Money Market Accounts Are Bursting! 7-14-06
Good Evening.
In our most recent post we hinted what might happen to the market should all the current fears start to abate. In fact, we went as far as implying that all the current ailments of the market might start to lift or fade off the front pages at roughly the same time. Was this Kcap listening to "Lucy in the Sky with Diamonds" or does this thought process actually hold merit? Lets see....
The current headlines are being consumed with the flare up between Israel and Lebanon. Everyone is use to tension in the Middle East but the notion that the U.S and Iran may be drawn into it seems particularly scary at this time. In fact, Bush would likely do anything to avoid this type of escalation. The last thing this country has an appetite for at this time is another direct military conflict. Bush has made this abundantly clear with his new anti-cowboy diplomacy message as of late.
A more preferable method for the Administration would be to lean on Israel in order to get them to back off before the point of no return is reached. The last thing the U.S. or Israel wants is to put Iran into a corner that forces Iran to take action in defense of Hezbollah. Most likely this can be accomplished since Israel is holding the cards. Therefore it would not surprise us for the entire conflict to fall off the front burner soon, at least as far as CNBC is concerned. The thought of a U.S. show down with Iran is what the underlying issue is for the main media. Besides, these events seem to fall off the front pages rather quickly when they are happening on foreign soil. Proof in point is that there was not one mention today of the major terrorist attack that happened in India this week. Unbelievably, that story already seems like boring old news for the American mainstream media.
We are not suggesting that the Israeli/Lebanon conflict is going to be resolved in the next few days. However, it is in the interest of the Bush Administration and Israel to not draw in Iran which should be more than enough to remove the situation from the front burner of the American Press. Iran has been a major thorn in the side of the markets over the past few months. Interestingly, should Iran be perceived as a paper tiger in the current flare up, the perception may develop within the markets that they are more bark than bite. The Bush Administration has an opportunity to cement that perception by influencing and curtailing the aggressiveness of Israel. Furthermore, the tension with Iran and now with Israel and Lebanon has caused the price of oil to spike in an unsustainable manner. This is not to say that high oil will not persist, but some steam will certainly be released once the current Geo-Political flare up is less threatening.
Remarkably we haven’t heard any mention of North Korea in the past few days. Essentially that government usually makes a quick splash in the headlines and is unheard from for several weeks. Perhaps history will repeat itself, allowing the markets to breathe a little on this issue as well.
Away from the Geopolitical events the market will be hearing from Ben Bernanke this week. We would not be surprised for Big Ben to deliver a slightly more Dovish speech as an attempt to offer further transparency into their next action. Clearly world events and the financial sector meltdown have not gone unnoticed by the Fed which has put the probability of a pause in August front and center.
Monday begins the heart of earnings season and will likely offer similar reports to what we saw today in GE. Companies should meet earnings and revenue estimates but offer slightly softer guidance due to the economic slowdown and uncertainties in the global economy. The collapse of the financial markets has allowed most stocks to enter the heart of earnings season at or near 52-week lows and in some cases multi-year lows i.e. MSFT and INTC. In other words, soft guidance has largely if not entirely been baked into the cake. Simply getting the news behind us would be enough to take stocks higher in the near term. Furthermore, important economic news such as CPI is slated to come out next week which can offer further catalysts for the badly bruised stock market.
Remember, all of the above events are unlikely to be resolved in the next couple of weeks. However, perception is reality and completely golden in the stock market. Therefore, any hint of improvement from these issues which is likely to happen over the near term is enough to send the stock market sharply higher. Ironically a case can be made that all of these situations may show enough improvement to change market perception in the next week or two.
Universally Hedge Funds and Traders have raised significant cash recently. Virtually nobody has had the courage to stay long despite their understanding of the tremendous oversold condition that exists in the market. Even Bullish Traders are sitting on huge hoards of cash. Essentially it’s hard to find a Bull who has his money where his mouth is. The Bears are also way too arrogant lately and are loaded with short positions that need to be covered. The current market environment may have the most poorly positioned participants (for a rally) that we have seen in a very long time. Simply put, despite everyone’s awareness of the potential huge snapback in the market people do not have the courage to commit their cash.
The media continues to scream of the potential indeterminate amount of time that the geopolitical tensions may persist as well as the severity. They have been hammering market participants with negative news flow on every one of the above issues relentlessly. Remember, the general media is almost always a contrarian indicator regarding the financial markets. In fact sell-off’s related to geopolitical concerns should almost always be bought. Your friendly neighborhood Kcap Team is currently very long due to the fact that we have decided to live with short term pain in order to avoid the deeper agony of being left in the dust when this market explodes to the upside.
We believe we will be very right despite looking like a "LUGNUT" in the interim.
Have a good weekend. ___________________________________________________
The analysis, opinions and/or forecasts expressed on the Kcap Trading Blog (âKTBâ) are for informational purposes only and should not be relied upon in making investment decisions. By using this site you agree that Kleiner Capital Management, LLC (âKCAPâ) and its principals are not liable for any action you take or any decision you make in reliance on any content. Please be aware that there is no commitment by KCAP to update the KTB. Furthermore, there may be inconsistent timing and follow up (if any) of posts.
None of the information on KTB is considered individualized investment advice and should not be construed as a recommendation or solicitation to purchase any securities. Reliance on information provided on KTB in no way establishes an advisor-client relationship. Investors are encouraged to seek the advice of a qualified investment professional prior to investing funds.
Clients of KCAP, as well as the firmâs principals and other employees, may be invested in securities discussed at KTB. However, any mention of said securities is not intended to influence market conditions for the security to the benefit of KCAP clients and/or principals and employees. KCAP is not affiliated with any advertisers on this site and does not endorse any of their content. For additional information and disclosures, please visit www.kleinercapital.com.
The information on KTB has been furnished from sources we consider to be reliable, but no guarantee is made with respect to accuracy.
___________________________
In our most recent post we hinted what might happen to the market should all the current fears start to abate. In fact, we went as far as implying that all the current ailments of the market might start to lift or fade off the front pages at roughly the same time. Was this Kcap listening to "Lucy in the Sky with Diamonds" or does this thought process actually hold merit? Lets see....
The current headlines are being consumed with the flare up between Israel and Lebanon. Everyone is use to tension in the Middle East but the notion that the U.S and Iran may be drawn into it seems particularly scary at this time. In fact, Bush would likely do anything to avoid this type of escalation. The last thing this country has an appetite for at this time is another direct military conflict. Bush has made this abundantly clear with his new anti-cowboy diplomacy message as of late.
A more preferable method for the Administration would be to lean on Israel in order to get them to back off before the point of no return is reached. The last thing the U.S. or Israel wants is to put Iran into a corner that forces Iran to take action in defense of Hezbollah. Most likely this can be accomplished since Israel is holding the cards. Therefore it would not surprise us for the entire conflict to fall off the front burner soon, at least as far as CNBC is concerned. The thought of a U.S. show down with Iran is what the underlying issue is for the main media. Besides, these events seem to fall off the front pages rather quickly when they are happening on foreign soil. Proof in point is that there was not one mention today of the major terrorist attack that happened in India this week. Unbelievably, that story already seems like boring old news for the American mainstream media.
We are not suggesting that the Israeli/Lebanon conflict is going to be resolved in the next few days. However, it is in the interest of the Bush Administration and Israel to not draw in Iran which should be more than enough to remove the situation from the front burner of the American Press. Iran has been a major thorn in the side of the markets over the past few months. Interestingly, should Iran be perceived as a paper tiger in the current flare up, the perception may develop within the markets that they are more bark than bite. The Bush Administration has an opportunity to cement that perception by influencing and curtailing the aggressiveness of Israel. Furthermore, the tension with Iran and now with Israel and Lebanon has caused the price of oil to spike in an unsustainable manner. This is not to say that high oil will not persist, but some steam will certainly be released once the current Geo-Political flare up is less threatening.
Remarkably we haven’t heard any mention of North Korea in the past few days. Essentially that government usually makes a quick splash in the headlines and is unheard from for several weeks. Perhaps history will repeat itself, allowing the markets to breathe a little on this issue as well.
Away from the Geopolitical events the market will be hearing from Ben Bernanke this week. We would not be surprised for Big Ben to deliver a slightly more Dovish speech as an attempt to offer further transparency into their next action. Clearly world events and the financial sector meltdown have not gone unnoticed by the Fed which has put the probability of a pause in August front and center.
Monday begins the heart of earnings season and will likely offer similar reports to what we saw today in GE. Companies should meet earnings and revenue estimates but offer slightly softer guidance due to the economic slowdown and uncertainties in the global economy. The collapse of the financial markets has allowed most stocks to enter the heart of earnings season at or near 52-week lows and in some cases multi-year lows i.e. MSFT and INTC. In other words, soft guidance has largely if not entirely been baked into the cake. Simply getting the news behind us would be enough to take stocks higher in the near term. Furthermore, important economic news such as CPI is slated to come out next week which can offer further catalysts for the badly bruised stock market.
Remember, all of the above events are unlikely to be resolved in the next couple of weeks. However, perception is reality and completely golden in the stock market. Therefore, any hint of improvement from these issues which is likely to happen over the near term is enough to send the stock market sharply higher. Ironically a case can be made that all of these situations may show enough improvement to change market perception in the next week or two.
Universally Hedge Funds and Traders have raised significant cash recently. Virtually nobody has had the courage to stay long despite their understanding of the tremendous oversold condition that exists in the market. Even Bullish Traders are sitting on huge hoards of cash. Essentially it’s hard to find a Bull who has his money where his mouth is. The Bears are also way too arrogant lately and are loaded with short positions that need to be covered. The current market environment may have the most poorly positioned participants (for a rally) that we have seen in a very long time. Simply put, despite everyone’s awareness of the potential huge snapback in the market people do not have the courage to commit their cash.
The media continues to scream of the potential indeterminate amount of time that the geopolitical tensions may persist as well as the severity. They have been hammering market participants with negative news flow on every one of the above issues relentlessly. Remember, the general media is almost always a contrarian indicator regarding the financial markets. In fact sell-off’s related to geopolitical concerns should almost always be bought. Your friendly neighborhood Kcap Team is currently very long due to the fact that we have decided to live with short term pain in order to avoid the deeper agony of being left in the dust when this market explodes to the upside.
We believe we will be very right despite looking like a "LUGNUT" in the interim.
Have a good weekend. ___________________________________________________
The analysis, opinions and/or forecasts expressed on the Kcap Trading Blog (âKTBâ) are for informational purposes only and should not be relied upon in making investment decisions. By using this site you agree that Kleiner Capital Management, LLC (âKCAPâ) and its principals are not liable for any action you take or any decision you make in reliance on any content. Please be aware that there is no commitment by KCAP to update the KTB. Furthermore, there may be inconsistent timing and follow up (if any) of posts.
None of the information on KTB is considered individualized investment advice and should not be construed as a recommendation or solicitation to purchase any securities. Reliance on information provided on KTB in no way establishes an advisor-client relationship. Investors are encouraged to seek the advice of a qualified investment professional prior to investing funds.
Clients of KCAP, as well as the firmâs principals and other employees, may be invested in securities discussed at KTB. However, any mention of said securities is not intended to influence market conditions for the security to the benefit of KCAP clients and/or principals and employees. KCAP is not affiliated with any advertisers on this site and does not endorse any of their content. For additional information and disclosures, please visit www.kleinercapital.com.
The information on KTB has been furnished from sources we consider to be reliable, but no guarantee is made with respect to accuracy.
___________________________
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posted by Kleiner Capital Management, LLC. | 6:30 PM
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