Pay Close Attention To The WARNINGS in [Market-Ticker]

Posted 2011-12-09 08:20
by Karl Denninger
in Investing

Pay Close Attention To The WARNINGS

The EU summit "deal" is noise; we knew going in there would be no "grand bargain" and there isn't. Britain said "stuff it" (rightly so) along with a few others; those who went along did so pretty much at gunpoint.

The vassal state model may look attractive as an alternative to Mekosy, but they're nuts. What they'll ultimately get out of this is a war. Oh Archduke, is that you over there somewhere?

The internal issue for America is more-acute in the market sense. Texas Instruments last night warned on weakening demand and got clocked in the aftermarket. This morning Dupont issued a warning. Either standing alone could be looked at as company-specific. The two together cannot.

I said a bit over a year ago that PPI pressures would eventually filter through and hammer margins directly, and likely would result in cost-push pressures that ultimately would hurt the top line -- although perhaps not at the firms that had the cost pressures. In other words the deteriorating standard of living would eventually have to show up somewhere -- "charge it" only works for a while.

It appears that it now is showing up. This sucks, to be blunt, but it is very unlikely to be contained.

My macro-level view has not changed much; timing is everything in the markets and I still believe we'll more-or-less hold together until late in December -- another couple of weeks, and perhaps into early January, but in 2012 it's going to come apart.

Those who think that we'll get through the election will be wrong -- I'll go out on the limb and put that out there right now. No chance folks -- there's not that much dry powder available to anyone.

As such consider your positions carefully if you're long the market -- the wild gyrations are a warning -- overall "bullish" markets don't behave this way, but ones that are about to fall apart sure as hell do.

I expect a very profitable 2012 -- and not on the long side either.

Discussion below (registration required to post)

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User Info	Pay Close Attention To The WARNINGS in forum [Market-Ticker]
Drench Posts: 28631 Incept: 2009-11-10	You expect to realize those profits. Now that's optimism... I'm thinking it'll be 300+ S&P handles in less than a second. Last modified: 2011-12-09 08:25:53 by drench 2011-12-09 08:25:06 Permalink
Digitlman Posts: 331 Incept: 2011-03-04	But...futures are green! Everything is fixed! Huzzah! 2011-12-09 08:25:25 Permalink
Drench Posts: 28631 Incept: 2009-11-10	I almost forgot. It'll be at 3 a.m., too. 2011-12-09 08:28:59 Permalink
Corn1945 Posts: 4167 Incept: 2009-04-30	Texas Instruments has been warning forever now and it hasn't made a dent in the broader market. I personally wouldn't use them as a gauge of the market as a whole. 2011-12-09 08:36:45 Permalink
Randy123 Posts: 5785 Incept: 2008-09-24 Earth	I'm paying attention to my blood pressure. **** this rigged market. ---------- China is the Enemy. Wake Up. New Normal. Same As The Old Awful. 2011-12-09 08:37:32 Permalink
Medicdan Posts: 8024 Incept: 2010-02-11 Scottsdale, AZ	I agree Gen, next year is going to be great. Drench wrote.. I'm thinking it'll be 300+ S&P handles in less than a second. That's funny. If your serious, your in for a surprise. Markets that fall hard bounce even harder. A controlled slow grinding sell off with some whippy days is what I would expect. ---------- Arizona & desert gardening http://azediblegarden.com/ 2011-12-09 08:44:00 Permalink
Drench Posts: 28631 Incept: 2009-11-10	Yeah, markets do that, but this isn't a market anymore, it's a computer game. 2011-12-09 08:49:14 Permalink
Fraudster Posts: 4175 Incept: 2011-05-10	Pretty gutsy putting yourself out there Karl. I agree that there is extreme vulnerability in the markets and wider economy. ---------- *"Let China sleep, for when she wakes, she will shake the world."* - Napoleon Bonaparte *"Circulation ceases first at the outer edges [Europe and Japan]. It will take a while yet for the decay to reach the heart [America]."* - Foundation & Empire by Isaac Asimov 2011-12-09 08:57:07 Permalink
Tdray Posts: 249 Incept: 2008-12-11	I'm sure that little explosive incident in Rome won't affect European volatility much. 2011-12-09 08:57:26 Permalink
Lucky1 Posts: 2020 Incept: 2009-08-05 Pittsburgh	Weakening Demand. You got it. I posted this in Gold yesterday; I'll repost it here since it's on topic. I am in primary manufacturing. Our top line sales were down 20% October to November 2011; and down 25% November 2010 to November 2011. We hit the wall - someone has pulled the plug. December is not picking up - next week is crucial as the holiday week(s) we always fall off. Right now we're looking at minus 30 to 35% YOY for December if it holds as is. ---------- "Crime is contagious. If the government becomes a law-breaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy." -USSC Justice Louis D. Brandeis: Dissenting Opinion in "Olmstead v. United States" (1928) 2011-12-09 09:11:59 Permalink
Musicandnature Posts: 1954 Incept: 2007-12-05 NJ	Medic, maybe great is not the best word. It sucks livin in these times with so many suffering no matter how successful one trades it. Especially since the people who have been prudent over last decade are screwed while the imprudent have in many cases walked off with expensive new cars/ trucks and livin in places 2x nice as us and paying no mortgage- at least I see it in my town. Gen, the retail climate in my inde pharmacy is abysmal. Also there was an article a few days back how everyone is looking for super sales and 50 off is 'not good enough' for shoppers. People don't think how much it costs to run a brick and mortar store. ---------- Since it costs a lot to win, and even more to lose, You and me bound to spend some time wonder'n what to choose. Goes to show, you don't ever know, watch each card you play and play it slow...Wait until that deal come round, don't you let that deal go down, no no. Garcia/Hunter. 2011-12-09 09:13:38 Permalink
Steph4liberty Posts: 1684 Incept: 2010-10-22 Raleigh, NC	Quote: Yeah, markets do that, but this isn't a market anymore, it's a computer game. Hope you don't mind, Drench, but I want to add part of that last comment to my signature line. ---------- "Man will never be free until the last Banker is strangled with the entrails of the last Politician" - unknown "This isn't a market anymore, it's a computer game." - Drench 2011-12-09 09:14:31 Permalink
Quillbill Posts: 1469 Incept: 2009-06-23 Northwest Illinois	I was certian that it would have been enough to get through the elections in a "muddle through" fashion with retail sales being "robust" and paraded triumphantly on the MSM channels. I have changed course. This is going down in the time frame Gen lays out above if not sooner. People really need to hedge this to the best of their abilty. Just look at ONE video of the animals***ed off at McDonalds about chicken *ing nuggets or the mob style trampling for sub $2 towels at Wally World and then imagine yourself having to participate in that to feed your own family. You can choose the line you stand in TODAY. Not tomorrow. The best defense is to NOT be where the offense is occuring. Personal responsibilty is now paramount to getting out the other side. Good luck. Prepare well. ---------- It is a new day....DO SOMETHING WITH IT! 2011-12-09 09:15:12 Permalink*
Drench Posts: 28631 Incept: 2009-11-10	Steph4liberty, 2011-12-09 09:17:12 Permalink
Fisticuffs Posts: 1086 Incept: 2007-07-28	ADI warned a few weeks ago as did GTI (makes electrodes for steel manufacturing). RBN was meh on guidance. NTAP warned. WHR, which I lovingly dub "Flush" for a ticker symbol, and MHK, which I lovingly dub "Scalp" for a ticker symbol, have warned repeatedly. It's all coming apart. ---------- B(ern)ank(e) 2011-12-09 09:17:30 Permalink
Genesis Posts: 130779 Incept: 2007-06-26	Quote: Especially since the people who have been prudent over last decade are screwed while the imprudent have in many cases walked off with expensive new cars/ trucks and livin in places 2x nice as us and paying no mortgage- at least I see it in my town. Gen, the retail climate in my inde pharmacy is abysmal. Also there was an article a few days back how everyone is looking for super sales and 50 off is 'not good enough' for shoppers. People don't think how much it costs to run a brick and mortar store. Read that again. You're contradicting yourself. Most of the people involved were NOT prudent. Spending all you make is not prudent. Spending more than you make is really not prudent. If you WERE prudent and yanked it in 07 or early 08 you're fine. If you didn't buy a bubble house you're fine. Yes, you may have hard times, but if you have your standard-of-living beyond "hand to mouth" because you were actually prudent you'll get through this. People don't care -- and shouldn't care -- how much it costs to run a store. The consumer only cares about one thing -- what you provide for the price charged. That's it. That's the essence of the value equation; HOW you achieve it is up to you as the storeowner, and none of the customer's business nor his problem. ---------- I don't care* if it makes sense -- only if it makes money. -- Me* Bank (n): See scam, fraud and theft. *Eat a bankster -- they're low-carb.* *What part of "shall not be infringed" was unclear?* 2011-12-09 09:19:00 Permalink
Genesis Posts: 130779 Incept: 2007-06-26	Drench: Looks like a coat to me ---------- I don't care* if it makes sense -- only if it makes money. -- Me* Bank (n): See scam, fraud and theft. *Eat a bankster -- they're low-carb.* *What part of "shall not be infringed" was unclear?* 2011-12-09 09:20:05 Permalink
Ct1977 Posts: 231 Incept: 2009-08-13 East Hartford, CT	I was wondering when the margins in general were going to take a hit. Didn't think it would take this long to start showing up in earnings but it certainly is now. Add in the fact retailers basically had to give away their goods and how long can it really be before the brown stuff hits the fan..... 2011-12-09 09:27:26 Permalink
Rd Posts: 470 Incept: 2008-02-27 Long Island, NY	One thing I don't see anybody talking about until yesterday, a CEO of a hotel chain on CNBC mentioned that there was a lot of demand pulled forward for infrastructure/inventory for this year 2012 due to tax breaks(Depreciating 100% this year instead of over many years, 2012 I think he said only 50% depreciation.) His firm made a massive IT infrastructure build this year for that reason - so think about the impact to Corporations, they are doing good SALES (really pulled forward demand) and their COSTS are higher (So tax expense is down, therefore in following years they will pay more in tax's) He is afraid of what will come next year 2012, even if congress extends the tax breaks maybe all the forward demand has been extinguished. Maybe this sets up a good short on IT infrastructure. 2011-12-09 09:31:00 Permalink
Flappingeagle Posts: 1229 Incept: 2011-04-14	Quote: I expect a very profitable 2012 -- and not on the long side either. Rephrasing what you've said before, you can't win a bet on the end of the world, if you are correct, you can't collect. Therefore, be careful on how much 'profit' you wish for, if you get to far into 'very profitable' you will find you've transitioned into 'lost everything because I could not collect.' Flap ---------- Here are my predictions for everyone to see: S&P 500 at 320, DOW at 2200, Gold $300/oz, and Corn $2/bu. "You can't build a house of cards on a shaking table." - Tony Johns The January 2015 AMZN put at $130 (cost $4.25) will be a winner. 2011-12-09 09:36:56 Permalink
Stonedog Posts: 2080 Incept: 2008-05-29 New Jersey	Karl, totally agree with you post... I never thought that we'd make it through 2009 - 2011 without a complete and utter collapse. Of course, I did not know back in Janaury 2009, the lengths to which TPTB would go to in order to goose the economy to make people believe that things were "recovering"... while we here at the TF knew better (with the lion's share of the credit for knowing this going to yourself). I won't recite the laundry list of government/central bank programs and interventions... but I knew early this summer that the game was just about up and to me it was more or less confirmed with the market actions in August. I've been saying that 2012 will be the year the $#!t hits the fan re: the world economy. There are far too many negative reports out there... But final confirmation only came when the various central banks recently cut the rate for the swap lines. That spoke to me of utter desperation as does this action by the Europeans. It's game over. Thank you for playing... ---------- "I would characterize my professional disdain as more of a professional contempt for their [Central Banker, Banker and politician] economic and financial policies, priorities, presumptions and prescriptions." - Lauren Lyster on Capital Account for Friday June 16, 2012 "All the stimulus, the bailouts, the quantit 2011-12-09 09:37:04 Permalink
Nma Posts: 121 Incept: 2010-03-16	What level donation gives a user access to your trading positions? 2011-12-09 09:43:33 Permalink
Rvacha Posts: 8295 Incept: 2008-10-03 Cleveland	+1 Rd - I think that is a big story to watch TXN IS a good indicator of what the real (global) economy is doing. That doesn't mean the markets will agree on a short term basis though. Additionally TXN doesn't employ a bunch of clueless idiots - if they are seeing what they think are a series of turning points that keep evaporating IMHO it simply means many others aren't getting it right either - and probably don't fully grasp how wrong they've got it ATM ---------- "I suggest you panic." - Hugh Hendry 2011-12-09 09:44:27 Permalink
Tm22721 Posts: 976 Incept: 2008-01-09	Quote: overall "bullish" markets don't behave this way Bullish is only one letter away from bull***. ---------- The country is terminally ill and IT JUST WANTS A PILL. The only way up is down. 2011-12-09 09:44:27 Permalink*

Drench wrote..

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