46 Weeks to Go

2011-10-03T08:45:00.001-07:00

2010-03-18T11:38:00.000-07:00

Greenspan Concedes That the Fed Failed to Gauge the Bubble

"In his most detailed examination of the causes of the financial crisis, Alan Greenspan, the former Federal Reserve chairman, acknowledges that the Fed failed to grasp the magnitude of the housing bubble but argued that its policy of low interest rates from 2002 to 2005 did not cause the bubble."

Was the housing bubble the disease or just a symptom of a much bigger disease? You know, like maybe a massive worldwide credit bubble?

2010-02-24T05:44:00.000-08:00

Financial problems are once again beginning to bubble up to the surface.

The housing market although less bad, is not healthy yet and may take a turn for the worse. link 1 link 2
The FDIC is fighting to stay solvent and protect americans savings. link
Greece still poses a wider threat. link
Commercial real estate still stinks. somewhat dated link

Hopefully people smarter than me are prepared for a possible financial crisis round two.

New York Times Machine

2010-02-10T08:37:00.000-08:00

This is pretty cool

Insightful Analysis or Partisan Hot Air?

2010-02-05T06:52:00.000-08:00

This morning, the BLS reported the unemployment rate fell to 9.7% from 10.0%. I realize this is only 1 data point, but it follows all sorts of partisan hackery claiming fiscal stimulus destroys jobs.

It reminded me of the situation roughly a year ago when the stock market was free falling "all because of our new president's policies." March 6, 2009, "Obama Bear Market Punishes Investors. . ." and "Obama's Radicalism is Killing the Dow." 3 months later, the Dow was up 33% and up 51.7% from March 6, 2009 to Feb. 4, 2010.

I can only hope the recent "analysis" on jobs proves as insightful.

Addition to Yesterday

2010-02-04T09:20:00.000-08:00

Again if the fiscal stimulus bill signed into law is making the recession worse at is asserted here, then weekly unemployment claims should accelerate after the bill was signed into law (January 2009).

Just Saying It Doesn't Make it True

2010-02-03T08:48:00.001-08:00

Ugh.

Grover Norquist's Americans for Tax Reform posted the following late last month: Post "Stimulus" Unemployment: A Historical Perspective.

It pulled some very interesting charts from the original Dallas Fed paper. But, I do have issues with its basic premise.

1. Keeping in mind that the basic thesis is that the fiscal stimulus bill enacted in January 2009 is destroying jobs. The observation that "it was October when the big-government spending spree really started," is pretty irrelevant.

2. Correlation does not imply causation. Statistics 101. The ATR doesn't bother to answer the question, "Why does increased fiscal spending destroy jobs." They only bother to note that job losses are very high at the same time a large fiscal stimulus is taking place. In addition, take a look at chart 1. What I see is a very steep upslope in the unemployment rate starting roughly 2Q08. Then in about the beginning of 3Q09, the rate of increase in unemployment seems to be slowing. Coinciding with the period when the biggest impact of the fiscal stimulus bill was expected to occur. It's a small sample, but it seems to run counter to the ATR's basic premise.
3. Economists do have ways of evaluating whether government spending is impacting hiring by private businesses. The first way is to look at interest rates. In a nutshell, if government borrowing is soaking up all the available demand for lending (i.e. bonds) in the market, then there should be a commensurate rise in interest rates since a borrower would need to offer a more attractive rate of return to get some of the cash. Here's a look at 10 and 20 year corporate bonds from 2006 to present. There's a slight increase year over year in the 20 year maturity, but the yield on the 10 year is certainly lower. Visit this site and you can see that 2 and 5 year yields fell as well.

The second way to evaluate whether government demand is crowding out private demand for employees is by looking at wage inflation. The chart below from the BLS is pretty straightforward. Businesses are paying less for employees.

The take home message from the ATR is, "No matter how they try to spin it, the Stimulus has not only failed, it has also made the economic downturn considerably worse." Unfortunately it's never really explained how fiscal stimulus destroys jobs, only an observation that unemployment is rising despite more government spending. Like I said earlier correlation does not imply causation. If it did, I'd be a rich man.

2010-01-29T08:58:00.000-08:00

I'm still not sure what to make of Bruce Bartlett, but this post today is a great read. I hope someone in the current administration is paying attention.

2008-07-30T08:32:00.000-07:00

Trade Recaps:

QLD - I entered a discretionary trade on 23Jul, buying QLD and setting a stop at -1 ATR (14d) or $3.00 from the executed price. The position size was set so that should the stop get triggered, the total loss would be 1% of total capital. At the end of the same day, I changed the stop to a trailing loss of 1 ATR. I was stopped out of the trade on 28Jul a $70.49.

Rationale for entry: The rationale for the trade was the bullish setup on the $NASI detailed in a post on 23Jul and mildly bullish COT data for the Nasdaq 100.

Reason for the loss: In retrospect I should have kept the stop loss at its initial setting until a positive trend was established. Changing the stop as I did caused me to be whipsawed out of the position.

Conclusion: When the 10 day low is equal to or greater than the executed price, the stop is changed to a trailing 10 day low.

DUG: Entered a discretionary trade on 23Jul executed price $35.94 with a stop set at -1 ATR (14d) $2.00 or $33.94. Position size set to lose 1% of total capital if stop was triggered. Doubled position size on 29Jul at $37.48. New stop set at $34.68 which was -1ATR from the average price of 36.68. Stopped out of position on 30Jul at 34.68.

Rationale for the entry: DUG had broken above $35 resistance on strong volume. Energy prices continued to break down and the trend appeared to be up.

Reason for loss: DUG dropped dramatically this morning taking out my stop and violating support @ $35. I suspect this is a short covering rally, but it remains to be seen.

Conclusion: Several things went wrong in my decision making process.
1. DUG is a volatile security. 1ATR may be insufficient setting for a stop loss. 1.5ATR or a 15 day low may be more suitable.
2. I had no good rationale for doubling my position other than the fact that the trade appeared to be working in my favor. I failed to use sufficient money management principles and ended up losing more than 1% of my trading capital on the trade. Actual loss was 3% of total.
3. The break above resistance on 23Jul was probably insufficient reason to enter the trade. Evaluation of COT data to support the trade should have been done.

2008-07-30T08:31:00.000-07:00

Stopped out of DUG at 34.63. Net (-5.6%) on the trade.

2008-07-29T08:50:00.000-07:00

Stopped out of QLD @ 70.49. (-2.9%). Doubled up on DUG at $37.48, average cost basis is $36.68. New stop at 14d ATR (2.05), $34.63.

2008-07-23T19:57:00.000-07:00

rmcranie, aka The Old Fool at Clearstation and Investor Village's NASDAQ board introduced me to his Poor Man's Timing Indicator. I've added the bollinger bands in order to look for extremes. Coupling this with COT data for the NASDAQ 100 can provide some good insight into where the market may be headed. Right now, it looks like the bottom just put in will resemble Dec 07 rather than March 08. I'll be keeping my QLD long on a tight leash.

2008-07-23T12:09:00.000-07:00

Added QLD @ 72.62, stop @ 69.12, target gap fill @ $79.

Added DUG @ 35.94, stop @ 33.94, target March high around $44.

AAPL retraced all of its losses from the earnings dip. That's pretty bullish.

2008-07-23T09:03:00.000-07:00

As long as oil continues to fall, I do not want to step in front of this market's rise. Interestingly, investors are not repsonding well to big tech's earnings yet the NDX is leading the way today. Buying an airline might be a way to play the oil drop. I like DUG too, but buying a short fund in a rising market seems risky despite the price action.

Which one looks more like a buy?

2008-07-22T06:10:00.000-07:00

I have a bunch of ideas pulled from other posters throughout the web. The Fly is long VLO which fits into my thoughts that energy has another leg up in it. No position though.

I'm watching SKF today to look for signs that the selling last week was just due to a short covering rally. Might add for a swing trade today.

Currently long GLD for the long term. I'll look to add DGP on a pullback to gain some leverage.