Sunday, January 27, 2008

The recession is in.

I'm not quite sure what to make of this statistic that Google searches dropped month by month for October, November and December of last year. The article mentions that normally searches drop around Christmas, but I don't consider October and November to be 'around Christmas'. And I am not aware of another search engine that is taking that kind of market share from Google.

Some are saying a recession started late last year, and something has definitely gotten both the Fed and Administration motivated to stimulate the economy in a hurry.

I suspect this statistic is telling us something important.

Investor's Business Daily: Even Vaunted Google Ad Business Susceptible To Recession.

[If you can't view that, also available at CNNMoney.]


Some evidence suggests a search slowdown. The average number of daily Google searches in the U.S. fell from 4.4 million in October to 4.2 million in November to 4 million last month, says Nielsen.

The average number of topic searches per user also dipped, falling to 37.9 in December from 40.8 in November, Nielsen says.

Analysts say it's too early to make much of these figures, since search activity typically falls around Christmas, but a continued decrease in search traffic likely will mean consumers are buying fewer products online, Parr says.


Reading a bit more about search and Nielsen's work, it seems there may be two factors that confound this bit of data [I think here of the quote about 'lies, damned lies, & statistics'..].

One, Microsoft appears to have taken a bit (a small bit) of market share away from Google in December via the giveaway of trinkets.

Two, Nielsen apparently changed their methodology for rating search share in.... October. Since the data cited above begins in October, this means the data could be suspect.

The observation though, is about the trend of lower searches and I can't find a statistic on overall searches. But I did find an article and search data provider (Comscore) that indicates that a related item, paid search, decelerated recently. (See 'Why Google Got Crushed Today'.) So the general theme is alive.

I'd also highlight this observation about the shipping index:

Financial Post: What could rattle Canada?


One statistic stood out. The Baltic Dry index, a composite index of shipping costs for dry bulk items such as cement, sugar and coal, posted record drops two days running.

Having lost 20% last week, the index is now down 42% from its November peak.

"The recent collapse in the Baltic Dry Index ... is a warning sign that the commodity boom could be about to come to an abrupt end," warned Julian Jessop, chief international economist at Capital Economics in London in a note.

The index is considered a good proxy for global growth, although it must be pointed out the declines last week were magnified by disruptions as a Brazilian miner cancelled 30 large cargoes of iron ore in a pricing wrangle with China.

Thursday, January 24, 2008

Here's the fairly substantial financial incident.

Little quicker than I thought, but it appears to explain that torrent of selling overseas Monday.

Bloomberg: Societe Generale Reports EU4.9 Billion Trading Loss.


Societe Generale SA said bets on stock index futures by a rogue trader caused a 4.9 billion-euro ($7.2 billion) trading loss, the largest in banking history.

Jerome Kerviel, 31, was the trader responsible, the Paris- based bank said today. Societe Generale plans to raise 5.5 billion euros from shareholders after the loss and subprime- related writedowns depleted capital. The Bank of France, the country's banking regulator, is investigating the alleged fraud.

The trading loss exceeds the $6.6 billion Amaranth Advisors LLC lost in 2006, and is more than four times the $1.4 billion of losses by Nick Leeson that brought down Barings Plc in 1995. An offer by Chairman Daniel Bouton to resign after the trades were discovered this past weekend was refused by Societe Generale's board, the bank said.

``At first this seemed like a joke,'' said Nicolas Rutsaert, an analyst covering European banks at Dexia SA in Brussels. Societe Generale ``was a leader in derivatives and was considered one of the best risk managers in the world.''

Tuesday, January 22, 2008

A Random Run Down Wall Street.

Note to self:

A stampede eventually tires and gets pretty hungry. Keep an eye on the grains. Not saying buy, just keep an eye.

e.g. DBA, RJA.

There will be blood.

Note to self:

Do not buy any financials or any major market average that is dominated by financials until you see a fairly substantial financial incident.

Friday, January 18, 2008

Walks like a duck, talks like a duck..

Pretty obvious, really. The question is, does it get worse, stabilize, or gradually recover? A week or so ago I thought to myself as I listened to interviews on CNBC and Bloomberg that, boy, most of these people sound pretty cavalier. Now the mood has changed. I just heard Bob Pisani say on CNBC that the Street wants to see more fear, which is to say it will probably get worse. That sounds right.

MarketWatch: A long-time bull throws in the towel.

Stock market bulls lost an important ally on Wednesday: Dan Sullivan is now convinced that we are in a major bear market.

Sullivan is editor of two newsletters, The Chartist and The Chartist Mutual Fund Letter. Sullivan has been publishing the first of these since the late 1960s, nearly 40 years ago. Very few others have been continuously editing an advisory newsletter for any where close to that long a period.

Sullivan, therefore, has seen lots of different kinds of market environments, which is why we should place more than the usual weight on what his intuition tells him. And right now, as he said in an interview Thursday afternoon, his "gut feeling" is that we're in a bear market that we will need to let "run its course."


Sullivan mentioned two major factors. The first is technical: In recent days, all of the major market averages convincingly broke below their August lows.
The second is the breakdown of the industry groups that were previously leading the market. Sullivan believes that each bull market is dominated by groups with exceptional relative strength, and that the bull market's end is often signaled when those groups lose that strength. As recently as early January, Sullivan had argued that these market leaders were still bucking the downdraft. He says that they are doing so no longer.

As a result, Sullivan has liquidated his two model stock portfolios and gone completely to cash. The last time he was in an all-cash position was in early April 2003, nearly five years ago.

Tuesday, January 08, 2008

Tough call.

The economy is clearly slowing, and the market is getting fearful, but, as this note points out, it's a crap shoot whether this is medium term negative or positive for the market. Basically, it depends on how long and hard this slump is, which is tough to predict in advance.

The beginning of this year does not look like fun though. The stuff that's been working? Health care, consumer staples. Think ESRX, CL, MO.

NY Times: Bad Start, Recession Near?


The maven of S.&P. numbers, Howard Silverblatt, points out that today ranks No. 6 among the worst first days of a year for the S.&P. 500. The index fell by 1.4 percent.

Every one of the previous five came when the economy was in a recession, or not far from one.

Here’s the list:

1. 1932, down 3.7% on the first day. Thus began the last year of the worst part of the Great Depression. The National Bureau of Economic Research thinks the recession that began in August 1929 lasted until March 1933.
2. 2001, down 2.8%. A recession began in March.
3. 1980, down 2.0%. A recession began that month.
4. 1949, down 1.6%. A recession had begun in November 1948.
5. 1983, down 1.6%. A recession had ended in November 1982.

Now even if you make the leap that this somehow forecasts the economy, it doesn’t do much for the stock market investor. The stock market had great years in 1980 and 1983, and a good year in 1949. On the other hand, getting out at the beginning of 1932 or 2001 turned out to be a wise decision.

Friday, January 04, 2008

Death to the housing oil bubblers!

Tech, housing, oil.. all great bull markets come to an end at some point.

And this was my year to sell, I started to think. Maybe sell 'em all. That's right, sell everything.


Auf wiedersehen.

Hasta la vista, baby.

I came in pretty nervous, after all. A bull market that dates (with brief respites) back to 1998, which major mojo starting in 2003. 2006 was a little so-so, but 2007 was another barn stormer. And everybodys now talking about oil.

Money Magazine [the most mediocre of the finance magazines by a long shot], for crying out loud, a huge skeptic of oil in 2004 (and a housing bubbler till the bitter end), even getting bullish.

And the kicker: CNBC turning to all oil, all the time lately.

And now Doug Kass.. - DOUG *&^%$#@ KASS - [do you have ANY idea how skeptical this guy is?!], called for $135 oil in his 2008 Surprises (See "20 Surprises for 2008.", it's number 15.

Number 15..? After a huge bull run we can't even make the *&^%$#@ top 5?!)

But then, I ran across this video:

CNBC: Sector Stars for 2008.

And I listened to the survey on how many money managers believe energy will repeat as the best sector this year.

Go ahead, what percentage would you guess?


A third?

A quarter?

One or two?

How about - none. Yep - no money managers believe in energy this year.

Energy is back, baby!

Ok, I'm kidding. Even I don't think energy will be the best sector of 2008. But zero - that has got to get your contrarian hackles up a bit.

I'm a little skeptical on financials being the best performing sector of 2008, but I've had GS on my potential buy list for a while, and maybe this is my year to buy it. Not sure I'm buying until somebody big blows up there though.

What's looking healthy right now? Bought a little TEVA (generic drugs) the other day .