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Well contained.
23,000 jobs lost. Factory orders down. Debt markets in the biggest freeze since the great depression. The dow up over 100 points. Makes perfect sense to me.
I think we are passed the part of the movie when Mr. Peck from the EPA has ordered the power disconnect of the basement containment unit...and we're somewhere between the building shaking and the point where the roof blasts open and all that crazy *&$%# starts flying out of it.
Isn't this just a loss of faith in another bit of the more outrageous BS that Wall Street was selling?
The bankers(real ones, investment banks &/or shadow banks) said these were liquid investments despite the fact that the underlying bonds were long term munis. The banks simply created the liquidity and now that the banks can't take the risk of holding these things the market has tanked. Maybe their shares are overpriced too.
Yup.
Sigh.
It's the Sta-Puft Marshmellow man.
The dow up over 100 points. Makes perfect sense to me.
Can I has ZIRP?
All of the relationships between interest rates on various pieces of paper seem to have been severed. It is a mystery to me!
Hoocouldazirped?
Zirpes, rhymes with 'Slurpees'.
Dow up 100? False bounce. No volume.
Checked against yesterday's volume at same time. Today's volume is far lower.
Institutions are selling, retail investors are buying. This rally is not sustainable.
Don't worry. The latest scheme is to let public organizations and municipalities bid on their own bonds.
Um, OK.
All kinds of rumblings that the mortgage bailout fat lady is clearing her pipes.
There is no market. Only Zuul.
NSA,
Zirpes also rhymes with herpes.
Muni's can afford it though. A doubling of interest rates never hurt anyone.
It sure will be a good thing when monolines split off their good muni business from their bad CDO business.
Should help alot.
Cheers,
But... but... we NEED a bailout! We NEED unaffordable housing! High housing prices are key to Amerika! Spending more than one makes is also vital! Ugh, how can this be!?
Hahaha... And yet the Dow is up over 100 points. No volume, but still - the sham must continue. Get all the sheeple to but up stocks and such the Pigs can unload them. Stick it to somebody else - that's the way!
Supposedly today we'll get AMBAC bailout. "really" as CNBC tell us repeatedly.
This event has been telegraphed so much it's now a no-win situation for the bulls.
Even if there's bailout, there'll be "selling on the news".
If there's no news, there'll be panic in the market.
CNBC is their own worst enemy.
In a classic example of innumeracy:
The California Statewide Communities Development Authority said yesterday it is considering raising $10 billion to finance buying back the bonds it sold for local governments and hospitals. The issuers would then pay fixed interest on the debt, which would be held by the authority, for a year.
And just exactly how does a JPA go about "raising" $10b? The auction-rate market perhaps? LoL.
I cannot believe the way the market is reacting to all this bad news? Can the market ever go down 1000 ever again? Rules are already in place to stop the markets if it falls 1350 points. WS is a bunch of crooks
"23,000 jobs lost. Factory orders down. Debt markets in the biggest freeze since the great depression. The dow up over 100 points. Makes perfect sense to me."
C'mon, don't be so pessimistic... according to MSN, the ISM Services Index is up!! Woo!
Don't cross the streams, Hank.
I wish Gasparino would just shut the hell up about AMBAC. No longer matters and they keep flogging that dead horse. Talk about trying to milk every bit out of his "moment of glory"...tabloid journalism at its best.
California is easily able to sell bonds without insurance...
California Draws Record Demand as Muni Bonds Rally (Update3) - Bloomberg.com
So what that the Dow's was up 100 points (it's already falling back)?
A bull market climbs a wall of worry. Why shouldn't a bear market slide down one of complacency?
Without bulls, there'd be no one to sell short to.
A bailout of the mortgage market will not save the housing market. It will only determine where the mortgage losses reside (taxpayer vs. financial investors vs. homeowners).
Regardless, going forward the housing market will correct because lending standards are reverting to historical norms (ie- real down payments at market interest rates).
So unless all buyers of housing into the future are subsidized as well, the price of houses will fall to a level where incomes (coupled with sane lending standards) make the purchase viable.
Therefore, prices will continue to drop until a sustainable price/income equilibrium is reached (and in some parts of the country (CA, for example) a lot more).
OT-
WaMu bonuses will not be based on mortgage failures:
WaMu Board Shields Executives' Bonuses - WSJ.com
Seems to me that a bonus is paid on the bottom line. What's going on here?
It's days like this when you realize how few people control the daily buying a selling of stocks.
Come on, 100 million people own stocks. I bet that perhaps 1/10 of 1% have even heard of ABK and most of those have no idea of its significance.
That fact that a rumor on CNBC which less that 1/10 of 1% of those stock owners were even were watching and less so in a possition to immediately buy or sell stocks at that moment based upon that info, highlights how few people are determining the direction and price of stocks.
I need to start proofreading.
Just doing some very quicky math --- the increase in the ABS interest rates means at least an extra 750 million a month in interest costs above the January average interest rate.... more money that people don't have but need to pay....
Money-Market Rates Rise, Signal Return of Gridlock (Update2)
By Kim-Mai Cutler
March 5 (Bloomberg) -- Money-market rates for euros and pounds climbed to the highest since mid-January, signaling the global squeeze on short-term bank lending may be returning.
[snip]
Of course, we've factored "muni bond failures" into our economic models. We've also factored 'cascading cross defaults,' falling consumer sentiment readings, a major slowdown of money velocity, the credit crunch, negative savings rates, the slowdown and pending CRE bankruptcies, the housing bust, the drops in state revenues, the plunge in new car sales... all that's in our economic model now.
That's why 'everyone in the know' says that we aren't in recession now. Or, failing that... that it will be short, and shallow.
I just attended a school district meeting in Oregon yesterday. Everyone is still planning for growth. People in the school districts still think population will always expand, and that we can fund a new 75 million dollar high school next year.
I just shook my head. This quote came to mind...
"No point in telling that poor bastard about those bats... he'll find out soon enough..."
- Hunter S. Thompso
Allen C writes:
California is easily able to sell bonds without insurance...
From the link:
"The state received orders from more than 4,000 investors equal to over 72 percent of the bonds available."
That looks like an undersubscribed issue to me. $490 million went unbid. Lucky residents just took on an additional $35 new debt per capita instead of the $49 as planned. just for reference the State (just the State) is on track to take on a thousand dollars of new debt per capita this year. When you hear about the concern that individuals are carrying too much debt don't forget to add this in as well.
Zirpes, rhymes with 'Slurpees'.
NSA | 03.05.08 - 10:31 am | #
And Herpies
Thanks for the WaMu link,reminds me of my favorite Nixon quote "I accept the responsibility,but not the blame"
hc said: "Institutions are selling, retail investors are buying. This rally is not sustainable."
404 : Page Not Found
According to the Investment Company Institute there was a huge outflow from stock mutual funds in January.
"Highlights: Long-term funds - stock, bond, and hybrid funds - had a net outflow of $22.01 billion in January, vs. an inflow of $3.57 billion in December.
Stock funds posted an outflow of $44.84 billion in January, compared with an inflow of $2.17 billion in December. Among stock funds, world equity funds (US funds that invest primarily overseas) posted an outflow of $9.09 billion in January, vs. an inflow of $9.41 billion in December. Funds that invest primarily in the US had an outflow of $35.75 billion in January, vs. an outflow of $7.24 billion in December."
That one-month outflow of $44.84 billion from stock funds is one of the largest since July, 2002, when it was over $52 billion.
My point: The retail investors bailed in January, indicating a major sentiment (panic) low. There may be minor retests of recent index lows, but they're major buying opportunities.
Sebastia
"$490 million went unbid."
That was before selling the balance to institutions.
"Officials, who were to complete the sale tomorrow, wrapped it up early by selling the rest of the debt to institutions."
The stock market responds to unexpected news and changes in concensus. The market is going up today, in part because it went down several days in a row and in part because new money comes in at the beginning of each month.
My faith in fundmentals has been somewhat restored with the decline in NCI building systems (NCS) during the past few days. They make steel and walls for nonresidental construction and warned that 2008 is not going to be good.
"There may be minor retests of recent index lows, but they're major buying opportunities. --Sebastian"
You mean like the great buying opportunities last July and October and late December? I pity the suckers who listen to bozos like you.
My point: The retail investors bailed in January, indicating a major sentiment (panic) low. There may be minor retests of recent index lows, but they're major buying opportunities. - Sebastian
Ohhhh, I am sooo saving this one.
Allen, the plan was to get a surfeit of retail subscribers Dutch auction style. Institutions came in because of the high returns. Man do I feel sorry for the suckers who bought multi-decade GO bonds at 5.4%
Okay, stupid question. Does "failure," here mean something lie it does in RE auctions? ie, that the reserve price wasn't met. If there were NO bids, that's an issue. If they didn't LIKE the bids that they got, then that's another matter.
Anonymous said: "You mean like the great buying opportunities last July and October and late December? I pity the suckers who listen to bozos like you."
It's not about me, it's about the data. The largest shake-out of retail investors in nearly 6 years occurred in January.
S.
There seems to be a general consensus here that the Ambac announcement was responsible for the late day rally. My take is that the real push came because cisco affirmed guidance for the year, as in this tech crap is going to be ok. that's why the nasdaq rallied harder and closed up on the day.
As a general note, the hedge fund community over time is almost forced to engage in short vol type trades to generate a return stream that can be marketed, even though it is prone to periodic meltdowns. I think that this is an important feature in this market in that all the profit in hedgefund land is now being generated by long vol strategies. Being short the ANX, CMBX or any of these structure products in a negative drip strategy and at the current prices is a very expensive one to carry at that. If these markets change direction for any
reason the unwind is likely to be very fast.
On another note it appears that the general market correlation is now negative to oil and gold prices. This
has been changing over the weeks and is setting up for yet more volatility in that the currently 'winning' trades are highly correlated.
Why are these bonds not sold to the public Dutch Auction style like US Treasuries? I am sure when a bunch of people are hoping to get the same return from a bunch of deadbeats on Prosper.com these bonds will look like caviar.
Rob Dawg said: "Ohhhh, I am sooo saving this one."
Put it in a "Favorites" folder right next to "no recession in 2008.":)
At some point one has to ask how much of the bad news has been factored-in, since major market lows occur when everything looks terrible and unlikely to improve, not when things look okay.
S.
Yossarian | 03.05.08 - 11:09 am
Great Gonzo pull Man! There are days i swear i seethem too, must be the mescaline or the adrenal gland, hmm.
Commodities are higher. Silver is trading a buck higher, gold $20 higher and crude oil over $3 dollars higher. Financial futures prices are lower.
With the dollar down to it's lowest level yet against the Euro and other currencies, with the price of gold pushing at $1000/oz and silver shooting the moon, with oil topping $103/bl...
does it really Matter what the markets are doing? They'd have to do a lot better than a 100 pt gain to make up the ground lost against our devalued dollar and surging commodities. Right now, it's barely treading water and has gone nowhere the last 12 months - which means it's down (adjusted for inflation). Yes?
Wow,
CRB and DOW up at the same time. Weird.
Still Seb, you keep buying pretty pieces of paper, and I'll keep buying shiny metals.
I suspect I'll have the edge year end.
Cheers,
Sebastian writes:
Rob Dawg said: "Ohhhh, I am sooo saving this one."
Put it in a "Favorites" folder right next to "no recession in 2008.":)
I thought that was "no recession is even possible in 2008."
At some point one has to ask how much of the bad news has been factored-in, since major market lows occur when everything looks terrible and unlikely to improve, not when things look okay.
I understand the difference twixt fundamentals and merely beating expectations and the forward looking nature of stocks. I also know what happens in those events where fundamentals take the fore. In this case any return to fundamentals bodes ill for stocks until the dollar makes their asset values attractive to foreign investors.
"At some point one has to ask how much of the bad news has been factored-in, since major market lows occur when everything looks terrible and unlikely to improve, not when things look okay."
If I read any one that actually admitted what all the write downs are going to do to liquidity (Goldman says $2 trillion if $400 billion lost, but it looks like $600 billion so $3 trillion at least) and talked about how that reduction in liquidity will affect things going forward, then I might agree with you. However, no one I've read that is even remotely bullish even seems to understand the difference between "money" and "value."
I cannot believe the way the market is reacting to all this bad news? Can the market ever go down 1000 ever again? Rules are already in place to stop the markets if it falls 1350 points. WS is a bunch of crooks
What?
ISM Services index is back over 50.
Recession is over.
This is the beginning of a great new bull market.
Party time!
OT: I was looking for a broker who was sound (not in danger of going under) to take the place of MLynch and MStanley whom I have been using. I checked up on Schwab and from what I have found Schwab is relatively free from the toxic waste of subprime and the like. I would guess it might have something to do with Mr. Schwab's owning about 20% of the firm. One tends to be more careful when one's own money is at stake.
I was just reading some interesting news on Spain...when we fall the domino effects are going to be enormous..by the way anyone get a look a the dollar index....ouch!
ac,
Or perhaps it's our Japanese satraps destroying their fiat faster than we are.
INO Foreign Exchange - US Dollar/Japanese Yen (FOREX:USDJPY) Price Chart and Quote
Hell of a fight here the last few days given this:
INO Equities Stocks Indexes - U.S $ INDEX (NYBOT:DX) Price Chart and Quote
Just a thought.
Cheers,
Chris-
Schwab's execution sucks to be quite honest. I've had more busted trades from them over the last few years than A-trade or my all time favorite Shittrade (scottrade for those who have never had the pleasure of an institution losing a wire for $50k)...
they seem to be about the same all over....
Ciao
MS
Sometimes, it's so simple that even the stupidest bulls should be able to see it.
Every day in which oil closes over $100 a barrel is a terrible day for the U.S. economy and global stock market.
A day of $100+ oil is like a 100 degree day for polar bears at the North Pole. Its melting your ability to profit.
There's not one meaningful product or service made in the U.S. that isn't tied to oil. Why is it so hard to see?
Sebastionistas,
Consider this:
If you go back ten years ago today the DOW was at 8444.30. To get to today's DOW, you have an annual average rate of return of 3.8%. If you add the dividends of 1.8%, you get an average return of 5.6%.
That's if you went "all-in" back then. Your return may be significantly worse with dollar-cost-averaging since you've been buying stocks at above that trendline more often than below.
The return for the S&P is worse: 3% flat excluding dividenDs. Less than 5% including dividends.
Add in the fact that during the last 10 years you had many more longterm buyers than retiring sellers. You weren't buying in the face of a babyboom generation of sellers. That's all changed now.
Perhaps this move by retail investors are a great deal of boomers locking in what gains they have and moving to cash assets off which to live. Don't assume all that cash is just waiting to come back in.
Average Joe: Shhhh... You have to remember that "stocks only go up!" Just like housing, tech stocks, etc. Gotta keep the people in debt and buying into the scam - how else can we take their money?
ac,
The ISM index of non-manufacturing activity came in at 49.3. This was a 'beat' of lower expectations...
Did I miss your sarcasm tag?
"Schwab's execution sucks to be quite honest"
I use them for my IRA and just use their website. I have never had any problems, but then again I don't trade exotic securities so perhaps those problems are outside my ken.
A few more years of returns at or below the last 10 years, then stocks will lose their reputation as a guaranteed longterm good investment (like housing, like Japanese stocks).
Things that are now universal truths are soon becoming old-wives tales.
"don't fight the fed"
"housing always goes up"
"stocks outperform over the long term"
Some things aren't always true.
When 401kers are faced with the truth and demand more investment options than just being long U.S. stocks, then demand will level or drop as supply from boomer sellers increases.
wow, just listened to our energy secretary. could have been the first public official i have heard that made gwb sound like a great orator.
scary.
AJ,
Add in that declining productivity with increasing labor costs to the forecast for continued double digit earnings growth...
Michael:
Well I have had no problems with Schwab. On the other hand I don't trade much. I tend to be a buy and hold guy. I am not looking for super executions but rather for solid reliability, financial reliability. I like Siebert very much for day to day trades+you can talk to somebody there in a jiffy, but I am leering of too much in street name with a broker whose stock tends to sell so low.
Rich,
In 6 months $100 oil is going to be a pleasant memory just like $75 and $90 are now.
Sebastian,
You assume that the stock sales/exodus in Jan means someone is sitting on a pile of cash, waiting to come back.
Ever considered that the money has evaporated? Banks, Hedge funds were selling their assets to cover losses they're facing in the credit and derivatives market. That money is already lost to credit contraction.
There is no money to "come back" into the stock market.
Additionally, with all the killing of the shorts recently, the market is actually setting itself up for a huge drop since there won't be anyone left to cover their positions.
Showing a large exodus of money from the market when there's a credit contraction/money destruction going on means nothing.
All in DOW March 1998 would not have done anywhere near that good. You forgot to subtract out changes in the index. No Intel, Microsoft or disney off the top of my head. How are your Sears, Goodyear, Union Carbide, etc. stocks doing instead? survivors bias writ large.
AJ, energyecon,
Add to that the continuing precipitous fall of the dollar as well.
A man might be a millionaire but it's meaningless if a loaf of bread costs $100K.
Cheers,
ac,
The ISM index of non-manufacturing activity came in at 49.3. This was a 'beat' of lower expectations...
Did I miss your sarcasm tag?
Yeah, for some reason the initial data point I got was wrong.
Anyhow, just remember -- you have to buy the bad news.
Remember, in Ben Bernanke's Easy Money Apocalypse bad news is good news.
Good news is good news too.
Indeed, there is now evidence that many state/local governments are under serious fiscal and debt strains and that default rates on muni bonds will start to surge--Roubini
Won't this bring the recession home to the super rich with a vengeance? Don't many of them have millions, billions? in tax free Munis?
wow, just listened to our energy secretary. could have been the first public official i have heard that made gwb sound like a great orator.
scary.
david_in_ct
It really gives credence to the statement:
"Incompetent people hire incompetent people".
From Rumsfeld, Snow, Paulson, Brownie, Gonzales, to Bernanke the list goes on and on.
I'm banking on mediocre-sorta-eh news these days. Seems to be a safer bet.
Cheers,
NEWS ALERT
AMBAC SHARES HALTED PENDING NEWS
Rob Dawg,
Thanks for that DOW clarification. That's probably why the S&P did almost a percentage point worse.
Halted for possibly the most widely-known news in financial history.
Could be in for a severe disappointment if the banks do nothing but backstop a rights offering.
Anyone know what ten year treasuries were selling for in March 98? Would they have outperformed stocks?
Chris,
"Indeed, there is now evidence that many state/local governments are under serious fiscal and debt strains and that default rates on muni bonds will start to surge--Roubini"
Which is why I've been chuckling about a monoline split. Yep, gotta split out that stunningly good muni business. That'll do the trick.
Cheers,
on the schwab thing:
I don't trade exotic securities or anything any different than most of you.
I think waiting for over 5 minutes for a market order (yes I know the problems that allows) in a completely liquid stock is just unacceptable...no matter what the "market forces" are.
That is jut too long........I do seem to accumulate all these "free trades" though.......I am wayyyy passed getting free trades to soothe me....
Ciao
MS
Here is a puzzle for my limited intellect, regarding the forward looking markets...
In what has to be one of the most telegraphed bailouts of all time, ABK news will likely spike the markets up big time because it was not priced in - yet all the bad news is blown off because it is already priced in...
I've got 10 year T's in 98 around 5%, down from 6.7 the previous year and increasing to 6% in 99.
"From Rumsfeld, Snow, Paulson, Brownie, Gonzales, to Bernanke the list goes on and on."
I think you guys are too hard on Ben. He wss not dealt a terribly good hand and whatever you think of Paulson, you don't get to be CEO of goldman by being a moron. I would have thought you guys would be rah rah for hank as he seems to be leading the no bailout charge.
NEW YORK (AP) -- Oil prices surged to a new record over $104 a barrel Wednesday after the government reported a surprise drop in crude oil stockpiles and OPEC held production levels steady.
Most analysts had expected the Energy Department's Energy Information Administration to report oil supplies rose last week for the eighth straight time. Instead, they fell by 3.1 million barrels.
ipodius, mp
well if u guys can croon about 1 days worth of gold/oil pullback, i guess i can croon about todays HUGE advance as well as the last 6yr advance.
The munis may not be an ultrakeen superprofitable business once split from structured finance guarantees. However, as long as attached their survivability is only slightly better than a pig in a slaughterhouse loading ramp. So things will be a lot better for the munis once split. The wolves may take them down but their chances improve if they escape the slaughterhouse.
10yr auctions:
http://www.federalreserve.gov/releases/h15/data/Monthly/H15_TCMNOM_Y10.txt
I doc ill croon with you..all the way to the bank
energycon,
Good one.
I like the old saying that is related:
"stocks are forward looking"
Yea right. Dow 14,000 this summer was looking forward.....Nasdaq 5000 was forward looking.
The fact that people still say it with a straight face, as if the markets are ACCURATELY forward looking, is hilarious.
B
"In what has to be one of the most telegraphed bailouts of all time, ABK news will likely spike the markets up big time because it was not priced in - yet all the bad news is blown off because it is already priced in..."
maybe because there is so much short interest in the market its getting hard to find new sellers. since buying here is so clearly wrong, maybe some of the buyers have a longer term holding horizon than the next 15 minutes and aren't likely to get shaken out by the day to day volatility. As seb has pointed out, a lot of retail money has left the game.
ALBANY, N.Y. (AP) -- A bailout of bond insurer Ambac Financial Group Inc. is scheduled to be announced as early as Wednesday afternoon, according to a person close to the talks who spoke on the condition of anonymity because the deal wasn't final.
The deal would split Ambac's operations into a top-rated municipal bond business and a structured finance unit. Ambac is in trouble because the company wrote guarantees on billions of dollars of questionable structured finance assets.
The person who spoke on condition of anonymity says one of the details to be worked out with New York insurance regulators is when an announcement could be made without disrupting the markets. The announcement could be postponed until next week even if the deal is final. Ambac's troubles have sent stock prices plunging in recent months.
Ambac wouldn't confirm or deny a deal was imminent.
WTF?
Thanks RobDawg.
So treasuries were 5.65% 10 years ago today. Handily outperforming the S&P500 with absolutely 0 risk.
Well that's logical. MBIA jumps up because of some hinky deal that Ambac's customers will give it some money to keep it paying guarentees made to said customers.
Makes perfect sense. I'm going to go study some Escher drawings now to prep for some home remodling.
The Official M.C. Escher Website
Cheers,
OT: online brokerages, as I wait for ABK news to flash on my Interactive Broker Workstation I use Ameritrade for slow money, IB for fast money and Schwab for comatose( mutual funds with a multi year time horizon ). IB and Ameritrade work OK for me - and I'm much more humble and a lot less resentful than those Schwab animated characters. Disgusting characters the lot of them.
-K
Average Joe writes:
Thanks RobDawg.
So treasuries were 5.65% 10 years ago today. Handily outperforming the S&P500 with absolutely 0 risk.
Quite welcome. Ain't the internet wunnerful?
Just keep in mind that the 10yrs were 0 risk only in retrospect. Past results are no guarantee of future performance.
idoc,
"well if u guys can croon about 1 days worth of gold/oil pullback, i guess i can croon about todays HUGE advance as well as the last 6yr advance."
I was going to...but I didn't.
Cheers,
RobDawg,
True....and true for stocks too, which has been riding a wave of reputation of overperformance for many years. Why buy stocks? Answer: Because stock's historical performance proves that overtime they outperform.
Well history is changing, which was my point.
I'm long supermarket pricing guns....short quality of life.
Average Joe said: "Anyone know what ten year treasuries were selling for in March 98? Would they have outperformed stocks?"
In March, 1998 the 10-Year Treasury Index was yielding around 5.5% to 5.75%. That was about 1.75% above the earnings yield for the SP500 at the time, meaning that a long-term risk-free bond was a better value than the SP500.
Today, however, the 10-Year Treasury Index is trading 2.65% below the SP500 earnings yield, meaning that stocks are a better long-run value than bonds.
S.
Today, however, the 10-Year Treasury Index is trading 2.65% below the SP500 earnings yield, meaning that stocks are a better long-run value than bonds.
Yeah, all that needs happen for that to continue is for the S&P 500 to maintain the same historically off the charts earnings improvement of the last 5 years.
S&P Earnings History
Average Joe: The market is forward looking, but the average investor is convinced that he's smarter than the average investor. Therefore to some extant market moves are predicated on what a trader of average intelligence thinks that people dumber than him will do in the future. So the idiocy of the market is a self fulfilling prophecy.
RE: online trading
I use Fidelity, and never had a market order take more than a few seconds, and that is over the last 10 years. I'm sure I don't trade like most of you, but they have been better than stories I've heard about the others. Considering it is still privately owned by the Johnson's, I don't fear a collapse destroying them. They just reported 07 earnings of over $2 billion, so they can't be as foolish as the other biggies.
Today, however, the 10-Year Treasury Index is trading 2.65% below the SP500 earnings yield, meaning that stocks are a better long-run value than bonds.
Sebastian - Quote your source for the SP500 earnings yield.
I've been using Tradeking. Haven't had any problems so far.
Today, however, the 10-Year Treasury Index is trading 2.65% below the SP500 earnings yield, meaning that stocks are a better long-run value than bonds.
No reason to let 100+ years of data proving that this statement is incorrect get in your way Sebastian.
Maybe i'm naive, but i don't buy this "Market is looking forward" nonsense. I don't see how you can interpret an instantaneous indicator of supply and demand imbalance, as saying anything other than "Let's see what happens next".
& if you're meta-analysing the causes for the supply/demand imblance, then it can pretty much say whatever you want it to say. As marketwatch's headline writer cheerfully demonstrates on a daily basis. As far as i can see, if you adjust for communication lags of information within the system, then the market tends to be a trailing indicator if anything.
my 2 cents,
MLM said: "No reason to let 100+ years of data proving that this statement is incorrect get in your way Sebastian."
The future isn't knowable. However, what we can do is make good judgements about what to do with our money based on what we know now.
In March, 1998 bonds were a better long-run value than the SP500 based on what was known at the time: Bond yields were higher than earnings yields.
Today, we know that the SP500 earnings yield (TTM as-reported peak EPS) is higher than the bond yield. That makes it completely reasonable to think that stocks will outperform bonds going forward, in the same way and for the same reason that bonds could be expected to outperform stocks 10 years ago.
S.
Horse@#$t. As anyone who has actually studied the so-called "Fed model" (comparing treasury yields to earnings yields) will tell you, you are comparing apples and oranges.
As I pointed out the last time this came up (and I'm not going to bother to give you the links again), the Fed model's (and your) basic assumptions are incorrect, and what's more, it hasn't worked over any reasonable time frame.
Read Shiller, Smithers & Wright, or even Hussman.
wow, just listened to our energy secretary. could have been the first public official i have heard that made gwb sound like a great orator.
scary.
david_in_ct | 03.05.08 - 12:05 pm | #
Obviously you have not listened to the Tres Sec Hank Paulson lately then. How he ever got to the top of GS is a big time mystery, not the Agatha Christie type, more the St. Augustine type. Your average autistic 10 year old is more articulate.
ambac files to sell stock
they didn't get enough dough from the banks
In the FWIW category I just doubled my position in TMA....
Pugg squaar is most correct when said'
"Right now, (the market) it's barely treading water and has gone nowhere the last 12 months - which means it's down (adjusted for inflation). 03.05.08 - 11:40 am | #"
and that's a really big point.
what we are fighting here is a battle to maintain capital. i'm ok with my commodities investments, but face it, the numbers are good but appear deceptively better as evaluated in dollars...dow , s&p look awful.
493 visitors on line ...
how this neighborhood has grown in the past year.
mockl = mock ok i'm stupid
More odd depression level economic news:
DELTA AIR LINES FEBRUARY TRAFFIC RISES 6.7%
DELTA AIR LINES FEBRUARY LOAD FACTOR 74.9% VS 74.1%
In this great depression the homeless at least get to fly around to job interviews.
MLM said: "As anyone who has actually studied the so-called "Fed model" (comparing treasury yields to earnings yields) will tell you, you are comparing apples and oranges."
No. It tells you how investors feel about stocks relative to bonds (apples to oranges).
In secular bear markets (like now) investors fear stocks and embrace bonds. That's why the SP500 earnings yield is so high and why the yield on 10-Year Treasuries is so low.
The last time this condition existed was 1973-1980.
S.
No. It tells you how investors feel about stocks relative to bonds (apples to oranges).
So I guess what you're saying is that although it has no fundamental basis, and in fact there was there was a marginally stronger negative correlation from 1948 to 1968, that investors feelings have since changed.
I don't think I can go with that. But, good luck with it.
That makes it completely reasonable to think that stocks will outperform bonds going forward, in the same way and for the same reason that bonds could be expected to outperform stocks 10 years ago.
"Stocks will outperform bonds going forward" does not equate to "stocks will go up while bonds while go down". You are using data that support the former to argue the latter.
During the early- to mid-'80s, the prices of both stocks and long-term bonds absolutely soared. Rip-roaring bull markets in both. Where is it written that stocks and bonds can't both fall in value simultaneously?
In the seventies as inflation rose both the stock markets and the bond markets declined.
The problem with the Fed Model is that it compares a market (or forward looking) yield with a historical yield (eg TTM earnings/price). Some people attempt to correct for this problem by using forward looking consensus estimates - generally provided by WS strategists or by aggregating bottom-up WS analyst forecasts.
It should go without saying that making allocation decisions based on these sorts of estimates can be detrimental to your finances.
I need some help!!
I hold considerable Kayne Anderson MLP Invt Co Sr Notes Auction rate closed end bonds. My broker represented this as a risk-free, liquid 7-day rate reset paper. Since the bank is not willing to step into the market when auctions are failing, I cannot draw the money out.
My broker says the firm will provide a loan at Libor+0.5% against half the value of the bonds and Prime-1.5%?? for the other half.
Libor + 50bp rate is available only for a limited time period (6 months)
He thinks this will create a positive cash flow given the penaly rate for failure at about Libor + 3%?? (?? indicates not sure).
I dont know if this is a good deal under the circumstances. I need the money to buy an Apt under contract. My preference will be to get out of the position asap.
Can you see where this is heading, if the banks will enter the mkt and create liquidity? Can you suggest any recourse (regulatory, political or otherwise). Pls help
Thanx