappear into nowhere, and they insist that it is not possible. “The money has to go somewhere…It just moves from stocks to bonds to money funds... For every buyer, there is a seller, so the money just changes hands.” That is true of the money, but it’s not true of the values...For prices of assets to fall, it takes only one seller and one buyer who agree that the former value of an asset was too high. If a million other people own it, then their net worth goes down even though they did nothing. Two investors made it happen by transacting, and the rest of the investors made it happen by choosing not to disagree with their price. Financial values can disappear through a decrease in prices for any type of investment asset, including bonds, stocks and land.  Anyone who watches the stock or commodity markets closely has seen this phenomenon on a small scale many times. Whenever a market “gaps” up or down on an opening, it simply registers a new value on the first trade, which can be conducted by as few as two people. It did not take everyone’s action to make it happen, just most people’s inaction on the other side.  A similar dynamic holds in the creation and destruction of credit. Let’s suppose that a lender starts with a million dollars and the borrower starts with zero. Upon extending the loan, the borrower possesses the million dollars, yet the lender feels that he still owns the million dollars that he lent out. If anyone asks the lender what he is worth, he says, “a million dollars,” and shows the note to prove it. Because of this conviction, there is, in the minds of the debtor and the creditor combined, two million dollars worth of value where before there was only one. When the lender calls in the debt and the borrower pays it, he gets back his million dollars. If the borrower can’t pay it, the value of the note goes to zero. Either way, the extra value disappears."
Vadim Pokhlebkin, Elliott Wave International


Entire article: http://www.elliottwave.com/freeupdates/archives/2010/08/16/Deflation-How-Does-It-Affect-Asset-Values.aspx

Bear Market Rally

"This bear market rally was indeed a huge affair. But still not out of the realms of former bear market rallies, which are mostly forgotten today. A prime example is the rally following the 1929 crash.  Stock prices rose more than 50 percent, and contemporary economists declared the crisis over. But the crash was only the prelude to the devastating bear market that got going after the bear market rally of early 1930."

 Claus Vogt, Weiss Research

Mass Delusion

"It appears that mass delusion has replaced baseball as the national past-time in America. In the space of the last 15 years the American public have fallen for the three whopper delusions:
1.Buy stocks for the long run
2.Homes are always a great investment
3.Globalization will benefit all Americans"
James Quinn, TheBurningPlatform.com

It Sure Does Rhyme

“History Does Not Repeat Itself, But. It Sure Does Rhyme” Mark Twain

If you believe the correlation above, then October could be the beginning of the "next leg down".

A Backlashing

A consistent backlash that I hear is "you've been saying the market is going to crash forever!".  Or "You keep telling me to sell all of my stocks and buy gold".  Actually, since May 2000, I've been saying "shift out of stocks and into commodities with a specific focus on gold and oil".  This chart sums of the last ten years.  Remember, the "boiling frog" doesn't feel the slow increasing heat.

S&P500 vs Gold

The historical chart of the Dow Jones Gold Ratio defines the inflection points very well.

Hook Ya And Cook Ya

"Some of the strongest days in a bear-market bounce occur near the end of the move. It's the 'hook' that keeps investors 'hoping' that a new bull phase is underway. Now, any of these triple-digit days could be a reason for optimism about the market. Together, they could be a reason for investors to jump in or stay in. On the other hand, several rally sessions near the end of a bear market rally can potentially 'hook ya' and then 'cook ya.'"
Source: Elliott Wave International

An Update On The Headfake

On February 28, 2009, I made a post about the "head fake".  The timing of the call for the rally was quite good....three days prior.  The "head fake" could be approaching the end.  In Elliott Wave terms, the "C wave" is upon us.  From now to November should be a rocky road.  The election "hocus pocus" could present some facades and confusion.  Stay focused on the data.

Dow Jones Industrial Average (2006-2010)

The Ten Year Slope

"One of the most interesting things about the coming decline will be its initial slide down the slope of hope. The past ten years have seen an unprecedented sustaining of optimism in the face of deteriorating financial market and monetary conditions and a deteriorating economy. Even though the market is about to begin its greatest decline ever, the era of hope is not quite finished."
Robert Prechter, Elliott Wave International

The Straw And The Last Truck

I've made many references over the past few years to Nassim Taleb and "The Black Swan". I believe that watching this video is the best 12:21 minutes that you can spend today.



The best $11.16 that you can spend today:
http://www.amazon.com/Black-Swan-Improbable-Robustness-Fragility/dp/081297381X/ref=sr_1_1?ie=UTF8&s=books&qid=1276175547&sr=8-1

Thanks JHD for the find!

Flash Crash

Yes, The Pundits have coined a name for the 1000 point market crash two weeks ago, "Flash Crash". Yes it occurred in a "flash" and that's what really concerns me most. We've heard many explanations for it, but no one seems concerned that the market can change so abruptly without any warning.

This geologist is noting the event as a "tremor" with the major quake still upon us. What really is shocking is that stock trades that occurred during the "flash" have been cancelled. Is this really a free open market or is it controlled by "handlers"? You probably know what I think. Stay tuned!

A Technical Look At The Markets

For you market technicians, here's a really nice technical look at the markets from the PFS Group:

http://financialsense.com/Market/wrapup.htm