A Bull Is Born, 2009 34 comments
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Paul Price Tribute: My friend Paul Price is calling for a Bullish 2009.
Don’t Call it Early
Searching Google (GOOG) I found some comparable market calls:
Welcome to the Bear August 12, 2007
False Bottom 1 March 16, 2008
False Bottom 2 July 30, 2008
Why I think we are in a Bull Market
Reason 1. Based on Vanguard’s definition of a Bear Market, where a 20% decline in major indices indicates bear market territory, it makes sense to me to have a 20% similar appreciation indicate the death of Bear 2008 and the birth of Bull 2009.
So, from the bottoms of November 20th 2008, how far have we come?
| S&P 500 | Dow30 | |
| 8-Nov | 752.44 | 7552.29 |
| +20% | 902.928 | 9062.748 |
| Today's Close | 931.8 | 9034.69 |
Looks to me like we’re breaking the 20% barrier. Doug Short’s been looking at this against the previous Bear Markets.
click to enlarge
Reason 2. Lots of investors are looking for the return of their money and not the return on their money. There’s been a bubble in US treasuries that is screaming negative expected inflation over the next 10 years. My best guess is that since the Fed has pretty much doubled the supply of dollars… inflation will happen. The cause of the bubble can of course be explained by game theory, as can most of the manic depressiveness of market cycles.
Reason 3. The market rallied friday and Cramer didn’t say sell into the gains, even though it rallied on insignificant volume. There’s a lot of money sitting on the sidelines. Game theory indicates that sidelines money will come into play ball when they start to think that they’re going to miss the boat.
Sidenote. There’s been a lot of talk about this thing called the January Effect. Studies show that when an effect is made public, it ceases to exist. The reason we’re seeing this effect this time is not because of the old story of year-end tax purposes. We are seeing an inflation of horror story hedge fund sell-offs, that is all. I don’t like it that we might be in a Bull Market. I was hoping to see the S&P 500 and DOW fall a lot further than they have. If they start falling, I’ll start playing negative, but until then the outlook is positive.
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This article has 34 comments:
Looks like a good time to stock up on puts.
Even admitting that inflation by itself is a bullish force on stock prices, with earnings in the toilet and borrowing difficult, I'd rather invest in commodities.
One area he is right on is treasuries. They are in a bubble. But bubbles can go on longer than those shorting them can stand to see their money being ripped away. I believe the author is right in this regard, but I notice he didn't say anything about the timing. Eventually, he will be right, for sure.
Basically, most investors rabbit on about yields but most forget that these are calculated on last year's earnings which may bear little resemblance to next year's earnings. The current bounce is clearly a Bear Rally. The market has dropped by 40% but there is total confusion as to whether that is massively too much or too little.
The market needs time to work out what the wealth generating capacity of the commercial sector is going to look like. The recent bounce does not reflect a recover in the wider economy or even the sensing of the green shoots of recovery. It just means that some thing has been oversold, so they are getting back in. This reaction is common in the early stages of Bear Market, but is generally misguided. It is based on the assumption that it will soon be business as usual. However, is we take 2006-07 as the norm, it ain't ever going to get back to business as usual. That model of capitalism has been shown to have failed and won't be seen again in most of our lifetimes. Furthermore, this recession has been triggered by fundamental realignments of global financial power. Wall Street is never ever going to stand astride the globe in the way that it previously did.
The only Bull roaming Wall Street at the moment is depositing huge piles of steaming dung all over the side walks.
Many seem to be pinning great hopes on the coming stimulus, which from the plans now known seems to be mostly paper inflation, and this may even create more problems than it solves.
Everyone knows the economic fundamentals suck [to use the technical term] but few people have been looking at the valuation metrics compared to past bear market bottoms.
See the linked article:
seekingalpha.com/artic...
Analyst are hunting for divident stocks, why is not a profit companies?
Naturally, the market are in the trading range for a month then it uses to have some moving or bouncing because of unpatience and greedy.
Greedy is the opportunity. I believed the market could rally for few days then it will correct to what it uses to be.
No facts of economic improvement.
2. new year rally...possibly
3. obama rall..al..al..al..ly.....
4. oh...so it was a bear market rally...probably
2. new year rally...possibly
3. obama rall..al..al..al..ly.....
4. oh...so it was a bear market rally...probably
On Jan 04 09:49 AM Herbert Hoover wrote:
> Everyone's a bull today. Buy - Buy - Buy!!!!!!!!!!
>
> Looks like a good time to stock up on puts.
Remember that the stock market pulls the economy out of recession. I agree with your argument. When I look at the macro climate, the emerging economies look like they bottomed as well. Brazil, Russia and China all appear to be on their way back up and are recovering from lows that are reasonable bottoms.
On Jan 04 10:03 AM Against Aphobus wrote:
> What about the fact that none of the economic fundamentals have improved!?!
> The market will not just rise (sustainably) because some time has
> passed and a few sketchy technical points have been crossed. Inflation
> is the one "force of nature" effect that will push markets up (not
> in VALUE but in PRICE). Other than that, I don't see much of a case
> for a sustained bull market.
>
> Even admitting that inflation by itself is a bullish force on stock
> prices, with earnings in the toilet and borrowing difficult, I'd
> rather invest in commodities.
Stop dreaming, we are back to sharp sell off from Monday on.
If you want to tip-toe in, go for it. But, I wouldn't advise playing shorts anymore. There's a lot of evidence for a bottom. Emerging Markets are more of what I'm looking at for evidence, but they're carrying gains into the Developed Markets and Oil is set for a reversal in february if nothing else prevails thanks to seasonal analysis.
On Jan 04 09:51 AM investor88 wrote:
> "If they start falling I will start playing negative" otherwise give
> market benefit of doubt. Fair enough, can tip toe in?
On Jan 04 08:26 PM fubsy_cooter wrote:
> Your projection that rallying 20% would mean the death of the bear
> ignores that all bear markets have steep and rich rallies, in fact
> this is the third 20% rally in this bear. Other bears have had rallies
> as steep as 35%. This bear is far from over. My projection is for
> the S&P to hit below 600 this year based on S&P earnings
> of 40.00 with a 15 multiple (this is a ocnservative estimate). I
> give a reasonable chance for the bear to last several more years,
> and eventually take us to an S&P 500 value of 250 to 300. This
> being my global depression scenario. But I will bet anyone that
> the bottom is not in.
Yes, you're right--the stock market typically leads upward before the economy does. But for that to happen, the market has to become cheap. It isn't. Even with the most optimistic crack-dream-induced forward earnings forecast, the market is trading at 14 times. That's not even slightly inexpensive, let alone cheap.
Sorry, but this is a sucker's rally. It might last another couple of weeks. After all, we can expect Barack Obama and his miracle workers to get nothing less than fawning media coverage, through the first week or so after the inauguration. Then the blinders come off again.
And longer term, I just don't think any of this is sustainable. It's all a huge illusion. I don't know if this is the time for it to all come crashing down, but it really will be pretty ugly when it does.
1. The Federal government has been putting lots of money into the economy. It has to start showing up, sooner or latter.
2. Interest rates are low.
3. Stocks are crushed, so yields are not bad.
4. Energy prices are cheap. Puts lots of money into consumer hands. Helps corporate earnings.
Sooner or latter the market will improve. Is sonner now?
So, Glen, I do not agree with your prognosis. You may like getting comments of agreement, but this would be a dull website if everybody was in agreement.
On Jan 04 09:49 AM Herbert Hoover wrote:
> Everyone's a bull today. Buy - Buy - Buy!!!!!!!!!!
>
> Looks like a good time to stock up on puts.
Bull
Sh1t !!!
Haha, great question. At first glance, it may appear that I'm sitting on a broomstick. 20% below Dow9000 is 7200. I'm still in my imaginative as it may seem "Bull Market." EEB and EEM are still off their lows.
I'm still buying, just more confidently as the prices dip. I'm focusing on buying companies that are priced below book value, are technically oversold, meet my fundamental criteria, and have significant room to grow back to their 52-Week high.
Equities are merely trading vehicles until the credit market can function without government intervention.
The equity market is like a crack addict. it gets high off of government bail outs but then begins crashing when the euphoria wears off.
There is no growth without credit. Credit makes stocks look stupid--even after 20% bear market rallies.
You can trade this tape or you can buy positions and sit on it for years.
Or sleep at nite and buy some bonds. It will kick the tar out of equity returns this year without the volatility. It will have a superior risk adjusted return. And isn't that what smart investing is all about???
On Jan 15 02:32 PM Glen Bradford wrote:
> Equity has no clue:
>
> Haha, great question. At first glance, it may appear that I'm sitting
> on a broomstick. 20% below Dow9000 is 7200. I'm still in my imaginative
> as it may seem "Bull Market." EEB and EEM are still off their lows.
>
>
> I'm still buying, just more confidently as the prices dip. I'm focusing
> on buying companies that are priced below book value, are technically
> oversold, meet my fundamental criteria, and have significant room
> to grow back to their 52-Week high.
Thanks for following up. Looks like I'm going to have to eat my own words on this one.
Most of my portfolio has shifted into chinese companies:
ORS, CAEI, GHII, NWD, LTUS.
On Feb 02 04:32 PM Equity Has No Clue wrote:
> Hey Glen, how's that Bull Market treating you?
I've worked on Wall Street for 11 years so I have a bit of an edge on ya.
This is a total mess. And the current administration is a nitemare.
Any rally is of the bear market kind so you sell it. BIggest upcrashes are in bear markets.
So many more shoes to drop.