William Black throws cold water on Green Shoots

looks like stocks are starting to wake up to some semblance of reality. certainly they are around the globe. China was down 6% yesterday, Japan down 3%. After a 50% surge, most assume stocks are rational and right. Stocks were wrong in OCT 2007, and very wrong in MAY 2008. Its funny how so few economists/traders on CNBC actually came out to warn that maybe, just maybe, stocks were flying to high too fast and disconnecting from real picture. Instead, most just said 'this rally has legs' and 'we go higher from here'. Of course these guys will change their tune next time they are on.

Funny thing is, I know we have decent data ahead in GDP and other indicators as inventories are restocked and side effect of surging stocks increased confidence; especially in credit. But that is when stocks surprise you. They sell off on good news. Just like they surged on real bad news to start this rally leaving bears scratcing their heads, including myself. Hey, I admit, I didnt see a 50% rally happening. But I certainly have my doubts on the fundamentals improving as much as stocks suggested and a V shaped recovery that they seem to be pricing in. How could we go back to good old days when unemployment is rising, U6 is 16.4%, credit is contracting, banks still have problems, housing wealth destroyed, and stock wealth destroyed - even with this rally.

watch credit. On friday I talked about CMBXs acting hairy. Now watch corporate bond spreads as treasuries rise amidst this selloff. They will widen. Whether its a technical move or sign of something else, too early to tell. But if we learned anything from this crisis, its to watch credit as it is leading stocks. CMBXs and ABXs started to selloff again lately. Will LIBOR, TED, CDS spreads, and corporate bonds follow suit? If they all do, just watch out as it could feed on itself.

Nice post Noah. What I find amazing, and actually a bit sad, is that you have this asshole on Fast Money named Tim Seymour who on Thursday said in a mocking manner "where are my dollar bulls at?" I mean, this guy is a real moron, and he is actually offering advice on what to invest in?
For me, I am adding to UUP today, and adding FCX, XRT and CAT to my X shorts. I would suspect that we are at least going to test the 870's on the S and P.
However, if the fear that you describe returns, as I think it may, look out below

Great post, UD! I noticed that as well last week and initiated short positions on the weaker RE names. The question is, how long can stimulus sustain some sort of economic recovery when all the funds are being borrowed from Peter to pay Paul? Historically, it has a mixed track record at best.

mh23, I think its a good move on the UUP and been accumulating a position over the past week myself. I think we may be the only remaining USD bulls on the planet. :) Consequently, I would be a tad cautious on the commodity names for the time being as there seems to be growing evidence that China is slowing its stockpiling of copper and other hard assets. A rising dollar is also not a positive for commodity trends specially given their massive run-up from the March lows.

I think it may be a very interesting remaining of August and September. October may also have its usual surprise or two.

U.D. A great deal has been written about the way China conputes GDP. (production vs consumption) and that therefore the numbers are not reliable. Even Jim Rogers says China is way over valued here.

I actually meant to write TLT. I like the UUP as well, but I am going to go more heavily weighted into the TLT.

mh23 - i shorted 200s fcx at 64 last week and covered at 65.80 when it had that $3 up day! doh! I have some other shorts on though. i just cant trade the way i used to with focuses on real estate and urbandigs all at same time. way too much at once

china is known to manufacture its growth. About a week and a half ago, china did something surprising. They publicly talked how they might reign in lending after uber lending in first half and uber stimulus. they actually suggested the markets may be getting too frothy, and talked about taking away the kool aid. when was the last time our fed did such a thing? Volcker in the late 70s?

I'm with you Noah. Last week I had shorts on FCX, CAT and DOW, but I covered all of them with hardly any gains because I thought Goldman would continue to pump the market for a while longer. Luckily I kept X and I will reload on the rest. I too trade as something to do for a kind of hobby, so often times I have to take and retake a position a few times before they really start to work. I noticed that, for the first time in a long while, the 1 month Libor went up today.
My sense is that over the next 45 days there should be downward pressure on the markets and the dollar should continue to strengthen. After that, we will be at a crossroads. Either the fear trade will be back on, in which case there could be another major leg down, or as we approach Q3, the green shoots nonsense will start again, giving Goldman and the banks a chance to pump by telling people they can get in cheap after a correction.

"The U.S. recession is %u201Cending right now,%u201D Abby Joseph Cohen, New York-based senior investment strategist at Goldman Sachs Group Inc., said in an interview today on Bloomberg Television and Radio."

Abby is always good for a timely comment....

Funny how GS kept her hidden for the last year but when there seems to be any semblance of a rally they pull her out so she can yet again be the most optimist analyst predicting S&P at 1100 YE....

How does she still have a job