Rosenberg: Secular Bear Market at Halfway Point (CNBC Video)

David Rosenberg, former Merrill economist now at Gluskin Sheff was featured on CNBC. Here is the video and a summary of his thoughts.
  • 40% dead cat bounce from March to May
  • 6 points of multiple expansion during rally, not earnings driven
  • Consensus: $75 operating earnings per share priced into 2010
  • At best we'll see $50 this year in S&P earnings
  • Equities are pricing in an earnings recovery we won't see until 2012
  • $50 in EPS + 13-14 multiple = $675ish... (So, retest?)
  • Another fiscal package won't save the day
  • Had 18 Year bull market (1982-2000), we move in 18 year cycles..
  • Halfway through secular bear market in equities, w/ two price peaks (wow)
  • There will be huge spasms along the way, you can't be a buy and hold investor!

SPY Put/Call Volume Ratio Low vs. Open Interest

Look at the difference between SPY put/call open interest ratio and put/call volume Ratio via Schaeffersresearch yesterday. The $SPY put/call open interest ratio was at monthly highs and put/call volume ratio was at monthly lows. At the 7/6/09 close the SPY put/call open interest ratio was at 1.83 and the 21 day SPY put/call volume ratio was at 0.77. The last time we saw 0.77 was when SPY sold off from 89 to 68 (March 2009 lows). Look at the chart. The sentiment reading could totally flip to be contrarian in nature though. So traders are loading up on puts vs. calls but trading more calls vs. puts (21 day average? from Schaeffers). So will a volume rush into puts make put holders money? The VIX has been in a range since May (24-33) so a put premium volume spike would need to occur, or a big complacent SPY sell off.

SPY Put/Call Volume Ratio (Courtesy of schaeffersresearch.com)

SPY Put/Call Open Interest Ratio (Courtesy of Schaeffersresearch.com)


$SPY is down 1.34% as we speak and there are technical levels near by that could CRUSH the S&P if broken (June 28: SPY Head and Shoulders Chart Pattern, Watch 875 Neck Line). A head and shoulders neckline breach would bring in sellers. I'm thinking this is why traders/institutions are speculating or hedging with puts imho. You never know though. In May the put/call open interest ratio hit monthly highs while the market kept rallying, so those contracts were ripped up or a big fund pocketed some nice premium if those puts were sold-to-open (SPY May Put Pessimists Squeezed, Contracts Ripped Up).

$SPY Head and Shoulders Pattern?


Oil Put in a Double Top -Credit Suisse Sneddon (7/6/09)

Reported from BloombergTV today (7/6/09). Credit Suisse technical analyst David Sneddon said oil put in a "double top" today. "Double tops signal the trend is changing. Oil prices stalled out at roughly the same price over the last month". Sneddon sees $59 as the first support level with a potential break to $57.75.

Goldman Sachs Program Trading Code Stolen

I thought this may be of interest. According to Reuters and Zero Hedge (must read), Sergey Aleynikov, a former Goldman employee, was arrested for allegedly stealing Goldman's secret program trading codes. He uploaded them onto a German website registered by a person in London. The complete affidavit can be found at those two articles (PDF). Was this dude a quant spy? Goldman code stealer by day and professional dancer (h/t Reuters) by night? We shall see.. The story is kind of a mix between Hackers, Pi, Wall Street and Office Space. If he gets off for "accidentally" stealing Goldman's proprietary code, he should definitely play the lead role in Wall Street 3. Here's more from Bloomberg: Goldman Sachs’ Investment in Trading Code Put at Risk by Theft.
“The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways,” Facciponti said. “The copy in Germany is still out there, and we at this time do not know who else has access to it.” (Bloomberg)

UltraShort Oil & Gas $DUG Testing $20 Resistance

The UltraShort Oil and Gas ETF $DUG is testing ceiling and downtrend resistance at $20. A break above $20 could bring some upside momentum. We'll see if this oil correction is for real and if it breaks below the 50 day moving average. Crude could then test $57.50-60 support/200dma, imo.

If the US Dollar breaks down, equities catch a bid, middle east tensions arise or a hurricane hits, this oil correction would be short lived. Protect yourself...

UltraShort Oil & Gas $DUG (Courtesy of Stockcharts.com)

UltraShort Oil & Gas Weekly DUG (Courtesy of Stockcharts.com)

Crude Oil ($WTIC - Stockcharts.com)

JPMorgan Strategist Lee Bullish On Cyclical Stocks, ISM Rebounds

The weekend strategy session continues. Here is JP Morgan's Thomas Lee on BloombergTV. He thinks the rebound in manufacturing data shows an industrial recovery (JPMorgan Global Manufacturing PMI, 46.9% - July 1, 2009 PDF). He sees a V-shaped recovery on cyclicals or "smoke stack" industrials given the recent rise in ISM data. From the report:
"The worldwide manufacturing sector took a further step towards recovery in June. The JPMorgan Global Manufacturing PMI — which acts a barometer of the overall health of the sector — posted 46.9, its highest reading since last August. Output expanded slightly following a year-long period of contraction." (Source)

The June ISM Manufacturing Index number increased 2% to 44.8%. The 17 month trend trend in economic activity is still contracting at a SLOWER pace. Look at the downtrend. History shows dramatic rebounds after ISM hits less than 40%. The chart does not show ISM during the 1930s. The # needs to break above downtrend.

ISM Manufacturing: PMI CompositeIndex (St. Louis Fed)


Summary of JP Morgan's Thomas Lee on Bloomberg:
  • Manufacturing is a huge generator of corporate earnings, 30% profits/9% employment
  • 2002 playbook was consumer credit expansion, 2009 recovery = global industrial cycle
  • Sees V-shaped industrial recovery pulling us out of recession
  • Will be different recovery, smoke stack industries will beat expectations
  • If ISM recovery plays out, will be upside revisions to transports, steels, auto parts, tankers
  • Lee Doesn't like GOLD, output gap and slack in terms of unemployment not inflationary
Roubini is also bearish on GOLD and inflation so keep an eye on $GLD. Also $XLI (Dow Jones Industrials SPDR), $IYT (iShares Dow Jones Transports), $SLX (Market Vectors Steel) for JPM's industrial recovery forecast.

Peter Schiff Market, $USD Video Update July 4, 2009

Peter Schiff July 4, 2009 Video Update from Euro Pacific Capital. It is always interesting to hear what Peter Schiff has to say.


Summary:
  • 80 points from head and shoulders neckline, a close below could spell a bigger decline
  • Catalyst for weakness was jobs data, lost 470,000 jobs, higher than expected
  • Gov bailouts are interfering with the correction process that will ultimately lead to hiring
  • Days of dollar rallying off of bad economic news will soon come to an end
  • India calling for alternative, in addition to Russia and China is negative for Dollar
  • **But read this: Reuters: China says dollar to remain leading world currency (7/5/09)
  • Schiff Expects economy to weaken further, unemployment rise

Other videos featuring Peter Schiff:
Peter Schiff on Jon Stewart, Yes He Was Right 6/10/09
Peter Schiff Expects a New Low in Nominal Terms (4/10/09)
Peter Schiff Says Beware of Inflation, US Dollar (3/22/09)
Schiff: Dow Hits New Low Priced in Gold, TIPS Understate Inflation (2/12/09)
Peter Schiff Compares U.S Economic Crisis to Collapse of U.S.S.R. (1/10/09)
Peter Schiff, Rick Santelli Talk Gold and US Dollar Recycling (10/23/08)
PETER SCHIFF vs. WHARTON PROF JEREMY SIEGEL (10/21/08)

Walstreetpro's Thoughts On Gold - Lazlow 3/09

In honor of Independence Day here is a clip I found featuring Walstreetpro on The Lazlow Show on 3/14/2009. He gives his thoughts on Gold, the Federal Reserve etc. It's 3 months old but still worth it and funny.

Nassim Taleb Interview in 2001, Fooled By Randomness

Nassim Taleb was interviewed in 2001 by Harold Channer. He talked about his book Fooled by Randomness. He published The Black Swan in 2007.



Other Links:
Nassim Taleb, Black Swan on CNBC Video July, 2009
Nassim Taleb on "The Black Swan" (Video 2/4/08), Roubini & Taleb Discuss Crisis on CNBC (2/9/09)

Soros on Dollar, China, Credit Regulation (WSJ Videos)

Here are videos with George Soros interviewed by WSJs Alan Murray at a conference. In April Soros never replied to my question, but I'm sure he shorted the USD trend break. Soros, Are You Long Or Short The US Dollar?.

Nassim Taleb, Black Swan on CNBC Video July, 2009

This is from the CNBC article: 'We're in the Middle of a Crash': Black Swan. He talks about the economy, temporary relief, fragile system is crashing, jobs report, unemployment numbers, continued deleveraging, and the U.S debt.
"Instead of deflating debt they are thinking of inflating assets". "What makes me very pessimistic is not to see any leadership or any awareness on a part of government on what needs to be done, which is to deleverage somewhere between $40-to-$70 trillion worldwide" Nassim Taleb 2:55 (double check wording).

Economic Updates From Walstreetpro2

ALERT: Economic Updates from Walstreetpro2.

IYR, SRS Real Estate ETF Chart Observations

I'm looking at the real estate ETFs IYR/SRS after $SRS (UltraShort Real Estate Proshares or the Inverse Dow Jones Real Estate Index ETF) failed to breakout in mid May. SRS has a 2x inverse relationship w/ IYR. No fundamental data here just checking out the charts.

On a short term basis $SRS is being wedged and will be forced to move one way or another soon. The long term charts are interesting. The SRS chart looks wacked out because of it's 200% inverse relationship but you can see some potential technical set ups. IYR/SRS could be setting up normal and inverted head and shoulders patterns across multiple time frames. For now IYR needs strong green volume above 30.81. It's time for the market to make a decision on real estate.

High Yield Corp Bond ETF (HYG) Correction Due?

In my opinion the High Yield Corporate Bond ETF (HYG) looks due for a correction. Even if we are in a bull market there are still corrections. It looks like the risk dump has already begun with a report showing a higher than expected 467,000 jobs lost in June and a 9.5% unemployment rate (CNN). $SPY (S&P ETF) is down 2.27% and $HYG is down 1.36% to $78.12.

HYG just tested $80, a resistance level not seen since July, 2008. You can see from the chart that HYG traded between 80 and 90 before the financial crisis but during the recession. Are high yield investors ready to be compensated for pre-crisis level risk priced in yield? You can always argue about the "priced in" threshold though. This is an interesting article I found at Bloomberg.com.
Downgrades Point to Wider High-Yield Bond Spreads, Moody’s Says

"June 22 (Bloomberg) -- Downgrades in the U.S. high-yield credit market to Caa3 or lower are occurring at a record pace this quarter and suggest bond spreads may be too narrow, Moody’s Investors Service said.

Rating cuts to Caa3, the ninth level below investment grade, or lower are on track to reach 97 in the April through June period and 182 for the first six months of the year, the most for any two-quarter period, Moody’s said in a June 19 report. The downgrades indicate that the U.S. high-yield default rate will exceed May’s 10.2 percent by a “substantial margin,” Moody’s Chief Economist John Lonski wrote in the report.
(read full article)

California Issues IOUs, California GO Bond Bets

Kudlow talked about California's General Obligation bonds last night. I'm trying to find a California Municipal Bond ETF consisting strictly of general obligation bonds. Info from the video:
  • Martin Weiss of Weiss Research released a report on June 22 saying the bonds are a sell.
  • Matt Fabian of Municipal Market believes California GO bonds are a buy based on yield.
  • Jon Schotz of Saybrook Capital likes the GO bonds because by law they are second in line behind education in payouts.