The Bubble of Uncertainty Is About to Burst 96 comments
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We are in the decade of the bubble. This new bubble, which I call the ‘uncertainty bubble’ is different because its price action is negative, however, the bubble-like characteristics are the same as the previous bubbles in tech, housing, and oil. Once mainstream momentum attaches itself to a cause, it will run beyond what the fundamentals warrant. This bubble has been especially dangerous because there is nothing that investors despise more than uncertainty. The bubble of uncertainty has caused a rather dramatic stock market sell-off but this bubble is about to meet the same fate as its predecessors-it is about to burst.
The Obama Effect
Back when the Presidential campaign began, nobody knew for certain who Obama was or how he would govern. He was inexperienced and hadn’t voted his opinion very often. He was the ultimate candidate of uncertainty. This worked to his advantage in a brutal campaign where all sides were trying to distance themselves from the Bush administration.
In a weird way, this anti-Bush obsession inadvertently turned anti-American. The perception became one of American despair, American fear, and American greed. As a result, the majority of Americans became obsessed with finding an anti-Bush replacement and they knew they had their man in Obama. Ironically, many people paid no attention to the details of what he said, instead they focused on his tremendous ability to articulate, to inspire, and to lead. Even moderate voters jumped on board, not because of any particular policy ideas but because they yearned for change. Let’s not kid ourselves, we all know there was a tremendous ‘cool factor’ in supporting Obama. It was a historic moment. But the true reality of how he would govern remained a mystery.
The Larry Summers Effect
In trying to uncover the mystery of Obama governance, many supposed that this recession would protect us from his liberal agenda but it hasn’t. If anything, it has emboldened it. Much of this can be attributed to his top economic advisor, Larry Summers.
Summers is a seasoned veteran. He learned a lot during his days in the Clinton administration. As a member of the Clinton cabinet he witnessed how Clinton was handcuffed by the economy he inherited from Bush Sr. Summers knows that if you are a slave to the recession you will never accomplish your goals. To Summers and Obama the liberal agenda means everything. It’s more important than re-election. Those who were hoping for a repeat of Bill Clinton, a President who talked liberal but governed as a conservative, have been let down.
Obama is not Bill Clinton. He is the opposite. He talks in a way that moderates can agree with but then he governs as a liberal. Wall Street has been stunned by this realization as they don’t know what to do with a President who is more concerned with the lower and middle classes than he is about them. This situation has led to a lot of negativity coming from Republicans and the conservative media but one good thing is happening. The uncertainty of Obama governance is slowly dissolving away. Even if you don’t like how things are shaping up, it’s important to remember that any plan is better than no plan.
The Obama Stock Market
After a miserable 2008 many assumed that the market could never have a repeat performance. So far, it’s been worse. January was the worst January in history. The market has now dropped in 21 of the 32 days Obama has been in office. Uncertainty spread from the campaign trail into the banking sector. So many unknowns made it virtually impossible for investors to make intelligent decisions and so the selling has continued.
As Warren Buffett says, in the short run the market acts as a voting machine but in the long run it acts as a weighing machine. We all see the negative vote but we are now at the point where another significant move down in the stock market represents the pricing in of events far worse than a recession. Our economic backs are against the wall. The bubble of uncertainty will burst as detailed solutions replace the unknown.
It’s important to remember that Obama ran a flawless campaign and he has been very actively engaged in solving the primary problems of this crisis: banking, unemployment, and housing. It can't happen in one day but the gradual economic healing process has begun and will soon start showing results. The market will transform from a voting machine to becoming a forward-looking, fundamentally driven entity that is able to compare itself year over year with the 2008 recession. With every passing quarter those comparisons get easier and easier. Historically speaking, the current economic fundamentals do not warrant a 60%+ market sell-off. Economic history is telling us that we are in bubble territory and that the potential for a burst is very real.
Conclusion #1
Ford (F) sits at $1.85. GE is at $6.85. Bank of America (BAC) is at $3.30. CBS is at $3.40. A host of other former stalwart stocks are priced in the single digits. If Washington’s long term plan works to restore any form of certainty and confidence in this economy, then these stock prices represent a huge opportunity.
The 2009 selloff that has taken us from Dow 9,000 to Dow 6,600 is based more on uncertainty and negativity over who Obama really is than it is on economic fundamentals. I understand that each sector in its own way is facing uncertain times but the root of this uncertainty comes from Washington.
2009 is a year in which Washington transitions from economic referee into economic player which in itself has made Wall Street uncomfortable. Having a relative unknown like Obama leading the new economy has only added to market frustration. In the same way that many ignored his campaign promises, they are now ignoring the formation of his plan. Endless uncertainty will not prevail.
Conclusion #2
Investors need to understand that times have changed. This decade of bubbles has changed the investment climate of today and it has altered the way investments should be handled in the future. The days of buy and hold are over, because of the real risk of 40% drops in the stock market. These kind of drops are too much to handle.
We have now had two of them in the last eight years and the potential for a third is on everyone’s mind. I have written up a booklet called 'The Crash and Burn of Buy and Hold' that is available if you click here. This handbook will help you to adapt your investing strategies to the new, extremely volatile environment that these bubbles bring. I don't want anyone getting left behind.
Disclosure: None
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This article has 96 comments:
I found myself agreeing completely with conclusion # 2 and yet sensing that the message you seem to be implying in conclusion #1 may encourage exactly the kind of investing behavior (i.e. buy and hold) that is not warranted in the future.
It may take a very long time before it will be profitable to follow the implied advice from citing Warren Buffet's remark about the market being a weighing machine in the long run.
The only sane way to invest in the future will be to come to grips with having both long and short strategies available and not to overstay one's welcome on either side of the market.
"At a time when a seasoned market veteran should be preaching the benefits of diversification and patience to overcome the tough times, this guy sounded more like a rookie -- telling everyone to sell out after the S&P 500 had already dropped 30% for the year."
He then called for Jim Cramer's suspension. Now he says above: "The days of buy and hold are over," and even writing a little booklet about it, now that criticizing "Buy and Hope" is a popular phenomenon.
On Sep-18, he declared that we'd have a sustainable market rally soon because Paulson did everything perfectly.
When an author declares silly statements like these, it is hard not to fall into a downward spiral of rationalizations. The author becomes biased because saving his ego and reputation becomes the first priority. His perception of the reality gets distorted in desperation.
I wonder how many other people are having the same dissonance?
CP
The only rational conclusion you can draw is that their business plan resembles a swiss cheese.
uncertainty.....the party is over...and the tab has come due....the only fight left is WHO is going to pay for all of our avarice and temerity !!
I'll hold off buying for now. After all, what if prices decline further?! I could lose money, right?!
Meanwhile, the weather continues to get warmer and warmer, which in my estimation, will reduce demand for down jackets even further. You'd have to be a sucker to buy a down jacket in this market! We're nowhere near the bottom.
I might buy that down Jacket in September or October of 2009 if the down jacket market stabilizes by then. For now, price volatility makes it too risky an investment.
destroy our economy and society. So bad, in fact, that even Lincoln Club members (stalwart conservatives in Orange County, CA) voted for Obama. Downward spiraling wages for working citizens, unaffordable housing for workers, userous credit rates, "lazy fairy" economics, McMansions being built instead of comfortable, safe housing for the masses, relaxation of health protection policies, lax gun control, lax border control, the rise of "Ineptomania" personified by Rush Limbaugh - the pied piper of the uninformed.
Patience is the third dimension we must learn to live in.
There was a stupid theory running around the markets that Democrats are good for stock prices. It had statistical 'support' in the numbers, and lots of people in the media wanted to believe it. I never did. Paying people to be failures and punishing people who succeed is stupid social and economic policy, and it is an exact description of mainstream Democrat thought. The 'numbers' backing up the theory had a very low p-value and ran counter to logic, but that didn't stop all the liberals in the press from flogging them. Luckily, I've been taught to think for myself.
"the rise of "Ineptomania" personified by Rush Limbaugh - the pied piper of the uninformed."
I listen to Rush Limbaugh from time to time. Do you? My guess is you don't listen to him very often, if at all.
In any case, I would rather have my brain than your brain any day, even it is older.
My key concern from an investment perspective is that I don't expect any sort of substantial economic growth, especially consumer demand, once we hit an economic bottom (which I think will occur next year, not this). I've mentioned elsewhere on this site that I think consumers' spendthrift days are over and they are becoming more thrifty--as the January personal savings data point out (6% of DI). Given the damage done to personal wealth, I (& three days ago Joseph Stiglitz--see here www.taipeitimes.com/Ne... ), I doubt we will see a return to the high consumer demand rates, much levels, we saw prior to this economic bust for many years, maybe a generation.
And I don't think the other well-recognized problems--banking insolvency, real estate crash, mortgage implosion, burgeoning unemployment, etc--will resolve soon either.
As a result, I don't think we will see much upward movement in the market after it hits bottom for several years. In this sense, it will be very much like the 1970s although clearly the drivers are much different.
So, to the extent I go further into this market, it will be looking at extremely healthy companies with excellent valuations and substantial dividend yields and superior long-term prospects with a hard "stop" order set behind my purchase. I like holding on for the long-term, but I'll dump losers in a minute and even winners if I find something that's better.
"Ironically, many people paid no attention to the details of what he said, instead they focused on his tremendous ability to articulate, to inspire, and to lead. Even moderate voters jumped on board, not because of any particular policy ideas but because they yearned for change."
Are we talking about Obama here, or Reagan?
I do agree with one thing though, Jim Cramer should be suspended......from openning his loud mouth, preferably!
I'm waiting for Volcker's influence to come thru, here is a man who isn't scared of dealing with massive economic problems - he is a man who known for 'thinking outside the box'. Trouble is, Volcker has to get past Larry Summers ego to have any influence.
And Summers was the main man involved with the final repeal of the Glass-Steagal act in 1999. This repeal completely de-regulated the markets and this, some say, is more than a partial cause of our current economic mess.
I view the equities market of recent history as 95% speculation, 5% true investment. Yes, the very deep equity market provides some value—liquidity for the real investors and the ability for companies to access fresh capital. (The real investor by the way the being one whose capital lays the foundation for increased future profit)
The author views this 50% dive as some kind of inverse speculative bubble. If you take the short-term view I could see his point.
Widen your view though and you start to see the forest again…then the bubble looks like the last 30 years.
This is not the end of the world, just a welcome return to balance.
On Mar 06 07:15 AM Robotto wrote:
> One of the things that I love about this site is that it's very easy
> to see a list of everything each author wrote. By looking at the
> track record, you can decide how much salt should be taken with each
> new article. Just as a sample of what this author said in the past,
> back on Oct-10 last year, he said:
>
> "At a time when a seasoned market veteran should be preaching the
> benefits of diversification and patience to overcome the tough times,
> this guy sounded more like a rookie -- telling everyone to sell out
> after the S&P 500 had already dropped 30% for the year."
>
> He then called for Jim Cramer's suspension. Now he says above: "The
> days of buy and hold are over," and even writing a little booklet
> about it, now that criticizing "Buy and Hope" is a popular phenomenon.
>
>
> On Sep-18, he declared that we'd have a sustainable market rally
> soon because Paulson did everything perfectly.
>
> When an author declares silly statements like these, it is hard not
> to fall into a downward spiral of rationalizations. The author becomes
> biased because saving his ego and reputation becomes the first priority.
> His perception of the reality gets distorted in desperation.
I really don't think the latter case is better.
On Mar 06 10:13 AM YoYoMama wrote:
> I'm with Atlasman. It's difficult to know what to do. Up until
> now, I've maintained my longs, and have been duly punished for my
> optimism. Now I'm looking for opportunities to sell into any rally,
> and will either sit on the cash or go short. Until the fundamentals
> of the economy change, I think we'll all be feeling a tug of war
> between knowing we need hope to carry on and having sense of doom
> that there's no end in sight...
On Mar 06 10:07 AM jksisco wrote:
> The uncertainty of the unknown, what will BHO do next, has cast a
> pall over the financial world. As each day brings forth more details,
> the uncertainty has evolved into a modicum of certainty that BHO,
> in the role of a petulant child, will stop at nothing to implement
> the most anti-capitalist policies ever imagined. The new reality
> of massive wealth redistribution has reflected quite accurately in
> the continuing destruction of once profitable institutions and millions
> of retirement nest eggs. What entity in it's right mind will want
> to venture forth to provide capital, knowing full well that they
> will be at the mercy of some new challenge from misguided government
> policy determined to level the playing field. First inflation and
> then stagflation will be our new , unwanted, best friend as we careen
> toward our own lost decade. Welcome to the Peoples Republic of America.
i'm not that big an Obama fan and history may not be kind but i don't know who would've gotten more done in less than two months. i know that i don't even want to contemplate what John McCain and Sarah Palin might have done.
My biggest criticism of Obama is his decision to put Summers and Geithner in their positions. It will be interesting to see how long they last.
On Mar 06 01:38 PM fahrender wrote:
>
> My biggest criticism of Obama is his decision to put Summers and
> Geithner in their positions. It will be interesting to see how long
> they last.
thanks Jason
It's as if people just accept that mortgages were always financed with commercial paper yielding <1% annually, always packaged into MBS's, always insured with CDO's, and always flipped by investment banks instead of held to maturity by commercial banks with high lending standards. NO. It wasn't always like that. The Glass-Steagal Act of 1933 was followed by over 60 years of banking system stability, contributing to US economic dominance. After its repeal, it took only 8 years to get back into the same type of deflationary credit crisis that inspired the law in the first place. Coincidence? No. Banking will never be stable unless commercial and investment banking are separated. How many times do we have to learn that lesson??? Will 2 depressions be enough?
I get more and more bullish as the stock market plummets, but my enthusiasm is tempered by the remaining dominance of people like Summers. If Obama is a leader, he will force Summers to admit he was wrong about Glass-Seagal and press for it to be reinstated. Reform will never be easier than now, while the megabanks are publicly hated penny stocks. Yet public ignorance of the issue puts it low on the priority list, so I worry.
On Mar 06 10:46 AM Bill Jencks wrote:
> The number of investors like Jason, giving such advice is astonishing.
> No real economics here, just wishing really.
>
> I'm waiting for Volcker's influence to come thru, here is a man who
> isn't scared of dealing with massive economic problems - he is a
> man who known for 'thinking outside the box'. Trouble is, Volcker
> has to get past Larry Summers ego to have any influence.
>
> And Summers was the main man involved with the final repeal of the
> Glass-Steagal act in 1999. This repeal completely de-regulated the
> markets and this, some say, is more than a partial cause of our current
> economic mess.
I know I can hate what is going on and be wrong for a long time. I couldn't stand the BS flying during this last 20 years. Fundamentally, elected officials were able to do what they want, spend heedlessly, and throw out the good parts of Reagan's program.
Now it's clear how much the bubbles masked deterioration of average people's finances. Throwing money at any programs by government, massive public and private debt, and outsourcing and anything to juice upper-income compensation have left us hollowed out and destitute.
If the last 20 years were prologue, the ridiculous "doing anything" programs by an administration more interested in activism and paying off allies than solving problems would be sending markets north.
I know we can't time the end of uncertainty, but, baby boomers will never spend the way they did again. And, with the foul oders from Washington and Wall St., maybe we're done with rising markets at any important announcement by the empty suits who heedlessly brought us to this point.
One hopes that the Obama bubble bursts as soon as possible so we can get on with fixing this mess.
On Mar 06 02:13 PM Yohei wrote:
>
> Talk about a frenzy of fashion following groupthink. A repellent
> display of crowd behavior and a true sign that the Ancients were
> right about democracy.
>
>
But hopefully all the idiots who voted for this conman will enthusiastically heed his expert advice and buy, buy, buy stock. After all, the "profit and earnings ratio" (whatever the hell that is) is really attractive.
Seems obvious to me that Obama wants capitalism in America to fail utterly. He wants the house to burn to the ground, so he can replace it with a shrine to Marxism.
In my 64 years I have never feared for this country. But I most certainly do now. I never thought I would see this country destroyed, especially from within. But that train has left the station and is headed for a very steep cliff--with a sociopathic charlatan as the conductor.
On Mar 06 02:59 PM User 355187 wrote:
> Right. The "period of uncertainty" is over. Now the "period of stunned
> disbelief" that this nutcase will destroy this economy and America
> as we have known and loved it is beginning. Next the "period of terror
> and acceptance of the inevitable" will emerge. That's when we are
> in BIG trouble.
>
> But hopefully all the idiots who voted for this conman will enthusiastically
> heed his expert advice and buy, buy, buy stock. After all, the "profit
> and earnings ratio" (whatever the hell that is) is really attractive.
>
>
> Seems obvious to me that Obama wants capitalism in America to fail
> utterly. He wants the house to burn to the ground, so he can replace
> it with a shrine to Marxism.
>
> In my 64 years I have never feared for this country. But I most certainly
> do now. I never thought I would see this country destroyed, especially
> from within. But that train has left the station and is headed for
> a very steep cliff--with a sociopathic charlatan as the conductor.
>
On Mar 06 02:59 PM User 355187 wrote:
> Right. The "period of uncertainty" is over. Now the "period of stunned
> disbelief" that this nutcase will destroy this economy and America
> as we have known and loved it is beginning. Next the "period of terror
> and acceptance of the inevitable" will emerge. That's when we are
> in BIG trouble.
>
> But hopefully all the idiots who voted for this conman will enthusiastically
> heed his expert advice and buy, buy, buy stock. After all, the "profit
> and earnings ratio" (whatever the hell that is) is really attractive.
>
>
> Seems obvious to me that Obama wants capitalism in America to fail
> utterly. He wants the house to burn to the ground, so he can replace
> it with a shrine to Marxism.
>
> In my 64 years I have never feared for this country. But I most certainly
> do now. I never thought I would see this country destroyed, especially
> from within. But that train has left the station and is headed for
> a very steep cliff--with a sociopathic charlatan as the conductor.
>
They have extracted something like 3% today from the high capitalized ones; some that are not doing badly either.
Its just matter of time for healthy companies to take companies private. While the commodity and basic material producers will look into having cartels since the market pricing scheme is getting really wacky.
On Mar 06 03:11 PM plumstupid wrote:
> The destruction from within began in earnest at 1200 20JAN81.
On Mar 06 03:31 PM Tesa wrote:
> What was that event if you don't mind me asking.
On Mar 06 02:20 PM plumstupid wrote:
> gee, sounds an awful lot like the behavior surrounding Palin! Just
> me, I could be wrong....
I agree with Leftfield that "any plan is better than no plan" is a completely ignorant statement. Who in their right mind can think that central government planning can manage the economy more efficiently than the markets? If anyone could please look at the hundreds of bureaucracies that make up our government, and point out a single one that is known for transparency, efficiency, integrity, and good decision making, I could have a little hope. To think that the administration of a mega-billion dollar bailout would be handled any more efficiently or prudently than any other government function is lunacy!
We are in a sad state when the government has such a massive effect on the markets. Their only role should be to regulate, and they have failed utterly in that regard. Now we put the failures (like Summers) in charge of restoring confidence in the markets
Another point: to state that "we are in the decade of the bubble" shows historical ignorance. Bubbles have been a problem (on Wall St.) since the creation of the Fed, starting with the Roaring 20's and it's inevitable correction.
The stocks he mentioned as opportunities have rightfully been hammered due to poor management decisions. The problems they have created for themselves are complex and won't be corrected simply with cheap money from the government. Leave them alone! If Ford is strong enough and well managed enough, they can benefit from GM's loss. If GE deals with the problems of their financial arm, they will be an investor darling again. If not, stronger, better managed companies will benefit. We don't need the government (or more accurately, lobbyists) to decide the winners and the losers at taxpayer expense.
I'm sure there are plenty of people like me who are looking forward to investing their savings at much more reasonable valuations.
Its the Energy that got harvested obviously and while there is enough left, the markets have to figure something else to energize the bubbles with.
On Mar 06 11:47 AM TexasER wrote:
> then the bubble looks like the last 30 years.
On Mar 06 03:42 PM Yohei wrote:
> Enjoy your comments. Generally agree with you. May I ask where
> you are located? One has to plan for all possible contingencies,
> of course, ranked in order of likelihood, and it is time to update
> my "time to run like hell" scenario....
Good for a chuckle, what? Droll, eh?
On Mar 06 03:11 PM plumstupid wrote:
> The destruction from within began in earnest at 1200 20JAN81.
On Mar 06 03:52 PM plumstupid wrote:
> Thailand
On Mar 06 03:53 PM Yohei wrote:
> Depends on what you mean by "in earnest". Certainly the "downhill
> slope" has been increasingly steep of late but has been obvious for
> much longer. Perhaps the decline "in earnest" started when Ben Franklin,
> during the Constitutional Convention, was asked "What sort of government
> are we to have?" answered with "A Republic, madame, if you can keep
> it."
>
> Good for a chuckle, what? Droll, eh?
So we see a future of "To each according to his needs, and from each according to his abilities" with "needs" and "abilities" defined by a new ruling class to come. Let me see. "Needs" was long ago defined precisely very simply as 800 calories of Russian sourdough rye bread a day. "Abilities" was also clearly defined as being whatever your party overseer decided they were.
History may not repeat but it certainly does rhyme!
On Mar 06 03:56 PM Socialism cannot compete! wrote:
> This is NOT just about uncertainty. In fact, it's not uncertain
> at all!!! It is VERY CERTAIN that Marxist economics prevent prosperity.
> The Big O has been implementing his plan to tax the producers and
> give it to the failures. We are keeping the zombies alive, and reducing
> not only the current profits of the producers, but LIMITING their
> ability to increase in the future -- the good companies should be
> taking the market share of those which ought to be allowed to fail.
> This is being inhibited by the propping up of those zombies. One
> counter-example may prove to illustrate this -- let's watch the next
> couple quarters from Best Buy, after Circuit City was allowed to
> fail.
On Mar 06 07:12 AM plumstupid wrote:
> Its all Obama's fault! Its all Obama's fault! Its all Obama's fault!
> Really! NO, REALLY!
Can "uncertainty" have/be a bubble? I don't think so. There's no organized market in uncertainty.
Several commentators have praised or blamed politicians (elected or appointed). Politicians are sometimes ascribed near-miraculous powers, for good or evil. They are merely human, too. Politicians do things which please people, else they lose office. They don't know the consequences of their actions any more than anyone else does.
I'm impressed by the amount of "knowledge" and "wisdom" floating around here.
Irrespective of your trading/investing strategy, please keep in mind that eventually the US will go the way of erstwhile USSR.It may take longer and it may not be as apparent but you'll get there.
So, please contribute your hard-earned dollars towards creating capital for companies that will keep on outsourcing jobs to Asia and Eastern Europe.You may not have a salary but what the heck, you'd be sitting atop a pile of capital gains.
Ford is burinng cash that was borrowed from a compete use of it's entire line of credit, It is loaded with debt and it's business model does not work. GE is run by a guy who does not know the board is about to cut the dividend even as he promises it is safe for the next year! It is about to lose it's AAA rating and is loaned with tons of loans about to go belly up (GE Capital), BOA, is flat out insolvent with hundreds of Billions in bad debt coutesy of the ML buy out in a little deal brokered by the Govenment, CBS, is a dying media company that missed the cable revolution. It has a negative P/E ratio, 52% drop in earnings in their last quarterly report (they lost over $17 per share) and over a $7 Billion negative cash flow.
This portfolio is flat out way too risky for my blood (I am being kind). As for the bubble effect, I would first say that the bubble of uncertainty is based on one hell of a mess and there is no indication that things are getting better. In fact, every indication is they are getting worse. As for the Obama uncertainty portion, many are now more certain than ever that this guy has no idea what the hell he is doing. He is a great speaker as long as he is reading prepared text. Get him on his own and...
www.youtube.com/watch?...
I would have loved to have asked this foillow up "Given that the S & P earnings for the last quarter were down by an all time record 51%, wouldn't you conclude that the current P/E ratio is not a true indication of future earnings potential and, therefore, it might be prudent to not invest at this time?
I think he might then answer "Ah Ah Ah Ah say what?"
He has NO IDEA what he is doing, the marlket knows it, and this is why stock are falling to new lows. He is spending like our GDP is growing at a 10% rate and he has no plan to pay off a debt burden that is leading the USA into bankruptcy! You see, this new bubble is the air that lies between the rather large ears of this smooth talking Chicago Machine politician. We are all in very big trouble and of that there is no uncertainty!
Yes, Obama was Mr Cool and represented change.
Kind of makes sense, but I'm less optimistic that 'best-laid plans' will succeed.
True, if they do manage to salvage things, there are some bargains floating around. But if they don't....uh-oh! We are in very, very, very deep.
I think hyperinflation lies ahead, and that the fiat economy may collapse. I hope I'm wrong, I definitely don't want to be 'gloom and doom', but my gut feel is that things are really bad.
Policy coming out of Washington has now become the Market driver-du-jour, and it is distracting from almost every other factor. Investor confidence is at an all time low (retail investors are now divesting while institutional money is sidelined). There are not too many upside catalysts, so the path of least resistance has been, and may well continue to be "down." Short interest is helping this process along. The reality is, however, that the small investor and person with 401K does not move the market, and all this collective pessimism won't be a driver to move stocks lower, as sellers become exhausted, and too shell-shocked to even look at their portfolios. When the big institutions decide that values are at the right risk/reward level to buy, that will move the market higher. It is difficult to exactly how much doom is already priced in, since fundamentals are clouded. And market psychology can turn on a dime, as we all know.
There IS uncertainty as to future earnings. Some sectors, such as basic materials are showing some life due to demand from China. Consumer Credit (today) showed slight improvement ($1.8 vs. $-5.0 exp.), but most outlooks are for revisions downward. It's a big guessing game.
Notwithstanding, I agree with all posts here at how regrettable it is that our economy has gotten into such dire straits, with many culpable parties at every level- from the guy who decided to inflate his income by 300% on his mortgage application to inept policy moves by our current regime. I know that I've gotten hurt in the pst when I expect the market to keep moving in a trend, just to be dumbfounded when it swings the other way (for no reason remotely connected to the state of reality!).
I too think the market will bounce, but not in a sustained way. I just think it will be because they relax mark to market wich will scare the crap out of the shorts.
concisetrading.blogspo...
I respect your opinion, but I must respectfully disagree. Not to say we won't see a significant rally after this recent bloodbath. I think we have hit a near term bottom this week. But this mess still appears far from finished.
Allow history to be your guide. Review the top industrial stocks before the crash of 1929 and then see how many survived. Many companies just simply went away and the market survived. Companies that many thought could not possibly falter. This same scenario more than likely is possible.
How is a crash of 1000-3000 points at the introduction of the stimulus helpful toward any financial demographic -even taking into account the redistribution?
It shouldn't be difficult to at least stabilize the market if you have a trillion dollar stimulus plan presented to you by the future generations
Can anyone be honest about the free markets - for every cheat in the free markets can we find the same in the public sector particularly the ones that private jets in Washington.
Don't we have any examples of other markets and how they react to these ideologies. I suggest one look at europe or maybe telecoms - that have sig govern intervention or canadien royalty trusts.
Most of these investments have declined and then flatlined. If private capital is appropriately enticed to invest and create greater efficiencies it will help lower and middle class far more than a crash and rising unemployment. But only the communists and emerging markets which have lower tax rates understand this because they wish to raise their standard of living - not finger point over the remaining spoils of a previous generations work. It is time we get a plan that works for the middle and lower class - that is really what investors want.
Look at what Volker says, is he a communists or Marxist.
“In this world, I don’t see how we can avoid international consistency” on securities regulations going forward, he said. “The U.S. is no longer in a position to dictate that the world does it according to the way we’ve done it.”
............
"Volcker, who ran the Fed from 1979 to 1987, said the financial industry’s problems stem from larger issues. “I don’t think this is just a technical problem, it’s a societal problem,” he said. He cited bankers on Wall Street receiving multimillion-dollar bonuses for engineering failed mergers.
“There’s something wrong with the system,” Volcker said. “What are the incentives, what’s going on here?”
www.bloomberg.com/apps...
On Mar 06 03:56 PM Socialism cannot compete! wrote:
> This is NOT just about uncertainty. In fact, it's not uncertain
> at all!!! It is VERY CERTAIN that Marxist economics prevent prosperity.
> The Big O has been implementing his plan to tax the producers and
> give it to the failures. We are keeping the zombies alive, and reducing
> not only the current profits of the producers, but LIMITING their
> ability to increase in the future -- the good companies should be
> taking the market share of those which ought to be allowed to fail.
> This is being inhibited by the propping up of those zombies. One
> counter-example may prove to illustrate this -- let's watch the next
> couple quarters from Best Buy, after Circuit City was allowed to
> fail.
All you would want is, like limbaugh, a soapbox to scream your hate, bias, partisanship and arrogance from, all tied up in a right wing pseudo-patriotic wrapper, so you can haul in huge mountains of cash from a gullible public that hates anyone who isn't white, fat, full of hate, racist and who is likewise TERRIFIED of anyone who isn't white, fat, full of hate, racist and terrified.
And as with limbaugh, your oxycontin pusher and World Wrestling Federation sponsors will become very wealthy as a result of all that free cash flow.
On Mar 06 09:54 AM LouieK wrote:
> g.pincheot writes about,
>
> "the rise of "Ineptomania" personified by Rush Limbaugh - the pied
> piper of the uninformed."
>
> I listen to Rush Limbaugh from time to time. Do you? My guess is
> you don't listen to him very often, if at all.
>
> In any case, I would rather have my brain than your brain any day,
> even it is older.
On Mar 06 12:16 PM fgbouman wrote:
> If I recall correctly, when Eisenhower left office the top marginal
> rate on personal income was 94%, we had embarked on the most massive
> infrastructure program in history, the Interstate highway system,
> we were churning out more and better scientists and engineers from
> our schools than any other country in the world by far, laying the
> groundwork for American economic dominance for decades. The Regan
> Revolution was an excuse for us to eat our seed grain and the self-indulgence
> that it has spawned has brought us to the pass that we find ourselves
> in now. We have to rebuild our social and physical infrastructure
> if we are to prosper again and that means we'll have to... gasp!...
> pay for it. Good times are ahead if we just buckle down and get
> to work. All of this carping about an administration that is working
> harder on behalf of the country than any in the past eighty years
> slows the recovery and, unless you are shorting the market, damaging
> your own net worth.
Bush era: commodities, financials, aerospace stocks
Obama times: health, CO2 and education stocks
politics drives the markets, always, nice and easy...
You just made Hall of Fame status in my book!
On Mar 06 02:59 PM User 355187 wrote:
> Right. The "period of uncertainty" is over. Now the "period of stunned
> disbelief" that this nutcase will destroy this economy and America
> as we have known and loved it is beginning. Next the "period of terror
> and acceptance of the inevitable" will emerge. That's when we are
> in BIG trouble.
>
> But hopefully all the idiots who voted for this conman will enthusiastically
> heed his expert advice and buy, buy, buy stock. After all, the "profit
> and earnings ratio" (whatever the hell that is) is really attractive.
>
>
> Seems obvious to me that Obama wants capitalism in America to fail
> utterly. He wants the house to burn to the ground, so he can replace
> it with a shrine to Marxism.
>
> In my 64 years I have never feared for this country. But I most certainly
> do now. I never thought I would see this country destroyed, especially
> from within. But that train has left the station and is headed for
> a very steep cliff--with a sociopathic charlatan as the conductor.
>
On Mar 06 03:57 PM henarl wrote:
> It is not uncertainty that is driving the market down but rather
> the perceived certainty that it is headed much lower.
The quality of life for the average person is far higher in Western Europe than in the States.
Those of us who are successful (and that clearly includes me at $500K a year) need to be cognizant of the role chance played in our lives and how it influenced our success.
If you or I were born Gambia there is a 25% chance we would not have made behind the second year of life.
Does anyone really think our former President would have been President if he had not been born into the Bush family. A man who demonstrated virtually no competence in his entire life?
The loser/winner view of the world was devised by winners who want to justify their selfishness.
You clearly fall in that category ...
Regards,
American in Paris
On Mar 06 09:42 AM EdwardATeller wrote:
> The article is full of wishful thinking. Sounds like an Obama supporter
> trying to rationalize the mistake of voting for him. None of this
> market action is a surprise to me. I saw the crowds when I voted,
> correctly identified them as a sign of a large Democrat victory,
> came home and hit the SELL button on EVERY stock I own. Best move
> I ever made. SPY was about 100 at the time, and now we are down
> 32%.
>
> There was a stupid theory running around the markets that Democrats
> are good for stock prices. It had statistical 'support' in the numbers,
> and lots of people in the media wanted to believe it. I never did.
> Paying people to be failures and punishing people who succeed is
> stupid social and economic policy, and it is an exact description
> of mainstream Democrat thought. The 'numbers' backing up the theory
> had a very low p-value and ran counter to logic, but that didn't
> stop all the liberals in the press from flogging them. Luckily,
> I've been taught to think for myself.
Until our banks become solvent again, the financial system will remain broken. The US is reluctant to backstop banks because that commitment would run into the tens of trillions, and might break the back of the US government.
We may have to let the entire system go down so that we can begin building a new system with glass steagall, conservative capital requirements, and a better compensation system.
Whether Obama is a liberal or a moderate does not have much to do with it.
On Mar 07 10:48 AM Douglas wrote:
> Absolutely brilliant statement User 355187!!!
> You just made Hall of Fame status in my book!
"The loser/winner view of the world was devised by winners who want
to justify their selfishness."
On Mar 07 11:06 AM American in Paris wrote:
> Hold on Mr. Teller,
>
> The quality of life for the average person is far higher in Western
> Europe than in the States.
>
> Those of us who are successful (and that clearly includes me at $500K
> a year) need to be cognizant of the role chance played in our lives
> and how it influenced our success.
>
> If you or I were born Gambia there is a 25% chance we would not have
> made behind the second year of life.
>
> Does anyone really think our former President would have been President
> if he had not been born into the Bush family. A man who demonstrated
> virtually no competence in his entire life?
>
> The loser/winner view of the world was devised by winners who want
> to justify their selfishness.
>
> You clearly fall in that category ...
>
> Regards,
>
> American in Paris
Why?
- Obama is very much concerned with changing US social structure at the expense of the US economy
- Obama continue the failed G. Bush policies of bailing out the Wall-Street and major corrupt banks. Obama also added to his bailout list corrupt and terribly inefficient State and local governments
- Obama failed to formulate his vision of restoring justice in America. The rampant looting of America by corporate bosses was not even addressed by Obama.
The Bottom Line
- Obama continues the failed Bush policies in dealing with the economic crisis.
- Obama failed to introduce substantive economic changes and initiatives creating uncertainties
- Obama totally irresponsible monopoly-money fiscal policies based huge deficits are ruinous to America economic and political well-being
Why are you still allowed to post? So you can destroy more people's capital? Let me see - last big call was BAC going to $20 when it was about 300% higher than it is today. Oh yeah, that was really auspicious.
Please do us all a favor and stop making any type of predictions. All you have accomplished in the past year is to destroy peoples weath. That is not the purpose of these forums
Let's see, tech bubble - fraud, housing bubble - fraud, and oil - all fraud.
You are correct, we are nothing but fraud on borrowed time.
Fraud, fraud, fraud, and more fraud....
Unfunded Medicare/Medicaid obligations.
Unfunded Social Security obligations.
Continued pressure on all forms of public assistance by those jumping legally or illegally into the US "lifeboat." (And I don't blame them for doing so--it's a great deal if you can get it.)
A gutted manufacturing base.
A government that grows in size, without fail, every year and under every administration/party.
What do you say-- Dow 40,000?
There is a lot of political fluff in your piece, and very little fact. Your views of Obama are opinion. Your judgment about the economy is largely opinion. "The market has now dropped in 21 of the 32 days Obama has been in office." may be fact, but it hardly justifies the effort you put in writing or the time readers spent suffering through this piece.
Next time, please remember, it is a picture that is worth a 1000 words. A single fact is proably not worth more than say 50 words.
In either case, his posts are of little value.
If I had only listened to him I would've been rich.
The most dangerous phrase in investing: "This time it's different."
We are in a recession. We will emerge from it. If you buy over-sold equities now in strong companies you will emerge a much wealthier individual.
Sadly, I bet most of the people posting negative comments here were convinced we were going to Dow 20,000 (or $400 oil). And now they're equally convinced we're going to Dow 2,000. The yappings of an hysterical crowd amped up on doomsday propaganda.
No, this time it's NOT different. It's just an economic cycle...and the smart money is positioning itself accordingly.
Cheers.
On Mar 06 02:20 PM plumstupid wrote:
> Just me, I could be wrong....
On Mar 07 09:14 PM Jackson Cash wrote:
> "This new bubble, which I call the ‘uncertainty bubble’ is different
> because its price action is negative, however, the bubble-like characteristics
> are the same as the previous bubbles in tech, housing, and oil."
>
>
> Let's see, tech bubble - fraud, housing bubble - fraud, and oil -
> all fraud.
>
> You are correct, we are nothing but fraud on borrowed time.
>
> Fraud, fraud, fraud, and more fraud....
It never ceases to amaze me that some of those who have done well in a Capitalist System, somehow, feel guilty about it and must rant about the “unfairness” even as they hold on to every single cent they have. The top 2% of wage earners in America pay 34% of all taxes. The top 5% pay 61% of all taxes. The top 40% pay 99.4%! The bottom 40% pay NOTHING!
American may indeed be wealthy. I see only 3 possibilities for his success. 2. His Daddy gave it to him. Good for him and stupid of his Daddy for not teaching him the lessons of life. 2. He gained his wealth by illegal activities. 3. He worked very hard to amass his wealth but now he feels guilty about it. How stupid!
If you think about it, if everyone just provided for their own needs and the needs of their family, if they took responsibility for their own lives, there would be no need for the Trillions we waste on Social Programs and no debate about the Obama Socialist agenda. The very concept that it is somehow “selfish” to not submit to a government that would confiscate what I have worked so hard for so they can hand it out to those who do not work for themselves is both immoral in that it violates the most basic social contract and stupid because it does not work. As we enter the 44th year of our “War on Poverty” and after Trillions spent, we are now told that millions of American’s still live in Poverty. Gee, maybe this is not working. Maybe the more you make available money, other people’s money I might add, to programs for the poor, the more people take advantage of these programs and the more poor you create. If such a welfare system did work, then Cuba and Russia would be the most prosperous nations on earth! As for Western Europe, it is your opinion that their “Quality of Life is better.” We shall see if this is true in the next 20 years, as the cost of paying for the every need of their citizens requires people like you to pay 80% of what you have.
The bottom-line here is this. If you are really concerned about the survival rate of kids in Gambia, please take all you have and give it to some foundation or entity devoted to making that better. Just do it with YOUR money and not mine, because when YOU do it with my money, you commit theft and reduce my ability to care for my family and myself!
On Mar 07 11:26 AM wpdragon wrote:
> American, you hit the nail right on the head with that one... Thanks.
>
>
> "The loser/winner view of the world was devised by winners who want
>
> to justify their selfishness."
>
Actually what seems to be working for me these days is a " run & shoot" approach.
their are opportunuties and you have to pay attention.
get in, get out, don,t be geedy.
the more volitile the stock the larger the window.
stay focused, watch the trading closley & you can pick up some juicy nuggets.
However i believe there will be a time down the road when
soild companies with good earnings, dividends & management will be good long term buy & holds.
The jury is still as to who they will be.
You may even have done the right thing for the right reason, but that isn't important. It's the doing that matters.
I expect that when it's time to buy, you will buy.
On Mar 06 09:42 AM EdwardATeller wrote:
> The article is full of wishful thinking. Sounds like an Obama supporter
> trying to rationalize the mistake of voting for him. None of this
> market action is a surprise to me. I saw the crowds when I voted,
> correctly identified them as a sign of a large Democrat victory,
> came home and hit the SELL button on EVERY stock I own. Best move
> I ever made. SPY was about 100 at the time, and now we are down
> 32%.
>
> There was a stupid theory running around the markets that Democrats
> are good for stock prices. It had statistical 'support' in the numbers,
> and lots of people in the media wanted to believe it. I never did.
> Paying people to be failures and punishing people who succeed is
> stupid social and economic policy, and it is an exact description
> of mainstream Democrat thought. The 'numbers' backing up the theory
> had a very low p-value and ran counter to logic, but that didn't
> stop all the liberals in the press from flogging them. Luckily,
> I've been taught to think for myself.
The law _says_ taxes are going to return to their 2001 levels in 2011. That's what it always said, and so the "increase" was hardly a surprise.
Obama's progressive policies are "on the margin" at best: _slightly_ higher taxes for the wealthy, a _slightly_ better deal for the poor.
That's all. To dramatize them as in some way revolutionary, when they would in fact leave the US political economy less progressive than a right wing European party (look at the Christian Democrats in Germany, for example) is just not born out by the evidence.
The US has a strong center-right bias on political economy, and Obama is only ever-so-slightly to the left on this.
Bias-based rationalization solely to support one's ego, only too often leads even some of the world's best thinkers to making the wrong decisions. Sadly enough, many of them simply lack the ability to say that they were in fact wrong in their prior thinking, and that they now hold a somewhat different view. Rather, they try any way they can to rationalize their prior positions. They will of course blame anyone and anything they can for why they are where they are, as opposed to accepting any degree of responsibility for their own actions, which obviously led them to the critical point. But unfortunately for many, this is simply human nature.
On Mar 06 07:15 AM Robotto wrote:
> One of the things that I love about this site is that it's very easy
> to see a list of everything each author wrote. By looking at the
> track record, you can decide how much salt should be taken with each
> new article. Just as a sample of what this author said in the past,
> back on Oct-10 last year, he said:
>
> "At a time when a seasoned market veteran should be preaching the
> benefits of diversification and patience to overcome the tough times,
> this guy sounded more like a rookie -- telling everyone to sell out
> after the S&P 500 had already dropped 30% for the year."
>
> He then called for Jim Cramer's suspension. Now he says above: "The
> days of buy and hold are over," and even writing a little booklet
> about it, now that criticizing "Buy and Hope" is a popular phenomenon.
>
>
> On Sep-18, he declared that we'd have a sustainable market rally
> soon because Paulson did everything perfectly.
>
> When an author declares silly statements like these, it is hard not
> to fall into a downward spiral of rationalizations. The author becomes
> biased because saving his ego and reputation becomes the first priority.
> His perception of the reality gets distorted in desperation.