Posts Tagged “ECB”

These Four Lessons Mean
Everything Today

4 | By Shah Gilani

Talk about information overload…

There’s so much news and data, so many opinions about events and data points, so many financial publications, so many shows, so many stocks, mutual funds, ETFs, futures, options, derivatives, so many opposing points of views about everything, it’s enough to make your head explode and your investing comfort level implode.

Most people tend towards like-minded analysts and economic analysis that confirms what they’re seeing and thinking. There’s a kind of comfort zone there, where “We’re in this together and if we’re wrong, well, I wasn’t alone; but if we’re right, boy am I smart.”

Then there are the “skittish” investors who think they know what they’re doing – that is, until they hear a different opinion from someone, anyone, they think has a leg up on them. And what do they do then? They usually ask, “Really?” Meaning, “Do you know something I don’t know?” Chances are, at that point, they are going to panic.

And, of course, there are those investors who know they are right, and stick by their convictions and positions all the way to, well, you know where.

Maybe you’ve been there.

I was there myself when I started trading professionally on the floor of the Chicago Board of Options Exchange in 1982.

But I quickly distanced myself from all the noise that distracted me from being a successful trader.

There is no magic bullet to being a successful investor; that’s the bad news. The good news is that it’s a lot simpler that everyone makes it out to be.

Here are the four most important trading lessons I have learned.

Sandbags and Santa Claus

0 | By Shah Gilani

Dear Reader,

Far from having my holiday spirits uplifted, I’m increasingly glum (about the markets, but not about life, liberty, and the pursuit of happiness) on account of the lack of any good cheer coming out of…well, anywhere.

Take Europe, for example. You know, Europe, as in the European Union. As in that region of the world that has always gotten along, happily sharing each other’s cultures, cuisines, and shrapnel wounds from their exploding sovereign debts, courtesy of a common currency that affords cheap financing for budget bludgeoning.

There’s no good cheer over there.

Didn’t anybody hear Christine Lagarde (formerly one Europe’s own when she was running finances for France, but now runs around with whips and chains as the high-heeled dominatrix of the IMF)? Last week she said that if we don’t all work together our situation will be similar to the 1930s.

She wasn’t just talking to the Europeans. She was warning world leaders and central bankers.

Good thing Fed Chairman Ben Bernanke got the message. He told lawmakers last week that they have “no further plans to aid European banks.”

So much for holiday spirit.

But, I think the Beard is just too modest; he wants to be a secret Santa.

In fact, there’s really a lot of gift-giving going on over in Europe. If you look closely you’ll see that stockings and sacks are being filled, and the Fed was the first to contribute.

But (frighteningly, if not ominously), if you look closer you’ll see those stockings and sacks aren’t being filled with presents, they’re being filled with sand. They’re sandbags.

Sandbags? Yes, sandbags, as in the last ditch effort to save towns from catastrophic flooding when the big dam breaks.

Click here to find out why European leaders are preparing for catastrophe…

Those “New” E.U. Fiscal Rules Aren’t So New

2 | By Shah Gilani

Very soon we will see if the old market adage “Buy the rumor, sell the news” is true.

While rumors of Europe’s impending demise were momentarily shot down by an array of silver bullets, the actual news out of Brussels of a grand bargain wasn’t… exactly… honest.

Let’s call the half-measures agreed to by European leaders “Brussels sprouts,” because they’re more like “green shoots” than a cabbage patch panacea.

The leaders agreed to agree that they needed an agreement on how to more closely integrate their fiscal and monetary interests.

Yeah, that’s what they said. I say good luck with that.

Actually, they made some other moves, too.

Find out what else these European “leaders” did…

A Rally and a Reality Check (or Two)

2 | By Shah Gilani

“Rudolph with your nose so bright, won’t you guide my sleigh tonight…”

Thank goodness there’s a light out there somewhere, so we can see what’s coming.

And judging by last week’s market action, guess what?

Santa Claus is coming to town!

Ho, ho, ho, what a rally. The Dow Jones Industrials rose 787.64 points, a 7.01% jump, making it the venerable benchmark’s second-best weekly up-move ever! The S&P 500 rocketed up 7.39%. The Nasdaq Composite shot up 7.59%.

But the real winner was the broader market, encompassing the less muscular household names ensconced in the Russell 2000; it rose a whopping 10.34%.

Speaking of the 10% gainers club, guess who else got their tickets punched on this sleigh ride? Not surprisingly (considering a little thing called “short-covering”), Italy was up 10.4%, Spain was up 10.24%. France was up 10.78%, and Germany was up 10.7%.

The week before last, not one single stock market in the world advanced by even a hair. Last week, every single key stock market in the world rose – and very impressively.

Oh, wait a minute. There was one little country that actually fell almost 1%. Good thing they’re not on anybody’s radar and don’t matter much. Who was it, you ask?

China.

Ho ho… uh-oh!

Too Little, Too Late (and a Jab at the Oracle)

1 | By Shah Gilani

Dear Reader,

In yet another sign that markets are broken, yesterday’s huge market advance came on the heels of two presumably separate (yeah, right) central bank moves.

Both were designed to add liquidity and support to shaky and dangerously deteriorating markets.

(That was good news?)

First, China lowered the reserve ratio its banks have to hold against loans they make. They didn’t do that because things over there are rosy. They did it because the property market is teetering and financing has been drying up.

Full story here…

Honesty is the Best Policy…

4 | By Shah Gilani

“Can I be honest with you?”

I hate it when people ask me that. As if I’m going to respond, “No, lie to me.”

But the truth is, it’s usually a preface that suggests we’re not going to want to hear what we’re about to be told.

So… can I be honest with you?

I have no idea what’s going to happen in stock markets or bond markets this week.

We are at a critical juncture for both stocks and bonds, and this week might be huge.

More truth after the break…

The Canary in the Coalmine, and Why JPMorgan’s Hands Are Filthy

0 | By Shah Gilani

What a fun day that was yesterday.

No, I’m not talking about Jefferson County, Alabama, filing for bankruptcy… that’s not fun or funny, as you’ll come to learn shortly.

I’m talking about global stock markets and bond markets.

Wow, what fun! Can you imagine being short stocks and having one heck of a day yesterday? I can.

Can you have imagined that Italy’s interest rates would have soared the way they did? I can. And you could too, if you read what I wrote on Monday about how the CDS market was broken and what that would do to Italian bond rates.

Look, I’m not the kind of guy to say I told you so, but if I was, I’d sure be saying it now.

Italy is the canary in the coalmine – not Greece. (FYI, they used to keep a canary in every coalmine, because if it died, that meant poisonous gases that humans couldn’t smell were present.)

If Italy implodes, either by its bond yields exploding, its economy sinking, or its fiscal house burning, all of Europe is going down. And America will surely follow.

While you were sleeping this morning, Italy had to offer 6.087% interest on the one-year bills it floated. That compares to the 3.57% it paid just last October 11. What smells is that Greece just floated some bills at 4.90%.

In other words, the canary (Italy, in case I lost you) is starting to teeter on its perch.

It has another €28 billion to roll over by the end of 2011, and how much it will have to offer investors to buy its paper is anybody’s guess.

There’s only one guessing game that matters in Europe right now. That is whether or not the ECB will step up and promise – à la the U.S. Federal Reserve Bank – to be lender of first and last (and in-between) resort.

The ECB has to do something bold. And it probably will.

If it does, the next guess will be, where will its backing and credibility to backstop all of Europe come from?

Will it come from the same teetering nations that’s its going to have to support? Good luck with that. Or will it come from the backing of the IMF, with a ton more commitments from the U.S. and other G20 countries? Good luck with that.

We’re going to get a relief pop this morning in the stock market. Good luck with that, too.

Until Europe is figured out – and it won’t be any time soon – stay short with tight stops, just in case there is a Santa Claus coming to a chimney near you.

Oh, and by the way, if Italy starts singing again, watch Spain, then France, they are the next canaries we’ll have to watch in the coal pit we call the European Union.

Full story here…

A Brave New (Broken) World

1 | By Shah Gilani

I said it the other day, and I’ll say it again.

The markets are broken.

It’s not that they’re not functioning on a daily basis, pricing risk and assets and performing their price discovery duties. They are doing that – or at least trying to.

Those are the little, daily things that markets do, and there are things there that are broken. (I’ll get to those things another time.) Think of those little things as the “hows” or the “mechanics” of buying and selling.

Think of the big things as the “whys” or the “psychology of investing.”

Those are the things that are broken.

Until they are fixed, or “things” change, drastically, we are in for some really wild swings in the months, quarters, and years ahead.

I’m going to point out all of these big things to you, over time. But today I’m going to point to just two.


Starting now…

What’s Challenging Democracy Today

0 | By Shah Gilani

A referendum? In Greece? Are you kidding me?

As my 16-year-old nephew Nathaniel says, “What the…?

Apparently, that’s a popular statement of surprise in his southern California surf town. The first time he said it, I was flabbergasted, thinking he was going to finish that well-worn exclamation with a bad word. But it works better his way…

What isn’t going to work is George Papandreou’s call for a referendum.

He wants the Greek people to decide if they want to tighten their belts so much that they’re willing to starve themselves to death for the sake of paying back the IMF and their European neighbors.

Why his move hurts everyone…

Trick or Treat?

0 | By Shah Gilani

For the past five weeks, it’s been treat after treat for bullish investors.

The “trick” will be seeing if it can last…

How sweet has it been?

The Dow rose 1,459.63 points in five weeks to end Friday at 12,231.11. The Industrials rose 3.6% last week alone. They’re up 14% in that short run, and we’re now up 5.7% on the year. The S&P 500 is also up 14% over the same timeframe, and the Nasdaq has been following dutifully.

The candy being held out has been the hoped-for resolution to all of Europe’s problems. Every little sign of forward movement burned the short tails of greedy bears hoping for a sovereign default and raging contagion.

On top of progress across the pond, earnings here at home have been another treat. Of the more than 300 companies in the S&P 500 that have reported third-quarter numbers, 71% beat analyst expectations.

The trick now will be seeing if it can last…