The evidence continues to mount that the similarities between March of 2000 and now are rising. Sentiment indicators and options speculation are at levels last seen during the tech bubble. In fact, they’re becoming more elevated. The stated P/E ratio is 130, a number never seen before. Not to be outdone, day trading by Joe Q public has risen to 1999 levels.
However, maybe the most interesting fantasy is the performance of the retail stocks, posting their strongest relative performance since March of 2007. This strength assumes an approximate 3% increase over the next year. That 3% rise would be the equivalent of $470 billion of retail sales. Keep in mind, current retail sales are now declining at an annual rate of $331 billion. You first have to make that up, and then rise another $470 billion. An $800 billion total swing! On whose credit card is that going to be put?
I’ll still stake my lot on the bond market. For you dreamers, good luck and keep spending.
Till next time,
Bill
Sources: Barons (9/09) and Bloomberg
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Friday, September 25, 2009
Wednesday, September 16, 2009
Choosing Sides
I’d like to take a stroll down memory lane, and share with you a reprint of my email dated September 28, 2006:
As a money manager, everyday you are required to make decisions. Those decisions are driven by an over-riding strategy predicated on facts, assumptions, experience and gut instinct. So let’s take a walk inside my mind to get a better handle as to why our stock portfolio is positioned as it is.
Remember, I’m only talking about the stock portfolio, or as we call it, the growth side. Many of you have large positions in alternative investments non-correlated to the stock market.
Currently, there is a clear disagreement as to the direction of the economy and thus the stock market.
The Federal Reserve position (5 ¼ % daily funds rate) suggests:
1. Oil prices are no longer an issue and will continue to move lower.
2. The housing market has bottomed, and after a few months, the uptrend will continue.
3. Geopolitical risks (Iran, Venezuela, China, Russia, Iraq, North Korea, Nigeria, India, and terrorism) have calmed down and will no longer be an issue.
4. Hurricanes like Katrina are once in a lifetime, and therefore, concerns are un-founded.
5. We are awash in oil and gas, thus high prices for gasoline, natural gas, and home heating fuel are a thing of the past.
6. The fact that interest rates are inverted, with long rates lower than short rates, makes no difference, because this time it’s different.
7. The consumer will shrug off higher adjustable-rate mortgage increases because they are paying less at the pump, and will continue to spend.
8. Foreigners will continue to buy our debt (dollars), to support our deficit.
9. There will be no recession.
10. The stock market will soar from here.
The Bond Market (4.60% 10-year bond yield) suggests:
1. Oil will continue to be an issue, as our dependency on foreign oil increases. Alternative fuel sources have been talked about since the 1973 Oil Embargo with little success.
2. The housing market will be as severe and problematic as 1989-1991, and could be as bad as the 1930’s. The homebuilders have not bottomed and the downtrend will continue.
3. Geopolitical risks ( Iran, etc.) are a fact of life and will continue to be with us for a very long time.
4. The weather, from hurricanes to drought, will have significant impact on all aspects of our economy.
5. The inversion of interest rates, with longer rates lower than short rates, is significant because it’s NOT DIFFERENT THIS TIME.
6. The consumer will be impacted by higher adjustable-rate mortgages, higher energy costs, and excessive credit card debt.
7. Foreigners will think twice about increasing their U.S. dollar purchases, and that position will impact our deficit.
8. The stock market will move lower from here.
9. There will be a recession.
There you have it. Two diametrically opposed positions. Which side do you think is right? Most people will initially answer “I don’t know.” I, however, do not have that luxury. I’m paid to make a decision, to use my judgment. I’ve done my homework, and strongly believe that the bond market is the correct position. Unfortunately, for the last several months, the stock market has disagreed. Because of my position that a recession is looming, geopolitics is significant, and there will be a significant collapse in the housing market. I’ve:
1. Raised a lot of cash.
2. Shorted the homebuilders.
3. Shorted the overall market.
For the last few months, that position has been contrary to the broad market. But given the world we live in, I don’t believe it will be contrary for long. Setting the right strategy and sticking with it is sometimes hard, and sometimes difficult, but always worthwhile in the end.
Fast forward to September 2009. It seems the more things change, the more they stay the same.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
As a money manager, everyday you are required to make decisions. Those decisions are driven by an over-riding strategy predicated on facts, assumptions, experience and gut instinct. So let’s take a walk inside my mind to get a better handle as to why our stock portfolio is positioned as it is.
Remember, I’m only talking about the stock portfolio, or as we call it, the growth side. Many of you have large positions in alternative investments non-correlated to the stock market.
Currently, there is a clear disagreement as to the direction of the economy and thus the stock market.
The Federal Reserve position (5 ¼ % daily funds rate) suggests:
1. Oil prices are no longer an issue and will continue to move lower.
2. The housing market has bottomed, and after a few months, the uptrend will continue.
3. Geopolitical risks (Iran, Venezuela, China, Russia, Iraq, North Korea, Nigeria, India, and terrorism) have calmed down and will no longer be an issue.
4. Hurricanes like Katrina are once in a lifetime, and therefore, concerns are un-founded.
5. We are awash in oil and gas, thus high prices for gasoline, natural gas, and home heating fuel are a thing of the past.
6. The fact that interest rates are inverted, with long rates lower than short rates, makes no difference, because this time it’s different.
7. The consumer will shrug off higher adjustable-rate mortgage increases because they are paying less at the pump, and will continue to spend.
8. Foreigners will continue to buy our debt (dollars), to support our deficit.
9. There will be no recession.
10. The stock market will soar from here.
The Bond Market (4.60% 10-year bond yield) suggests:
1. Oil will continue to be an issue, as our dependency on foreign oil increases. Alternative fuel sources have been talked about since the 1973 Oil Embargo with little success.
2. The housing market will be as severe and problematic as 1989-1991, and could be as bad as the 1930’s. The homebuilders have not bottomed and the downtrend will continue.
3. Geopolitical risks ( Iran, etc.) are a fact of life and will continue to be with us for a very long time.
4. The weather, from hurricanes to drought, will have significant impact on all aspects of our economy.
5. The inversion of interest rates, with longer rates lower than short rates, is significant because it’s NOT DIFFERENT THIS TIME.
6. The consumer will be impacted by higher adjustable-rate mortgages, higher energy costs, and excessive credit card debt.
7. Foreigners will think twice about increasing their U.S. dollar purchases, and that position will impact our deficit.
8. The stock market will move lower from here.
9. There will be a recession.
There you have it. Two diametrically opposed positions. Which side do you think is right? Most people will initially answer “I don’t know.” I, however, do not have that luxury. I’m paid to make a decision, to use my judgment. I’ve done my homework, and strongly believe that the bond market is the correct position. Unfortunately, for the last several months, the stock market has disagreed. Because of my position that a recession is looming, geopolitics is significant, and there will be a significant collapse in the housing market. I’ve:
1. Raised a lot of cash.
2. Shorted the homebuilders.
3. Shorted the overall market.
For the last few months, that position has been contrary to the broad market. But given the world we live in, I don’t believe it will be contrary for long. Setting the right strategy and sticking with it is sometimes hard, and sometimes difficult, but always worthwhile in the end.
Fast forward to September 2009. It seems the more things change, the more they stay the same.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Thursday, September 10, 2009
Random Thoughts After An Historic Speech
“The economy is back from the precipice.” – President Obama (9-9-09)
You may think the historic speech I’m referring to was President Obama’s. You’d be wrong. That speech was politics as usual. Yesterday’s real historic speech was the one given by Zhu Min, Group Executive Vice-President of the Bank of China. He said bankers on Wall Street are suffering from “over-confidence” and are “myopic” in the face of the continuing financial crisis. He went on the say: “THE REAL ECONOMIC CRISIS HAS JUST STARTED.” He then added that the Chinese and the world are once again developing bubbles in real estate, credit, and the stock market.
The stock market keeps rising. If one is to believe that the market is a predictor of the future, you could make a case that the U.S. economy is headed for a strong recovery. However, if you are to believe the U.S. government bond market, just the opposite viewpoint is being supported. The demand for one-year to ten-year treasuries is increasing at a very brisk pace, and not just from our own government. It would appear the bond market is not worried about inflation in the future. If it was concerned, bond prices would fall, and rates would rise. However, just the opposite is happening. Rates are falling, and bond prices are rising. Maybe foreigners (Mr. Min) know something we don’t. This connotes deflation and an economic relapse. Who is right? In addition, sectors of stocks are being swapped for other sectors. That might be a game of musical chairs being orchestrated by the high-frequency traders, which could very well end badly.
No new money is coming into the stock market. Savings rates are accelerating, incomes are being cut, margin balances (borrowing) is not increasing, and money markets have remained where they were last February. Foreclosures are up 18% year over year, and U6 complete statistics unemployment is approaching 17%.
Obama said “we’re back.” To quote Barney Frank, “What planet is he living on?”
Just some random thoughts.
Till next time,
Bill
Source: Bloomberg
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
You may think the historic speech I’m referring to was President Obama’s. You’d be wrong. That speech was politics as usual. Yesterday’s real historic speech was the one given by Zhu Min, Group Executive Vice-President of the Bank of China. He said bankers on Wall Street are suffering from “over-confidence” and are “myopic” in the face of the continuing financial crisis. He went on the say: “THE REAL ECONOMIC CRISIS HAS JUST STARTED.” He then added that the Chinese and the world are once again developing bubbles in real estate, credit, and the stock market.
The stock market keeps rising. If one is to believe that the market is a predictor of the future, you could make a case that the U.S. economy is headed for a strong recovery. However, if you are to believe the U.S. government bond market, just the opposite viewpoint is being supported. The demand for one-year to ten-year treasuries is increasing at a very brisk pace, and not just from our own government. It would appear the bond market is not worried about inflation in the future. If it was concerned, bond prices would fall, and rates would rise. However, just the opposite is happening. Rates are falling, and bond prices are rising. Maybe foreigners (Mr. Min) know something we don’t. This connotes deflation and an economic relapse. Who is right? In addition, sectors of stocks are being swapped for other sectors. That might be a game of musical chairs being orchestrated by the high-frequency traders, which could very well end badly.
No new money is coming into the stock market. Savings rates are accelerating, incomes are being cut, margin balances (borrowing) is not increasing, and money markets have remained where they were last February. Foreclosures are up 18% year over year, and U6 complete statistics unemployment is approaching 17%.
Obama said “we’re back.” To quote Barney Frank, “What planet is he living on?”
Just some random thoughts.
Till next time,
Bill
Source: Bloomberg
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Wednesday, September 2, 2009
Possible or Probable
Does the government want the stock market to drop, decline, consolidate, crash, or all of the above? I believe that it is not only possible, but probable, and here’s why.
As long as the market is moving higher, money flows will continue out of safe havens such as treasuries, thus dropping the value of the dollar. Since oil is denominated in dollars, as the dollar drops, oil moves higher. As oil moves higher, gasoline likewise moves up, thus impeding this so-called global recovery. Oil inventories are at their highest in years, and refining capacity is at it’s highest in fifteen years. OPEC continues to over-produce. All in all there is no demand; oil is appreciating because of the drop in the dollar.
In addition, as the dollar drops, interest rates rise. This doesn’t help the billions of dollars of refinancing in both the commercial and residential areas of real estate estimated to occur in the next eighteen months. A collapse in real estate, greater in proportion than previously seen, is lurking right around the corner, and higher rates compound the impending disaster.
FDIC Chairman Sheila Bair said: Commercial real estate loans were “catching up” with residential mortgages as a threat to bank’s balance sheets. “Commercial real estate is a looming problem. It’s going to be a bigger driver of bank failures toward the end of this year, and into next year.”
Therefore, I contend, the dollar must rise, oil must come down, and interest rates must come down.
Here’s how to do it. If fear and panic could be created, that would drive money out of the stock market, and into the safe haven of the dollar and treasuries.
It happened in November and December of 2008. Could it happen again? I believe it could.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
As long as the market is moving higher, money flows will continue out of safe havens such as treasuries, thus dropping the value of the dollar. Since oil is denominated in dollars, as the dollar drops, oil moves higher. As oil moves higher, gasoline likewise moves up, thus impeding this so-called global recovery. Oil inventories are at their highest in years, and refining capacity is at it’s highest in fifteen years. OPEC continues to over-produce. All in all there is no demand; oil is appreciating because of the drop in the dollar.
In addition, as the dollar drops, interest rates rise. This doesn’t help the billions of dollars of refinancing in both the commercial and residential areas of real estate estimated to occur in the next eighteen months. A collapse in real estate, greater in proportion than previously seen, is lurking right around the corner, and higher rates compound the impending disaster.
FDIC Chairman Sheila Bair said: Commercial real estate loans were “catching up” with residential mortgages as a threat to bank’s balance sheets. “Commercial real estate is a looming problem. It’s going to be a bigger driver of bank failures toward the end of this year, and into next year.”
Therefore, I contend, the dollar must rise, oil must come down, and interest rates must come down.
Here’s how to do it. If fear and panic could be created, that would drive money out of the stock market, and into the safe haven of the dollar and treasuries.
It happened in November and December of 2008. Could it happen again? I believe it could.
Till next time,
Bill
>>>>>>>>>>>>>>>>>>>>>
A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
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