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Random Thoughts


...when the smartest folks in the space wanna sell, it speaks volumes about their thoughts regarding the future.

  • I return from my weekend sojourn to the left coast, book-ended on one side by a six hour tarmac tussle and the other by similar delays on this morning's red-eye, and strap myself into my turret for another week of freaky streaks.

  • I spent some time this weekend with a rather savvy fella who focuses on financial services in general and credit issues in particular. In his words, he's viewing the makings of a perfect storm as he watches spreads pop across the real estate related spectrum (many of which were heretofore immune).

  • As we dined with Coops De Ville yesterday, we (collectively) spoke of the potential for another rally, one that quells fears and buries headlines as the cumulative issues...well, culminate.

  • The issues, as we discussed, are two-fold, with the first concern being "mark to market." As I offered on Friday's Buzz, the problem here isn't necessarily Bear Stearns. They're simply the catalyst. The ones at risk are those holding baskets of CMO's who don't have rich parents.

  • In terms of "the other side of the trade," which could either help or hurt the above bullet, it's worth other hedge funds and private equity firms are eyeing the public space. As my savvy friend opined, these folks are intimately aware that if financing costs continue to uptick, deals are gonna have a much tougher time getting done. We likened it to the Sam Zell EOP sale--when the smartest folks in the space wanna sell, it speaks volumes about their thoughts regarding the future.

  • Speaking of smart folks in the space, The Bank of International Settlements --considered by some to be the world's most prestigious financial body--offered that "something more depressing than a recession" may be in the works. Oh wait, those were my words. But their words were pretty consistent (and please don't shoot the messenger).

  • As far as today's tea leaves, market breadth is 3:2 positive, the piggies are pushing higher (still below the all-important 200-day at 115.40), Blackstone (BX) is off a finski (5% and yes, this is a tell) and, well, the Minx seems to be biding time as traders digest this latest mess.

  • This week's sign that the apocalypse is upon us.

  • Many thanks to my friends who facilitated a very happy 38th birthday. Hanging backstage with Sting before and after his Dodger stadium show has to rank up there as one of the cooler experiences of my 38 years on this earth. I don't take anything for granted anymore and that experience is certainly one of them.

  • Engine room, more supply! With the Fourth of July holiday approaching, underwriters are expected to crank out another $2 billion in offerings this week, according to Trim Tabs.

  • How many fund managers ran CDO pricing models over the weekend?

  • When will those mark-to-markets manifest?

  • Will it take as long as, say, the time between the initial sub-prime blow-ups and the recent revelations that they actually "mattered?"

  • Did you read Professor Succo's vibes on the subject Friday?

  • How bout this one, which was splashed on the front page of today's Wall Street Journal?

  • The VXO (-8%) is back below the sweet sixteen?

  • Are "yes, Jess and Greg" the answers to this tri-fecta?

  • If you believe in " input-output" media models, how can you bet against Yahoo!?

  • Do you have too many positions?

  • Do you see the double top on one side of the S&P (1540) and the ripcord support on the other (S&P 1490)?

  • And finally, some insightful vibes from Professor Jon Markman on this morning's Buzz…

    The next time someone tells you that the mood of the public is too optimistic for the market to advance further, send them a link to the "General Mood of the Country" page over at the Gallup Poll website.

    There you will discover two charts and a table that show, without much doubt, that quite the opposite is true. The public is actually more pessimistic about the future today than at any time since the late summer of 1992.

    Asked last week by polltakers, "
    In general, are you satisfied or dissatisfied with the way things are going in the United States at this time?" 74% of U.S. respondents said they were dissatisfied, while 24% said they were satisfied. That's a negative "spread" of -51 percentage points.

    Now, the funny thing is that stocks typically do best when the mood of Americans is most sour, and worst when Americans are buoyant.

    Just to give you an idea of how that works, in the first week of January 2000, the "General Mood" poll found that 69% of Americans were satisfied and 28% dissatisfied. The Dow Jones Industrials peaked a week later, and didn't crawl back to flat for seven years.

    Despite a plunge in the stock market, the positive satisfied/dissatisfied spread persisted well into the bear market -- including most of 2001 and 2002. The mood only turned decisively negative in March, 2003, just before the start of a massive bull market.

    Americans' mood never really got a lot better during the bull market, except for a few isolated months. But the mood really deteriorated in earnest in October, 2005. The average American was bummed out through the entire strong market of 2006, but the national mood just recently fell off a cliff into total moroseness. A worse public mood has been recorded in only 10 of the past 210 months.

    In the topsy-turvy world of stocks, all this anguish could be a good thing, however. The last time that the negative spread was exactly -51 was September, 1992. The Nasdaq 100 was up 24% five months later.


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