Article about correction on June 13,2 006

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转贴一篇关于这次CORRECTION的有意思的观点:

文章来源: aaaa 于 2006-06-13 17:11:33




THE CORRECTION CONTINUES

As a card-carrying member of the seven figure correction club, I feel your pain on this correction, believe me. But corrections in bull markets have MADE us money the last three years -- especially in the energy complex -- so with the pain comes opportunity.

This time, however, the correction catalyst is a new one to the world markets -- a move by all the central banks in the world to take back the incredible amount of cash (i.e., liquidity) that they injected into the world post-9/11 and Internet stock bubble collapse, which makes this correction and this fight different because of its worldwide scope.

Most of the incredible sharpness of the worldwide market collapse is the unambiguous footprint of the highly leveraged $1 trillion private investment partnership business -- i.e., the performance-fee business model of the hedge-fund industry.

I have talked about the outside influence of this hot money in all the world's markets, and the evidence of my concern has come home to roost in the GECD markets -- i.e., gold, energy, commodities and dollar collapse.

My concern on the over-cooking in the copper, iron and other metals markets was behind my sell recommendations on Southern Copper (PCU) and Companhia Vale do Rio Doce (RIO) earlier this year. I was early, but if you have not sold them, make sure you do so now.

WHY THIS MARKET MELTDOWN IS SO DIFFERENT

This sell-off was so sharp, and volatility has been so high (250% above the last four-year average), that I did NOT want to step into the whipsaw of the up/down action that brought seven straight days of 100-point up and down moves.

We will see if this conservative move pays off from a big snapback that is overdue to hit the markets in the next few days. It could come as soon as tomorrow if we see a lower-than-expected core inflation number or happen after the Fed meeting when they raise rates and reduce their market bashing.

But on a big melt up (from our huge oversold markets), I will take a very hard look at a number of positions.

I have been waiting for our consumer spending survey to come in, and what we now see is a very strong reduction in spending in the $50,000-a-year-and-under households, which is not surprising.

But we are also seeing the first contraction in the $100,000-$150,000 households, and that is worrisome.

The over $150,000 a year households are fine, but the under-$50,000 households are MUCH worse off than last year. That keeps our Wal-Mart short on the books, but it keeps the GDP growth rates below 3% in my model.

Our economy now hangs on the super spenders -- the over-$100,000 households -- and if we see hunkering down there, we will go 100% defensive because their spending is more than 50% of total discretionary spending.

WHAT I'M SEEING RIGHT NOW

When Goldman Sachs comes in with 80% earnings growth and tanks $4 a share and Lehman Bros. shows similar growth and drops 5%, we are very, very over-bearish.

We are seeing our semi-annual meltdown in our Canadian Energy Trusts (Canroys) that again means sell stops are being hit from leveraged owners. We are now on Canroy watch -- we will have a fantastic opportunity to buy these funds with leverage at the bottom of their trading ranges, so stay tuned for that move.

The Oil Services HOLDRs (OIH) is also right at the historic buy point or the final breakdown point. Based on the trading history for the last two years, we will be buyers on a breach of the 200-day moving average line.



The Energy Select Sector SPDR (XLE) March low is $50.55 -- let's call that the line in the sand for the XLE.



GOLD

The meltdown in gold is the bubble bursting from the typical reason -- forced selling by liquidating hedge fund and leveraged civilian buying.

This meltdown is a classic burst bubble, and ALL burst bubbles overshoot to the downside as much as they overshoot to the upside -- that's human nature working its magic on the markets.

Again, we are at a critical juncture here. I expect that we overshoot the 200-day moving average by 5%-10% before it puts in a bottom.



Let's call this correction what it is -- the revenge of the central banks against the hedge funds who were caught leaning the wrong way with HUGE leverage.

Every big hedge fund of size had the following positions on after the March low:

* Short the dollar
* Long gold
* Long commodity
* Long energy

Look at the commodity massacre.

Gold dropped below $600 for the first time in nearly two months, closing at $567.50. Copper fell as much as $290 to $6,750 a ton (lowest since April 25) and is off 11% in four days silver is off a whopping 72 cents to $10.35.

What we are also seeing affecting the markets here is the draining of the liquidity pool from the global market, which is unprecedented. It's unprecedented because of the correlation of markets worldwide due to globalized economies and globalized private trading funds.

Investors are in the process of becoming de-leveraged, either on their own or with a gun to their head via the cashiering of their positions.

Most of what we have seen early in this correction was profit-taking trading. The sharp falls of the last few days are clearly cashiering and forced-liquidation selling.

All of the Fed rate hikes in the last 30 years have come with financial entity disasters, from Penn Square bank in the early 1970s to Long Term Capital in 1998. We shouldn't be surprised to get news of a few big hedge fund blow ups.

THE GIANT DISCONNECT

Higher inflation expectations make interest rates go up, higher interest rates cause options prices change, volatility goes up, and when interest rates go up globally it portends slower global growth.

Here's the disconnect. How can inflation rates be rising with all the inflation trades going the opposite way?

If this was an inflation-based correction, notwithstanding Bear Market Ben's diatribes, then why have:

* Gold stocks cratered 50%
* Long-term bonds rallied
* Commodities crashed?

These are the ONLY answers that make economic sense:

1) The Fed has broken the commodity bubble, and forced liquidation has turned the correction into carnage.
2) The bond market is expecting significant slowing in the world economy -- and the Fed to start CUTTING rates by year-end.
3) Equities are being repriced to slower U.S. growth rates.
4) The treasury inflation bonds are the same price they were May 10.

Our research shows slowing consumer and commercial spending rates. They're slowing, but absolutely not crashing (i.e., 10% or more reductions).

So this "correction" looks mostly like an "incorrection" -- an over-reaction to the Fed inflation hawks that turned into a forced liquidation of the most bubblicious assets classes they were too long. This is a classic Fed over-correction.

Listen, the inflation pipeline has been crushed. All the inputs of copper, metals, oil, gold, natural gas and food have dropped 25% or more in the last 30 days.

What the market is NOW telling us is:

1) We do not have Gentle Ben, we have Brutal Ben -- and we have the over-shoot scenario more likely than the soft-landing scenario.

2) We do not see a recession based on our surveys -- long interest rates have gone nowhere from 2004. Relatively speaking, if the Fed keeps short-term rates under 6%, we still have relatively accommodative monetary policy. But the removal of cash from the world monetary system refocuses investor attention to risk, which explains the massacres in Iceland early this year, then the Middle East stocks (50% or more depreciation in stock prices in 30-day freefalls), Emerging Markets down 25%-35% (i.e., India, Russia, Brazil, China) and ugliness in ALL foreign markets.