All the world’s a short…
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Charts below are 5-year views.
NASDAQ biotech index:
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Inter@ctive WK Internet Index:
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Value Line Arithmetic (where’s the value?):
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Philadelphia Gold and SIlver Index (XAU), back at ’06-’08 commodities bubble levels:
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Mexico Bolsa:
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Venezuela:
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Argentina’s Merval Index:
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Pakistan’s Karachi 100 (look at the flat line where the govt suspended trading last fall — worked wonders, didn’t it? This market is up a lot less than most others — maybe people don’t trust it as much anymore, since they can’t be sure they’ll be able to sell when they want):
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Bet you didn’t know Mongolia had a stock market. Looks like a one hit wonder:
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Singapore Straits Times:
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Indonesia’s Jakarta Composite:
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Taiwan Taiex:
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All images above from Bloomberg’s stock index pages
Nice interview by Prechter on TechTicker:
http://finance.yahoo.com/tech-ticker/article/298957/Dollar's-Hit-a-%22Major-Bottom%22-Prechter-Says-Why-That's-Not-Such-Good-News?tickers=%5EDJI,%5EGSPC,UUP,UDN,TBT,GLD,SLV&sec=topStories&pos=9&asset=&ccode=
Excellent interview. Thank you.
Here’s a great chart for you guys:
http://1.bp.blogspot.com/_Gi-9fDeQJwo/SoCjbD0C6RI/AAAAAAAAAhU/b5dqEbrMriw/s1600-h/Bullish+percent+over+80.png
Courtesy of stevo77 on slopeofhope.com
This week I’m doing something I rarely do: buying a few front month and 1 month puts. Won’t tell you which ones, but I’m keeping it simple.
My Euro puts have doubled already.
Keeping my fingers crossed and on the sell-stop trigger…
All Asian markets have rebounded like decoupling in Asia is taking place and V shaped recovery is happening in the US and western Europe.
Still, short sellers are losing their shirts…
Mike, thanks for the chart…
I guess it shows why I didn’t predict the short squeeze in mid-late July. The sentiment indicators were neutral at 47.5. I did not interpret this (I do not have access to this sentiment indicator, but other Guy Lerner’s indicator gave a neutral signal) as bearish or bullish, but it was at least clear to me that the risk/reward for going short isn’t that good then. The whipsaw potential existed in such an oversold state.
Now after the short squeeze, everyone is short-term bullish; I do not know anyone who is actually long term bullish accept Abby from Goldman, but she doesn’t count. I guess the market does inflict maximum pain for the maximum number. The shorts were squeezed, and then maybe the bullish people now will be hit with a sell-off.
I wonder why everyone is a Paul Ehrlich now… instead of Julian Simon. Although I love Paul Ehrlich’s views (and I got banned from a Catholic forum because of this), I am betting with Simon in the short term.
Yes, sentiment indicators like surveys are key for entering trades. If one only entered trades when 85% or preferably 90% or more of participants were taking the opposite view, I am certain that their success would be improved dramatically, provided that stop-losses were used to prevent getting steamrolled by unusual extremes (95%+). But then of course once something reaches 95% it is as good an entry as you ever get.
I’ve read a bit of Ehrlich — he’s not a good economist. Saying we will never experience a depletion of a single mineral is going too far, but even in that case, there are always substitutions and other innovations, and plain old recycling. Human ingenuity and the natural law of markets (one corollary of which is that markets can be thwarted by government but they ultimately thwart any government that tries) work wonders. When the whale population was depleted in the mid-1800s, I bet there was great concern in some circles about we would do for lighting.
They are Ehrlichs now for the same reasons that he was wrong — prices had been going up for while, and talk of shortages was in the air to justify those prices. Also basic supply/demand cycles, which are just as emotional.
And now we have Soros painting a good picture too!
“I think it (the stimulus) has made a difference, the economy has actually bottomed and I think we are facing a positive quarter, and I think that is largely due to the stimulus,” he said in an interview with Reuters Television in New York.”
http://finance.yahoo.com/news/US-economy-has-bottomed-rb-3446490727.html?x=0&sec=topStories&pos=4&asset=&ccode=
Good’ol Prechter at it:
“Metal Mania: “Heavily Overbought” Gold & Silver Due for a Major Fall, Prechter Says”
http://finance.yahoo.com/tech-ticker/article/299368/Metal-Mania-%22Heavily-Overbought%22-Gold-&-Silver-Due-for-a-Major-Fall-Prechter-Says?tickers=GLD,SLV,GDX,FCX,NEM,PSAU,ABX&sec=topStories&pos=8&asset=&ccode=
and …drum roll …
“Bob Prechter “Quite Sure” Next Wave Down Will Be Bigger and March Lows Will Break”
http://finance.yahoo.com/tech-ticker/article/299205/Bob-Prechter-%22Quite-Sure%22-Next-Wave-Down-Will-Be-Bigger-and-March-Lows-Will-Break?tickers=%5EDJI,%5EGSPC,SPY,DIA,QQQQ,%5ERUT,BGZ&sec=topStories&pos=9&asset=&ccode=
I say again …. 10-15 % correction with a move up into Q1 2010 … and then the game is over …
Having followed Soros and Rogers for quite some time, I can understand why Rogers cannot even stand next to Soros anymore
But given that even Soros has become a market cheerleader, it seems to be the right time for a decent correction.
Also, Hussman has published an amazing chart that shows the current market condition dwarf anything that existed even at the top of the tech- and RE- bubbles: http://realitylenses.blogspot.com/2009/08/what-kind-of-recovery-is-market-pricing.html
Best day for the bulls in ages: impulsive sell-off from before the open, on good breadth decent volume, lame retracement, down at the finish. Bonds up, dollar strong, metals and oil weak.
Encouraging stuff. I’d say there were very few bears out there and a lot of complacent longs who already had all the positions they needed. Not much to drive a rally. Now stocks can fall under their own weight if they so choose.
Hussman does good stats, but he still doesn’t seem to get that we’ve had an epic credit bubble, nor what that means for earnings for the next several years. It is nuts to say that the market is priced to double an investment over the next 10 years (which is what his 7% expected growth estimate means). Sorry, John, nothing like the old US economy is coming back, ever. It’s done. Just buy utilities and short the rest.
Here’s something to remember about Hussman: his fund was loaded with consumer stuff including Harley Davidson, Tiffany and Apple going into 2008, and despite expecting a recession, he thought he had the stats to show that the consumer would keep spending. He bailed or reduced those positions and came through the year better than most thanks to his ample trading skills, but his mainstream university academic approach to economics has left him ill equipped to understand the enormity and intractability of this situation.
I still read his writing, since he does excellent statistical work and always has unique insights to share. He also has taken an admirable position on the structure of the bailouts, which while not Austrian, would place responsibility where it belongs: on the bankers and their BONDHOLDERS like Pimpco, who are the biggest recipients of taxpayer largess.
Mike: agreed on Hussman, he still thinks that it’s not “a normal recession” but doesn’t think it’s going to be the end of the US like you and I do. But he has good insight and stats as you say.
Axclr8: don’t forget that Bob Prechner is not an oracle
he thought the end of the world was 2004 (but admited there was a slight possibility it wasn’t) and also predicted the decline a couple of months ago, while the markets have rallied 15% since his prediction.
Credit spreads widened out nicely today–in my opinion, the strongest sign yet that the rally is over.
http://www.zerohedge.com/article/daily-credit-summary-august-10-momo-no-mo
PEJ: Regarding Prechter … exactly my point! He and MANY other so called Market Prophets called the disaster scenario … and there were many people who still were reeling from the 2000 – 2002 loss of 90% in wealth and decided to follow these Prophets into another 3 years of hell while watching the Markets go up …. So, why should we believe him now?
Anways, today one of my companies competitor has lowered prices by 90%:
Alibre Slashes Price 90% to $99
Limited time offer, previous retail price was $999
RICHARDSON, TX, Aug 11, 2009 – Alibre, Inc. today announced the boldest marketing initiative in the history of 3D CAD – making professional grade 3D CAD software, including parts, assemblies, and 2D drafting, available to anyone for under $100.
For a limited time, anyone can get Alibre Design for $99 (regularly $999). Alibre Design is the core CAD component of Alibre’s product offering, providing a complete parametric toolset for unlimited 3D part and assembly design and 2D drafting. Capable of creating complex mechanical designs with thousands of components, full assembly motion, automatic 2D drawing updates, and many other benefits, Alibre Design is similar to products such as SolidWorks, Inventor, and Pro/E. Tens of thousands of Alibre Design users in 50 countries and 15 languages use the software to design, verify, and virtually test their products.
As for my company: We are going to be forced to lower prices as well and we own 40% of the Market! Yikes …
Everywhere companies have to lower prices to bring in buyers. Look at the Housing Industry! These people were so damn arrogant at one time and now!
My favorite Video of all time: Classic Video back on September … poor Peter Schiff getting pounded on by so called financial experts (Bankers) on Bulls and Bears ….
It’s going to be a new world out there next year .. Crash of 2010 coming nearer ….
This guy got it right!
S&P 600: That’s Gary Shilling’s Forecast for 2009, Not an Index
http://finance.yahoo.com/tech-ticker/article/149147/S&P-600-That's-Gary-Shilling's-Forecast-for-2009-Not-an-Index?tickers=^dji,^gspc,FXI,TLT,EEM,UDN,SPY
Gary Shilling’s 13 for 13 :
One economist who did “see it coming” was Gary Shilling, president of A. Gary Shilling & Co. Consider these forecasts Shilling put out at the beginning of 2008:
1. Sell or sell short homebuilder stocks and bonds.
2. If you plan to sell your home, do so yesterday.
3. Sell short subprime mortgages.
4. Sell or sell short housing-related stocks.
5. Sell or sell short consumer discretionary spending companies.
6. Sell low-grade fixed-income securities.
7. Sell or avoid most commercial real estate.
8. Short commodities.
9. Sell or sell short emerging market equities.
10. Sell emerging country bonds.
11. Buy the dollar before long.
12. Sell or sell short U.S. stocks in general.
13. Buy long Treasury bonds.
http://finance.yahoo.com/tech-ticker/article/149057/He-Saw-the-Crash-Coming-What-Gary-Shilling-Sees-for-2009?tickers=%5Edji,%5Egspc,%5Eixic,SPY,DIA,TLT,UUP
Guys, enough with the lectures about Prechter not being an oracle. Who is? Sure, Shilling called it well, but so did Mish and a few others. And so did I for that matter, and I had never read a thing by Prechter until early 2008, by which time I was hugely short.
I actually should thank Hussman, because he mustered the data back in 2006 that a recession and bear market were on the way. Of course, I also learned a few things from Schiff, but then by reading Mish I came to understand the mechanics of deflation. That logic I found impeccable, so by late ’07 I was solidly in the deflation camp, which then lead me to Prechter.
Too many guys have a knee-jerk reaction to the man just because he was early, but I don’t know anyone better equipped to handle these times. And no, he didn’t say the rally was over in June — I don’t know where you got that. He’s been pretty clear on 1000+ and summer/fall.
Mike, don’t get me wrong, I very much appreciate what Prechter is doing and saying. I’m just saying that it’s not going to become true with a 100% accuracy.
Also, I will make yet another post about this inflation/deflation debate, but my main point is: deflation is here, but Bernanke and the feds/us gov and gang would rather destroy the dollar that just sit and do nothing.
Deflation can be a good reason for a currency to collapse: when everybody defaults on their debt…
Nonetheless, I was surprised to see that only 2% of people were bullish on the USD, so I took half of my profits on my short USD position.
Mike’s gonna be happy:
http://realitylenses.blogspot.com/2009/08/robert-prechters-conquer-crash-ii-new.html
Some great thesis on China’s exports getting crushed:
http://www.blackswantrading.com/files/articles/b94c9c97274f9ebdca051fb50411f9a9bscc081209.pdf
Mike: Do you see Commodities Like OIL going down in a deflationary environment?
Neve thought I would see this: Tough times in the porn industry
http://www.latimes.com/business/la-fi-ct-porn10-2009aug10,0,4788614.story?page=1
Hummm … Deflation at work …. damn I am starting to get worried …
Axclr8: according to the report about the porn industry, it’s not deflation but a flawed/outdated business model that’s killing them (and of course, piracy). This has nothing to do with deflation, contrary to what Mish states.
Pej: Yep. Good point .. in fact on the recent documentary from CNBC, the free PORN sites were really draining away revenue from the leaders of PORN today … humm, so much for starting a PORN site to ensure regular income! LOL!
It seems the word “FREE” ensures consumers today …
FREE $4500 money from the future generation
FREE Software or nearly FREE software prices at 90% of MSRP
FREE MONEY to buy a car today at 0% or .90%
Make it free and users cometh …
Since “destroying the dollar” would mean the end of the Federal Reserve, I find it hard to believe that’s the outcome Bernanke really wants.
The problem with these kinds of arguments is that their causality is reversed and hence the argument doesn’t hold.
Moreover and unfortunately, if you have a look at Mr Gideon Gono’s track record, you will understand that destroying their dollar not only didn’t result in destroying their central bank, but, yet even more incredible, he didn’t even destroy his own career, as he’s still the head of the RBZ
http://en.wikipedia.org/wiki/Gideon_Gono
Bernanke has more to lose than Gideon Gono. I am sure he does not want to be remembered as Arthur Burns. His best legacy he can strive for is that of futility: he doesn’t do anything detriment as Fed Chairman, but he doesn’t solve the crisis. It is not like he could do anything to solve the crisis.
Aki_Izayoi: so far, Bernanke’s actions contradict your scenario. He and his accomplices in crime (Paulson, Geithner, etc.) have committed many illegal actions and himself has exposed the Fed to the extent where Ron Paul managed to get his “audit-the-fed” bill signed by the majority at the house.
Not sure he hasn’t already distroyed the Fed…