Mark- Well, you know me. Regardless of how anyone is positioned, I don't hold back. If we all muzzled our 'takes' based on someone's else's holdings (which often change on a dime to begin with), we'd all be screwed.
Black Monday wouldn't be a bad thing, right? We could all back up the truck and take a long ride for a change.
"I think anyone that buys a housing stock right now will do quite well over the next 5 to 10 years."
That's a dangerous advice, TOF. Here is what Hussman had to say about housing last week:
**** From our perspective, we continue to observe pointed recession risks. I'll emphasize again that our Recession Warning Composite (see the June 28 comment Recession Warning) is based on the observation of multiple conditions simultaneously, and is not driven by any single indicator. Given that I've made two, and only two, recession calls over the past decade (October 2000 and November 2007) based on this Composite, and we've always and only observed such signals during or immediately preceding other post-war recessions, I don't take the present indications lightly, and I don't like the odds.
Among other views that should be taken seriously are those of Meredith Whitney, who has a much clearer understanding of credit issues than the majority of observers, and is always thought provoking. Not surprisingly, her views haven't changed a great deal over the past few months, but given that investors appear to acquire and abandon economic concerns on nearly a weekly basis, some consistency regarding the larger picture may be helpful:
"The government's involvement made the banks do really well. The government's out of the pool now, and we're on our own. The states that produced the most GDP are those that produced the most real estate, and I think we're in for a very rough second half. And here's where I would have never imagined... what happened over the past year-plus is that the government and the banks have provided a lot of mortgage modification programs, and consumers have been smart enough to say ok, if I wait, I'm going to get a better deal on a modification in 2, 3, 6 months. So I'm going to pay the things I need the most - my credit card bill, my auto bill, and even my home equity loan bill to a certain extent, and they've been not paying their mortgage bill.
So you look at the non-performing loans on bank balance sheets, they've doubled inside of one year alone, and in terms of the top 4 banks, which control over two-thirds of the mortgage industry anyway, they stand at over one times all of the mortgages that have been charged off since 2005. So you've got this massive rotting pool of assets on bank balance sheets that have provided the consumer excess cash by not paying one big payment and being able to pay others. The thing that's happening for the first time in a year is that banks are actually accelerating their foreclosure programs, accelerating their short sale programs, so you're going to see people who weren't paying their mortgage starting to have to pay rent. Unequivocally I see a double dip in housing. There's no doubt about it. But you see a real leg down when you have the supply displacement, when you foreclose and then you have to sell, it's usually a 20% drop." ****
If I'm comprehending this correctly, news from the gulf is encouraging. It sounds as if the well pressure is continuing to build past 6500psi. What I'm not sure of and haven't found yet is if that pressure is referenced to atmosphere or sub-sea pressures but I'm assuming it's referenced to atmosphere.
david - i think my point is that housing starts are at like 200k a year vs. natural demand of like 1.0 Million or so.
the odds of housing crashing again are small because we're already so close to zero. in looking at past cycles it's times like these that will reward long term buyers. most housing companies have very solid balance sheets right now.
My theory would be that we don't get the "black mondays" because everyone dumps on friday so they won't be holding thru a another "black monday". The fear level has to be very high, because it was the mutual fund redemptions over the weekend that caused the huge panic on monday morning. When all the 401k holders get scared to where they all go in and move their mutual funds over to cash over the weekend, you could see another black monday. Are they still holding at all, I wonder? My wife and mom are, but I haven't smelled panic yet.
Cheapy- Just curious. Have your wife and mon helpd this whole time? My parents have.
CP- You got it right. Looks like the cap will stay on another day. Good news considering the alternative.
2nd- You better! That's why we are here, right? I have no idea how the mind works, but I give you credit for your call on Fri. It might have made the difference from me adding in the morning before I had to leave. So, thanks.
TOF- MOG is positive on SPF also because of it's balance sheet. Remember, he's "part" of WY.
my mom still has about 50% in mutual funds, down from 95% when my dad was alive actively investing. I would guess she has probably lost 20 or 25% since I think it went on autopilot after he died till the losses mounted. i'm the "black sheep" because i trade in and out of things and put money into things like metal and miners instead of trusting the mutual fund industry and the Fed, and so my sis, who also lives closer to my mom, is now managing the portfolio, and at least its not been collapsing dramatically further of late that i know of, but i can tell from talking to my mom that a lot of it is gone.
my wife is a buy and hold person. when things get beaten down she doesn't have any cash to buy them because she was always already all in. she doesn't discuss it, but i think she is down between 1/3 to 1/2 from her account's peak value. that's also probably why she doesn't discuss it. she put a lot of actual earned money into her ira and 401k with not much left of any gains, where mine is at about 10 times what i put it, because i wasn't allowed to contribute to it, and as a result was forced to roll dice, so its not something easy for her to talk about with me.
my best source used to be the clients, where everyone knew i traded/invested, and people would tell me their problems, and ask if what they were doing was good, etc. that was where my best clues came from. back in 99 or 2000 i had 2 different people ask me why i wasn't owning cisco and other tech stocks. it was the tippy top peak of the nasdaq bubble. but you need the exposure if you will, to the opinions of other "normal" investors to be able to sense when things get to silly extremes like that. as time goes by i'm losing that. sites like this and CC have too sophisticated of investors to use as wind socks.
TOF, the reason housing starts are so low is because there is a huge inventory of unsold houses that is owned by the banks and by the people who will foreclose soon. In this environment, housing starts could be 0 for several years and there will still be plenty of houses on the market. As long as this situation persists, the homebuilder stocks will keep going down. I think the time to INVEST in them for a long term will be in 2-3 years (when the second wave of foreclosures will have passed), but not now.
cb- Those are amazing (anecdotal) numbers. (Congrats on a 1000% return, a true accomplishment you dismiss as 'rolling the dice.' I think you earned it.)
If the average buy-and-hold investor was able to resist selling at SPX 667, it's potentially worrisome. As with Grym's references to his diehard retired banker buddy, it makes me wonder what would happen should we retest the lows and begin to break below 667? Would that be enough to break their tenacity and cause a true panic bottom- one that might lie far below the kinds of numbers we're mentally throwing out now?
Crowd behavior can get pretty intense under true pressure.
Each time we swing back from a rally it hammers away at 'support' levels, as investors become less willing to buy the same dip. So I think the odds of 'Black ---day' increase with each iteration of the seesaw.
Recent conversations I've had with colleagues have taken a pessimistic turn. Some of the same people who used to 'joke' about a 'Depression' aren't joking now.
Ditto for my conversations with the older kids. The discussions about their futures used to have an optimistic tone. Now I freely share my concerns about the future of life in America.
These kinds of sentiment changes translate into real changes in behavior. It comes down to spending less. Which means lower profits for the companies that comprise the stock indexes.
It's kind of morbid, but lately I've also taken to commenting (either silently or to my wife) on 'dead stores/offices still standing' as we drive past certain businesses. I honestly don't believe some of them will be around in another year or two.
Those of you who live in the Bay Area have heard about the police layoffs in the city of Oakland. They are warning residents that police will no longer be dispatched for nonviolent crimes? They'll have to report burglaries using online forms or at the station.
If I were a homeowner in Oakland, I'd definitely be calling my neighbors and wondering WTF. There goes that acronym again. Maybe historians will someday make reference to 2010/2011 as the year(s) 'WTF' peaked on blogs.
2nd, Vad gave a nice reply to you in case you have not seen it.
Re: From Russia With Love Submitted by Vadym Graifer (1349 comments) on Sat, 07/17/2010 - 12:34 #65911 (in reply to #65901) 2nd,
glad to hear this approach works for you. Some comments:
The indexes have pretty much gone nowhere over the past nine sessions. Whereas trading small positions with (very) short time frames has netted an average of $300 a day
That's the idea of lowering a timeframe... absence of a trend on weekly doesn't mean there is no one on daily... or hourly, or minute. Market can open and close at the same number remaining useless for a swing trader, while making intraday roundtrip that a day trader can exploit.
...but I'm only risking 5-10k on each trade
Actually, you are not. Risk is not the whole amount of money deployed for a trade; it's amount of money you are setting as your max acceptable loss. That's the whole idea if risk/reward ratios.
... using only intuitive set-ups for now
Sorry... no such thing :) It's either intuitive entry (effectively, trading on what you think market is going to do, or setup - structured trade based on observable, studied and tested pattern. It includes certain elements (trigger, stop etc) and provides clear instructions what to do when, leaving little to no room for second-guessing or even thinking at all. All the thinking is done in advance while one is designing a trading approach; during action it's all about execution with discipline.
Appreciate the dozen or so 'opinionless trading' hints you've dropped my way over the years
You are very welcome. Again, glad it works for you. Simple change from "opinion" to "working assumption" in traders' terminology and approach would do a lot of good to their performance. Combatant confidence is proven wrong consistently; unsure ones allowing for multiple scenarios and staying flexible remain open-minded and able to follow the market clues.
Nooooooooooooooooo!!!!!!!!!!!!!!!!! :)
ReplyDeleteMark- Well, you know me. Regardless of how anyone is positioned, I don't hold back. If we all muzzled our 'takes' based on someone's else's holdings (which often change on a dime to begin with), we'd all be screwed.
ReplyDeleteBlack Monday wouldn't be a bad thing, right? We could all back up the truck and take a long ride for a change.
Couldn't black Monday morph into black Tuesday, Wednesday, Thursday? Maybe we need a downside target, I'd say max 880 as purely a guess on my behalf.
ReplyDelete880 sounds good. We could sweep the market clean of bulls.
ReplyDelete"I think anyone that buys a housing stock right now will do quite well over the next 5 to 10 years."
ReplyDeleteThat's a dangerous advice, TOF. Here is what Hussman had to say about housing last week:
****
From our perspective, we continue to observe pointed recession risks. I'll emphasize again that our Recession Warning Composite (see the June 28 comment Recession Warning) is based on the observation of multiple conditions simultaneously, and is not driven by any single indicator. Given that I've made two, and only two, recession calls over the past decade (October 2000 and November 2007) based on this Composite, and we've always and only observed such signals during or immediately preceding other post-war recessions, I don't take the present indications lightly, and I don't like the odds.
Among other views that should be taken seriously are those of Meredith Whitney, who has a much clearer understanding of credit issues than the majority of observers, and is always thought provoking. Not surprisingly, her views haven't changed a great deal over the past few months, but given that investors appear to acquire and abandon economic concerns on nearly a weekly basis, some consistency regarding the larger picture may be helpful:
"The government's involvement made the banks do really well. The government's out of the pool now, and we're on our own. The states that produced the most GDP are those that produced the most real estate, and I think we're in for a very rough second half. And here's where I would have never imagined... what happened over the past year-plus is that the government and the banks have provided a lot of mortgage modification programs, and consumers have been smart enough to say ok, if I wait, I'm going to get a better deal on a modification in 2, 3, 6 months. So I'm going to pay the things I need the most - my credit card bill, my auto bill, and even my home equity loan bill to a certain extent, and they've been not paying their mortgage bill.
So you look at the non-performing loans on bank balance sheets, they've doubled inside of one year alone, and in terms of the top 4 banks, which control over two-thirds of the mortgage industry anyway, they stand at over one times all of the mortgages that have been charged off since 2005. So you've got this massive rotting pool of assets on bank balance sheets that have provided the consumer excess cash by not paying one big payment and being able to pay others. The thing that's happening for the first time in a year is that banks are actually accelerating their foreclosure programs, accelerating their short sale programs, so you're going to see people who weren't paying their mortgage starting to have to pay rent. Unequivocally I see a double dip in housing. There's no doubt about it. But you see a real leg down when you have the supply displacement, when you foreclose and then you have to sell, it's usually a 20% drop."
****
If I'm comprehending this correctly, news from the gulf is encouraging. It sounds as if the well pressure is continuing to build past 6500psi. What I'm not sure of and haven't found yet is if that pressure is referenced to atmosphere or sub-sea pressures but I'm assuming it's referenced to atmosphere.
ReplyDeleteNot sure about Black Monday but Art Cashin did remark on Fri that July expiration & the following Monday do have a negative bias to them...
ReplyDeletehttp://www.cnbc.com/id/15840232/?video=1545008743&play=1
The one thing I am pretty sure of is that volatility does not help the bulls. Complacency helps.
ReplyDeleteSo now we have a teeter-totter market. There is risk in the market. Buy-and-hold investors do not like heightened risk.
Nervous bulls in Asia will have sell orders lined up within 24 hours.
david - i think my point is that housing starts are at like 200k a year vs. natural demand of like 1.0 Million or so.
ReplyDeletethe odds of housing crashing again are small because we're already so close to zero. in looking at past cycles it's times like these that will reward long term buyers. most housing companies have very solid balance sheets right now.
My theory would be that we don't get the "black mondays" because everyone dumps on friday so they won't be holding thru a another "black monday". The fear level has to be very high, because it was the mutual fund redemptions over the weekend that caused the huge panic on monday morning. When all the 401k holders get scared to where they all go in and move their mutual funds over to cash over the weekend, you could see another black monday. Are they still holding at all, I wonder? My wife and mom are, but I haven't smelled panic yet.
ReplyDeleteCheapy- Just curious. Have your wife and mon helpd this whole time? My parents have.
ReplyDeleteCP- You got it right. Looks like the cap will stay on another day. Good news considering the alternative.
2nd- You better! That's why we are here, right? I have no idea how the mind works, but I give you credit for your call on Fri. It might have made the difference from me adding in the morning before I had to leave. So, thanks.
TOF- MOG is positive on SPF also because of it's balance sheet. Remember, he's "part" of WY.
my mom still has about 50% in mutual funds, down from 95% when my dad was alive actively investing. I would guess she has probably lost 20 or 25% since I think it went on autopilot after he died till the losses mounted. i'm the "black sheep" because i trade in and out of things and put money into things like metal and miners instead of trusting the mutual fund industry and the Fed, and so my sis, who also lives closer to my mom, is now managing the portfolio, and at least its not been collapsing dramatically further of late that i know of, but i can tell from talking to my mom that a lot of it is gone.
ReplyDeletemy wife is a buy and hold person. when things get beaten down she doesn't have any cash to buy them because she was always already all in. she doesn't discuss it, but i think she is down between 1/3 to 1/2 from her account's peak value. that's also probably why she doesn't discuss it. she put a lot of actual earned money into her ira and 401k with not much left of any gains, where mine is at about 10 times what i put it, because i wasn't allowed to contribute to it, and as a result was forced to roll dice, so its not something easy for her to talk about with me.
my best source used to be the clients, where everyone knew i traded/invested, and people would tell me their problems, and ask if what they were doing was good, etc. that was where my best clues came from. back in 99 or 2000 i had 2 different people ask me why i wasn't owning cisco and other tech stocks. it was the tippy top peak of the nasdaq bubble. but you need the exposure if you will, to the opinions of other "normal" investors to be able to sense when things get to silly extremes like that. as time goes by i'm losing that. sites like this and CC have too sophisticated of investors to use as wind socks.
system goof caused inadvertent enter key there...
ReplyDeletethe short answer was yes, i don't think they have sold, nor do i think the avg long term investors have.
TOF, the reason housing starts are so low is because there is a huge inventory of unsold houses that is owned by the banks and by the people who will foreclose soon. In this environment, housing starts could be 0 for several years and there will still be plenty of houses on the market. As long as this situation persists, the homebuilder stocks will keep going down. I think the time to INVEST in them for a long term will be in 2-3 years (when the second wave of foreclosures will have passed), but not now.
ReplyDeletecb- Those are amazing (anecdotal) numbers. (Congrats on a 1000% return, a true accomplishment you dismiss as 'rolling the dice.' I think you earned it.)
ReplyDeleteIf the average buy-and-hold investor was able to resist selling at SPX 667, it's potentially worrisome. As with Grym's references to his diehard retired banker buddy, it makes me wonder what would happen should we retest the lows and begin to break below 667? Would that be enough to break their tenacity and cause a true panic bottom- one that might lie far below the kinds of numbers we're mentally throwing out now?
Crowd behavior can get pretty intense under true pressure.
Each time we swing back from a rally it hammers away at 'support' levels, as investors become less willing to buy the same dip. So I think the odds of 'Black ---day' increase with each iteration of the seesaw.
ReplyDeleteRecent conversations I've had with colleagues have taken a pessimistic turn. Some of the same people who used to 'joke' about a 'Depression' aren't joking now.
ReplyDeleteDitto for my conversations with the older kids. The discussions about their futures used to have an optimistic tone. Now I freely share my concerns about the future of life in America.
These kinds of sentiment changes translate into real changes in behavior. It comes down to spending less. Which means lower profits for the companies that comprise the stock indexes.
And right now, I'm concerned about the effect of all the above on stock prices next week.
ReplyDeleteI think we go down.
Which of course means we rally next week.
But ultimately, we go down.
It's kind of morbid, but lately I've also taken to commenting (either silently or to my wife) on 'dead stores/offices still standing' as we drive past certain businesses. I honestly don't believe some of them will be around in another year or two.
ReplyDeletehttp://www.nytimes.com/2010/07/17/business/economy/17consumers.html?emc=eta1
ReplyDeletehttp://www.screencast.com/users/Telestar3d/folders/Jing/media/00df09de-eed2-4998-ad6c-618415cf4b03
It's a dying landscape out there.
ReplyDeleteThose of you who live in the Bay Area have heard about the police layoffs in the city of Oakland. They are warning residents that police will no longer be dispatched for nonviolent crimes? They'll have to report burglaries using online forms or at the station.
If I were a homeowner in Oakland, I'd definitely be calling my neighbors and wondering WTF. There goes that acronym again. Maybe historians will someday make reference to 2010/2011 as the year(s) 'WTF' peaked on blogs.
2nd, Vad gave a nice reply to you in case you have not seen it.
ReplyDeleteRe: From Russia With Love
Submitted by Vadym Graifer (1349 comments) on Sat, 07/17/2010 - 12:34 #65911 (in reply to #65901)
2nd,
glad to hear this approach works for you. Some comments:
The indexes have pretty much gone nowhere over the past nine sessions. Whereas trading small positions with (very) short time frames has netted an average of $300 a day
That's the idea of lowering a timeframe... absence of a trend on weekly doesn't mean there is no one on daily... or hourly, or minute. Market can open and close at the same number remaining useless for a swing trader, while making intraday roundtrip that a day trader can exploit.
...but I'm only risking 5-10k on each trade
Actually, you are not. Risk is not the whole amount of money deployed for a trade; it's amount of money you are setting as your max acceptable loss. That's the whole idea if risk/reward ratios.
... using only intuitive set-ups for now
Sorry... no such thing :) It's either intuitive entry (effectively, trading on what you think market is going to do, or setup - structured trade based on observable, studied and tested pattern. It includes certain elements (trigger, stop etc) and provides clear instructions what to do when, leaving little to no room for second-guessing or even thinking at all. All the thinking is done in advance while one is designing a trading approach; during action it's all about execution with discipline.
Appreciate the dozen or so 'opinionless trading' hints you've dropped my way over the years
You are very welcome. Again, glad it works for you. Simple change from "opinion" to "working assumption" in traders' terminology and approach would do a lot of good to their performance. Combatant confidence is proven wrong consistently; unsure ones allowing for multiple scenarios and staying flexible remain open-minded and able to follow the market clues.
Thanks, t3d.
ReplyDeletehttp://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/07/17/MN6R1EFHC0.DTL
ReplyDelete