SE index down again

Interesting. Don't know how much interest rates have to do with it, but they can't be helping. I feel rather fortunate to have refi'ed when I did. The condo index has been flat since March 09, and my guess is it stays that way til we catch up to where the trendline from 95-00 would have taken us. Seems like roughly another year or two of flatness, in other words.

Recall the grim headlines in March -- Japan earthquake and nuclear disaster, Lybia civil war and NATO involvement, Oil prices jump, S&P drops below 1300, US consumer confidence dropped to 64, and US GDP estimates were widely reduced for 1Q11 and 2011 generally, etc. For a week or two in March, the world looked decidedly unfriendly, so I would not be surprised if bids were pulled and asking prices reduced to get deals done... From the headlines perspective, April looks better, but hard to see meaningful recovery in housing without a jobs recovery and easier bank lending terms... I think mortgage rates still look cheap on a historical perspective, but what good are low rates if you can't get bank approval?

I don't think it's so much the interest rate increase, but rather the end of the package of support for home prices (low interest rates + tax credit + delays in foreclosure). The Feds have successfully stopped the freefall of 2008/2009, but the economy has not recovered enough to maintain at our current level of pricing. So you have the Feds propping our overweight little market, trying to get it to stand on his chubby little legs, and gravity pulling its overfed pudgy belly down. No one wants to take the losses in one bite, and we have enough toxic assets to last another 10 years. I don't really know when the economy will grow us out of this mess.

We are in a bubble situation caused by QE2. Gold, stocks, & oil NEVER rise simultaneously. Margin (and the stock market in general) is at its highest since June 2008, right before the bottom fell out.

The Greenspan / Bernake monetarist policies are a failure; you'd think they'd have learned something since 1998. But they haven't, and the current policy is making things worse, not better, by increasing inflation at a time when there are no jobs.

Despite all of the QEII, housing prices are still falling, and they will continue to. Job growth is not enough even to cover new entries into the job market. The reduction in the unemployment rate is due entirely to people who have stopped looking, and what new jobs are added are in the low-wage retail and service sectors.

Best analysis out there:

http://www.marketwatch.com/story/2008-crash-deja-vu-well-relive-it-and-soon-2011-04-26

All bad news is ignored b/c the markets are being manipulated. That can't last forever; the longer it goes on,the worse the crash is going to get.

Sometimes, after an operation, you're in pain. The solution isn't to dull the pain with heroin. That is what is currently happening, and its results will be disastrous as the Fed shrinks its bloated balance sheet.

gold stocks and oil are all priced in what ? the dollar is doing what ?

The Index movements in Feb/March were relatively small, but I'd agree that (the rise in mortgage rates would probably be the cause, if anything.

Events in March probably had no impact on the March Index reading, beause of the time lag before closing. SE notes this in its methodology paper.

@stevejhx: "Gold, stocks, & oil NEVER rise simultaneously"

Hmm? Do the periods of 1975-1980 and 2003-2007 not count? stevejhx can you support your statement with a period of any length when Gold was rising and stocks/oil prices were moving in the opposite dirction? I'm not sure when that would be, except in the relatively short 2001-2002 recession.

steve, that's admittedly a terrifying article. As a born skeptic, I've always been wary of much of the doom and gloom that gets trotted out every so often, but this seems a bit more legitimate in my eyes. I've certainly been planning on pulling a good chunk out of equities. Where to put that money though?

In China, like everybody else.

metrocards

seg, do I need to remind you what happened after 1980 and 2007, respectively?

I'm a long-term bull, bjw, but not under these circumstances. The majority of my money is in cash, and staying there. My shorts that I made a few months ago are still on, & I have no intention of selling them, even though they're underwater. I ALMOST went long a few weeks ago - a thousand points on the Dow ago - but I just couldn't bring myself to do it: I had the order placed, but I cancelled it before it was executed, and I haven't looked back.

There is no fundamental reason underlying this latest 30% move up on the stock markets, EXCEPT QEII: margin is at an all-time high, moving average p/e's are the third highest ever: after 1929 and the dot.com bust (where p/e's were infinite: dividing by e = 0 has that effect). Real short-term interest rates are negative 5%. Housing prices are still falling, and unemployment is not getting better. This is all margin, and when margin bursts, it bursts big.

You might also have read that I'm considering a least a temporary relocation to Ft. Lauderdale, where property prices are down 50% from the peak, or more. And guess what? You can actually buy a property down there and rent it out at market rates, and make a slight profit! Just like you're supposed to be able to - historically speaking.

PS: Pay heed to Nassim Taleb.

I find it moderately hilarious when there's analysis indicating the stock market is in a speculative bubble, but that talk about gold as a reasonable alternative.

If we accept the notion for a moment that the run up in gold is just a reflection of the loss of real value of the dollar, it implies that the dollar has been losing value at a rate of ~20% a year for the last 10 years *and* that all other currencies in the world have lost ground at nearly the same rate. (Okay, not quite as fast, but in the case of the Euro, the Euro would be losing real value at the rate of ~12% a year over the past ten years.) There's no way to tie the run-up in gold to any real fundamentals, so I'm pretty sure it follows that it must be a speculative bubble as well, no?

how does one sell a short position?

My car (stock market) is facing uphill and going forward, but it should be going backward because of gravity. Gravity works all the time, and if it weren't for gasoline (QE2) it would be going backward, downhill. Also, I left my kids at the bottom of the hill (shorted the stock market) because the car shouldn't have moved forward and the kids can handle being alone (losses are ok for me as long as I'm theoretically right)

seg: Events in March probably had no impact on the March Index reading, beause of the time lag before closing. SE notes this in its methodology paper.

The methodology paper: "We used a three-month moving average to estimate the trend line, similar to the CSI, to adjust for these limitations and to reduce statistical errors. The sample size of each month is comprised of the reporting month and preceding two months. For instance, the May index is based on the samples of repeated sales in May, April, and March."

Ergo, March data does indeed impact the March SE index, which of course, stands to reason, given that it is called the "March" index...

What do you mean "how does one sell a short position." It's the opposite of buying one. It's sometimes called "covering."

I happen to think that gold is in an all-time bubble, as well, and will also crash.

mkratter: that's a great analogy. Really it is. It should be added as an appendix to every economics book published, and you should get a royalty.

Very happy for the recent stock runup.... but in light of continued housing (and other economic) problems, I'm not going to be greedy. Locking in some more profits today.

He means that you don't sell out of a short position. You buy to cover it unless you are buying something like an inverse ETF.

Steve, you are playing a dangerous game. While ultimately you may be correct, you can get killed doing what you are doing.

bob, I won't get killed doing what I'm doing. Most money is in cash. Yes the money is in an inverse ETF, because there are no margin requirements: it's cheaper. But the terminology doesn't matter; the effect is the same.

I hope you aren't still short from the triple top of 1110 on the S&P you were shorting last year.

Shorting is a huge risk. IMHO, it's rarely worth it.

I do enjoy it when people say that the run up in gold and commodity prices is due to the falling dollar. What, then, is causing the increased profit that companies like IBM are showing?

Might it be the declining dollar, boosting the earnings of companies that have major international operations (IBM, GE, etc.) because they report in dollars and dollars are cheap to convert?

This is a major bubble caused by crazy monetary policy that has never worked, yet they keep on trying it over and over and over again.

"My shorts that I made a few months ago are still on, & I have no intention of selling them, even though they're underwater. I ALMOST went long a few weeks ago - a thousand points on the Dow ago - but I just couldn't bring myself to do it: I had the order placed, but I cancelled it before it was executed, and I haven't looked back."

Ouch. I feel for you, steve. Seriously, I'm not being facetious.

The last 1000 points of runup has started to look a little questionable to me.

How is this Index viewed?

QE is a significant part of the market, but removing it is just taking the foot off the accelerator. We aren't sinking backwards if and when it is removed. Equities have improved because business fundamentals have improved. It isn't zero sum. Bonds on the other hand have fantastically helped redirect wealth from savers to investors, and that won't reverse

Case in point:

http://www.marketwatch.com/story/weak-dollar-positive-for-some-earnings-results-2011-04-26

SWE, no need to - my positions haven't changed materially, and I have no way of predicting the short-term performance of the stock market. I only look at fundamentals, and invest accordingly. I have been far more out of the money than I currently am, and have wound up making oodles.

The stock market has not behaved like this EVER. EXCEPT the 80% run-up it had from 1932 through 1937, only to collapse by 50% again in 1937-1938.

And that's exactly where we're headed back to.

You will be reminded, SWE, that I did - long before anyone else here - predict the demise of the housing bubble. The last time you made fun of my stock picks I wound up making 30% in three months. That was when QEI was pulled, leading to the Flash Crash and other similar events.

Removing QEII isn't taking the foot off the accelerator: the bonds purchased by the Fed mature, and unless a like amount is purchased (which might be announced tomorrow) the money will be drained from the system to the tune of about $20 billion a month.

Take a look at this chart:

http://blogs.wsj.com/economics/2011/03/18/a-look-inside-the-feds-balance-sheet-9/tab/interactive/

Tell me what you think of the "accelerator" principle.

Teddydog:

"Ergo, March data does indeed impact the March SE index, which of course, stands to reason, given that it is called the "March" index..."

March *data* does impact it. But March data represents a 2-3 month lag after the contract signing. So to use your original example, if potential buyers in March started worrying about Japan, oil prices, stock prices etc, and pulled their bids and contracts went lower-- then that effect will be most likely be felt in the May/June Index data once the trancations close. Here's what SE says:

"The data used here are public records where sales closings were recorded with the New
York City Department of Finance. Typically, in the Manhattan condo market, it takes two
to three months from the contract signing to close the transaction. However, the market
climate can change dramatically from the time a contract is signed until it actually closes.
By the time a unit sells and closes, the price is actually about three months old and reflects the market conditions of when it went into contract."

Seems pretty clear to me, though I could be wrong.

steve:
"seg, do I need to remind you what happened after 1980 and 2007, respectively?"

Yes you do, because you've lost me. Maybe your point is that a lengthy rise in the prices of gold/stocks/oil have preceded a stock market crash on a couple of occasions in the last 30 years? I took your original comment at face value.

On a somewhat related point, what do you make of the fact that S&P earnings are back to pre-crash levels, basically? What represents better quality earnings, in your mind, today's numbers or the artificially-juiced 2006-07 EPS that were driven to a significant extent by the housing bubble? 10-yr average EPS for Shiller PE need to consider more than just single arithmetic averages. What's the bigger impact, QEII or the I-bank phantom mortgage profits, homebuilders, brokerages, timber suppliers, faucet makers, plywood distributors, all aspects of the economy that got artificially juiced by the housing bubble and whose contribution is now just a fraction of before?

I think what you have to look at is how things always revert to the mean: housing prices revert to rents which revert to incomes. Always. Stock prices always drift up but only as a result of earnings, and p/e ratios revert to the mean.

Housing prices are still falling, even in Manhattan. They will continue to do so until the excess supply is sopped up, which will takes years. In Manhattan probably even longer b/c out of a population of 1.1 million, only about 8,000 properties change hands every year: most people rent. Add to that the difficulties in foreclosing in New York, and it means that the bubble will take longer to deflate.

Commodity prices are also driven by demand, so unless people started to eat an awful lot of corn since September, this is a bubble. Saudi Arabia says there is a gut of oil & CUTS supply, yet prices are at $110 a barrel. India, China, and Brazil are all raising interest rates to kill their imported inflation.

Uncle Ben is following the Alan Greenspan playbook - and we all know how well that played out. This is excess cash with no productive place to go. When it gets pulled, and reality sets in, it will crash. Things probably would have been much better had QEII not been implemented - if they don't put an end to it, we'll start to see some nasty fights at the Central Bank, played out in public.

Another case in point:

http://www.marketwatch.com/story/inflation-back-on-manufacturers-minds-2011-04-26

Overseas growth = dollar deflation. It won't last.

"What's the bigger impact, QEII or the I-bank phantom mortgage profits, homebuilders, brokerages, timber suppliers, faucet makers, plywood distributors, all aspects of the economy that got artificially juiced by the housing bubble and whose contribution is now just a fraction of before? "

You make my EXACT POINT, seg: none of them is any good. They were all fueled by different permutations of the same problem: excess liquidity with no place to go.

I remember saying during the dot.com boom - which I did not participate in - "how could a website that makes no money be worth more than IBM?"

Of course, it couldn't.

And food prices can't rise forever, either, nor can this low-dollar policy do anything but harm.

The last Fed Chairman who actually knew what he was doing was Paul Volcker: he said that the economy needed to suffer to get rid of inflation. He was right. Now somebody must PLEASE tell Uncle Ben that while you can be accommodative and keep money prices low for long periods of time & let it find its own outlets, the steroid solution will not work.

Never has, never will.

"You will be reminded, SWE, that I did - long before anyone else here - predict the demise of the housing bubble. The last time you made fun of my stock picks I wound up making 30% in three months. That was when QEI was pulled, leading to the Flash Crash and other similar events"

Ok, steve, I don't feel sorry for you at all anymore. I offered an olive branch, and you went back to your bs.

TLast time I made fun of your stock picks, what actually happened was you yelled short and the market went up 2500 points. Fairly well documented on the "stock market thread". I also made fun of you when you yelled we're falling to 6500, then we actually jumped a few thousand points, then you predicted 11k, then we actually fell under 7000. Then I also made fun of you when said you had already dropped your china bet before it tanked, yet pointed out a post where you noted you still had it after you claimed you sold it.

Oh, then I also made fun of you when we figured out you "accidentally" added 100% to all your returns... meaning your claimed 30% jump was probably just a 70% drop. That one was pretty hillarious.

If that's making "oodles"... sure.

I'm happy with SSOs at +270.64%

Seg: I take your point, and I don't disagree that the major impact from March will be felt in next month's index average. That said, looking under recorded sales data in SE does yield a reasonable sample size of closed sales for March, sufficient to influence a trend.

"You will be reminded, SWE, that I did - long before anyone else here - predict the demise of the housing bubble."

Actually points out some of your problems here. Calling crash too early is another way to miss out on profits. That's part of the your problem it seems. Your ideas aren't terrible, your sense of markets is.

> Now at 1839 as of March. The effect of the interest rate spike in November trickling in? Discuss

It might be matching my POV with the double dip, but I agree with teddy, and still think its not a terribly accurate picture. Besides the limited data, and the missing co-ops (most of the market), I look at many SE listings and notice them listed incorrectly, with combinations not well accounted for... plus the problem of delayed closings for old contracts - have to figure MUCH more prevalent in the condo market than co-ops.

combinations are a BIG issue. We over at urbandigs are dealing with that now as we work to build a better sales system. Data integrity is never ending! I sympathize with the tech team at SE to keep on top of every little data issue, once you think you got it, a dozen more issues are discovered.

No one can "time" the market. This bloated bubble just needs one sharp tipped needle to pop - dangers we currently know (Eurozone, Middle East, Japan) or some yet to be realized event. The stampede will be fierce and non forgiving.

SWE, sometimes I call the markets spot on, sometimes I'm rewarded in the short-term, and sometimes I'm off by months. This one was one of my biggest misses in timing terms ever - you said you doubted the last 1000 points; I doubted the last 1500, which is where I went short (round about Dow 11,000 on average - I shorted in increments).

I have no doubt that I will ultimately make money on all of the positions, though. In the meantime, cash remains my friend.

with all the event risk out there, stocks still havent backed off. what do you think is gonna happen when things clear up a bit ?

FLMAOz $500psf...... -shrug-

P.S. Got tired of beating up on the chubby fat kid with the down syndrome.... after awhile, the joy of laughing at a bleeding fktard is too much to bear even for me. C U in Paris this summer.

NYC rebounded too quickly, and this is the whiplash I predicted a couple of months ago. Prices are simply too high for mediocre stock right now.

Please listen carefully:

The index will bump up and down, with an overall down trend until it's new bottom in Aug/Sept. It will hover around there through the winter, with a slow trend up. Buy your stuff then. Then it will kick up again in Feb, Mar, poor Noah will be running around closing deals all day.

Then this time next year, the market will be creeping up all over the US, not just NYC.

You can thank me later.

"I'm happy with SSOs at +270.64%"

SSO down 45.1% from peak.

> SWE, sometimes I call the markets spot on

No, steve, never in the history of ever have you called the markets spot on. You've got just about the worst record on this board, short of SteveF...

"combinations are a BIG issue. We over at urbandigs are dealing with that now as we work to build a better sales system. Data integrity is never ending! I sympathize with the tech team at SE to keep on top of every little data issue, once you think you got it, a dozen more issues are discovered."

Yes, I do appreciate the effort you guys are putting in. I don't feel it impacts much of the stuff you cover (i.e. in counting pending sales, all sales are equal).

But I think it, combined with the lack of data, really weakens the pricing index model they are trying to build. Noble effort, but simply too problematic vs. Case Shiller, which just has so much more to work with, and less of the combo issue.

I'm the one that people laughed at, too, when I said that stocks were always a better investment that owner-occupied housing (which isn't an investment). And they are, and I still believe that. But I refuse to believe that this chart

http://www.marketwatch.com/investing/index/DJIA/charts?countryCode=US&submitted=true&intflavor=advanced&origurl=%2Ftools%2Fquotes%2Fintchart.asp&time=8&freq=1&comp=Enter%20Symbol%28s%29%3A&compidx=aaaaa~0&compind=aaaaa~0&uf=7168&ma=1&maval=50&lf=1&lf2=32&lf3=0&type=2&size=1&optstyle=1013

is real. Just looking at slow stochastics shows that that indicator has been over 50 - overbought - almost entirely since QEII was announced. The stock market is up 25% since then. If I thought the economy was 25% better, or that jobs were 25% better, or that anything had changed other than QEII, I'd be a big-time bull.

If there were any volume in any of this uptick, then I'd be a bull. But even today the volume was 183.6 million shares on the NYSE. Nothing. Hardly any volume at all over 200 million shares.

It hurts to be a bear because I missed out on a huge run-up. But I also missed out on the dot.com bubble, and bust. I missed out on the housing bust, too, even though I paid a lot of rent. Now I'm probably going to dip a toe back into housing, albeit in Florida where I can get a $700k house from 3 years ago for $300k.

I thought the market was long in the tooth at 11,000; I didn't think it would go above 11,500. I was wrong, but when not even a tsunami can stop the market, I forgive myself and will be patient.

I think needs is right - as the liquidity is drained prices will fall back, though they will fall more quickly than they rose (as they always do). There is nothing left to cause the market to continue to go up - cheap money is not the same as QEII.

Prices do need to go down, because the food and energy inflation caused by QEII will cause a double-dip, even if Uncle Ben doesn't like to admit it: for most people in the country, food and energy make up a large part of their expenses. When prices rise as much as they have as quickly as they have, without wages following, it will cause a recession.

w67thstreet
welcome back my brother. Your comments were sorely missed.
My space is almost done, maybe one more month. Pretty much just waiting on the crazy amount of mill work.
hope the spring is treating you and yours well.

"I'm the one that people laughed at, too, when I said that stocks were always a better investment that owner-occupied housing (which isn't an investment)."

I too was laughed at for similar notions... but the best revenge is winning, not losing in a different fashion. I take 270% as winning.

SWE, again, you choose your data points you will get the results you want. The only significant realized losses I ever had were in 2008 and, uhm, I think that was pretty much the norm. Last year I had a huge gain, right now my losses are unrealized, & I don't think they will be realized as I look at that chart, the VIX, margin, sentiment, historic p/e's, and so on.

I just don't see the fundamentals for the DOW to be anywhere about 10,000. If it weren't for QEII we'd probably be at 8,000 right now. Markets ignoring the euro crisis (still real), PIGS (still real), BRIC inflation (still real), the Japan problem (still real), food and energy inflation (still real), housing still tanked (still real), banks not making money (still real - and more than real when you back out released reserves), unemployment high and stuck (still real), falling real wages (still real), political crises in the Arab world (still real)....

Do I have to go on? What we have now is the recipe for stagflation - rising prices and falling wages. QEII has had the opposite effect of what it was supposed to have had: it has slowed growth by causing prices to rise.

Here's a chart of the spot price of corn:

http://futures.tradingcharts.com/chart/CN/M

Tell me what looks wrong with it, and how it doubled in price since QEII, approaching, just like everything, the June 2008 highs.

Are people really eating that many more Sugar Frosted Flakes in China, to cause this to happen?

Now, SWE, if the price of corn isn't enough for you, take a look at this:

http://dailybail.com/home/case-shiller-chart-home-prices-have-at-least-20-more-to-the.html

Or this one:

http://www.elliottwave.com/freeupdates/archives/2011/04/13/The-Stock-Market-and-the-Fed-s-Quantitative-Easing.aspx

Especially Figure 12.

It makes no sense, and it will not last.

Another thread based on this "theoretical reversion to the mean" crap?

If things always revert to the mean, why does it ever diverge? And when some trend is outside of the mean, is it re-averaged into the mean and therefore the mean changes over time? If you believe in the hard and fast mean, and your timing is countercyclical, can you get your money back?

>w67thstreet
about 4 hours ago
ignore this person
report abuse FLMAOz $500psf...... -shrug-
P.S. Got tired of beating up on the chubby fat kid with the down syndrome.... after awhile, the joy of laughing at a bleeding fktard is too much to bear even for me. C U in Paris this summer.

The Tarzan guy is back, how nice for us.

excelsior!!!

Wbuttocks!!!

I take that back, no one is really enthusiastic about you.

Whatz up Falco...

As the sun rises, the double dip is herez... all hail to W bottom.

All hail Wtushy and the chimpanzee dude on west 67th street with body odor.

w67thstreetzzzzzzzzzzzz!

What up Alan.

Hey troll. Me tarzan, you Jane. Bend overzzz and squeal like a monkey!

Sometimes I get hungry and eat alot. Sometimes I get horny and every girl looks hot. Reversion to the mean baby. In extreme cases you become a pedophile priest.

Theory meet reality. Fking nyc re bubble! W67 prediction, right past 2009 lows to $500psf. A Tarzan, with a finance degree. Aaaaaaaaahhhhhhh! Aaaaahhhhhhh! Ahhhhhhhhhhhhhh! Where that bitch Jane go?

Huntersburg a/k/a Buyerbuyer -- You even suck as a troll because you can't keep your multiple identities hidden.

MidtownerVirgin! How's your smallish 1 bedroom in midtown east?

w67thstreet
about 9 hours ago
ignore this person
report abuse Sometimes I get hungry and eat alot. Sometimes I get horny and every girl looks hot. Reversion to the mean baby. In extreme cases you become a pedophile priest.

Wbuttocks is a priest? or is this a family member of yours Tarzan?

> The only significant realized losses I ever had were in 2008

suuuuure... you magically undid all the other horrible positions you took and told us about. Wouldn't be the first time.

Oh wait, I forgot, you just added 100% to all of them! Instant profits!

> I just don't see the fundamentals for the DOW to be anywhere about 10,000

Again, more of why you keep losing money... you can't trade markets at where they SHOULD be, you have to trade them at where they are. Swearing you are right while you lose your shirt doesn't erase the losses.

> SWE, again, you choose your data points you will get the results you want. The

Btw, steve, only you get to "choose" after the fact when you bought things (or didn't, or did and said you didn't, or did and said you didn't). Don't project, that's all you.

All my "choosing" already happened... when I bought. The data points are when I actually bought/sold, I can't change that. I'll leave that "magic" to you.

The 270% isn't a stat from a period I "chose" to look up. It is the return marked by my brokerage for the shares I bought when I said I was buying them and told others to do it here.

SWE, you're boring.

christ elsewhere, must we hear endlessly of your SSO trade, which, btw, you said you were lightening upwell below current levels --and it's all so meaningless without looking at your entire portfolio

i trade futures and other even-more-leveraged instruments all day long and regularly produce much bigger than 300% returns on the equity required to carry such trades--and regularly produce similar losses--and the size i trade varies hugely, from trade to trade--that youve had a good trade in SSO means nothing, and is a bore to hear about endlessly, especially without knowing in detail (that i dont want to know) about the rest of your portfolio

Bottoms, I actually totally agree with you there. He's kind of like the guy who tweets what he ate for lunch - meaningless, but if he really insists, let him have his fun I guess.

well, wbottom, to be fair, it wasn't a "trade", it was what I was loading up on (instead of the usual index etfs). I'm not day trading. They were long term calls... and tt was the majority of what I bought over the crash period.

Your points are fair, but the comparison is not.

and, surprise, surprise, bjw's utter fascination with me continues.

"They were long term calls... and tt was the majority of what I bought over the crash period."

Sorry, clarification... IT was the majority of what I bought...

Oh swe, lighten up. They're harmless comments on a message board in the end.

Exactly, WB! What matters is the realized loss or profit - only SWE claims to be The All Knowing Might Carnac, who can always predict the direction in the stock market at all times, over the short-term.

I currently have losses on my short positions - I don't expect that they will remain losses. Last year I had very large gains. The prior year I was not in the market. That's the way it goes. On some investments I've been up 100% and lost money; on others I've been down 80% and made money. The key is to be able to hold a position and not worry about it endlessly, which is why inverse ETF's are so useful: no margin calls.

Uncle Ben just announced that the heroin den is over: QEII ends, and there is no QEIII. The only way to meet his inflation expectations is to cause commodity prices to drop. The only way to cause commodity prices to drop is to suck the extra money out of the system. Principal won't be reinvested after June, meaning about $20 billion a month gets sucked out of the economy.

Last time they did that we had the Flash Crash.

and yet stocks keep going higher.

exactly.

Yes they do - and so did property prices while the pump was primed. And so did dot.com stocks while the underlying companies were making nothing.

This policy is going to end in disaster. To keep a Ponzi Scheme going requires the continued addition of new funds. That's just been cut off. Higher inflation and slower growth are being caused by QEII. Even if the principal is reinvested - which it will be for a while - there is no new money in the system. The only way to reduce inflation is to withdraw the money.

"Exactly, WB! What matters is the realized loss or profit - only SWE claims to be The All Knowing Might Carnac, who can always predict the direction in the stock market at all times, over the short-term."

No, I'm just pointing out that you brag about your acumen all the time, and then turn out to be the worst picker of them all short of SteveF....

Don't be a hypocrite here... you have started threads with headlines like "I was right"

"Yes they do - and so did property prices while the pump was primed. And so did dot.com stocks while the underlying companies were making nothing."

And the smart money rode it up, and then sold a little before it crashed.... not years before.

Knowing markets means understanding there might be inefficiencies. Getting crushed by those factors doesn't really make one smarter.

"And the smart money rode it up, and then sold a little before it crashed.... not years before."

This is kind of twisted - there's no doubt some smart people saw the stock market crash coming, but I don't think too many of them could honestly tell you they had a good handle on the exact timing. So that "sold a little before it crashed" is a nice piece of revisionism, at least insofar as labeling it "smart" instead of "smart and more than a little lucky".

And only SWE is able to miraculously pick the direction of every stock at all moments in time.

Be real.

If you need to know, I rode the property market right to the top, and sold at the top. Does that make me magic? No. It means that I got very lucky in that regard, and had to endure a lot of pain along the way, including the bankruptcy of the developer of the complex where I had a lot of money invested.

The reason why you're incredibly impossible to believe, Eddie, is because every move you make is not only the perfect move, it is the perfectly timed move. I suppose you also predicted the Flash Crash, and the very moment it would happen.

Greenspan, I mean Bernake, didn't say anything surprising today. What he didn't say was more important: how to achieve those forecasts. And the only way to achieve them is to change policy - they can't let oil or commodities go any higher than they are; they must make them go lower, back to pre-QEII levels, or else inflation will take hold, and not be just a temporary spike in prices. That can only be done by withdrawal.

Gas is up 25% since September, while demand has declined and supplies have risen. It's all due to leverage, not fundamentals. Spot corn is my favorite:

http://futures.tradingcharts.com/chart/ZC/M

That pattern was not caused by everybody making muffins all of a sudden, and it is not a volatility issue - it is one of drift. The stock market and oil prices have the same pattern, and they all start with QEII, as did the overall increase in inflation and reductions in growth forecasts. Central banks don't admit mistakes until they have to, and even then.... Bernake still says he couldn't have saved Lehman, so you think he's going to admit that QEII was a mistake?

No. But there was no dissent at today's meeting, meaning that they placated the inflation hawks.

This policy was a disaster. It can't be undone suddenly, but not extending it was big.

gas supply is up? really ?

Crude Oil Climbs After Report Shows U.S. Fuel Stockpile Decline
2011-04-27 19:49:26.635 GMT

By Mark Shenk
April 27 (Bloomberg) -- Crude oil rose to a two-week high
after a U.S. Energy Department report showed that gasoline
stockpiles tumbled to the lowest level since August 2009.
Futures climbed 0.5 percent after the department said
gasoline inventories fell 2.51 million barrels to 205.6 million
last week. Supplies of distillate fuel, a category that includes
heating oil and diesel, declined 1.81 million barrels to 146.5
million. Prices briefly dropped on a 6.16 million-barrel gain in
crude oil stockpiles and surging imports.
“Gasoline supplies are definitely on the light side,”
said Kyle Cooper, director of research for IAF Advisors in
Houston. “With gasoline supplies falling and prices climbing,
refiners can pay more for oil. They are going to pay more to
take delivery of extra barrels of crude because they know they
will make money processing it into gasoline.”
Crude oil for June delivery rose 55 cents to $112.76 a
barrel on the New York Mercantile Exchange. It was the highest
settlement since April 8 when futures climbed to $112.79, a 31-
month high. Prices are up 37 percent from a year ago.
Gasoline for May delivery rose 6.22 cents, or 1.9 percent,
to end the session at $3.4194 a gallon in New York. It was the
highest settlement price since July 14, 2008.
Regular gasoline at the pump, averaged nationwide,
increased 1 cent to $3.879 a gallon yesterday, the most since
Aug. 3, 2008, AAA said on its website.
Gasoline demand rose 0.8 percent to 9.06 million barrels a
day over the past four weeks, 1.6 percent lower than a year
earlier, according to the report.
“Gasoline supplies keep dropping despite low demand,
because there’s probably a lot of U.S. product being sent
overseas,” Cooper said.

Fuel Shipments

U.S. fuel exports averaged a record 2.29 million barrels a
day from March 11 through April 8, department data shows.
Crude oil supplies rose 1.7 percent 363.1 million barrels
in the week ended April 22, the highest level since November,
the report showed. It was the biggest one-week advance since
July. Stockpiles were forecast to increase 1.7 million barrels,
according to the median of 13 analyst projections in a Bloomberg
News survey.
“This was a mixed report,” said Gene McGillian, a broker
and analyst with Tradition Energy in Stamford, Connecticut.
“Under normal circumstances a crude build of over 6 million
barrels and a big increase in imports would be enough to send us
much lower. Prices did drop but soon rebounded because we still
have falling gasoline and distillate stocks.”
Refineries operated at 82.7 percent of capacity, up 0.2
percentage point from the prior week. That’s down from 89
percent of capacity a year earlier. A 0.9 percentage-point
increase was forecast in the Bloomberg News survey.

Crack Spread

The crack spread, or profit from processing three barrels
of oil into two of gasoline and one of heating oil, climbed 4.7
percent to $26.77 at 3:40 p.m., based on New York futures
prices. The differential widened to $28.518 on April 18, the
highest level since May 18, 2007.
Oil also climbed after the Federal Reserve renewed its
pledge to stimulate growth with low interest rates and said a
pickup in inflation is likely to be temporary. The Fed
announcement bolstered equities and sent the dollar lower.
“The economic recovery is proceeding at a moderate pace
and overall conditions in the labor market are improving
gradually,” the Federal Open Market Committee said today in its
statement after a two-day meeting in Washington. “Increases in
the prices of energy and other commodities have pushed up
inflation in recent months,” and the Fed expects “these
effects to be transitory,” according to the statement.

Equity Rally

The Dow Jones Industrial Average climbed 67.62 points to
12,662.99, and the Standard & Poor’s 500 Index advanced 0.4
percent to 1,352.01 at 3:14 p.m.
The dollar fell 0.7 percent to $1.4749 against the euro,
after slipping to $1.4752, the weakest level since December
2009. A drop in the dollar makes commodities priced in the
currency more attractive for investors.
Gold for June delivery increased $13.60, or 0.9 percent, to
settle at $1,517.10 an ounce on the Comex in New York. The
precious metal reached $1,527.70, an intraday record.
Oil has advanced 23 percent in New York this year. Unrest
in the Middle East and North Africa has toppled leaders in Egypt
and Tunisia and spread to Libya, Algeria, Bahrain, Iran, Oman,
Syria and Yemen.
Brent oil for June settlement increased 99 cents, or 0.8
percent, to end the session at $125.13 a barrel on the London-
based ICE Futures Europe exchange. It was the highest close
since April 8.
Oil volume in electronic trading on the Nymex was 529,841
contracts as of 3:11 p.m. in New York. Volume totaled 448,963
contracts yesterday, 41 percent below the average of the past
three months. Open interest was 1.55 million contracts.

Oil supplies are up, not gas supplies. Gas supplies are always down this time of the year, because oil companies change over to their summer blend.

http://geology.com/news/2011/saudi-arabia-cuts-oil-output.shtml

Bubble:

http://www.marketwatch.com/story/warning-are-commodities-about-to-crash-2011-04-27?dist=afterbell

And even today, volume on the NYSE was only 160 million shares. Since September this has been a shallow 30% rise - all speculation.

This is where Bernake admits the failure of the policy:

http://www.marketwatch.com/story/bernanke-says-inflation-means-no-qe3-2011-04-27?dist=afterbell

This policy has done nothing but cause inflation through a Corn Bubble.

> And only SWE is able to miraculously pick the direction of every stock at all moments in time.

No... I just don't pick wrong most of the time, then start threads to brag about it after changing the story. Then I'd be you.

> The reason why you're incredibly impossible to believe, Eddie, is because every move you make is not only the
> perfect move, it is the perfectly timed move.

Now you're just making things up. I pointed out several times that I was buying at Dow 8s, 7s, and 6s. That wasn't perfectly "timed" at all... it was just taking advantage of what I saw (well, what others who I have faith in pointed out and I believed... Robert Shiller being a huge one) as historical buying opportunities. I also noted I sold some on the way up. Not perfectly timed either.

But I definitely didn't do what you did, which was get the call wrong and then try to change the story 5x.

> I suppose you also predicted the Flash Crash, and the very moment it would happen.

No, but I did note I was buying some more then too.

That's the point you keep seeming to miss. Its not about knowing everything, or making perfect moves. But it is about taking advantage of trends... not fighting them and losing.

"But it is about taking advantage of trends"

Hmm. So in this last run-up, how did you account for the behavior of stochastics and MACD, which have consistently indicated an overbought market since September?

But more importantly, HOW DID YOU KNOW THAT THE MARKET WOULD REBOUND AFTER THE TSUNAMI?!

Because dude, WOW. Unf*cking believably good you are. If only I were that good, I would never lose any money, and there would be no reason for me to use options or option strategies. In fact, if I could just concentrate hard enough, or invoke the right saints and spirits, or shine up my crystal balls, that would be even easier than "spotting that trend" and going with it!

> But more importantly, HOW DID YOU KNOW THAT THE MARKET WOULD REBOUND AFTER THE TSUNAMI?!

I didn't... but you had lost lots of money well before then, so that's a red herring now... don't try and change the subject.

> If only I were that good, I would never lose any money, and there would be no reason for me to use options or
> option strategies.

I think you have it backward... you are creating these "needs" to protect youseelf, but I think your protections are what are losing you all that money.

"but you had lost lots of money well before then"

Not really, but suit yourself.

"you are creating these "needs" to protect youseelf, but I think your protections are what are losing you all that money."

Wow. That sure does show up your level of investor sophistication. Or not.

How much money do you think an out of the money put costs to buy, SWE?

> Wow. That sure does show up your level of investor sophistication. Or not.

The recognition that options and other derivatives created in theory to reduce risk have in fact promoted it?

Yeah, sorry Steve, but that was Finance 101... coulda helped you.

> How much money do you think an out of the money put costs to buy, SWE?

depends on how much out of the money, the volatility, and the time value. Seriously, Steve, finance 101.

macd and stochastics done mean shite. u sound like ericho. for someone that preaches such a macro outlook im surprised you would put such weight on cheezy technicals like those.

"The recognition that options and other derivatives created in theory to reduce risk have in fact promoted it?"

Really? You have empirical data to back that up?

Sorry, marco, like them or not, those cheesy technicals drive a lot of trading.

Unless there's a nearly 40% run up in all tradable assets in 8 months, due to a flood of liquidity.

This will end in a thud.

Actually, SWE, the answer to my question was "not a lot."

And your answer is wrong - you should read Wiki more closely: if an option is out of the money, all it has is time value, so its price can't depend on the time value, as that would be circular. If you mean time to expiration, that can sometimes have an effect on the price, sometimes not.

I think you're getting your lessons from Riversider and his MBS hedge, or maybe the LICC treasury duration tailwind.

I watched Donald Trump, take credit for Obama releasing his birth certificate ("even the Clintons couldn't get him to do it") and then proclaim that now the press can stop discussing the topic with him.

Some of the spin on this thread would even make The Donald blush.

>all it has is time value, so its price can't depend on the time value, as that would be circular

??

stocks and gold again..

And the more things continue like this, the worse it is going to get.

Stocks don't rise like this under these conditions, with growth slowing to 1.8% and 425,000 new jobless claims. Oil is up to nearly $115 a barrel, and consumption is falling. This is a bubble just like June 2008 was a bubble, this time caused by the massive mistake that QEII was.

If it does not reverse on its own, the Fed will be forced to about-face very, very quickly.

There goes Steve's problem.... again where stocks "should" be, not where they actually are.

"if an option is out of the money, all it has is time value, so its price can't depend on the time value, as that would be circular"

This is one of the most nonsensical sentences I've ever read. Try again, Steve.

I always find the continuously updated Shiller PE chart a good long term perspective on stock valuations.

Stocks may well have further short term upside potential but the longer term underpinnings are weak.

http://www.multpl.com/

"macd and stochastics done mean shite. u sound like ericho. for someone that preaches such a macro outlook im surprised you would put such weight on cheezy technicals like those."

agreed

wait...so companies arent actually amking money right now? Did IBM just raise or lower thier dividend ? are insiders buying or selling stock right now ?