The Larry Kudlow interpretation of that stat would be: “THE FINANCIAL SECTOR IS BOOMING!!!”

Matt

you wrote: “On Fast Money last night, they were discussing the dramatic surge in XLF call buying, which was considered to be wildly bullish. I consider it to be wildly foolish if the buying was based upon Thursday morning’s GDP number.”

If you believe the GDP report, buying XLF makes sense: “Domestic profits of financial corporations increased $24.7 billion in the second quarter, compared with an increase of $37.3 billion in the first.” (http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm) There seems to be something broken in the banks’ own reporting. They get the sign wrong…

Gustav is a monster now, but it won’t hit Florida, though Hanna looks like it might. My building is connected by underground wires to a Florida Power and Light substation, so my power is pretty steady. When the substation gets knocked out, it’s pretty high on this list for repairs, so even then, I’m usually powered up in no more than a day.

Matt

I think a category four hurricane is too much for the electricity infrastructure in Florida?!
Hope to hear from you soon.

“DATA FROM AN AIR FORCE RECONNAISSANCE AIRCRAFT INDICATE THAT
GUSTAV HAS CONTINUED TO STRENGTHEN AND NOW HAS MAXIMUM WINDS
NEAR 145 MPH…230 KM/HR WITH HIGHER GUSTS. THIS MAKES GUSTAV AN
EXTREMELY DANGEROUS CATEGORY FOUR HURRICANE ON THE SAFFIR-SIMPSON HURRICANE SCALE.”

I’ve been watching hurricanes very closely for 14 years from here in Miami, and the forecasts seem to be getting more and more accurate – especially the three-day forecast. So, I think the Gulf Coast will definitely take a hit from Gustav. However, the one thing that you don’t hear discussed very often is how fast Gustav will be moving when it does hit. A few years ago, a giant storm sat on top of Cancun for 2-3 days. That’s a nightmare. But Gustav looks like it will race through the Gulf very quickly, and that will minimize the potential damage.

Matt

David Rosenberg at Merrill Lynch forecast earnings at 68 USD for 2008 and 63 USD for 2009. I think he is too optimistic for 2009 as energy companies’ earnings will fall more due to lower prices and continued cost pressure.

Add on recessionairy and gloomy multiples and we have a long way to go before the bottom-fishing can commence. Bunker down folks.

Random musings:
We had now two times a pattern of 3 days up then one day down. This time the down day did not fall as much as last time. If were going up next week it will from a higher level.

Almost everyone I follow expects more volatility beginning next week…

On Thursday the market was shot up with the futures – you see that in the European intraday charts. The stock up/down pattern that day looks more like a short squeeze / coverting of positions. No real buying interest if you ask me.

Don’t expect a recovery anytime soon. I can’t find the graph now but analysts’ expectations are way, way to optimistic for Q1/09 and the following quarters. The world economy is a tanker, it moves slowly but it has decided to slow down. So will earnings.

The credit crunch is alive and well. Ignore positive news as long as the banking system does not show signs of healthy expansion. Too much money is spent to patch up mistakes of the past, not to finance new growth.