Not sure if reality is setting in or not, but sure is nice to know that a red number is possible.
Nic Lenoir of ICAP has a guest post on Zero Hedge tonight that is worth a look - How Crazy Can It Get?. Nic covers some interesting points regarding QE and the government backstop of the markets and how the potential for this run up to continue is still a reality. "However as always one must remain cautious because these days capital markets are a mere reflection of government action... as long as government remains unchallenged." We all have a good idea that without QE and stimulus and some creative accounting this market would be toast. With the money in the coffers running out, will the second stimuli come and thus provide the fuel to keep the rally going at which point might just bring in some real sideline money afraid to miss the run? Of course this is the worst thing that could happen LT, but is well worth pointing out to us permabears.
I'll follow that piece up with Mish's Rally in 6th Inning or Top of the 12th? where he expands on Riholtz's comments in Rally May Only Be in 6th or 7th Inning, Ritholtz Says. Read Mish's post as it has many good links and covers both sides. His conclusion, "The key take away from this is that economic fundamentals are very poor, yet no one knows what inning we are really in. The key word in the concept the Rally May Only Be in 6th or 7th Inning, is "May". I spoke with Barry Ritholtz this morning. He also agrees it's also possible this rally is in the top of the 12th, overtime. No one knows for sure. For nimble traders, the difference is moot. For those in buy and hold rather than rental mode, the difference is huge. Please manage your risk accordingly."
Denninger points out a lot of good stuff. One topic I like the best is the false consumption created by the stimulus packages pulling forward purchases thus leaving a black hole in the future. Oops: "Pulled Forward" Demand Really IS False! "All this faux "demand" being generated by the so-called "stimulus" is just doing more damage to the economy - damage that is accruing and will come to the surface with devastating effect."
Naked Capitalism brings us Quelle Surprise! Regulators Starting to Worry Re Bank Commercial Real Estate Exposuresby Yves Smith. "The Fed is poking its nose into the portfolios of some banks, oddly taking great care to say these are NOT stress tests (is that meant to say they are not bogus and actually involve people who might know a tad about the underlying assets?)" Interesting, you mean someone has possibly decided to take the issue seriously? I won't hold my breath.
That is enough for tonight. Why am I presenting the possibilities of further upside? Well, I have bet on the manipulators up till now. Although the charts are nearing the ending patterns all over the place. P/E ratios are ridiculous. Overbought scenarios exist in almost every market. What am I trying to say, well Nic's article in ZH brought me back to reality and reminded me that as long as the government is in control with GS at the helm, they will do whatever the hell they please.
I want to pass along a hearty CONGRATULATIONS to TD and the team at Zero Hedge for their key (IMO) role in SEC Votes Unanimously To Ban Flash Trading, Seek Public Comment. The power of a small group of intelligent people, a few Bloomies and the internet. I guess Tom Brokaw is in total disbelief.
GL trading.
Interestingly enough, the CEO of FED-EX, Fred Smith was interviewed today and he sees GDP for Q3 at 3% and Q4 at a whopping 4.9% with full year 2010 at 2.9%
ReplyDeleteYou would think that the CEO of an extremely economically sensitive company as FED-EX would have a pretty good finger on the "pulse" of the economy, at least over the shorter term. Bottom line: He obviously sees that the economy has turned.
Whether or not that has already been "discounted" by the market (and portfolio managers that are under-invested and under-performing) with the p/E of the S&P at 17.5x FY-2010 earnings is the $64,000 question.