I’ve always found that I do my best trades when I get sufficient information and the constantly back-and-forth between the ears quiets down as a moment of clarity takes over and a single voice says “Yes, I think this is the right move…” The trade is place, and more often than not, it works out. But, until that moment arrives, there’s a cacophony of internal chatter driven by competing inputs.
There’s talk, in Washington, for example, that democorps are taking the tax cut for us middle class working folks off the table. No comment from the White House, but my internal chatter goes something like “Hmmmm…given that we need to kick-start consumer spending if the old paradigm/way of things is to be saved, why would they do that?” And, of course, without the consumer coming back to party a bit, there’s no reason to be bullish on stocks until after we get past 2010 some ways.
Another fine conversation to ‘tune in’ on has to go with the price of gold (POG) – see chart above. When the price soared $70 bucks last week, I was thinking “Aha! We are getting public recognition that inflation is coming up the pipeline!” However, since then, gold has moved back to just over $920 at press time and the internal chatter is saying “Hold off, George, maybe we will get that pullback to under $750 which would make for an ideal entry point on the long side.” So still watching that one.
In the meantime, you see where oil is down a bit before the EIA data? Folks I know in Europe are saying this could be a key reversal and if that’s the case, then gold coming down is part of another hit of deflationary pressure.
Then we’ve got to digest along with the Wheaties the report from the World Bank this morning that India was tops globally in remittances in 2008. In other words, the money coming from India, Russia, Malaysia, and South Africa was pretty good, but as things tighten up globally, this money could decline quickly and you know what that leads to: global depression digging in deeper and more difficult to ameliorate.
US Durable goods orders are out this morning, against an expectation that the advance numbers for February would be down about 2.5%. Well, here’s how it worked out – much better than expected:
“New Orders
New orders for manufactured durable goods in February increased $5.5 billion or 3.4 percent to $165.6 billion, the U.S. Census Bureau announced today. This increase follows six consecutive monthly decreases, including a 7.3 percent January decrease. Excluding transportation, new orders increased 3.9 percent. Excluding defense, new orders increased 1.7 percent.
Shipments
Shipments of manufactured durable goods in February, down seven consecutive months, decreased $0.9 billion or 0.5 percent to $179.1 billion. This followed a 5.2 percent January decrease.
Unfilled Orders
Unfilled orders for manufactured durable goods in February, down five consecutive months, decreased $10.5 billion or 1.3 percent to $773.7 billion. This followed a 2.0 percent January decrease.
Inventories
Inventories of manufactured durable goods in February, down two consecutive months, decreased $2.9 billion or 0.9 percent to $336.8 billion. This followed a 1.1 percent January decrease.
Capital Goods Industries
Nondefense
Nondefense new orders for capital goods in February increased $3.6 billion or 7.4 percent to $52.8 billion.
Defense
Defense new orders for capital goods in February increased $2.6 billion or 35.3 percent to $10.0 billion. “
Again, more grist for internal chatter, pushes me bullish, but nothing conclusive.
A call to Robin Landry didn’t clarify things, either. Landry got most of his clients out when early Monday this target levels were broken to the upside, but he’s skeptical this rally’s staying power until his wave counts confirm. “I’m watching first the 7,200 area on the Dow, and then around 7,100… if we see a break down under 7,000 in short order that gets really bearish, so I just keep watching my indicators…” So over the next few days, perhaps a week or so, we will find out if this was an Elliott wave 4 or a 5th wave failure and in the meantime, I’ve got both counts in mind, too.
The important thing about being a good trader, I’ve always heard – not that I am one myself – is that you have to be unbiased and ready to play either direction; the upside or downside. As the Bond Dude often points out to me, your money doesn’t know where it came from.”
While the chatter continues keeping me up nights, there’s still no sign of a ‘turn” in the secular economy, at least one of sufficient size to flip things around and become incredibly bullish. Take the Mass Layoff report out last week, just for example:
Landry is expecting things to clarify over the next week, or two. But for now, I am pretty comfortable with my present position which continues to be cash and treasuries. I’ll just wait a spell more and see if the ‘chatter’ quiets down. When it does, I’m ready to go short, but long seems more likely. As always, it’s likely to be a matter of timing, is all. As a friend in Luxembourg noted this morning:
“Potentially negative divergences yesterday as the S&P cash and the Dow Jones Industrial Average saw highs above yesterday’s highs while the S&P futures and the New York Composite Index were not able to register higher highs. Those types of divergences often lead to market turning points. “
Not that I’m the only skeptic that the right medicine has been administered yet to cure-what-ails-us: Paul Tharp’s got a good story in the NY Post this morning headlined “Nobel Laureates trash plan for toxic assets. One key quote (which mirrors what I’ve been telling you for who long?) goes like so:
“Three Nobel winners Edward Prescott, president of the Federal Reserve Bank in Minneapolis, and economics Professors Vernon Smith and James Buchanan stood by their joint statement months ago that Congress was playing in fantasyland with the huge bailout.
They call the rescue effort “a triumph of hope over experience to believe that more government will help the United States today.”
So with all this going on, the biggest story of the day may turn out to be the start of the Fed coming into the market today to start purchasing of Treasuries to unfreeze the credit mess. As I’ve warned before, this a a ‘snake-swallows-its-own-tail’ kind of thing. Once started down that path in previous economies, the snake starts to get a real appetite going.
Am I the only financial reporter who’s got a $105-billion in expired Zimbabwe dollars taped on my office wall to remind me how hungry that kind of snake gets?
Britain’s Busted, Too
We are not alone: If you think Uncle is alone in our spendy-frenzy, the headlines from the UK are increasing critical of free-spending, gold-selling, mint pimping Gordo Brown. Example: “The Bank of England and No.10 at war: We can’t afford Budget spending spree, Governor tells Brown.”
Here, let me simplify that headline for you: ”The Bank of England and No.10 at war: We can’t afford Budget spending spree, Governor tells Brown.”
How’d I do?
‘You Know Things are Bad’ When Department
Playboy is closing its Manhattan offices.
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Try as I may to masquerade as an East Texan, I still find bunnies more interesting than rabbits.
New Depression Weather
That drought in the nation’s midsection is causing headlines like “Drought Reignites Dust Bowl Fears” to appear. And with good reason. Have I ragged you about your garden yet today?
New Electrics
Here’s a world-changer for you: The U.S. Navy has a research team which has experimental confirmed cold fusion according to an article this week in EE Times. This is the best article I could find on it and it has the diagram of the experimental container, too. So…if you’re a home experimenter, have at it. Fleischmann and Pons were right, it seems…
