Jan

27

Do we have any predictions of the path of S&P in the next 5 days… based on the past 16 years, looking at the most similar moves over the last two days, I see Monday up. But perhaps a terrible decline along the road.

Alan Millhone writes: 

Dear Chair,

Is the failure of Obama care and concerns on its bailout making folks jittery ?

Sincerely,

Alan

Ralph Vince writes: 

I don't know if it is something that conscious, Alan, but surely, whether one alludes to it as success or failure, there IS some economic impact to higher premiums, to the socialization of anything. In this instance, the bigger question, is given that there must be some diminishment in economic activity as a result of this "law," (and if that were not the case, it would be fully implemented at present rather than piecemeal) my concern is what kind of a multiplier effect is there on this across other sectors of the economy.

This, coupled with 10 billion/month less in pumping, and there is a drag out there that was not there 120 days ago. The extent of that drag remains to be seen.

Alan Millhone writes: 

I feel the drag will turn into a good dragging.

The 10B was a poor band aid to cover a deepening economic wound.

I see a big increase of street people walking thru my town. I see increased numbers of people using the Cash lands in my town. I see more U hauls on the road

My local banker CEO says last year he had more charge offs since he has been there. He also says delinquent payments are up considerably.

A local bank is closings its three local locations and basically all employees lost their jobs. Huntington Bank bought the bank.

I have rental property and renters overall having a rough time.

My gut tells me bad times ahead.

Ralph Vince writes:

My GDP models have me expecting the next leg down to be considerably worse than 2008. This is very disturbing to me.I won't delve into obamacare yet.

Anatoly Veltman writes: 

Funny you should say that, Ralph. I haven't taken a position in many years; but it's crazy how charting can work within some minds. When she started coming off the 2009 bottom, I had a conversation with a friend in front of a live but very long-term chart. Looking at it, I explained that penetrating the 2002 bottom by substantial amount, the SP chart has sustained significant damage. At the time, I could confidently state that the 666 low will one day brake. Alas, I added, the chart is imminently Bullish — so I will not be assuming a Short any time soon. Next question was: "How Bullish is it?" And I had to shake my head: "Possibly, new record first…" Well (I was deservingly told), you're no help Anatoly.

For full disclosure: I have since changed my mind about breaking the 666. The sole reason for my change of heart is my belief that by the time that were to come around, the measuring unit (the USD) will not have nearly the purchasing power of 2009. So in real terms, I'm holding to my speculation; but not in nominal terms. To complicate things, the lower we may go right now, the less Bearish I will become. I really prefer to be Bearish at records - and it's harder for me to believe the top is in place when the move down is already in progress. Kinda opposite to Chair's weekend topic…But when Rocky was forced and announced his market call earlier in January — I was forced into seconding him instantly. Partly because we all knew that profit takers will not act out before January, for tax reasons.

David Lillienfeld writes:

I came across some notes I made last year about an interview with Leon Cooperman. Cooperman was commenting about having taken a large position either in student loan bonds. When he was asked about the increase in student debt, the problems graduates are having finding jobs, the lack of much increase in wages, and so on, all of which suggest a coming default, Cooperman just smiled and commented that the bonds were likely to paid off at par by the US government should they default and that he looked at them as being low risk at worst. Last time I looked, student debt was north of 1 trillion, and I think it may be up at 1.3 trillion by now. I don't hear many talking about student debt as the underbelly of the economy these days, but it seems to me that there's a storm brewing there. How long would it take for a default on the first tranche or two of those loans to spook investors?


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