Market Bottom: Are We There Yet?

Everyone seems to want to know when they can pick up all the bargains in the market. Seems that risk is a forgotten word. There are those that think that this is simply a BEAR Market rally. There have to be reactions and markets do not go down forever. The truth is only time will tell. The fact is the Dow rose 39.51 points, or 0.5%, to 8017.59, its highest close since Feb. 9. The Nasdaq has risen 25% during its four-week winning streak.

Highlighting the decreased awareness of risk has been the following; Treasury prices dropped, now the yield on the 10-year note is pushing towards 3%. Gold slipped under $900 an ounce ( today it is at 879.00. The Chicago Board Options Exchange Volatility Index, (The VIX) a technical gauge of investor anxiety, sank 5.6% to fall under the 40 mark. The dollar climbed above 100 yen.

So are we safe to get back in the water ( as in the shark thriller Jaws) again? This is what makes a market.

However, lets examine what has really happened. The central banks have flooded the world with liquidity... which could quite possibly lead to massive inflation. Have the banks started lending freely? No. Are foreclosures subsiding? No. Are job losses stopping or has hiring started? No! The unemployment rate jumped 0.4 percentage point to 8.5%, the highest since November 1983. There was a weaker-than-expected reading of service-sector activity. This demonstrates continued weakness.
Putting another fact on the table. In the Great Depression there were more than 15 rallys greater than 15% each.

Time will tell. Be flexible. Do not have any opinions. If the market has bottomed you will still have alot of chances to make money. Have a plan. Be aware as much as the stock market can go to 5000…it can go to 15000.

Comments

[mac.barron]

I want the minute of my life that I spent skimming this article back.

I actually really like a lot of Andy's stuff. His last piece on "What to Expect When You're expecting Inflation" was very good.

2009 Apr 07 02:20 AM

[Brodie]

It's not that difficult to see that we are not at bottom yet. Take the stats on the large bump in defaults on prime mortgages in the last quarter., 1,597, 683 seriously delinquent mortgages out there, are all of the securities on these mortgages to be on the market soon? I hope not. and in the prime category a move from 1.67 % to 2.40% or in other words a 44% increase in defaults by good strong risks, that is those poor working stiffs who are no longer employed, and who are no longer buying anything but absolute essentials.
The "market" does not stand independent of the real world, and the "bottom" cannot be seen yet, or even contemplated, until a resurgence in demand occurs. The growth in delinquencies on prime mortgages is a strong indicator that the bottom is falling out.

2009 Apr 07 02:33 AM

[Warm_Paw]

The bottom has come and gone.
What is occurring is an orderly meltdown.
This kind of meltdown will cause a loss of probably 35% to troubled mortgages.
Just troubled mortgages.
The trillion dollar losses discussed in NOTIONAL value remain notional as long as the masses don't panic.
Panic was about to bring about the kind of selloff that wasn't warranted or justified.
The more keys that get handed in, the more properties go to the value of next to nothing with no one wanting to buy or make payments.
The banks don't want to be reasonable and write down these mortgages for homeowners to what is reasonable.
The banks don't want to BE reasonable.
They've been too well fed profiting on speculation of derivatives.
That speculation that got us here.
Replacing the top echelon of banking execs ensures people put in place to objectively assess the situation.
Do you believe the people who got us into this mess are going to do the right thing to get us out?!
Had they done the right thing, we wouldn't be here.
If the end is near, then it's a global meltdown.
There isn't a third world country that's going to bail the USA out.
The banks are being asked to write down their asstes. To claim big scary losses. The govt is ready to intervene and prop them up.
We want to put this behind us.
The banks would sooner no one know how greedy and incompetent they have been.
They know the govt will wind them down if they bet the whole farm on a lottery way of making profit.
Keep righting these articles, it's helping the country get back on it's feet.
You just keep right on shorting America.
Put your money where your mouth is.

2009 Apr 07 03:09 AM