Alan greenspan on why 1% fed funds "It was our job to unfreeze the American banking system if we wanted the economy to function. This required that we keep rates modestly low" 90-91 downturn lead rates down to 3%, 00-01 down to 1% It seems pretty clear that is going under 1% this time. Yet the bond market disagrees and the late 09 fed futures using them as a guide disagree as well. If you are bold you can buy late 09 fed contracts that are actually pricing in hikes and clean up. I wont be this bold because I just flat out cant tell why the market is not aware of this so I could be missing something and I will stick with the Jul 09
Could the SP500 have bottomed and a new bull market start? pretty unlikely IMO. US stocks seem to still be carrying an overvaluation from the stock market bubble, people still havent paid for the excess of that period SPX PE stands at 12 now, problem is, earnings are still going to go down quite a lot. lets say this sends the PE to 15(just a guess here), no bull market(PE expansion) has ever started with a PE of 15. they start with PEs of 10 or lower and high dividend yields, from 2003 to 2007 SP had PE contraction, it went down because earnings growth was so strong. Now we have earnings destruction coming down the pipe and to expect PE expansion from here its wishful thinking at best, price is likely come down as well. I'm only buying big safe bargains that are already so cheap its hard for them to contract much further
Wachovia just dropped a bomb and futures are plunging. it seems that the only way this market can have a sustainable rally is if they shutdown bloomberg and news agencies for a week. reality keeps slapping the market on the face everytime. I still havent short Swedbank as I refuse to short stocks making lows, if it keeps going straight down without me then I will just have to watch as it goes to zero
Just found this interesting post in a forum "All, We had the opportunity to have Paul Tudor Jones speak to our Financial Trading class today. He had some interesting things to say, and I thought I'd share them with you. I'll just quote/paraphrase some of the things he said and let the discussion evolve if anything is of particular interest. "If anyone in the world was stranded on a deserted island, and they could only have access to one form of trading, either all the fundamental information in the world, or the access to charts for technical analysis, I would say that, and it's not even remotely close, people would be foolish not to choose technical analysis every day of the week and twice on Sunday." "I can't think of a single circumstance in which I will ever hire a trader who says he bases his decisions on fundamentals. I've been burned too many times by these guys who think they are smarter than the market." He was ranting pretty hard core against fundamental traders. He was saying they run such a huge risk of going broke because the fundamentals can change without them knowing it, and they will average down too many times due to the market being oversold, too much value on the table, etc. "All the major busts and meltdowns in the history of Wall Street have developed from owning a super reversal portfolio." A super reversal portfolio is one he defines as opposite the trend in regards to the 200 day moving average and the 25 day moving average. So long something that's below both the 200 day moving average and 25 day moving average, or short something above those trend lines. "Using that [fundamentalist] mentality...that may have worked in the past, but it's insane to average down in the greatest liquidation of the biggest credit bubble in history, especially considering the S&P is trading at 1.7x book. In the Great Depression it traded at 0.4x book and in the 70's it traded at 0.8x." He says he more of less lives by 3 rules: 1) The trend is your friend 2) Losers average losers 3) 5 to 1, ie only risk your money when there is a 5 to 1 payoff for that specific trade. The last interesting thing I can recall: He shat upon Warren Buffett, saying he may be one of the greatest investors in history, but he has absolutely terrible risk management skills to be entirely fully invested and long at this current juncture. He also called into question his ability to profit in a bear market, citing that he started investing in 1972, one of the greatest times in history to start investing."
Dwight Anderson and Ospraie LLC were seeded by tudor jones. they were the commodity fundamentals dream team and yet their fund couldn't survive a recession. I tended to follow his 25-200MA rule indirectly by just not getting involved in counter trends(unless im buying a shares of a companie selling below netcash ben graham style) but its not fun to hear that I will blow up one day I'm going to stick to my fundamental style, probably tone down my averaging down, in fact once commodities bottom(will pay attention to the jones 25-200 idea) I'm going to bet significant amounts that things will skyrocket. it will be a John Paulson moment as the risk reward will be through the roof
Great quotes otherwise, but the above has to be completely wrong: 1956â1969 Buffett Partnership, Ltd., Omaha - General Partner 1970âPresent Berkshire Hathaway Inc, Omaha - Chairman, CEO
I stopped reducing bearish positions on vix spikes and big declines. this market makes no sense anymore, historical patterns or 'contrarian' signals seems useless, it trades as if it was going straight to zero, unreal
"When something's going up or down in a straight line and you start to get political resistence, you'd better pay attention" - Sushil Wadhwani the BOJ will step in, its just a matter of when. I want to take profits there because of that, yet the trend is so strong and the 03/04 interventions didn't cause big adverse moves(between 100 and 200 pips drop). the 98 intervention sent the yen 800 pips lower. which one could the yen get? The VIX is on the moon so the move could be massive, carry unwind flows would stop for a while as people think boj will save the day. in 98 the fed helped, this time the level of intervention and coordination is so huge that the ECB and carry trade currencies central banks could help as well so the move could be big. I'm inclined to get out and be on the dollar, I get the same risk aversion profit but avoid a massive move against it. at this point the more money one makes in the yen just means he is more likely to be walked over by a truck
got my facts wrong, the 98 intervention was to strenghten the yen. the yen rallied 800 pips with the help of the fed