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The global capital-market rally since the March lows was a great trading opportunity, but the rally may have been based on shifting-sentiment (as opposed to structural improvements in the economy). The market was “pricing in” (or hoping for) a quick recovery; even though there was no evidence to suggest clear-&-compelling improvement in GDP, employment, deleveraging consumers, or corporate earnings.
- Yes, the government was able to stop Financial Armageddon; but that’s not the same thing as an improving economy.
- Yes, the US economy is resilient and will recover and prosper in the long-run. But “In the long-run, we’re all dead”, to quote the Nobel Prize winning economist Keynes.
Like the cartoon character that has run off the ledge of the mountain but has not yet noticed the fact that he’s running on thin-air, once equity investors look down it may get ugly.
Neither Borrower, Nor Lender Be
Whether you’re a bull or a bear, we can all agree on the following fundamental-facts:
- Deleveraging Consumers and Businesses. Everyone (except for the government) is tightening their belt and reducing their consumption. Government alone cannot carry the economic load forever, and if consumers (or businesses) don’t quickly step in we may face a double-dip recession. The $64,000 question is: How does the private sector look (or what’s left of it)?
- Unemployment Is Above 9% and Climbing. Unemployment is a lagging-indicator, and historically continues to get worse even if the economy picks up. This bit of bad news is not going to get better anytime soon, even if you think the economy is recovering now!
- Depressed Wages. Many corporations take advantage of high unemployment levels to keep wages down for their existing employees. This makes sense for the firms (the weaker economy justifies lower wage growth) but it has the unintended consequence of reducing the purchasing power of those already employed.
- Demographic Disaster. If consumers are the engine of the US economy, then Baby-Boomers are the turbo-charger; since they make up such a large demographic. But Baby-Boomers are nearing retirement and even if the economy picks up this year they have a lot of saving to do in order to repair the massive damage to their wealth. In short, deleveraging consumers & businesses, unemployment, depressed wages, and fortifying baby-boomers cast doubt on the bulls believe the economy is going to rebound…at least not by the consumer.
- Catch 22. Corporations cannot lead a recovery until banks are healthy. But banks cannot repair their balance sheets until they can lend to consumers that are both financially sound (which they are not), and willing to borrow (which they do not). But if things continue as the current rate (or “improve” only slightly) then banks cannot rebuild their balance sheets because for every item a bank recapitalizes, it faces another default somewhere else (foreclosure, credit cards, etc).
- Government Tapped Out. The resources and credit-worthiness of the US government are almost unlimited. Almost. But there’s only so much the government can borrow before it too must tap-out. Furthermore, if the borrowing becomes too excessive, then the medicine will become worse than the disease. Too much borrow may eventually crowd out private sector borrowing, increase borrowing costs, place a huge burden on taxpayers which reduces future consumption and economic activity, etc.
- Global Economic Decline. The US cannot export itself out of this problem, because the rest of the world is in the same position (if not a lot worse). The BRICs (or any other emerging market) grow largely due to exports and not organic domestic-growth. The OECD nations are all sickly, one worse than the other. Unfortunately, bad economic news has come “not as spies, but as battalions”.
Fear, Greed, & Beauty-Contests
So where is the DOW headed, as we enter Q2 earnings season? In the end, Q2 earnings will not matter. Nor will the mountain of forecasts dissecting it. What matters is how the market responds to Q2 earnings. As a trader, I agree with the Keynesian “beauty contest” rule: to determine winners of a beauty contest look to and anticipate the judge’s decision and don’t bother deciding who you think will win because you think they’re “pretty”. In short, what the market thinks matters, even if you think the market is “wrong”.
The rally off the March lows was based on shifting-sentiment. Fear of losing out on the rally, greed to jump in and make profits, and “pricing in” (or hoping for) a quick recovery. What the market thinks matters, even if you think the market is “wrong”. But the market is also self-correcting…like the cartoon character that has run off the ledge of the mountain, once it realizes its predicament, it will eventually come crashing down (or, “mark to market”).
OOPS, I DID IT AGAIN…I MADE YOU BELIEVE
The things you can always count on are: death, taxes, and whipsaw. Any trader worth his or her salt can attest to the fact that the market throws some wicked sucker punches, or whipsaws. Prior to a major rally, market participants will become convinced that the sky is falling (think fear). Right at a market top, investors and traders will be told that good times are here to last, things are “really different” this time, if you don’t buy now you’ll miss the opportunity of a life-time (think greed), “green shoots”, etc. The cycle repeats itself, ad infinitum.
Trading Options
If you believe that the market has rallied on sentiment, and not sound structural economic changes; if the seven-fundamentals I’ve outlined give you pause, then trade defensively and consider shorting via the Direxion 3-times leverage Bear ETFs (BGZ, TZA, FAZ). The additional leverage allows you to produce larger gains while committing smaller amounts of your capital.
So when should traders commit capital? I’ll save the technical-&-fundamental analysis of “entry-points” for another article, but the chart below shows that the 8,200 level for the DOW is critical from a trading perspective (since the March rally, we’ve hit but not broken through the 8,200 support level…at least, not yet). But that’s a discussion for another article…
Disclosure: No positions as of submitting article.
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This article has 111 comments:
While unemployment is rising-unemployment is 4.5% in college educated degreed but much higher than 15% in low income. I think that the dow will go to 7500 then back up to 8500-9000 by the end of the year. However it will be very low growth for a long time but there will be growth-however inflation and oild are the wild card to know how much growth
Millions of retiring baby boomers are upset and may vote for change if their portfolios and retirement plans don't rebound. Thus, propping up the market until the next generation acquires the retiring boomers toxic financial assets may be perceived as sound public policy, and concerns have been voiced that the market is being manipulated, as in "We'll give you billions of taxpayers' money and y'all make sure the market goes up". This argues against shorting, and for taking any profits slowly, as the next big drop may be a long time coming. On the other hand, if and when it comes, it is likely to be like a bursting dam.
These are challenging times for any rational long-term investor.
On Jun 29 08:54 AM prudentinvestor wrote:
>
>
> These are challenging times for any rational long-term investor.
SUSPEND DISBELIEF.
Or do you really think this Ponzi scheme can last?
I remembered someone once told me in 2006 that the Housing Bubble is going to burst, but it did not mean that I should start shorting then. The point is we are all crying "Wolf!" every day.
Elliott Wave International are a lot more pessimistic than you, and unfortunately they are very, very good at forecasting. I see you are citing mainly fundamental arguments. Their view is purely technical.
Worrying indeed. I don't pretend to know the answer as my predicting skills are quickly diluted over multi-month horizons relative to a few days.
If we are in a replay of the Great Depression of the 30's then you will be right, but for those of us who don't see the problems being the same your analysis is of no use.
The point being that this article is just another opinion and whilst there are many people who agree with Serge, I can find equally and even more qualified (a.k.a. really smart) people who disagree with him. Build a high quality diversified international portfolio and align it with your long term strategic investment objectives - that's how you give yourself the best chance to succeed in investing. Not by trying to market time (impossible) and not by trying to hit home runs (very low probability).
Where's my Cantonese phrase book, errr, or is it Mandarin?
On Jun 29 10:24 AM Mad Hedge Fund Trader wrote:
> Pick any number. Now that we are solidly into a correction, I have
> been flooded with requests from readers to call the next bottom in
> the S&P 500. Well here it is. Brace yourself. Put it on a Post-it-Note
> on your computer. It is without a doubt and unquestionably going
> to be 880, 850, 830, 800, 750, 666, or 320. That last number works
> out to be 90% of the book value of the S&P 500, which was the
> low seen in the 1930s depression. Yes, that depression, not this
> one. You are really asking me to solve a one billion variable equation,
> because that is the number of direct and indirect participants in
> global stock markets. If the few green shoots out there start to
> die off, the meltdown in commercial real estate accelerates, the
> Fed missteps by draining liquidity too soon, or there is another
> unforeseen shock to the system, then you can go with the lower of
> these numbers. If we are distracted by the health care debate, emerging
> market economies continue to perk up, and this strength helps our
> technology stocks stay alive, then sleepy narrow trading ranges will
> dominate, and the higher support levels will hold. But no matter
> what happens, I will be able to come back to you in three months
> and claim that I was right.
The untimely suspension of the uptick rule had to be a factor in leveraging the decline and again points to insiders knowing in advance what was going to happen.
Abolishing the uptick rule was preceded by what the SEC said was the most exhaustive study in history. That same sort of exhaustion was shown in their handling of the Madoff complaints.
I plan on writing an article of how the CREDIT CRISIS IS NOW A BUDGET CRISIS, and how state budgets, endowments, and other public sectors have been hit hard on the budgets. This could lead to the next wave of bailouts; we still have tough times ahead. This article will be released through my company's website: BullishBankers.com
Hopefully this article will be released later this week or early next week!
1. Show me where the stock market waits for unemployment to improve before it recovers.
2. Show me statistics where personal income is dropping as you anecdotally claim (even year over year personal income is still positive).
3. Show me where personal spending and retail sales are still dropping on a month over month basis (here are a couple charts for you):
www.briefing.com/Commo...
www.briefing.com/Commo...
You also make the common bear statement that it is the bulls who are saying "this time it is different". I'm saying this time it is the same, and I'm a bull. So show me where the market has crashed this much, or near this much followed by an improvement in the 2nd derivative of nearly every economic indicator and at least half of them have become positive, but the market crashed again anyway and fell even more than the previous crash. I look at similar markets, like 1974-75 where the market crashed a LOT, unemployment was rising, but other indicators were showing an improvement in the 2nd derivative and the market recovered hugely, without a second irrational crash. Show ME why it is "different this time", or tell me how it is actually the same and I just don't see the second crash that you speak of (or should I say 3rd crash since the first crash was in the fall of 2008).
Summers will rape the rest of the wealth as he has been positioned to do. America is bankrupt and the conversation is that the Dow might hit 6000, we have a lot bigger fish to fry that that. The whole disheartening part is that no one is doing anything about it. We are so wrapped up in bailing our own boats that we are allowing the ship to sink.
How can any be called long term investments?
On Jun 29 12:44 PM conceptwizard wrote:
> I think we are missing the big picture. Amaggedon was not avoided
> it was simply postphoned. There is still a 500 trillion derivative
> exposure out there, that can take us out in a moments notice. The
> dollar will be replaced, its only a matter of time, another doomsday
> effect for America. The BRIC is moving as rapidly as they can without
> crippling themselves.
> Summers will rape the rest of the wealth as he has been positioned
> to do. America is bankrupt and the conversation is that the Dow might
> hit 6000, we have a lot bigger fish to fry that that. The whole disheartening
> part is that no one is doing anything about it. We are so wrapped
> up in bailing our own boats that we are allowing the ship to sink.
Thus given the demographics we now find ourselves in ....spending must by necessity reset at a lower lever....10 to 15 % lower is as good a guess as any......and thats where corporate profits ly... in the last 10 to 15% of revenues....Thus one could postulste that going forward the e side of the p/e equation is all but wiped out
On Jun 29 12:09 PM thiazole wrote:
> This article seems to be based on nothing more than anecdotal data
> that is all easily debunked (ie, where is the hard data?). In the
> end, instead of spending the next hour debunking every point you
> make, I'll just leave you with some challenges:
> 1. Show me where the stock market waits for unemployment to improve
> before it recovers.
> 2. Show me statistics where personal income is dropping as you anecdotally
> claim (even year over year personal income is still positive).<br/>3.
> Show me where personal spending and retail sales are still dropping
> on a month over month basis (here are a couple charts for you):<br/>www.briefing.com/Commo...
>
>
> www.briefing.com/Commo...
>
>
> You also make the common bear statement that it is the bulls who
> are saying "this time it is different". I'm saying this time it is
> the same, and I'm a bull. So show me where the market has crashed
> this much, or near this much followed by an improvement in the 2nd
> derivative of nearly every economic indicator and at least half of
> them have become positive, but the market crashed again anyway and
> fell even more than the previous crash. I look at similar markets,
> like 1974-75 where the market crashed a LOT, unemployment was rising,
> but other indicators were showing an improvement in the 2nd derivative
> and the market recovered hugely, without a second irrational crash.
> Show ME why it is "different this time", or tell me how it is actually
> the same and I just don't see the second crash that you speak of
> (or should I say 3rd crash since the first crash was in the fall
> of 2008).
It did so at the 100 level during the 30's and 40's after reaching that level decades earlier and then again at the 1,000 level in the 60's, 70's and early 80's.
In the seventies we didn't retrace beyond 500 but the market also had only risen by 2.6x over its 1929 bull market high while the gain this time was 14x the high in 1966. The bigger they are the harder they fall.
The trend average for the DJIA is, I believe, around 6,000, so having the the index fall back to 1,500 or so is not out of the range of possibilities. We certainly have all the pieces in place for this to happen.
I don't expect this to happen but I do believe it is possible and certainly it is not impossible given the tremendous leverage built into our economy.
If one is a believer in at least the reasonable (30%+) possibility of Dow 6k or less, what is the best vehicle for hedging over the next 6-9 months? Buying puts on the Dow (or Financials) Bull 3x, 2x or 1x?
Also, which sectors might be the driver? I see Financials as the obvious choice but they can re-write the rules as they go along...is there a more vulnerable sector?
Any suggestions/comments will be welcome.
But I think the Fed is running out of bullets. And I think companies are running out of cost-cutting ideas. I think US demographics are changing, and with less household formation and more downsizing it will be many years before housing reaches the old highs. Bank balance sheets are still a joke: most are carrying their commercial loan portfolios at 98 cents on the dollar. In the markets, Goldman is something like 20% of the volume, the big boys are just picking each other's pockets in a giant rigged casino, waiting to play Mr. Retail Investor like a chump.
There are entire DECADES where cash was the best-performing asset class. It's so boring but right now I am 80% cash, 5% gold, 5% commodities, 10% various equity positions, mostly emerging. July earnings season will be key and will confirm (or deny!) the direction.
The whole commercial system is designed to remind us what we don't have, so take time to remember what you do have.
On Jun 29 07:07 AM BlueOkie wrote:
> Where did you come up with 6,000?
So are you saying that the market was just as bubbled in 1966 as it was in 1929? Are you saying that if the Dow had hit 5000 in 1966 with the same fundamentals, then the Dow would be underpriced now because it is less than 2.6 X 5000?
Hopefully you can see the flaw in your logic...
On Jun 29 04:23 PM Fred Voetsch wrote:
> In the seventies we didn't retrace beyond 500 but the market also
> had only risen by 2.6x over its 1929 bull market high while the gain
> this time was 14x the high in 1966. The bigger they are the harder
> they fall.
They're coming for equities because it is crystal clear these companies will still be arround after regieme change regardless of the color of the new currency.
On Jun 29 01:42 PM ampsucker wrote:
> i might not buy a new ford mustang in this economy, but if someone
> could sell me some nice, affordable, thin film solar collectors i
> could just staple onto my roof, i might seriously consider that....
1. Not only the government is spending money. AAPL, RIMM and others are spending heavily on R&D. Other industries are also doing well. This is why we measure things, to get a handle on complex situations.
2. Unemployment is rising. Yes, and it is expected to keep rising for a while as it is a lagging indicator. This is not unexpected.
3. Wages are depressed. Really? Wall street is still handing out bonuses. Other companies have given raises. How about some measurement of the net effect of raises and trimmed salaries?
4. Boomer retirement. It would be nice to have a study done on this. What will be the effect of boomers postponing retirement? Is it a good thing that they keep working? Would it be better to have them retire and then start spending some of their nest eggs and contributing to consumer consumption?
5. Catch 22. Complex issue. No comment.
6. Government Tapped Out. I'll plead ignorance but it seems we still have a number of options open to us.
7. US can't export itself out of this problem.
I'll agree with that given we've been running a trade deficit for quite some time.
On Jun 29 08:45 AM surferdoc wrote:
> While I agree the market is going lower in the short term,it is going
> higher by the end of next year. The market never should have gone
> down as low as it did. A small percentage of companies lost 90% of
> the money/profits/losses.P... caused it to go down as low as it did.Many
> good companies are making some money but much lower profits
>
> While unemployment is rising-unemployment is 4.5% in college educated
> degreed but much higher than 15% in low income. I think that the
> dow will go to 7500 then back up to 8500-9000 by the end of the year.
> However it will be very low growth for a long time but there will
> be growth-however inflation and oild are the wild card to know how
> much growth
Bapcha
Agree with others. The points and argument are weak.
The policy response has been appropriate. Panic was averted. The economy was boot strapped. The lender of last resort and the admininstration acted correctly - both Bush and Obama - the Congress on the other hand is another story. The market and the economy are responding - this is all as expected. We will see 1000 in the S&P before we see 666 again. Q2 earnings "don't matter" huh? Really? Earnings are on the mend. Financials will lead they have before. Watch.
As for the macro points. Stick to trading - you are no economist.
1. Deleveraging is a good thing. The worst is past. Consumers and others rebuilding balance sheets is a net postive for the economy. Yes consuption will decline but from such a fantastically aberrant high. It had to happen and does not need to get back to those levels for growth to recure. Further it reduces the risk of a bubble reforming and bulids a solid foundations.
2. Unemployment is rising. So what? Talk to me when it hits 20% . If it reaches 10 or 11% that is priced in.
3. Wages are depressed. Good point (for the bull case). Positive for earnings, keeps inflation in check, gives the fed room to move. Think about it.
4. Demographic disaster. I doubt it. First of all the U.S is aging less quickly than all other developed economies and most large emergings. In 30 years U.S demos will be better than most. That means that growth and consumption will continue here. Second. Boomers will work longer and be more productive than their parents. This is especially true in the US. Being 65 y/o in China is very different to being 65 y/o in the US. This doosday claptrap that the author spouts is not connected to facts or trends in work and productivity. Yes. 30 or 50 years ago getting to 65 was the end of the line. Not any more - when I can sit at home and design a product that is manufactured in China (and be paid multiples of what the line worker in China makes) or consult to a company that wants to build an LNG train in Dubai. Think about it.
Here's a freebie - the next time some dude spouts off about the decline of manufacturing in the US. First of all tell him that manufacturing has declined everywhere - it is a planet wide phenom. just as agriculture declined from the 1800's onwards. Next ask him what he would rather do - be the guy operating the machine or the guy designing the machine or arranging the financing to buy the machine. The value added is different.
5. Catch 22. Non issue. Watch bank earnings this year. Bet on it.
6. Government Tapped Out. Government debt obsession rears it head. Debt is not an issue if it is spent on productive investment. Define productive. A fleet of gold plated Mercedes Benz's to ferry around govt. officials = not productive. Improved education for elementary and high school students = very productive. Clean energy = marginal. So long as debt overall on average adds to the productive capacity it enhances future consumption especially in an economy that has secure property rights and steady productivity.
7. US can't export itself out of this problem. It does not have to.
That's all.
so much crap you said.
hopefully, i wasnt the only one to notice this, a bunch of others, above me, share the same thoughts, maybe, stick to your brunnete girl, she is pretty cute. but quit the dope.
Consumption is killing us - and our planet. When we all see that, not from intelligence and foresight, but instead from disaster or war, it will be a different story.
I would be worrying about a lot of other things besides the S&P and the DOW if I were you.
I also have a question - if the US Dollar is going to get creamed, which I believe to be true, has there got to be anything safer and smarter to bet on than Gold? Why does Gold feel so passe to me and why does it seem to beg the fundemental question of what kind of house of cards is our entire system really built on. If i'm going to hoard something, shouldn't I like Fresh Water a hell of a lot more than Gold these days?
Classic bear/bull phenom. Been around forever and we'll see it again multiple times over the next 50 or so years. Late 2008 and early 2009 were the best of times as a net buyer.
Funny thing about gold and the dollar. I can walk into a grocery store and buy my groceries with the almighty dollar; however, I have yet to find a grocery store that accepts gold as a form of payment. Gold fear mongering comes around during every bear market; yet, the return on gold as an investment is abysmal.
On Jun 30 09:00 AM diddy wrote:
> I'll speak as a consumer, not a trader. There are 1000+ options for
> every stupid product under the sun, and we don't need that many options.
> I'm not buying. I don't NEED to buy. I've been programmed by a now-misguided
> society to consume.
>
> Consumption is killing us - and our planet. When we all see that,
> not from intelligence and foresight, but instead from disaster or
> war, it will be a different story.
>
> I would be worrying about a lot of other things besides the S&P
> and the DOW if I were you.
>
> I also have a question - if the US Dollar is going to get creamed,
> which I believe to be true, has there got to be anything safer and
> smarter to bet on than Gold? Why does Gold feel so passe to me and
> why does it seem to beg the fundemental question of what kind of
> house of cards is our entire system really built on. If i'm going
> to hoard something, shouldn't I like Fresh Water a hell of a lot
> more than Gold these days?
As for gold's purpose, I will assume that poster diddy means physical gold with good delivery. Fresh, abeit possibly acidic water will fall from the skies. Gold will not. That will probably continue to be the case for the duration of our physical universe. An ancient market defines gold bullion. The greater market is indeed a house of cards.
OK-then draw a line from 1935 to present day -one for the lows and one of the highs.
Over time this gives one the range-bollinger bands were created just like this!
Historically stocks should or will usually trade in the ranges.
Of course if you look to the stars one will say we are 3-5 yrs from historical world changes. all I can say is dig a cave and hide in it!
On Jun 29 07:07 AM BlueOkie wrote:
> Where did you come up with 6,000?
Get off this website. Put your money where your mouth and go buy default swaps since we're SO OVERLEVERAGED. Either that or sell some shorts. I don't care which one as long as you quit crying and wasting bandwidth.
None of you have any idea what you're talking about. Your claims are WILDLY unlikely. You're predicting a type of global depression that could destroy economies as we know them. Be reasonable if you wish to be taken seriously. I think the dow will go up, but I'm not going to tell you it'll go to 30,000 just to get some attention for my blog. The dow will never touch 6,000.
On Jun 30 12:38 PM MWilliams1188 wrote:
> None of you have any idea what you're talking about. $1,000 bucks
> says the dow never touches 6000
Wishing you a good buy or short.
Peace!!!
On Jun 30 12:49 PM MWilliams1188 wrote:
If you're really this radically pessimistic of the market, you have no business being investors, or Americans for that matter.
Real Estate is a bubble just like a thousand other bubbles before this. Admittedly it has been a gigantic bubble which has helped fuel our insane profligacy and consumerism. But guess what? Houses and the land they are built upon are a finite resource in a rapidly growing world; they are assets that are deprecating rapidly in the short term, but will appreciate in the long term. Many houses might be "underwater" but does that realistically affect the average household? It only hurts the speculators or those that lost jobs. As housing approaches stabilization, it becomes a zero sum game and its impact on the economy becomes negligible.
Some like to point out that how will we ever reach the profit levels achieved by the financials at their peak. The stock market is a measure of value creation, and as America and the world deleverage, a significant portion of invaluable human capital will be diverted to other, more productive industries. This future value added is impossible to measure right now, but consider how much of the financial industry was merely a leech sucking up precious capital on society.
1)What to do in an environment (global and U.S.) in which the U.S. $$$ will not be worth squat, most all currencies are U.S. Dollar pegged one way or another and so paper money won't be worth squat.
2)Hyperinflation and a "new U.S. Dollar = $100 Old U.S. Dollars, and possession of Gold in all forms and hardmetals once more outlawed.
3)All leverage collapses down to 1:1
4)All municipalities go bnakrupt as RE Taxes fall by 80%
5)No payroll taxes to speak of coming into treasury
6)Social Security and Medicare Bankrupt as we speak.
7)Mass starvation and food riots as the infrastructure falls apart and can no longer support the population = only politicians get to eat.
Other than a store of basic commodities = guns and bullets.
Where do you invest to preserve capital (financially and from the political theives) on Mars?'
Answers would be welcome please. IMO
Welcome to flight 505
Serge,
I can not agree.
It's not a $64,000 question.
Try a $64 Trillion question!
Serge,
Again, I can not agree.
The actual rate is likely to be considerably higher. see shadow stats!
www.shadowstats.com/al...
Serge,
The leading edge of the Baby Boomers have already passed their Peak Earning & Spending years.
In addition, Peak Oil is already part of history, it Production Peaked in 2005.
The Baby Boomers & Peak Oil, in fact are the real base caused for the current downturn.
The greatest difficulties we face is that both of these issues are long term and they can not be magically solved by governments, the FED or anyone else.
It doesn't happen too often, but it really would pay to be open & honest, with Joe Public and to enlist our help, in getting the best outcomes possible?
I recall an economics class in which the prof said we will never have another Great Depression. The government would not allow it to happen. Looks like he was right. I think we are on the right track. If all that great AAA paper was not able to be sold world wide we would not be in this mess. Exchanging the blue Monopoly money for new script. I'm sure many of the people that were responsible for the AAA ratings are quite remorseful. Right. Some people made fortunes prior to the crash. I love it when business wants no government interference...until they need a hand out. :-)
Not all businesses are to blame but all are down because of unrestrained financial foolishness. 21st century tulip bulbs.
We will recover but it will not be the same as other recessions. This started when we could no longer deduct interest on consumer loans from personal income taxes. Wah La. Use a home equity loan to buy a car or whatever. It just grew from there. The U.S. has consumed more goods and services since 1960 than the rest of the world combined from the beginning of time. We are the champions and we lost. :- )
The market? It may be flat for a good while or we may see a decline before an advance. But I don't expect it to be a rapid return to lofty highs. Too inflationary. It will depend on earnings and I don't think anyone here expects them to catapult accross the board. I am just going to be cautiously aggressive. No heavily leveraged balance sheets etc. It will be more of a stock pickers market than in the past.
I don't think the world will end but I do think many of us are going to be living differently.
Many commentators here have taken exception to the 6,000 figure. Okay, maybe they have a valid point. But I think the author is just trying to say that the market will fall by quite a bit. It could be 7,000 or 6,000 or 5,000 or even 4,000 (since many 'experts' agree that this crisis is bigger than the 1930's).
I agree with the author. The chances of the Dow falling are quite high. Although there is also a slim chance that the Dow rising higher than now by end of the year, don't be too happy when it happens. A higher Dow will come with a shrinking dollar -- and so you are back to square one. I would rather they support the dollar than the stock markets. The dollar is the world's reserve currency, and if it is allowed to go up and down like a wild yo-yo (e.g., by monetizing debt) , very soon, the rest of the world will find a replacement.
Stock picking should still work, but look for continuing growth abroad. There's so much manipulation of currencies/commodities... bonds that for now, things are quiet and meta-stable. I'm waiting to see which way things break in a meaningful way.
Either, the dollar goes down, stocks and commodities go up, or, vice versa. Following the oversold bounce in March we've been flopping and chopping for the better part of two months, in general, although individual stocks or commodities like AAPL or USO have continued to perform.
The logical way to restart the global economic engine is to resume over-consumption in the West. But the previous cycle's over consumption was fueled largely by credit growth, not job or wage growth. So it's unclear to me where the jobs are going to come from that will produce the income that will drive consumption.
One recent study showed barely a million new private sector jobs created in the past decade in the US. The rest are government jobs, a trend that has accelerated. Sadly, all the frothy high paying jobs fueled by excessive credit in the financial services industry and real estate are being wiped out.
And America continues to export what is the heart of any vibrant economy, manufacturing jobs. Ross Perot had it right in 1991 when he said that as our manufacturing jobs were outsourced to the developing world, we would become a progressively more impoverished nation.
In a Thomas Friedman "flat world" a US high school grad can't expect a manufacturing job making 20-40 dollars an hour with benefits when his employer is competing with companies paying one tenth those wages and benefits in China or Mexico. I see these unemployed folks everyday. They literally have nothing to do with themselves. No jobs. They tend to watch TV and smoke pot.
Things are somewhat more stable in Europe and Japan, but they face similar competitive disadvantages and have been mired in low growth no growth economics for longer than us.
Growth in the developing economies is clearly fueling consumption of raw materials but its not clear that many jobs are being created in the West to manufacture goods consumed in India, China, etc.
With job losses, stagnant wages, wealth loss in equities and real estate, and very little interest income due to low interest rates, money is in short supply, and with excess capacity still being worked off, deflation is not off the table, in which case, cash is king, as it appreciates relative to goods and services.
However, if the US Dollar falls off a cliff, prices will be rising at a time when money is tight, leading to a full blown economic crisis and a rapidly declining quality of life. That would be too destabilizing an event for the world to tolerate at this time, and the powers that be will not likely allow that to occur.
The powers that be crave stability above all else, although at times cumulative imbalances need to wash through the system. The short term for the US would appear to be a slowing rate of decline of various economic indicators, followed by stabilization at lower levels of employment, wages, housing prices, etc.
We bounce back somewhat when psychology improves, credit is more free flowing, balance sheets are healed, and some risk taking ensues. For that to happen in a meaningful way, however, taxes have to be low enough to justify the risk, and regulations not too burdensome. And with the current political climate, this could be a problem.
Some have suggested that the various pieces of legislation being passed by the Congress (stimulus-debt, cap and trade taxation, health care taxation, etc) will so hobble the private sector that by the time an ordinary economic recovery would have occurred, it will not manifest. Some speculate that FDRs new deal had this effect in the 1930s. And then there is Japan post 1989.
The key to prosperity in these leaner times may be to become more conservative in our expectations, more conservative in our investments and expenditures, and be alert for diamonds in the rough: companies with continuing growth, supply-demand imbalances in certain commodities, little bull markets.
Many have compared this US crisis with the Japanese bubble in the late 80's.
But has anybody looked at the Nikkei?
Nikkei peaked at 39,000 points in 1989 and since 1992, it has never gone higher than 25,000. Lowest is 7,000. Today, it is 10,000.
Now, if the US is going to be like Japan, Dow 6,000 will not be the bottom.
And don't forget Japan is an exporting country and with huge savings and foreign reserves. In 1989, it was definitely better off than US in 2008.
On Jul 01 01:35 AM Dr. O wrote:
> I'd say we're in a Japanese-like bubble burst except our individual
> and governmental balance sheets are insolvent. The only logical way
> for this thing to end, over the longer term, is continued devaluation
> of the US Dollar, and continued loss of reserve currency status.
Or the companies that are being hit with increased taxation and regulations (any of you care to realize the result of the new 401k rules? hint: my employees are going to lose 3% a year because I can't afford the REPORTING).
Or maybe you mean the companies that will be regulated out of existence with Cap & Trade, or health care, or forced unionism, or "competition" with the third world?
We are in deep crap and NO ONE is even trying to stop it.
Our small businesses are being eradicated. Take a drive through your local industrial park/office complex and SEE the truth.
On Jun 29 01:42 PM ampsucker wrote:
> i don't know if there is an economic theory with a name that describes
> it, but for lack of a better term in my vocabulary, i'll call it
> "stepped down budget planning".
>
> the folks i know are still spending money on daily things things.
> they are still buying and fueling the economy. it's just that we
> have all been downsized. we have "stepped down" our needs. instead
> of a new car, we buy a used car. instead of dinner out, we have
> a family bbq. in stead of a big trip, we pick a drive-to destination
> closer by.
>
> i think this effect can be seen on a macro scale by looking at large,
> mid and small cap companies and how they perform. there too we see
> the stepped down effect. large caps are barely treading water.
> but mid and especially small cap sectors are performing very well.
> i think over the long haul, that is where you will see the biggest
> recovery coming from. (and emerging and certain international equities,
> as well.)
>
> i might not buy a new ford mustang in this economy, but if someone
> could sell me some nice, affordable, thin film solar collectors i
> could just staple onto my roof, i might seriously consider that....
>
>
> when the dow and s&p, composed of large cap players, is falling
> like a rock, look to the smaller, grass roots, service and durable
> goods companies for the re-invention of the US economy.
>
> amp
Why do people find it so hard to understand that, with a mountain of debt existing higher up on the accounting food chain, and with capacity for servicing it continuing to collapse (just keep your eye on that moribund real estate market), equity in all forms is at incredible risk of being indiscriminately sold simply for the sake of raising capital that's needed higher up in the financial food chain?
What do you think was behind last year's equity sell-off? This risk remains intact. Dow 6000 is a terribly optimistic forecast.
On Jun 29 12:44 PM conceptwizard wrote:
> I think we are missing the big picture. Amaggedon was not avoided
> it was simply postphoned. There is still a 500 trillion derivative
> exposure out there, that can take us out in a moments notice. The
> dollar will be replaced, its only a matter of time, another doomsday
> effect for America. The BRIC is moving as rapidly as they can without
> crippling themselves.
> Summers will rape the rest of the wealth as he has been positioned
> to do. America is bankrupt and the conversation is that the Dow might
> hit 6000, we have a lot bigger fish to fry that that. The whole disheartening
> part is that no one is doing anything about it. We are so wrapped
> up in bailing our own boats that we are allowing the ship to sink.
We have built an ecomony based on credit - a foundation of sand. Credit should only be used by business (payroll, expansion, etc). We have allowed Dick and Jane to purchase on fake money, and now it is time to pay the piper. Homes are lacking equity, jobs are unsure - what financial institute will lend? We have a economical house built of cards and the cards are about to give way (pun intended).
The question no one will answer is - who can buy anything other than the necessities, or how many can as opposed to how many can't? I've been developing financial analysis software and offering consultation since '65, without client loses, based on a simple approach - do you really think it is worth it? I'm afraid the majority of America has been investing in a fantasy, and this fairy tale is not going to have a happy ending.
Always remember this, which they don't teach at any school, capitalism does not wave any flag or honor any nation - it demands return and the more the better. Capital has always ruled and labor has and will always bend to it.
1. Stimulus will be kicking in earnest later this year.
2. Domestic demand from emerging market. (this is huge - China +India will be twice the size of the US by 2020).
3. Inflation will start to take hold.
4. Business conditions continue to improve www.philadelphiafed.or.../
5. Forward P/E's will come in greater focus and comps will start looking good.
6. Exports will start to boom (mainly to emerging markets)
7. Replacement demand from durable goods / auto's will kick in earnest,
8. Housing will stop falling.
I could go on. While we are not going to go to S&P 1500 anytime soon I refuse to fall into the trap of pessimism.
Cheers.
Is the Stock Market Cheap?
June 27, 2009 updated with the June 24th Standard & Poor's earnings estimates
A standard way to investigate this question is to look at the historic Price-to-Earnings (P/E) ratio using reported earnings for the trailing twelve months (TTM). Proponents of this approach ignore forward estimates because they are often based on wishful thinking, erroneous assumptions, and analyst bias.
The "price" part of the P/E calculation is available in real time on TV and the Internet. The "earnings" part, however, is more difficult to find. The authoritative source is the Standard & Poor's website, where the latest numbers are posted on the earnings page in a linked Excel file (see column D).
The table here shows the TTM earnings based on "as reported" earnings (Dec-08) and a combination of "as reported" earnings and Standard & Poor's estimates for "as reported" earnings for the first three quarters of 2009 (Mar, Jun, Sep). The values for the months between are linear interpolations from the quarterly numbers.
The average P/E ratio since the 1870's has been about 15. What is it today? With the S&P 500 currently hovering around 920 and the June reported earnings estimate of .48, the current TTM P/E is around 1900. That's right: 1900! Of course this is complete nonsense. At the top of the Tech Bubble in 2000, the conventional P/E ratio was a mere 30. It peaked north of 47 two years after the market topped out. So a P/E ratio of 1900 with the index down about 41% from its October 2007 all-time hight can't be taken seriously.
As these examples illustrate, in times of critical importance, the conventional P/E ratio often lags the index to the point of being useless as a value indicator. "Why the lag?" you may wonder. "How can the P/E be at a record high after the price has fallen so far?" The explanation is simple. Earnings fell faster than price. In fact, the negative earnings of 2008 Q4 (-$23.25) is something that has never happened before in the history of the S&P 500. And Standard & Poor's earnings estimates for July through September will give us negative annual earnings. A P/E calculated with negative earnings would flip the ratio past a divide-by-zero error to a negative ratio. Make that nonsense squared!
The P/E10 Ratio
Legendary economist and value investor Benjamin Graham noticed the same bizarre P/E behavior during the Roaring Twenties and subsequent market crash. Graham collaborated with David Dodd to devise a more accurate way to calculate the market's value, which they discussed in their 1934 classic book, Security Analysis. They attributed the illogical P/E ratios to temporary and sometimes extreme fluctuations in the business cycle. Their solution was to divide the price by the 10-year average of earnings, which we'll call the P/E10. In recent years, Yale professor Robert Shiller, the author of Irrational Exuberance, has reintroduced the P/E10 to a wider audience of investors. As the accompanying chart illustrates, this ratio closely tracks the real (inflation-adjusted) price of the S&P Composite. The historic P/E10 average is 16.3.
The Current P/E10
After dropping to 13.4 in March, the May 2009 monthly average P/E10 has rebounded to 16.2 — right on the average. In fact, with the index now hovering around 920, the P/E10 stands at 16.6. The chart below gives us a historical context for these numbers. The ratio in this chart is doubly smoothed (10-year average of earnings and monthly averages of daily closing prices). Thus the fluctuations during the month aren't especially relevant (e.g., the difference between the monthly average and monthly close P/E10).
Of course, the historic P/E10 has never flat-lined on the average. On the contrary, over the long haul it swings dramatically between the over- and under-valued ranges. If we look at the major peaks and troughs in the P/E10, we see that the high during the Tech Bubble was the all-time high of 44 in December 1999. The 1929 high of 32 comes in at a distant second. The secular bottoms in 1921, 1932, 1942 and 1982 saw P/E10 ratios in the single digits.
Where does the current valuation put us?
For a more precise view of how today's P/E10 relates to the past, our chart includes horizontal bands to divide the monthly valuations into quintiles — five groups, each with 20% of the total. Ratios in the top 20% suggest a highly overvalued market, the bottom 20% a highly undervalued market. What can we learn from this analysis? Over the past several months, the decline from the all-time P/E10 high has dramatically accelerated toward value territory, with the ratio dropping from the 1st to the upper 4th quintile in March.
www.konarka.com/index..../
On Jun 29 01:42 PM ampsucker wrote:
>>>> but if someone could sell me some nice, affordable, thin film solar collectors i could just staple onto my roof, i might seriously consider that....<<<<
Might need about 4-6 more earnings cycles to make a decent call.
Since November there has been a lot of institutional buying, setting up a decent base at the current levels. There has to be a good impetus for them to sell and stay out. Let the traders take it down and buy on the dips. At the same time there is no fundamental reason for the market to go up from here. I wouldn't be a buyer at the current levels. Everything is at a price that needs to be confirmed by actual earnings.
Unrealistic government spending will have an intermediate term impact to keep the economy going. If it weren't for all of the government intervention the DOW would have already hit 6000 (for what its worth as an indicator). The chart would be looking like the great depression. We'd be at the end of the first bear market rally and preparing for the next drop.
We're still in a recession and it's effects have not been fully felt yet. If the government(s) are unable to spend their way out of it there will be another big drop down the road. At that point there may not be a lot of upside, or money, left.
On Jul 01 05:06 PM WarrenTeeSmith wrote:
>>> So, I'm not going to fret about a few thousand points at this stage of the game. It's when the writer of this article, and his followers, starts turning bullish, and starts calling for 20,000 on the Dow, that I might take pause, and allow some of you nice folks to buy some shares from me.<<<<
on the weekly chart it's clear as a bell
On Jun 30 10:44 AM root wrote:
> Has anybody noticed the head and shoulders pattern emerging in the
> chart of the dow?
Read carefully and you will see that the author(s) of this article have backed both horses. This shows what everyone knows but will not admit.........
no one can predict the future
The belief that one can predict the future with mathematics is as scientific as witchraft, despite the Nobel prizes given for this practice.
DSS
arabianmoney.net/2009/.../
The private sector will reduce their leverage to a more conservative level. Most of you are assuming it will be wiped out.
So, deposit taking financial institutions now have access to an increased deposit base (bank borrowings) at very low cost. These same financial institutions will turn around and lend those deposit financings to businesses in need of loans for investment and expansion. Those loans will be profitable to the banks as they are lent out at much higher rates than they cost the banks. You might say that businesses are not borrowing for expansion right now and you would likely be incorrect. Global companies are expanding because they have great growth opportunities elsewhere in the world. Don't take my word for it; listen to GE and observe where they are investing money and where they project they will make money.
I do agree with your concerns about the US economy. It will not turn positive very quickly and, under this administration with its cap & trade, health reform, huge deficits, and socialist agenda, capital will flow out of the US and be invested in other parts of the world. That does not mean that the DJIA will go down. It means that the big global players in the DJIA are going to make more of their profits from outside the US. I fear for the US worker, consumer, taxpayer, citizen. The future will be difficult for them and, moreso, if Obama continues on his path of dissuading American capitalism from investing in the US.
Finally, I believe that the currency of choice will no longer be the US dollar because of the inflationary printing that has and continues to take place and that the more stable Canadian Dollar is going to be the "Swiss Franc" of North America.
So, given the situation, the US economy and employment will likely not turn positive very soon but the global economy will and global companies and their stocks (many of them in the DJIA) will rise.
On Jun 29 12:47 PM BOBO101 wrote:
> If you are a rational long term investor, take a look at the price
> charts for the 3 leveraged ETFs(Direxion 3-times leverage Bear ETFs
> (BGZ, TZA, FAZ)) and then do a little bit of research on these so
> called etfs.
>
> How can any be called long term investments?
Huh?! Keynes died in 1946:
John Maynard Keynes, 1st Baron Keynes (pronounced /ˈkeɪnz/) (5 June 1883 – 21 April 1946)
The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel has been awarded to 62 individuals since 1969. (Dead people don't get prizes.)
nobelprize.org/nobel_p.../
* 2008 - Paul Krugman
* 2007 - Leonid Hurwicz, Eric S. Maskin, Roger B. Myerson
* 2006 - Edmund S. Phelps
* 2005 - Robert J. Aumann, Thomas C. Schelling
* 2004 - Finn E. Kydland, Edward C. Prescott
* 2003 - Robert F. Engle III, Clive W.J. Granger
* 2002 - Daniel Kahneman, Vernon L. Smith
* 2001 - George A. Akerlof, A. Michael Spence, Joseph E. Stiglitz
* 2000 - James J. Heckman, Daniel L. McFadden
* 1999 - Robert A. Mundell
* 1998 - Amartya Sen
* 1997 - Robert C. Merton, Myron S. Scholes
* 1996 - James A. Mirrlees, William Vickrey
* 1995 - Robert E. Lucas Jr.
* 1994 - John C. Harsanyi, John F. Nash Jr., Reinhard Selten
* 1993 - Robert W. Fogel, Douglass C. North
* 1992 - Gary S. Becker
* 1991 - Ronald H. Coase
* 1990 - Harry M. Markowitz, Merton H. Miller, William F. Sharpe
* 1989 - Trygve Haavelmo
* 1988 - Maurice Allais
* 1987 - Robert M. Solow
* 1986 - James M. Buchanan Jr.
* 1985 - Franco Modigliani
* 1984 - Richard Stone
* 1983 - Gerard Debreu
* 1982 - George J. Stigler
* 1981 - James Tobin
* 1980 - Lawrence R. Klein
* 1979 - Theodore W. Schultz, Sir Arthur Lewis
* 1978 - Herbert A. Simon
* 1977 - Bertil Ohlin, James E. Meade
* 1976 - Milton Friedman
* 1975 - Leonid Vitaliyevich Kantorovich, Tjalling C. Koopmans
* 1974 - Gunnar Myrdal, Friedrich August von Hayek
* 1973 - Wassily Leontief
* 1972 - John R. Hicks, Kenneth J. Arrow
* 1971 - Simon Kuznets
* 1970 - Paul A. Samuelson
* 1969 - Ragnar Frisch, Jan Tinbergen
On Jul 02 02:34 PM duhduh wrote:
> The writer says: "...to quote the Nobel Prize winning economist Keynes."
>
>
> Huh?! Keynes died in 1946:
>
> John Maynard Keynes, 1st Baron Keynes (pronounced /ˈkeɪnz/) (5 June
> 1883 – 21 April 1946)
>
> The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred
> Nobel has been awarded to 62 individuals since 1969. (Dead people
> don't get prizes.)
>
> nobelprize.org/nobel_p.../
>
> * 2008 - Paul Krugman
> * 2007 - Leonid Hurwicz, Eric S. Maskin, Roger B. Myerson
> * 2006 - Edmund S. Phelps
> * 2005 - Robert J. Aumann, Thomas C. Schelling
> * 2004 - Finn E. Kydland, Edward C. Prescott
> * 2003 - Robert F. Engle III, Clive W.J. Granger
> * 2002 - Daniel Kahneman, Vernon L. Smith
> * 2001 - George A. Akerlof, A. Michael Spence, Joseph E. Stiglitz
>
> * 2000 - James J. Heckman, Daniel L. McFadden
> * 1999 - Robert A. Mundell
> * 1998 - Amartya Sen
> * 1997 - Robert C. Merton, Myron S. Scholes
> * 1996 - James A. Mirrlees, William Vickrey
> * 1995 - Robert E. Lucas Jr.
> * 1994 - John C. Harsanyi, John F. Nash Jr., Reinhard Selten
> * 1993 - Robert W. Fogel, Douglass C. North
> * 1992 - Gary S. Becker
> * 1991 - Ronald H. Coase
> * 1990 - Harry M. Markowitz, Merton H. Miller, William F. Sharpe
>
> * 1989 - Trygve Haavelmo
> * 1988 - Maurice Allais
> * 1987 - Robert M. Solow
> * 1986 - James M. Buchanan Jr.
> * 1985 - Franco Modigliani
> * 1984 - Richard Stone
> * 1983 - Gerard Debreu
> * 1982 - George J. Stigler
> * 1981 - James Tobin
> * 1980 - Lawrence R. Klein
> * 1979 - Theodore W. Schultz, Sir Arthur Lewis
> * 1978 - Herbert A. Simon
> * 1977 - Bertil Ohlin, James E. Meade
> * 1976 - Milton Friedman
> * 1975 - Leonid Vitaliyevich Kantorovich, Tjalling C. Koopmans<br/>
> * 1974 - Gunnar Myrdal, Friedrich August von Hayek
> * 1973 - Wassily Leontief
> * 1972 - John R. Hicks, Kenneth J. Arrow
> * 1971 - Simon Kuznets
> * 1970 - Paul A. Samuelson
> * 1969 - Ragnar Frisch, Jan Tinbergen
On Jul 01 05:06 PM WarrenTeeSmith wrote:
> Very interesting article. I am very much encouraged by all of the
> followers, who are at least as negative towards the market as the
> writer of the article. I have no idea where the market will be six
> months or a year from now. I could almost care less, if the market
> as a whole declines another 1,000 or 2,000 points. I am fairly certain,
> that the next 6,000 point move on the Dow, or the next six hundred
> point move on the S & P, will be up and not down. In the mean
> time, I will continue to buy good companies with good management,
> and hold them for the longer term. I will enjoy didvidend yields,
> far in excess of what a 5 year treasury is yielding. Maybe in 5 or
> 10 years I will look back and say you folks were right, I could have
> waited for the market to drop another 1,000-2,000 points or so. And
> if it does, I will step in and scoop up a whole bunch more. I personally,
> have never been great at predicting market direction over the short
> term. Finding great companies, with good balance sheets, and good
> management, at an attractive price....those are things I have been
> able to do well, and has paid me on average, about 13% a year, compounded
> over the last forty years. So, I'm not going to fret about a few
> thousand points at this stage of the game. It's when the writer of
> this article, and his followers, starts turning bullish, and starts
> calling for 20,000 on the Dow, that I might take pause, and allow
> some of you nice folks to buy some shares from me.
>
>
On Jun 29 11:54 AM Credit Geek wrote:
> I believe there is some very accurate projections here. First, there
> really is no place for the economy to go. The U.S. does not need
> to build so many residential or commercial properties, we already
> have a glut of assets in those categories. We will not be producing
> as many automobiles based on what has happened and there will not
> be an offset increase of demand for the non-union assemblers autos
> in the southeast U.S. The securitization market is suspect and it
> is unclear whether that market will revivie to a substantial level
> of financing growth. Secondly, the baby-boomers are somewhat stuck
> in their ability to sell primary residences and cash out equity.
> Finally, it has been well publicized what is happening to state and
> municipal budgets. These entities are also large sources of consumption
> and employment. I think the U.S. economy is really not performing
> other than just providing basic products and services and there will
> be no help from overseas demand. How we really start growing again
> in that environment, and how we get the federal government out of
> the economy, is very unclear and I think that does result in downward
> pressure on the equity market.
Don't follow the crowd; think for yourself; read, read, read!
But there is a probability the market will go sideways (and keep the danger of going down next day relevant)
As well as probability of the market going up (again, especially, if too fast, it may go crushing as well).
I think the sideways trend is most probable, but who knows?
Every day is a challenge.
4, demographic disaster: the baby boom generation is very talented and productive, and if they have to work a few more years than intended before they retire, that is not going to drag the econ. down, as many are entrepreneurial and will be self-employed etc.
5. Catch 22 is not as bad as he makes it out to be. Most of us are still working and paying loans, and enough people are buying up the foreclosed real estate that banks are not frozen in place.
And most important, Bernanke listened to Cramer, and opened up credit lines to unfreeze the mess, and he seems to be carefully monitoring flows and is erring more toward inflation and away from the 1930s Fed huge mistake of punishing America by shrinkng the money supply.
I may be a fool, maybe not, but this financial collapse WAS NOT ANY DIFFERENT than previous money panics, except that more and fancier technology was involved. Most of us are not employed in the financial sector, we just need it to be around for us when we need loans.
5 are either not not sufficient or truecauses
On June 30th, China quietly announced an end to this program.
www.planbeconomics.com.../
On Jul 04 01:46 PM redwine44 wrote:
> I disagree with his #3, depressed wages: other than govt. employees
> here in Calif., employers are not forcing wage cuts, and union teachers
> are accepting contracts with no wage changes.
>
> 4, demographic disaster: the baby boom generation is very talented
> and productive, and if they have to work a few more years than intended
> before they retire, that is not going to drag the econ. down, as
> many are entrepreneurial and will be self-employed etc.
>
> 5. Catch 22 is not as bad as he makes it out to be. Most of us are
> still working and paying loans, and enough people are buying up the
> foreclosed real estate that banks are not frozen in place.
>
>
> And most important, Bernanke listened to Cramer, and opened up credit
> lines to unfreeze the mess, and he seems to be carefully monitoring
> flows and is erring more toward inflation and away from the 1930s
> Fed huge mistake of punishing America by shrinkng the money supply.
>
>
> I may be a fool, maybe not, but this financial collapse WAS NOT ANY
> DIFFERENT than previous money panics, except that more and fancier
> technology was involved. Most of us are not employed in the financial
> sector, we just need it to be around for us when we need loans.<br/>
>
> 5 are either not not sufficient or truecauses
Over the last few months sentiment has shifted and bullish expectations --green shoots--were driving the market higher. Lately some of the numbers are worse than expected and thats driving the market lower.
Now we get the doomsday scenerios again and the build up of negative expectations. Inevitably at some point the numbers are going to be better than expected and back up we go.Ironically articles like this one are the seeds for the next rally.
On Jul 03 08:36 PM nport wrote:
> The only reasonable voice here is Warren Tee Smith ..step forward
> Warren, u get the prize today! The only sensible investor on this
> thread. Branch Rickey once said: " Wisdom is the residue of experience."
> And Mr. Smith and I share a whole bunch of business cycles which
> have taught us that things are never as bad as the bears think (read
> P. Schiff) nor as great as the bulls believe (read A. Greenspan).
> Those of you who are with Schiff are confused. You think Gold will
> save you. Well my friends, Gold, more likely as not will break your
> heart. I have seen it happen many times over the past 45 years. Of
> course, I could be wrong. Even a stopped clock is right twice a day.
> Warren Buffett and his co-chair at BRKA, Charlie Munger, buy good
> companies run by honest and able managers when their equity can be
> bought at prices which provide a margin of safety. See (The Intelligent
> Investor, by Benjamin Graham). They don't spend a great deal of time
> on Macroeconomics, interest rates, the money supply etc. They just
> buy keep buying hamburger when it is on sale. Those of you attracted
> to trading, see head & shoulders, cups & saucers, have my
> profound sympathy for your addiction. Mr. Smith and I both understand
> that optimism is the enemy of rationality and being perpetually bearish
> can be harmful to your financial health. Buffett has said concentrate
> on what is knowable (Know·a·ble a. That may be known; capable of
> being discovered, understood, or ascertained) and what is important
> and waste no time predicting the future. (Unknowable) I don't know
> if the Dow is going to 6,000 or ? but I believe now is as good a
> time as any to seek value. You will pay a high price for certainty.
> Smith and I have made good money in the past and we will continue
> to abide by our long held beliefs re: investing for the long run.
> Look you can't have it both ways..If the dollar is in a long term
> secular downtrend, then by definition, inflation will rule. Everything
> we buy from other nations will cost more. That means inflation. and
> the first thing you will notice is investors running from dollars.
> Before they run for metals they exchange dollars for stocks. Don't
> believe me? Check out the bull run in 1967-69. This time next year,
> maybe even late in 09, I would expect the same thing to happen. So
> 6000? or 15000? Who knows? What I firmly believe and have experienced
> is, profits await the investor prepared to take advantage of Mr.
> Market.
> Don't follow the crowd; think for yourself; read, read, read!
> Elliott Wave International are a lot more pessimistic than you, and
> unfortunately they are very, very good at forecasting.
I want to make sure people get the full story behind your post. While EWI is indeed predicting a very dire long term outcome with the Dow going well sub 2k, they also believe that this sucker's rally will hit a higher high this year before it enters Primary 3 down (AKA the big wipe out). They know that stocks don't go straight up or straight down. They predicted this sucker's rally almost to the freaking day.
You're still an idiot. I believe I still have a $1000 bet with Maxe Paul too