The denial on Wall Street is amazing - lower profits (check) lower dollar (check) credit subprime problems unresolved (check) housing price collapse (check) car sales down and Ford/GM laying off workers (check). . .hmmmm and market hits 14,100 go figure!
You heard it here first - BNSF railworkers talking to me last weekend, "container traffic is way down, but the railroads don't want anyone to know because the stockholders would bail.". . .
fl+cal population is (60 mil)~20% of US population..but the % of US pop growth is much much larger..(alsi both states may have as much as ~10 mil illegals as well)
The new economics, known as neo-conomics, says that recessions are a good thing because they lead to rate cuts and rate cuts mean the Dow goes up.
Neo-conomics teaches that the Dow goes up when things are bad because it indicates future rate cuts and the Dow goes up when things are good because, duh, they are good and that means up.
Basically the Dow always goes up now. So everybody can buy stock and get rich. This is similar to the neo-conomics theory of 3 years ago that everybody could buy an investment house and get rich because real estate always goes up.
The dumb liberals screwed up the neo-conomic housing boom with a bunch of reality-based negative talk and worry. But, theory indicates that the Infinite Up Dow Effect is immune to reality. So buy stocks now and get rich!! Hurry, 'cause they aren't printing any more stock certificates.
Per the link, California ran a budget deficit of $1.9B in September, and has only $8.4B remaining available on a line of credit.
Breaks my sociopathic heart that the socialists in Sacramento may have to slash spending (or try to push through emergency tax increases) in as little as four months.
Thanks for the quick lesson right out of the book of fools, maybe Ill take you up on your lesson and go out and buy 500 shares of Countrywide...after all it must go up right?..
No thanks Ill keep my money in my pocket away from you Neo-con shills.
borkafatty, quit bringing up the skyrocketing price of gold; I sold mine in March, expecting that the market would go down faster than gold would go up (and that I would make more money by being in SDS).
So much for my short-term prognosticating ability.
Somewhat off topic but while getting a ride back to the VW/BMW car dealer yesterday I asked the guy driving how the car biz was these days. I told him that I know a guy who drives the trucks that pick up new cars at the docks and bring them to the dealerships. He used to work 7 days a week. Now he says they are done by thursday. The guy said two things that I thought were interesting.
1) "We're doing alright and the other foreign cars dealers are doing alright. But I can't imagine the US cars are selling. I mean, "who the hell buys a Mercury".
And then he said
2) "It seems everyone has less money these days. Even people who have money don't have money like they used to".
While waiting to pick up my car I was checking out a used M3($49,000) and a used M5 ($90K). Both had less than 10K on them. The sales guy told me they were both traded in for lower cost models.
At this rate, and it is likely to worsen, California's budget deficit will double to $4B. As noted earlier, as California goes, so goes the nation. Yup, just in time for the early retirement segment of the all those unfunded liabilities....that will start needing funding in about say 3 months...
It'd be really interesting if we had access to other states' sales tax receipts too - wonder if this is impacting other states at the same time. Do all states with sales taxes do these reports?
The denial on Wall Street is amazing - lower profits (check) lower dollar (check) credit subprime problems unresolved (check) housing price collapse (check) car sales down and Ford/GM laying off workers (check). . .hmmmm and market hits 14,100 go figure!
The only thing the stock market needs to go up is easy credit for leverage, and they've got plenty of that.
What happened since the Aug. 18th low is the most vigorous stock market rallye since spring 2003. It's amazing. These kinds of rallies last longer than a year. I think this by itself shows there cannot be a recession in the next 18 months.
Oct. 11 (Bloomberg) -- U.S. stocks rallied, sending benchmark indexes to records for a second time this week, after Wal-Mart Stores Inc. raised its profit forecast and a government trade report suggested economic growth is accelerating.
Maybe the housing bust is good for the economy? I mean facts are facts.
David Rosenberg, ML, 10/11/07: Breaking News -- 3Q earnings on the precipice of turning negative We saw a several profit warnings from companies yesterday, which prompted Thomson Financial (who track earnings) to say that S&P 500 earnings have a good chance of turning negative. Not that it wouldnt take much, with the current 3Q tracking at just 0.1% YoY (we will see a slew of earnings reports in the next several weeks). Indeed, if earnings were to decline, this would be the first negative print since the end of 4Q01.
According to a Wall Street strategist: "Earnings don't matter, what matters for the market is whether or not Fed would cut rates." Yes, fed would cut rates all the way to zero as the depression develops in 2008. Bulls, charge!
Recession=lower interest rates=higher stock market. Ergo the stock market will go up in a recession. Then, when the economy recovers it will also go up. And when the next downturn comes, since that will mean lower interest rates again, it will go up some more. Give up on real estate. Put all your money in the stockmarket; it never goes down.
Dow and S&P weightings and the resulting indexes reflect the dollars loss as a value holder. The majority of the market weights of both indexes are composed of strong multinationals with dollar nuetral earnings, that is a third from Europe, a third from Asia, and a third from here. So while our absolute earnings go down they are hedged by thier non us Earnings. I can't help but think this a part of the reason for the froth in us large cap market indexes.
IMO, the increasing value of the domestic US stock market is currently caused by international and emerging markets going up, not the other way around. Once China or some other country has a sell-off, or if the bond market sells off, then we'll have trouble again, be patient.
The "velocity" of money in California is clearly slowing. 30 day pay, even slow pay is common now. Few still take advantage of my 1/2% 10 day discounts. The kitchen&bath guys are idle. Even the last of the specialty construction crowd; stone and landscaping can be had on short notice.
I suspect that the reporting period just barely caught the leading edge of a very severe decline in governmental revenues. The next datum will be around Dec 20th when the counties report property tax bi-annual payments (Due Dec 10th). There is generally a 10% late fee so there is a strong incentive to pay if you can. DQs here will probably send state and local agencies into a round of emergency COPs and budget cuts.
Amazingly Moodys just today upgraded the University of California's credit rating to Aa1. The Daily Bruin | Error
There's no chance of California keeping up the canard any longer. Gray Davis was recalled in great part for overspending. Since then overspending has increased as has debt and defered obligations. There's is in my opinion the largest disconnect twixt the governing and governed since the 1760s.
The next President would promise to declare CA and FL federal disaster areas (due to collapse of housing). These two states combined have huge electoral vote.
That said, you're not likely to stay solvent fighting a bubble.
I don't understand why so many smart people buy into this logic. If you believe the best time to buy stocks is when they are crashing and depressed, the best time to short them is when they are heading into a bubble.
In your lifetime, you may never again have an opportunity to short the smallest, crummiest companies in the U.S. in the most troubled industries, selling at P/Es of 40+, at a time when earnings are deteriorating so fast.
Remember: Stocks usually are leading indicators. This time, they aren't. Stocks usually have risk factors priced in. Now they don't.
Earnings don't matter now?
Maybe not. But they will.
They surely will at some point in time not far off.
That said, you're not likely to stay solvent fighting a bubble.
I don't understand why so many smart people buy into this logic. If you believe the best time to buy stocks is when they are crashing and depressed, the best time to short them is when they are heading into a bubble.
Excecpt that you can lose more money than you have shorting stocks. If you tried to short tech stocks when the NASDAQ was at 2500 in the late 90s, you would have lost your entire portfolio.
Excecpt that you can lose more money than you have shorting stocks. If you tried to short tech stocks when the NASDAQ was at 2500 in the late 90s, you would have lost your entire portfolio.
Baloney. You would be rolling in dough.
You would only have lost your whole portfolio if you didn't have the liquidity to meet margin calls. In short ETFs, there are no margin calls. You just buy and hold them. No hurry.
Remember this, if people thought it was rational for homes to appreciate 20% a year for many many years, then they'll think it's rational for stocks to appreciate 50% a year for many many years. The spectulative frenzy keeps growing but it just leaps from one asset class to another. At some point, this will all come to an end.
I predict the stock market will go into reverse in a big way before the end of the month. We had this earlier in the summer -- For awhile, the market would go up on either good or bad news. Then, it turned around and would good down on either good or bad news. Whatever is driving the market these days is liable to change for good reason...
Excecpt that you can lose more money than you have shorting stocks. If you tried to short tech stocks when the NASDAQ was at 2500 in the late 90s, you would have lost your entire portfolio.
Baloney. You would be rolling in dough.
You would only have lost your whole portfolio if you didn't have the liquidity to meet margin calls. In short ETFs, there are no margin calls. You just buy and hold them. No hurry.
rich | 10.11.07 - 1:51 pm | #
I must agree with Rich. The ETF's are the waty to go. You can only lose what you have invested. Unlike shorting indivdual stocks.
CR said: "Based on sales tax revenue, it now appears that the California economy is in recession."
I can't believe I'm the only one who even thinks to post on this point.
Looking at your chart, CR, there's only one (confirmed) recession year shown, 2001. Without showing CA sales tax revenue numbers during mid-cycle slowdowns and other recessions, you don't have anything other than your assumption that CA is headed for recession to support your claim.
I've made exactly this kind of mistake in the past (making assumptions based on an inadequate number of observations or without confirmation from independent data), and I promise you that this one will come back to haunt you. Mid-cycle economic slowdowns (and minor stock-market corrections, for that matter) are very deceptive, leading the unwary to think something worse is coming.
...assumption that CA is headed for recession to support your claim.
I've made exactly this kind of mistake in the past (making assumptions based on an inadequate number of observations... - Sebastian
You aren't in California are you? I'm hard pressed to think of an economic indicator anecdotal or otherwise that refutes the idea that California is in the very early stages of recession.
I'm with rich; SDS is a very nice double inverse ETF of the S&P 500. No margin calls, with all the benefits of a short. My SDS money is for long-term use (i.e., for use during the upcoming depression), so there's no need for me to pull it out prematurely.
For me, the only cost of SDS during this stock market runup is the running commentary from my wife, needling me to get us back into gold.
--
Not Just US Recession, But Misery On the Rise...
Americas Misery Index Way Ahead of France & Italy
David Rosenberg: US [Misery Index, compiled by Merrill Lynch] still close to historic highs. There has been virtually no improvement in the US misery status since we first rolled out this measure in early 2005, with the index still very close to 14-year highs.
Fourteen years ago (when the data starts) Italy was far ahead (in misery) of France and France was far ahead of the US. Situation has totally reversed. The rise of misery began after 1999 according to the data. Does it have anything to do with the Scam Market bubble burst followed by bad policies of the Bush-Greenspan-Bernanke regime? We know what lies ahead for China and India with their stock bubbles.
Cant we Americans be humble and learn from the French, or even Italians, about how to run the govt. and the economy? Looks like we are too busy lecturing to the rest of the world how to run govt and economy.
Jas,
In the mid 90's the French govt warned the US that they had thwarted a plan to fly passenger airliners into the Eiffel Tower. No action taken. "What a ridiculous warning. Stupid French, what do they know?"
So I guess Oil being at just under $84 Dollars is really no big deal...And yet we have fools telling us to get into stocks....please...Although I do like the ETF.
I'm with rich; SDS is a very nice double inverse ETF of the S&P 500.
Thanks, jg, but don't put too much into SDS. The TTM P/E of the S&P 500 is 18.08. The next fiscal year estimate is 16.55, which means not much earnings growth is priced in. S&P is heavily weighted to large multi-nationals that can benefit from a crashing dollar.
I would recommend TWM instead, double inverse of Russell 2000. TTM P/E is 41.42 and next fiscal year estimate is 27.77, which means huge earning growth is expected and priced in.
If large-caps are now at near zero Q3-4 earnings growth, small caps have to be at -2 to -4% EPS growth. There is so much garbage out there is small caps right now it's unbelivable. Way too many highly leveraged balance sheets, too many fancy private financing gimmicks at high borrowing cost and potential death spirals, too much earnings enhancement gimmickry and too much domestic/dollar exposure. U.S. small caps today = dot.coms in 1999.
If the market starts to unwind, there'll be plenty of opportunities to short on the way down, the smart play is to stay out of the way; i.e., capitulation.
Trying to fight the tape is a guaranteed way to lose money(ask Sebastian re: NEW), the idea is to analyze the data, wait for the inflection point to come, then ride the coattails.
I'm with rich; SDS is a very nice double inverse ETF of the S&P 500. No margin calls, with all the benefits of a short. My SDS money is for long-term use (i.e., for use during the upcoming depression), so there's no need for me to pull it out prematurely.
I think the inverse ETFs are a pretty good idea, but keep in mind these are based on stock swap derivatives. You're no longer involved with stocks here.
When you short stocks, you raise cash and get paid up front (assuming you're right).
With stock swaps there's always a chance the counterparty will go bust and you won't get paid if there's a real market rout.
Also, I believe the way that these swaps are settled will cause them to bleed money in a sideways market (actually the prospectus for some of these funds say that outright).
How do short and double-short ETF's work? It seems too good to be true that, unlike regular short sales, your risk is limited if the prices head for the moon. Is there a risk that, in a crash, they might not pay off the way you expect? For that matter, in an ordinary short sale, can you collect your profit if trading in the stock is suspended after the company takes a big hit?
This would be interesting to check out all the states. I found it readily for Pennsylvania, and what do you know, good news! The Dept of Revenue reports 9/07 sales tax receipts were $688.3 million, $9 million above the estimate; y-t-d $2.2 billion, $20.5 million above estimate.
Unfortunately, if you ignore the estimates and look back to the 9/06 press release, sales tax receipts were $706 million, $2.2 billion y-t-d. So, Pa. sales tax is down 2.5% Sept 06 to Sept 07, and running even year-to-date. (Come to think of it, it was a very warm September here in Pa.)
Realty transfer taxes in Pa. were $35.5 million Sept 07 compared to $52.3 million Sept 06 (down 32%), and $142.5 million y-t-d 07 vs. $164.3 million y-t-d 06.
Well, Secretary Paulson and gang are fighting hard against the 2 p.m. downturn: S&P 500 futures activity is already higher than it was entire day yesterday.
"U.S. Treasury Secretary Henry Paulson said on Thursday that he backed a strong dollar and that currency rates should be set by markets"
In other words if the markets does not like the US dollar, the US dollar will go down.
Foreign investors bailing and the US welcomes inflation by way of imports.
We have already seen some currencies unplugging, and some soveriegn funds unloading US treasuries. The rise in the price of oil/bbl is not about increased oil prices but rather a lower US dollar.
...and California is the world's 5th or 6th largest economy. It's a pretty big deal to see that sales have actually declined there. It's bound to have a slowdown effect on the lead mines in China, for one thing.
Thanks, jg, but don't put too much into SDS. The TTM P/E of the S&P 500 is 18.08. The next fiscal year estimate is 16.55, which means not much earnings growth is priced in. S&P is heavily weighted to large multi-nationals that can benefit from a crashing dollar.
I agree that there are better things to short, but on a historical basis (10 year earnings) the S&P is where it was in 1929. The only time it was more overvalued was prior to the 2000 turnaround.
We're seeing now how quickly leverage-based earnings can evaporate. And that's accounted for a lot of the recent S&P 500 earnings growth (notably in the financials).
More Junk:
NEW YORK, Oct 11 (Reuters) - Moody's Investors Service on Thursday cut its ratings on home builders Centex Corp (CTX.N: Quote, Profile, Research) Lennar Corp (LEN.N: Quote, Profile, Research) and Pulte Homes (PHM.N: Quote, Profile, Research) to junk status, saying it expects bleak housing industry conditions to linger at least until 2009.
The downgrades affect about $9.4 billion of debt and $3.25 billion of commercial paper authorizations, Moody's said.
Key problems facing home builders include rapidly declining orders, high housing inventories, disruptions in the mortgage market and heavy cancellations, Moody's said in a statement
NEW YORK (Reuters) - Most U.S. retailers reported dismal September sales that missed Wall Street's expectations, hurt by unusually warm weather, prompting some to cut their outlook for the entire quarter.
"The weather had a great deal to do with what happened... Who wants to buy a heavy coat when the temperature outside is 100 degrees (Fahrenheit)?" said Kurt Barnard, president of Barnard's Retail Consulting Group...
NEW YORK (Reuters) - About half of all states are collecting less from their sales taxes than expected, which could signal a recession lies ahead as the home market fades.
The receding housing boom could then reveal the underlying economic weakness it had camouflaged, according to Philippa Dunne, a co-editor with the New York-based Liscio Report, published by an economic research firm.
To Dunne, the recession warning light is flashing yellow.
"There are a lot of unknowns, but the state sales tax receipts are pretty much at recession levels," she said, adding about 25 states are seeing disappointing sales tax revenues.
How in the world did sales tax collections go down when all the jobs created in the economy over the last year were in the food and drink industry? Does Clifornia not have a meals sales tax?
How do short and double-short ETF's work? It seems too good to be true
They are not too good to be true. They are just an effective way to short weakness.
They track pretty closely to indexes, but they double the daily change in the opposite direction. If the S&P 500 is up 1% in a day, the double-short ProShares (SDS) will be down 2% that day (or so).
If the S&P were to lose 10% over a period, SDS can be expected to be up 20%, and vice versa. There are no dividends or margin calls to deal with, as in shorting individual stocks. Short squeezes aren't a big deal, because you're dealing with diversified indexes.
Your first investment in a 2X short ETF should be with half the money you would normally invest, just to get comfortable with the risk/volatility. My best rec now would be SRS, which is double short the Dow Jones Real Estate Index (mostly CRE).
Volume is really picking up here on the downside - not a good sign for equities. Maybe tonight is the night the China equity bubble finally starts to deflate?
NEW YORK, Oct 11 (Reuters) - Moody's Investors Service on Thursday cut its ratings on home builders Centex Corp (CTX.N: Quote, Profile, Research) Lennar Corp (LEN.N: Quote, Profile, Research) and Pulte Homes (PHM.N: Quote, Profile, Research) to junk status, saying it expects bleak housing industry conditions to linger at least until 2009.
This is a kiss of death for these companies. Many institional investors (pensions)now are required to sell their bonds out of portfolio. Their IPSs don't allow junk.
Their cost of financing will rise above a level that makes any sense for homebuilders. Without access to financing, they are just corporate shells. They can't buy land, which is the key to coming back strong in a couple of years.
They are not too good to be true. They are just an effective way to short weakness.
They track pretty closely to indexes, but they double the daily change in the opposite direction. If the S&P 500 is up 1% in a day, the double-short ProShares (SDS) will be down 2% that day (or so).
If the S&P were to lose 10% over a period, SDS can be expected to be up 20%, and vice versa. There are no dividends or margin calls to deal with, as in shorting individual stocks. Short squeezes aren't a big deal, because you're dealing with diversified indexes.
Your first investment in a 2X short ETF should be with half the money you would normally invest, just to get comfortable with the risk/volatility. My best rec now would be SRS, which is double short the Dow Jones Real Estate Index (mostly CRE).
Rich,
I actually called ProShares to try to find out more about the counterparties and their creditworthines, but they wouldn't tell me anything I didn't already know. They thought I was a hedge fund manager, and I went along with it to try and pump them for information.
From what I could determine the swaps are "settled" on a daily basis (the gains or losses change hands) so that should make them relatively safe, but I'm still wary.
And again, there's something to be said for actually shorting stocks and getting cash in hand up front. But I think the short ETFs are a better idea for most people.
"Too good to be true" always scares the hell out of me though.
Regarding the business cycle, I'm surprised that no one posted a link to this Bloomberg article about declining ad revenues in Businessweek and Fortune. Apologies if this is a doublepost.: BusinessWeek magazine is undergoing a facelift and adding stories on new products and personal finance in an attempt to attract readers after advertising pages fell 20 percent last quarter.
...
Business magazines have been hit by the decline in U.S. auto sales, which led to a 5.1 percent drop in the number of magazine ad pages purchased by the industry in the second quarter, according to the bureau.
Time Inc.'s Fortune suffered a 13 percent drop in ad sales in the second quarter as the number of pages sold slid 20 percent, the bureau said. Closely held Forbes and the Economist, partly owned by Pearson Plc, bucked the trend and increased ad revenue by more than 10 percent. Industrywide, U.S. magazine ad pages declined 1.9 percent in the same period.
If the S&P were to lose 10% over a period, SDS can be expected to be up 20%, and vice versa. There are no dividends or margin calls to deal with, as in shorting individual stocks. Short squeezes aren't a big deal, because you're dealing with diversified indexes.
Also you get a dividend from the interest on the cash positions these funds hold. These funds don't own anything per se. They're engaged in agreements to swap money back and forth. The value of the fund is just sitting around in cash, if I did my homework correctly.
If the S&P were to lose 10% over a period, SDS can be expected to be up 20%, and vice versa.
Also, in general this is not true, unless the period is one day. For example, I am looking at a 6 month period where the SPY is up 15% and SDS is down 25% (not 30%). Multiply 1.02 * 0.98 several times in a row and you'll see why this is the case.
i'm in the process of rebalancing my CRE short portfolio from short IYR to long SRS. can be held for longterm capital gains as well. what kicked me over was the dividend bills i kept getting from being short IYR on a huge position. i also will like the doubling effect as well when the dam breaks.
this swing reminds me of the first discount rate whack the Fed did to save the financials which was about a 700 pt swing. that i'm convinced prevented a huge crash. it whacked 50% off my 100% yearly gain at the time. i was pissed. this just goes to show you how tenuous the mkts are. they can't survive w/o the Fed juice.
Which rating agency will be the first to downgrade American Debt? (They better not do it with dumbass still in office, or they are likely to be arrested for treason.)
"If you believe the best time to buy stocks is when they are crashing and depressed, the best time to short them is when they are heading into a bubble."
Keynes dealt with that when he said "markets can stay irrational longer than you can stay solvent."
"Looks like Paulson is dribbling again....They know something big is on the horizon"
Why would anyone think that an administration that lied us into a war would tell the truth about the dollar? So you call for a strong dollar while you make sure it depreciates constantly.
I've been thinking hard about SRS (and now the Russell 2000 short ETF TWM).
but I get a little worried come October 30/31...
I just feel like the Fed has spoken, and no stock drops will be allowed. So should I jump in, then sell on October 29... then jump back in again on november 1???
I'm just waiting for the 'surprise' 50basis point drop again...
I thought SRS was a great buy at 79.00 a couple of days ago, and a pretty good buy at 79.50 today.
TWM hit it's 52 week low today. I guess that's a buy, although extrapolating the action from one day is never wise. Heck, yesterday even the bears noted the apparent underlying buy of the market.
I've already been scorched in the "worst month for the S&P, historically." I need to see that VIX perk up a little more before diving into the short side again.
You want to see a real one state recession, stop by Michigan and stay a while. It didn't start just a few months ago either. I agree that California is showing the signs, but we already have all the posts put in the ground and signs are mounted on them.
To put this into a little context, using BEA Gross Domestic Product by state for 2005 as a percentage of the total US GDP.
1. California 13%
2. Texas 8%
3. Florida 5%
Michigan 3%
So with CA joining FL and MI in a recession you have 21% of our total GDP in recession.
Some more context. Florida breaks their taxable sales out by categories. Below is a table that shows the change in Taxable Sales for the month of July 2007 compared to the month of July 2006 (latest month detailed info available).
Total Sales - 2.5%
Auto & Acc. Sales -11.4%
Consumer Durables -10.0%
Tourism & Recreat + 0.7%
Consumr Nondurable + 7.9%
Building Investmt -18.5%
Business Investmnt - 2.0%
One can see that long-term purchases are getting killed. It will be interesting to see if California follows these same trends.
So goes California, so will go the nation.
Are there stats for the number of loans in each period? Suspect the number of loans could be down more than 7%.
The denial on Wall Street is amazing - lower profits (check) lower dollar (check) credit subprime problems unresolved (check) housing price collapse (check) car sales down and Ford/GM laying off workers (check). . .hmmmm and market hits 14,100 go figure!
You heard it here first - BNSF railworkers talking to me last weekend, "container traffic is way down, but the railroads don't want anyone to know because the stockholders would bail.". . .
what about florida , CR? i read somwhere sales were off by ~5% yoy.
fl+cal population is (60 mil)~20% of US population..but the % of US pop growth is much much larger..(alsi both states may have as much as ~10 mil illegals as well)
Bloomberg.com:
Government Bonds
What's that smell
The new economics, known as neo-conomics, says that recessions are a good thing because they lead to rate cuts and rate cuts mean the Dow goes up.
Neo-conomics teaches that the Dow goes up when things are bad because it indicates future rate cuts and the Dow goes up when things are good because, duh, they are good and that means up.
Basically the Dow always goes up now. So everybody can buy stock and get rich. This is similar to the neo-conomics theory of 3 years ago that everybody could buy an investment house and get rich because real estate always goes up.
The dumb liberals screwed up the neo-conomic housing boom with a bunch of reality-based negative talk and worry. But, theory indicates that the Infinite Up Dow Effect is immune to reality. So buy stocks now and get rich!! Hurry, 'cause they aren't printing any more stock certificates.
The dollar is taking a serious hit today..did i miss something?? And gold is at $751. Great for Exports...Wait thats right we have non..
Consumption is still good. It is just that consumers have switched to e-retailers.
Per the link, California ran a budget deficit of $1.9B in September, and has only $8.4B remaining available on a line of credit.
Breaks my sociopathic heart that the socialists in Sacramento may have to slash spending (or try to push through emergency tax increases) in as little as four months.
zarmao:
Thanks for the quick lesson right out of the book of fools, maybe Ill take you up on your lesson and go out and buy 500 shares of Countrywide...after all it must go up right?..
No thanks Ill keep my money in my pocket away from you Neo-con shills.
borkafatty, quit bringing up the skyrocketing price of gold; I sold mine in March, expecting that the market would go down faster than gold would go up (and that I would make more money by being in SDS).
So much for my short-term prognosticating ability.
Somewhat off topic but while getting a ride back to the VW/BMW car dealer yesterday I asked the guy driving how the car biz was these days. I told him that I know a guy who drives the trucks that pick up new cars at the docks and bring them to the dealerships. He used to work 7 days a week. Now he says they are done by thursday. The guy said two things that I thought were interesting.
1) "We're doing alright and the other foreign cars dealers are doing alright. But I can't imagine the US cars are selling. I mean, "who the hell buys a Mercury".
And then he said
2) "It seems everyone has less money these days. Even people who have money don't have money like they used to".
While waiting to pick up my car I was checking out a used M3($49,000) and a used M5 ($90K). Both had less than 10K on them. The sales guy told me they were both traded in for lower cost models.
INO - (CBOT:ER.Z07.E) Price Chart and Quote
can someone explain what this is?
borkafatty -
According to the CIA factbook:
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2078rank.html
U.S. exports are just a little over $1 trillion more than "none".
Just sayi
At this rate, and it is likely to worsen, California's budget deficit will double to $4B. As noted earlier, as California goes, so goes the nation. Yup, just in time for the early retirement segment of the all those unfunded liabilities....that will start needing funding in about say 3 months...
It'd be really interesting if we had access to other states' sales tax receipts too - wonder if this is impacting other states at the same time. Do all states with sales taxes do these reports?
The denial on Wall Street is amazing - lower profits (check) lower dollar (check) credit subprime problems unresolved (check) housing price collapse (check) car sales down and Ford/GM laying off workers (check). . .hmmmm and market hits 14,100 go figure!
The only thing the stock market needs to go up is easy credit for leverage, and they've got plenty of that.
We can always go knockin on doors at the upper end of broadwaySF... look for handouts
ac: 'The only thing the stock market needs to go up is easy credit for leverage, and they've got plenty of that.'
I agree, ac. But, that will change, I think, with the first major bond default.
time for the cramer melt down vid again...
just for fu
jg
no,no,no
http://www.occ.treas.gov/ftp/deriv/dq406.pdf
pg 5
no defaults , no losses, ever
shame on you...
Hey the Dow is up 100 points today, so who cares?
What happened since the Aug. 18th low is the most vigorous stock market rallye since spring 2003. It's amazing. These kinds of rallies last longer than a year. I think this by itself shows there cannot be a recession in the next 18 months.
O-Joe
Oct. 11 (Bloomberg) -- U.S. stocks rallied, sending benchmark indexes to records for a second time this week, after Wal-Mart Stores Inc. raised its profit forecast and a government trade report suggested economic growth is accelerating.
Maybe the housing bust is good for the economy? I mean facts are facts.
--
Thank you, CR!
I have been saying this for almost two months.
OT...
David Rosenberg, ML, 10/11/07: Breaking News -- 3Q earnings on the precipice of turning negative We saw a several profit warnings from companies yesterday, which prompted Thomson Financial (who track earnings) to say that S&P 500 earnings have a good chance of turning negative. Not that it wouldnt take much, with the current 3Q tracking at just 0.1% YoY (we will see a slew of earnings reports in the next several weeks). Indeed, if earnings were to decline, this would be the first negative print since the end of 4Q01.
According to a Wall Street strategist: "Earnings don't matter, what matters for the market is whether or not Fed would cut rates." Yes, fed would cut rates all the way to zero as the depression develops in 2008. Bulls, charge!
Jas
O-Joe,
And where else is the money supposed to go?
The housing bubble is gone. The only assets that can inflate are the stock market and commodities markets.
Too much money chasing way, way too few assets - and the money is in the hands of the wrong people to help the economy.
This is what happens when you siphon all the wealth to the top.
"Money is like manure - it's no good unless it is spread around encouraging young things to grow".
Otherwise, it stinks.
Sounds like CA is far from being alone:
State sales taxes flash recession warning
The article notes that "about 25 states are seeing disappointing sales tax revenues."
Recession=lower interest rates=higher stock market. Ergo the stock market will go up in a recession. Then, when the economy recovers it will also go up. And when the next downturn comes, since that will mean lower interest rates again, it will go up some more. Give up on real estate. Put all your money in the stockmarket; it never goes down.
Indeed, James. VMW for everyone!
That said, you're not likely to stay solvent fighting a bubble.
Dow and S&P weightings and the resulting indexes reflect the dollars loss as a value holder. The majority of the market weights of both indexes are composed of strong multinationals with dollar nuetral earnings, that is a third from Europe, a third from Asia, and a third from here. So while our absolute earnings go down they are hedged by thier non us Earnings. I can't help but think this a part of the reason for the froth in us large cap market indexes.
IMO, the increasing value of the domestic US stock market is currently caused by international and emerging markets going up, not the other way around. Once China or some other country has a sell-off, or if the bond market sells off, then we'll have trouble again, be patient.
--
In $ terms isn't CA 15% of the US economy?
CA's Res RE is above 25% of the the total US Res RE. Home sales are down close to 60% from 2005. Oh boy!
Jas
I can't believe tanta and Cr have not posted commentary on rhe rental effect mentioned in the WSJ this morn.
The "velocity" of money in California is clearly slowing. 30 day pay, even slow pay is common now. Few still take advantage of my 1/2% 10 day discounts. The kitchen&bath guys are idle. Even the last of the specialty construction crowd; stone and landscaping can be had on short notice.
I suspect that the reporting period just barely caught the leading edge of a very severe decline in governmental revenues. The next datum will be around Dec 20th when the counties report property tax bi-annual payments (Due Dec 10th). There is generally a 10% late fee so there is a strong incentive to pay if you can. DQs here will probably send state and local agencies into a round of emergency COPs and budget cuts.
Amazingly Moodys just today upgraded the University of California's credit rating to Aa1.
The Daily Bruin | Error
There's no chance of California keeping up the canard any longer. Gray Davis was recalled in great part for overspending. Since then overspending has increased as has debt and defered obligations. There's is in my opinion the largest disconnect twixt the governing and governed since the 1760s.
--
FL has been in recession for several months.
The next President would promise to declare CA and FL federal disaster areas (due to collapse of housing). These two states combined have huge electoral vote.
Jas
Looking at Countrywides press release this morning, it is interesting to note that they say headcount is barely decreased...
http://media.corporate-ir.net/media_files/nys/cfc/13_Month_Statistical_Data_092007.pdf
But other sites are reporting layoffs right and left... any idea what is happening?
I don't understand why so many smart people buy into this logic. If you believe the best time to buy stocks is when they are crashing and depressed, the best time to short them is when they are heading into a bubble.
In your lifetime, you may never again have an opportunity to short the smallest, crummiest companies in the U.S. in the most troubled industries, selling at P/Es of 40+, at a time when earnings are deteriorating so fast.
Remember: Stocks usually are leading indicators. This time, they aren't. Stocks usually have risk factors priced in. Now they don't.
Earnings don't matter now?
Maybe not. But they will.
They surely will at some point in time not far off.
That said, you're not likely to stay solvent fighting a bubble.
I don't understand why so many smart people buy into this logic. If you believe the best time to buy stocks is when they are crashing and depressed, the best time to short them is when they are heading into a bubble.
Excecpt that you can lose more money than you have shorting stocks. If you tried to short tech stocks when the NASDAQ was at 2500 in the late 90s, you would have lost your entire portfolio.
Baloney. You would be rolling in dough.
You would only have lost your whole portfolio if you didn't have the liquidity to meet margin calls. In short ETFs, there are no margin calls. You just buy and hold them. No hurry.
The dollar is taking a serious hit today..did i miss something?? And gold is at $751.
http://www.financialsense.com/fsu/editorials/dore/2006/disaster.mp3
Remember this, if people thought it was rational for homes to appreciate 20% a year for many many years, then they'll think it's rational for stocks to appreciate 50% a year for many many years. The spectulative frenzy keeps growing but it just leaps from one asset class to another. At some point, this will all come to an end.
I predict the stock market will go into reverse in a big way before the end of the month. We had this earlier in the summer -- For awhile, the market would go up on either good or bad news. Then, it turned around and would good down on either good or bad news. Whatever is driving the market these days is liable to change for good reason...
Another problem looming is of course the inflation in the pipeline. Take a look at Burgerflation (apologies to Economist)
Oct. 2006 Big Mac $2.79
Oct. 2007 Big Mac $5.15
That's an 84% increase in one year! More fuel for the inflation v. delfation discussion.
Oops. for no good reaso
Baloney. You would be rolling in dough.
You would only have lost your whole portfolio if you didn't have the liquidity to meet margin calls. In short ETFs, there are no margin calls. You just buy and hold them. No hurry.
rich | 10.11.07 - 1:51 pm | #
I must agree with Rich. The ETF's are the waty to go. You can only lose what you have invested. Unlike shorting indivdual stocks.
CR said: "Based on sales tax revenue, it now appears that the California economy is in recession."
I can't believe I'm the only one who even thinks to post on this point.
Looking at your chart, CR, there's only one (confirmed) recession year shown, 2001. Without showing CA sales tax revenue numbers during mid-cycle slowdowns and other recessions, you don't have anything other than your assumption that CA is headed for recession to support your claim.
I've made exactly this kind of mistake in the past (making assumptions based on an inadequate number of observations or without confirmation from independent data), and I promise you that this one will come back to haunt you. Mid-cycle economic slowdowns (and minor stock-market corrections, for that matter) are very deceptive, leading the unwary to think something worse is coming.
Sebastia
add MI to CA and FL
already in recessio
O-Joe,
And where else is the money supposed to go?
The housing bubble is gone. The only assets that can inflate are the stock market and commodities markets.
Too much money chasing way, way too few assets - and the money is in the hands of the wrong people to help the economy.
This is what happens when you siphon all the wealth to the top.
"Money is like manure - it's no good unless it is spread around encouraging young things to grow".
Otherwise, it stinks.
Hear Hear!!
Looks like Paulson is dribbling again....They know something big is on the horizon
Business & Financial News, Breaking US & International News | Reuters.com
...assumption that CA is headed for recession to support your claim.
I've made exactly this kind of mistake in the past (making assumptions based on an inadequate number of observations... - Sebastian
You aren't in California are you? I'm hard pressed to think of an economic indicator anecdotal or otherwise that refutes the idea that California is in the very early stages of recession.
I'm with rich; SDS is a very nice double inverse ETF of the S&P 500. No margin calls, with all the benefits of a short. My SDS money is for long-term use (i.e., for use during the upcoming depression), so there's no need for me to pull it out prematurely.
For me, the only cost of SDS during this stock market runup is the running commentary from my wife, needling me to get us back into gold.
--
Not Just US Recession, But Misery On the Rise...
Americas Misery Index Way Ahead of France & Italy
David Rosenberg: US [Misery Index, compiled by Merrill Lynch] still close to historic highs. There has been virtually no improvement in the US misery status since we first rolled out this measure in early 2005, with the index still very close to 14-year highs.
Fourteen years ago (when the data starts) Italy was far ahead (in misery) of France and France was far ahead of the US. Situation has totally reversed. The rise of misery began after 1999 according to the data. Does it have anything to do with the Scam Market bubble burst followed by bad policies of the Bush-Greenspan-Bernanke regime? We know what lies ahead for China and India with their stock bubbles.
Cant we Americans be humble and learn from the French, or even Italians, about how to run the govt. and the economy? Looks like we are too busy lecturing to the rest of the world how to run govt and economy.
Jas
Anyone know what just moved the markets (LOL ok any wild guesses)?
Just lost half the tape or better, NASDAQ went red?!
Jas,
In the mid 90's the French govt warned the US that they had thwarted a plan to fly passenger airliners into the Eiffel Tower. No action taken. "What a ridiculous warning. Stupid French, what do they know?"
Terror from the sky - Jane's Security News
So I guess Oil being at just under $84 Dollars is really no big deal...And yet we have fools telling us to get into stocks....please...Although I do like the ETF.
Thanks, jg, but don't put too much into SDS. The TTM P/E of the S&P 500 is 18.08. The next fiscal year estimate is 16.55, which means not much earnings growth is priced in. S&P is heavily weighted to large multi-nationals that can benefit from a crashing dollar.
I would recommend TWM instead, double inverse of Russell 2000. TTM P/E is 41.42 and next fiscal year estimate is 27.77, which means huge earning growth is expected and priced in.
If large-caps are now at near zero Q3-4 earnings growth, small caps have to be at -2 to -4% EPS growth. There is so much garbage out there is small caps right now it's unbelivable. Way too many highly leveraged balance sheets, too many fancy private financing gimmicks at high borrowing cost and potential death spirals, too much earnings enhancement gimmickry and too much domestic/dollar exposure. U.S. small caps today = dot.coms in 1999.
If the market starts to unwind, there'll be plenty of opportunities to short on the way down, the smart play is to stay out of the way; i.e., capitulation.
Trying to fight the tape is a guaranteed way to lose money(ask Sebastian re: NEW), the idea is to analyze the data, wait for the inflection point to come, then ride the coattails.
And where else is the money supposed to go?
http://www.wikinfo.org/index.php/Image:Uncle_Sam_%28pointing_finger%29.jpg
Buddy can you spare a dime?
I'm with rich; SDS is a very nice double inverse ETF of the S&P 500. No margin calls, with all the benefits of a short. My SDS money is for long-term use (i.e., for use during the upcoming depression), so there's no need for me to pull it out prematurely.
I think the inverse ETFs are a pretty good idea, but keep in mind these are based on stock swap derivatives. You're no longer involved with stocks here.
When you short stocks, you raise cash and get paid up front (assuming you're right).
With stock swaps there's always a chance the counterparty will go bust and you won't get paid if there's a real market rout.
Also, I believe the way that these swaps are settled will cause them to bleed money in a sideways market (actually the prospectus for some of these funds say that outright).
Oh, now you tell me, rich! I placed a huge bet on SDS back in March.
That makes sense, shorting the Russell instead of the S&P.
Me, I foresee a big panic out of stocks, hitting the S&P 500 in addition to the small caps. A replay of Oct. '29. That's my bet.
I could be wrong. But I think I've read about this movie before...
all three big tapes red and the R2K - things that make you go hmmmm - wazzup with the '1000 Year Bull Market?
OK what body floated to the surface where? Or did something big go down in the ME?
Apologies for the OT chatter BTW...
BS phat phingered the futures...
over sold sp500 ...
should read 1000, not 10000
RUMOR
Hedgies cashing out? Let the bear market begin....please!
How do short and double-short ETF's work? It seems too good to be true that, unlike regular short sales, your risk is limited if the prices head for the moon. Is there a risk that, in a crash, they might not pay off the way you expect? For that matter, in an ordinary short sale, can you collect your profit if trading in the stock is suspended after the company takes a big hit?
I stand by my earlier comment: We entered a recessionary phase in May 07.
Cramer!
This would be interesting to check out all the states. I found it readily for Pennsylvania, and what do you know, good news! The Dept of Revenue reports 9/07 sales tax receipts were $688.3 million, $9 million above the estimate; y-t-d $2.2 billion, $20.5 million above estimate.
Unfortunately, if you ignore the estimates and look back to the 9/06 press release, sales tax receipts were $706 million, $2.2 billion y-t-d. So, Pa. sales tax is down 2.5% Sept 06 to Sept 07, and running even year-to-date. (Come to think of it, it was a very warm September here in Pa.)
Realty transfer taxes in Pa. were $35.5 million Sept 07 compared to $52.3 million Sept 06 (down 32%), and $142.5 million y-t-d 07 vs. $164.3 million y-t-d 06.
Why would the S&P be the cause when the Nasdaq was ahead of the other indices going down?
Must be one fat finger.
Well, Secretary Paulson and gang are fighting hard against the 2 p.m. downturn: S&P 500 futures activity is already higher than it was entire day yesterday.
Intraday Futures Prices - Markets Data Center - WSJ.com
Baidu.com downgraded by JPM. GOOG, AAPL, etc getting whacked hard in sympathy.
"U.S. Treasury Secretary Henry Paulson said on Thursday that he backed a strong dollar and that currency rates should be set by markets"
In other words if the markets does not like the US dollar, the US dollar will go down.
Foreign investors bailing and the US welcomes inflation by way of imports.
We have already seen some currencies unplugging, and some soveriegn funds unloading US treasuries. The rise in the price of oil/bbl is not about increased oil prices but rather a lower US dollar.
"Baidu.com downgraded by JPM. GOOG, AAPL, etc getting whacked hard in sympathy."
As Marc Faber said, AAPL, GOOG, and RIMM are important to watch because a lot of retail investors have piled into these stocks.
Here, sales tax on autos amounts to half of collections, so slow auto sales without offsetting gains elsewhere would be enough to lower collections.
...and California is the world's 5th or 6th largest economy. It's a pretty big deal to see that sales have actually declined there. It's bound to have a slowdown effect on the lead mines in China, for one thing.
--
Barley: "stand by my earlier comment: We entered a recessionary phase in May 07."
My forecast as of Feb'07 was for Mar-May'07, but I was early on that. For the past two months it is Aug-Sep'07 and it looks good.
Jas
Thanks, jg, but don't put too much into SDS. The TTM P/E of the S&P 500 is 18.08. The next fiscal year estimate is 16.55, which means not much earnings growth is priced in. S&P is heavily weighted to large multi-nationals that can benefit from a crashing dollar.
I agree that there are better things to short, but on a historical basis (10 year earnings) the S&P is where it was in 1929. The only time it was more overvalued was prior to the 2000 turnaround.
We're seeing now how quickly leverage-based earnings can evaporate. And that's accounted for a lot of the recent S&P 500 earnings growth (notably in the financials).
I wonder what those UCLA Anderson guys have to say now.
Forbes.com File Not Found
"..California Will Avoid Recession .."
More Junk:
NEW YORK, Oct 11 (Reuters) - Moody's Investors Service on Thursday cut its ratings on home builders Centex Corp (CTX.N: Quote, Profile, Research) Lennar Corp (LEN.N: Quote, Profile, Research) and Pulte Homes (PHM.N: Quote, Profile, Research) to junk status, saying it expects bleak housing industry conditions to linger at least until 2009.
The downgrades affect about $9.4 billion of debt and $3.25 billion of commercial paper authorizations, Moody's said.
Key problems facing home builders include rapidly declining orders, high housing inventories, disruptions in the mortgage market and heavy cancellations, Moody's said in a statement
Jas: ...I think May will have been seen to be the tipping point.
It's always the weather ...
Yahoo! 404 - Page Not Found
Warm weather dampens retail sales
NEW YORK (Reuters) - Most U.S. retailers reported dismal September sales that missed Wall Street's expectations, hurt by unusually warm weather, prompting some to cut their outlook for the entire quarter.
"The weather had a great deal to do with what happened... Who wants to buy a heavy coat when the temperature outside is 100 degrees (Fahrenheit)?" said Kurt Barnard, president of Barnard's Retail Consulting Group...
-- Hiding Out
Reuters now saying:
NEW YORK (Reuters) - About half of all states are collecting less from their sales taxes than expected, which could signal a recession lies ahead as the home market fades.
The receding housing boom could then reveal the underlying economic weakness it had camouflaged, according to Philippa Dunne, a co-editor with the New York-based Liscio Report, published by an economic research firm.
To Dunne, the recession warning light is flashing yellow.
"There are a lot of unknowns, but the state sales tax receipts are pretty much at recession levels," she said, adding about 25 states are seeing disappointing sales tax revenues.
How in the world did sales tax collections go down when all the jobs created in the economy over the last year were in the food and drink industry? Does Clifornia not have a meals sales tax?
Sorry forgot to place the link:
State sales taxes flash recession warning
lots more volume on the drop then on the rise of today's market.
FNM:Legislation to expand portfolios temporarily to ease crunch
lots more volume on the drop then on the rise of today's market.
Yep. People want to get out, but not prematurely. Most of the recent rallies have been low volume short-squeezing.
The high volume tells you where people really think the market is headed.
I said that the stock market would go into reverse this month for no good reason. I meant today (-;
SPY down on volume TTFN
what the hell just happened an hour ago??
Billy Hill,
They are not too good to be true. They are just an effective way to short weakness.
They track pretty closely to indexes, but they double the daily change in the opposite direction. If the S&P 500 is up 1% in a day, the double-short ProShares (SDS) will be down 2% that day (or so).
If the S&P were to lose 10% over a period, SDS can be expected to be up 20%, and vice versa. There are no dividends or margin calls to deal with, as in shorting individual stocks. Short squeezes aren't a big deal, because you're dealing with diversified indexes.
Your first investment in a 2X short ETF should be with half the money you would normally invest, just to get comfortable with the risk/volatility. My best rec now would be SRS, which is double short the Dow Jones Real Estate Index (mostly CRE).
Volume is really picking up here on the downside - not a good sign for equities. Maybe tonight is the night the China equity bubble finally starts to deflate?
This is a kiss of death for these companies. Many institional investors (pensions)now are required to sell their bonds out of portfolio. Their IPSs don't allow junk.
Their cost of financing will rise above a level that makes any sense for homebuilders. Without access to financing, they are just corporate shells. They can't buy land, which is the key to coming back strong in a couple of years.
Hold on to your hats.
It was clearly my post telling shorts not to panic that triggered this move!
They are not too good to be true. They are just an effective way to short weakness.
They track pretty closely to indexes, but they double the daily change in the opposite direction. If the S&P 500 is up 1% in a day, the double-short ProShares (SDS) will be down 2% that day (or so).
If the S&P were to lose 10% over a period, SDS can be expected to be up 20%, and vice versa. There are no dividends or margin calls to deal with, as in shorting individual stocks. Short squeezes aren't a big deal, because you're dealing with diversified indexes.
Your first investment in a 2X short ETF should be with half the money you would normally invest, just to get comfortable with the risk/volatility. My best rec now would be SRS, which is double short the Dow Jones Real Estate Index (mostly CRE).
Rich,
I actually called ProShares to try to find out more about the counterparties and their creditworthines, but they wouldn't tell me anything I didn't already know. They thought I was a hedge fund manager, and I went along with it to try and pump them for information.
From what I could determine the swaps are "settled" on a daily basis (the gains or losses change hands) so that should make them relatively safe, but I'm still wary.
And again, there's something to be said for actually shorting stocks and getting cash in hand up front. But I think the short ETFs are a better idea for most people.
"Too good to be true" always scares the hell out of me though.
Democrats to push bills to ease subprime refinancing crunch
Democrats to push bills to ease subprime refinancing crunch - MarketWatch
The bill would give the two companies authority to buy $125 billion in subprime mortgages
Regarding the business cycle, I'm surprised that no one posted a link to this Bloomberg article about declining ad revenues in Businessweek and Fortune. Apologies if this is a doublepost.:
BusinessWeek magazine is undergoing a facelift and adding stories on new products and personal finance in an attempt to attract readers after advertising pages fell 20 percent last quarter.
...
Business magazines have been hit by the decline in U.S. auto sales, which led to a 5.1 percent drop in the number of magazine ad pages purchased by the industry in the second quarter, according to the bureau.
Time Inc.'s Fortune suffered a 13 percent drop in ad sales in the second quarter as the number of pages sold slid 20 percent, the bureau said. Closely held Forbes and the Economist, partly owned by Pearson Plc, bucked the trend and increased ad revenue by more than 10 percent. Industrywide, U.S. magazine ad pages declined 1.9 percent in the same period.
If the S&P were to lose 10% over a period, SDS can be expected to be up 20%, and vice versa. There are no dividends or margin calls to deal with, as in shorting individual stocks. Short squeezes aren't a big deal, because you're dealing with diversified indexes.
Also you get a dividend from the interest on the cash positions these funds hold. These funds don't own anything per se. They're engaged in agreements to swap money back and forth. The value of the fund is just sitting around in cash, if I did my homework correctly.
Now watch the Dow close in positive territory.
If the S&P were to lose 10% over a period, SDS can be expected to be up 20%, and vice versa.
Also, in general this is not true, unless the period is one day. For example, I am looking at a 6 month period where the SPY is up 15% and SDS is down 25% (not 30%). Multiply 1.02 * 0.98 several times in a row and you'll see why this is the case.
Now watch the Dow close in positive territory.
I won't be surprised.
ac, rich
i'm in the process of rebalancing my CRE short portfolio from short IYR to long SRS. can be held for longterm capital gains as well. what kicked me over was the dividend bills i kept getting from being short IYR on a huge position. i also will like the doubling effect as well when the dam breaks.
this swing reminds me of the first discount rate whack the Fed did to save the financials which was about a 700 pt swing. that i'm convinced prevented a huge crash. it whacked 50% off my 100% yearly gain at the time. i was pissed. this just goes to show you how tenuous the mkts are. they can't survive w/o the Fed juice.
Japan Debt Rating Raised By Moody's on Fiscal Policy (Update5)
Which rating agency will be the first to downgrade American Debt? (They better not do it with dumbass still in office, or they are likely to be arrested for treason.)
Turbo, don't get my hopes up!
ac and rich, thanks for the amplifying/explanatory comments on the inverse ETFs and Moody's downgrade; very helpful.
"We can always go knockin on doors at the upper end of broadwaySF... look for handouts
euphoria | 10.11.07 - 12:58 pm | # "
Hmmmm.... dibs on Gordon Getty's place!
"If you believe the best time to buy stocks is when they are crashing and depressed, the best time to short them is when they are heading into a bubble."
Keynes dealt with that when he said "markets can stay irrational longer than you can stay solvent."
N. Cali:
But Bernanke probably never eats Big Macs, so why should he notice?
"Looks like Paulson is dribbling again....They know something big is on the horizon"
Why would anyone think that an administration that lied us into a war would tell the truth about the dollar? So you call for a strong dollar while you make sure it depreciates constantly.
"Warm weather dampens retail sales"
I wonder if damp weather will warm them? Or does all weather dampen sales?
I've been thinking hard about SRS (and now the Russell 2000 short ETF TWM).
but I get a little worried come October 30/31...
I just feel like the Fed has spoken, and no stock drops will be allowed. So should I jump in, then sell on October 29... then jump back in again on november 1???
I'm just waiting for the 'surprise' 50basis point drop again...
I thought SRS was a great buy at 79.00 a couple of days ago, and a pretty good buy at 79.50 today.
TWM hit it's 52 week low today. I guess that's a buy, although extrapolating the action from one day is never wise. Heck, yesterday even the bears noted the apparent underlying buy of the market.
I've already been scorched in the "worst month for the S&P, historically." I need to see that VIX perk up a little more before diving into the short side again.
You want to see a real one state recession, stop by Michigan and stay a while. It didn't start just a few months ago either. I agree that California is showing the signs, but we already have all the posts put in the ground and signs are mounted on them.
To put this into a little context, using BEA Gross Domestic Product by state for 2005 as a percentage of the total US GDP.
1. California 13%
2. Texas 8%
3. Florida 5%
Michigan 3%
So with CA joining FL and MI in a recession you have 21% of our total GDP in recession.
Some more context. Florida breaks their taxable sales out by categories. Below is a table that shows the change in Taxable Sales for the month of July 2007 compared to the month of July 2006 (latest month detailed info available).
Total Sales - 2.5%
Auto & Acc. Sales -11.4%
Consumer Durables -10.0%
Tourism & Recreat + 0.7%
Consumr Nondurable + 7.9%
Building Investmt -18.5%
Business Investmnt - 2.0%
One can see that long-term purchases are getting killed. It will be interesting to see if California follows these same trends.
Can Canadians buy short ETFs in Canada?