Traderbill's Financial Markets Weblog

…widely attributed to the Mayor of Hiroshima…arigato!

Yesterday’s “blowoff” was unlike all of the others as it was a constant rate of decline all day…amazing! More like a long term trend as each ‘countertrend’ rally was weaker and weaker. One would do well to study that chart because that is what the longer term pattern in a bear market looks like…think of down five and up two…over and over. It is impossible in that environment for you to be smarter than the market. You may think you are but eventually you will get burned…badly!

The striking thing yesterday was how all encompassing the selloff was…essentially there were no winners. Yet by the afternoon Cramer was chirping that that is why you need to watch his show so he can provide a roadmap. How about right to the brink, Jimbo? You were wrong in 2000 about defensive stocks and you are again. In a bear market there are no defensive stocks. Utilities? Please! They fell 3.5% yesterday obliterating two days of gains. Of course, Cramer says you can trade it? Really? IF you are a big manager you can…you can’t especially if you have to wait for the close for his hot picks.

TB like most folks has a discount broker, Schwab in this case who he is very pleased with. Pays $12.99 a trade…some are cheaper but let’s just assume the costs of a 100 share trade are 1/8. Round trip that is 1/4. So a 1/2 point paper gain turns into a 1/4. True you can buy big blocks and minimize the cost…if you can afford that, but pray tell, at what point would you have sold yesterday? Conversely, would you have been a buyer on Friday’s recessionary payrolls report (get used to the R word because you are going to hear a lot of it…TB will make book on that. Of course, if you are a big trading account you might be able to profit but you are going to be wrong a lot of times…still, the advantage is to the big guys.

“The race isn’t given to the swift, nor the battle to the strong…” but that’s the way to play it.

If, as they say the ‘dumb’ money trades in the first half hour and the ’smart’ money trades in the final half hour, we are in for a rough ride. Along those lines isn’t it interesting that with the Dow down 250 or so CNBC devoted a half hour to the Giants victory parade? This, from your financial authority…some help they were! TB can’t handle that bunch of idiots any longer…especially the politically motivated Kudlow. If you have cable get on Bloomberg…even though their displays are archaic.

Look at the stock summary below and see if you can find light at the end of the tunnel, other than an oncoming train.

Now imagine your great-great-grandfather, being a John Muir or Euel Gibbons type (those two names should not be associated), trodding across Utah. He sees a knoll and sits down atop it admiring a beautiful day. Looking far to the east he sees puffs of black smoke…and then identifies it as a train. Far to the west he sees another one and watches entranced as they approach one another but as they get very close his view is hampered by a large boulder. He scrambles atop it only to see the trains come to a stop their cattle catchers almost touching…amazing what looked like a disaster, wasn’t, merely the driving of the golden spike at Promontory, Utah on May 10, 1869. The Union Pacific had linked with the Central Pacific (the railroad of Stanford, Crocker, Huntington and Hopkins, the Big Four of San Francisco). That the railroad was built on the bodies of ‘coolies’ was not significant to them, only that they got as much of the government subsidy (deed to every other square mile their railroad tracks crossed…the ethanol of the 1800’s). This was the beginning of the wealth gap that was to peak at the turn of the century. Parallels to today, no?

Being a history buff and having found a copy of great-great-grandfather’s journal, you decide to retrace his steps. Lo and behold you find the very knoll and sit where he must have. Off to the east you see an AMTRAK train and to the west another…like your ancestor you scramble atop the knoll seeing that they will this time collide, but there is nothing you can do…you shout futilely but the keep on coming…and then CRASH! it’s over and all that is left is two smouldering hulks and carnage. That is how TB feels watching us go thru the worst financial crisis since the Depression and hearing morons like Kudlow say there won’t even be a recession…just a bit of a slowdown but capitalism will save the day…sure it will, Larry…sure it will. Perhaps TB should have just sat back and enjoyed the Giants victory parade, but no, he prepared for a wonderful dinner in San Francisco at Jeanty at Jack’s, his favorite French bistro, with is friend, mentor, and almost employer from NYC. It was a great dinner with fascinating conversation but the implications left him feeling a little ill. How do you stop this or conversely, if it is bound to happen, how does one profit from it? A bottle and a half of wine and great food did not provide the answer, just some sense of civility.

So back to sitting on the knoll and not willing to scale the rock yet.  

If you think TB is too cynical consider that they are now investigating Countrywide for inflating payments and interest rates on loans in bankruptcy filings…what a bunch of crooks! See how well Sarbanes-Oxley works? Also, Beazer laying off and shutting down mortgage unit while Centex is also laying off and having severe difficulties…yet housing stocks are off the lows…what kind of fool am I?Well, McCain won decisively in California and a good portion of the other 22 states. Not so for the Dems where Clinton powered thru while Obama won 13 of the 22 with New Mexico undecided. So it is clear…it will be McCain vs. ?

Have a good day and hang in there…it’s good to be king…AND hold cash!

TB