Friday, September 28, 2007

Merrill Lynch

I thought it might be a good idea to touch on Merrill Lynch again. Dylan Ratigan can repeat it again and again that what's good for GM is good for America. Now that may have been true 50 years ago but today it is less so today. I know 1 in 12 jobs here is auto related according to many sources much smarter than I but what I do know is that as goes Merrill so goes the market. What we are seeing now is a MAJOR NEGATIVE DIVERGENCE between MER and the overall market.

The mass media and Wall St. pundits can ignore and cover it over but the fact remains that as the overall market has raced back from the abyss Merrill has floundered down here, looking worn and tired. Now maybe it is making a large base from which to catapult higher shortly. And maybe we are going to get another rate cut from uncle Ben, with the markets near all time highs !

There is a rot under the financials that is growing worse by the day. Waiting and hoping that these toxic paper positions will recover is folly of the first order. The mortgage re-sets are coming, and as the consumer retracts, much slower economic numbers will be the order of the day. Then instead of Merrill playing catch up with the overall market the reverse will be true. With the market playing catch up to Merrill, on the downside.

I wish I had better news for you but the weight of the factual evidence points to this. My question for the ultra ardent bulls is this, do you really want a stock market at 16,000, 18,000 or 20,000 if it means a dollar at 60,50 or 40. If so you should consider investing in Zimbabwean equities with double digit appreciation weekly if not daily. Forget the fact that in Zimbabwe, the former 'breadbasket of Africa', there is nothing on the grocery store shelves and prices on consumer goods(if you can get your hands on them) re-set every couple of hours. Mark my words, lower rates will be the death knell to equities over time and if devaluing the currency was the path to properity Latin America would rule the globe. Good trading to you all.


Flagg707 said...

Thanks for the Merrill Lynch chart. I had no idea it had broken down so badly. Should get very interesting once this blow-off to the upside stalls out at 14,600 or so (or higher, I guess...)

Harleydog said...

Cannot tell how high this can go as we are in uncharted(no pun) territory. to quote Gary Shilling 'the market can remain irrational far longer than you and I can remain solvent' keep losses small so when the broader tape starts to roll with individual issues which already have, we will be there. thx for reading