Market Talk

Spaf

Honorary Hall of Fame Member
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Kingdom of TSP

Sunday-Weekly

Market News, Doodles, Tea Leaves, & Yak Date: June 26, 2005


Market News.

-> http://www.briefing.com/Silver/InBrief/PageOne.htm

Market Talk: Krude stays in saddle! High lube creates market savings slowdown fear. Growers flock to church to confess sins of overestimating crops.

Elsewhere: Flying machines sales were up, according to Boing.


Doodles, and Tea Leaves - Weekly.

Doodles:
S&P 500 (Index)
Closing at 1191.57, dn -25.39.
CMF (money flow) at -0.049, dn -0.240.
RSI (strength) at 45.2, dn -22.2.
MACD (trend) at 5.81, dn -2.50: bearish.

Nymex (Crude oil)
Closed at 59.84, up +1.37.

Attachment:Sorry. Server problems!?!?

Tea leaves: Red.


Yak.

Remarks: Holding 100%-G.
Oil markers: Safe: <55, Caution: 55-60, Panic alarm: >60.
Stops: Alert stop (1205) broken. Trailing stop (1193) broken.
TSP Returns (weekly): G=0.00, F=+0.08, C=-0.27, S=-0.26, I=-0.20
 
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Oil this morning in Europe now trading over $60 a barrel. The U.S. market will have to decide what it wants to do about that news.

Note: Over the weekend I saw Chinese auto sales off by 50%- the communist government reigned in credit there- can't have too much growth in the auto sector to quickly. Yet price of oil is soaring mainly on Chinese demand increasing.

Look for a slide again today, and then maybe a day breather tomorrow.

My money is betting we have not hit bottom. (I'm still mostly in G)

I think by the end of the week we will have a much clearer picture- either it will have settled down and ready to begin moving back up (in which case I will move everything back into stocks) , or , it will still be drifting lower. Lets see what the fed does with rates...

Finally, we need to have an "asian centric " I type fund. The current I fund is almost exclusively european. That is only a small part of the world.

The strongest market today is: China. Shanghai composite is up 2% today.


http://finance.yahoo.com/intlindices
 
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Oh I'm here...dunno about DMA and Greg....

Interesting about oil.....http://money.cnn.com/2005/06/27/markets/oil.reut/index.htm:X

doesn't look good about gas over the next several months......http://money.cnn.com/2005/06/26/news/gas_prices/index.htm ....it hits right in the ole pocketbook......for everyone....:shock:

guess we can thank those new fangled environmentalist liberals who regulated any renewal or development in oil refineries over the years....kinda like ole California......ain't going to develop any new energy sources.....therefore we outta power!!!!!:?

I think DMA is gonna split from the Govt TSP altogether....but, I'll let him make that final announcement....it'll be a shame if he leaves the board.....I like the ole boy and his info/data.....:^

:dude:
 
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Though the Bush administration would never admit to such a thing, I've long theorized that the action in Iraq was serving a dual purpose - 1) to remove Saddam and 2) to give us a convenient area to launch military strikes against the Iranian nuclear facilities.

Nothing's a certainty here, but it'd be wise to not overlook the possibility of conflict with Iran. They've been dragging their feet on the nuclear issue very much like Hussein was doing with the UN inspections before the Iraq war. Only this time, we all can see for ourselves that Iran has a functional nuclear program and is producing plenty of evidence (in the form of Uranium hexafluoride gas).

They say it's for peaceful electrical purposes. The country sits on a mountain of oil - plenty to export and use for its own energy needs... which would certainly point a finger in the direction of nuclear technology being geared toward weapons development.

In the short term, I'm hoping for oil to drop back down toward $55 or so. Then I'm going to go long on the oil sector in my brokerage account.
 
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I can't help but mention that you should take a look at the S&P over the last 2 years....observe the volume over the period.....notice....its been the highest on average since March....;)

Mix this fact with the S&P market price during the period at its peak and recent failure to exceed the peak of 1229 and what do you have.....a failure....:shock:

I think just maybethey have anticipated the effect that high oil prices have on the current market...:?

Remember first its the stocks doing well.....energy prices have to be low.....then when the stocks peak its the energy sector....it has been low it has room togo high....then when it peaks....invest in bonds, currenciesand such until the market andenergy costs recedes......follow this and you follow a winning investment pattern....

Have a good'un!!!:^

:dude:
 
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Oh one other thing, I wanted to remind everyone the events of last week brought a rather large negative impulsethat hasn't been seenvery often since Oct. Other two were in Jan and March-April timeframe....there is a negative bias on this data and it sends a warning.....

Be vigilant!

:dude:
 
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Agree

Don't like the way market looks right now, too risky! Time to put the helmet on! Walk over to the sidelines and wait and see!
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Spaf
 
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Will the F fund keep going up in the short term or has it just about peaked?????

A big jump just like in March in 2004 would be nice.

big.chart
 
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Ted wrote:
What is the look up symbol for the S-fund, on barchart.com?
The closest thing barchart will have is the ishare small cap 600 index under IJR.
 
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The Kingdom of TSP

Daily Edition

Market News, Doodles, Tea Leaves & Yak Date: June 27, 2005, Closing


Market News.

News: Lube over 60! Horseman Krude declairs brighter future for bucketteers. Some guru's blame market for having market prices to high with no discounts.

Elsewhere: Flying machine makers reported to be raking it in.


Doodles and Tea Leaves - Daily.

Doodles:
S&P 500 (Index)
Closing at 1190.69, dn 0.88
CMF (money flow) at 0.079, dn 0.030
RSI (strength) at 44.6, dn 00.6
MACD (trend) at 4.29, dn 1.52: bearish.

Nymex (Crude oil)
Closed at 60.54, up 0.70

Tea Leaves: Red.


Yak.

Remarks: Holding 100%-G.
Stops: NA
 
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Mike,

Dip Wad Osama has been hiding out in Iran for the last 2 years. He is being given protection by the ***wipe Mullahs - he hates the land of the Great Satan as much as the ***wipes do. We are now on both sides of Iran - building our military bases and setting up defenses. I believe we still owe them for the days when yellow back Jimmy refused to teach them a lesson. The Iranian population is fairly westernized and like Americans in general. It's the ***wipe Mullahs that are in control and they control the military conscripts and the other power bases. We are hoping we can subvert them from within - take all their toilet paper - but they just get stronger by the day. Yes, Mike there is a conflict coming and Israel will help carry some of the burden. We can squeez them from both sides into the open arms of Allah. Presently they are the largest contributors of terrorism worldwide. The Russians won't even help them. They belong to us when the time is right.

Dennis
 
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Birchtree wrote:
Mike,

Dip Wad Osama has been hiding out in Iran for the last 2 years. He is being given protection by the ***wipe Mullahs - he hates the land of the Great Satan as much as the ***wipes do. We are now on both sides of Iran - building our military bases and setting up defenses. I believe we still owe them for the days when yellow back Jimmy refused to teach them a lesson. The Iranian population is fairly westernized and like Americans in general. It's the ***wipe Mullahs that are in control and they control the military conscripts and the other power bases. We are hoping we can subvert them from within - take all their toilet paper - but they just get stronger by the day. Yes, Mike there is a conflict coming and Israel will help carry some of the burden. We can squeez them from both sides into the open arms of Allah. Presently they are the largest contributors of terrorism worldwide. The Russians won't even help them. They belong to us when the time is right.

Dennis
hehehe...we do have em surrounded.

not sure how well the russians would take us going to "plan b"....of course if the populationrevolts and over throws thosecrackpot preachers running things we will not find out.;)
 
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INTELLUCTUAL DEPRAVITY...by The Mogambo Guru

China's government is, so I read, mulling plans to prop up their fallen stock market by buying shares, which is such a bad idea that I am surprised that they are even thinking of something so stupid.

Now, there are a lot of people in the United States, namely me, who are so naturally distrustful and paranoid that they believe the worst in everybody. And we, mostly me, is are am absolutely convinced that the Fed would happily create tons and tons of money to buy stocks, bonds, houses, raw land, real estate on the moon, perpetual motion machines, Elvis collectibles, and anything else you can name in their desperation to get more money pumped into the economy. And the reason that we, meaning I, is are am so convinced is that the Fed is already on record as saying that they are not only willing to do any of those very things, anytime that they want, but they have literally given themselves that option! In effect, the banks will create money and buy up everything for themselves!

I used to think that we Americans are a real stupid bunch of people, but for us to allow this blatant ripoff and fraud really takes the cake for me.

So your term paper assignment is to research the entire economic and financial history of all the countries in the world, and all the countries that ever existed in the world, and find an example of where the banking industry could, for free, buy up the assets of the country, and keep them for themselves, and thus the banks get richer and richer and richer, until, one day, they will own everything. Your task will be difficult, young grasshopper, because I have never heard of a nation so stupid that they would allow the banks (and the stockholders who own them), to do such a thing.

If my eyeballs are bugging out and I am running gracefully berserk through town wearing this adorable pink tutu and snazzy matching handgun and holster set, you gotta remember that if we simply allow the banks to just take stuff for free, then nothing makes sense anymore! So of course I look insane! But I am obviously not insane, as I prove by being upset as hell about this!

This, of course, brings to mind the words of Thomas Jefferson, one of the most remarkable men America has ever produced (and who is, parenthetically, my entry as "The Greatest American"), who was ALSO not insane. He said, "If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers conquered." And where will their homes be? Owned by the banks, along with everything else!

So that is what China is getting ready to do, and I suspect that that is what our central bank, the Fed, is already doing, too. We are so trusting and simple-minded that we are letting the banks create money out of thin air to buy stocks and bonds, thus transferring assets into their own hands? Yow! Banks are getting our stuff for free? Double-yow!

The ugly reality is that all that additional money flooding into the economy will make inflation soar. But, and this is the crucial "but," if you do not care about inflation, then everything is okay! If you don't mind seeing millions of people suffering from the ravages of inflation, then you are going to love this! Stocks will go up, making people who own stocks richer! Bonds will go up, making people who own bonds richer! Houses will go up, making people who own houses richer! The people who do not own any of these things will be poorer. Lots poorer. Lots and lots poorer.

And given the depths of moral and intellectual depravity that is the norm these days, that is why I am getting more and more cautious about predicting the eminent doom of stocks and bonds and houses. The Fed, which has spent the last eight years doing this silly expansionist crap, may just be getting warmed up! So stocks and bonds and houses may continue to go up for a long, long time. Weird. And scary

But there is nothing to stop them, since the Congress is a spineless bunch of socialist, Big Government ######### (SBGB), and especially now that our money has been ruined by the Supreme Court, which means it is time to again bring up the fact that the Supreme Court is directly responsible for the huge, suicidal error of allowing a fiat currency in America. With this one monstrous, colossal blunder, our money can literally be the one thing that money was not ever, ever, EVER supposed to be! Namely, a damned fiat currency! Money made out of nothing but printed paper and electronic digits!

But don't get me started on the lying hypocrites that have comprised our Supreme Courts since the infamous traitorous commie ####### FDR extorted their compliance with his un-Constitutional scam of confiscating gold and the rest of that un-Constitutional crap, because it usually ends up with me going ballistic and then waking up weeks from now in a straightjacket, screaming, "Oh, noooooo! Not again!"

But creating more money will make prices rise. But people don't like paying higher prices, and it causes anger. And so I am telling Bettie, according to her name tag, that I am personally outraged at being charged $1.27 for a single damn tomato that is smaller than a baseball, and she is telling me to take a hike, and walk my nasty little butt back to the end of the long line of other customers complaining about the prices.

So (and I am sure that you will agree with me here), my quality of life is falling, as I have to pay higher prices for things AND the quality of my "shopping experience" is adversely impacted, too! So the question springs to mind, "Is that decline in the value of my shopping experience adequately reflected in the Consumer Price Index?" Hahahaha! I doubt it very much! Rising prices is extracting a price from me in more ways than one! And a high price at that, dammit!

And so, follow my reasoning here, if my quality of life is a price I pay, and then if I pay more money but get less value, then it should be included as a rise in the Consumer Price Index. But it is not! So inflation is understated! And so inflation is again proved by The Mogambo to be actually higher - a lot higher! - than what the government tells us it is! The ########!

But Mr. Puplava of FinancialSense.com is not interested in my tomato problems, but instead harks back to my earlier remarks about fiat currencies, and notes wryly, "Ironically, it was the abuse of the gold standard, the Fed's credit-creating habits of the 1920s, and its subsequent mischief in the 1930s, that not only gave us the Great Depression, but also prolonged it. When the government can replicate the monetary unit at will without regard to cost, whether it's paper currency or a computer entry, it's morally identical to the counterfeiter who illegally prints currency. Both ways, it's fraud."

And how does this all fit into my screeching denunciation of the banks? Easy! As I get ready to launch into one of my famous Mogambo diatribes, Mr. Puplava sees what is happening, and frantically jumps in and takes over for me. He says, "A fiat monetary system allows power and influence to fall into the hands of those who control the creation of new money, and to those who get to use the money or credit early in its circulation."

Well, the obvious question is, "If power, influence and money accrue to those who create fiat money (the banks), who pays the cost?" I threw myself that softball question so that I can get a few words in, but before I can answer that question, Mr. Puplava again beats me to the punch with the answer, "The insidious and eventual cost falls on unidentified victims who are usually oblivious to the cause of their plight. An actual transfer of wealth goes from the poor and the middle class to those in privileged financial positions."

And if you think that Greenspan and his horrible, dimwitted cronies at the Federal Reserve are so much smarter than all the other countries in all of history who have tried this crap and failed, then guess again. Mr. Puplava reports, "In many societies the middle class has actually been wiped out by monetary inflation, which always accompanies fiat money."

Well, if this is true, why doesn't anybody try and stop it? Again, he has an answer ready. "In the early stages of inflation, the business class actually benefits from the easy credit. An astute stock investor or home builder can make millions in the boom phase of the business cycle." That is why they call it a boom. And to make sure that you understand the ramifications of this insidious inflation, he adds, "The poor and those dependent on fixed incomes can't keep up with the rising cost of living."

Well, perhaps this explains why the use of credit cards to buy fast food is gaining so much ground. According to CardWeb.com, in the first quarter of the calendar year, Americans charged $6.6 billion in fast-food restaurants. For the full year, they project that consumers will charge more than $30 billion on fast food. This enormous sum of money, representing an even more enormous load of delicious, fat-filled calories, equals about 21 percent of annual sales at these restaurants!

Regards,

The Mogambo Guru
 
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Outlook for Rates and the Curve
by Douglas Greenig (6/10/05)

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Alan Greenspan has swerved in the direction of the skid. After Federal Reserve officials had spent months trying, unsuccessfully, to jawbone the bond market lower, Greenspan has thrown in the towel by acknowledging that there must be powerful forces keeping long-term bond yields low.

In a speech to the International Monetary Conference in Beijing on June 6th, Greenspan noted: "The unusual behavior of long-term rates first became apparent almost a year ago. In May and June of last year, market participants ... built large short positions ... in anticipation of the increase in bond yields that has been historically associated with a rising federal funds rate. But by summer, pressures emerged .. that drove long-term rates back down. In March of this year, market participants once again bid up long-term rates, but as occurred last year, forces came into play to make those increases short-lived."
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Greenspan then explores alternative hypotheses for the unusual market behavior:
  • The market is anticipating economic weakness
  • Pension funds are immunizing liabilities by purchasing more long-term bonds, possibly due to demographic trends
  • Central banks have been purchasing treasuries (as part of programs to stem dollar depreciation)
  • Globalization has led to cross-border flows of saving into U.S. and other bond markets
  • Globalization has reduced inflation risk-premia
In sorting through these alternative explanations, Greenspan makes cogent points that bear repeating:
  • The "conundrum" is not merely a story about U.S. long rates, but is a global phenomenon: long-term interest rates are low globally and other G7 rates (ex Japan) have declined more than in the U.S.; risk premia have declined for many asset classes
  • "World demographic trends are hardly news, and recent adjustments to (pension) funding shortfalls do not seem large enough to be more than a small part of a complete explanation."
  • Foreign central bank purchases have lowered U.S. Treasury yields - but what about bunds, JGB's, EMD, etc. ?
The good doctor then lapses into perplexity - but acknowledges that powerful forces must be at work.

It's not that confusing if you look at the world through the right glasses. As I have noted in previous commentaries, the key ingredients in the special sauce are: the positive supply shock from globalization, technology-led productivity gains, rapid expansion in money and liquidity for a decade, and the knock-on effects of increased wealth and income inequality worldwide.

The supply-side effects from globalization and technology have not only been disinflationary but also have boosted global growth. The disinflationary impact is felt in many ways: e.g. cheap goods from China, weaker labor markets in developed countries, which restrains wage growth and (all else equal) spending, and so forth.

Countering these disinflationary forces have been reflationary forces: most notably, a long period of monetary expansion (see graph below) and expansionary fiscal policy (see the next graph below). (Notably, there has been no expansion, on either front, since 2003).


The effects can be explored using aggregate demand and supply curves. It is well understood why the demand curve for a single commodity slopes downward, but we are speaking now of an aggregate curve relating national output and the overall price level. This curve does slope downward from Pigou's wealth effect (lower prices increase real wealth - hence, greater spending), Keynes' interest rate effect (lower prices lead to lower currency demand, lower interest rates - hence, higher investment spending), and Mundell- Fleming exchange-rate effects (lower prices lead to lower interest rates and a cheaper currency - hence, greater exports). Expansionary policies, like gunning the money supply or a spendthrift fiscal stance, shifts the aggregate demand curve out.

[align=center][/align]
The aggregate supply curve is clearly vertical in the long-run. This means that national output is based on real factors like technology and greed, not the activity of a central bank's printing press. But in the short-run, money illusion (the temporary confusion of real and nominal quantities by businesses and consumers) and various rigidities ("menu costs," sticky wages and the like) can lead to an upward sloping short-term aggregate supply curve. In other words, reflationary policies can temporarily induce greater output by businesses. Supply shocks - like globalization and technology - can shift both short and long-term aggregate supply curves to the right.

The effects of a positive supply shock combined with reflationary policies are:
(1) unambiguous for output: more
(2) ambiguous for the price level (depending on curve shape and the shifts)


[align=center][/align]Now, we introduce an important complication. The effectiveness of expansionary policies in shifting out the aggregate demand curve is heavily influenced by how newly created money is distributed in the economy. If you put money in the hands of poor people, they tend to spend it on current consumption. If you put money in the hands of rich people, they tend to save it: i.e. buy deferred consumption goods (assets).

An overwhelming body of evidence suggests that wealth and income inequality exploded in the U.S. over the last decade. Although global data are problematic, most analyses point to a general global increase in inequality: partly because rich countries have gotten richer (cross-country inequality) and partly from increases in inequality within many countries. See, for example:
[url]http://www.globalpolicy.org/socecon/inequal/2004/0615millionaires.htm[/url]
[url]http://www.globalpolicy.org/socecon/inequal/2003/09inequality.pdf[/url]
http://www.levy.org/default.asp?view=publications_view&pubID=fca3a440ee

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The bottom 40% (by income) had a decline in net worth from 1983 to 2001, whereas the top 20% had a 90% gain. Using wealth, not income, categories, the top 20% in wealth went from 81.3% of total net worth to 84.4% over this period. The bottom 40% had a 0.9% share in 1983 and a 0.3% share in 2001. The 40th-60th percentile band went from a 5.2% share to a 3.9% share.

So my claim is that the distributional story tells us that the expansionary policies have had a relatively smaller effect on current consumption - and have led to greater asset demand: less of an economic boom, more of an asset bubble. Hence, the aggregate demand effects have not dominated the supply effects; inflation (in current goods and services) has remained relatively tame.

"Excess" global saving (stimulated by an unevenly distributed surge in money and liquidity) neatly explains Greenspan's several conundrums. There is no reason for perplexed handwringing.

What happens now? Well, the demand-side shocks are dissipating. The incremental impact of fiscal policy is neutral now. Money and liquidity have ceased to grow. Yet the supply-side dynamics continue. This points to a moderate growth, low inflation environment, with a tendency toward disinflation. No wonder rates are low, and the curve is flat.

Is there a reason for the curve to invert, on a sustained basis? No. Not unless the Fed raises interest rates enough to engender a marked economic slowdown (GDP < 2.5%), in which case, the market will price future rate cuts.

The key here is housing. Over the last couple of years, employment gains in housing-related industries have contributed almost 1mm new jobs to the U.S. economy. It comes to about 40,000 a month, depending on when you start the analysis. Home price gains have lead to equity withdrawal: monetizing home price gains to buy iPods, Hulk Hands, boats and bling.

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My take is that Fed would like to slow the housing market, not beat it down like a red-headed stepchild. Everyone understands implications of a broken housing market for spending and jobs. As ARM resets happen over the next few years, a crisis would occur if home prices were down, say, 20%.


Greenspan understands this. Greenspan is listening to the markets. Two more singles and the ballgame is over. Then we will probably find ourselves in a sleepy, low-rate, low-vol, flat-curve environment. As this unfolds, you will probably wish you had bought more mortgages and sold more vol back when ...

That's my best guess, in any case. Good luck trading!
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I hope you enjoyed this article by Douglas Greenig.
 
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