Archive for March, 2012

The Banks Win, Again

41 | By Shah Gilani

Finally, some well-deserved help for beleaguered monster banks is on its way.

Make that, well on its way.

Those poor big banks accidently and inadvertently got caught up making so many easy loans to deserving, hard-up borrowers, who wanted to buy overpriced dream homes, and a few million other folks who deserved two homes and McMansions to keep up with the Joneses (you know the Joneses… most of them were “friends of Angelo”).

But now, at last, the banks are making profits again.

After suffering the indignity of insolvency and near collapse for all their hard work, the New Samaritans are still being haunted by their generosity, as regulators hound them into settlement submission, merely for doing God’s work.

So, what’s the good news?

When Fools Rush In

32 | By Shah Gilani

Is Goldman Sachs playing us all for Muppets when they say stocks now present a generational buying opportunity?

The investment bank’s 40-page bullish report, titled “The Long Good Buy: The Case of Equities,” says to forget the huge run-up since 2009, forget the 25% rise in equities over the last five-and-a-half months, and forget bonds. This party is just getting started.

Are they right? Yes, they are. Should you heed their advice and sell your bonds and load up the truck with equities? Hell no.

Goldman’s report is like me forecasting increasing dark towards evening. It’s too obvious. Of course stocks are a better buy than bonds in the long run when bond yields are so low.

But there’s this little problem of timing that they don’t address.

So Far, Not So Good

25 | By Shah Gilani

So far it’s been a sloppy and weak-looking week for stocks, and I’m talking globally. And the futures this morning (as I write this at 8:00 am EST) are pointing to further weakening.

What’s happening?

Some of this morning’s weakness in U.S. futures is a reflection of the clouding over of Europe’s growth prospects. (Don’t tell me you actually thought we had “de-coupled” from Europe’s influence on us or the world…?)

Stocks are down across the board in Europe, because manufacturing on the Continent has been slowing. The latest reading of the European Union’s PMI came in at 48.7. Fifty (50) is the line in the sand – anything below that points to a contraction.

The bottom line for Europe is that huge fiscal debts are being attacked by means of brutal austerity. As if that isn’t going to suppress growth at exactly the time when consumption and production growth are most desperately needed!

Oh, it’s happening.

Make or Break Time

41 | By Shah Gilani

If you missed the stock market rally last week because you were home alone, don’t feel bad. The truth is you’re not alone.

What rally you ask? Oh, that would be the one that most investors missed. I’m not talking about the rally last week. I’m talking about the rally that started last October.

Wait, let’s be honest, let’s go further back. Most investors have missed the rally that started in March 2009.

Now, step onto your front lawn and you’ll see most of your neighbors on their lawns too.

They’re all looking skyward, which means you will too.

What is it? Is the sky falling?

Stress Tests and the All-Clear-to-Rally Signal

23 | By Shah Gilani

On Sunday I repeated that I’ve been cautiously bullish (too cautious, I also said) since October. I also told you I was optimistic that all the major indexes would break through the important psychological, headline, and large-round-number resistance levels they started flirting with two weeks ago.

Boy, was that an understatement.

On Tuesday, markets blew the lid off of any impediments in their way.

In fact, the price action was so fast and furious you’d have thought the Federal Reserve said something about keeping interest rates low, or maybe that some good news about bank stress tests had leaked out.

And to think, only one week earlier, markets had a steep fall from grace on account of Fed Chairman Ben Bernanke not saying anything about another round of quantitative easing.

What a difference a week makes.

In case you missed the psychology of the market, it went like this…

The Case for Spitting into the Wind
(At Least for Now)

62 | By Shah Gilani

You’ve heard the expression “You don’t spit into the wind,” haven’t you?

Well, it’s true when it comes to trading and investing, too. You keep the wind at your back, and you don’t spit up easy profits by bucking the trend.

That’s all well and good, so long as the wind is coming from a discernible direction. I prefer a warm southwest breeze myself. That’s why I live where I live (in Miami).

But we have no control over the many ill winds that blow over our investing horizons.

The best we can do is be aware of subtle shifts in directional changes, and watch out they don’t strengthen into hurricane force monsters.

I’ve been cautiously (too cautious, I admit) bullish since October, and I remain optimistic that stocks have enough momentum to try and push through important psychological barriers – such as 13,000 on the Dow, 1375 and 1400 on the S&P5 00, and 3000 on Nasdaq.

That doesn’t mean we won’t see a correction first. Or that last Tuesday wasn’t a tiny correction in and of itself.

But 30 years of hardcore trading, and catching every major move in that long time span (no, I hardly ever pick the exact top or bottom, but I have come close) has taught me to go with my gut, to know when I “blink” that it means something.

And lately, I’m starting to “blink” more and more…

Q&A: March 2012

23 | By Shah Gilani

Thanks for flooding my email inbox. I asked for it…

Let’s start off with some comments and questions about U.S. financial regulation:

Q: Was Dodd Frank a feint, or a genuine effort to pass the only bill that Congress could, in light of Republican and Wall Street opposition? ~ Jim

A: It was both. I’d say you’ve got it exactly right and said it better than I could have.

Q: Shah: Isn’t there some way for you to galvanize support on this website for bringing back Glass-Steagall? Some way to put some meaningful legislation on the national agenda in this election year? It would be a wonderful public service if you could pull it off. Please! ~Terrence T.

A: We don’t know until we try, right? It seems impossible, but where there’s a will there’s a way. So, at your urging and with the support of a lot of you smart but fed-up folks who agree we should try, I will do my best to push for the reinstatement of Glass-Steagall. I’ll need your help and comments on upcoming articles on this effort. Thanks in advance.

Click here for more Q&A…

Posted in Q&A

A Flash Crash, Fat Fingers, and Positioning for a Correction

55 | By Shah Gilani

Speculation is running rampant about what really happened last Wednesday morning.

In case you missed it, as Fed Chairman Ben Bernanke was chatting up Congressional clowns that morning, Treasury bond prices collapsed in one minute flat, and gold dropped 3.73% in less than an hour, ending $90 an ounce (or 6%) lower.

Was it a “ghost in the machine” flash crash?

Was it a “fat finger” error?

What happened?