Good Morning All,
The extremely oversold condition of world markets that existed at the outset of this week is well on its way to a massive self correction. I have suggested more than once in recent days that a great downside crescendo would quickly be followed by a "jaw dropping" (in the words of Art Cashin) upside rally. Well the selling climax was not quite as dramatic or satisfying as we would have preferred, at least not in U.S. markets, but it certainly was in Asia and in Europe. It has also been historically severe in commodities, currencies and much of the Toronto stock exchange. This may also be seen as the pre Obama bounce by some of the more biased observors, a group to which I proudly belong. This rally now appears to be gaining legs and may well project to mid January (bumps along the way) when indexes should well have recovered 50% of their bear market losses. After this point or this date, remembering the rule that you may get one or the other right but never both, we will reconsider but first of all enjoy the ride.
My next career has clearly been set out as last night's speech by Barack was right on the Copp target of "vision talk". McCain was not even mentioned, this was a soppy but brilliant exploitation of America's feel good, feel hope sentiment. Cheers to Obama's staff and to the man himself for running a superb campaign from start to finish. Now if I were a religious person I would be in prayer.
Friday, October 31, 2008
October 29th, 2008 Edition
Good Morning All,
Someone recently asked me when I thought the Dow Jones and TSX would trade back over 10,000, I replied November 5th, an answer that has since led me to wonder, considering yesterday's stunning reversal, whether I was being a touch too conservative. Well let us not get too carried away with the power of the recovery as it is still only one day old in North America and two around the world, after all we have seen this movie play as recently as October 12th and 13th. The positive and longer term take we have out of this action is that base for a greater move upwards is growing and that the breadth of this advance has put in place an extremely important building block. Look for today's rate cut by the FED to solidify markets by week's end after the initial rollercoaster ride it often encourages has subsided. This market may have begun to discount bad news and as a forward looking discounting mechanism...this is what it is supposed to do when it is about to change trend.
The Barack speech tonight does not have to be a game changer, it just has to be a good closer. These next few days are going to be nervous ones for many of us around the world and in America as the fear of a Karl Rove inspired upset interferes with our logic. Yes it should be a Democratic sweep, but if things were things and real was real....Al Gore not George Bush would have been President in 2001 and we would not have to talk about Iraq (someday soon) or deregulation concerns now.
A commodity price recovery has also begun and with it our loonie should return to the 85 cent level before your trips south.
Note: 79 years today since the crash of '29. Just a mean thought, not a serious one, to help start your day.
Someone recently asked me when I thought the Dow Jones and TSX would trade back over 10,000, I replied November 5th, an answer that has since led me to wonder, considering yesterday's stunning reversal, whether I was being a touch too conservative. Well let us not get too carried away with the power of the recovery as it is still only one day old in North America and two around the world, after all we have seen this movie play as recently as October 12th and 13th. The positive and longer term take we have out of this action is that base for a greater move upwards is growing and that the breadth of this advance has put in place an extremely important building block. Look for today's rate cut by the FED to solidify markets by week's end after the initial rollercoaster ride it often encourages has subsided. This market may have begun to discount bad news and as a forward looking discounting mechanism...this is what it is supposed to do when it is about to change trend.
The Barack speech tonight does not have to be a game changer, it just has to be a good closer. These next few days are going to be nervous ones for many of us around the world and in America as the fear of a Karl Rove inspired upset interferes with our logic. Yes it should be a Democratic sweep, but if things were things and real was real....Al Gore not George Bush would have been President in 2001 and we would not have to talk about Iraq (someday soon) or deregulation concerns now.
A commodity price recovery has also begun and with it our loonie should return to the 85 cent level before your trips south.
Note: 79 years today since the crash of '29. Just a mean thought, not a serious one, to help start your day.
October 28th, 2008 Edition
Good Morning All,
The late day disappearance of bids in Toronto may not have quite qualified as my projected capitulation but it may have to do because sometimes, as Robert Redford said in the movies, "life doesn't always work out the way you think it will". New York on the other hand was crescendoless as the relatively tiny fallback at day's end was unconvincing. All that being written, it is interesting to note that a "V" shaped market performance over the last pair of days in Asia may have provided us with the fuel required for a sustained rally in Europe and North America. Futures are much higher in New York at this time and promise a memorable opening. To this end I repeat our Art Cashin quote of last week, "when this market turns, the upside will be jaw dropping". No promises yet, but conditional hope that we may have arrived at the pre election rally date.
Barack Obama has reserved 30 minutes of air time tomorrow night and I expect a different type of speech than the standard fare with which we have all become fidgety. His campaign has been a masterfully executed exhibition of political acumen since its outset in Springfield Illinois a century ago, or so it would seem. The no panic serenity shown during the times of crisis with either Hillary, McCain or even during the Palin surge speaks well of both his character and his management skills given the fact that his original team remains in place and on target. So tomorrow night and through the weekend I believe we should look for the "vision thing" as opposed to a trash the opposition one, wherein Barack attempts to raise the bar on expectation, a message not just of change but of hope and the no nonsense actions of what it will take to achieve a better way.
On the other side it appears that the McCain Palin ticket is imploding as the infighting has brought the none too secret personal ambitions of Sarah barracuda to the fore. This is what McSurge gets for putting the campaign first, belieing his slogan to put the "country first". We are now about to see what happens to someone whose reach exceeds their grasp as the real Sarah emerges. I may appear to be out of line in some circles but the candidacy of this ego centric, vindictive witch has posed, and until election day will continue to pose a clear and present danger to both America and the world.
This busy week will end an incredible month. Tomorrow we are likely to top it off with a 50 basis point cut by the Federal Reserve and another rock and roll day. Perspective during times such as these isn't everything, to paraphrase Vince Lombardi, its the only thing.
The late day disappearance of bids in Toronto may not have quite qualified as my projected capitulation but it may have to do because sometimes, as Robert Redford said in the movies, "life doesn't always work out the way you think it will". New York on the other hand was crescendoless as the relatively tiny fallback at day's end was unconvincing. All that being written, it is interesting to note that a "V" shaped market performance over the last pair of days in Asia may have provided us with the fuel required for a sustained rally in Europe and North America. Futures are much higher in New York at this time and promise a memorable opening. To this end I repeat our Art Cashin quote of last week, "when this market turns, the upside will be jaw dropping". No promises yet, but conditional hope that we may have arrived at the pre election rally date.
Barack Obama has reserved 30 minutes of air time tomorrow night and I expect a different type of speech than the standard fare with which we have all become fidgety. His campaign has been a masterfully executed exhibition of political acumen since its outset in Springfield Illinois a century ago, or so it would seem. The no panic serenity shown during the times of crisis with either Hillary, McCain or even during the Palin surge speaks well of both his character and his management skills given the fact that his original team remains in place and on target. So tomorrow night and through the weekend I believe we should look for the "vision thing" as opposed to a trash the opposition one, wherein Barack attempts to raise the bar on expectation, a message not just of change but of hope and the no nonsense actions of what it will take to achieve a better way.
On the other side it appears that the McCain Palin ticket is imploding as the infighting has brought the none too secret personal ambitions of Sarah barracuda to the fore. This is what McSurge gets for putting the campaign first, belieing his slogan to put the "country first". We are now about to see what happens to someone whose reach exceeds their grasp as the real Sarah emerges. I may appear to be out of line in some circles but the candidacy of this ego centric, vindictive witch has posed, and until election day will continue to pose a clear and present danger to both America and the world.
This busy week will end an incredible month. Tomorrow we are likely to top it off with a 50 basis point cut by the Federal Reserve and another rock and roll day. Perspective during times such as these isn't everything, to paraphrase Vince Lombardi, its the only thing.
Monday, October 27, 2008
October 27th, 2008 Edition
Good Morning All,
The following thoughts may not be music to your ears but bear with the story for a moment because like all past market tales, it has a happy ending. Friday did not prove to be, as we opined, "the mother of all capitulations day" but to be fair we did give it until this week to occur, so let's compare the last two months of market devestation to the first movements of a Mannheim school symphony and today's worldwide declines to the fourth and final crescendo. Or even more heart rendering, how about an old Roy Orbison love song that begins in tears and builds to an echoing throb of victory "as the market turned and walked away with me". Okay so that wasn't quite the line but some literary license is surely allowable during times such as these.
On the positive side Bill Gross, reputedly the smartest bond guy around, said this morning that intervention is working and that he expects 3 month LIBOR to drop below 3% very soon. This is important news because recession or not, it must be seen that the solutions being put in place are having such an effect thereby limiting the potential of the coming economic horror show to something manageable.
As the calendar moves toward November 4th we can look forward to a pre election rally that will front run an Obama victory. It is also possible that markets can turn higher without an American capitulation day but it would be easier for all if such an event, no market how intimidating it looks at the time, would occur. This water drip torture is worse than a final shake out. The process continues.
Friday, October 24, 2008
October 24th Edition
Good Morning All,
Well buckle your seat belts everyone and get ready to witness a major piece of history. World markets are down double digits (percentage wise) and S&P 500 futures are down limit and thereby closed through to the market opening. This scary scene may last part of the day, all day or even through to Tuesday morning but by the time it stops it will have discounted the end of the world. We have spoken of capitulation day before and even seen a few in our market lifetime, October 24 is shaping up to be the mother of such events. The good news is that it will soon be over and that the rebound, to quote floor trader Art Cashin, "will be jaw dropping". None of us can put a number or a time on the real bottom, we will just have to know it when we see it. Remember too that you don't have to catch the absolute low in order to win, nor do you have to be a hero. One week from now let's hope we are wondering what it was all about.
He who panics first, panics best. He who panics last is left holding a small empty bag. This is about markets ...not the economy. This transfer of wealth is not just from the middle class to the already wealthy but from the newly rich to the super rich...and more certainly to the cash rich sovereign funds. Be on the side of those who advantage themselves from such opportunity as this is not just a lifetime event we are witnessing but a centennial one.
Alan Greenspan finally admitted to being wrong yesterday and contritely acceded to complicity in the process. I hope he is not a jumper.
Better days ahead.
Well buckle your seat belts everyone and get ready to witness a major piece of history. World markets are down double digits (percentage wise) and S&P 500 futures are down limit and thereby closed through to the market opening. This scary scene may last part of the day, all day or even through to Tuesday morning but by the time it stops it will have discounted the end of the world. We have spoken of capitulation day before and even seen a few in our market lifetime, October 24 is shaping up to be the mother of such events. The good news is that it will soon be over and that the rebound, to quote floor trader Art Cashin, "will be jaw dropping". None of us can put a number or a time on the real bottom, we will just have to know it when we see it. Remember too that you don't have to catch the absolute low in order to win, nor do you have to be a hero. One week from now let's hope we are wondering what it was all about.
He who panics first, panics best. He who panics last is left holding a small empty bag. This is about markets ...not the economy. This transfer of wealth is not just from the middle class to the already wealthy but from the newly rich to the super rich...and more certainly to the cash rich sovereign funds. Be on the side of those who advantage themselves from such opportunity as this is not just a lifetime event we are witnessing but a centennial one.
Alan Greenspan finally admitted to being wrong yesterday and contritely acceded to complicity in the process. I hope he is not a jumper.
Better days ahead.
Thursday, October 23, 2008
October 23, 2008 Edition
Good Morning All,
Yesterday I called for a test of 900 on the S&P 500 and we got that plus some as the index cratered to the 875 level before staging a minor late day recovery. The rumour has it that a massive liquidation by two more failing hedge funds was largely responsible for the no bid low volume market within which this transfer of wealth took place. The real news of the day, month, year, decade remains the coincidental bursting of the easy credit and speculative commodity bubbles that have been ten or more years in the making, all of which plus some took place on Alan Greenspan's watch. Long time readers of this letter have been aware of my disenchantment with this highly overrated former FED chairman for many years beginning with his misplaced fears of inflation in 1994 that engineered the then biggest bond market collapse in history. Greenspan misspeaks again today.
The U.S. dollar strength against the EURO and the commodity currencies has continued to trade out of hand and is also likely related to hedge funds and fears of a EURO collapse. As with everything this is getting extremely overdone. Look for a big bounce through next week on the other side of this trade and a redeployment of U.S. cash hordes into undervalued equities. My favourite floor trader Art Cashin has reiterated that a resolution of markets to the upside is near even though he suggests that an interim rally today may well result in an early (next) week capitulation day. A daily market watch such as this letter has become will soon be unnecessary once things stabilize.....and they will.
So Sarah now believes, and I quote her, that "the election is in God's hands" which leads me to this morning's rant on the sensitive subject of religion. Why can't people just be kind, thoughtful, moral and generous without having to dress in silly costumes, worship mythical dieties, and quote badly documented historical treatises. If I personally had to choose a legend to have faith in it would be Arthur's Camelot and the wish that the spirit and hope generated some 48 years ago by another young President could be once again duplicated and that all those wanting to pray would do so ...for the safety of Barack and the unity of the world.
Wednesday, October 22, 2008
October 22nd, 2008 Edition
Good Morning All,
Well so much for the quiet week I was hoping for although not promising as markets once again exhibited their recently adopted drama which began with an up Monday and a down Tuesday that willl continue this morning. I suppose all is not lost in our quest to put back to back positive weeks together as the day is young and the sense of fear is palpable. So let us look for a quick trip test down to 900 on the S&P 500 and a bounce from there.
On the good news side of the equation it now appears that credit markets are beginning to "thaw" as LIBOR has once again been set at much lower rates and the commercial paper market is active with lower yields. This is shaping up to be a memorable day.
The world economy has been hit with a macro problem that requires macro solutions some of which are presently on the table. The workability of these efforts is in process and the jury is still out. The one thing we do know for certain in these uncertain times is that new and intelligent leadership is required in Washington. To this end we do not need campaigners who appeal to America's lowest common denominator but to its highest ideals, none of which include phoney patriotism or bogus claims about Joe the unplumber's tax bill. Think for a moment about who is advising whom. On the McCain side we have Alan Greenspan who will deservedly receive much of the historical blame for the mess we are in, former Senator Phil Gramm a practicing deregulator and a host of supply side hacks left over from the greed school of business management. On the Obama side we have Paul Volker, the best Fed Chairman ever (even so considered by such right wing frantics as Dennis Gartman), Warren Buffett and the Larry Summers/Robert Rubin tandem that served the country so well under Clinton.
So Sarah thinks Barack is a socialist because he wants to "spread the wealth around" and that some parts of the country are more pro American than others. Hmmm sounds to me as if Barack's musings are more along the lines of Robin Hood or Jesus Christ than they are of Karl Marx, but how would I know....I have yet to be born again.
Well so much for the quiet week I was hoping for although not promising as markets once again exhibited their recently adopted drama which began with an up Monday and a down Tuesday that willl continue this morning. I suppose all is not lost in our quest to put back to back positive weeks together as the day is young and the sense of fear is palpable. So let us look for a quick trip test down to 900 on the S&P 500 and a bounce from there.
On the good news side of the equation it now appears that credit markets are beginning to "thaw" as LIBOR has once again been set at much lower rates and the commercial paper market is active with lower yields. This is shaping up to be a memorable day.
The world economy has been hit with a macro problem that requires macro solutions some of which are presently on the table. The workability of these efforts is in process and the jury is still out. The one thing we do know for certain in these uncertain times is that new and intelligent leadership is required in Washington. To this end we do not need campaigners who appeal to America's lowest common denominator but to its highest ideals, none of which include phoney patriotism or bogus claims about Joe the unplumber's tax bill. Think for a moment about who is advising whom. On the McCain side we have Alan Greenspan who will deservedly receive much of the historical blame for the mess we are in, former Senator Phil Gramm a practicing deregulator and a host of supply side hacks left over from the greed school of business management. On the Obama side we have Paul Volker, the best Fed Chairman ever (even so considered by such right wing frantics as Dennis Gartman), Warren Buffett and the Larry Summers/Robert Rubin tandem that served the country so well under Clinton.
So Sarah thinks Barack is a socialist because he wants to "spread the wealth around" and that some parts of the country are more pro American than others. Hmmm sounds to me as if Barack's musings are more along the lines of Robin Hood or Jesus Christ than they are of Karl Marx, but how would I know....I have yet to be born again.
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