Wheee, what a week!
Down 350 points on Friday, up 200 points Monday, down 100 points by 11:30 on Tuesday and back up 100 points by the day's end, down 200 points to open Wednesday but getting it all back at the close and then today was down 50, up 100, down 200 and back up 150 all to end up right where we were (13,650) the whole week after the last Fed meeting.
The above chart is one that we use to talk about a stocks movement over time, usually that time is more than 8 hours! Every day the market seems to take us on this roller coaster ride and it is just a little exhausting and that may be a dangerous thing because it's a little harder to be bullish when you're exhausted. We know that is true because even the best parties we've ever been to ended at some point (otherwise we'd still be there right?). Of course the current non-stop party king is China and that rising tide continues to lift our ship as global growth is the highlight of Q3 earnings, even as the US crawls to a standstill.
This morning we looked at the less than Durable goods orders, which were off sharply from last month and later in the day we go the New Home Sales Report that showed September home sales rose 4.8% from the previous month. There are several problems with this; Problem 1 is that August was revised down close to 10% and August already sucked at 795,000 (now 735,000) so September is up 4.8% to 770,000 – that is less than August was supposed to be a month ago. Problem 2 – the margin of error on the government statistics (not really known for their accuracy at the best of times) is +/- 10.3%, this is about the same margin of error you would get if you polled 5 people standing in line at the 7-11 about economic activity. Problem 3 – last year the annualized rate of new home sales was 1,004,000, 23.3% more than this year. Problem 4 – cancellations – the Census Bureau does not count cancellations yet here are the current RECORD cancellation rates:
Firm . . . Cancellation rate for Quarter
Centex (CTX) 35%
MDC Holdings (MDC) 57%
KB Homes (KBH), 50%
Lennar Homes (LEN) 32%
D.R. Horton (DHI) 48%
Beazer Homes (BZH) 68%
NVR (27%)
"Not to burst anyone’s bubble (um, bad choice of words), but … consider that new home sales have been increasingly overstated in recent months, given that they do not account for cancellations after sales contracts have been signed. With many of the nation’s largest homebuilders reporting cancellation rates of 30% to 50% of late, actual sales are far lower than the top-line number reported by the Census Bureau each month, while the price data do not take into account the massive discounting being resorted to by many builders in order to move homes… And, those looking for the housing market to be “rescued” by either further cuts in the Fed funds rate or by Congress will be sadly disappointed… These things will do nothing to cure the issue at the root of the housing market — a lack of affordability." –Richard Moody, Mission Residential
Meanwhile oil jumped for joy ($3.36 on the day to $90.46) at the prospect of another rate cut putting the commodity bubble into overdrive. There was no stopping that action today as we already have Turkey bombing across the boarder into Iraq, the former CEO of Goldman Sachs (who conveniently predicted an "event" that would spike oil to $90 just 30 days ago!) leveled sanctions against Iran, rescuing the commodity-heavy broker from a two week decline that cost the broker $9Bn in market cap and threatened the industry. At the same time, Alberta decided to increase the taxes on Canadian oil sands, a move that may impact development of new fields and OPEC decided it was a good day to make a statement that they "don't see a need to check the price surge."
According to Breaking Views: Global crude storage levels are at record highs and "Worldwide oil appetite has been flat as increased demand in China and India are offset by declines in the west." This is something I've been saying for a year but it' s nice to have back up! So what is causing this "shortage" in the US? "The only place where (supply is short) is at the delivery point used by futures traders when contracts are physically settled. Cushing stocks may be important for a few refiners in the Midwestern US but they are a really bad indicator of the health of the worldwide oil market."
The article goes on to explain that 99% of oil futures contracts never end in physical delivery – something we pointed out on Tuesday. According to Breaking Views, "the amount of oil traded via futures contracts right now is 10 times world consumption. Meanwhile, oil tanks worldwide are overflowing."
Wake up people – you are being robbed!!! I went into great detail last month about the nature of this little con game that's being played out at the NYMEX but maybe now that a venerable newsletter agrees with me we can do what we need to do. What do we need to do? The same thing we were told to do in 1976:
"I don't have to tell you things are bad. Everybody knows things are bad. It's a depression. Everybody's out of work or scared of losing their job. The dollar buys a nickel's worth; banks are going bust; shopkeepers keep a gun under the counter; punks are running wild in the street, and there's nobody anywhere who seems to know what to do, and there's no end to it.
We know the air is unfit to breathe and our food is unfit to eat. And we sit watching our TVs while some local newscaster tells us that today we had fifteen homicides and sixty-three violent crimes, as if that's the way it's supposed to be!
We all know things are bad — worse than bad — they're crazy.
It's like everything everywhere is going crazy, so we don't go out any more. We sit in the house, and slowly the world we're living in is getting smaller, and all we say is, "Please, at least leave us alone in our living rooms. Let me have my toaster and my TV and my steel-belted radials, and I won't say anything. Just leave us alone."
Well, I'm not going to leave you alone.
I want you to get mad!
I don't want you to protest. I don't want you to riot. I don't want you to write to your Congressman, because I wouldn't know what to tell you to write. I don't know what to do about the depression and the inflation and the Russians and the crime in the street.
All I know is that first, you've got to get mad.
You've gotta say, "I'm a human being, goddammit! My life has value!"
So, I want you to get up now. I want all of you to get up out of your chairs. I want you to get up right now and go to the window, open it, and stick your head out and yell,
"I'm as mad as hell, and I'm not going to take this anymore!!"
You never know, it just might work… And by the way, don't forget to vote!
Now that I've got that off my chest we can go back to January 2000 party mode (I'd say it's about the 12th) and enjoy whatever boost Microsoft may give the markets tomorrow. The company had blockbuster revenues and kudos to Reinharden who called the 10% bump and congats to all who took our Jan $32.50 play today, that should be good for our 5th Daily Double of the week and it's only Thursday!
