Monday, November 19, 2007

Stock Market Salmonella

Well. Yeesh.  This is supposed to be a strong period of the year.  It's a short week.  The turkey is thawing in the 'fridge.  You've rearranged your schedule to pick relatives up at the airport.  But the market is totally unaware of our happy annual ritual. Looks like the stock market has not reached an internal temperature of 165 degrees, and we have us a case of Stock Market Salmonella.

I remain long.  I remain bullish.  I rotated into higher beta holdings on friday, and will continue to look for areas that I think will outperform when the bull market resumes.  The Black Box is flashing buy signals on most everything right now.

Lets begin Turkey Week with a look at the gloom, doom and curious goings ons.  People are selling for a reason.  

  • Bill Fleckenstein has his weekend MSN freebie up in No Shelter From the Housing StormFor any folks out there still branding our credit problems "contained," Mr. Money Market has one word for them: not.
  • Todd Harrison at Minyanville looks at the "3-D Dilemna":  You may remember us talking about the 3-D dilemma (dollar, debt, derivatives) for a long time.  This is playing out now, unwinding some of the cumulative excesses that have built through the years.  While there is tremendous risk left in this complicated concoction, the question is quite simple if only anyone knew the answer: containment or contagion.  The simple truth, however, no matter what anyone tells you, is that nobody—not Hank Paulson, not Ben Bernanke, not LLOYD! Blankfein, not any television prognosticator and certainly not I—can possibly forecast the depth, velocity or timing of such an intricate mix.  (But we will try, right Toddo?)
  • CalculatedRisk notes that the Mortgage fall out has more to go.
  • The Bob Brinker Fan Club notes that there is something curious going on with Brinker's audio on demand service.  The hourly MP3 downloads for hours 1 and 2 for Moneytalk on 11/10/07 only have about 28 minutes of audio each, as opposed to the typical 38.5 minutes. Bob's program opening monologue is completely missing from hour 1 (though it is referenced by a caller at minute 10), and instead it starts abruptly with a call to the show.  (Did you see the movie "Dick" where Michelle Williams is recording a 18-and-a-half-minute declaration of love on Nixon's tape recorder?  WHAT'S ON THE MISSING 10.5 MINUTES, BOB?)
  • Greg Mankiw notes that there is income inequality everywhere you look, even the NFL!  (Hat tip to Adam Warner for the link). 
  • Bill Cara's daily commentary, traders can no longer ignore the economic condition of the US.   The primary economic drivers, being consumer spending and business and residential investment, are trending down in the US. There are new reports that the economic slowdown is beginning to affect the commercial real estate sector. Moreover, the US Department of Labor (Bureau of Labor Statistics) reported on Thursday that year-on-year, the overall Consumer Price Inflation (CPI) jumped from +2.8 pct in September to +3.5 pct in October, but the current yield on the two-year Treasury Notes is now down to +3.33 pct and falling.  What this means is that inflation in the US is destroying wealth today, the implications of which are very serious.
  • From Barry Ritholtz, if the US has a recession, who is to blame?  (We're just trying to put it off until 2009, BR, so we can blame Hillary!)
  • When looking at gloom, I'd be remiss if I didn't include a link to FinancialSense.  From Talking Turkey with  PhD Peter Navarro, While retail sales were up slightly, the increase was due to higher expenditures on gasoline. In other words, we are not buying more stuff but merely paying more for our oil based products.  More broadly, this is shaping up to be the worst holiday season in years. Consumers are caught in the vice of rising gas prices and falling home equity as home prices sank back to 2005 levels.  I'm sure some talking heads on the tube will be able to tease out of a declining dollar, rising oil prices, and a flagging consumer some bullish buying opportunity. I ain't going to be one of them. Risk reward continues to favor the short side. For the risk-averse, cash is king

There you have it.  Gloomy enough to make you crawl inside a turkey carcass and wait it out.  As long as you don't mind having giblets as a neighbor...

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