Tuesday, June 24, 2008

Market Recap 06/24/08

Thanks for cruising by to read. Posted daily, just after the close. If you appreciate the effort, don't forget to rec. Also, the caps blogosphere is getting crowded and my posts are getting pushed down within an hour, so bookmark the source; JoshSebastian.BlogSpot.com. Enjoi

Foreword: I'm still tweaking the format so bear with me. I think I'm going to do a foreword, cite my sources & add in some commentary, then put off-topic and random crap on the bottom. Eat what you like, leave the rest. Also, since I officially got rejected by the Fools, I think I'm going to start discussing more specific trades and such. At this point...I don't really think anyone knows what the hell is going on in the market. So...anyone who has any short-term conviction is probably a fool. The reason I say this is the tug-of-war going on with oil. There is a HUGE bear camp and a HUGE bull camp, both of which are certain of their thesis. The only other sentiment gap this large, that I've witnessed, was housing. My point is that if there were ever a time that oil SHOULD have gone down...yesterday and today were that time. China fuel price increase, Saudi production increase, speculation crackdown chatter, futures traders cutting their longs, etc. Thus, I think the bulls may get proven correct, again (watch for action tomorrow on inventory news). USO (oil futures) have been building a base around $110....the futures guys, just aren't spooked....but if support doesn't deteriorate tomorrow, I'd get long.

Dollar - The dollar is banging around between 73 and 73.6 with nowhere to go. Watch for some action here soon...I can't imagine what would lift the dollar so I say we fall through 73 if we don't get news out of the fed soon.

Gold - Futures up slightly. Everyone seems to think the dollar is the ULTIMATE gold indicator...so I'm guessing it will take that dollar drop I'm looking for to set gold in motion. (Wait till they find out gold will keep going despite a low but firm dollar.) I'm still long gold via GLD $86 Calls. I rolled into the $86 yesterday and out of the $88 Today. Go me.

Oil - Futures down slightly. The USO is all over the place, but closing down with $110 being what I'd call a median price over the last couple weeks. Watch for big moves on inventory news tomorrow.

Inflation -
I know everyone thinks we're headed for the worst inflation ever. In terms of price inflation...maybe...if the rest of the global economy keeps kicking our a$$. In terms of money inflation....no frickin' way. It's being called a credit "CONTRACTION" for a reason. Money is getting sucked OUT of the system. We've been inflating for a while, this is the great unwind. All of you who are shouting about M3...those are SIVs coming back on the books guys. Think about it...is credit cheap right now? No! But your dollar isn't worth crap either.

Consumer Confidence - Falls to lowest level since 1992
(Wait...wasn't that an election year too?) I really don't put much faith into these. This is the same consumer that started racking up debt on credit cards once the home equity lines closed. The same consumer that said they'd save their rebate check, but spent it at best buy.

Case-Shiller Index - Says home values fell 15.3% YOY, the most since the private group began keeping year-over-year records in 2001. Home prices losses have now wiped out 4 years of gains. Guys, if you've seen this graph and still think we're headed for a quick rebound...we need to have a talk. (Check out the whole series)


Interest Rates - Are what some people are saying is pushing the market up. That the fed would have to be high to raise tomorrow....but I'm in cash
on the S&P front. It's hard to say what might happen tomorrow. Perhaps S&P up on news of no rate hikes...but I thought that was a forgone conclusion. Maybe the case-shiller data sealed the no-rate-hike deal. My guess is a drop though 1,300 on the S&P soon, then back to speculating over rates....cause the news is just gonna get worse kids.

Interest Rate Chicken - Was won by India today, who raised interest rates "to 8.5 percent from 8 percent" and reserve requirements "to 8.75 percent from 8.25 percent" (reserve requirements, what's that?) So now we have Mexico and India who have hiked due to inflation worries...keep watching!

Dow Hikes Prices, again (25%)

- Is Warning of "Anemic" U.S. economy.

Mish is reporting cases of non-paying home owners remaining in their homes more than a year late, yet banks will not foreclose. Also a homeowner begging for foreclosure on his condo. Great Stuff.

"There can only be one of two things happening here, neither of which is any good.
  • Banks do not want those foreclosures on the books right now because they will have to report them. Better a delinquency than an REO?
  • Banks are so backed up with foreclosures and REOs, and they are so understaffed in processing foreclosures and selling REOs, that they do not want to take on any more."
CFTC plans more oversight of foreign exchanges - (Yawn) Wake me at "cheap" oil, will you?

NYSE buys 25% of Qatar's Exchange Market - It's about time we started buying Arab assets. Someday soon people will realize how undervalued these exchanges are. Oh well.

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