Bottom-Fishing

Construction on new homes in the US fell 14% in December to a seasonally adjusted annual rate of 1.01 million, the slowest monthly building pace in more than 16 years, the Commerce Department reported Thursday. Housing starts for single-family homes in the West fell 16% to the lowest level since the data were first collected in 1959. Building permits fell 8% in December to a seasonally adjusted annual rate of 1.07 million, the lowest since May 1993. For all of 2007, housing starts fell 25% to 1.35 million, the lowest annual total since 1993. The question is whether one sector can bring down the economy. The property side is just playing out its excesses, to me, any rebound is and will be temporary in nature.

Then we had another conflicting signal, the seasonally adjusted number of people filing initial claims for state unemployment benefits in the US in the week ended Jan. 12 fell to 301,000, down 21,000, to mark the lowest level seen since Sept. 22. Initial claims have now fallen for three consecutive weeks. The four-week average of new claims fell by 11,750 to 328,500 -- the lowest level since late October. The previous week's level of initial jobless claims was unrevised at 322,000.The four-week average is considered a better indicator of the health of the nation's labor market because it smoothes out one-time events such as holidays or strikes, analysts say.Compared with the same time last year, initial claims are up about 5%, while continuing claims are up about 11%. Its too early read too much positives into the job claims improvement. On a year on year basis claims are still higher.

Initial claims ranging from about 300,000 to 325,000 are consistent with healthy job growth, economists say. Readings consistently higher than 350,000 would signal significant weakening in the labor market. Hence market watchers are still neutral on the jobs data.

From the chat room, I often see comments that the Dow futures are positive and hence indicate recovery. Futures during Asia time zone or after market closes in the US should not be read in such a one-dimensional way. Players of futures largely involve traders who were already short or long certain stocks. Depending on their risk appetite, they could lock in gains, take some losses, or hedge their shorts - with so many variables, it would be very shallow to regard premarket futures as a directional guide with confidence.

My prognosis, we are in for a difficult period, not just a difficult week, with or without an election.

Comments

solomon said…
It is no difference here in Bursa. some key players are also believe to control the index.

I play the contrarian and believe the market should bottom out soon. a mild recession is necessary. US now is adopting the same 1997/98 Malaysia measures by having stimulus package.

I prefer to hold on defensive stock like utilities (TNB and water stocks). Avoid plantation as valuation is overly bought and financial as economic will slow the next couple of months.
Salvatore_Dali said…
why do we have to hold stocks all the time... there is this thing called cash, and now cash is king, defensive or not, i don't want to be holding stocks in markets coming to terms with global inflation and a slowdown at the same time, i think its called stagflation ... stay in a strong currency, thats my view
bantersy said…
dali,

not stretching a longer term, focusing on short term, do you think mth end FOMC will stimulate the market and fuel some short rally?

the touted aggressive rate cut in the upcoming 1Q meetings, can it change the environment to more neutral from a bearish stance?

wkend coming, enjoy dude!
ikanair said…
The unholy trinity
1) US subprime
2) US consumer
3) Shanghai bubble

1st one nearly full blown, just wait for the 2nd and 3rd
there ain;t any bottom till shanghai crash.
Salvatore_Dali said…
the month end rate cut by the fed has already been discounted unless its more than 0.5%, it will be suicidal to do more than 0.5%, then the USD could lose 5% in a day ...
yau said…
i think m'sia market cannot touch. but hong kong is a good buy level at 24000 points and singapore at 3000 points. i think can buy singapore stocks such as china XLX, yangzijiang,cosco, china hongxin. these few stocks are in good buying prices. my advice, say goodbye to m'sia market even election also cant help much
Tony said…
Hello Dali (excuse the pun). I am new to your blog. Most of us seem to agree all markets should head south and KLCI should do so at least post election. So what do you think of A KLCI put warrant? SGAEPW080630 at 34 cents (SGX) Ratio of 200. 6 months to maturity.
sopsky said…
This comment has been removed by the author.
bantersy said…
dali,

during asia time, the dow futures is thinly traded and the correlation between asian indices seem to cross link with one another. the bullishness in asian markets will have an influence on the futures index as well. these two days, the futures were pointing to a sky rocking high only to be materialised with a whopping drop especially yesterday when many thought big ben testi in congress help come out with something for markets. the vol for futures in dow is so thin that it should not be taken seriously like what you have mentioned.
bOcyOGL said…
Hi, I am still wondering how you guys bought overseas stock/etf/funds. Maybe I didnt do my homework.

Any comments on gold? I am waiting for USD 1000. Stagflation seems no good news for gold.. or not?

Enjoyed reading your posts Thanks
bantersy said…
dali,

outlook is negative, how about oil coming down as well. it can't be standing high while the rest are coming down.