MarketVVizard's Market Thoughts

Top 800. Jan 14, 2004 1:46 PM

» MarketVVizard - INTC

Anything could happen before tomorrow morning but the SOX is getting hammered after hours on the INTC news (news which at a glance looks quite good). Internets also taking a hit on the Yhoo report.

Maybe I'm just nuts, but I haven't felt so confident about shorting in over a year. Complacency is at all time highs. Put/Call has been surprisingly bearish even on market dips. SOX has been under performing and was negative all day today including at the close when everything else was up. Everything looks incredibly toppy. Gold finally started a pullback today as the dollar recovered (signals in a shift of assets and possible shift in psychology). I don't know if selling the news will become a trend or not, but selling "good" news certainly won't do much for investor confidence.

-- posted by MarketVVizard

Top 801. Jan 14, 2004 2:36 PM

» Kirk - Re: INTC

In response to message posted by MarketVVizard:

I think we've seen quite a bit of news selling the past month. Often stock go one way in after hrs then reverse the next day. So far, I haven't noticed any trend... but I did take some profits out again today. (minor but sells none the less... )

-- posted by Kirk

Top 802. Jan 14, 2004 8:39 PM

» azxcvbnm - Re: INTC

In response to message posted by MarketVVizard:

I think it's still too dangerous to short right now. The news continues to be fairly good, so there's no telling when the market will top. With bond yields so low, even the meager 1.5% dividend yield on the S&P500 looks decent. I believe there will be better opportunities to short when the news becomes more negative, as stocks don't drop all in one day.

-- posted by azxcvbnm

Top 803. Jan 15, 2004 8:11 AM

» MarketVVizard - Re: Re: INTC

In response to message posted by azxcvbnm:

"I think it's still too dangerous to short right now. The news continues to be fairly good, so there's no telling when the market will top."

Always hard to call a top when you're AT the top. Most avoid doing this to keep from looking stupid. But I never let "looking stupid" prevent me from doing or saying something I believe. Investing is all about making money, and it doesn't matter much what your predictions are as long as you are making money. And you don't know you're right until you bet.

Gold continues its sell off, now down over $15 from its highs and staring at $400 as the dollar reverses its freefall. The winds of change are in the air.

Will all this last for just a couple days or less? Who knows. I'm adding stops to my shorts that guarantee profits, but hoping I can hold for a long time and ride out the next wave down. If the indexes are green by end of day today, or put/call goes above 1, it would be a pretty good indicator we are not ready to seriously roll over yet. That said, I fully expect the market to begin rolling over WHILE "the news is good". If you wait until the news is bad, you will miss a lot of the move. Of course flip side is that you would be much safer, not losing money on bad calls.

-- posted by MarketVVizard

Top 804. Jan 15, 2004 8:28 AM

» MarketVVizard - Food for thought -- Trade, pricing, jobs, inflation

A Trade Miracle: Volumes Shift, Prices Don't

by Caroline Baum
Jan. 15 (Bloomberg) -- The last thing we need is the designation of another ``New Era'' to characterize every new phenomenon that comes down the pike.

That said, we need some way to explain the improvement in the U.S. trade balance with the rest of the world in the last two quarters without the usual shift in relative prices.

``It's a virgin birth,'' says Bob Barbera, chief economist at ITG/Hoenig in Rye Brook, New York.

In the old model, a decline in the value of the currency leads to a change in the relative prices of goods. Consumers substitute domestic goods for imports; exports became more attractive.

The improvement in the trade deficit doesn't come right away, however. The increased price of imports (the currency buys less) initially overwhelms the shift in preferences: from imports to domestic goods at home; from domestic goods to imports abroad. The phenomenon, graphed, looks like the letter ``J;'' hence, in economists' terms, ``the J-curve effect.''

Eventually the volume of imports declines enough to improve the trade balance.

This time around, a big decline in the U.S. dollar -- the trade- weighted dollar fell about 16 percent last year -- has had no effect on the price of core consumer goods and only a negligible effect on import prices.

Volume Shifts

In other words, ``the shift in exports and imports has come about without a shift in relative prices,'' Barbera says. ``It's not supposed to happen that way.''

Not supposed to, but seems to, nonetheless.

Barbera has a hypothesis -- ``more like a kernel of an idea,'' he says -- as to why.

The old model ``assumes companies are domiciled in countries,'' he says. ``Now we have multinational companies. A big swing in the currency leads to a big swing in relative unit labor costs.''

Instead of a shift in prices, what's shifting is where things are produced.

For example, with the 17 percent decline in the dollar versus the euro in 2003, it makes more sense for BMW to produce cars in South Carolina than in Munich. Even though BMW is has its headquarters in Germany, its U.S.-produced cars sold in France are counted as U.S. exports.

Now, BMW may not produce identical models here and there. And producers generally need to see ``wrenching shifts'' before they move production from one locale to another, especially if it entails a capital investment, says Joe Carson, head of global economic research at Alliance Capital Management.

Export Surge

Still, in an environment where industrialized nations are struggling to compete with the developing world and its cheap labor, companies may be quicker to capitalize on shifts in their costs.

U.S. exports rose 2.9 percent in November to a three-year high, and while imports fell 0.8 percent. Together, they shaved the trade deficit by 8.6 percent to a 14-month low of $38 billion. While December could show a nasty reversal, it appears trade won't subtract from fourth-quarter growth, prompting economists to mark up their GDP forecasts roughly to 5 percent from 4 percent.

Total exports soared at a 35 percent annualized rate in the three months ended November as the dollar's deterioration accelerated.

In the 12 months ended November, exports rose 9.3 percent while imports gained 5.8 percent.

U.S. goods exports to China set a monthly record of $3.3 billion in November. For the year ended November, U.S. goods exports to China soared 53.8 percent, more than four times the increase in Chinese imports.

Import Response

The politicians may have to change their story: about China stealing our manufacturing jobs (China's losing manufacturing jobs -- to productivity); about the loss of U.S. export competitiveness; about the need to impose trade sanctions to ameliorate it.

More curious than the sharp jump in exports is the tepid growth of imports in light of booming second-half U.S. economic growth. The high-income elasticity of imports -- when we grow a lot, we import a lot -- would have suggested a surge in imports. Instead, total imports rose an annualized 18.5 percent in the three months ended November, about half the pace of export growth.

The Institute for Supply Management's monthly survey has been hinting at increased export demand. The ISM new export order index rose to a 14-year high of 60.4 in December, suggesting further export growth.

More to Come

``It's reasonable to assume that export orders haven't fully responded to the drop in the dollar,'' says Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York.

Gross exports (not net exports) could be ``the single largest contributor to growth this year, a result of the dollar coming off and the dollar liquidity coming back as a stronger world economy,'' says Neal Soss, chief economist at Credit Suisse First Boston.

Soss is less sanguine about the overall trade balance and expects a resumption of imports to widen the deficit and subtract modestly from 2004 growth.

New Era or Error?

The negligible pass-through to date of the dollar decline to prices notwithstanding, Shepherdson thinks it ultimately will contribute to more inflation than the Federal Reserve thinks. In a Jan. 4 speech to the American Economics Association annual meeting in San Diego, Fed Governor Ben Bernanke said that ``a 10 percent decline in the broad value of the dollar would be expected to add between one and three tenths to the level of core consumer prices (not the inflation rate), spread out over a period of time.''

The trade-weighted dollar index has fallen about 26 percent in nominal terms and 12 percent in inflation-adjusted terms since its high in January 2002.

If Barbera is correct in the ability of the trade balance to adjust without a change in relative prices, the economics textbooks will have to be updated.

If he's wrong, then it won't be the first new era to become an old error.

-- posted by MarketVVizard

Top 805. Jan 15, 2004 9:39 AM

» Normxxx - Re: Re: Pensions Again

In response to message posted by Normxxx:

For example, the current rush is to move all future cost increases of medical care to the pensioners. Eventually, all companies will just eliminate medical coverage for current and already pensioned employees

Are Expectations Too High? full text
by Chad Hudson | January 15, 2004

One news story that probably got lost with everyone focused on earnings was a study conducted by the Henry J. Kaiser Family Foundation and Hewitt Associates. According the study retirees will be left shouldering much of the increase in healthcare costs. Ten percent of respondents said they terminated benefits for future retirees last year and one in five companies may eliminate it in the next three years. Additionally, 71% said they passed a larger share of the premium to retirees and 86% anticipated doing it over the next three years. Not only have the costs increased, but a lot of companies face a huge under-funded plan. While under-funded pensions have garnered attention, post-retirement benefits have not attracted the same attention from analysts. In many cases the funding gap for these benefits outweigh those of the pension. At the end of 2002, General Motors' pension was under funded by $19.3 billion. The company made front page news by issuing debt to fund the obligation. However, its health benefits plan was under-funded by $51.4 billion. Its obligations were $57.2 billion with assets of only $5.8 billion.

-- posted by Normxxx

http://www.suite101.com/discussion.cfm/i...

Top 806. Jan 15, 2004 9:47 AM

» Normxxx - Re: Food for thought -- Trade, pricing, jobs, inflation

In response to message posted by MarketVVizard:

For an alternative explanation, see:

-- posted by Normxxx

Top 807. Jan 15, 2004 9:53 AM

» Normxxx - Re: Re: Re: INTC

In response to message posted by MarketVVizard:

I'm betting on several weeks for the Gold - $US turnaround. But the stock market has faked me out, while I will not bet on it moving higher, I will not bet on it going lower. I'll just adhere to that old bit of wisdom, "When in doubt-- stay out!" (Although I have a toe in the water short from last Friday.)

-- posted by Normxxx

Top 808. Jan 15, 2004 10:49 AM

» azxcvbnm - Re: Re: Re: Re: INTC

In response to message posted by Normxxx:

MarketWiz, I thought Gold's decline and the rise in the dollar were possitive news for the stock market. Gold's selloff means the money is probably headed to bonds or stocks, and a stronger dollar will encourage foreign investment in our stock market. Am I wrong?

-- posted by azxcvbnm