Brain Droppings

...and I have no time to contemplate it let alone comment on it. The rally off of 12,500 is not surprising. For the record, the decline is three waves leaving a the possibility of the bull still being alive. I think not but Mr. Market has not given me any indication one way or the other. The rally off of 12,500 looks impulsive (Five waves) which could be the start of a new leg of the bull.

In the news we have the Fed and the ECB ganging up to prop up the market by lending large sums to counter the panic. It's hard to argue against giving the addict more dope when he goes into full blown tremors. The question is how much to give him without perpetuating the addiction. I'm afraid the answer is always that there has to be a little pain. So as a believer in capitalism I am appalled by the gov't rescuing stupid people but I realize that the housing bubble's bursting can be horrific for the economy and I can't blame the authorities for trying to stem the tide. In fact, I fervently hope they succeed as to not would mean a recession on a grand scale.

Which leaves the question will they or won't they? The Fed was very clever to dodge the twin catastrophes of the DotBomb and 9/11. Well, not really clever. They were smart enough to make credit as cheap and available as they could. Now that we are faced with a bubble which is an order of magnitude bigger I doubt that the old voodoo will do. Or as Joe Walsh once probably said, "The problem isn't that I was drinking, the problem is that I stopped." More easy credit for the economy, please.

P.S. I don't know what to make of this as the details are sketchy at best but I thought you should know that someone might be betting a huge sum that the market will crash in the next three weeks.

Labels: easy credit, housing bubble, Trade

Fred Thompson looks ready to 'officially' enter the race next week. After hearing how all the campaigning started too early I wonder how it hurts Fred to wait this long as some suggest. I don't know the financial implications regarding donations. That part aside I think Thompson has plenty of time convince voters.

I haven't picked a jersey out yet. I like what I've heard from Thompson so far but there is much more to see and hear in the coming months before deciding who gets to wear (be) #44.

As I prepare for a likely move at the end of next month I've begun to take inventory of all the junk stuff we have in our place. I can live with 80+ pairs of shoes and numerous other accessories some people think necessary but I've come across one item that I think is excessive.

There are 52 pairs of jeans in my home. I only own 5 of them and I only bought two, the other 3 were gifts. That means that one person owns 47 pairs of jeans. I've asked a few women how many pairs they own and 10 is the most so far. Feel free to contribute your inventory total to the comments section if you like.

Elvis Presley died 30 years ago yesterday. I don't remember that day. But I do remember the day after when I was told about it only because I was playing at my friends house down the block and his mother, an Elvis fan, asked that we go to the store and buy a newspaper to read the details and perhaps save as a keepsake.

I didn't think much of the request at the time except that she had never asked us to buy a newspaper before. We rode our bikes about a half mile to the store and bought the paper and I believe some milk and brought it back no problem.

I've thought about that over the years but not because of anything Elvis. What I remember most is that I had only just turned seven years old and my friend was five, soon to be six. There was nothing wrong with that in my mind but I wonder how acceptable or common it is today to send a seven and five year old off to the store a half mile away by themselves.

At least that's how I would have announced this news.

Labels: Physics

No surprise here. Responsibility, work, stress are all piled onto the primary bread winners at this age. You want to be happy?

Researchers found that most people rated their time at university as the best years of their life, closely followed by their retirement years.

The biggest difference between the sexes was in the contentment of those not working, with women far happier than men to stay at home not seeking work.

Don't work.

The big news of the day for people who don't go to the supermarket is the rising cost of food. This is being driven by energy prices.

The Labor Department’s most recent inflation data showed that U.S. food prices rose by 4.1 percent for the 12 months ending in June, but a deeper look at the numbers reveals that the price of milk, eggs and other essentials in the American diet are actually rising by double digits.

Inna and I only buy our eggs from a small grocery store which has better quality and lower prices for eggs and produce than Jewel. We consume at least five eggs a day so it is a big part of our diet.

Adding to the good news is that home sales were down in 41 states. Prices also fell modestly but did rise in some areas. I believe this is because of the difficulty in the subprime mortgage market.

Until only a few weeks ago, just about anyone could walk into the bank and get a mortgage. The young, the old, the jobless and heck, there were stories of dead people getting mortgages.

Anything was possible. Until now.

There are stories coming out from all over the country of homebuyers now unable to get loans. Virtually overnight access to credit has simply gone away.

It is harder to get a mortgage so only the better credit risks who usually have more income can afford to buy. And they are buying more expensive homes which drives up the average sale price, IMHO.

Labels: housing bubble, Inflation

And I thought I was bearish.

The US government is on a ‘burning platform’ of unsustainable policies and practices with fiscal deficits, chronic healthcare underfunding, immigration and overseas military commitments threatening a crisis if action is not taken soon, the country’s top government inspector has warned.

David Walker, comptroller general of the US, issued the unusually downbeat assessment of his country’s future in a report that lays out what he called “chilling long-term simulations”.

I want to step out of my role as permabear and say that the Social Security and health care problems will be solved by simply not paying for them. The way I imagine it happening is that the underfunding crisis hits and we decide to cut the benefits. We being the majority who pay taxes.

Drawing parallels with the end of the Roman empire, Mr Walker warned there were “striking similarities” between America’s current situation and the factors that brought down Rome, including “declining moral values and political civility at home, an over-confident and over-extended military in foreign lands and fiscal irresponsibility by the central government”.

Not to mention a currency which the central bank has no problems debasing year after year. Just as long as our major trading partners do the same. The only problem with this analysis is that national defense is a very small fraction of our GDP. Even with the war.

“I’m trying to sound an alarm and issue a wake-up call,” he said. “As comptroller general I’ve got an ability to look longer-range and take on issues that others may be hesitant, and in many cases may not be in a position, to take on.

“One of the concerns is obviously we are a great country but we face major sustainability challenges that we are not taking seriously enough,” said Mr Walker, who was appointed during the Clinton administration to the post, which carries a 15-year term.

The fiscal imbalance meant the US was “on a path toward an explosion of debt”.

Ironically, the Federal gov't looks financially stable with debt as a percentage of GDP quite average. John Q Public is in much worse shape, however. Savings is almost negative and consumer debt and mortgage debt have stretched the credit worthiness of the average American to dangerous unique levels. So is the party over?

In Florida and California it is.

"A decline in prices, like increases, tends to be self-fulling," Michael Carney, head of Cal Poly Pomona's Real Estate Research Council, tells the LATimes here. "If buyers see prices falling, they hold off and don't buy and cause prices to fall even further. But it takes a while.

So we stand at stalemate while sellers have no real pressure to lower their prices. Which is a shame because I have a couple of houses in mind that fill my bill for the almost perfect home. And it looks like we might be moving to Mokena. Any house that has an English Pub and a swimming pool with a pool house that is almost a house unto itself is tops on my list. Mom? Forget the flying car, how about a down payment. P.S. Work is going well enough that I am actually thinking this might be possible in a couple of years. One thing I did learn is to keep my overhead very low to keep the pressure off me when I trade. Too many bills to pay means I think about those bills when I make trading decisions. Traders have to pay cash. It is the only way to avoid worry and the losses which accompany them.

Labels: housing bubble, Stupid things Bill wants to do

If I can't have a flying car then I want to do this.

He will leap head-first from a weather balloon 25 miles above Earth and plummet at more than 1,000mph with only a parachute for company.

He will face external temperatures of minus 100c while inside his carbon-fibre suit it will be a stifling 65c - almost 150 fahrenheit.

Labels: Stupid things Bill wants to do

Good for them, although it is a bit late in the game to lose faith in the Goldilocks economy.

It's worth recalling in this connection that the root cause of this credit correction was the Federal Reserve's willingness to keep money too easy for too long. The federal funds rate was probably negative in real terms for close to two years between 2003 and 2005. This led to a misallocation of capital into real estate and certain mortgage instruments that is currently being worked off. For the Fed to take its eye off the price-stability ball now in response to short-term market gyrations would only compound the original policy mistake.

Now if we could only convince Larry Kudlow. Nah, there is no chance of that. The problem is that we are so far into this bubble that the pain of its deflation will be far worse than an earlier call for fiscal rectitude would have been in say... 1997 or '98. For the Fed to sit out at this point and let nature take its course will produce a huge amount of suffering which might be avoided with a little taste of the easy money. I am not talking about slashing rates to the create another bubble but we should realize that doing nothing is a recipe for a horrific crash and depression.

For this reason, and because Ben Bernanke has studied the Great Depression, the Fed will ease when the markets really start to melt down. Then we will know that it is too late to act. But don't try and talk the Fed out of its only hope to mitigate the disaster they created.


P.S. There are enough indicators showing the market oversold that I would not be surprised to see a bounce or sideways trading early this week. We will see how far this takes us before I can say the bear has resumed.

Labels: easy credit, Stock, Trade

It was the heat of the sub-prime contagion hitting Europe that is keeping this market drop rolling around the world. The S&P futures are down 10.75 points which might mean nothing considering the huge volatility we are experiencing. I doubt this needs to be said but if when we break through the support at Dow 13,170-13,130 then it's time to buy that generator and stock up on canned goods.

Until then, relax. Well don't relax. Just don't worry too much. Now is a good time to predict the end of this correction if it is just your garden variety blow out. (I don't actually believe it is but being flexible keeps you from being married to a bad idea.) The support below 13,130 starts at 12,750. Also, the first leg down is 870 points (14000-13130) and subtracting that from our recent high of 13695 gives us 12,825. A market that paused at these levels would be a normal bear but bouncing off these levels would force me to consider the garden variety correction thesis.

Labels: crash alert, Stock, Trade

Goracle debunked?

Apparently the numbers used to "prove" that Mother Earth had a serious case of the vapors were the result of a Y2K bug. Good to know I can now drive my big honking gas guzzler guilt-free.

Labels: global warming

It is hard to label the beginning of this move. But it doesn't seem to matter where the one and two waves lie, we obviously have a very clear impulse wave down which means we have a change in trend. Now the three wave correction to the initial down wave appears to be complete. So allow me to push my crash alert back a few weeks when we take out Dow 13,000.


At this point the most optimistic outlook is another impulse wave down which would complete the correction above 12,000. Then the bull would be back. That possibility is remote in my view. Actually, an even more optimistic view would have the totaly correction finished at wave b but this seems unlikely. A move above Dow 13,800 would force me to rethink this.

Labels: crash alert, Stock, Trade

Barry Bonds is now the new home run king having passed Hank Aaron (didn't David Aardsma do that a few years ago? - YES!) last night.

All the commentary on baseball records tainted by steroids and blaming MLB, fans, owners, players, or anyone else misses one big point. True, we don't know for sure what drugs Bonds, Mark McGwire, Sammy Sosa....the list goes on...took and when (if) they took them. But what matters to me is that none of these players are being honest with the fans. They wont come clean.

Some wont even deny it as McGwire says he does not want to talk about the past. I hope Sosa, McGwire, Bonds and Rafael Plameiro do not make it into the Hall of Fame without first giving an honest, complete account of their achievements.

Our economy is suffering withdrawal symptoms which seem to have greatly affected the credit markets and threaten to spread. (Hehe, spread...credit market, get it?) If you haven't watched Jim Cramer loose his mind before then you are in for a treat. Watch it ASAP because I am not sure if this link will be good for very long. MSN videos can act a little funky including causing your browser to crash. For a very long time I didn't bother trying to watch video on their site because of this. Anyway, back to the topic. Cramer is calling for the Fed to do a bit of early intervention before the pain spreads too far and to cut rates now. Or as he would say, "NOW!!!"

I can't say he is wrong in a hair of the dog sort of way. Overindulgence in easy credit left us with a financial hangover so a little easy credit might ease the pain. The trouble is knowing when to stop so that you don't end up feeling worse the next day. Which causes me to wonder, if the Fed follows the Greenspan model and immediately slashes interest rates when the credit crunch seriously threatens the capital markets then will we just postpone the pain for another 4 to 6 years? At some point you are going to have to suffer if you overindulge. The only question is when. For one possible answer to that question I turn to the incomparable Bill Fleckenstein:

As to why the unwinding has taken so long to commence, only recently has the cause become clear: the mark-to-model fantasy employed by those who have bought the sliced-and-diced mortgage paper.

But the fantasy is unraveling as these structured-credit products are now slowly being marked to market. Just as virtually every subprime-mortgage lender has blown up, Alt-A lenders (the next rung up the ladder creditwise) will blow up -- and, ultimately, many hedge funds will blow up, though we're in the early days of that process.

In the years since our equity bubble peaked, trillions of dollars' worth of debt have piled up throughout corporate America. So now, as we enter recession, we will experience not just a weak economy, real-estate market and stock market, but the exacerbating effect of a mountain of bad debt, completing the analogy to Japan of the 1990s.

Labels: bubble, easy credit, Madman Cramer

If you want it off make them put it on.

Bookworm agrees with the notion that women should not completely cover themselves by wearing burqas and niqabs in public places.

Perhaps if men started demanding that women cover themselves it would call more attention to the absurdity.

Getting priorities right.

Popular Mechanics (via Instapundit) points out how we have neglected our infrastructure:

"The fact is that Americans have been squandering the infrastructure legacy bequeathed to us by earlier generations. Like the spoiled offspring of well-off parents, we behave as though we have no idea what is required to sustain the quality of our daily lives."....

"In the end, investigators may find that there are unique and extraordinary reasons why the I-35W bridge failed. But the graphic images of buckled pavement, stranded vehicles, twisted girders and heroic rescuers are a reminder that infrastructure cannot be taken for granted. The blind eye that taxpayers and our elected officials have been turning to the imperative of maintaining and upgrading the critical foundations that underpin our lives is irrational and reckless."

Political promises of anything new seem to be good for getting votes but new programs and projects are only directing funds away from the infrastructure we depend on.

This could be a good retrieval exercise.