Monday, March 16, 2009

About the Cramer Stewart Dust-Up and The Power of Blogs

I watched all of the Stewart routines dealing with CNBC along with the interview with Cramer. First -- I don't watch Jim Cramer. I barely watch CNBC. I'm a big fan of Bloomberg. CNBC, well, sucks. I find their reporting to be sub-par and their analysis to be shallow (at best). Bloomberg is a far better product.

That being said, I should also add that I think all analysts are worthless. Consider this from the latest Barron's:

Click for a larger image:

Simply put -- no one did well long-term. And everyone got destroyed over the last year. That means no one -- NO ONE - - advised their clients get the hell out, shift into something safe and wait it out. Part of the problem is none of these guys knew we were in a recession. Consider this:

Back on Oct. 1, analysts predicted Q1 earnings for S&P 500 companies would rise 25.7% vs. a year earlier, according to Thomson Reuters. By Jan. 1, they were predicting a decline of 12.5%. Now the forecast calls for a 34.1% plunge.

That rights -- 9 months into a recession, analysts thought that earnings would increased 25.7% y/o/y. That's how clueless these guys are.

And no -- there were plenty of people who called the problem.

A look at my writings indicates that I wrote an article on November 22, 2007 which concluded:

1.) The multi-year charts indicate the rally is still on, although the high volume over the last year may indicate we have seen a selling climax.

2.) The year chart shows traders have a hair trigger, and will sell on high volume.

3.) The Russell 2000 has broken a 4 year uptrend and is nearing a bear market sell-off point.

4.) The Transports are in bear market territory, preventing a Dow theory confirmation.

5.) Market breadth has been declining, especially on the NASDAQ during its latest rally.

6.) Investors are moving into Treasury debt, indicating a flight to safety may be going on.

This market has some serious chinks in its armor. The Russell 2000 and Transportation average are cause for serious concern. So is the lack of market breadth during the NASDAQ's latest rally and the Treasury market rally. If only one of the preceding facts was occurring we could dismiss it. However, with all four occurring at the same time, it's important to take a close look at the market to see if a rally can continue.

On November 24, I wrote the following:

At the end of every week, I go to the performance function to see how the major ETFs (using the XL__ series) have performed over various time frames. I look at returns for the following time periods: year, 180 days, 90 days, 30 days, 10 days and week. What I'm looking for are general trends to see how money is shifting in the market. I then look at the charts to see what they are saying.

Here are some observations from that analysis.

1.) The XLEs and XLBs -- which were a prime driver of the latest bull market -- have stopped advancing. This may be a sign that traders who rode these sectors for most of the year are getting out and taking profits.

2.) The financials -- which comprise about 20% of the S&P 500 -- have a negative return for all the time periods.

3.) Consumer discretionary has a negative return for all but one time frame (yearly).

4.) Over the last 30, 10 and weekly period, the best performing sectors are utilities (which performed best over the last 30 days) and consumer staples (which performed best over the last 10 days). Energy popped over the last 5 day period, largely thanks to oil's rally.

In short, it looks as though traders are taking profits in the previously strong areas of the market and are shifting those realized gains into safer, recession resistant areas of the market.

And I am far from the only one who was concerned. Barry at the Big Picture, Mish and Calculated Risk all wrote about their concerned about the economy and the markets as a whole. If you had read the blogs and avoided the financial channels and then acted on the advice you would have done just fine.