Warning Signs 01 (Oct 08 - Feb 15)

[winston]

Will The Three Trends of 2009 Prevail in 2010?
GaveKal Five Corners

Looking back at the past year, we can conclude that three inter-related trends have dominated financial markets:-
1) an impressive weakness in the US$,
2) a significant rally in commodities, and
3) a pronounced out-performance of emerging markets, including Asia.

Today, these three trends appear to be running out of steam: the US$ has been rallying, commodities have rolled over and, in November, for the first time in what feels like an eternity, the US MSCI actually out-performed all other countries in the World MSCI index.

For us, this begs the question of whether the trends of 2010 will prove different to those of 2009? And the answer to that question may be found in the most unlikely of places, namely the Middle-East.

http://www.investorsinsight.com/blogs/j ... -2010.aspx

[winston]

CREDIT MARKETS CONTINUE TO WAVE THE WARNING FLAG

One of the primary reasons for our move to sell equities in mid-January was the warning shot the CDS market was sending. Specifically, we said:

As the problem of debt refuses to go away and in fact, quietly spreads, we’ve seen another slow development over the course of the last few weeks – problems in Greece appear to be worse than originally expected and credit default swaps are sending warning messages again.

The term structure in Greek CDS recently inverted as investors are now increasingly concerned of a default in the next few months. This is something we saw in 2008 before the financial markets nearly collapsed. That time the inversion was in Lehman Brothers and Merrill Lynch CDS.

As the problems in the banking sector unfolded in late Summer 2008 the sovereign debt of the big three developed nations began to skyrocket before reaching a crescendo in early 2009. What’s alarming with the situation in Greece is the similarities in CDS price action. The recent uptick could be serving as a warning flag of things to come in 201o and 2011 when the problem of debt has potential to rear its ugly head again. Barclays might not have been too far off when they said the probability of a crisis would grow in 2010.

Well, this situation has only worsened in recent weeks and the equity markets have dipped over 5% since our “must sell” signal. Jim Reid at Deutsche Bank is reiterating the concern we expressed several weeks ago that this is looking increasingly similar to the action in the markets heading up to the Lehman bankruptcy:

“The danger for every risk asset beyond IG credit is that if higher quality assets see forced re-pricing then it surely has to impact the riskier end of markets. The situation is increasingly reminding us of August/September 2008 when the credit market was sending out a strong sell signal to the equity market. Failing a quick sovereign bail-out, the credit markets are sending out a similar sell signal.”

Reid goes on to note that the markets appear to be accelerating what the governments hoped they could heal with time. In essence, we’ve put all our chips on the table with the hope that our banks would earn their way out of this crisis and that the problem of debt would slowly heal itself. But as we’ve described time and time again with our comparisons to Japan, this is an incredibly risky maneuver and will ultimately result in kicking the can further down the road. The likelihood that we will ultimately solve a debt crisis with more debt is looking increasingly slim. We’ve said it before and we’ll say it again, the classic Keynesian response of print and spend simply does not apply to this balance sheet recession.

The crisis in Europe is evolving as Greece is no longer the only concern. Portugal now appears to be on the brink of a political crisis and the next domino in line is Spain. Spreads continue their Lehman-like action:

CDS1 CREDIT MARKETS CONTINUE TO WAVE THE WARNING FLAG

Equity investors would be wise to take note. There is simply no reason to be taking outsized risks in such an environment

http://pragcap.com/credit-markets-conti ... rning-flag

[winston]

TOL:-

I dont do the grave-yard shift nowadays. Wonder whether those guys on CNBC were jumping up and down when the Dow crossed 11,000 ?

Didnt somebody mentioned that his contrarian indicator is when Money Honey Maria jumped with glee whenever the Dow crosses a round number ?

[winston]

The Asian Commentators on CNBC were intially so happy when they reported that the Dow cross 11,000.

But when they turned to their own local market performance eg. Australia failing to cross 5000, a down day in Japan and maybe a slow day again in HK , they were downright disappointed

[millionairemind]

The Asian Commentators on CNBC were intially so happy when they reported that the Dow cross 11,000.

But when they turned to their own local market performance eg. Australia failing to cross 5000, a down day in Japan and maybe a slow day again in HK , they were downright disappointed

So you are using them as contrarian indicators..

[kennynah]

The US cnbc crew are too noisy. The Asian crew bores me

[winston]

TOL:-

Nowadays, the penny stocks in Singapore can jump a lot on a simple Analyst Report.

And people have no problem buying high and then hoping to sell higher, to a bigger fool.

Let's see whether a new generation of heroes will emerge..

[kennynah]

of cos, we will always have zeros...else, whom would you and i make money from?

[winston]

12 Ominous Signs For World Financial Markets By Michael Snyder

Can anyone explain the very strange behavior that we are seeing in world financial markets right now? Corporate insiders are bailing out of the U.S. stock market at a very alarming rate. Investors are moving mountains of money into gold and other commodities.

In fact, there is such a rush towards gold that shortages are starting to be reported in some areas. Meanwhile, some very, very unusual option activity has started to show up. In particular, someone is making some incredibly large bets that the S&P 500 is going to absolutely tank during the month of October.

Central banks around the world have caught a case of “loose money fever” and are apparently hoping that a new flood of paper money will shock the global economy back to life. Meanwhile, the furor over the foreclosure procedure abuses of the major U.S mortgage companies threatens to bring even more turmoil to the U.S. housing industry.

There are some very ominous signs that something is just not right in world financial markets right now. Some of the signs listed below may be related. Others may not be. That is for you to decide.

Often, just before something really bad happens, you can actually see the rats leaving a sinking ship if you know where to look. The truth is that if things are going to go south it is the insiders who know before anyone else.

So are some of the signs below actually clues for what we should expect in the months ahead? Maybe. Maybe not. You make your own call.

But it is becoming hard to deny that there are some serious danger signs out there at this point….

#1 Corporate insiders are getting out of the U.S. stock market at an absolutely blinding pace. It is being reported that the ratio of corporate insider selling to corporate insider buying last week was 1,411 to 1, and this week the ratio has soared even higher and is at 2,341 to 1.

#2 Many of the world’s wealthiest people are buying absolutely massive quantities of gold right now.

#3 It is being reported that J.P. Morgan (JPM: 39.90 +0.26 +0.66%) is gobbling up the rights to as much physical gold as it possibly can.

#4 The United States Mint has announced that it has run out of 1-ounce, 24-karat American Buffalo gold bullion coins and that it will not be selling any more of them in 2010.

#5 It is becoming increasingly difficult to explain the unusually high option volume that we are witnessing right now.

#6 Some very large investors are making massive bets that the S&P 500 is going to take a serious tumble during the month of October.

#7 On Tuesday, the Bank of Japan shocked world financial markets by cutting interest rates even closer to zero and by setting up a 5 trillion yen quantitative easing fund.

#8 The president of the Federal Reserve Bank of New York and the president of the Federal Reserve Bank of Chicago are both publicly urging the Fed to do much more to stimulate the U.S. economy, including beginning a new round of quantitative easing, even if it means a significant rise in the U.S. inflation rate.

#9 Nobel Prize-winning economist Joseph Stiglitz told reporters on Tuesday that the loose monetary policies of the Federal Reserve and the European Central Bank are throwing the world into “chaos”.

#10 At the end of September, federal regulators announced a $30 billion bailout of the U.S. wholesale credit union system.

#11 Bank of America (BAC: 13.39 -0.17 -1.25%), JPMorgan Chase and GMAC Mortgage have all suspended foreclosures in many U.S. states due to serious concerns about foreclosure procedures.

Now, Texas Attorney General Greg Abbott is actually demanding that all mortgage servicing companies in the state of Texas immediately suspend all foreclosures, the selling of foreclosed properties and the eviction of people living in foreclosed properties until they have completed a review of their foreclosure procedures.

#12 Not only that, but Nancy Pelosi and 30 other members of Congress are requesting a federal investigation of the foreclosure practices of U.S. mortgage lenders. Needless to say, this controversy has the potential to turn the entire U.S. mortgage industry into an absolute quagmire.

So are dark days ahead for world financial markets?

Well, yeah, but it is incredibly hard to predict exactly when things are going to fall apart.

The truth is that there are going to be a whole lot more “crashes” and “collapses” in the years ahead.

The important thing, as discussed yesterday, is to keep your eye on the long-term trends.

The U.S. economy is undeniably in decline. The only thing keeping the economy going at this point is a rapidly growing sea of red ink. Debt is literally everywhere. It is what our entire financial system is based on in 2010.

In the months and years to come, the major players are going to try very hard to keep all the balls in the air and to continue the massive shell game that is going on, but in the end the whole thing is going to collapse like a house of cards.

Unfortunately, we have been destroying the U.S. economy for decades and there is simply not going to be a happy ending to this story.

http://www.dailymarkets.com/stock/2010/ ... l-markets/

[winston]

i can sense the very buoyant mood amongst many forummers....
good luck.....

Yes, I always take this as a warning sign. People forget how far the market has risen from the abyss and they think that the "good times" can continue forever...