So will the Fed cut by 50 basis points on September 18? Maybe sooner?
Well I don't know the answer but this does raise a question that depending on the answer means they will not go 50 basis points.
What happens if they go 50 basis points and then next month they revise today's number up to something like 50,000 job gains, at they same time they revise last month's number back up too and then the fresh number shows some sort of meager gain?
That scenario is plausible, consistent with slowing but might not be as dire as some think it is today.
To be clear I have no answers, just a question or two.
Proud Member Of
Random Roger
© 2009 | Gadget Theme Blogger Template
Original WPtheme By Blogger Template | Converted By Gadget Lover
| Distributed by eFree Blogger Help
Original WPtheme By Blogger Template | Converted By Gadget Lover
| Distributed by eFree Blogger Help
26 comments:
I'm certainly not going to pretend to come bearing answers, but it seems to me like the market is setting itself up for a big disappointment. If the market is "expecting" this big cut, anything less will trigger a sell off (most likely). If they get exactly what they "expected" we might have a modest gain. So I don't really like the prospects short term. All I'm saying here is that I'm expecting continued volatility regardless of what happens.
Feel free to nominate me for the most pointless post of the day :)
not pointless at all. its a sort of no win position they are in.
Duh, if I put 50% in DIA
and 50% in DOG will I be
even?
just wondering;-)
Roger: The household numbers, which were also released today, were also bad. Unlike the payroll numbers, which are often revised, the household numbers are pretty reliable and not subject to big revisions. Together, these point to a recession--whether it will be serious or not is unclear.
Norm G.
thank you Norm
Roger,
Most signs point to a recession and the market having problems. As one poster noted, even with a 50bp cut there would be a small uptick because that's the expectation. What types of investments do well in this situation? Are there sectors we should be overweight in? We're seeing the peaks of various cycles at the same time, historically which is the next to boom.
doug,
great subject for this week's video. thank you.
i had originally planned to discuss migratory patterns of water fowl.
Dammit Doug, I wanted the migratory patterns. OK, I'll settle for Roger's expert opinion on ways to prepare for the bear market everyone is saying is upon us :)
Looking forward to it, Roger! Thank you.
Watch for a rally into the bell. I would not want to be short going into Monday. The fed could drop a rate cut and a shorty would be killed.
It seems like the Financials such as MER and GS have plenty of buying into the weakness today
I do not think the Fed wants to give speculators what they want.
If hedge funds want 50 they will get 25. If things improve and they want 25 they will get a discount rate cut again.
Now I do think the Fed will supply lots of liquidity to help the banks. They have been doing this for weeks with the actual Fed funds rate below 5.25 many days.
Roger's comment; "To be clear I have no answers, just a question or two", is the same lot most investors are in.
That being said, we all know that Wall Street hates uncertainty. Add that to the possibility that a socialist could be president in a year and a half and...yikes!
As for a possible rate cut from the Fed; I heard Hillary Kramer the other night on The Nightly Business Report say that the Fed cut has already been factored into the market, what with the gains that we saw in the last couple weeks.
That could be a 25bp expectation though. A 50bp cut could spark a small rally, but that could be a signal for the wise investor still in the market to take profits before the recession.
And this from CBS Financial:
"The Fed funds futures market is pricing in a 75% change (chance)for a 50 basis point cut in September, after giving it an under-50% chance ahead of the August payrolls report. By the end of the year, the futures market anticipates the fed funds rate, now at 5.25%, could drop to 4.25%."
http://tinyurl.com/2m2all
Has that likely cut already been factored into the market?
Anon 12:09
Rally into the bell? What, are you a broker or something? LOL
Check again.
And I would rather be short going into Monday than long.
As much as everyone hates to hear it, I think we need a good old fashioned sustained sell off. There's too many shaky hands right now and they need to be shaken out of the market. Also, they're referring to this volatility as "market turmoil" a lot which leads me to believe that everyone has forgotten what true market turmoil us. This means we need a good healthy dose of it.
Nobody knows for sure. I like to constantly ask myself. "Am I prepared if the Dow drops 1000 points?", "Am I positioned if the Dow gains 1000 points", "What is my plan if the market goes sideways".
I am losing my shirt in this market, down over 3% on the year and not happy. I was up 12% just a few months ago.
A few comments on the job numbers. The unemployment rate itself remains low historically at 4.6%. This, though, is an expression of the economy, not the market. If the market rallies, it may happen long after the reality of the low numbers sink in. Put differently, a loss of 4,000 jobs is hugely fractional. Still, over the coming months, the expectation is that joblessness will increase, probably with the same low numbers. That expectation is enough to cause the market to fear recession. When fear sets in, numbers be damned, at least for the short or intermediate term.
Another question has to do with linkage between the housing market and job losses. If it is a true link, then maybe fear is justified that the mess has spread into the broader economy. But with the 4,000 jobless number, the connection is not established.
To look at these numbers is to use a rear view mirror, not binoculars. The past may point to a recession, but Paulson may be right when he says job numbers are volatile and no guarantee of things to come.
All that is supposition. As for me, I am not going to ride this one out on a full-weight bronco. I'll watch for the basis point bounce, mainly just before the event as I cannot be assured of 50. But I'll look for chances to lighten up or dump weak stuff. My cautious appraisal: long, no; short, yes.
John
If you were up 12% on the year a few months ago say in May or June, then you must have a risky portfolio that I would guess to be not well diversified.
I think the market is much like my children (who are now mostly grown). They don't really listen until you yell. The market doesn't really listen until some data point or points start to yell. Well, today was a screaming Friday, and the market listened.
What is truly disturbing is that not one person, economist, begger, indian chief, saw this number coming. Oh, there have been handwringers such as myself waiting for a drop, for it didn't make sense that the number hasn't dropped before now. NOw it has not only dropped but gone negative. Ouchy, wow, wow.
They ought to just throw the damn number out. It has been materially overstating and/or understating numbers, why even bother? (stated partly in jest).
As usual, Roger is a port in the storm.
Screw being well diversified, I want my portfolio to go up and not sideways for ten years because I was too diversified. Most money managers over diversify and that is why they never beat the market. It is a wall street term that is used to much. Diversification WILL hurt your results long term. Keep telling yourself that diversification is key and you will never make returns above the market. You will lag most of the time.
My current portfolio:
70% USD money market funds @5%
12% gold
8% Everbank Pan Asian currency index
10% bear funds/etfs (BRPIX, DOG, FDPIX)
Ive had some bad days in the past months but days like today I do pretty well. I wish I had less USD. My portfolio is up about 2% ytd.
Jim
Anon 3:45.
You win the prize for the dumbest post here is the last two years.
http://tinyurl.com/2urb8x
http://tinyurl.com/3botjo
The market has been up for the last ten years overall, so then a well diversified portfolio should have at least matched the general market return of about 12% a year or so and not moved sideways in value as you suppose. And maybe had an even better return if you collected on any dividends.
If you want to stay in a single 'hot' sector or with a few 'hot' stocks and your portfolio gets hammered, why come on here and whine? It has to happen sometime or another. It's unavoidable.
That's why even traders like Jim Cramer say that "bulls and bears make money; pigs get slaughtered."
And if your investment goal is to consistently beat the market by quite a bit with a narrow portfolio, you are a 'pig' and not an investor. And you will probably end up quite disappointed in the long run with your investments. We all learn this lesson one way or the other, and most professionals can't beat the market with any consistency.
I suggest that you get a copy of "The Unbeatable Market" by Ron Ross. You may even want to get a copy of Cramer's book, "Real Money" if you want to be a trader. On page 163 of his "25 investment rules to live by" he states that 'Diversification is the only free lunch'.
I have read both books.
Anonymous 8:28--If you were to do a little research rather than throw stones rudely, you'd find that the portfolio managers that consistently beat the market are not well diversified at all.
Nevertheless, those managers are also professionals, and most average investors are not equipped to assess and manage the risk of a non-diversified portfolio.
I would suggest to Jim this....(with the qualifier that I'm not qualified to advise, but...) holding those bear funds without having a plan for entry/exit can lose you money if you are holding them long term. The gains you make will only offset the losses that you've been forced to take.
Lesia.
I would like for you to name me some managers that consistently beat the market without being diversified in their portfolios.
And why would you give such bad advise on this blog?
"I am losing my shirt in this market, down over 3% on the year and not happy."
Down 3% over 9 months is "losing your shirt"? I would definitely pop open a stock market almanac or other reference books so you can get familiar with the kinds of losses you can expect when investing. If you don't know your time horizon and risk tolerance you shouldn't be investing.
Please talk about the deep recession or depression scenario.
As you say, a 100 depression is also "normal" and we are do but you seem to be too "emotional" to take this scenario seriously.
It is a very, very real scenario everyone that built financial careers of the last 30 years is ignoring, seems like almost denial and I'd love to hear your macro analysis of that very possible and normal scenario?
Post a Comment