On hiatus

See the main yelpy blog; I got tired of trying to keep two blogs going. It doesn't sound hard but it's kind of a pain in the ass.

Ouchez

No charts needed to impart the magnitude of Friday’s massive sell-off. AAPL lost almost $15 a share! Yikes! What a crappy start to the trading year, three massively-down days in a row. I’m not above indulging in a bit of Schadenfreude because for six months I’ve been warning everyone I know to CASH OUT. Oh no, someone sold his AAPL stock after me nagging him, then turned around and bought it all back on Weds. Well, that cost him about a hundred grand. Not my problem.

I may not be raking in the growth by having all of my savings in the SHY ETF (short-term treasury bonds), but it’s all still there. The next 1-2 years are going to be all about return OF capital, not return ON capital, or in other words, keeping what you’ve already got. If you are still invested in stocks, long ETFs, and/or mutual funds of stocks, GET THE HELL OUT. Ignore that “dollar-cost averaging” nonsense. There’s a bit if truth to it but it only works with regular periodic investment like what’s done in a 401k. It doesn’t do anything for money in IRAs or brokerage accounts where you’re typically NOT investing $XXX every two weeks or whatever. Dollar-cost averaging is a warm-fuzzy notion sold to panicky investors by brokers and plan admins who want your ass invested in whatever makes them a percentage. They don’t get much if you put it all into a money market or treasury fund.

Now, returning to personal finance which is why I started this thing (and it’s kind of morphed into bitching about the stock market and overall economy, and that won’t change).

This month I’m moving out of my apartment and into a fabulous South End house in Boston. No I did not win the lottery; I’m taking care of the house while its owner, a former grad skool professor of mine and a good friend, travels the world for 7-8 months. This means 7-8 months of NOT PAYING RENT nor any other household expenses such as utilities. So those savings will get banked in preparation for buying a car in November when the lease on my Audi is over. I’m never leasing a car again; it’s a rip-off and you have nothing left at the end except an empty parking space. My plan so far is to buy either a cheap-ish new car or a 2-3 year old used one with a good track record like a Civic or Accord or something, maybe a diesel Jetta if I can find one. I probably won’t be able to save enough to pay cash, but I’ll have a hell of a down payment.

After that I have a tentative offer to do the same for some friends whose parents left one a condo in Florida which was bought and paid for years ago, and it mostly sits empty. When I jokingly asked about it they said “sure!” So we’ll see about that. I hate Florida, and the building is full of nosy old geezers, but a free place to live is a free place to live, never mind the alte kackers.

Why bother?

OK, I know, it’s been ages. I’ve been travelling and shit.

On the first trading day of 2000, the S&P 500 index opened at 1469 and closed at 1455.

Today, the first trading day of 2008, the S&P 500 index opened at 1468 and closed at 1447.

So, to be somewhat glib, the market is slightly worse off than it was eight years ago. Actually, if you account for inflation, it’s far worse off. And you can clearly see what happened soon after Jan 2000.



The orange line shows where we were then and are today (klicken to embiggen). Some progress! Where’s that yelptard Cramer screeching for more rate cuts? Oh he did already? Figures.

It’s the no-confidence, stupid

In addition to being a crisis of solvency, BondDad reminds me that it’s also a crisis of confidence. Real interest rates are up especially amongst insitutions because nobody is really willing to lend a stapler much les a few billion here and there what with all the massive write-offs past and future (oh you bet there’s more coming).

Post-Fedsday monkey business

The smarty-pants over at Rebel Traders sum up today’s nonsense. Money quote:

The action taken this morning by the Federal Reserve is a desperate measure. The last time this was done was right after the attacks in the United States on 9/11. And that was done while we were already in a recession. Now here we are with major indices still playing with all time highs and the Federal Reserve is having to resort to desperate measures. This is not good. It is an act to save the banks and maintain solvency. And this is how the smart money saw this too and sold off the markets. The measures taken today were aimed at helping the financial sectors, and it was the financial sectors who sold off the hardest today.

I emphasized that one sentence to point out that what’s facing the economy is not a liquidity crisis (there’s an ocean of cash sloshing around the system) but as a number of others have pointed out, one of solvency of the banking institutions.

I stayed out because I really had no idea what was going on after waking up to the S&P e-minis shooting north at 8am. I could have made a killing shorting these today and covering at the bottom, but woulda coulda shoulda, I didn’t have the stones. It’s tough being a tiny trader with just enough margin to trade one whole S&P e-mini contract, long or short, and one wrong move means I don’t get to trade til I either pump in some more cash or trade something else trying to get it back. Grr.

Petulance, visualized

The first image shows the effect post-Fed announcement of a 25bps cut in both the Fed funds rate and the discount rate on the S&P (left) and NASDAQ (right) E-Mini futures. I made a nice buttload shorting NASDAQ futures at 2:15pm today (though I have to admit that I gave a little back shorting S&P futures afterwards. oh well!).

The second image shows how the advancing issues vs. the declining issues for the NYSE (top) and NASDAQ (bottom) totally did a 180 and went screaming the other way.

Charts like these are rare and rather illuminating.

Bottom line: The Street was expecting a 50bps cut and threw a huge, shrieking, snotty, dung-flinging tantrum when they didn’t get it. Fuck off. We really needed a rate HOLD, you fucktards.

You should note that any increase or decrease in the Fed funds rate has little-to-no bearing on the interest rates ordinary citizens pay. It’s all about the Pigmen. Oh and Pigwomen.

Speaking of buy buy buy

I went to the Rockingham Mall in Salem New Hamshah today to visit the Apple Store there and see if they had any open-box deals or refurbs, but the friendly dyke said no, sorry. I was not really pleased to park in the next town over, more or less, and walk in the cold, but the parking lot was packed and people are just blowing out the credit cards this year because they were hauling a huge amount of crap out of the place. I had to go through Sears to get to the Apple store and saw lots of 50%-off signs but didn’t go through any other stores so I don’t know what kind of deals were to be had elsewhere.

It felt kind of un-American leaving the mall with nothing. OK, not really.

OMG Buy buy buy!

Today’s eye-popping rally might look like good news; maybe it was, but a big pop was inevitable at some point after so many losing days.

However, this ain’t over. Anyone who thinks we’ve recovered/bounced off the bottom is in for a pretty rude awakening. For example:

Credit flowing to American companies is drying up at a pace not seen in decades, threatening the creation of jobs and the expansion of businesses, while intensifying worries that the economy may be headed for recession.

The combined value of two leading sources of credit — outstanding commercial and industrial bank loans, and short-term loans known as commercial paper — peaked at about $3.3 trillion in August, according to data from the Federal Reserve. By mid-November, such credit was down to $3 trillion, a drop of nearly 9 percent.

Not once in the years since the Fed began tracking such numbers in 1973 has this artery of finance constricted so rapidly. Smaller declines preceded three recessions going back to 1975; at other times such declines tended to occur in conjunction with an economic downturn.

Pay close attention to the stuff I emphasized.

I’ve also learned that in so-called bear markets, huge rallies aren’t unusual, and they’re generally followed by equally-impressive plunges. Nobody’s really called a bear market, and maybe much of today was panic short-covering, as many of the big fliers had big short ratios and are still shitty companies, like FAF, but weak shorts covering their losses can make them look attractive to bottom-feeder buyers who don’t do their homework.

As always, maybe I’m wrong. But I don’t think I am.

In case it wasn’t obvious

If it’s going to happen, the start of a so-called bear market is unlikely to be a one-day “Black Monday” -20% event like in 1987. In 2000 the markets still went screaming up after the confirming Dow sell event and stayed that way until the entire mess came crashing down in August 2000 and didn’t begin to recover until March 2003. That was nearly a three-year bear market, and doesn’t account for the tech crash that showed its hand in April 2000 and broke down in September 2000. In fact if you look at the 10-year charts for the S&P 500 and the NASDAQ (which show the breakdown far better than a Dow Industrials chart), you can see the disconnect in tech vs. the broader markets, which tech brought down in its wreckage.

My point below is this: be prepared and position your savings for protection. A bear market is very unlikely to start Monday, or next Friday, or even next month.

10-year NASDAQ 100 chart (monthly)


10-year S&P 500 chart (monthly)


As usual, BondDad has a very clear and thoughtful explanation of current trends, though I’m not sure he’s agreeing with the Dow Theory sell signal thing.

Fucktards

Mortgage companies smelled “Profit!” at Shrubtard’s “ownership society” without considering steps 1 and 2:

1. 1. Collect underpants/bad-credit fucktards (regardless of race)
2. 2. ? (=130% LTV mortgage! cash-out refi!! cash cash! and cash!)
3. 3. Profit!

The underpants gnomes had a better model.

Oh and fucktards claiming this is a result of scary librulism? Fuck that. It was all about sacred profit, til the beams broke.

—via the Brain

Okay kids, this is serious

I’m a little familiar with Dow Theory, but not intimately. It’s not that hard, though, as this article lays out. Basically, today there was confirmation of a primary Dow Theory sell signal, confirmed by one (or both, but not in this case) of the Dow Industrial index and the Dow Transportation index hitting a high, retreating to a low, and failing to hit the prior high. The Transports failed badly in this regard, though the Industrials went a little over the July high of 14,000-ish. The signal today confirming the sell was the Industrials retreating below the last low, while the Transports reached this nadir awhile back.

You can pooh-pooh nearly all such theories at your own risk. The important thing is that a lot of the swinging-dick types on the Street take this shit seriously. The last time this sell signal appeared was in late 1999, and we all know (or should) what happened in April 2000: the tech crash. This along with record new lows almost daily lately in the US dollar vs. the yen and euro, along with the increasingly-obvious catastrophe in the mortgage and asset-backed securities means we’re far more likely to tumble into a recession, and my fear is this one will be a really, really bad one that lasts a long time.

So think about that before you whip out those credit cards on Friday. If the numbers from Black Friday aren’t absolutely, massively huge, there is no more good news coming to prop up the markets. If you haven’t already done so I would strongly recommend taking ALL stocks, mutual funds, ETFs and whatnot straight to cash or cash equivalents, and that includes your 401k. If you’re feeling frisky there’s plenty of inverse ETFs or “bear” funds that make money on the downside, but do your own research into these and be careful. I went to a cash-equivalent in my retirement accounts awhile back and ensured my 401k assets and all future contributions are going into the closest thing most people have to cash in a 401k/403b which would be your plan’s money market fund. These aren’t crash-proof, but it beats watching your years of savings evaporate.

I know I’ve honked on about this before, but please, please take the time and effort to protect yourselves. Oh and if you have any money in any Countrywide or WaMu or National City CDs or savings or whatever, get the fuck out. Now. You might get it back from the FDIC, someday, but you’re far better off somewhere else, and I can’t really recommend anyone else except USAA and not everyone can get an account there. Consider a local independent bank or a credit union and ask bluntly how much toxic mortgage shit they’re holding (and run if it’s more than 4-5%), but the most critical thing to do ahead of such events is to preserve capital. I have not lost a cent on any of my accounts (except the little trading one where it’s OK and expected); though I’ve missed out on the recent huge ramp-up in Apple and the other darling stocks, it’s all still there.

Got gas?

Filled up the familty truckster lately? Not that it matters, because a barrel of "light" (what, low-calorie?) crude popped over $99 and some change. Now for some reason gasoline prices have gone up, but not on the order of magnitude of the price of its source.

I guess that'll change soon enough.

Florida

You know things are getting bad when desperate investards are putting ads on craigslist trying to dump all those “homes of [in] your dreams” in Poland. They’re also showing up on the real estate sections of craigslist in Russia, Venezuela, and, um, Pakistan.

No wonder Fark has Florida as its own category.

Weird nausea-inducing day in the markets. Not even gonna try picking that one apart, aside from seeing Countrywide print a low of $8.21 before closing pretty much where it opened. Damn, why did I sell those CFC Jan $20 puts? Sure I made a little but each contract is worth over a grand now. Shtool!

Ruh roh!

GE money market breaks the buck. So sorry, here, take 96¢ on your dollar and get out.

This is, um, not real good news, and add to that Bank of America, Legg Mason et al having to inject a shitload of cash into their own MM funds to prevent a buck-breakage. A money market breaking a dollar NAV is (was?) rare and extremely bearish.

The market popped up early but stayed in a range of about 10 points on the S&P, til around 3:30 when all hell broke loose, though there was a slight uptick at the close. Tomorrow we get the CPI numbers, so if they’re bad, watch it, because a hot CPI means no more rate cuts. So sorry, pigmen, sucks to be you only getting a six-figure bonus instead of seven. Merry Grinchmas!

Update: it turns out that the GE fund isn't a money market in the retail-investor sense but more of an institutional parking lot for excess funds. It's still pretty bad, and the fact that GE didn't shore the thing up to $1/share like BofA and the others did might be an indication of bigger problems at GE's financial arm.

Nice recovery. Or was it?

Well after four days of getting pounded traders made up for it, but the volatility and unease isn’t any better (yeah I know the VIX is down; that’s not what I’m talking about). Wal-Mart’s not-bad numbers completely overshadowed Home Depot’s horrible ones and I guess any not-bad news was greeted with fervor. Housing “pending” sales put a fire under some asses but a lot of people fail to realize that a 0.2% gain on that indicator is essentially meaningless, and plenty ignored the year-over-year slide of -20% from last October and instead focused on the “good news!” that the change from last month wasn’t horrible. But it’s all still pretty horrible, just depends on what side of the trade you’re on. I think a lot of today was that the markets were very oversold, beaten up, there was a lot of “buy the dips!” going on early today and maybe a short squeeze. Apple shot up like mad though it still has a way to go to regain the high of $190 and change. But fundamentals are no better today than they were on Friday. Tomorrow morning we get the PPI and retail sales indicators. If those aren’t at least “not bad” then things might change quickly.

Speaking of that, let my loss be a lesson to my one or two readers (see blog header): when you enter a hyper-volatile, risky position that becomes profitable very quickly, SELL. I wanted to close some QQQQ puts I’d bought early yesterday and had the trade all set up about five minutes before close, but I chose to put on too high of a limit price. Oh I could have just set it between bid and ask, but no, I got a little piggish. The trade failed and I was stuck with the puts overnight. Of course the early and continuing rally took off all my gains and then some, but I was able to get out without a total loss but I left about $700 on the table. Grrr. Same deal with the AIG puts I kinda forgot to close because they were so cheap, but I failed to notice that they doubled in value Friday and now will probably expire worthless, unless I can get a bid that’s more than the commission to close them. Grrr II.

Once again I am neither a “bear” nor a “bull”. For my quickie spec trades I go with the trend, long or short. Always being one or the other will get you killed, and I firmly believe that fundamental economic and market conditions are bad bad bad. So I guess that makes me a bear for awhile.

The end is in sight

Logged into my bank today and saw some good news:

BALANCES:
PLATINUM MASTERCARD – $0.00
TOTAL REWARDS AMERICAN EXPRESS CARD – $0.00

One down, one more to go.

I never actually used this Amex card, nor the Amex Blue I got early this year, and I converted my Starwood Amex to Blue Cash because I have a load of Starwood hotel points already and there’s no annual fee on the Blue Cash account.

I’d close all my credit card accounts save one but that dings your credit score and I never carry them anyway except the Blue Cash. Believe me, after racking up $35,000 on cards from 2000 til about 2005 and finally getting the discipline to stop using them and pay it off, I have no interest in repeating that experience. There’s about $4,600 left to go.

Look, I know, it’s hard but I am hardly the most disciplined person in the world and if I can do it, so can you. A coupla years ago I’d look at the amount of debt I was carrying and how much money I was pissing away on interest and just feel overwhelmed. Then I lost my job, which really threw my situation into stark, ugly relief. But I got another job, sold my condo for a decent profit, and since then I’ve been saving and paying off debt as much as possible. It really didn’t take that long once the impossibly-obvious solution dawned on me: stop spending money that’s not yours, and don’t spend any more of what is yours than you have to.

The Bernanke Cycle

Tim Iacono created a it’d-be-funny-if-it-wasn’t-true list of steps taken, so far, to shore up a crumbling economic house: The Bernanke Cycle.

1. Federal Reserve cuts interest rates
2. Equity markets surge
3. Dollar decline accelerates
4. The price of oil and gold soar
5. Treasury reiterates “strong dollar policy”
6. Housing market problems get worse
7. Credit market problems get worse
8. Dollar decline accelerates
9. The price of oil and gold soar
10. Federal Reserve talks tough on inflation <—– YESTERDAY
11. Treasury reiterates “strong dollar policy”<—– YESTERDAY
12. Equity markets plunge <———— YOU ARE HERE
13. Go to step 1

Hm, for some reason the line numbers aren’t showing up; maybe the style for an ordered list is broken or something. Whatevs.

Housetards, banktards: USA = Tardistan

It’s telling that in the past 9-10 month I’ve seen plenty of home-equity cash-out man-toys like sports cars, RVs, Harleys, snowmobiles and other rarely-used crap parked on lawns with “For Sale. Pretty please?” signs on them, and you can’t see what internal tchotchkes were added to the house e.g. $50,000 kitchens for clowns who don’t cook, giant TVs for their fat asses to watch “Flip this house!”, $5,000 mattresses and other nonsense. Many paid off their credit-card debt with cash-out funds, only to run it all right back up to the limits. What kind of idiot buys crap and pays off other debt with cash-out proceeds on which they must pay for 30 years?! I guess that’d be all of them.

Home equity should never be a cash-farting Sampo fueling reckless consumer spending. That’s why it’s called equity. Once spent, it’s gone. Oh, the market’s gone down? Sorry, sucks to be you, and your house is only worth what someone else is willing to pay for it, not the balance on your statements.

You who did this have nothing and no-one else to blame but yourself and your greed. Same goes for you big-bonus dickhead geniuses at Bear/Goldman/Morgan and the lenders and sleazebag storefront brokers that started this whole clusterfuck. Everyone’s all giddy about the great free market until the trade starts going the wrong way, then it’s wailing and bawling to the Fed and Congress for a handout. Well, fucktards, you got two rate cuts and now the dollar’s crashed, the stock markets are tanking, and prices for everything are going up, so those cuts did fuck-all to fix an impossible problem. The markets gave back all the Sept 18 rate cut gains and more; the second cut last month didn’t do shit other than crash the dollar even further.

Oh and I sure hope anyone who was holding tech stocks sold them all on Tuesday. We’re going down; tech shit the bed and the rest will follow soon enough. Friday was a crazy trading day and I lost big paper-trading the S&P futures until the last 45 minutes finally made it all back. The NASDAQ chart is horrific; all the gains since July have evaporated. I’ve been sitting in cash or equivalents since around September and while I missed out on the huge ramp-up since then, I’ve still got it all, and now is when I’m thinking of going short with inverse ETFs like QID (opposite of the QQQQ NASDAQ tracking ETF) and the like, since I can’t directly short stock in my IRA and I don’t have enough available cash for the required margin to short.

As usual, BondDad has a more objective take on the indexes.