Friday, March 7, 2008

200 and Another 2000 to Go

That's it. Keep telling us how things are getting better, Crammer, or financials have hit a bottom CNBC, or buy the dips and sell the rips! That's my favorite, the same kind of strong analysis that has led CNBC to recommend the financial ETF XLF at every price decrease from $32 down to $24. I simply recommended shorting it at $32 on this site (I shorted it at $29 on the way up first). But hey, I'm no wizard like these guys.

I think the following quote sums up current market conditions:

"We are in historic scarier-than-all hell territory," said T.J. Marta, an analyst who monitors the fixed-income markets for RBC Capital Markets. "I am hearing many people say that the market is more broken now than it ever has been."

Specifically, he is referring to the now illiquid bond markets, whether they be munis or short-term treasuries. He's also referring to the never ending spiral of poor credit and bad CDO obligations. Citi is now trying to unload $45 billion in their loan portfolio. USB reportedly sold a $24 billion subprime portfolio to Pimco for .70 on the dollar, way below the market price of .84.
Reports also state that Ambac was cold calling people to participate in their stock offering, a stark contrast from CNBCs report that the money would be raised without problem.

Paused a second there to take in the horrifying job numbers for Feb., down 63K! As I wrote a few days ago, real-time data that is available but the Fed refuses to adapt to led to a much more accurate prediction of 77K jobs lost. Estimates by economists ranged all the way up to growth of 100,000K, how is that possible? In his last appearance that will ever be allowed, Steve Liesman even threw a wet blanket on a 0.1% decrease in Feb. unemployment. He explained it as such a bleak employment environment that less people were attempting to find jobs. By the way, Jan. payroll losses were revised to -22K. The service sector, supposedly the steadiest in the economy, only produced 26K new jobs last month, arrghh.

The Fed, perhaps with some knowledge of this number before others, revealed that they will be buying up to $100 billion in securities to force liquidity upon the market. The B-teamers had just spent 5 minutes talking about what a foreboding sign this would be in correlation with a bad unemployment number, and admission if you will, of recession. Bada boom!

The S&P and NASDAQ hit 52-week lows yesterday, bottoming below Jan. 22 levels, but the Dow still hovers 400 points above. I have no faith in charts or trending. I just think this market should be much lower.


boom and doom said...

Ax, I agree with you the market is over valued. That is why I pulled all my money out in Jan. I wish I would have done it three weeks earlier and cut some of my losses. I am now in gold, silver, commodities and fixed income. Seeing good returns on these for now. I disagree with you on the market having another 2000 to go down. I think in 2010 the Dow will be in the 8000s. I think the housing market and credit problems, and the recession are going to be more prolonged than anyone thinks. Also, the government's policies they are implementing: lower interest rates, tax rebates, suggesting lenders forgive principal on mortgages, continually downplaying the problems, etc. will cause more future problems than if we took our medicine now and fixed the problems instead of trying to save 2008. We will see deflation in both products and assets. My prediction; we will see.

AX said...

Wow, thought I was bearish B&D! The only concern I see in achieving sub-10K levels is the Fed. We've seen that the last 2 chiefs have been subservient to the market, not the economy. This is playing out for the 2nd time. Greenspan provided incredibly low interest rates to start the housing rally which in turn brought wealth and healing to the market. The surprise rate cut in Jan. triggered an 1100 point rally, damn the dollar and the precedent of a 17-year Japanese recession.

On paper, I believe a few of the major banks including WaMu and Citi are broke along the lines of Thornburg. I don't know if the gov't will let them fail. They've bailed out Citi once before.

Did you buy commodity ETFs, miners, actual silver and gold? I've been looking into buying bullion for awhile now. Wheat, rice and beans also interest me, along with the next major industry to crash....Thanks for reading as always.

boom and doom said...

Well, the Fed may bail the market out again, but there is a day coming when this is going to fall apart. It can't go on forever. I'm worried that my daughter or my grandchildren will have a lower standard of living than I have. In a way I hope it is sooner rather than later so I can help her and teach her how to best survive. But my prediction is that we are facing an 8 year period here through 2015 that will be unlike anything we have experienced in our lifetimes. We will have our Japenese type recession, if not now, sometime in the future. And the longer it is put off, the worse it will be. Read "Financial Reckoning Day" by William Bonner and "Bubble Man" by Peter Hartcher. In Bubble Man, focus on what Paul Volcker has to say about the US economy after the recession ended in 2002 beginning on page 202. It doesn't give a real warm and fuzzy feeling.

I bought commodity ETFs: ishares silver trust etf (SLV) up .06% since Mar. 3, iShares S&P GSCI Commodity-Indexed Trust (GSG) up 4.61% since Feb. 20, and iShares COMEX Gold Trust (IAU) up 6.99% since Jan. 24 (dates are when I bought). Wish I would have bought about 3 months ago.

AX said...

Thanks, I'll check into it. Wish I had held onto my Countrywide 45 puts I bought in 06' a little longer too, but sounds like you'll still do well. If we're right about the economy, commodities will have nowhere to go but up, including huge oil prices.

Home Equity is at a 60-year low (ratio-wise) and personal savings at an all-time low. Your daughter and my daughters may have plenty to worry about in the next 20 years unfortunately.....