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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (4383)	8/20/2001 9:04:51 AM
From: John Pitera	Read Replies (2) \| Respond to of 33421

the equity put call ratio, which gives a better reading on investor sentiment, than the index put call ratio's, worked it's way up to 1.00 on Friday, this coupled with a Friday morning TRIN reading of 4.30. A scan of the 5 Day TRIN, 10 Day, 21 Day, 30 day and 55 day TRIN are all showing very high readings, which indicates that the selling has really been pervasive, but also that a sentiment oversold situation similar to April will once again appear, over the next number of weeks. We could either see some more stop and start grinding into the next low that takes several weeks....... or even into Oct, or a more intensified bombing out process that comes a bit quicker timewise..... Since Friday was an options expiration day, it will be interesting to see what the P/C numbers look like early this week. The VIX has worked it's way up to it's 200 dma at 28, where it's topped 3 times since June and in fact he 28 level has been a key pivot area for the VIX since Feb of this year. We saw the VIX stay pretty consistently above 28 during the relentless shelling of stocks we saw during Feb and March into the April 4th Nasd Low. Back in 1997 and 1998, when we would see real nice rounds of selling, the VIX was able to more easily vault up into the 40's or even 50's and those environments of panicky selling gave us quicker, more piercing bottoms in price and in Fear. These Days..... it's the Withering Bear working through his machinations, at a more languid pace. But to come back to the point I would think we would see the VIX break out above it's 200 dma and vault into the upper 30's or so in the next few weeks. ....on the equity put call............. The Chicago Board Option Exchange's equity put-call ratio shot past 1.00 on Friday. This ratio is a contrarian sentiment indicator; if too many are bullish, the smart approach is to be bearish, and vice versa. The indicator is considered to be sending a bullish signal if it is between 0.75 and 1, neutral from 0.4 to 0.75, and bearish if it is below 0.40. So why did the put-call ratio pop? Puts on tech stocks were the most actively traded during Friday's expiration. In Intel, "investors seemed like they did not want this stock put to them. They closed out their option positions, and they aren't that bullish," says Michael Schwartz, CIBC World Markets' chief option strategist. Kyle Rosen, who runs the Rosen Capital Management hedge fund, says the ratio popped on heavy put buying. Until Friday, "people expected the trading range to continue, and most had been sellers of call options" to rake in premium. Stop selling calls, Rosen urges. "We took out some of the July lows, and investors flocked to put options for protection. That means the end of this decline is closer." Instead of buying stock outright or shorter-dated options, which could be slammed in the near term, he recommends investors purchase longer-dated at-the-money Standard & Poor's 500 index calls dated at least six months out. "Calls are very cheap here, which is unusual after such a decline, when prices for calls usually go through the roof."

To: John Pitera who wrote (4383)	8/20/2001 10:02:07 AM
From: Moominoid	Read Replies (1) \| Respond to of 33421

House prices are soaring in Sydney and elsewhere in Australia as the rental vacancy rate rises and rents begin to fall....

To: John Pitera who wrote (4383)	8/20/2001 10:14:58 AM
From: MulhollandDrive	Read Replies (1) \| Respond to of 33421

Hi John, It's good to see you posting again. I noted one of the "cool posts" this morning written by an auto dealer and would be interested in your perspective (especially wrt the strength of the US dollar) "The economy is acting in a way profoundly different (?) Somehow I just can't shake this feeling that the economy (ie the consumer) is like Wiley Coyote chasing the Roadrunner and as he rushes headlong off the cliff, he doesn't go "splat" until he looks sideways and recognizes the the seriousness of his "predicament" <vbg> Message 16217547.

To: John Pitera who wrote (4383)	8/20/2001 2:56:49 PM
From: Raymond Duray	Read Replies (1) \| Respond to of 33421

Hi John, Thanks for your thoughtful reply and the Barron's POV on the Surreal Estate market. W/R/T the 10% of Japanese who hold equities, this needs to be viewed in the light of the fact that TTBOMK, the Japanese salaryman and his wife were never really that involved with equities, even at the height of the bubble in 1989. As I recall (corrections encouraged), the percentage of the Japanese population who entered the equities fray never got above 35-40%, unlike the current situation in the US, where about 60% or so of investors have some exposure to equities. The Japanese were and are, largely postal savers. I.e. investing for a meager interest rate (actually saving rather than investing) through their unique form of "mattress money". As far as a "profound loathing" is concerned, I sense I've been well ahead of the crowd in this viewpoint. Not that this has necessarily made me a popular contributor to any number of threads here at SI. <w> As to the housing market, Barron's is completely in character here with it's cup 3/4 empty analysis. What they don't point out is that if the unemployment rate is 4.6% (or whatever) that the employment rate is 95.4%. A not insignificant super-majority, IMVHO. The rates at which the expected profits of the home builders are anticipated to be falling off seem reasonable to me. Though my opinion is skewed in that our local real estate market is extremely vibrant at the moment. Alas, it's impossible for me to stay completely in character as a curmudgeon in the face of contrary facts. <g> ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ On a separate note, I'm working my way through Stigum's 1990 version of "The Money Market" and am wondering if there are any on the thread who've read both the 1990 and current versions (OK, at least skimmed) and could comment on the worth of my continuing with the older version as a historical document, versus how much this older text may have been "overtaken by events", as the saying goes. Comments welcomed! Cordially, Ray :)

To: John Pitera who wrote (4383)	8/21/2001 12:32:42 AM
From: Raymond Duray	Respond to of 33421

Hi John, Re: "The Incredible Lightness of Housing".... Here's another media source that's decided to look at the downside potential of the housing "bubble". The current issue of Forbes suggests trouble ahead: forbes.com [[Note: Site requires a free registration. ]] <Snip>: The downside to easy credit: overleverage. Most households have either no mortgages or very manageable ones. But there are enough people stretching their budgets to have caused a key debt-burden ratio to hit an alltime high. The ratio of mortgage debt service to total disposable income climbed to 6.46% in the fourth quarter of 2000, surpassing a 6.35% record set during the first quarter of 1991 in the depth of the last recession. Collective owners' equity in the U.S., as a percentage of the real estate's value, sank to 55% in the first quarter of this year, the lowest level ever and down from 70% in 1982. "Leverage against an asset that can deflate in value is a recipe for disaster," says economist Charles W. Peabody of Mitchell Securities in Manhattan. <End Snip>

To: John Pitera who wrote (4383)	8/23/2001 2:48:55 PM
From: Raymond Duray	Read Replies (1) \| Respond to of 33421

How to End a Housing Boom? Hi John, I found that the recent decision by the Bush Administration to impose a 19.3% tariff on Canadian softwood lumber had me reflecting on the Smoot-Hawley crowd from a bygone era. And has me curious as to our commitment, as a nation, to the principles of the WTO "free markets" regime. Finally, one wonders if the imposition of the tariff is a case of the left hand not knowing what the right hand needs to do in the steering of our now fragile economy through the shoals of recession, or if rewarding the lumber interests who are expecting a return on their "campaign contribution" investment, is trumping the seeming common sense of keeping the home construction industry rolling with inexpensive lumber. Just some musings, nothing really substantive, sorry. Here's an interesting article regarding the latest trade war spat from the perspective of our friends to the North: thestar.com Aug. 23, 02:00 EDT New weapons needed in softwood dispute Canada will need both muscle and shrewdness to deal with a United States administration that plays by its own trade rules. The softwood lumber dispute, the first major skirmish of the Republican presidency, will set the tone of Canada-U.S. economic relations under President George W. Bush. That is why it is important that Ottawa get its strategy right. The initial signals are encouraging. Prime Minister Jean Chrétien spoke to Bush personally, pointing out that the U.S. can't expect free trade in energy when it slaps punitive duties on Canada's lumber. Meanwhile, Trade Minister Pierre Pettigrew challenged the 19.3 per cent tariff before the World Trade Organization. But it will take more sophistication than this to do business with Washington in the Bush era. The president's response to Chrétien's lecture — he advised the Prime Minister to tell Canadians that he had "given him hell'' — suggests that Bush thinks the phone call was little more than a public relations gesture. Likewise, the reaction of U.S. Trade Representative Robert Zoellick to Canada's WTO challenge — he insisted the whopping tax was legal and justifiable — suggests that trade appeals are regarded as little more than an expensive nuisance in Washington. Certainly that has been Ottawa's experience. Four times, in the last 20 years, it has challenged U.S. treatment of Canadian lumber producers before international trade panels and won, only to see the U.S. ignore the results. Canada needs a few new arrows in its quiver. For example: A high-profile advertising campaign, pointing out that the cost of the lumber tariff comes out of the pockets of American consumers, in the form of more expensive homes and higher priced renovations might be effective. The U.S. Association of Homebuilders is already complaining loudly. A willingness to speak out about the way Washington practises "free trade'' at forums such as next November's WTO meeting in Qatar might cause the Americans to think twice about their bully tactics. A suggestion that Ottawa is prepared to delay the export of Canadian oil and gas until it has carried out exhaustive environmental hearings, negotiated a revenue-sharing deal with the government of the Northwest Territories or Yukon and satisfied the concerns of native people might be useful. Such measures would be perfectly legal — and frustratingly protracted. Chrétien is right that provoking an all-out trade war with the U.S. would be a mistake. But there are plenty of other ways to send a message to Washington.