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Hedge Funds Leave Table, Go to Bar

Thursday, July 8, 2010, 12:12 PM

As we watch the market gyrate wildly back and forth seeking direction, it seems that hedge funds, the hired guns of the Wild West, are finding the action too exciting for their taste.

When hedge funds are backing slowly away from the table, mumbling about needing to go do something somewhere else for awhile, it means that the situation has become unpredictable and potentially dangerous. » Read more

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Blast Off!!

Tuesday, July 6, 2010, 9:34 AM

I hope everybody in the US took advantage of the long weekend to get some R&R.  I certainly did, although it was extremely hot here in the northeast.

Last night, stock futures were sinking into the ooze, but then, right at the appointed hour (3 a.m., which is when these things happen) they took off like a rocket and now we are looking at a blast-off open.

For you veteran observers, I call this "Monday," but here it is happening on a Tuesday.  Why?  Because the US markets were closed yesterday, so we get a Monday on a Tuesday.

» Read more

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My Yahoo! Finance Article: A Sneak Peek

Friday, July 2, 2010, 10:02 AM

In consideration for my talk at Yahoo! headquarters in Sunnyvale, CA a while back, an article I wrote will go on the front page on Tuesday of next week, the peak Web traffic day. 

Like the Financial World article, my goal here is to gently introduce the main concepts of this site to a wider audience.  Again, I am not trying to run all 100 yards on the first play. 

Here's a sneak peek at it for enrolled members: » Read more

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Bad Start for the Third Quarter

Thursday, July 1, 2010, 8:29 AM

Quite often, the start of a quarter is a strong moment for stocks, presumably due to all of the pension and 401k money that flows in as a function of the calendar date.

This one seems to be starting out very weak, which seems just a bit more ominous.  With all the recent weakness, you might think we'd be due for a bounce here.

Not so much.

» Read more

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Evidence For QE II

Wednesday, June 30, 2010, 12:02 PM

No, the "QE II" I am referring to is not an ocean liner, but the next putative round of thin-air money printing that will be known as Quantitative Easing II.

I see plenty of signs that might lead a deflation-fearing Central Bank Chairman to begin making plans.

Here are a few of the things that are certainly causing a good degree of worry down at Bernanke Central in the Eccles building.  The Fed, and Bernanke in particular, are avowed 'deflation fighters' who are constantly keeping their eyes peeled for anything that might hint at deflationary forces.

» Read more

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States of Disarray

Tuesday, June 29, 2010, 7:46 AM

One reason that I am unconvinced that we are in anything that can credibly be called "recovery" is that the US states have been turning in increasingly poor economic data throughout, especially in my favorite data series, 'sales tax.'  It's my favorite because sales tax receipts are not subject to statistical massaging or seasonal adjustments.  They are merely collected and reported.

I've never been able to satisfactorily resolve the gap between Federal Government reports of steadily increasing levels of consumer spending/income vs. declining sales tax receipts and stubbornly high unemployment.

Let's begin with the federal data on spending and incomes:

» Read more

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Second Leg of the Housing Decline Set To Begin (or Why Economists Are Dangerous To Your Wealth)

Monday, June 28, 2010, 7:33 AM

Second Leg of the Housing Decline Set To Begin (or Why Economists Are Dangerous To Your Wealth)

Monday, June 28, 2010

Executive Summary

  • Housing data is weak and just took a turn for the worse
  • Stimulus efforts were essential to keep housing propped up
  • The stimulus has ended
  • QE and stock market prices are correlated
  • What’s coming next
  • What you should do

We bought our house in November of 2009.  This will turn out to have been a very bad financial decision.  We’ll be underwater on that purchase for a very long time; maybe forever (or until Bernanke’s great experiment takes the final turn towards massive currency destruction and inflation; whichever comes first).   

Of course, we bought it knowing that.  Our decision to buy centered on our valuing time more than money.  What I mean by this is that all of the changes that we are now fully engaged in around our house, ranging from insulating to installing solar panels to putting in a fruit orchard, all take time.  Time became more important to us than money, and so we bought.

But for every nation dealing with the after-effects of a housing bubble, what matters is that house prices start to climb again.  Of course, the housing bubble was just a symptom of the larger and far more damaging credit bubble, but housing is a useful indicator for where we are in the larger credit-bubble story.

Because of its importance to both the bubble’s bursting and its eventual repair, I track housing for signs of true recovery.

Insider

It's Raining Oil

Thursday, June 24, 2010, 8:07 AM

There's an interesting video out that purports to show that oil has come down out of the sky during a rainstorm in LA.  The video is too short for me to conclude anything, and it's always possible that someone spilled a quart on purpose to create a sensation, but it's possibly a real event.

At this point, I am ready to be surprised by the events in the Gulf.  If something can go wrong down there, it goes disastrously wrong.

» Read more

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About that sinking feeling...

Tuesday, June 22, 2010, 8:36 AM

Back in May, I was struggling with whether or not to send out an Alert.  For those new to the site, an Alert is an extremely rare thing for me to send, and I do not do it lightly.  There must be compelling evidence that something extraordinary is afoot that would personally cause me to take specific actions or kick my current rate of activity into a higher gear.

During early May, right before the recent bouts of market volatility, I was growing increasingly concerned by the constellation of market signals that I was seeing, but not concerned enough to actually issue an alert.  Truth be told, I was struggling quite a bit with the decision about sending one, and finally on May 13th, I wrote and posted the Insider titled, "I've got that sinking feeling."

Just this morning, member Spectrabill left this comment on the bottom of the thread for that post: » Read more

Insider

News As Noise: Gold Breaks Out

Friday, June 18, 2010, 1:32 PM

It's important to have a mental filter in place when reading news articles, especially when they seek to explain financial movements.

For example, check out this little ditty in Bloomberg today:

June 18 (Bloomberg) -- Gold futures rose to a record $1,263.70 an ounce in New York as Europe’s fiscal woes and dimming prospects for the U.S. economy prompted investors to step up purchases of bullion as an alternative asset.

Well, here we might note that world stock markets are up today for the ninth day in a row and the US stock market is up 4.5% over the past two weeks. Those data points do not jibe well with the concept of "dimming prospects" for the economy.  Plus it's kind of hard to make the case that a rise in gold should correlate with dimming economic prospects.  One might actually make a better case for the opposite effect.

Instead, I think there's probably some other reason for gold surging today.  Here are a few other candidates:

» Read more