The S+P Futures were up a little before the CPI number and now they are up a lot. A fade from the open would be a negative and I'm thinking the holding the gain but with low volume might be a negative as well.
I think the comments function wasn't working because I had several comments show up in my email this morning. I am not worried about the oils. The downward move was more than a rolling over which feels like it is more bout emotion than anything else. Other parts of the market though have been rolling over slower which, if I'm right, is more worrisome.
Fannie and Freddie getting worse is a scary thing because they create liquidity for more mortgages to be created. If it works out that less mortgages can be created I have to think that is a big negative, am I wrong? I'm surprised this isn't getting little more attention than it already gets.
One reader mentioned something about my succumbing to emotion. Emotions don't really drive the bus here. I have taken defensive action in raising some cash. If yesterday was a bottom I will have turned out to have been wrong. Since I know that I and every other manager gets some calls wrong there is really nothing to get emotional about. Its like driving through town, I know I will hit some green lights and some red lights. It makes no sense to take a different route at every red light.
To be perfectly clear, I know I will get some wrong. I'm not worried about that. A reasonable goal, once you can accept that you will be wrong, is to be right a little more often than you are wrong. If you think about it, that is all you need to put the odds in your favor over a long time period.
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You could even tolerate being right a little less often than you are wrong, as long as when you are right you tend to get the big wins, and when you are wrong the damage is not too great...
Just came from Bill Cara's site and to say he is ticked off about how the latest economic data are being spun by the talking heads would probably be an understatement; but outrage over the way the sell-side (mis)conducts its business is part of Bill's ethical persona and, since he gets it right far more often than not, such 'emotionalism' can safely be discounted (frankly if he ever lost that passion I'd worry about him).
My own take is to agree that the slow rollover in the mortgage securitization business along with a spike in inflation (never mind that core cr*p, Barry Ritholtz has said all that needs to be said about how misleading that is), rising interest rates and a flattening yield curve, a sharp drop in Sept industrial production and consumer sentiment spell d*e*f*e*n*s*e - not 'out' but reduction in beta, shifts in sector and country weighting and increasing cash are appropriate responses. I've already done some of this but am looking for a near-term dead cat bounce to finish the process - if I don't get it I may lose a bit more than I like but 3rd quarter returns gave me the buffer I need and, who knows, we might get a bit more rally than I expected; nobody ever became poor by selling a profitable position and I can settle for 'less rich' when called for and that's the way these things go sometimes.
Keep up the good work, enjoy NZ. -RW
Yesterday, I bought SPY at pretty darn near close to session low and am looking to add some EFA soon.
As I've mentioned before, I'm a big fan of the SPY/EFA combo.
Roger: Excellent post. Keep up the good work.
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