11/12/10…ship of fools

TB’s Quote of the Day: “I’m just a second rate officer in a third rate ship.” Ship of Fools (1965)…that is how most veteran portfolio managers feel today!

…TB still doesn’t get it…you might agree with that statement…but neither does John Hussman, TB’ friend, Bob Smith, and others. Today the Hang Seng is off 1.9% while the two big mainland China exchanges and the CSI 300 are off 5-6%!!! Growth in Europe has slowed to the slowest pace in four years as THEIR central bankers try to do the right thing, yet we are confident in U.S. stocks. If you saw the Trade Deficit Wednesday you noted the improvement…imports down, exports up – slightly…but what caused that? A plunging dollar! A falling dollar by definition will lower imports and raise exports…but by such a meager amount on a huge decline in the greenback? We ARE a ship of fools…and a ship manned by fools is bound to run aground…or like the Carnival Ship get towed unceremoniously back to port.

Cisco lowered their growth forecast…following Intel a month or so ago…so what…so what??? These are tech stocks…IF there is a recovery they should be doing well, not limping along. In both cases we took stocks down and now that China (the engine of growth) is showing weakness with a stock market in a true bubble, how are we supposed to continue with the post-election euphoria? …and whether you are a republican or a democrat…you can’t be proud of what you saw…nor excited at the prospect of more gridlock. TB believes there will be a backlash against the GOP in two years…be careful what you wish for…

Do you realize the Dow has not given back almost all of the gains on that breakout rally of November (S&P gave it back entirely intraday, while the two Nasdaq indices closed the gap from 11/4 before bouncing). Today should do the trick and then we are back looking at 11000 support – note the 40 day is 11035 and the 50 day 11920 and we know what has happened on selloffs when they are close together…the 200 day is major support at 10570 and slowly rising. Note that Kellogg (K) disappointed on rising commodities input costs that could not be passed along and on yesterday, Campbell Soup (CPB) disappointed on lower earnings due to a failure to discount their products enough. It was at $37 on the rally and closed at $34.50 yesterday after gapping down 50 cents on the open, while Kellogg managed to recover a bit after sliding for the prior seven days. K’s dividend is 3.3% and CPB’s is 3.2%...even those couldn’t save them!

Meanwhile volume chugs along at about 1 billion shares…sans the breakout on 11/4 which will be negated today…or about 150-200 million below average. Were it not for flash trading we wouldn’t have a market…this is not to say that flash trading adds liquidity on a false sense of liquidity…and that is what TB and the others are worried about. Look what we are trading off: China, Europe, QE2, last quarters earnings, you name it…anything except top down economic fundamentals…or the dollar! We have to be the stupidest people on the planet…and that is why TB believes…firmly…that we will have another financial crisis within five years…and more likely three…because we aren’t doing a thing about the underlying problem: too much debt…public, private, AND personal! Companies continue to hire temp workers or outsource, raise benefit costs to employees (even as their own are NOT rising), and hand out meaningless pay raises of 3% or so…except to their ruling class….what a joke!

So if you like growth stocks….have at them…but not with TB’s money!

. . . - - - . . . . . . - - - . . . (S.O.S.)

What more is there to say? Oh…have a nice day!

TB

Trader Bill thinks it is clear to anyone reading these missives that they are merely commentaries...as he sees it...and do not necessarily reflect the views of anyone other than his own. Information is gathered from sources he has found reliable, but no guarantees of accuracy are implied. These are merely observations of events in the marketplace offering in an attempt to offer a non-mainstream viewpoint. Copyright TBD Capital LLC, November 12, 2010.

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