Gumby
Active member
I am seriously thinking about joining you today!
....but afraid the market may roll over after Dr. Strangemath speaks.
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Corepuncher's Account Talk
- Thread starter Corepuncher
- Start date
I am seriously thinking about joining you today!
....but afraid the market may roll over after Dr. Strangemath speaks.
Corepuncher
Well-known member
Some explanation for at least a portion of the rally today:
http://market-ticker.denninger.net/archives/549-Weekend-Special-Lehman,-Pumping,-And-Lawsuits.html
Pump monkeys rule!
Updated Tracker COB 8/22/08
----------------------------------------------------------------------
2008 YTD Return: +8.86%
Today: +0.01%
Current Allocation: 100G
Tracker Rank: 2
Tentative Next Move: Wait for < 1240 to buy after 9/1/08
----------------------------------------------------------------------
http://market-ticker.denninger.net/archives/549-Weekend-Special-Lehman,-Pumping,-And-Lawsuits.html
Pump monkeys rule!
Updated Tracker COB 8/22/08
----------------------------------------------------------------------
2008 YTD Return: +8.86%
Today: +0.01%
Current Allocation: 100G
Tracker Rank: 2
Tentative Next Move: Wait for < 1240 to buy after 9/1/08
----------------------------------------------------------------------
ContrarianJeff
Member
Corepuncher--I enjoy reading your comments. Right now on the automatic tracker, you're ahead of me by about 1.5%. Congrats.
I've got a question for you. I saw you have 5 IFT's during this month alone. Are you just making as many transfers as you want on the tracker without regard to the 2 IFT limit? I can't stand the IFT limits, but I'm sticking to it on this tracker just so I can get an accurate measurement of my TSP performance.
Because of my disgust with the TSP (and because there's no way to short the market), I've borrowed as much as I can from my TSP account and added it to my ETrade account. I wonder if there are a lot of folks who have done the same. I've done really well buying dips and shorting blips, so I'm thankful for that. (FWIW--I think markets (especially financials) are soon headed for the next leg down and the July lows will not hold.)
I've got a question for you. I saw you have 5 IFT's during this month alone. Are you just making as many transfers as you want on the tracker without regard to the 2 IFT limit? I can't stand the IFT limits, but I'm sticking to it on this tracker just so I can get an accurate measurement of my TSP performance.
Because of my disgust with the TSP (and because there's no way to short the market), I've borrowed as much as I can from my TSP account and added it to my ETrade account. I wonder if there are a lot of folks who have done the same. I've done really well buying dips and shorting blips, so I'm thankful for that. (FWIW--I think markets (especially financials) are soon headed for the next leg down and the July lows will not hold.)
Corepuncher
Well-known member
I'm holding to the TSP rules on the tracker...I just moved into G several times. A few months ago I forgot to make like 3 moves on there that I made in real life thus the descrepancy (I'm about 2% ahead of the tracker). Agree financials are toast. I feel very strongly, that if you are patient, you will get in MUCH MUCH LOWER than we are now...but of course you can try to play the market a bit on the way down.
Corepuncher
Well-known member
This is utterly unsustainable and yet, as it corrects back to sustainable levels, it must by definition impact your lifestyle in a severe, impossible-to-avoid fashion.
Unfortunately the 20% of America who "geared up" and tried to "live large" is and will be screaming for bailout after bailout from our government. If they go down this path it will be a near-exact repeat of what Herbert Hoover did in the early part of The Depression, and will lead to the same result!
If you've been prudent for the last few years your job is to ride your government officials to stop this nonsense and instead focus on ring-fencing the government's balance sheet while forcing bloated asset prices, especially housing, to contract to affordable levels.
The key point is that irrespective of the path taken, the pain and business failures will occur. We are now arguing over who gets to eat the losses - not whether they will happen - and how long it will take before we find a "clearing price" for those assets that are overextended in their valuation, whether it be McMansions or shopping mall footage.
Unfortunately the 20% of America who "geared up" and tried to "live large" is and will be screaming for bailout after bailout from our government. If they go down this path it will be a near-exact repeat of what Herbert Hoover did in the early part of The Depression, and will lead to the same result!
If you've been prudent for the last few years your job is to ride your government officials to stop this nonsense and instead focus on ring-fencing the government's balance sheet while forcing bloated asset prices, especially housing, to contract to affordable levels.
The key point is that irrespective of the path taken, the pain and business failures will occur. We are now arguing over who gets to eat the losses - not whether they will happen - and how long it will take before we find a "clearing price" for those assets that are overextended in their valuation, whether it be McMansions or shopping mall footage.
Corepuncher
Well-known member
Denninger's blog is really good today and I wanted to post it all.
The 2009 "Consumer Crash" Call is UNDERSTATED
I was directed this morning to a lovely article over at The Prudent Bear calling for a 2009 "Consumer Crash".
It is full of charts and documentation, and I strongly suggest you read it. All of it. It should in fact be required reading for our political entities and every high school student in the nation, along with every literate adult.
It is very heavy on charts and statistics, some of which I am going to unabashedly quote, and expand on.
Yes, expand on.
Here's the first pair:
Now this looks very bad, but in fact it is much worse than it looks. Why? For the same reason the rest of these charts are worse than they look - they portray averages, but not distributions.
And it is the latter - distribution - that is the real problem.
See, there are a very large number of people - perhaps much as 25% of America, that have no debt at all. Not even a car loan. I'm one of them, and in fact this has been, in the main, my viewpoint since I was a youngster.
Yes, I've had car loans and mortgages, but I never was one to run a credit card balance or charge plate at a store. Ever. There are quite a few people like me, some of them older, some younger, but not everyone is in debt up to their eyeballs.
This may sound encouraging. In fact, its not. Its quite discouraging, and seriously so, because for every person who is prudent, there is one who is doubly underwater to the degree depicted in the graph.
The impact of this will not sink in until you think about it. There are plenty of people, including those on Kudlow every night, who try to claim that "the consumer's debt load, while rising, is manageable."
They're looking at this same graph you are above, and while they are alarmed, they're saying "oh, yes, its a bit over 1x income, but that's not horrible given that debt service is in the low teens as a percentage."
What they're missing is that there is 20% of our population that is being utterly smashed, with debt to income ratios north of 300% and total debt service requirements in the 60% range or more!
Then there is "Joe Median" who has debt service in the teens.
And then there are people like me, who pay no interest to anyone.
Why does this matter? Because that 20% of the population is part of our "consumption lifestyle" - its the lady that I saw a few weeks ago at the opening of Dark Knight who had to pull out three credit cards before she found one that wasn't declined (over limit?) to pay for the $50 worth of popcorn for her and her brood.
For those people accustomed to spending like there is no tomorrow, the pattern of the last few years has been:
For that 20% of Americans who were goaded into "spend spend spend" following the 9/11 attacks and actually did so beyond their means, the train has hit the wall - we are now witnessing the "slow motion" pileup of cars as they derail.
This is bad.
But it gets much worse, because all of this "phantom home appreciation" in fact came from nothing more than speculative froth, and that translated into literally all sectors of the economy. There are now over 4,100 WalMarts in the United States alone, with almost the entire expansion over the last ten years being driven by the "McMansion boom" in the suburbs and exurbs of America. This "demand" was in fact false speculative froth, in that in 2005 we had nearly fifty percent more "home sales" than were justifiable by actual demographic demand!
Here's the next piece of bad news that you are going to like even less:
The bad news here is that the correction in prices, in inflation-adjusted terms, is only half-over. We've seen about a 20% decline thus far; another 20% is in front of us, and just as the first half took two years, the next half will probably take another two, meaning that prices are unlikely to finish correcting until some time late in 2010.
What this means for you is that if you think home prices will "bottom" in the next six to nine months you are sadly mistaken and are about to get a very expensive and nasty lesson in the reality of economics.
In addition we are likely to see an overshoot in prices - perhaps by 1/4 to 1/2 of the "height" of the bubble. If so, that would take inflation-adjusted home prices down to around $100,000, which is a decline of another fifty to sixty percent - not 30% - from today's prices.
You think this projection is "overblown"? Take a gander at this piece:
What's the take-away from this?
If you owe more than 70% of today's value of your home, you will be underwater with certainty. If you owe more than half, there is at least a 50% chance you will be underwater within the next two years. 30% of all buyers in the last five years are underwater now. The other 70% of those buyers will be with nearly 100% certainty.
This puts into stark relief the outright fraud of programs like "Hope Now" and similar game-playing, in that such a refinance, if you take it, removes the no-recourse nature of your original mortgage. That is, you will lose the ability to walk away in the future, assuming you even qualify for one of these sucker-refinance "opportunities", as the bank will gain the ability to come after in perpetuity and garnish your wages.
Don't do it!
Instead, if you are underwater today or at risk of becoming underwater in the next two years, go talk to a good bankruptcy attorney right now and figure out what your options are when, not if, your home value declines by another 30% - and whether you might be better off accelerating what is a certain future bankruptcy so you can start rebuilding your credit and life now.
If you still have equity but won't with reasonable certainty sell the house now and rent, then buy it back at 30-50% off in two or three years.
Don't let the sucker be you!
Why is this important? Because in two years if you intentionally default and rent a home for a while you will be able to buy your house back for 30-50% less than it is "worth" today, cutting your mortgage payment by 50% permanently and winding up with a sustainable mortgage. You will also have two years to build a 20% down payment on the much lower purchase price, and that same two years to start rebuilding your credit.
Again - this isn't legal advice - and you need it if you're going to practice what is known as "efficient breach" in contract parlance. I know I've been preaching this for nearly a year now and will repeat it once more - go get that advice today and figure out if this is the right course of action for you. For a very large percentage of those who bought homes in the last five years, it is.
When you analyze all of this you come to an ugly and inescapable conclusion - we're in deep trouble as an economy, and this is not going to be a "short and shallow recession."
It is instead going to be a very deep and long one, because credit growth - not earnings power - is what has driven the economy for the last 20 years, with the worst of it - a parabolic blow-off - happening in the last six.
(the rest continued in post below)
The 2009 "Consumer Crash" Call is UNDERSTATED
I was directed this morning to a lovely article over at The Prudent Bear calling for a 2009 "Consumer Crash".
It is full of charts and documentation, and I strongly suggest you read it. All of it. It should in fact be required reading for our political entities and every high school student in the nation, along with every literate adult.
It is very heavy on charts and statistics, some of which I am going to unabashedly quote, and expand on.
Yes, expand on.
Here's the first pair:
Now this looks very bad, but in fact it is much worse than it looks. Why? For the same reason the rest of these charts are worse than they look - they portray averages, but not distributions.
And it is the latter - distribution - that is the real problem.
See, there are a very large number of people - perhaps much as 25% of America, that have no debt at all. Not even a car loan. I'm one of them, and in fact this has been, in the main, my viewpoint since I was a youngster.
Yes, I've had car loans and mortgages, but I never was one to run a credit card balance or charge plate at a store. Ever. There are quite a few people like me, some of them older, some younger, but not everyone is in debt up to their eyeballs.
This may sound encouraging. In fact, its not. Its quite discouraging, and seriously so, because for every person who is prudent, there is one who is doubly underwater to the degree depicted in the graph.
The impact of this will not sink in until you think about it. There are plenty of people, including those on Kudlow every night, who try to claim that "the consumer's debt load, while rising, is manageable."
They're looking at this same graph you are above, and while they are alarmed, they're saying "oh, yes, its a bit over 1x income, but that's not horrible given that debt service is in the low teens as a percentage."
What they're missing is that there is 20% of our population that is being utterly smashed, with debt to income ratios north of 300% and total debt service requirements in the 60% range or more!
Then there is "Joe Median" who has debt service in the teens.
And then there are people like me, who pay no interest to anyone.
Why does this matter? Because that 20% of the population is part of our "consumption lifestyle" - its the lady that I saw a few weeks ago at the opening of Dark Knight who had to pull out three credit cards before she found one that wasn't declined (over limit?) to pay for the $50 worth of popcorn for her and her brood.
For those people accustomed to spending like there is no tomorrow, the pattern of the last few years has been:
- Run up credit cards, rolling balances over from one to another "0% intro offer" as required, then opening a new line to charge up.
- When that gets to be difficult, HELOC out the money, pay down the credit cards, and repeat.
For that 20% of Americans who were goaded into "spend spend spend" following the 9/11 attacks and actually did so beyond their means, the train has hit the wall - we are now witnessing the "slow motion" pileup of cars as they derail.
This is bad.
But it gets much worse, because all of this "phantom home appreciation" in fact came from nothing more than speculative froth, and that translated into literally all sectors of the economy. There are now over 4,100 WalMarts in the United States alone, with almost the entire expansion over the last ten years being driven by the "McMansion boom" in the suburbs and exurbs of America. This "demand" was in fact false speculative froth, in that in 2005 we had nearly fifty percent more "home sales" than were justifiable by actual demographic demand!
Here's the next piece of bad news that you are going to like even less:
The bad news here is that the correction in prices, in inflation-adjusted terms, is only half-over. We've seen about a 20% decline thus far; another 20% is in front of us, and just as the first half took two years, the next half will probably take another two, meaning that prices are unlikely to finish correcting until some time late in 2010.
What this means for you is that if you think home prices will "bottom" in the next six to nine months you are sadly mistaken and are about to get a very expensive and nasty lesson in the reality of economics.
In addition we are likely to see an overshoot in prices - perhaps by 1/4 to 1/2 of the "height" of the bubble. If so, that would take inflation-adjusted home prices down to around $100,000, which is a decline of another fifty to sixty percent - not 30% - from today's prices.
You think this projection is "overblown"? Take a gander at this piece:
"He was selling houses for $300,000. That means a buyer would have needed a household income of about $100,000 to comfortably make the payments. But Merced’s per capita income of $23,864 ranks among the lowest for metropolitan areas in the country. “None of us paid much attention,” Mr. Glieberman says."
Now it is true that for every home that is valued at four times the sustainable maximum there are some that are much closer to a "real" price. But folks - does this not put a "face" on what's really going on, and those who claim "it will all be ok"?
What's the take-away from this?
If you owe more than 70% of today's value of your home, you will be underwater with certainty. If you owe more than half, there is at least a 50% chance you will be underwater within the next two years. 30% of all buyers in the last five years are underwater now. The other 70% of those buyers will be with nearly 100% certainty.
This puts into stark relief the outright fraud of programs like "Hope Now" and similar game-playing, in that such a refinance, if you take it, removes the no-recourse nature of your original mortgage. That is, you will lose the ability to walk away in the future, assuming you even qualify for one of these sucker-refinance "opportunities", as the bank will gain the ability to come after in perpetuity and garnish your wages.
Don't do it!
Instead, if you are underwater today or at risk of becoming underwater in the next two years, go talk to a good bankruptcy attorney right now and figure out what your options are when, not if, your home value declines by another 30% - and whether you might be better off accelerating what is a certain future bankruptcy so you can start rebuilding your credit and life now.
If you still have equity but won't with reasonable certainty sell the house now and rent, then buy it back at 30-50% off in two or three years.
Don't let the sucker be you!
Why is this important? Because in two years if you intentionally default and rent a home for a while you will be able to buy your house back for 30-50% less than it is "worth" today, cutting your mortgage payment by 50% permanently and winding up with a sustainable mortgage. You will also have two years to build a 20% down payment on the much lower purchase price, and that same two years to start rebuilding your credit.
Again - this isn't legal advice - and you need it if you're going to practice what is known as "efficient breach" in contract parlance. I know I've been preaching this for nearly a year now and will repeat it once more - go get that advice today and figure out if this is the right course of action for you. For a very large percentage of those who bought homes in the last five years, it is.
When you analyze all of this you come to an ugly and inescapable conclusion - we're in deep trouble as an economy, and this is not going to be a "short and shallow recession."
It is instead going to be a very deep and long one, because credit growth - not earnings power - is what has driven the economy for the last 20 years, with the worst of it - a parabolic blow-off - happening in the last six.
(the rest continued in post below)
Birchtree
Well-known member
I'm sorry I had to dutifully skip over that read - I make it a point to stay away from Denninger. The wife and I are going out this evening for a steak to help out the economy - hope I don't have to stand in line very long. I noticed the U.S. dollar index has broken above its downtrend resistance line. The technicals suggest a test of 80-81.
Corepuncher
Well-known member
Actually the full article is much better:
http://www.prudentbear.com/index.php/commentary/guestcommentary?art_id=10098
Read that one Birch and then state a bull case for me. All facts. :cheesy:
http://www.prudentbear.com/index.php/commentary/guestcommentary?art_id=10098
Read that one Birch and then state a bull case for me. All facts. :cheesy:
Corepuncher
Well-known member
Updated Tracker COB 8/26/08
----------------------------------------------------------------------
2008 YTD Return: +8.89%
Today: +0.03%
Current Allocation: 100G
Tracker Rank: 2
Tentative Next Move: Wait for < 1240 to buy after 9/1/08
----------------------------------------------------------------------
----------------------------------------------------------------------
2008 YTD Return: +8.89%
Today: +0.03%
Current Allocation: 100G
Tracker Rank: 2
Tentative Next Move: Wait for < 1240 to buy after 9/1/08
----------------------------------------------------------------------
Birchtree
Well-known member
From a contrarian perspective now is probably the time the bull will rise up and charge. There is no good news to be had - only bearish despair. But as a contrarian I will keep the candle burning because I've been down this path several times before over the years and I know what the future eventuality will be and the outcome means further wealth for me because I can hold to my discipline when everyone else is in sheer panic mode. I have both dollar cost averaging and dividend reinvestment on my side and I'll just keep plugging away toward accumulation - after all it's always the number of shares that makes the difference.
I am.
Corepuncher
Well-known member
I agree there is bearish despair but also objective analysis and statistics suggest some pretty slow growth and headwinds ahead. I don't feel any panic at this point.
I'm sure you have enough money that you can take a big hit and still be ok. Depends on your time horizon. Personally, I would say if you are retiring anytime within the next 5 years to just take it out. We could go relatively sideways for a while. Things are happening today that are unprecedented...therefore you can't compare to history necessarily. Not only is our savings rate NEGATIVE...but interest rates are already low and will go no lower. Inflation will be the dagger in the heart of the economy if it increases.
Corepuncher
Well-known member
I've been messing with it a bit lately. Overall a bit more red than I've seen. Still trying to code up a calibration program to backtest different methods and get some hard stats on how it does. Since I"m using equal standard deviations, all parameters are being weighted equally...and you know that is not right. I need to find out what proportions are best. It will take some time though. So, keep that in mind...this doesn't necessarily tell you what to do..it's just info.
Corepuncher
Well-known member
Gustav will likely become a strong hurricane and enter the Gulf of Mexico. Right now, the ECMWF model brings it into Mobile, AL, and the GHM and GFDL models keep it mainly south of Cuba, then, turn it NW right into the heart of the Gulf. Possible TX or LA landfall...and we all know what that means!
The hurricane center "official" track is has gradually been adjusted to the LEFT. Now, you have to understand that the NHC moves in gradual increments, and even if the models make a big move, the NHC will not move their official track as much for fear of too much zig zagging. They are usually way too conservative with the wind speeds as well for strong hurricanes. So they might say 85 KTS at 72 hours out, but it would be 110 KT or something.
Get ready for a big oil/nat gas day tomorrow. Markets didn't respond too much yesterday I think because 1) Them models were not as bullish and 2) They are a little tentative after the POS tropical systems we had earlier this year. This one looks different to me, and could be MAJOR.
The hurricane center "official" track is has gradually been adjusted to the LEFT. Now, you have to understand that the NHC moves in gradual increments, and even if the models make a big move, the NHC will not move their official track as much for fear of too much zig zagging. They are usually way too conservative with the wind speeds as well for strong hurricanes. So they might say 85 KTS at 72 hours out, but it would be 110 KT or something.
Get ready for a big oil/nat gas day tomorrow. Markets didn't respond too much yesterday I think because 1) Them models were not as bullish and 2) They are a little tentative after the POS tropical systems we had earlier this year. This one looks different to me, and could be MAJOR.
Corepuncher
Well-known member
have you guys seen www.tspcenter.com ? It's another site for some info. They also have a leader board. Their leader is up 9.68%, so on par with us.
The last noteworthy panic was back on 15 July 08; verifiable with added capitulation. It will take another drive to that point for another panic attack, IMHO. Inevitably, the Government will throw the taxpayer dollar at it again, promising bailout, after bailout. Like Mr. Quinn stated, "Companies need to fail, housing needs to find its bottom based on supply, demand and price. Those who gambled must be allowed to lose and suffer the consequences. If the government attempts to shift the losses to those who lived lifestyles of thrift, an angry uprising will ensue. Government intervention in this natural process could lead to a decade long depression. Let’s hope that reasonable heads prevail."
http://www.prudentbear.com/index.php/commentary/guestcommentary?art_id=10098
If our government is willing to run up a 3 trillion dollar bill on a never-ending war on world terrorism... they will run up a few 100 billion dollar bailout bills too. Very irresponsible... and yet, very American.
http://www.prudentbear.com/index.php/commentary/guestcommentary?art_id=10098
If our government is willing to run up a 3 trillion dollar bill on a never-ending war on world terrorism... they will run up a few 100 billion dollar bailout bills too. Very irresponsible... and yet, very American.
Corepuncher
Well-known member
HURRICANE UPDATE: Wow, while models are all over the place with Gustav and yet ANOTHER possible hurricane a few days later, it is obvious that the tropics are HEATING UP!
Get ready for some crazy Oil and Nat Gas action!
This may result in another stock market leg down, which in turn may reward all those in G with a good buying price after 9/1.
Get ready for some crazy Oil and Nat Gas action!
This may result in another stock market leg down, which in turn may reward all those in G with a good buying price after 9/1.
JTH
Well-known member
First off, thanks for the Excel update, I know it's a work in progress, but then again so are many of us.
On a side note, it appears that when users sign up to that site, they are automatically inrolled into G on their fantasy accounts. Problem is many of those users never come back or adjust their accounts. This means some of those rankings are suspect. I'm not sure which ones are accurate ot not, I thought I'd just point it out as a potential warning to others.
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