Wednesday, July 28, 2010
In our day and age, when implied correlation is approaching 1 with each passing day, and when nuanced relationships are ignored, as every correlation somehow immediately becomes causation only to be invalidated, chewed out and left for dead, there is one certain and virtually guaranteed statistical relationship left, that not only persists day after day but has now become its own self-fulfilling prophecy. We speak of course of the (inverse) correlation between stock prices and volume: i.e., "volume up, stocks down; volume down, stocks up." Rinse, repeat, over and over and over. Rarely has this correlation been as pronounced (although we have been discussing it for well over a year) as over the past 12 weeks. Behold.
What this means is that any distributions only occur to the downside, and that the second retail gets suckered into stocks once again, for whatever reason, the selling pressure will again materialize as the algo decides to take advantage of the "sidelined" money and be a better seller into every bid.
But there are four bombshells he did NOT talk about:
FIRST and foremost, what's CAUSING the economy to sink? The stock market has not yet crashed. Interest rates have not yet surged. Gasoline prices have not skyrocketed. There has been no recent debt collapse, market shock, or terrorist attack.
So what is the invisible force that's suddenly gutting the housing market, driving consumer confidence into a sinkhole, and killing the recovery that Washington was so avidly touting just a few months ago?
Bernanke won't say. But the answer is clear: The recovery had very little substance to begin with. Rather, it was, in essence, a mirage — a dead cat bounce bought and paid for by Washington's massive bailouts, stimulus programs, and money printing.
Put another way, the recession never really ended. Yes, we saw some growth in GDP. And yes, thanks to that growth, some companies are still reporting better earnings — the news that spurred a rally in the stock market last week. But at the core of the economy, the fires that started the recession are still burning intensely. (more)
The state of the U.S. economy is worrisome and there is a high possibility of a double-dip recession, one of the property market's most well-known economists said Tuesday.
Robert Shiller, professor of economics at Yale University and co-developer of Standard and Poor's S&P/Case-Shiller home price indexes, told Reuters Insider he does not know where home prices may be headed, but believes the economy may be on a precarious path.
"For me a double-dip is another recession before we've healed from this recession ... The probability of that kind of double-dip is more than 50 percent," Shiller said. "I actually expect it."
Shiller said he is unclear where home prices are headed. (more)
The confidence index fell in July to the lowest level since February on worries about a stagnant job market in the world's top economy.
The data stoked fears that a U.S. economic recovery was stalling, and prompted U.S. benchmark oil prices to back down sharply from a new 11-week high of $79.69 a barrel earlier Tuesday. Crude settled down $1.48 a barrel to $77.50.
U.S. stocks fell, giving up earlier gains, and the U.S. dollar firmed against a basket of foreign currencies, an indication investors were piling into safe havens, such as Treasury bonds. (more)
(MarketWatch) - With this week's upturn, the U.S. markets are showing signs of life.
Most notably, each major U.S benchmark has closed above its 200-day moving average, raising the flag to a potentially significant trend shift, as detailed below.
NEW YORK — The disconnect between Wall Street and Main Street is growing.
Americans' confidence in the economy faded further in July, according to a monthly survey released Tuesday, amid job worries and skimpy wage growth. That's at odds with Wall Street's recent rally fueled by upbeat earnings reports from big businesses such as chemical maker DuPont Co. and equipment maker Caterpillar Inc. That's because the pumped-up profits are being fueled by cost cuts like layoffs and overseas sales. In fact, big companies have shown few signs they're ready to hire.
The Consumer Confidence Index came in at 50.4 in July, a steeper-than-expected decline from the revised 54.3 in June, according to a survey the Conference Board. The decline follows last month's decline of nearly 10 points, from 62.7 in May, and is the lowest point since February. It takes a reading of 90 to indicate a healthy economy — a level not seen since the recession began in December 2007.
"Consumers have a much different view of the economy than the stock market does, and their views matter more to the economy," said Mark Vitner, an economist at Wells Fargo. The index "tells me the economy is heading for slower growth in the second half. We have low expectations for back-to-school." (more)
The number of vacant properties, including foreclosures, residences for sale and vacation homes, rose from 18.6 million in the year-earlier quarter, the U.S. Census Bureau said in a report today. The ownership rate, meaning households that own their own residence, was 66.9 percent, the lowest since 1999.
Lenders are accelerating foreclosures as borrowers fall behind in mortgage payments after the worst housing crash since the Great Depression. A record 269,962 U.S. homes were seized in the second quarter, according to RealtyTrac Inc. Foreclosures probably will top 1 million this year, the Irvine, California- based data company said in a July 15 report. (more)
Let's see why Ford (NYSE: F) currently makes our buy list.
The recent history of the U.S. auto industry probably has you convinced of three things:
- U.S. automakers are hopelessly uncompetitive.
- They can't make quality cars.
- Anyone who invests in them, especially after the recent bankruptcies of General Motors and Chrysler, needs to get their own engine checked.
(Money Magazine) -- Question: I'm 28 and would like to have $1 million by the time I retire at 65. What are some of the investing options I should consider? --Joshua Sin, Fresno, Calif.
Answer: I'm all for savvy investing, and I'll get to what I think you should do on that front in a minute. But let's not forget that when it comes to building wealth, investing alone won't do it.
You also need to save.
I don't care how brilliant an investor you are. If you're not putting away a decent amount of money on a regular basis throughout your career, your chances of accumulating a million bucks are lower than LeBron's chances of getting elected mayor of Cleveland.
To understand what I'm talking about, let's look at a few numbers. (more)