Some good reads and analysis here:
http://decisionpoint.com/ChartSpotliteFiles/100122_cspot.html
http://www.hamzeianalytics.net/2010/01/significant-inflection-point-may-be-at.html
http://blog.chart.ly/2010/01/24/if-you-are-looking-for-a-bounce/
http://twitpic.com/z99q8
http://www.twitlonger.com/show/4q85g
Sunday, January 24, 2010
Sunday, January 10, 2010
Forecasts for 2010
Some good links here if you wanted to research various market forecasts for 2010...
http://www.zerohedge.com/article/more-predictions-2010
http://www.zerohedge.com/article/more-predictions-2010
Tuesday, January 5, 2010
2010 is here: Will the Fed Come Clean ?
Zero Hedge Asks:
http://www.zerohedge.com/article/marketwatch-calls-out-fed-disprove-it-manipulating-index-futures
Also:
http://www.zerohedge.com/article/rosenberg-points-out-stock-market-now-lagging-indicator-discusses-byron-wiens-beliefs-tooth-
Here are David's thoughts:
No doubt that the global economy appears to be on a firm footing, but much of this has reflected dramatic fiscal stimulus, overbuilding and credit extension in China. Only the future knows how sustainable this is.
We do know that just about all the growth in the U.S.A. in Q4 is coming from inventory restocking; and that every basis point of growth in Q3 came from government stimulus, directly and indirectly. The same stock market that couldn’t see a recession coming in late 2007 even though it was two months away, doesn’t see how low-quality this “recovery” is since there is nothing organic about it. The market is relying continuously on government support, so much so that nearly 20% — by far a record — of U.S. personal income is now coming from Uncle Sam’s generosity in the form of transfers. This deserves a lower-than-normal price-earnings multiple, but it may take time for Mr. Market to figure this out, just as it took several quarters for it to see the effects of a housing recession and credit collapse two years ago. The stock market, in other words, has managed to become a classic lagging indicator.
This is obviously a bold claim, as it means that the traditional phrase "The market is always right" is now completely wrong. With no volume, and various predatory algos determining daily market direction, it was only a matter of time.
Rosenberg, proceeds to destroy the optimistic groupthink:
We ran some simulations back to 1955 and found that historically, what is normal is that every basis point of nominal GDP growth typically generates 2.5 percentage points of corporate earnings growth. The consensus sees $76 of operating EPS for the S&P 500 next year, which compares to a likely $56 stream in 2009. In other words, that would imply an expected 36% profits boost this year. That in turn would require a 14% increase in nominal GDP, which is basically impossible. Okay — a spurt that strong was last posted in 1951, so let’s be fair. It’s a 1-in-58 event. In the past 75 years, there were a grand total of six when profit growth topped 30%, and guess what? That pace of profits required, on average, 10% growth in nominal GDP. And that last happened 25 years ago. Either way you slice it or dice it, achieving the consensus profit forecast is an extremely low-odds scenario.
The consensus sees $76 operating EPS for the S&P 500 in 2010, which would be a 36% increase from 2009
Meanwhile, the consensus basically sees 4% nominal GDP growth for 2010, which would suggest a 10% profit rise in 2010, which would imply a solid but somewhat less exuberant $62 EPS call for the year. Remember that this time last year the consensus was at $77 operating EPS for 2009 and we got $56 — what saved the market was the Geithner & Bernanke show. What do they do for an encore this year?
Keep that last point in the back of your mind. At the end of 2008, the consensus was at $77 for S&P 500 operating EPS for 2009. Even by the end of January, when it was so obvious that the bear market and recession were far from over, the bottom-up consensus was calling for operating earnings to come in at just under $70 per share. What did we end up with for 2009 when all was said and done? Try $56 EPS or 27% below what “market participants” were predicting when the year began.
Forget all the calculations off the “artificial” March lows. Forget the 25% slide in the first 10 weeks of the year to that awful trough. Here is the reality. The S&P 500, from point to point, rallied 23% in 2009 even though earnings for the year as whole came in a whopping $22 a share or 27% below what was being priced in at the start of the year. Now that is remarkable. It almost wants to make you believe in the tooth fairy.
What does this mean? A 22% overvaluation.
We are sure that if we told you on December 31, 2008, that the market was looking for $77 on operating EPS for 2009, but $56 is all we would muster, you wouldn’t have told us that your price forecast for year-end would be 1,115. And here we are today, and the same consensus crew is calling for just about the same level of earnings again — this time for 2010. If the consensus is correct, then the market is sitting very close to fair-value with a 15x forward P/E multiple. If we are right on earnings, then we are looking at over an 18x forward multiple or a market that is overvalued by 22%.
Yet this whole valuation aberration is the product of an overbullish groupthink crowd, headed by none other than Byron Wien, for whom Rosie shares the following kind words:
We’ve known Byron Wien for a long time — he was a formidable competitor while we were both on the sell side and in later years, a valued client and friend while he was on the buy side. He had a pretty good year in 2009, of that there is little doubt. But his just-released list again totally epitomized the consensus view — and it is useful to know this because as Bob Farrell told us in his Ten Commandments of investing, “When all the experts and forecasts agree, something else is going to happen” (the 9th commandment).
We won’t reprint Byron’s list here, though we were inundated with our views on it yesterday, but all the ‘surprises’ are on the upside as far as the economy, profits and interest rates are concerned. His whole piece involves world peace, a huge equity rally, massive bond selloff, Fed tightening, a dollar bull market, successful policy action on energy and financial sector reform. Nothing on double dip, deflation, renewed equity slide, Israeli military strike, 10% home price decline, sovereign default risk, Euro-area discord, or a Chinese relapse. These don’t seem to worry Byron — but then again, with the VIX index at 20 … the market seems unperturbed about downside risks as well.
And some simply hilarious observations from Rosie on the New Normal:
In the post-bubble credit collapse economy, what was previously unthinkable suddenly becomes the “new normal”. From March 1983 (when the Reagan-led economic expansion took hold) through to September 2008 (when Lehman collapsed) we never once had a month where U.S. vehicle sales came in as low as 11 million units at an annual rate. That is a span of 25 years.
In yesterday’s WSJ, page B1, there is a huge article titled Late Surge in Car Sales Raises Hopes for 2009. This “surge” seems to have taken sales up to 11 million units in December (data out later today), which would be up from 10.9 million in November. So here we are today, and it is apparently good news that we had virtually no growth in sales towards the end of the year even with dramatic incentives (according to the article, GM gave its dealers $7,000 for some of its models) and that we had 11 million units when the ‘old normal’ was 16 million units (not to mention that 12 million is the cutoff for replacement demand — autos are still being taken off the highways and driveways of America).
http://www.zerohedge.com/article/marketwatch-calls-out-fed-disprove-it-manipulating-index-futures
Also:
http://www.zerohedge.com/article/rosenberg-points-out-stock-market-now-lagging-indicator-discusses-byron-wiens-beliefs-tooth-
Here are David's thoughts:
No doubt that the global economy appears to be on a firm footing, but much of this has reflected dramatic fiscal stimulus, overbuilding and credit extension in China. Only the future knows how sustainable this is.
We do know that just about all the growth in the U.S.A. in Q4 is coming from inventory restocking; and that every basis point of growth in Q3 came from government stimulus, directly and indirectly. The same stock market that couldn’t see a recession coming in late 2007 even though it was two months away, doesn’t see how low-quality this “recovery” is since there is nothing organic about it. The market is relying continuously on government support, so much so that nearly 20% — by far a record — of U.S. personal income is now coming from Uncle Sam’s generosity in the form of transfers. This deserves a lower-than-normal price-earnings multiple, but it may take time for Mr. Market to figure this out, just as it took several quarters for it to see the effects of a housing recession and credit collapse two years ago. The stock market, in other words, has managed to become a classic lagging indicator.
This is obviously a bold claim, as it means that the traditional phrase "The market is always right" is now completely wrong. With no volume, and various predatory algos determining daily market direction, it was only a matter of time.
Rosenberg, proceeds to destroy the optimistic groupthink:
We ran some simulations back to 1955 and found that historically, what is normal is that every basis point of nominal GDP growth typically generates 2.5 percentage points of corporate earnings growth. The consensus sees $76 of operating EPS for the S&P 500 next year, which compares to a likely $56 stream in 2009. In other words, that would imply an expected 36% profits boost this year. That in turn would require a 14% increase in nominal GDP, which is basically impossible. Okay — a spurt that strong was last posted in 1951, so let’s be fair. It’s a 1-in-58 event. In the past 75 years, there were a grand total of six when profit growth topped 30%, and guess what? That pace of profits required, on average, 10% growth in nominal GDP. And that last happened 25 years ago. Either way you slice it or dice it, achieving the consensus profit forecast is an extremely low-odds scenario.
The consensus sees $76 operating EPS for the S&P 500 in 2010, which would be a 36% increase from 2009
Meanwhile, the consensus basically sees 4% nominal GDP growth for 2010, which would suggest a 10% profit rise in 2010, which would imply a solid but somewhat less exuberant $62 EPS call for the year. Remember that this time last year the consensus was at $77 operating EPS for 2009 and we got $56 — what saved the market was the Geithner & Bernanke show. What do they do for an encore this year?
Keep that last point in the back of your mind. At the end of 2008, the consensus was at $77 for S&P 500 operating EPS for 2009. Even by the end of January, when it was so obvious that the bear market and recession were far from over, the bottom-up consensus was calling for operating earnings to come in at just under $70 per share. What did we end up with for 2009 when all was said and done? Try $56 EPS or 27% below what “market participants” were predicting when the year began.
Forget all the calculations off the “artificial” March lows. Forget the 25% slide in the first 10 weeks of the year to that awful trough. Here is the reality. The S&P 500, from point to point, rallied 23% in 2009 even though earnings for the year as whole came in a whopping $22 a share or 27% below what was being priced in at the start of the year. Now that is remarkable. It almost wants to make you believe in the tooth fairy.
What does this mean? A 22% overvaluation.
We are sure that if we told you on December 31, 2008, that the market was looking for $77 on operating EPS for 2009, but $56 is all we would muster, you wouldn’t have told us that your price forecast for year-end would be 1,115. And here we are today, and the same consensus crew is calling for just about the same level of earnings again — this time for 2010. If the consensus is correct, then the market is sitting very close to fair-value with a 15x forward P/E multiple. If we are right on earnings, then we are looking at over an 18x forward multiple or a market that is overvalued by 22%.
Yet this whole valuation aberration is the product of an overbullish groupthink crowd, headed by none other than Byron Wien, for whom Rosie shares the following kind words:
We’ve known Byron Wien for a long time — he was a formidable competitor while we were both on the sell side and in later years, a valued client and friend while he was on the buy side. He had a pretty good year in 2009, of that there is little doubt. But his just-released list again totally epitomized the consensus view — and it is useful to know this because as Bob Farrell told us in his Ten Commandments of investing, “When all the experts and forecasts agree, something else is going to happen” (the 9th commandment).
We won’t reprint Byron’s list here, though we were inundated with our views on it yesterday, but all the ‘surprises’ are on the upside as far as the economy, profits and interest rates are concerned. His whole piece involves world peace, a huge equity rally, massive bond selloff, Fed tightening, a dollar bull market, successful policy action on energy and financial sector reform. Nothing on double dip, deflation, renewed equity slide, Israeli military strike, 10% home price decline, sovereign default risk, Euro-area discord, or a Chinese relapse. These don’t seem to worry Byron — but then again, with the VIX index at 20 … the market seems unperturbed about downside risks as well.
And some simply hilarious observations from Rosie on the New Normal:
In the post-bubble credit collapse economy, what was previously unthinkable suddenly becomes the “new normal”. From March 1983 (when the Reagan-led economic expansion took hold) through to September 2008 (when Lehman collapsed) we never once had a month where U.S. vehicle sales came in as low as 11 million units at an annual rate. That is a span of 25 years.
In yesterday’s WSJ, page B1, there is a huge article titled Late Surge in Car Sales Raises Hopes for 2009. This “surge” seems to have taken sales up to 11 million units in December (data out later today), which would be up from 10.9 million in November. So here we are today, and it is apparently good news that we had virtually no growth in sales towards the end of the year even with dramatic incentives (according to the article, GM gave its dealers $7,000 for some of its models) and that we had 11 million units when the ‘old normal’ was 16 million units (not to mention that 12 million is the cutoff for replacement demand — autos are still being taken off the highways and driveways of America).
Monday, November 23, 2009
SPY today ... bizarre
just in case you thought the market action is normal, I give you this:
(today's action is the 1/4 of the chart on the RHS)
Friday, November 13, 2009
Beware the FHA
The FHA Is the New Subprime [Kevin D. Williamson]
An interesting piece in the New York Times today:
The Federal Housing Administration said Thursday that its cash reserves had dwindled significantly in the last year as housing prices slumped and many of its borrowers defaulted on their mortgages.
Still, government housing officials stressed that the agency, which insures loans made by private lenders, would not need a direct bailout.
“Even if we were to go below zero, if the reserves were to become negative, there is no extraordinary action that Congress or anyone else needs to take,” the secretary of Housing and Urban Development, Shaun Donovan, said at a Washington press conference.
Setting aside the metaphysical question of whether a "reserve" with a negative number in front of it still is a reserve, the most interesting words here are "direct bailout." That leaves the door wide open for all sorts of other action.
Who could have seen this coming? Oh, yeah — I did, in May:
But really, who’s backing million-dollar mortgages any more? Oddly enough, the FHA – meaning taxpayers — is getting close. W. C. Varones, a San Diego–based investment manager who blogs at agoravox.com, reports that generous FHA down-payment terms mean that an investor could pick up a $700,000 house, finance $697,000 through the FHA for 5 percent on a 30-year mortgage, and only pay a 1.75 percent FHA fee in exchange. Paying 3.5 percent down under FHA terms, rather than 20 percent down through a conventional bank mortgage, “translates into a $12,000 fee and $300/month in exchange for keeping your extra $115,000 in cash,” he writes. “Plus, you can roll the fee and the points into the loan, so it’s not cash out of pocket.” His conclusion: “FHA is the new subprime. … And the sucker is not a sleazy outfit like Countrywide. It’s the FHA. That means you, the taxpayer.”
If there’s any doubt that the FHA is staggering in Fannie and Freddie’s footsteps into the subprime woods, take a look at their default rates: One in ten FHA-backed mortgages written in the first quarter of 2008 have gone bad already, with borrowers missing at least two consecutive monthly payments, the Wall Street Journal reports. Some 12.3 percent of the 2007 FHA loans were “seriously delinquent” by February of 2009, with 4 percent going to foreclosure or bankruptcy. It gets ugly when you drill down to particular FHA lenders. Strategic Mortgage of Columbus, Mo., has a 12.1 percent FHA default rate, and the president of the firm sounds like the Rev. Jeremiah Wright when he defends his practices, explaining to the Columbus Post -Dispatch that his competitors “made FHA loans to rich, white people in the suburbs; they’re not servicing the same communities I’m servicing.” One has to wonder what sort of community Great Country Mortgage Bankers of Florida was servicing: Their default rate hit nearly 70 percent before the FHA was embarrassed enough to shut them down.
And FHA has been bringing these eccentric business practices to an ever-larger market: With default rates rising, FHA’s loan volume has grown 400 percent since 2007, and its market share is now more than 30 percent. And FHA has expanded beyond housing; in April, the agency put together a three-quarters-of-a-billion-dollar deal to build a hospital in Trenton, N.J., the largest single transaction in FHA history. They’ve also gotten into the “reverse mortgage” business, writing loans against the value of elderly people’s houses and taking the property in lieu of payment after the borrowers die. The stimulus bill cleared the way for FHA to greatly expand its portfolio of reverse mortgages of up to $625,500 in most of the country, and even higher in Hawaii, Alaska, and the Virgin Islands.
An interesting piece in the New York Times today:
The Federal Housing Administration said Thursday that its cash reserves had dwindled significantly in the last year as housing prices slumped and many of its borrowers defaulted on their mortgages.
Still, government housing officials stressed that the agency, which insures loans made by private lenders, would not need a direct bailout.
“Even if we were to go below zero, if the reserves were to become negative, there is no extraordinary action that Congress or anyone else needs to take,” the secretary of Housing and Urban Development, Shaun Donovan, said at a Washington press conference.
Setting aside the metaphysical question of whether a "reserve" with a negative number in front of it still is a reserve, the most interesting words here are "direct bailout." That leaves the door wide open for all sorts of other action.
Who could have seen this coming? Oh, yeah — I did, in May:
But really, who’s backing million-dollar mortgages any more? Oddly enough, the FHA – meaning taxpayers — is getting close. W. C. Varones, a San Diego–based investment manager who blogs at agoravox.com, reports that generous FHA down-payment terms mean that an investor could pick up a $700,000 house, finance $697,000 through the FHA for 5 percent on a 30-year mortgage, and only pay a 1.75 percent FHA fee in exchange. Paying 3.5 percent down under FHA terms, rather than 20 percent down through a conventional bank mortgage, “translates into a $12,000 fee and $300/month in exchange for keeping your extra $115,000 in cash,” he writes. “Plus, you can roll the fee and the points into the loan, so it’s not cash out of pocket.” His conclusion: “FHA is the new subprime. … And the sucker is not a sleazy outfit like Countrywide. It’s the FHA. That means you, the taxpayer.”
If there’s any doubt that the FHA is staggering in Fannie and Freddie’s footsteps into the subprime woods, take a look at their default rates: One in ten FHA-backed mortgages written in the first quarter of 2008 have gone bad already, with borrowers missing at least two consecutive monthly payments, the Wall Street Journal reports. Some 12.3 percent of the 2007 FHA loans were “seriously delinquent” by February of 2009, with 4 percent going to foreclosure or bankruptcy. It gets ugly when you drill down to particular FHA lenders. Strategic Mortgage of Columbus, Mo., has a 12.1 percent FHA default rate, and the president of the firm sounds like the Rev. Jeremiah Wright when he defends his practices, explaining to the Columbus Post -Dispatch that his competitors “made FHA loans to rich, white people in the suburbs; they’re not servicing the same communities I’m servicing.” One has to wonder what sort of community Great Country Mortgage Bankers of Florida was servicing: Their default rate hit nearly 70 percent before the FHA was embarrassed enough to shut them down.
And FHA has been bringing these eccentric business practices to an ever-larger market: With default rates rising, FHA’s loan volume has grown 400 percent since 2007, and its market share is now more than 30 percent. And FHA has expanded beyond housing; in April, the agency put together a three-quarters-of-a-billion-dollar deal to build a hospital in Trenton, N.J., the largest single transaction in FHA history. They’ve also gotten into the “reverse mortgage” business, writing loans against the value of elderly people’s houses and taking the property in lieu of payment after the borrowers die. The stimulus bill cleared the way for FHA to greatly expand its portfolio of reverse mortgages of up to $625,500 in most of the country, and even higher in Hawaii, Alaska, and the Virgin Islands.
Sunday, November 8, 2009
Matt Taibbi - Wall Street's Naked Swindle
http://www.rollingstone.com/politics/story/30481512/wall_streets_naked_swindle/1
Taibbi takes on Naked Short Selling; the collapse of BSC and LEH, Hank Paulson, Ben Bernanke, Timmy Geithner and more.
Taibbi takes on Naked Short Selling; the collapse of BSC and LEH, Hank Paulson, Ben Bernanke, Timmy Geithner and more.
Thursday, November 5, 2009
HK - Petrohawk - interesting observations
Actual close was around $24.55 today, right at the 50 day EMA.Interesting trade today; tested 200 day EMA support; then rallied to test 50 day EMA resistance. Still in a downtrend; but could be changing trend.
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