Monday, July 26, 2010

Hopefuls Force Rally

Updating the Upward Price Propensity Chart. The blue line measures the 2010 combined performance of the S&P and Nasdaq eminis as of today. The green line measure the validity of the rally.

Markets and economy need a rally badly to keep things together, but this looks like a bunch of forceful hopefuls.

Thursday, July 15, 2010

Gaming Earnings

The largest gaming system on earth, earnings data, is being released for second quarter performances and once again analysts seem to be shy of reported results. Hard to believe these guys love being viewed as fools constantly but whip me must be their mantra.

INTC
the other day and JPM today, have beat estimates. Now for the tech guys it really does not matter because as we know from stocks such as AAPL, another thirty ways to send your picture and download anything is supposed to be innovation. As for JPM, they are a classic example of how bad things really are when writing down bad debt and implementing weird accounting rules makes you a winner. They even have said they will buy back their own stock, which despite what any bull may tell you, is never bullish.

Now there may be some opportunities out there but think what got us here. Banks and investment firms went after the weakest, yet largest portion of the economy to offer cheap financing in order to reap huge transactional profits. Some firms such as Goldman even flipped on their clients by taking the other side of the debt structured products. Legal but not well played.

So the opportunities to create jobs by fostering investments in businesses had already taken a backseat to consumer and mortgage lending because the trade was quick. No one had to sit around waiting to see if the business investment worked, just lend the money and take the fee. Ultimately the debt loads imploded as did the trades connected to them and here we are, left with a soft economy where altered lending standards have dried up potential job creation and any peripheral growth, such as trading, is suffering.

Now there is always China. But you have to have faith that the spin on their story has more sucker time and that the real bad banking in a totalitarian country will not result in a headline one morning which drives the market into new lows.

Monday, July 5, 2010

Ignore Prechter and Economic History

I noticed today that the top two most emailed articles from the New York Times were, number one, an article about Robert Prechter, the Elliott Wave guy, and two, an article about a book titled This Time Is Different, written by two economic experts covering 800 hundred years of global booms and busts.

It is easy to gather from the popularity of these two articles just how preoccupied folks are with current market conditions, but more importantly, an attempt here by readers to learn if there is anything about current market conditions which might forecast what is ahead. The answer is no.

First of all, Robert Prechter has been around forever rolling his cycle map out in front of traders always predicting extremes, whether up or down, and rarely being right especially when factoring in any notions of timing. Now Bob is calling for the greatest of all market dives which will, and if any one survives, result in the greatest bottom in the history of, well, big bottoms. According to Bob, everyone should sell just about everything they own and run with only a can of tuna to the woods and wait for his signal. But since timing has never been one of Bob's big strengths, better just skip the nature part and rent a movie.

The other article is about a Harvard economist named Ken Rogoff and University of Maryland economist Carmen Reinhart who together have written a history covering 800 years of economic disasters where, some how, unbelievably to the two professors, each previous economic disaster was generally ignored by the next blow up participants and so on so on. That is insight. It may be news to these two authors that they have offered little in the way of any useful material to combat present economic woes and according to their own analysis, everyone will ignore their advise in the future anyway.

So do not listen to Prechter and ignore the history lesson. This market will be different and no one will know just when a solid bottom is in or when the next boom will bust. If you are a buy and hold investor, that model is broken and new investment alternatives will be delivered from Wall Street which will be just a lethal. Individuals and groups will now have a challenge to find investment management which utilises adaptive risk methodologies. Good luck.