Friday, August 24, 2007

Fed rate cut in the mirror


Detroit is near a deep, deep crisis. If the housing will hammer Detroit, probably Michigan will be like the Death Valley.....

Contrywide CEO Mozillo predicts recession

"I can't believe when you're having this level of delinquencies — [home] equity is gone, the tide has gone out — that this doesn't have material effect on the psyche of the American people and eventually on their wallets."


The doubt remains if the housing slump will contaminate the stock markets in a decisive way that originates an economical recession. The problem is no longer contained on the mortgage lenders but on the depreciated houses' prices that turn impossible for low income families to continue to meet their mortgage payments, put their homes to sell and few people and for few dollars wants to buy it.

Thursday, August 23, 2007

Recession?

Think of this:
  • Fed Rate: 5,25%.
  • ECB: 4,0%. Near a new increase.
  • Month after month, new starts in homebuilding decrease.
  • Mortgages and foreclosures, rising.
  • Investor confidence in Germany, at the lower level from the last 8 months.
  • Nikkei performs poor, even with a 0,5% rate of BOJ.
  • Volatility is high.
  • Bank stocks are decreasing everywhere.
  • Commercial paper reduced dramatically.
  • What else do you need for a..............

The un-Greenspan

"Bernanke: the un-Greenspan" by Mark Eavis at Fortune.

Sunday, August 19, 2007

The Bernanke uncertainty

After all the last week's turmoil, people are much more uncomfortable. We are like in a big nine meters sea, particularly if you look to the volatility: The Chicago Board Options Exchange Volatility Index stayed near the highest since 2003 after the Fed unexpectedly reduced the rate it charges banks for loans on Aug. 17 .

The Friday's comeback, probably was a technical rebound together with an emotional reaction to the FED's reduction. This confirms our vision: The Fed said it reduced the discount rate to 5.75 percent because risks to economic growth have risen ``appreciably.'' The statement was a departure from the previous week, when central bankers kept rates unchanged a ninth straight time and reiterated inflation was their ``predominant'' concern.

But after all, we will focus in these two main issues:
  • Goldman Sachs Group Inc., whose hedge funds lost $3 billion in August after the S&P 500 declined 6.9 percent from a July 19 record, said in a letter to investors last week that a ``significant investment opportunity'' now exists.
  • The Fed's actions have been less predictable for investors since Chairman Ben S. Bernanke took over in February 2006 after more than 18 years under Alan Greenspan's leadership.

Moral hazard versus bail out

That's the decision which is being balanced. The ideal move would be to let the market enforce the pedagogy of punishing the banks that made the foolishness of lending money to subprime borrowers. But reality prevails over ideals and the move had, and will continue to be - until crash do us part -, to cautiously bail the banks, and indirectly the hedge funds that should receive the "moral hazard".

The problem now is that the financial markets and the "real economy" are, completely and immediately, interconnected and the real economy suffers with its upturns and downturns. I don't ignore the lessons this crisis permits but, for the time being, the priority, for Bernanke and the bunch (and Bill the Butcher also...) is to sustain the market. I think Jim Cramer's alert was fundamental to ignite an answer from the FED.

Thursday, August 16, 2007

Wednesday, August 8, 2007

Big volume


Credit crunch are not solved, even tough, this is a huge volume for the Nasdaq in August. Pay attention to some volatility.

Monday, August 6, 2007

Jimmy Cayne: fired!

Read this:

Chief Executive Jimmy Cayne and his one-time protege Warren Spector attended the National Bridge Championship in Nashville in July just as the credit markets were starting to implode, showing how much their priorties were out of whack.

This is unacceptable. This is the Lay and Skilling type of business. This is outrage.

The cherry in the cake: Spector, who was fired Sunday as the subprime meltdown engulfs the Wall Street bank, actually won his first national championship in the four-day competition which attracted about 5,000 people from 18 countries, according to Rick Beye, the tournament's director.

Sunday, August 5, 2007

Who is Warren Spector?

Every crisis has a name.

Remember John Meriwether? The guy from Long Term Management Capital.

Remember Nick Leeson? The guy from Barings Bank.

Probably you will listen to this name: Warren Spector. Why? Because of this: The Wall Street bank’s board (Bear Stearns) is reported to be meeting on Monday to consider the future of Warren Spector, its co-president and head of capital markets. One analyst said that if Bear made no statement before the markets opened on Monday investors would fear there was “more bad news to come”.

Friday, August 3, 2007

Cramer: Bernanke, Wake Up

Mad Money host Jim Cramer makes a passionate plea to Federal Reserve Chairman Ben Bernanke to consider cutting interest rates and, in turn, help the market and the people who are losing their jobs on Wall Street.

Jim Cramer looks like very angry with Chairman Ben Bernanke. See the interview:



Thursday, June 14, 2007

Wednesday, June 6, 2007

The Asian factor

Greenspan, Bernanke, Paulson and all top-spins will not achieve a real estate turnaround for 2007. The bubble was so big, similar to the internet stocks, that the burst will be definitely also similar.

Look to this: Sales of previously owned homes probably will tumble 4.6 percent to 6.18 million and the U.S. median home price likely will fall 1.3 percent to $219,100.

No matter the influx of money to the US, the GDP will be lower for the year: The U.S. economy probably will expand at a 2 percent pace in 2007, compared with 3.3 percent last year.

Even tough, the world economy is in good shape. It is the first time, probably since the last 20 or 30 years, that a near-crisis in the US will not mean a world crisis. It is the Asian factor.

Thursday, May 31, 2007

Take a break


US is in the middle of a real estate crisis. Prices of homes are decreasing. New starting homes are improving. But the picture is a little bit far from the end.

S&P - 500 is moving higher. It will be better to take a break. Otherwise, we will have a hardlanding!

Thursday, May 24, 2007

Greenspan and the Chinese bubble

We all know that Alan Greenspan has made a big masterpiece in the international markets, in the last part of the 20th century.

Even, after leaving the Fed, any remark from Mr. Greenspan make some noise. But, as always: good noise.

Mr. Greenspan, right now, is telling us about China. In this case, what he has said, doesn't surprise us: former Federal Reserve Chairman Alan Greenspan warned a big correction is due in Chinese stocks.

We do not believe in trees rising to the skies. The bubble in Chinese stock market, will burst, right now, or 3 years from now.

Investors, with or without speculative behaviour will be burned. Just because of that, the warning from Mr. Greenspan it is very healthy.

Thursday, May 17, 2007

TJX. Breakdown of the 50 SMA support?

In the chart of TJX (TJX Companies Inc) between points 1 and 5 we have a behaviour of higher lows and higher highs, but in point 6 the highs behaviour is violated with a high lower than the previous and in point 7 the lows behaviour is violated with the price of the stock falling slightly below the previous low. So we have a sign of a trend change.

The RSI crossed below the fifth line, also a sign of a trend change. A important point now is the 50 Simple Moving Average (SMA) and notice how the price closed almost equal to the value of the 50 SMA. If the price breakdown this support then the odds increase for a strong move down. A obvious stop loss for a short position is placed near the 28.8, i.e., the previous high.

LYO. A classic base and breakout pattern.


A consistent pattern in stock markets is a base followed by a breakout in big volume. In the chart of LYO (Lyondell Chemical) we identify a base of tree months and then a breakout of good quality. It´s possible that a pull back to the base occur in the short term, but the pattern is very powerful. In addiction, when we study a long position we like price/book numbers not very high, in this case is less than 3. For a more aggressive trader or investor, that enter the position faster not waiting for a pull back (a pull back that may never occur), a possible stop loss is near 32 usd.

KRY. Trading with the trend after a pull back?


In stock markets a fundamental rule is expressed frequently by the phrase "the trend is your friend". With KRY (Crystallex intl), since March, we have a series of higher highs and higher lows and we draw a nice bullish trend line using the higher highs, in accordance with the rules. We write nice because a lot of touches give more significance to the trend line.
Trading with the trend is better when we wait for a pull back to occur and here we have a pull back to the trend line and near the 20 day simple moving average, also a important support during an uptrend. The RSI remains bullish above fifty. For a long position a obvious stop loss is near the previous low (3.7 usd).