Hopes Fulfilled - Recession Over?

I found it comical to see Cramer this morning almost mimicking my April Fools joke from yesterday by publicly calling today that "The Depression is Over!" Today on national television Cramer said that thanks to the genius works of Geithner and Bernanke, he is officially calling it that the "depression" is over. He indeed feels that we are still in a recessionary state, but obviously is saying that the worst is over. Cramer...Come on! Are you serious? I think during the recent distress of GE, the government came in and took control of the GE's assets (including CNBC), which is now why every analyst on CNBC is now saying that President Obama and Geithner have been flawless in their government intervention. Either way, Cramer has made a lot of "national calls", many of which have never come to pass. Good luck on this one Cramer, no going back and editing your show like you usually do!

Come on guys, we discussed these "speed bumps" in my post last week, so there should not be much of a surprise. Indeed I was a bit surprised at the degree of praise the markets received, but a lot of the extra praise came from more "fluff" from the G20 meeting. At any rate, a day like today is nothing new that we haven't seen. Whether it is a new trillion dollar economic stimulus, loan modification options, or a company bailout, we have always seen these temporary, violent responses from the market. The keyword being here is "temporary." This is another one of those days where I believe the market reacted before they analyzed what it meant, much like we saw when the Fed announced their trillion dollar toxic asset plan. You will remember a vicious sell off that followed that day.

What caused much of the praise today was the mixture of the statement from the G20 meeting in which they said as a group, the committee will do all that is necessary to bring health back to the global economy and the vote from FASB to "relax" mark to market accounting. The G20 announcement should not be earth shattering to anyone who has kept up with the committee in prior meetings. They have always taken this stance and I believe if it were not for the mark to market meeting, most investors would have looked right over the meeting.

As for the FASB meeting, the results were much as I anticipated. The vote was to "relax" the mark to market standards, giving banks more options when considering to write down debt. As I have said before, this should make a difference on paper as far as reporting and keeping their balance sheets balanced, but it will not solve the problem of frozen lending. In fact, from here on out, I would suspect investors to be even more "skeptical" of bank's earnings reports, as the numbers will no longer reflect current values. So although this may help with their reserve requirements from the Fed, more will be required to get banks lending to the consumer again, which ultimately needs to happen if we expect to turn this economy around. So, I am calling it as well, "Cramer you will eat your words!"

Bulls and dependent analysts are already trying to downplay the significance of the non farm unemployment number which is being released tomorrow. They are indeed yielding to the fact that the number will most likely be the worst we've seen thus far, however they are saying that the unemployment is a delayed indicator and that there are many future indicators that are becoming more positive. Nonsense! Unemployment is one of the biggest influences of GDP performance. Sure, it may not be as "forward looking" as some indicators, but to say that the worst number we have received is good news for our economy is, in my mind, ignorance.

I personally don't feel that investors will be so easily duped tomorrow. Indeed there is a lot of positive momentum in the market right now, but a bad unemployment number will eventually take its toll, whether it be tomorrow or next week. I strongly believe, just as we have seen with other new announcements, the news driven rally will be short lived, and we will then look for something new to keep the rally going. We did see the Dow trace back toward the end of trading, closing under the 8000 mark, which mentally, for investors, is pretty significant.

As we would expect, the shorts continue to get crushed by these rallies, which is a big reason why I am choosing to play it safe at the moment. If tomorrow takes the market above 8000 levels, I would believe that is a pretty good indicator that we have some more of this rally to endure, especially with more fluff to be announced. There will still be small opportunities in between, but as for the big set up, we've probably still got some bleeding to do on these shorts.

My apple options (QAADB) were up over 100% at one point, which actually turned today into a profit, over powering my losses from my SRS and FAZ call options. I had written off these apple options months ago. It's amazing what time and patience can do. RIMM soared after hours with a positive earnings report, which should keep Apple and RIMM in the green tomorrow.

My biggest goal remains capital preservation in my Zecco.com trading account. Bears are getting killed in this rally if they are not careful. Although my current patient strategy may be frustrating to some, it has saved me from serious losses that I could have suffered if not for my patience, in which I go into more detail on today's podcast (subscribe here). I do feel there will be a great opportunity to make money on the short side, but that time is not quite yet in my opinion. Happy Trading and we'll see you tomorrow.

15 comments:

  1. Jeremy Says:

    Hey FF,

    Everybody knows that timing is the key in investment/trading. I think you are not positioning well your clients. from the time you stayed out of the market, big money could have been made, but you didn't courageously ask your clients to act! Now the rally has slowed and there is not much opportunity to earn money either way. This three week rally could have made anybody rich not needing to invest for years! which you missed badly. I am a bit upset about your continuous negative tone in your analysis, but come on, give us the correct time to go long or short and with what! That is what pros do.

  2. Finance Fanatic Says:

    Jeremy,
    you must have not been reading my blog very long and I don't advise anyone on here to make any investment moves, I just report what I am doing.

    If you had read back in the beginning of March, you would have seen that I predicted a strong bear market rally back up to the 8000 mark and above and I made significant profits from going long in financials.

    As of just recently, I feel that we have reached a fork in the road where we could either keep pushing up or turn around, and strongly believe the worst is not over. If you are looking for someone to give you positive reinforcement about our economic condition and "advise" you to go long, well you stopped at the wrong place, and you should check out CNBC, you'll find plenty of Hedge fund managers telling you what to buy.

    I have done very well in March. Sure, I have not pushed all my chips in as yet, but there are reasons for that. I keep at what I'm good at and what has made me money in the past. You should make the trades you want, and not let my commentary get in the way of that.

  3. Faisal Says:

    All I hear is crying and blaming, Jeremy. Lol, were you under the impression that FF was your personal finance manager?

  4. denis Says:

    you said before you buy SRS under $50 well its under that now. Are you thinking of buying yet?

  5. Anonymous Says:

    I read this blog to help me keep some perspective against all the positive hype.
    Keep up the good work FF.

  6. Jeremy Says:

    FF, I have been reading your reports since Oct. 2008! I have also made a little bit of money (10% up) not by listening to your advices. You just scare people to death to take any action. I remember you sold your BAC long time ago, also sold some of your SRS at 80 and AAPL is your only other long you have been talking about plus some IRA ones, which doesn't matter for short term trading. I am not a fan of CNBC either. I don't think you did very well during the upside from what you have reported. You scare people of a crash! We have already had several crashes and will still have more later. But you scare your blog readers to earn any money on the upside.You should act more responsibly with so many people reading your blog now and paying you! And I am not your enemy, just an upset friend.

  7. Finance Fanatic Says:

    Jeremy, you can't judge performance by picking a spot on a time frame. We can have this conversation a year from now and it would make a lot more sense. This rally could have just as quickly deteriorated as it went up since I liquidated my longs (which I also made a killing on FAZ put options).

    Thanks to the government and trillions of dollars of spending later, we have sustained that rally. The point is, I make strong trades not based on government intervention, because they are unreliable and usually unsustainable. I make my trades based on real, economic data. As of now, that data is negative, and the unemployment data released today confirms that.

    Just because I choose to play it safe during these times, does not mean everyone should. I believe in a bear market, there is more opportunity and safety when playing the bear side. Hindsight is always 20/20, and I wish I had more inside contacts within the Fed and govie to help guide me on their announcements. All the bulls got killed worse with their buy recommendations in January, when the sell off came back. Notice I have not been buying short either, but preserving my capital. That has been my goal for March, and I have done well to accomplish that goal.

    I do not charge anything for people to read my posts and I do not give recommendations for individual performance. I understand your concern, but as for me, I've done pretty well thus far for 2009. Once again, please do not let me get in the way of any strategies you deem to be profitable.

  8. Anonymous Says:

    http://www.bloomberg.com/apps/news?pid=20601103&sid=aylbeokVZaWo&refer=us

    Does this story matter or what?

    Obama Bank Policy Signals $1 Trillion in Writedowns

  9. Alison Says:

    FF, you did mention that FAZ should not go much below $30. I am hurt by your recommendation.

  10. Boogy Says:

    All short's are getting hammered. This is how bulls have felt for the last 2 years. SRS @ 38, FAZ @ 15, SKF @ 80, and so on ! We will have our day in the sun again, the biggest problem is just when you liquidate your shorts....They run !The hardest thing to do right now is go long after the monster run stocks have had and there is nothing that shows any more value in buying stocks. Earnings should show a more grim picture and if your shorting into this rally, they better have horrible guidance.
    I have started positions in FAZ and SRS and had to cover some of the shares but will hold some and add when momentum swings the other direction, if there not $0. Ha

  11. Finance Fanatic Says:

    Alison,
    ETF's do not work like normal equities where they are tied to a value like EPS. They track DAILY performances of a sector and are built on momentum. Technical points are constantly changing, and if you have read consistently on my blog, you would have noticed that I continue re-adjusting my entry points for all the etfs as momentum and VIX levels change.

    I did eventually lightly buy into SRS at $59.80 and FAZ call options when FAZ was at $20, as I felt they were low enough for a first round and that momentum was easing a bit. I did not "recommend" any of the funds at certain levels, as I myself had not started buying into until just recently. These bear market rallies can sure mess with people's psyche. It feels like a funeral on here!

  12. 5U Says:

    Everyone should check out this zero hedge article on KIM. It's very good and sheds light on SRS and future REIT equity offerings using this same formula.

    http://zerohedge.blogspot.com/2009/04/wall-street-back-to-its-criminal-ways.html

  13. Newbie Says:

    I think FF has been pretty spot on from a macro point of view. Yes, the rally has been longer and more powerful than anyone thought, even the bulls, but this sets up pretty nicely for that "crash" FF had been pointing out. Sure no mention of that in the past several posts, but inevitably it is coming. I myself am picking up some shorts at these levels because at any moment momentum can swing. Just as violently as we have gone up we can go down.

    No one should buy stocks based on other peoples thoughts, feelings, etc... Use the information you receive and make your best judgment on the big picture. Fundamentally this is market is terrible, but you wouldn't know that from the way the market has traded the last 4 weeks.

    This ridiculous bully market rally can certainly frustrate bears and there will likely be more frustrating days, gasp... weeks to come, but it is based on government intervention and lying. The truth will eventually come and what the government has done and is doing will be the final straw that breaks the camels back, or in this case the US.

    God does not like UGLY!

  14. Anonymous Says:

    Can we have FAISAL removed from the main Chat:
    31 Mar 09, 11:33
    Faisal: i wish to spit on obamas face
    31 Mar 09, 11:34
    Faisal: and kill his family


    furious: string1, what did geithner say?
    6 Apr 09, 06:50
    Faisal: he said his ass hurts
    6 Apr 09, 06:50
    Faisal: and he wants his mommy


    Faisal: if i could press a button, and all of them and their extended family would die, i would press it right now, with my dick
    6 Apr 09, 13:00
    Faisal: i would rather have kim jong-il as a president
    6 Apr 09, 13:02
    Faisal: **** you nigers

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