Can't buy stocks, can't sell 'em

Economic fundamentals continue to weaken, making the long side unattractive. Yet the prospect of more money printing makes the short side downright dangerous.

By Bill_Fleckenstein Jul 20, 2012 2:42PM

Market fundamentals were dealt another knock early this week by Monday's retail sales report, which was negative for the third month in row, both for total sales and sales excluding autos. According to the people at The Liscio Report, who do terrific work, streaks like this are rare.

 

Since the ex-auto series began in 1967, there have been only five instances of three-month streaks in both series. Four were in 2008; the most recent results mark the fifth. Liscio pointed out that three-month streaks in either series are also rare. Since 1947, there have been only 29 streaks of three months of negative retail sales (i.e., just 3.7% of the time). However, all but two of those have been during recessions, or within three months of one.

 

All the news that makes it fit to print

As the Liscio folks said, "In other words, this is a worrisome sign," and I obviously agree. It indicates that the economy is either in a recession or close to one (we really barely got out of the 2008-09 collapse), and the pressure continues to build on the Federal Reserve to do something about it.

 

There was a chance we would get some hints this week during Federal Reserve Chairman Ben Bernanke's congressional testimony on Tuesday, but he just pointed out that the economy was weaker than the Fed had previously thought, and that he was prepared to act. But he gave no indication what he might do or when he might do it.

 

Given Bernanke's air ball, I turned my attention to how stocks behaved in the wake of earnings reports. (I don't really count the financial stocks that have reported as any kind of an indicator, because they are all make-believe in the first place.)

 

Is Intel trying to tell us something?

 One of the companies I keep an eye on, Intel (INTC), reported Tuesday night and managed to beat the number for this quarter, thanks to an inventory build, but it lowered guidance for next quarter. Frankly, though I have no position in Intel, I was surprised that earnings weren't a little bit worse, and I suspect the lower bar it has set for itself will not be low enough.

 

As for the stock, after briefly trading lower both Tuesday night and  Wednesday morning, it closed about 4% higher on Wednesday. That seemed to inspire confidence across the tech sector, which boosted the Nasdaq ($COMPX) and pulled the Dow ($INDU) and S&P ($INX) higher as well.

 

Then Qualcomm (QCOM) and F5 Networks (FFIV) both lowered guidance, and both rallied anyway. Meanwhile, IBM's (IBM) revenues were light again, but its earnings were magically better -- as usual -- and it gained 3%.

 

Money, money everywhere, and not a stock will sink

The action in those four stocks demonstrates that, in a money-printing environment, it is extremely difficult to succeed on the short side.

 

There are various and sundry stocks that have declined "painlessly" -- e.g., Research In Motion (RIMM) -- but from a practical standpoint, it is nearly impossible to have any serious exposure unless you are a sensational trader. Perhaps the recent tech action was just shorts being squeezed, and negative news will shortly become negative news, but I don't think that dilutes the point that, despite poor macro and bottom-up fundamentals, short-selling has never been more difficult.


54Comments
Jul 21, 2012 2:21AM
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Easy on Fleck's for being a pessimist. You got to call em' like you see em'. Optimism about our  current economy is either denial or delusion.

 

We got a massive train wreck, folks. The fiscal cliff looms dead ahead. What we've done to get back on track the last four years is a bust.  Europe is crashing and burning. Food, gas, healthcare costs going up. Unemployment rising again.

 

Deja vu. Going into fall 08 all over again. Maybe worse. FORWARD?

Good luck with that.

Jul 21, 2012 4:45AM
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The whole mess were in can be contributed to the Federal Reserve which is as Federal as Federal Express. It's the head of a privately own company that heads the banking industry(cartel). Who got tarp? who gets bonus while economy flounder? not one member of congress Dem or Repub challenges this because their all on the take. They could care less who you are. So all here will watch their money disappear one way or another.
Jul 20, 2012 8:17PM
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That is exactly the problem and where is all the money coming from ....................Thanks Ben and Timmy

Jul 21, 2012 11:47AM
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In other words, Obama and his sophomoric economic policies, coupled with his insane spending of money whose only reality is of being tabulated on a sheet showing how much further we just went in debt, have forced all of us who have actually worked for a living into a position of never having the ability to retire.  This is especailly true when we look ahead to the debacle of Comrade Obama Care, where my wife an I will have to pay for others health care as we pay for our own, which by the way, we planned for and can do because we got out of bed in the morning all our lives and went to WORK.  We aren't democrats.
Jul 20, 2012 8:25PM
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Kind of makes you wonder why they're making shorting difficult, perhaps it's because they want everyone in on the brighter side of things before the rug is pulled and we go to crap again?

Spanish bond rates are going close to all time highs, if they reach 8% lookout (currently 7.267%). Europe has been quiet last few days, almost too quiet, and then there's China. China is now rethinking thier posistion on thier own growth and will probably go that route, which makes me wonder if thier 7.6% growth rate was accurate or not..

And then there's the fed whose only real play is to bring interest rates to 0% so the banks are forced to find people to lend to so they can make a profit, opposed to the .25% they are making now on thier money by hording it.

With all the head winds we're facing, perhaps going short is'nt a great call, but I can't see investing money either, perhaps cash is the best posistion to be in now?

Jul 20, 2012 10:22PM
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You want to talk to me?  I know that  the alliteration in "pessimism" must have confined and confused you.  I can do it right now and off the top of my head.  He is hardy lesser lthan "teleprompters"  ,,, ah, who is the President?   I would not go there.  What he has said is coming down and all is "lag" time.  We 'bandaide"  ..... emphasis on aide.  Did you get that?  Are you that daft not to see what is going on?  We are not what we were.  We are dumber in all cultural ways.

Yeah, you think about it.  Press your button the right way as if give a darn.  We .... as a nation are in serious trouble.  The "markets" are insignificant.  They have been. 

Jul 23, 2012 2:02PM
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With all the negative news such as double dip recession in Europe and here in America, depressed housing and job market in US, inflation, etc. there is no reason for the market to not be down below  10,000.  Why it is only down about 120 points today only validates the power of manipulation.  I say scr*w Wall St and those involved with legalized gambling casino that is using other people's money and shame on our government for allowing this robbery to continue.  Companies will continue to layoff people, close plants, outsource departments, reduce benefits etc. all to make the bottom line which analysts continue to lower their expectations to give the illusion things are better than they really are.  We have an economy built on lies, deception, accounting loopholes, greed, cheating and printed money and that is a recipe for disaster.  Just wait and see...it will happen. 
Jul 22, 2012 8:09AM
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30 stocks that will drop like rocks really soon-- the Dow. Have you given any consideration as to who IBM's customer is? It's business. IBM is one of the Dow's leading stalwarts but as the economy slows down, it will see it's stalwartiness fully disappear. Seeing as it sold all of it's tangible assets a decade ago... what remains? Trademarks, copyrights and patents... oh my. Caterpillar bet on the wrong farm. Instead of leading us into the future by centralizing civilization in energy-efficient cores connected by mass transit or alternative fuel vehicles, it helped build bad dams in China and broke ground for new Wal-Marts that fizzled in BRIC nations. Apparently, we're going to increase our intake of Fast Food- (two other Dow members) as these stalwarts are dethroned. I'll pass on obesity-prompting sodium-laced nutrition-less diet and concentrate on my garden sans the GMO frankenstein fruit. I'll also pass on Facebook, Twitter and eyesight-narrowing handheld devices. I already passed on banks and look forward to the sum total penalties fines and prison sentences that BETTER happen to bankers worldwide. It's about companies with stable employment ranks that make it here and don't have hired-in executives earning 500 times what the workers get. Fair isn't a barge being rowed by slaves, it's an all-encompassing effort with the focus on quality, not quantity or how management will be screwing with the underlings today.  

 

Reform... it's the new buzzword... hope it's a great contagion. Legalese? Never again. Notably, the business world can add deception and fraud into a contract and it is binding. Let's not allow it any longer. You flirted with 13,000 Dow components... but you sold your assets and don't mean much in the scheme of current circumstances. May you drop plenty, perhaps down to 120 this week and a new era of Man sans Self-Proclaimed Elite, restore Pride and Honor over New World Order.

Jul 21, 2012 12:54AM
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Don't want to buy stocks, then I won't have to sell them. What a f*cking waste of time.
Jul 23, 2012 7:46AM
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"great post v_l (hope you meant 12,000 on the dow and not 120 - yikes!). love the analysis (which i think is spot-on),"

 

No typo... you have to remember how egotistically ignorant they are at the top. Having terminated all the viable personnel, sold the secrets to foreigners, abandoned the buildings and auctioned off the machinery and equipment... what specifically comprises a Dow component today? Say- nothing- and be spot on. The markets are leased office space, phony executives, fiat gambling in inflationist style financial crap shoots. Europe is dead. Two-thirds of our real money is buried in those bonds. Default will collapse all other bonds (that never fulfilled what bonds are meant to) and compromise all of the derivative contracts. Both bonds and contracts were written using a False LIBOR Index, so the claim of bogus instrument is accurate but the ability to recompense or compensate no longer exists. Everyone 65 years old or older will get a piece of paper saying: We Owe You but can't pay you for 50 years. They deserve that promise for having caused this whole economic collapse with greed and ignorant claims of Elitism. All this said... everyday we waste not creating a sub-economy for the inevitable plus one day... will take that much longer to organize on the day we crash. And we will. There is no such career as Financier. No need for collusion among money handlers and no use for complex financial instruments that exist above and dysfunctional to the real economy. Where do you go when you've screwed the world? You BETTER already have your ticket. As for those of us resigned to digging in dumpsters... hate it. Get enraged by having to do it. Spark up your skill sets and intolerance... both are coming into vogue as soon as this week.

Jul 21, 2012 3:31PM
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Oh and bookmark this prediction - Obama loses by 4%.  Someone leaks his college records and that does it.  He certainly can't release them as he knows it spells doom for him. The birther thing is probubly a canard.  The irony is that claiming to be from Kenya when it suited his needs has now become a liability.  "Oh what a tangled web we weave when first we practice to deceive" (Bacon). 

Jul 21, 2012 3:23PM
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He's right - with rich uncle benjie panting to pump more into W.S.'s coffers, broad short selling makes no sense. On the other hand, he can only pump it so far and anemic earnings won't warrant further pps increases. So the market has settled into an inflated  morass until Euro implodes then all hell will break lose.  Good thing he promised not monetize the debt eh? 
Jul 21, 2012 10:13AM
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Watch retail sales numbers for back-to-school families. If those retailers come in with bad reports, it means the credit cards are maxed and we are indeed in full recession mode by the end of 2012. Vote Obama and throw out this worthless Congress and stop this madness!!!!
Jul 21, 2012 4:56PM
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"I personally don't see this being like either '08, or 1929, difference is now people have more guns, and have lost the ideals that helped get us through 1929. That to which I speak is helping one another out, people will be less likely now to give a stranger A meal, instead that stranger will be given a ball of lead. But this is our cultural shock of having A global economy"

 

Indeed. But you have to consider how far we got distorted when wealth tried to anchor us in the 20th Century. Guns allude to psychotic behavior. I suspect they will play out short and volatile, then go back into the darkness where they can be delusional without contestment. The hard part is not being a victim. In the book: Business Plans For An Uncertain Future... it refers to the fact that things will reach the point where change MUST occur and it does, regardless of what opposes it. Keep your hat on, we are nearing that time.  

Jul 22, 2012 6:58AM
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When do they print an article showing where Romney's donors live? Bellagio casino owner- $35 million and counting.
Jul 21, 2012 8:35PM
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yea for now, but as soon as we rid ourselves of that pig marxist bastard obama, the stock market will see a boom like it's never boomed before!!

 

Romney + obama = Reagan/carter redux, thank GOD!!!

Jul 20, 2012 9:39PM
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I think the king of pessimism has finally got himself caught in an endless loop.

 

He's pessimistic on short-selling, which means he must not be pessimistic on going long.  But he's still pessimistic on everything, so he must not be pessimistic on going short.  But he's pessimistic on short-selling, which means he must not be pessimistic on going long. But he's still pessimistic on everything, so he must not be pessimistic on going short. But he's pessimistic on short-selling, which means he must not be pessimistic on going long. But he's still pessimistic on everything, so he must not be pessimistic on going short. But he's pessimistic on short-selling, which means he must not be pessimistic on going long. But he's still pessimistic on everything, so he must not be pessimistic on going short. But he's pessimistic on short-selling, which means he must not be pessimistic on going long. But he's still pessimistic on everything, so he must not be pessimistic on going short. But he's pessimistic on short-selling, which means he must not be pessimistic on going long. But he's still pessimistic on everything, so he must not be pessimistic on going short. But he's pessimistic on short-selling, which means he must not be pessimistic on going long. But he's still pessimistic on everything, so he must not be pessimistic on going short. But he's pessimistic on short-selling, which means he must not be pessimistic on going long. But he's still pessimistic on everything, so he must not be pessimistic on going short. But he's pessimistic on short-selling, which means he must not be pessimistic on going long. But he's still pessimistic on everything, so he must not be pessimistic on going short. But he's pessimistic on short-selling, which means he must not be pessimistic on going long. But he's still pessimistic on everything, so he must not be pessimistic on going short. But he's pessimistic on short-selling, which means he must not be pessimistic on going long. But he's still pessimistic on everything, so he must not be pessimistic on going short. But he's pessimistic on short-selling, which means he must not be pessimistic on going long. But he's still pessimistic on everything, so he must not be pessimistic on going short. But he's pessimistic on short-selling, which means he must not be pessimistic on going long. But he's still pessimistic on everything, so he must not be pessimistic on going short. But he's pessimistic on short-selling, which means he must not be pessimistic on going long. But he's still pessimistic on everything, so he must not be pessimistic on going short. But he's

Jul 21, 2012 5:57PM
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Hinkley, you vote Republican and blame Obama for mad spending, but have you ever checked the facts, lets see who the mad spenders really are.

Reagan grew government 6.8% per year X 8 = 54%

Bush grew government 7.7% per year X 8 = 61%

Clinton grew government 3.5% per year X 8 = 28%

Obama is growing government at 1.4% per year X 8 year projection = 11% He's the most frugal President we've had in 60 years, if you want to return to the mad spending of the republican years, fine, but you you can only blame yourselves for our children's debt. Until you stop being part of the problem and vote responsibly for Democrat's our Country has no hope.

Jul 21, 2012 10:09AM
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The problem with this economy is the right-wing GOP conspiracy to fill our schools with religion instead of science, technology and money-handling skills for our children. If you think their agenda is working just read the many blogs below with spelling errors by our right-wing bloggers. The American economy is in trouble because 99 percent of our citizens have once again maxed out their credit cards and are living beyond their means. I believe we are in recession here. In Europe, totally different story as they save more and many European companies are reporting record earnings this week. If we don't start addressing our failures and begin to retrain our children's brains, we are creating a slave race in this country that props up the one percenters forever. It doesn't help that the GOP-controlled Congress has done absolutely nothing in the last 16 years to help this economy. Their primary focus seems to be religion and aiding and abetting illegal immigrants for their votes. Republicans don't want our working poor here to have socialized medicine but they comp the bill in full for illegals. What are we doing here?

Jul 21, 2012 9:08AM
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All the wealthy should be required to pay cash money on the budget  deficit. Even people who have thirty thousand dollars in savings, should be required to pay say,  five  thousand dollars cash. To pay the budget deficit off.

This would be much better than QE3.

The Feds could do other things along with this cash money all they need to do is use their imagination.

Then  the Federal Government ,   should pay around 17 million,  to twenty million unemployed and low income, people,  around 600.00 dollars,  per week for two years tax free, only take 20 or 28 % from the top, and give that to the States each week as most needed. this will stabilize  the States,  and create jobs, and demand, and tax revenues,  this money should not be paid back. Allow these people to work, but take the taxes from what they earn. Also stop "ALL" aid to them during these two years, to save money, no food stamps, or any other aid for two years[ The ones who need too  could apply later, under a new application showing,  why they need it, that alone,  could save a lot of money later.All this would create demand, and save billions of dollars, in many different way`s., less crime, food stamp money, helping business to do better, etc.etc. It would even save money by these people being able to pay more for health care, saving money on what would have been spent to subsidies them.

The markets would go up! All business would make money, the States would make more in tax revenues, the deficit would be paid, it would give a two year window not to raise taxes, or to leave the taxes, as they are for two years, they should be able to plan this, and do it more effectively.

One thing I will say! this plan would cost around a trillion dollars, to do, but if we, go into another  recession, or worse it will cost much more than that, and not just in money, it could take many years to come out of the next recession, and set  the country back years.

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ABOUT BILL FLECKENSTEIN

Image: Bill Fleckenstein, MSN money

This column is a synopsis of Bill Fleckenstein's daily column on his website, FleckensteinCapital.com, which he's been writing on the Internet since 1996. Click here to find Fleckenstein's most recent articles.

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