Thoughts on the End Game

John Mauldin, 23 Jan 2010

When I was at Rice University, so many decades ago, I played a lot of bridge. I was only mediocre, but enjoyed it. We had a professor, Dr. Culbertson, who was a bridge Life Master at an early age. He was single and lived in our college, playing bridge with us almost every night. He was a master of the “end game.” He had an uncanny ability to seemingly force his opponents into no-win situations, understanding where the cards had to lie and taking advantage.

Traveling to London and on into Europe, I have some time to think away from the tyranny of the computer. Over the last year, and especially the last few months, I have written in depth about the problems we face all across the developed world. We have no good choices left, so making the correct unpleasant choice is now our most hopeful option.

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Contrarianism is the New Consensus

By Paul Kedrosky

It rarely pays to be contrarian. For the most part trends go in the same direction for some time – that’s why they’re called “trends”.  Whether it’s real estate prices, credit card debt, Treasury issuance, or Croc sales, they can continue along implausibly for far longer than you might think, sane and right-thinking and sober-minded sort that you are.

But contrarianism can work sometimes. When? At inflection points, mostly, when the trend is exhausted and can do nothing but reverse. It can then pay immensely (c.f., John Paulson) to take the other side of a cemented consensus. The trouble is, it’s just about impossible to pick such inflection points – lots of people went short residential real estate well in advance of Paulson, only to lose oodles of money.

Given this, why is contrarianism so appealing? It is appealing – and growing immensely in popularity – because it has so much smart-guy frisson. This naive contrarianism lets you pose outside the system, meanwhile keeping good company like Warren Buffett, John Paulson, the Freakonomics fellows, and oodles of self-declared fellow travelers, most of whom almost certainly aren’t doing what they say they are.

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Don’t Just Watch the Parade Go By

By Arne Alsin
RealMoney.com Contributor

11/9/2009 11:30 AM EST

Count on it. For the next several years, the stock market belongs to the bulls. You’re going to see periodic pullbacks, to be sure, but they’ll be minor, transitory affairs, just enough to keep sideline money out of the market for as long as possible. 

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Kass: Market Has Likely Topped

By Doug Kass
RealMoney Silver Contributor
8/26/2009 8:41 AM EDT

URL: http://www.thestreet.com/p/rmoney/marketcommentary/10590587.html

This blog post originally appeared on RealMoney Silver on Aug. 26 at 8:11 a.m. EDT.

Back in early March, there were signs of a second derivative U.S. economic recovery, the PMI in China had recorded two consecutive months of advances, domestic retail sales had stabilized, housing affordability was hitting multi-decade highs (with the cost of home ownership vs. renting returning back to 2000 levels), valuations were stretched to the downside and sentiment was negative to the extreme. These factors were ignored, however, and the S&P 500 sank to below 700.

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The Greenback Effect

Source: New York Times, 18 Aug 2009

By WARREN E. BUFFETT, Omaha

IN nature, every action has consequences, a phenomenon called the butterfly effect. These consequences, moreover, are not necessarily proportional. For example, doubling the carbon dioxide we belch into the atmosphere may far more than double the subsequent problems for society. Realizing this, the world properly worries about greenhouse emissions.

The butterfly effect reaches into the financial world as well. Here, the United States is spewing a potentially damaging substance into our economy — greenback emissions.

To be sure, we’ve been doing this for a reason I resoundingly applaud. Last fall, our financial system stood on the brink of a collapse that threatened a depression. The crisis required our government to display wisdom, courage and decisiveness. Fortunately, the Federal Reserve and key economic officials in both the Bush and Obama administrations responded more than ably to the need.

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The Great Reflation Experiment

(Source)

By John Mauldin, 31 July 2009

The question we have been focused on for some time now is whether we end up with inflation, or deflation, and what that endgame looks like. It is one of the most important questions an investor must ask today, and getting the answer right is critical. This week, we have a guest writer who takes on the topic of the great experiment the Fed is now waging, which he calls The Great Reflation Experiment.

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Gold Market Update

(Source)

Gold broke down and went into decline, as predicted in the last update posted early this month. At that time our maximum downside target was the strong support in the $880 area, but now there are strong signs that the decline has either run its course, or is close to having done so, and that a breakout to new highs may be close at hand.

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Gold Market Update by Clive Maund

Source: Clive Maund, 08 June 2009

Gold did embark on a new intermediate uptrend as predicted in the last Gold Market update posted towards the end of April, however, the uptrend was not as strong as expected and it failed to break out to new dollar highs and is now starting to weaken again without mounting a serious challenge of the highs first. This is bearish for the short to medium-term.

On the 6-month chart we can see the modest uptrend in force from the start of May and how it took the price up towards $1,000 again, resulting in a gain of about $100. Last week it showed signs of serious technical deterioration as it buckled beneath the resistance approaching $1,000. This was hardly surprising given that the oversold dollar bounced strongly from important support, a reversal that projects a dollar rally to higher levels. So far gold’s intermediate uptrend has not been violated, but the double “bearish engulfing pattern ” that showed up on the chart during last week does suggest that a breakdown is pending, that will be followed by a significant reaction, although the fast neutralizing RSI indicator does suggest that this breakdown will probably be preceded by a brief bounce early this week. How far will a reaction carry? – it is expected to take gold back towards, but not necessarily right down to the support zone shown on the chart in the $880 area.

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The Correction Is Here

The Correction Is Here
By Helene Meisler
RealMoney.com Contributor

5/14/2009 5:02 AM EDT

URL: http://www.thestreet.com/p/rmoney/technicalanalysis/10500926.html

First of all it looks like we found a new indicator that few, if any, use. I’m talking about the put/call ratio of the CBOE Volatility Index, or VIX, that we discussed here Tuesday. It is now four for four in its calls for the past 15 months. Let’s hope no one else gloms on to this indicator so we can continue to find it useful. But the big “news” is, as I posted in Columnist Conversation Wednesday, is that the indicators finally rolled over. We’ve discussed the McClellan Summation Index enough this week so I won’t harp on it again. Let’s just say that Nasdaq’s definitely ticked down more and it will now take quite a rally to turn it back up. The New York Stock Exchange only ticked down for the first time Wednesday.

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Nazz Clings to Bottom of Channel

Nazz Clings to Bottom of Channel
By Helene Meisler
RealMoney.com Contributor

5/13/2009 5:07 AM EDT

URL: http://www.thestreet.com/p/rmoney/technicalanalysis/10500283.html

Red, green, red, green, red, green. No, I’m not playing a children’s game. That’s how the market has traded for the past six trading days; alternate days of up and down. On May 4, we were at 907 on the S&P 500 and as of Tuesday we stand at 908. Yet wasn’t it last week that everyone decided the market can’t go down? Was Tuesday a decline or was it a rally? Or was it a saving of the market? Whatever it was, the statistics weren’t great. But they weren’t awful either. The only minor changes were that the market’s breadth didn’t turn positive the way it usually has, and that the Russell 2000, after beginning the week at the top of its channel, is now awfully close to the bottom of the channel.

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Eyeing Correction, But Market Keeps Rallying

Eyeing Correction, But Market Keeps Rallying
By Helene Meisler
RealMoney.com Contributor

5/12/2009 5:07 AM EDT

URL: http://www.thestreet.com/p/rmoney/technicalanalysis/10499666.html

I keep looking at the screen and seeing the S&P 500 down 19.99 and I can’t help but think it looks like a price tag and the bulls will think the market has gone on sale! Isn’t it amazing that what was down last week managed a (weak) rally Monday and what was strong managed to give up its gains? But all the attempts on the upside in Nasdaq didn’t help the Semiconductor index, or SOX , recapture that uptrend line. And the ratio of the SOX to the Nasdaq also stayed down. For the past three weeks I have been discussing a correction in the market. And it not only hasn’t happened, the market has rallied. I keep waiting for the indicators to roll over but they don’t. They come “this” close and then we rally again and they get saved.

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Biotechs, Semis Sit This One Out

Biotechs, Semis Sit This One Out
By Helene Meisler
RealMoney.com Contributor

5/11/2009 5:14 AM EDT

URL: http://www.thestreet.com/p/rmoney/technicalanalysis/10499071.html

Isn’t the market perverse? Just one week ago technology was good and grand and everyone was so worried about the banks and the financials and they swore up and down that there was no way the financials could lead us out of this. But now look who is taking charge. And look what has happened to the poor old semiconductors. They’ve fallen by the wayside, left to fall nearly 10% this past week without a word spoken. And for the truly bullish folks it’s now as though they don’t exist. Only the banks do. The semis relative to Nasdaq did in fact break that uptrend line I showed the past week. The Semiconductor Index, or SOX, depending on how thick your pencil is, might have broken its uptrend line or could be still sitting right there at it. And wouldn’t it be just like the market, now that the financials are so swell, to rally the semis and sell the financials off? The ratio of the SOX to Nasdaq was the only real change I saw in any of the indicators on Friday. The McClellan Summation Index for Nasdaq is still just stopped. It hasn’t yet rolled over and Friday’s action didn’t send it back up. So it remains at a critical point.

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Semis, Nasdaq at Critical Point

Semis, Nasdaq at Critical Point
By Helene Meisler
RealMoney.com Contributor

5/8/2009 5:07 AM EDT

URL: http://www.thestreet.com/p/rmoney/technicalanalysis/10498390.html

It’s time for yet another channel check. This time it’s because Nasdaq has managed to fall right down to the bottom of its channel. That was quick! And now it becomes critical. Not just because Nasdaq needs to bounce if the uptrend is alive and well (we know where I stand on that), but because for the first time since the lows the Nasdaq McClellan Summation Index stopped going up. One more down day and it will roll over. Keep in mind I have stated several times that unless and until the indicators roll over and we break that lower channel line we can’t officially call an end to this rally. So the big test now is in the next few days.

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Kass: Rally Through Summer?

(Source)

Doug Kass

03/18/09 – 12:25 PM EDT

This blog post originally appeared on RealMoney Silver on March 18 at 7:36 a.m. EDT.

From my perch, the American International Group (AIG QuoteCramer on AIGStock Picks) bonus outcry and today’s House Capital Markets Subcommittee hearings are simply a sideshow to the main event — namely that we have likely seen a significant and maybe even a generational low in the U.S. stock market.

How to seek alpha in a bull market was the message I tried to communicate on CNBC’s “The Kudlow Report” last night.

I continue to view the March 5 low as the “Nouriel Roubini stock market bottom,” the day the grizzly NYU Professor pronounced a 600 or lower S&P 500 price objective during his worldwide lecture tour.

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Kass: Pushing the Pause Button

(Source)

By Doug Kass
RealMoney Silver Contributor

3/27/2009 12:02 PM EDT

URL: http://www.thestreet.com/p/newsanalysis/investing/10478509.html

This blog post originally appeared on RealMoney Silver on March 27 at 8:29 a.m. EDT.


In “It Ain’t Heavy, It’s a Bottom,” I outlined a variant view that the U.S. stock market was not only making a yearly low but, quite possibly, a generational low. Today it might be difficult to remember the degree of pessimism that existed during those dreary early days of March as the S&P 500 hit 666 on the very day of my bottom forecast, which I openly declared on “The Kudlow Report.” Also in “It Ain’t Heavy, It’s a Bottom,” I coupled my investment rationale (the mosaic of fundamentals, valuation and sentiment) with what I saw as some solid parallels between 2008-2009 and the 1937-1939 interim interval. That led me to a specific forecast for the S&P, which was presented in the SPDRs (SPY) chart below.

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Kass: It Ain’t Heavy, It’s a Bottom

(Source)

Doug Kass

03/16/09 – 09:31 AM EDT

Join Jim Cramer, Doug Kass, Helene Meisler and other RealMoney pros at TheStreet.com Investment Conference on “Best Ideas to Make Real Money.” Save the date: Saturday, May 2! More details here.


This blog post originally appeared on RealMoney Silver on March 16 at 8:28 a.m. EDT.

Today’s column is ambitious and some might think reckless in its objective of introducing an optimistic market forecast and the logic behind my S&P 500 — and SPDRs (SPY QuoteCramer on SPYStock Picks) — price targets.

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Kass: Printing an Important Market Bottom

Doug Kass

03/11/09 – 11:59 AM EDT

This blog post originally appeared on RealMoney Silver on March 11 at 7:06 a.m. EDT.

Last night I not only re-emphasized my 2009 market bottom call on “The Kudlow Report,” I also suggested the possibility that a generational low is being put in place.

Yes, I said that.

Here is the tape.

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Angry Bernanke denounces AIG

ST link

WASHINGTON: Federal Reserve chairman Ben Bernanke said troubled insurer American International Group (AIG) operated like a hedge fund and having to rescue the company made him ‘more angry’ than any other episode during the financial crisis.

He made the comments in response to a question from Senator Ron Wyden at the Senate Budget Committee hearing yesterday.

‘If there is a single episode in this entire 18 months that has made me more angry, I can’t think of one other than AIG,’ Mr Bernanke said.

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FOMC Statement for 28 Jan 2009

Release Date: January 28, 2009

For immediate release

The Federal Open Market Committee decided today to keep its target range for the federal funds rate at 0 to 1/4 percent. The Committee continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.

Information received since the Committee met in December suggests that the economy has weakened further. Industrial production, housing starts, and employment have continued to decline steeply, as consumers and businesses have cut back spending. Furthermore, global demand appears to be slowing significantly. Conditions in some financial markets have improved, in part reflecting government efforts to provide liquidity and strengthen financial institutions; nevertheless, credit conditions for households and firms remain extremely tight. The Committee anticipates that a gradual recovery in economic activity will begin later this year, but the downside risks to that outlook are significant.

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