Bear Market Madness…

 

Oil dropped 2.7% today on a pullback. And the media is instantly jumping all over this as if some great event had happened. The Associated Press headline today:

Investors move back into stocks after strong home sales data, oil’s retreat

Investors moved back into stocks.. did they really? Well, if we use volume as a gauge then they were not. Not in any convincing manner anyway. And why did oil pullback some? Because of the reports this weekend that driving (demand for oil) had decreased substantially. So, let me connect the dots. The economy continues to weaken, people can’t afford to drive and go shopping, the hard facts that the economy is getting worse are coming off the printing press, and that is a reason to buy up stocks again? Someone please tell the media to "get real". History has shown us that the economy continues to weaken long after commodity price runs have temporarily topped. And is this really a temporary top in commodity prices to begin with?. Falling oil prices do not equate to an improving economy, just the opposite can be said, it is a declining economy that brings commodities back down as they become victim to the declining economy like everything else. Rising oil prices simply helped speed up the declining economy, that is all.

The economy began to deteriorate when oil was less than $80 per barrel. I don’t think that a drop in oil to $125 is really going to make any difference in the grand scheme of things. Even if oil dropped to $100 again, it is still a weak economy that is getting weaker. I still anticipate oil to go higher in the long run, but a brief pullback is no reason for the media to claim that a victory has been established, It is utter nonsense the way the media has been covering our economy.

And what about those "strong home sales" that the media also printed as a headline? Attorneys that I know who process foreclosures for Fannie Mae and Freddie Mac have been receiving increasing numbers of transactions to process. It is important to keep in context that the Governments data on home sales does not distinguish between banks taking properties off the market as they go back on the books of the mortgage companies and those of regular buyers and sellers conducting a transaction. And the foreclosure rate is increasing rapidly, this we know to be true.

And prices? No bottom in sight…

 

 

 

 

 

 

 

 

Bear Market Madness… I chose that title for tonight’s wrap up as the sentiment in a bear market goes through some of the wildest swings you will ever experience in your trading and investing lifetime. In a bear market the gloves come off and it becomes a war with bulls and bears constantly at each others throats. When you think of how the markets operate at the very core it really is a war. But, in a bear market it becomes a war of strategy, deception, planning, and propaganda. Everything you find in a real war except there are no machine guns and no bullets (at least I hope not). Over the past 5 trading sessions the DOW has lost nearly 600 points, and today the DOW gained 69 points. And with that 69 points comes the propaganda again. CNBC reported today that the pullback in oil may be a signal that the worst in the oil crisis may be over. Suddenly everyone wants to go long on stocks for the long term again. Have you noticed that you don’t hear anyone on CNBC say that this is a bear market? For some reason they hardly ever mention that anymore. As if they completely forgot their history from the bear market of 2000-2002, and every bear market in history before that.

This is still a bear market, inflation will be with us for a long time to come, and the economy will weaken to anemic growth for a protracted period of time. And the recession will be longer and deeper than the media and the Government will tell you.

There is good money to be made on the long and short side in a bear market, it is all about timing. And if our new site was on the air right now you would be joining us doing both on our day trades. We are pressing to have the site operational as fast as conceivability possible. Our longer term outlook for the US stock markets remain bearish and the declines in equities may have only begun. The decline from January to March may very well be a teaser of what may be in store for us down the road.

Bear Market Madness… it can make some people want to pull their hair out, it can be frustrating, and it can be disastrous for those that don’t have an escape plan for their long term investments (buy and hold). But, as educated, thinking, and insightful traders as we are here, our job is to do our best to keep you and your money together. And to build it up as we go.

Day trades, swing trades, position trades… all good and solid trading plans. In a bear market each becomes a challenge, but we are here to help you through these very bad economic times.

Today reminds me of the picture hanging in my office…

 

 

 

 

 

 

 

 

Off the Wires:

 

ACCORDING TO S&P PRICES ACROSS MOST COMMERCIAL PROPERTY/CASUAL LINES IN THE US ARE FALLING
- S&P adds that there are strong indications that the profits of underwriters may begin to fall due to the fall in prices

 

INVESTORS IN SOME TYPES OF MORTGAGES ARE PRESSURING LENDERS TO REPURCHASE THESE ASSETS - WSJ
- Investors who lost money by buying subprime mortgages are trying to force banks and mortgage companies to repurchase a rising number of troubled loans.
- The potential liability from the growing number of disputed loans could reach billions of dollars, according to FBR analyst Paul Miller.
- In a recent filing, Countrywide disclosed that its estimated liability for such claims rose to $939M as of March 31 from $365M y/y

 

NYT REPORTS THAT TALKS BETWEEN US AIRWAYS AND UNITED AIRLINES APPEAR TO HAVE COLLAPSED
- The report cites people with direct knowledge of the matter.
- According to the NYT, there has been little contact between United and US Air in recent days and the internal teams of sr. executives at both companies as well external bankers and lawyers assigned to the project have put it on "permanent hold."
- People close to the matter noted that talks between United and US Airways might revive at some point.
- Follow Up: Later a source said that the talks between the two airlines have not ended, but no deal is expected in time for review by the Bush administration; The source added that United is continuing alliance talks with Continental

 

S&P SAYS THAT DEFAULT RISK REMAINS DESPITE MARKET IMPROVEMENTS - REPORT
From the Press Release:  "Despite the recent market improvement, we maintain the same fundamental outlook as we did at the beginning of the year," said Diane Vazza, head of Standard & Poor’s Global Fixed Income Research Group. "We continue to expect deterioration in credit quality for the high-yield segment." Downgrade risks are elevated, and the pace of downgrades has accelerated in 2008.

 

ABC CONSUMER CONFIDENCE FOR WEEK ENDED MAY 25: -51 V -49 PRIOR (MORE THAN 22 YR LOW)

 

And the last item for tonight is a screen shot of the latest Federal Reserve aggregate reserves of depository institutions data:

 

 

 

 

 

 

 

 

(Source: Federal Reserve)

Good night to all, see you in the morning.