Early Saturday Morning Thoughts
The market is skittish. Even blow out earnings from several brokerage houses didn't help move these stocks. We're all on Fed watch. So what else is new? The negative sentiment coming from a number of interest rate bears expect a 50-75 point basis upward move by the end of the year. Maybe a 50 point move this coming week. They could be right. So why isn't the market really tanking now ahead of the supposed interest rate storm? Why aren't shareholders bailing en masse? Why isn't the Dow below 10,000 now due to this perilous interest rate scenerio? Oh, the techs are getting hit. Really? TXN, IBM, LU, CSCO etc., etc., etc., are near their highs. Internets are weak - that is granted but they are fully valued right now. So what is the market really saying? The Fed will probably raise rates next week, how much, who knows. And the bond market is falling anticipating a 75 point move by the Fed over the next several months(but isn't that already priced into the bond market as we speak - maybe the 30-year bond touches 6.30%-6.40%). But that's it folks IMO. Notice that 30-year mortgage rates are at 8% now and housing sales are dropping 3%-4% the last 2 months. We get 9% and we kill the housing market. That would be a wise move by the Fed????? Essentially, the bond market is doing the Fed's work now. And the Fed, IMO, is caught between a rock and a hard place. If they raise rates significantly, let's say 1/2 point this week, goodbye to the recovery of South America and you can kiss Argentina, in particular, really goodbye. A 1/4 point move is not good for that region either. Asia's recovery is tepid - (they're just getting their noses out of the water and starting to breathe) and the same goes for Europe. German inflation year over year is less than 1% - IBD today. So the Fed wants to slow the consumer down with hardly no inflation and a changing world e-centric economy where raising prices is doom to any company. Okay consumers - let's all slow down now - don't buy any stuff - really - there goes Asia and Europe as well. Wow - brilliant Fed - not only wants to put us into a world recession but wants to put us in a spiraling deflationary depression where nobody buys goods and we just build inventories. I DON'T THINK SO - JMHO. My personal take on the Fed raising rates is because of currency concerns. The Yen is rising and is severely restricting the Japanese recovery which is on track but is stalling. Higher rates here = lower Yen = continued recovery in Japan. Continued recovery in Japan means more tech goods to be sold to Asia - means renewed strength out of weakness in the Semiconductor Industry in Japan which has suffered - means good things for RMBS if the DRAM manufacturers in Japan and Korea want to make a profit again - wouldn't that be nice for a change. Oh yeah - keep selling that cheap SDRAM stuff and have your business go into the tank - are the Asians that stupid. I DON'T THINK SO.
So back to the market - yes the market will get its interest rate spanking because the "old guys" at the Fed are scratching their beards saying we gotta take some money out of people's pockets and teach them that the Fed is almighty and that continued prosperity with low inflation is not the way it's supposed to be without a good Fed whipping now and then. But that should set up an excellent buying opportunity and the focus will be on earnings very shortly. I can only hope. About RMBS earnings - we all know they're going to be stagnant or even below estimates - isn't that already factored in - if not there will be a vicious Fudster attack. Be prepared. The shorts need to get out eventually before the Camino launch and would like to at lower prices to lock in gains or lessen their losses.
As far as RMBS goes - Friday was not good to say the least but it did close over 88 and held the Maginot Line as Zeev mentioned. Don't you just hate down days with big volume. But has the fundamentals of the story changed regarding the Semi business, RMBS, or INTC doing its Camino/Coppermine thing? The question is where does the stock price go from here in the short-term. I still say $147+/share in less than 1 year. But that is long-term to most folks - me I can wait - age has taught me that. And that's being very conservative - I like to easily hit my targets like Abby Cohen. Short-term is up in the air. Could we go to the low 80's? Could we fill the gap at 72-73? The answer is yes - we could. I'm not so sure. There is a lot of support in the high 70's to low 80's and if that is cracked, yes we will fill the gap once again. And that price action would tell me that there are some concerns out there in Fudland about further delays or the ramp-up not going as smoothly as everyone anticipated. But maybe this time is different if I take a contrarian viewpoint about gaps always being filled historically for RMBS. That gap, IMO, is not what I would call a breakaway gap where the stock price broke out to new highs. I would be more concerned about that not being filled than this particular "within-the congestion" type gap as one views it on the charts. BUT IF THE GAP IS FILLED AT 72-73, THIS WOULD BE ONE OF THE BEST BUYING OPPORTUNITIES IN THE HISTORY OF RMBS. And filling that gap would not breach the moving averages either.
If, and that's a big if IMO, RMBS fills the 72-73 gap and then falls further to drop below its 50-200 DMA's, then there is something seriously wrong with the RMBS/INTC story, or the market tanks bigtime, or interest rates spiral upward - and then no stock is safe. Bonds wouldn't be safe, real estate wouldn't be safe - oh yeah let's invest in mattresses because we'll all be putting our money there. Oh yeah - goodbye to Dems retaining the White House if that happens - they're probably history already but that is another topic.
Bottom line - be prepared for a ride, but the rocket ship, not the bus, is getting ready for liftoff. We're close gang - really close. Uncle - how many days to the RMBS Xmas? Good luck to all.
jmanvegas |
