Thread: coolhand's Account Talk

Or something like that...

Plenty of Pent-Up Buying Power
Last Update: 06-Mar-09 08:57 ET

http://www.briefing.com/Investor/Pub...ot/PageOne.htm

One bear that didn't hibernate this winter is the market. With yesterday's losses it is down 24.2% year-to-date and has fallen as much as 15.8% since President Obama was inaugurated on Jan. 20.

This week alone it has dropped 7.2%, which again prompts market watchers such as ourselves to infer that it is oversold on a short-term basis and seemingly due for a meaningful bounce.

As we have noted in the past, overbought markets can stay overbought longer than many people think. That perspective, however, applies just as well for oversold markets, particularly when they are plagued by fears of deflation in stock prices. That is, an expectation that cheaply-priced stocks will continue to get cheaper.

There has indeed been a buyers strike, as evidenced by the cascading stock prices across all sectors and the continued increase in money market fund assets, which hit $3.91 trillion in the latest week versus $3.83 trillion at the end of 2008 and $3.45 trillion in the year-ago period.

Money market fund assets, in fact, are now at a level that is 70% of the S&P's market cap of $5.60 trillion. In June 2007 (i.e., pre-subprime crisis) the level of assets in money market fund assets was just 19% of the S&P's then $13.7 trillion market capitalization.

To be sure, there is plenty of buying power, but participants continue to lack the confidence to fire.

On that score, the February employment report brought the bad news that was expected -- literally. The consensus estimate called for a decline of -650K positions and the reported number ended up -651K. The prior month's nonfarm payrolls decline was revised to -655K from -598K.

The unemployment rate, however, surprised in a negative manner as it jumped to 8.1% (from 7.6%), which was above the 7.9% consensus forecast.

Hourly earnings, up 0.2%, and the average workweek, at 33.3 hours, were in line with estimates.

The initial response to the report was positive, but the economic devil lies in the details.

Payroll declines were seen in all areas, with the exception of education and health services (+26K) and government (+9K).

The manufacturing workweek fell another 0.2 to 39.6 hours, which is a negative portent for industrial production.

Additionally, the number of long-term unemployed increased 270K to 2.9 mln; the number of persons who worked part-time for economic reasons jumped 787K to 8.6 mln; and the number of discouraged workers was up 335K from a year-ago. Each of these measures underscores the difficulty in finding a new job in the current environment.

One bright spot is that average hourly earnings were up 3.6% from a year-ago, which will aid in the purchasing power for employed individuals. Still, the rising unemployment rate and the high level of nonfarm payroll declines, which were at their highest in February since Oct. 1949, are expected to remain deterrents for consumer spending which drives GDP.

The S&P futures suggest the cash market will start today's session 1.6% higher. However, it's not the manner in which the market opens, but how it closes, that is the important thing to watch.

That was a GREAT READ - Coolhand

Thanks man

I enjoy reading your posts. Gosh what happens to that 70% level if the FDIC decides it has to reduce its coverage or can't provide coverage at all? Where will it all go? I know.

Originally Posted by Birchtree

I enjoy reading your posts. Gosh what happens to that 70% level if the FDIC decides it has to reduce its coverage or can't provide coverage at all? Where will it all go? I know.

Or overseas cause the $ will tank big.
How's it going Birch? Been busy lately, so not able to keep up with the mb. Took the day off for r&r.

Hope I don't regret it.

Where will it all go? I know.

The Post article on page 1 this morning says it is being sought by the administration to buy “recently issued, highly rated securities” that finance consumer lending with the government covering losses.

This is incredible. Certain market factions are trying to stop market analysis in some pockets. Apparently, Hamzei Analytics is having to significantly scale back the info they used to provide to traders.

http://www.traders-talk.com/mb2/inde...owtopic=102794

Beating Back Obamanomics

Mises Daily by Llewellyn H. Rockwell, Jr.
Posted on 3/6/2009 12:00:00 AM

http://mises.org/story/3367

It's raining, pouring, economic fallacies by the hour, followed by a flood of horrible policy that is driving us ever further into economic depression. The regime in charge has really gone nuts, revealing itself as both deeply ignorant and horribly evil.

We find ourselves facing the horror of what has always been the Achilles heel of the left wing: its abysmal ignorance of economic science. The ideological tendency has gone from Keynesianism to outright socialism in a matter of a few weeks.

And the trajectory seems to be accelerated mainly by the logic of the interventionist cycle: bad policy leads to bad results that are addressed through bad policy, and so on, straight down the fast track to serfdom. Obama's attachment to "transparency" — the buzzword of the day — allows all intelligent people to observe the sickening sight in real time, and to the cheers of the kept class of intellectual phonies like Ben Bernanke and Paul Krugman.

The encouraging thing — and perhaps this too was inevitable — is that the right wing is getting its act together. It has suddenly discovered that economics matters. You can cheer on the hot wars, fight the culture wars, and crack down on political dissidents all you want. But in the end, what makes for the good society is a sound economy. Without it, all the rest falls apart.

Thus all our favorite conservatives are starting to make sense. The American Spectator is alarmed. Rush Limbaugh sounds like LRC. The American Conservative has temporarily dropped its love of protectionism to warn of dollar inflation. The love of war has gone AWOL at National Review. The Heritage Foundation is warning that government spending and taxation are driving us to ruin. Pat Buchanan is defending the free market!

Where were these people during the last eight years of Bush's misrule? Asleep or seeking preferment or something. It's not as if Obama caused this crisis; he is only making it worse. In any case, the Right has begun to turn to the side of truth and justice, precisely as they did during Clinton's rule, and this is all to the good, in general.

But just in case we are observing yet another expedient shift, it might be a good idea to understand precisely why socialism is a bad idea. The Obama administration doesn't seem to get it. And there is plenty to get. Socialism crushes human rights, builds the state, impinges on the liberty of conscience, and breeds social, cultural, and economic degeneration.

People have made those points for hundreds of years. Somehow, and for whatever reason, many people rejected these critics. No, they said, all of this sounds plausible, but you don't understand how the sheer glory of the socialist ideal, with perfect equality and social justice, will bring about a new sense of things. Mankind will be inspired to share, create, work, and obey by the astonishing emergence of a completely new form of social organization.

Ludwig von Mises in 1920, however, added something special and new to the critique of socialism. He said that socialism in all its forms cannot accommodate any economic development beyond the hunter-gatherer stage. And the reason has to do with the socialist attack on the ownership and exchange of capital goods. Without ownership, there is no exchange, and so prices do not emerge. Here is his 1920 essay, which says it all.

Without market prices for capital goods, accounting is not possible. You don't know if you are making money or losing money, saving resources or wasting them, doing the right thing or not doing the right thing. Think of all the decisions that have to be made on the production end that require you to know whether you are wasting resources or not. With steel, do you make more buildings or trains? Or do you make cutlery or computers? Or cars or cables?

You can't just rely on assessing consumer demand. The demand for stuff is infinite. What matters are choices in light of foregone alternatives. These can't be discerned with polls or intuition. What matters here is the weighting of all alternative uses of resources. They can only be worked out in real time, in light of the choices of consumers and the profitable production decisions of producers.

None of this is possible if you don't have real market prices providing the real stuff that makes cost accounting possible. Collectivize property and you abolish the market for capital goods. No prices emerge. Every choice you make is arbitrary. There is no more rationality remaining. You just end up groping around in the dark.

No socialist has ever been able to provide an answer to Mises's devastating point. And why? Because no socialist has seriously thought through how their cockamamie system would work. Lenin used to say, oh whatever, just run the whole economy the same way the post office is run. But notice: the post office has a problem with innovation, pricing, cost accounting, and making ends meet. Its only source of life comes from the competition provided by private competitors. The post-officeization of the entire economy would mean a return to barbarism.

Mises's illustration of the failure of socialism provides a fantastic means to discover what is right about markets and wrong about all forms of collectivized economic planning. It shows what happens when you nationalize banks and credit. But it also shows what is wrong with all bureaucracies.

Mises put all his criticism together in a single book, a book that remains the definitive refutation of the entire intellectual apparatus of socialism. It is a classic, a must-read, a treasure for all ages. To read it is to be amazed. It has changed the minds of millions of people since it appeared in 1922. It is the one book that utterly crushes the economic agenda of the Left, revealing what fools they really are.

Mises's point has also been a fruitful one for further theorizing about all forms of collectivism. See, for example, Hans-Hermann Hoppe's Theory of Socialism and Capitalism.

And look: it's not as if socialism is a new idea. It was tried in the 20th century. It produced economic stagnation and despair. In its purest form, it extinguished more than one hundred million people. That's why The Black Book of Communism must be owned and read and understood by every thinking person. It is the most terrifying book you will ever read. It is a standing rebuke to any living soul who claims that economic understanding doesn't matter.

Take this seriously: it is where the Obama tendency is leading us.

Coolhand:

I read Traders Talk frequently, but missed these posts.

I really like the Seven Sentinels I will definately use them and some other tools I have, and agree they should give the general market direction; just perfect for limited TSP moves.

After today 3 are on a buy one is close, and the other 3 are still in sell. However, those three in sell can turn on a dime (new highs/lows bullish percent index from buy signals on point and figure charts).

I really like the BB band calibration on the bullish percent index and the index crossing pattern. This one is a must have in the toolbox! By itself, it gives really good buy and sell signals for intermediate term trading, perfect for TSP.

Originally Posted by Uptrend

Coolhand:

I read Traders Talk frequently, but missed these posts.

I really like the Seven Sentinels I will definately use them and some other tools I have, and agree they should give the general market direction; just perfect for limited TSP moves.

After today 3 are on a buy one is close, and the other 3 are still in sell. However, those three in sell can turn on a dime (new highs/lows bullish percent index from buy signals on point and figure charts).

I really like the BB band calibration on the bullish percent index and the index crossing pattern. This one is a must have in the toolbox! By itself, it gives really good buy and sell signals for intermediate term trading, perfect for TSP.

Thanks for taking the time to check it out. I've been following it to a limited extent for over a year, but have not been using it as much as I should have in this bear market. It's a main stay for me now. Especially with our limited IFTs, as you also noted.

Coolhand,

Is Seven Sentinels a pay website or service? Can you provide a link? Thanks.