I think my Wall Street Journal is safe from human consumption, but I'll let the readers be the judge. Its not as clear-cut as I had originally thought it would be..... but that's ok.
My evidence:
- Online sales increasing "at the slowest pace on record"; original prediction 36% increase, actual 19% (through yesterday.) Since online "stuff" has to be shipped, its over for this Christmas by now (and probably was Friday.)
- Retail sales for December ain't good. Predictions were for a 16% y/o/y Christmas season. There is not a snowball's chance in hell we are going to get a double-digit number. Uh uh.
Merrill Lynch gets a "$6.2 billion injection". Good, right? Uh, the price was $48/share. Anyone look at where Merrill was trading? $56.
So let me see how this works - I give you $6.2 billion in exchange for stock at $48 a ticket, short against the box, pocket $8/share immediately and have all my money back. That is an instantaneous and risk free 16.6% return!
"Investment" my ass!
What if you're a Merrill shareholder? You just got diluted to the tune of $8/share for the guys who "gave" them the money; they took zero risk, you got buttfucked. Merry Grinchmas.
Oh, and if you hold their stock here? You're a total idiot; this is yet another "Guido" deal and if you think the stock will hold at $56 you're betting against the guys who they "negotiated" with. What sort of stupid do you have to be in order to buy into this sort of trade on the long side?
The market figured it out - a bit - later, with Merrill dropping a buck and change through the day. Give me a break; this is the stupidity of investors on display in spades!
Don't look at the TNX today. Its pinging the 50DMA - a break above there is extremely bullish for rates (and bad for mortgages and other borrowing costs.) Bet on this one not working out well for the bagholders, er, equity longs.
What's driving this? Credit card default deterioration, for one. And by the way, the data filed with the SEC the other day is three months old (September/October stats.) Betcha it got a lot worse in the last three months. Anyone want to lose a QUALITY bottle of single-malt on that wager? I didn't think so.
Contained to subprime mortgages eh? Uh, no. Discover, Capitol One, American Express. Amex is particularly shocking as they don't lend to the lower end of the credit quality spectrum. If their default rate is rising materially things are bad all the way up into the upper-middle class - the $100,000-$150,000 annual income family. Oh, by the way, those are the "aspirational consumers" - you know, the fools who will buy $500 handbags - and pay the whole $500, just so they can "flaunt" that expensive Coach purse. (The truly wealthy might buy one, but only at half off - they didn't get rich by being stupid!)
Let's see how this works. Credit quality declines, and borrowing costs go up. This causes more defaults and thus credit quality declines more. Borrowing costs go up more. Credit quality declines again...... isn't that the "D" word that nobody wants to speak about?
Gold and Silver are out of their triangles today. Not decisively, but out is out. Long as a trade? Maybe, but not today with insufficient volume. Wait until the day after Grinchmas. If you decide to do it, be careful and keep a tight stop on the position. A break over the swing high on GLD would be confirmation - and bullish. If you're one of those guys who think that Gold is going to the mooooooon, are you really interested in trying to front-run it and perhaps get smashed? I am deeply disturbed by the price action in the miners; the HUI chart is, shall we say, "troubling". Until and unless we get confirmation there trading long on metals needs to be done with great care and tight stops. Be aware that deflation, when it comes, will smash metals; being long physical metal beyond a small amount as a "TEOTWAWKI" hedge is a high-wire act.
Never mind that from a seasonal perspective February marks the end of the "seasonal demand cycle" for metals (as jewelry), and of course the merchants are going to try to shove their "stuff" out to you - before demand goes in the toilet for the next six months.
Careful with that axe Eugene.
Volume today is anemic, as expected. Internals showed about a 3:1 advance/decline ratio, consistent with the market average's moves. If you're a bull, this was a good day, but ominously the VIX posted a 2% increase - while the averages were up a half-percent. Hmmm... Oh, and that nasty IV skew is still there, although it has come in a bit - Friday was the day to buy your hedging PUTs on the VIX if you're bearish on the markets for January, although they were still reasonably-priced today.
You have to love a market that's up and the VIX is as well. Someone ain't buying it, and that "someone" is the market-makers on the floor who are selling the options us retail guys buy. They know what happens to their O-ring when they're wrong, and they've been nailed a couple of times in the last few months. Now it appears they're front-running the next plunge.
Prescient or wrong? My crystal ball is cloudy, but if I want to be long volatility today I'm being asked to pay up to an unreasonable degree..... and betting against these guys, historically, is a loser. Hmmm....
Oh, as for those who argue we "can't have deflation" with a "fiat currency"?
I'll deal with you in my look forward Ticker, due out right around New Years.
Here's your Christmas Technical!
PS: Note that the 2007 technicals will be cleared from the server on New Year's Day due to space management requirements. The tickers will remain, of course. There will be no daily ticker updates (and there may be limited videos) during the next week; I'm going to relax, sleep in, and enjoy life during the holiday...... give your families a hug, a kiss and your time - its Christmas.
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