The Market Bubble Is About to Pop 137 comments
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You may find it hard to resist going whole-hog into the market these days, especially as we are likely to get a very strong third quarter. By some estimates, growth could be 4%. It could even reach 6%.
However, all the growth we'll see will be the result of unsustainable factors such as inventory accumulation, car production increases (due to the “cash for clunkers” program), etc. With this in mind, you must resist the urge to increase your weighting in stocks.
Long-term, we still face substantial headwinds. But our feeling is, if the market bubble does pop, it will likely be the last pop.
It's true that irrational markets can rise, and in doing so attract more irrationality. But in the end there will be some event, some realization, that higher earnings (the ultimate motivator of stock prices) will not show up. We're not smart enough to know exactly when the catalyst for this realization will arise, but we do have a handle on why future earnings will not measure up by the first quarter of 2010, or perhaps as early as the fourth quarter of 2009. We also believe the issues with earnings will be serious enough to derail today's historically strong market rally.
Looking at stock market commentary, we continue to be amazed that no one mentions commodities. Bloomberg, Barron’s, and other major media invariably deal with commodities and stocks in separate columns and articles. Never do they discuss commodities and stocks together, in the context of their interrelationship. We think this is a serious mistake, for nothing matters more to the outlook for stock prices than commodities these days. And there's no asset group more important for you to own on a long-term basis than commodity plays.
Just to remind you, the commodity plays we continue to recommend are Transocean (RIG), Nabors (NBR), Mosaic (MOS), Fluor (FLR), Petrobras (PBR), Potash (POT), National Oilwell Varco (NOV), Chevron (CVX), and FPL Group (FPL) – the latter two being our most heavily weighted.
In addition to commodities, which are used to make things, we also like one in particular, the one that functions as currency, and that’s gold...
SLOW GROWTH AND HIGHER PRICES ARE IN STORE
Over the past 45 years, there has been an interesting relationship between growth and commodities, in which the average change in commodity prices has roughly equaled the average change in GDP. In the short term, a rising GDP tends to lead to higher commodity prices. In the longer term, when GDP rises sharply, commodity prices tend to stay flat or fall. And when commodity prices rise quickly, GDP tends to struggle.
The 1970s were a notable time when we had soaring commodity prices which short-circuited GDP gains. We had a massive recession between 1973 and 1975 on the heels of OPEC's engineering a massive hike in oil prices.
Commodity prices then moderated, but began rising again in the late 1970s. It took a stalwart Fed Chairman, Paul Volcker, to finally halt commodity prices by raising interest rates dramatically, which reduced GDP and allowed more commodity supplies to come on stream. He set the stage for low to negative commodity price growth and a very strong market throughout the 1980s and 1990s.
The 2000s, however, have told a different story. Stocks have dramatically underperformed their long-term average. In fact, the years from 1997 to 2007 may have been the worst ever in real terms. During that period, commodities soared. GDP growth, which until recently looked to be on a strong trajectory, faltered. The last time we saw both the 6-year growth in GDP and the 3-quarter growth in GDP above their averages at the same time was back in 2000. In other words, it's almost been a decade since we've seen above average GDP growth, both short and long-term, simultaneously. (In fact, it's been four years since we've had even short-term GDP growth above average.)
During this long period of slow GDP growth, commodity prices have surged. By the 2nd quarter of 2008, they had risen nearly 185% over a 6-year period. That's a bigger gain than we saw in 1973-4.
Bear in mind that this past decade has not been marked by commodity shortfalls due to political events, as we had in the 1970s. Commodity prices have risen purely as a result of growth – but not growth within the U.S.
As for the most recent 3-quarter period, even assuming growth of 6% during the 3rd quarter of this year (admittedly a reach), the 3-quarter growth rate will still be negative. Yet commodity prices for the same period will have risen 16%. It's unheard of for commodity price growth to be a standard deviation above the mean in the context of negative economic growth! Plus, 6-year commodity price growth is close to 75%, which is off the charts and almost unbelievable given the weakness of the U.S. economy and that of the entire developed world!
Our point is that the U.S. has become a non-player in the commodity dynamic. The real players are the emerging markets, which continue to grow like crazy. Indonesia, for instance, will likely grow at an annual rate of 5-6% for the next 6 quarters. China and India will grow even faster. The emerging nations have become more important factors than the developed nations. Nearly 100% of world growth over the next 6-8 quarters will likely come from the emerging markets. And as the emerging markets become bigger and bigger players, their need for commodities will become even greater.
This is bad news for the U.S.
High commodity prices caused growth in the U.S. to be subdued during the 2000s. Now, with the emerging markets growing larger and driving commodity prices higher, U.S. growth will be even more restrained.
Also holding down U.S. growth for some time will be the very tired U.S. consumer, who accounted for over 100% of U.S. growth during the 2000s.
It's not a pretty picture. Nonetheless, it is clear that, for the next 10 years or more, money will be made by those who invest in the hard stuff – commodities – and the emerging markets.
Keep your eye on this big picture...
WHO'S THE GREATEST FOOL?
As we said above, stocks could rise a little, but we are caught in a “greater fool” market. Irrational markets can always become a little more irrational. In such a market, many people can foolishly buy overvalued stocks and sell them at even more overvalued prices, on the theory that there's always a “greater fool” to buy them. Of course, the danger is that you could turn out to be the greatest fool of all, and be left holding too many shares when the bubble pops.
We don't want you to be caught in that trap. We want you to look back on this period and be glad someone warned you in time.
Everything tells us that we are headed for major trouble in the stock market, and that our economy is far from being out of the woods. You are better off being selective and focusing very strongly in commodity and emerging market plays.
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This article has 137 comments:
RTK - Biomass etc. Approved commercial use
SYNM - Newest animal grease leftovers etc to synthetic fuels approved military use one fuel for all types of vehicles and planes.
SSL - natural gas to synthetic fuels
bravo!
Maybe not a 'crash' coming. More like a gentle 'waterfall' type event with the curve steepening as the masses all head for the door at the same time!
Regarding commodities, there have been multiple pieces recently about decoupling of USD vs stocks/commodities. I am unconvinced. Therefore, if the market correct (I agree it will), the USD will be a safe haven and commodities will sell off. But that’s a trade.
On fundamentals, I fully agree with investing (as opposed to trading) in both commodities and those that produce them, but avoiding the USD. Your book “Game Over” reinforced my growing conviction of our global predicament with commodities, especially the US. Oil and the international drillers are especially attractive.
However, today’s market is characterized by short term, almost robotic trading. If that persists, long term commodity fundamentals will be ignored and better prices would accompany an equity selloff.
I've seen lots of commentaries that talk about commodities. I'm not sure what he's looking at.
The USD is no longer seen as a safe haven, indeed it is now seen as a dangerous place to have your money.
To think that as the US goes - so goes the world, is to put yourself at a disadvantage. As Peter Shiff has stated "we are not the engine. We are the caboose and we are being cut loose".
Japan will have company on their road of stagnant deflation with little or no economic growth for years, as the rest of the world moves on.
My best guess and how my models are predicting this market to play out is a retracement to 950/920/870 (bear trap) area and then another rally to 1100 (equivalent to 50% retrace) to set up an even bigger bull trap before dropping to the march lows or lower. The more bearish option is we don't go higher than a 38% which is exactly where we closed friday so we are close to the start of the final leg of the bear market this month or next. Needless to say, this is not going to be an easy market to play any asset class, as I don't see the global markets decoupling -- some have definitely gone up more than others, but they all still rise and correct in tandem.
It's not a question of being US-centric, it's just that without the US consumer, there is not enough final demand in the world. Demand in Japan is dead, demand in Europe is dead. Emerging economies (particularly China) have lived off the over consumption in the US. Now they have a problem because they can't just create substitute demand in their own economies over-night. Apart from the question of scale (sheer dollars) the Chinese economy is organised around export markets, not servicing internal consumption. Without strength in the US economy, China and other EMs will suffer too.
On Aug 11 12:06 PM Donald Ingram wrote:
> The world does not revolve around the US, we are not the center of
> the universe. There is decoupling occuring. It started with the amputation
> of toxic assets made in the US of A and has been continuing as can
> be seen when the Treasury sales are shunned.
> The USD is no longer seen as a safe haven, indeed it is now seen
> as a dangerous place to have your money.
> To think that as the US goes - so goes the world, is to put yourself
> at a disadvantage. As Peter Shiff has stated "we are not the engine.
> We are the caboose and we are being cut loose".
> Japan will have company on their road of stagnant deflation with
> little or no economic growth for years, as the rest of the world
> moves on.
I'm leaning more and more toward a deflationary depression and we could be getting a big dollar rally .. very similar to last fall again.
Banks are simply doomed.
I need to see some trend deterioration (to go along with some momentum deterioration that is already happening) -- and I want to see this in weekly charts as well as the daily charts.
Here's some pictures of the sell signals from Monday. The list of sell signals is below.
seekingalpha.com/insta...
Sell SSTGX
Sell SSEC
sell XGCSX
Sell TXN
Sell SKSRX
Sell SCGDX
Sell HMY
Sell BBL
Sell FXA
SELL GG
SELL ECH
SELL ABX
SELL XAU
SELL RIMM
SELL FXE
SELL UDN
SELL MSFT
SELL COP
SELL EWC
SELL GGB
SELL SCGEX
SELL EWG
SELL EWP
SELL F
SELL SAP
SELL MIKL
On Aug 11 11:40 AM Charles Lieberman wrote:
> If the economy does badly, then how can commodities do well? That
> makes little sense. Commodities have rallied because investors expect
> demand from China and other buyers of commodities to continue buying,
> which can happen only if the global economy recovers. Also, it makes
> little sense to get into emerging markets, if you think the U.S.
> economy will do poorly. The de-coupling argument was disproven last
> year. If the U.S. economy lapses into recession, it will take down
> demand for exports from emerging markets, which are also highly vulnerable
> to credit market conditions. Emerging markets will do well only
> on the premise of a global economic recovery.
Recession is over, says economist
According to Dennis Gartman, a number of indicators point to a recovery that is just getting started.
money.cnn.com/2009/08/...
I guess it depends what you want to believe...
profits???
1. Goes up on bad news from MSFT, AMZN, AXP's poor numbers results few weeks ago.
2. The investment gurus and analysts who got blind sided by last fall's fall and March low (boy weren't they pessimistic) are now in unison as bullish as ever, even with heck of a run since March.
3. Bears are hiding and appear to be capitulating on short covering. One can say the bears were "early" smart money.
4. Russell 2k has been on a tear. Speculation galore or halcyon days are back?
5. CNBC has special on Dow 9k and Cramer is pounding the table with buys and the lemming retail and professional investors are piling in. So much for the lows we had in Oct/Nov and March.
6. And even Barron's sounding bullish sans Abelson?
7. Historically Sept is the worst month followed by Oct. Just around the corner.
8. Low volume on recent rally in last month or so despite program trading. Volume proceeds price. Lack of volume on follow-thru to S&P 1k and Nas 2k portend downside ahead.
9. Lowry’s Buying Power Index nudges record 1933 low. Few breadth studies are as insightful as those provided by Lowry Research since 1931.
"The key to Lowry’s is not the absolute level of its Buying Power Index. It’s the relationship between Buying Power and Selling Pressure. The span between declining Buying Power and rising Selling Pressure hit a 78-year record distance of 807 on July 8. The wider the span, the more bearish the situation.”
10. Very heavy insider selling. Insider selling to buying is 4.16 to 1 in July compared to 0.76 to 1 in March.
Takeway?
My 2-cents is that we'll see 50% retracement to March low in Sept/Oct.
It's me, Dennis Kneale.
Now I know the picture doesn't look like me.
I tried to find a very good looking man to disguise myself (I think I found one don't you agree?)
Anyway, there is nothing to worry about. Sure, I know I kept yelling from the rooftops from DOW 14K that everyone should be buying hand over fist, and yes at some point at some time in the future I am sure all the Americans who took my advice might make their money back.
Same goes for FNM & FRE, when I called people "fraidy cats" for not buying those stocks right before they fell 99%.
Hey don't complain, you just had a 150% rally the other day. So just think, you are now only down 99% instead of 99.9%.
Am I good or what?
Look no matter what you hear from the bears, etc, everything is fine now. No really it is. How do I know? Well cause I said so. I can pull up countless charts and statistics and mold into any green shoot I see fit, so there.
And if you, as average Americans, lose your butts again, hey it's not my problem. I will think of you as I collect my $45K bi-weekly paychecks.
But like I said folks, the recession is over. Everything is A-OK again. I know you can feel it. I am flush with cash and more wealthy that any of you will ever be in your lifetime.
So sit back, enjoy. Life is good when you have no relationship what so ever with average American families.
Love,
Dennis Kneale
A scary thing is that as the market goes down, Sturm Ruger, RGR goes up. They make rifles.
Time to take turns around the camp fire protecting ourselves from the 20% unemployed?
On Aug 11 11:40 AM Charles Lieberman wrote:
> Emerging markets will do well only
> on the premise of a global economic recovery.
"It is a far, far better thing that I do, than I have ever done; it is a far, far better rest that I go to, than I have ever known."
On Aug 11 05:08 PM jjp wrote:
> Time to take turns around the camp fire protecting ourselves from
> the 20% unemployed?
Anyone tell you that you look like the new detective on Law and Order: Criminal Intent? One of my favourite shows.
You have FPL Group (FPL) among the commodity plays you continue to recommend. How is Florida Power and Light a commodity play?
Cheers.
Yes, would agree the ST reversal may well be starting. Notice how the end of day spike today was down instead of up. We have not seen that for many months now (previously the end of day spikes were all "stick saves up" presumably by GS and da boys to keep the market from correcting down). Maybe GS and da boys may finally have sold off most of their long postion inventory and dumped their tanker oil plays after running the market up for months now. If so they now need much lower prices to be able to accumulate more inventory for the next run-up. Also, it was noted that overall market short interest (end of July) is at the lowest level since Feb/09. If so, they have shaken most weak shorts out by now, which is bound to eliminate much of the short covering that has helped the ST rally. In fact it may well accelerate a downward correction if significant new short selling comes into the market. If GS and da boys are not going to support the rally for the ST, then they have been know to massively short the market themselves ... gotta keep them multi-billion dollar bonuses going, so they will move the market in the direction that makes them the most money, which is probably down at this stage of the game. Guess we will all find out in the coming weeks.
On Aug 11 01:50 PM Michael Clark wrote:
> I got a slough of sell signals today in an intermediate-term trading
> system: some interesting names in the list, inclduing the Shanghai
> Index, some gold stocks, Texas Instruments, Microsoft, SAP, Ford,
> and the Bearish US Dollar ETF. I'm not necessarily calling this a
> top; but this seems to indicate a pullback is 'probably' coming.
> This rally has been pretty desperate -- and I don't see the government
> backing off its financing of the rally without a fight.
>
> I need to see some trend deterioration (to go along with some momentum
> deterioration that is already happening) -- and I want to see this
> in weekly charts as well as the daily charts.
>
> Here's some pictures of the sell signals from Monday. The list of
> sell signals is below.
>
> seekingalpha.com/insta...
>
>
>
> Sell SSTGX
> Sell SSEC
> sell XGCSX
> Sell TXN
> Sell SKSRX
> Sell SCGDX
> Sell HMY
> Sell BBL
> Sell FXA
> SELL GG
> SELL ECH
> SELL ABX
> SELL XAU
> SELL RIMM
> SELL FXE
> SELL UDN
> SELL MSFT
> SELL COP
> SELL EWC
> SELL GGB
> SELL SCGEX
> SELL EWG
> SELL EWP
> SELL F
> SELL SAP
> SELL MIKL
On Aug 11 12:06 PM Donald Ingram wrote:
> The world does not revolve around the US, we are not the center of
> the universe. There is decoupling occuring. It started with the amputation
> of toxic assets made in the US of A and has been continuing as can
> be seen when the Treasury sales are shunned.
> The USD is no longer seen as a safe haven, indeed it is now seen
> as a dangerous place to have your money.
> To think that as the US goes - so goes the world, is to put yourself
> at a disadvantage. As Peter Shiff has stated "we are not the engine.
> We are the caboose and we are being cut loose".
> Japan will have company on their road of stagnant deflation with
> little or no economic growth for years, as the rest of the world
> moves on.
On Aug 11 09:56 PM Mark Bern wrote:
> I'm sorry, but we haven't amputated toxic assets in the US. All
> we've done thus far is "hide" the toxic assets.
How can you like commodities and emerging markets but not like US equities here? Surely if your thesis is that growth is not sustainable and there are headwinds and credit is contracting blah, blah, blah then you want Treasuries and cash don't you? You want to avoid commodities and all equities.
And you like gold - because you expect inflation? With tons of capacity and unemployment out the wazoo and slow growth and no credit. Blah, blah, blah. You like gold? Really?
You really believe that commodity prices held down US growth from 2000 to 2007? I don't buy either premise. I don't buy that growth was held down. We grew nicely out of the shallow recession and unemployment if you recall drove down to the 5's.
If you are going to take a position it needs to be internally consistent. You just can't say stuff because you feel like it. Let me give you an example of the sort of thing you might say - "I believe we will see 8 to 10% growth and zero inflation. I think commodity prices will collapse and equities will rise strongly". See. It makes no sense. These elements don't add up. You get that. Right?
Here's some homework professor. (You are a doctor? - what exactly are you a doctor of anyway?) The US and Japan = 36% of world GDP. China, India, Brazil, Russia and all other emergings equal about the same amount. If US and Japan are not going to grow what does that do to commodity demand across the board?You really believe you can get a commodity rally with US and Japan moribund? Throw in the Euro area at 22% of world GDP and I doubt it. You figure it out.
One other thing. I like Indonesia too but its economy is 2% of the US. If the US grows at 2% - Indonesia needs to double - in the same period - to contribute as much to world GDP growth. You really believe that Indonesia will double next year?
Look. I don't care if your point of view is different to mine. I like to read well reasoned clear and logical stuff by people who are thoughtful, insightful and make sense. The more contra to my own view the better as I learn by testing but your stuff is not good. Please lift your game.
That's all.
On Aug 11 11:37 AM chap08 wrote:
> I think that you are confused. Whatever happens, US stocks, EM stocks,
> industrial commodities and energy will pretty much go in the same
> direction. To achieve what you describe (US down, the rest up) you
> would have to achieve a high level of decoupling that simply isn't
> there yet. And if the direction is down, there is a good chance that
> your high beta plays (EM and commodities) will go down most.
When the market drops, commodities will follow down, holding commodities such as gold will be foolish.
Now the moral to the story is, China is the biggest bubble risk, China stocks down, commodities down, everything down.
By the end of the business day these same bears will be pushing little old ladies out of the way to sell their safe-haven investments and purchase more responsive, but so called riskier stocks. At the same time they will be looking for a reason to sneek a sucker punch into China or European markets for having the gall to rally against the forces of the almighty US economy and the New York Stock exchange.
On Aug 11 01:50 PM Michael Clark wrote:
> I got a slough of sell signals today in an intermediate-term trading
> system: some interesting names in the list, inclduing the Shanghai
> Index, some gold stocks, Texas Instruments, Microsoft, SAP, Ford,
> and the Bearish US Dollar ETF. I'm not necessarily calling this
> a top; but this seems to indicate a pullback is 'probably' coming.
> This rally has been pretty desperate -- and I don't see the government
> backing off its financing of the rally without a fight.
>
> I need to see some trend deterioration (to go along with some momentum
> deterioration that is already happening) -- and I want to see this
> in weekly charts as well as the daily charts.
>
> Here's some pictures of the sell signals from Monday. The list of
> sell signals is below.
>
> seekingalpha.com/insta...
>
>
>
> Sell SSTGX
> Sell SSEC
> sell XGCSX
> Sell TXN
> Sell SKSRX
> Sell SCGDX
> Sell HMY
> Sell BBL
> Sell FXA
> SELL GG
> SELL ECH
> SELL ABX
> SELL XAU
> SELL RIMM
> SELL FXE
> SELL UDN
> SELL MSFT
> SELL COP
> SELL EWC
> SELL GGB
> SELL SCGEX
> SELL EWG
> SELL EWP
> SELL F
> SELL SAP
> SELL MIKL
On Aug 12 08:21 AM User 240062 wrote:
> Which program are you using? Thanks
On Aug 12 08:21 AM User 240062 wrote:
> Which program are you using? Thanks
On Aug 11 11:58 AM random guy wrote:
> Heard this since mid-March.
With the amount of money the government is spending, both through borrowing and printing there is an absolute certainty that inflation will emerge. Any ECO101 course will teach you this. Thus the conclusion as per the article that commodities will soar and the economy will stagnate (due to the government being forced to "fight inflation"). I disagree with the timing stated in the article and feel that this will begin in late 2010 and/or 2011. But the points in the article are certainly valid.
On Aug 11 11:37 AM chap08 wrote:
> I think that you are confused. Whatever happens, US stocks, EM stocks,
> industrial commodities and energy will pretty much go in the same
> direction. To achieve what you describe (US down, the rest up) you
> would have to achieve a high level of decoupling that simply isn't
> there yet. And if the direction is down, there is a good chance that
> your high beta plays (EM and commodities) will go down most.
I like the experiments currently being done by the US Navy and EMC2. The Polywell Fusion Reactor. Right now the money being spent is small (the low millions) and there is no way to play it.
So for now - cross your fingers and hope.
On Aug 12 08:25 AM perceptions_now wrote:
> With both Oil & Demographics already Peaked and on the road to
> permanent decline, INNOVATION is now our NUMBER ONE NEED!
On Aug 11 11:40 AM Charles Lieberman wrote:
> If the economy does badly, then how can commodities do well? That
> makes little sense. Commodities have rallied because investors expect
> demand from China and other buyers of commodities to continue buying,
> which can happen only if the global economy recovers. Also, it makes
> little sense to get into emerging markets, if you think the U.S.
> economy will do poorly. The de-coupling argument was disproven last
> year. If the U.S. economy lapses into recession, it will take down
> demand for exports from emerging markets, which are also highly vulnerable
> to credit market conditions. Emerging markets will do well only on
> the premise of a global economic recovery.
I disagree.
In a period of de-leveraging money will be made nimbly taking positions in the most liquid markets, playing both sides of the trade. Per any "buy and hold" strategy, the best performance one can hope for during a time when leverage is contracting is to pick the investment that loses less than others.
Likewise, there is no way emerging markets are going to escape the chaos of a de-leveraging whose course has only just begun. So, why take the currency risk? Name me a country whose currency is backed by more tons of fissile material and I might be persuaded the U.S. dollar can be orderly replaced as the world's premier reserve currency within the confines of the current arrangement among nations trading with one another.
Asian currencies, the Yen in particular, can replace the dollar.
A whiplash of inflation or hyperinflation after our dance with deflation could easily be the tipping point.
Russia and China are already moving away from the dollar.
Don't let patriotism delude you into thinking they care about us.
We've sold the farm to buy magic seeds and the beanstalk is growing up into the clouds; might be a golden goose there...or not.
Dr. Leeb's points are sound; the U.S. is in decline, we are a debtor nation and produce less and less. In this lens, emerging nations and economies will have better growth, need for raw materials of commodities (copper, oil, etc.) and they will have money to buy them.
I'd much rather invest in a commodity that everyone in the world needs versus U.S. equities that may or may not be profitable based on the whims of the CEO's and government officials.
If we're not exporting on the slave trade, then we import what we exported his green sprout to sell as an imported deported assemble goods and are they selling the very best that your money can buy?
The little Obama-mobile that couldn't didn't and they are going more than out of business. They are out of business.
Over time, the U.S. dollar will weaken as we monetize our large debt. Peter Shiff likes to make dramatic statements to boost his investment firm, but has been an absolutely lousy stock picker. The U.S. has problems and some careful asian stocks will do better over the next five years or even U.S. multinationals. To say we are the caboose is absurd.
On Aug 11 12:06 PM Donald Ingram wrote:
> The world does not revolve around the US, we are not the center of
> the universe. There is decoupling occuring. It started with the amputation
> of toxic assets made in the US of A and has been continuing as can
> be seen when the Treasury sales are shunned.
> The USD is no longer seen as a safe haven, indeed it is now seen
> as a dangerous place to have your money.
> To think that as the US goes - so goes the world, is to put yourself
> at a disadvantage. As Peter Shiff has stated "we are not the engine.
> We are the caboose and we are being cut loose".
> Japan will have company on their road of stagnant deflation with
> little or no economic growth for years, as the rest of the world
> moves on.
Doug Kass very publicly made a prescient bottom call in early March. He has now flipped Bearish, and explains why:
1. Cost cuts are a corporate lifeline and so is fiscal stimulus, but both have a defined and limited life.
2. Cost cuts (exacerbated by wage deflation) pose an enduring threat to the consumer, which is still the most significant contributor to domestic growth.
3. The consumer entered the current downcycle exposed and levered to the hilt, and net worths have been damaged and will need to be repaired through higher savings and lower consumption.
4. The credit aftershock will continue to haunt the economy.
5. The effect of the Fed’s monetarist experiment and its impact on investing and spending still remain uncertain.
6. While the housing market has stabilized, its recovery will be muted, and there are few growth drivers to replace the important role taken by the real estate markets in the prior upturn.
7. Commercial real estate has only begun to enter a cyclical downturn.
8. While the public works component of public policy is a stimulant, the impact might be more muted than is generally recognized. There may be less than meets the eye as most of the current fiscal policy initiatives represent transfer payments that have a negative multiplier and create work disincentives.
9. Municipalities have historically provided economic stability — no more.
10. Federal, state and local taxes will be rising as the deficit must eventually be funded, and high-tax health and energy bills also loom.
Doug points to the animal spirits in full force, shorts scrambling to cover, and a crowded bullish sentiment as additional reasons for the tactical shift. He believes a “self-sustaining economic recovery appears doubtful”
That fits in well with my 1973/74 parallel of the current market environment.
On Aug 11 12:06 PM Donald Ingram wrote:
> The world does not revolve around the US, we are not the center of
> the universe. There is decoupling occuring. It started with the amputation
> of toxic assets made in the US of A and has been continuing as can
> be seen when the Treasury sales are shunned.
> The USD is no longer seen as a safe haven, indeed it is now seen
> as a dangerous place to have your money.
> To think that as the US goes - so goes the world, is to put yourself
> at a disadvantage. As Peter Shiff has stated "we are not the engine.
> We are the caboose and we are being cut loose".
> Japan will have company on their road of stagnant deflation with
> little or no economic growth for years, as the rest of the world
> moves on.
What? This is completely wrong.
I'm waiting for a pullback and sticking to corporate bonds for now. I think we will have an opportunity in the fall to make a strategic asset allocation bets.
On Aug 11 11:37 AM chap08 wrote:
> I think that you are confused. Whatever happens, US stocks, EM stocks,
> industrial commodities and energy will pretty much go in the same
> direction. To achieve what you describe (US down, the rest up) you
> would have to achieve a high level of decoupling that simply isn't
> there yet. And if the direction is down, there is a good chance that
> your high beta plays (EM and commodities) will go down most.
What? This is completely wrong. "
----------------------...
That time frame is wrong, but move it out a year or 2 and it is dead on:
S&P 1/1/99 1225
S&P 1/1/09 890
Looks negative to me. In fact the last 12 years have been negative in real terms.
On Aug 11 07:00 PM untrusting investor wrote:
> Michael,
> Yes, would agree the ST reversal may well be starting. Notice how
> the end of day spike today was down instead of up. We have not seen
> that for many months now (previously the end of day spikes were all
> "stick saves up" presumably by GS and da boys to keep the market
> from correcting down). Maybe GS and da boys may finally have sold
> off most of their long postion inventory and dumped their tanker
> oil plays after running the market up for months now. If so they
> now need much lower prices to be able to accumulate more inventory
> for the next run-up. Also, it was noted that overall market short
> interest (end of July) is at the lowest level since Feb/09. If so,
> they have shaken most weak shorts out by now, which is bound to eliminate
> much of the short covering that has helped the ST rally. In fact
> it may well accelerate a downward correction if significant new short
> selling comes into the market. If GS and da boys are not going to
> support the rally for the ST, then they have been know to massively
> short the market themselves ... gotta keep them multi-billion dollar
> bonuses going, so they will move the market in the direction that
> makes them the most money, which is probably down at this stage of
> the game. Guess we will all find out in the coming weeks.
People talk about decoupling as if it is all or nothing. I see it as a gradual transition that is well underway. China has handled the worst of it (25% drop in exports) relatively well. As consumer spending stabilizes in developed countries, the export drag on growth in China should diminish. And China has the wherewithal to finance the transition to a less export-dependent economy for the foreseeable future if necessary. Realizing that the US is becoming ancient history as a driver of worldwide economic growth, China is cultivating strong trade relations with other fast-growing economies such as Brazil. I'd much rather face the macroeconomic problem of persuading domestic consumers to spend than to deal with the more overwhelming macroeconomic problems facing the US.
Dr. Leeb deals in the abstract and theoretical and obviously hasn't a clue to the practical.
Every company in America is licking their chops for Obama Care thus releasing themselves from paying health care premium payments.
Clearly most of the readers of this blog just don't "get it" because they never had to carry the crucifix of paying for an entire company's health care obligation year in and year out.
Every dime of money that is not paid into health care is free money...unforseen profit...bottom line bonanza.
It will pump up profitibility, stock prices , stock options prices , CEO pay and above all be a greased skid to Fascism.
Rebutt that boys with cold hard facts ...not theory or ideological rhetoric.
The DJIN will print 12,000 because NONE of you calculated for this.
Not even the Obama Bankster Oligarchy.
www.liveleak.com/view?... this "must watch video" it is great and beyond rebuttal ;
"Washington does not have the Constitutional or moral authority to outlaw private markets"
theburningplatform.com...
tinyurl.com/nmzsfj
Everybody in industry know that we are struggling to survive until 2010. Tech stocks keep surging and ignored all the warning signs. First it was finance. Then tech stocks are next: SYMM, NTGR, IBM, BRCD, VMWARE, NETAPP, NTAP, FFIV, HPQ, ATHR, MRVL, AMAT, NVLS, TLAB, CIEN, LLTC, JNPR, NVDA, etc
Overvalue, High Risk.
Correction is necessary and healthy for NASDAQ.
Wouldn't it be better to be a sideline sitter in the meantime?
I'm in absolute and complete agreement with your critique of
and recommendations for market investment. I remember
very well a comment you made not too long ago concerning
the present Federal Reserve Board Chairman and I quote:
"Ben Bernanke should do a fine job as chairman, he cut his
teeth on the depression".
Your recent commentary concerning Mr. Bernanke has taken on
a somewhat different tone, as if Mr. Bernanke broke his teeth
instead. Is there any particular reason that you have changed
your opinion of his performance as chair of our central banking system here in the United States?
Again thank you for your propitious and timely advisement.
Erick Tippett
Chicago, Illinois
I'm not the expert on this play. However, my understanding is the commodity price appreciation suggested is not demand driven because of production. Rather, it is an inflation hedge after the full effect of the Fed policy of printing money debases US currency. Since US currency is the world's reserve, US actions inflate other currencies as well, making commodity assets the only holding of "real" value. Time will tell if this is near term or 3-4 years out, and minimal 3 to 8%/ year or hyper-inflation, wisdom.
On Aug 12 01:54 AM FB5000 wrote:
> You really believe you can get a commodity rally with US and Japan moribund?
>
BTW ; How 'bout that DOW Quinn ?
Time to do an article Quinn ; "How to make Fascism Work For Me While I Wait for the Civil War."
www.cmegroup.com/tradi...
you'll notice the stand made at 9,363 on the CBOT DOW future in the last 2 hours confirming my Fibonacci calculations.
They got the stops above 9,360 before closing.
Bears got religion this afternoon.
www.cmegroup.com/popup...($5)&type=p
Sent: Saturday, August 08, 2009 11:18 AM
Subject: For your thoughtful consideration
Fibonacci retracements are an important big picture benchmark for market observers who use technical analysis.{IN ALL MARKETS}
The DOW future at the CBOT made an all time high of 14,060
the low of the bear market move was 6,460.
the total number of points lost from the top Thursday October 11,2007 was 7,600.
A .382% Fibonacci retracement of the total bear market would be 2,903 points.
6,460 plus 2,903 points is 9,363 on the CBOT DOW future.
My technical work has the tradable resistance between 9,700 & 10,000.
Market participants are and will continue to be acutely aware of Fridays high and may stage a bear raid from there. Know how they will be thinking.
Those same follower of Fibonacci retracements will be forced to capitulate and call for a 50% or for Fibonacci purists, a .618% retracement , should the .382% retracement at 9,363 fail to hold as resistance
10,260 is the 50% retracement {6,460 + 3,800}
11,156 is the .618 % retracement {6,460 + 4,696}
On Aug 12 03:07 PM James Quinn wrote:
> Fat drunk and stupid is no way to go through life, son.
>
> theburningplatform.com...
On Aug 12 09:32 AM Obewan wrote:
> Is it possible China will stockpile enough commodities and then stop
> buying causing a collapse in prices and a flight to the $US which
> the Chinese will happily sell?
On Aug 12 09:13 AM WD216 wrote:
> I notice many of the people commenting refuse to believe that commodities
> can rise sharply despite a slowing or flat economy. Are they all
> too young to remember the 1970's? The term "stagflation" was created
> then.
>
> With the amount of money the government is spending, both through
> borrowing and printing there is an absolute certainty that inflation
> will emerge. Any ECO101 course will teach you this. Thus the conclusion
> as per the article that commodities will soar and the economy will
> stagnate (due to the government being forced to "fight inflation").
> I disagree with the timing stated in the article and feel that this
> will begin in late 2010 and/or 2011. But the points in the article
> are certainly valid.
><snip>
> 10. Very heavy insider selling. Insider selling to buying is 4.16
> to 1 in July compared to 0.76 to 1 in March.
Yep. For a look at a *concentrated* insider view, look at the insiders at ADM selling. If I count right, 18 different officers reported surrendered or sold shares over the last few days. Appx. 88.7K shares. Yes, I know that often this is done for tax reasons (or to pay taxes), but in this volume? If they had confidence in the value increasing in a reasonable time-frame, would they dump so much? I think not.
That's one thing we can count on - when insiders think things are really going bad, they cover their buns regardless of what we are told.
>
> Takeway?
>
> My 2-cents is that we'll see 50% retracement to March low in Sept/Oct.
I'm not sure of that time-frame or magnitude, but I agree 100% that a *noticable* correction is in the offing.
HardToLove
I hope we can rally together to save our country by reducing government intervention that has made this market schizophrenic.
Just beacuse China is stockpiling commodities does not mean there is any real demand for it - demand has collapsed. The price rebound in commodities has only been due to 1. China stockpiling, 2. Huge green shoot speculation, 3 Huge production cuts.
Baltic Dry Freight has come down from its recent rebound highs, container freights are at decade lows (no exports).
Don't bet on commodities- there is reason they are called commodities.
The US stock market (especially tech and financial stocks) and bond market are the biggest bubbles I've seen in decades.
Commodities and emerging markets will decline initially, but then rebound. Commodities have rapidly growing demand from the emerging world, and more importantly productive capacity in most commodities is dropping rapidly due to a lack of investment, partly due to the financial crisis.
And despite the Wall Street propaganda, the emerging economies are less and less reliant on the US. With the current trends, in a few years they won't "need" the US at all.
Innovation will (and should) dampen appetite for many commodities even as overall demand increases because we will we figure out how to make due with much less. The opportunities are huge.
I predict this "3rd awakening" will drive U.S. to returns to its "yankee enginiutity" roots and leads the charge on this, so that we see an upswing in commodity usage efficiency like what we technology driven productivity gains accomplished in recent decades.
The money will move from over reliance on consumer spend and all of the secondary problems that causes to more efficient use of resources, better infrastructure, health care, via innovation.
don't hold oil stocks, gold stocks or anything that can be sold. The time will come when gold and oil will lead us out but not now. Nothing will hold off in the grand finally. Everyone will want and or need cash.
Dollar will rise big and you will get crushed if you bet against it now.
Obma team will look awful and everyone will blame them. Whether they desire it or not they will get the blame. Just think of all the 100,000 teachers who have been notified don't come back. Bet 99,950 voted for the O team. Bet it will be down to 50/50 when they find out their unemployment benes run out. If his supporters are feeling the heat imagine what his poll numbers will be like amoung the common dudes who were not that excited but held their noses and voted for him anyway. As Far as good old Arlen in Pa. goes, imagine his delight to run as a democrat just when they become toxic. Good timing Arlen baby.
Additionally, dating to the early Ben Graham years, inflation requires: 1) High consumer demand 2) Easy consumer credit 3) Full employment. Try as I may, I cannot determine which of the golden three points are in play ATPIT or the reasonably foreseeable future.
>Sell SSTGX 0.01 (0.10%
> Sell SSEC Find out tomorrow
> sell XGCSX 0.10 (1.24%)
> Sell TXN 0.24 (1.02%)
> Sell SKSRX 0.03 (0.88%)
> Sell SCGDX 0.11 (0.67%)
> Sell HMY 0.20 (2.24%)
> Sell BBL 0.76 (1.48%)
> Sell FXA 0.47 (0.57%)
> SELL GG 0.13 (0.37%
> SELL ECH 0.28 (0.61%
> SELL ABX -0.03 (0.09%)
> SELL XAU ???? gold index up to 144
> SELL RIMM -0.38 (0.53%)
> SELL FXE 0.61 (0.43%)
> SELL UDN 0.12 (0.44%)
> SELL MSFT 0.40 (1.73%)
> SELL COP 0.27 (0.62%)
> SELL EWC 0.33 (1.42%)
> SELL GGB 0.44 (3.77%)
> SELL SCGEX 0.32 (1.55%)
> SELL EWG 0.20 (1.00%)
> SELL EWP 0.54 (1.20%)
> SELL F -0.11 (1.41%)
> SELL SAP 0.35 (0.75%)
> SELL MIKL ????
On Aug 11 01:50 PM Michael Clark wrote:
> I got a slough of sell signals today in an intermediate-term trading
> system: some interesting names in the list, inclduing the Shanghai
> Index, some gold stocks, Texas Instruments, Microsoft, SAP, Ford,
> and the Bearish US Dollar ETF. I'm not necessarily calling this
> a top; but this seems to indicate a pullback is 'probably' coming.
> This rally has been pretty desperate -- and I don't see the government
> backing off its financing of the rally without a fight.
>
> I need to see some trend deterioration (to go along with some momentum
> deterioration that is already happening) -- and I want to see this
> in weekly charts as well as the daily charts.
>
> Here's some pictures of the sell signals from Monday. The list of
> sell signals is below.
>
> seekingalpha.com/insta...
>
>
>
> Sell SSTGX
> Sell SSEC
> sell XGCSX
> Sell TXN
> Sell SKSRX
> Sell SCGDX
> Sell HMY
> Sell BBL
> Sell FXA
> SELL GG
> SELL ECH
> SELL ABX
> SELL XAU
> SELL RIMM
> SELL FXE
> SELL UDN
> SELL MSFT
> SELL COP
> SELL EWC
> SELL GGB
> SELL SCGEX
> SELL EWG
> SELL EWP
> SELL F
> SELL SAP
> SELL MIKL
Here are the potential flaws in your argument
>> If the US dollar continues to its low of last year vs....(using the CDN dollar just for an example), that's a more than 25% increase or 25%- 35% drop for everyone else. That won't spur any demand? And that is before the record government spending binge occurred.
>> At its current record setting pace China would need 25 to 30 years to reach the US standard of living. In fact everyone else could play without the US for a looong time and not catch up. Most of the world has still never driven a car or used a telephone.
>> What is it Americans really need?? What is it the rest of the world still does not have?
>> The 70% consumption US economy is dead! And more debt will not help. Everyone will just have to accept it.
On Aug 11 11:40 AM Charles Lieberman wrote:
> If the economy does badly, then how can commodities do well? That
> makes little sense. Commodities have rallied because investors expect
> demand from China and other buyers of commodities to continue buying,
> which can happen only if the global economy recovers. Also, it makes
> little sense to get into emerging markets, if you think the U.S.
> economy will do poorly. The de-coupling argument was disproven last
> year. If the U.S. economy lapses into recession, it will take down
> demand for exports from emerging markets, which are also highly vulnerable
> to credit market conditions. Emerging markets will do well only on
> the premise of a global economic recovery.
On Aug 12 01:54 AM FB5000 wrote:
> Correct.
>
> How can you like commodities and emerging markets but not like US
> equities here? Surely if your thesis is that growth is not sustainable
> and there are headwinds and credit is contracting blah, blah, blah
> then you want Treasuries and cash don't you? You want to avoid commodities
> and all equities.
>
> And you like gold - because you expect inflation? With tons of capacity
> and unemployment out the wazoo and slow growth and no credit. Blah,
> blah, blah. You like gold? Really?
>
> You really believe that commodity prices held down US growth from
> 2000 to 2007? I don't buy either premise. I don't buy that growth
> was held down. We grew nicely out of the shallow recession and unemployment
> if you recall drove down to the 5's.
>
> If you are going to take a position it needs to be internally consistent.
> You just can't say stuff because you feel like it. Let me give you
> an example of the sort of thing you might say - "I believe we will
> see 8 to 10% growth and zero inflation. I think commodity prices
> will collapse and equities will rise strongly". See. It makes no
> sense. These elements don't add up. You get that. Right?
>
> Here's some homework professor. (You are a doctor? - what exactly
> are you a doctor of anyway?) The US and Japan = 36% of world GDP.
> China, India, Brazil, Russia and all other emergings equal about
> the same amount. If US and Japan are not going to grow what does
> that do to commodity demand across the board?You really believe you
> can get a commodity rally with US and Japan moribund? Throw in the
> Euro area at 22% of world GDP and I doubt it. You figure it out.
>
>
> One other thing. I like Indonesia too but its economy is 2% of the
> US. If the US grows at 2% - Indonesia needs to double - in the same
> period - to contribute as much to world GDP growth. You really believe
> that Indonesia will double next year?
>
> Look. I don't care if your point of view is different to mine. I
> like to read well reasoned clear and logical stuff by people who
> are thoughtful, insightful and make sense. The more contra to my
> own view the better as I learn by testing but your stuff is not good.
> Please lift your game.
>
> That's all.
>
>
>
>
Why not hedge the downside in commodities, i.e, examples like DUG.
On Aug 11 12:24 PM Suzanne H. wrote:
> Agreed, if the economy does badly, commodities are not going to be
> a place to hide. Commodities have barely retraced 38% of their move
> down, whereas the market has already and looks to be stalling there
> as did the Shanghai last week (can see charts legacyfunds.wordpress..../).
> I also believe we are in a deflationary environment not inflationary,
> and again the dollar may surprise everyone and move to the upside
> (although I agree some time from now, the $ is going to drop and
> commodities will rise). Commodities and emerging markets are going
> to decouple at some point, but it isn't now and much lower prices
> are far more probable vs. higher prices, so trade on technicals.
>
>
> My best guess and how my models are predicting this market to play
> out is a retracement to 950/920/870 (bear trap) area and then another
> rally to 1100 (equivalent to 50% retrace) to set up an even bigger
> bull trap before dropping to the march lows or lower. The more bearish
> option is we don't go higher than a 38% which is exactly where we
> closed friday so we are close to the start of the final leg of the
> bear market this month or next. Needless to say, this is not going
> to be an easy market to play any asset class, as I don't see the
> global markets decoupling -- some have definitely gone up more than
> others, but they all still rise and correct in tandem.
On Aug 12 03:57 PM naidle wrote:
> So the stock market may crack again yet we should pile into commodities?
>
>
> Wouldn't it be better to be a sideline sitter in the meantime?
On Aug 11 01:16 PM Jason Tillberg wrote:
> Watch the Baltic Dry Index.. it's tanking and no one seems to be
> taking notice, except Trader Mark. There goes your commodities boom.
>
>
> I'm leaning more and more toward a deflationary depression and we
> could be getting a big dollar rally .. very similar to last fall
> again.
>
> Banks are simply doomed.
On Aug 13 12:08 AM gordo39 wrote:
> You fail to consider the potential effects of inflation/weak dollar
> on commodity prices. Inflation isnt solely caused by demand...what
> about a weak dollar? Do you know how much the money supply has grown
> since September 2008??
Archman - - you are a riot, my sides hurt.
My take - - I am actually market neutral in general but right now my list of attractive longs is very short (maybe MO?) and my list of potential shorts grows daily. Gee, I wonder what that means?
Why G.Bush allowed China into the WTO whilst fixing its exchange rate is a mystery to me. Where would the CNY trade today if it was free-floating? I'd guess at $3 rather than $6.8
Why G.Bush allowed China into the WTO whilst fixing its exchange rate is a mystery to me. Where would the CNY trade today if it was free-floating? I'd guess at $3 rather than $6.8
On Aug 11 11:34 AM marky5 wrote:
> "Looking at stock market commentary, we continue to be amazed that
> no one mentions commodities"
>
> I've seen lots of commentaries that talk about commodities. I'm not
> sure what he's looking at.
That was DEEP indeed. In fact I'm searching for my rubber boots as we speak.
You make the amazingly prophetic call that emerging markets will continue to emerge... and have the temerity to call others jokers??? Well gosh, I say gravity will continue to exist as well. No brainer? you define the term!
On Aug 12 09:05 AM Deepv wrote:
> Most of you are jokers because you are overconfident in your macro
> views and do not discuss valuation. If the market is in a bubble
> why do I keep finding stocks trading at or under book value? You
> suffer from behavioral failrure that the future will be like the
> recent past. You are US centric investstors in the middle of an
> emerging markets boom and don't know it. It may not lead to higher
> stock returns over next months but the growth is coming. Why not?
Other than commodities, what other viable options do they really have?
That ladies and gentlemen, is so severely overbought, it ain't funny. I'm so very short, and will be until we see a 10-15 range PE.
On Aug 12 08:20 AM perceptions_now wrote:
> Economics is extremely useful as a form of employment for economists.
The price of gas is not as nuts...
=====
Question: Why wouldn't higher commodity prices also subdue growing in emerging markets? Are the other costs associated with capital formation/utilization so much cheaper (of course including labor) in emerging markets that it overcomes commodity prices?
regards
On Aug 12 05:02 AM Maxe Paul wrote:
> Ok Dr, talking about commodities and only mentioning China once should
> be a crime in itself, they go hand in hand.
>
> When the market drops, commodities will follow down, holding commodities
> such as gold will be foolish.
>
> Now the moral to the story is, China is the biggest bubble risk,
> China stocks down, commodities down, everything down.
(beware the over building of condo cities in China. It is going to take their banks down, big time ))
regards
On Aug 14 02:22 AM Student of History wrote:
> Perhaps the run up in comodities is due to the fact that foreign
> investors do not trust the dollar or dollar based investments? I
> don't blame them.
>
> Other than commodities, what other viable options do they really
> have?
i'm so used to seeing u on tv arguing with peter schiff and saying good things about government policies. all these bearish views don't sound like u.
Undoubtedly, Dr. Leeb got quite caught up in the commodity and EM mania with his clients and is trying to get others to join the "fun". Look for a surprisingly STRONG dollar - not weaker - as the world again seeks safety this fall when the relief rally finally fades.
Commodities are now seen as the new place for your money. Particularly precious metals along with oil. People are fleeing the USD and any USD backed assets as fast as they can, without causing to much of a down turn in the dollar, so as to try and preserve what purchasing power it has left.
Eventually it will dive in value, or just outright crash. Protect yourself and position your wealth accordingly.
On Aug 15 10:02 AM Infinitum wrote:
> Flimsy arugements at best, i.e. great usage of data to try and show
> causation slow growth U.S. = higher commodity prices except it's
> invalid. Misses that the weak U.S. dollar is mostly to blame for
> the spike in commodity prices. How do you explain $140 per barrel
> of oil only to have it trade at $30 < one year later? Sure demand
> is down, but for those of you unfamiliar with this fact, most commodities
> are denominated in the USD. Therefore, lower $ = higher commodity
> price, and vice versa. Chart the dollar vs. any commodity denominated
> in USD to visually see this dynamic.
>
> Undoubtedly, Dr. Leeb got quite caught up in the commodity and EM
> mania with his clients and is trying to get others to join the "fun".
> Look for a surprisingly STRONG dollar - not weaker - as the world
> again seeks safety this fall when the relief rally finally fades.
at some point, inflation expectations will peak. I expect to see gold crash. Right now people are buying gold coins faster than the mint can make them. When the price starts to drop those coins will come on the market and we will have an intense gold bear.
Once the intoxication of cash and momentum wears off, this market will head lower. The continuing contraction in the economy will exacerbate the next leg down, too. The next decade will witness the S&P 500 bounce between 600 and 1,500 several times.
On Aug 12 11:44 AM dividendmachine1 wrote:
> I really liek this author and think he is among the best on here
>
>
> But i dont agree with him on this article
>
> The Chinese who control our 10 yr yield and the price of commdities
> KNOWS that their growth depends on the American consumer
>
> They will do whatever it takes to keep that pumped up
>
> The correct play here is athe strong dividend stocks that did not
> take part in the rally
>
> The sector rotation from those stocks that ran up too fast into the
> large cap multinationals is what you will be seeing
>
> As a person who is financially independent from investing and writes
> an investment newsletter , I just want to add a few statements.peace
Also I see a dollar rally ahead and lean toward another sell off in most everything including Gold, Stocks, Commodities, etc.
On Aug 14 10:10 PM nevket240 wrote:
> Stupid statement. Gold is NOT a commodity. It is put in that basket
> by the Ignorant. Gold is a currency. Only the mindless or the mendacious
> try to bracket Gold with Iron or rice.
> regards
Gotta love the bears. They predict selloffs every day for months on end in a bull market. Then you have a 2 day correction and they all jump up and say "I told ya so!!" Well, if you constantly predict a selloff , yes, you are going to EVENTUALLY be right. But at what cost? Maybe the market revisits March lows? Maybe it retraces back to 875 soon? Maybe the deepest correction we see for the next 3 months is merely down to 955?
The point is, bears are wrong, and have been wrong for the past 6 months. Shorting the market isnt profitable, so you bears simply folow a market thats costing you tons of dough while stubbornly digging in your heels refusing to be long because of the "impending correction" that just wont seem to come.
Seriously, I'm not making a case for a move up or down from here, but at some point you have to trade the market you're in, not the market you WANT to be in. Like I said, maybe the market goes below March levels this Monday. Maybe it doesnt. But between March and now I've traded stocks and caught doubles, triples, not to mention countless 25%-50% moves trading weekly or every few days. I've been bearish at times on the broad market and tightened up my stops, and I've done enough homework to avoid trading into the May correction and the deeper late June correction, as to avoid major trading losses.
Its not about being right or wrong, its about making money. Being bearish isnt making you a dime, and again, maybe you catch a nice down move and m ake back some of your losses, maybe you dont. But you're swimming against the tide--you talk about a waterfall? LOL being short has been like riding a boogie board down niagra falls for 30 days and 30 nights.
On Aug 11 11:26 AM Donald Ingram wrote:
> Agreed. Gold and commodities are the safest play going forward.<br/>Maybe
> not a 'crash' coming. More like a gentle 'waterfall' type event with
> the curve steepening as the masses all head for the door at the same
> time!
All it will take for the U.S. Dollar and U.S. bond markets to become safe havens again is the perception that the global recovery is a false picture -- and that global economic stability is deteriorating. All the governments of the world are engaged in cheerleading the economic recovery, giving away massive amounts of taxpayer money to try to stimulate stock market and real estate investment. The real question is: what happens when government's stop giving away money? Do consumers step up and support the economy? Or do the economies continue to sink when the government stops giving away free money?
There is a very good chance that the world economies will continue their slide when the free money dries up...and then the U.S. Dollar again becomes attractive.
If the above happens, it won't be a 'gentle waterfall' type event -- selling will begin on light volume, and the bottom will drop out of the market. There are not enough investors trying to get into long positions -- not enough true believers -- so it will definitely become a buyer's market. The indexes, in fact, will collapse.
On Aug 11 12:06 PM Donald Ingram wrote:
> The world does not revolve around the US, we are not the center of
> the universe. There is decoupling occuring. It started with the amputation
> of toxic assets made in the US of A and has been continuing as can
> be seen when the Treasury sales are shunned.
> The USD is no longer seen as a safe haven, indeed it is now seen
> as a dangerous place to have your money.
> To think that as the US goes - so goes the world, is to put yourself
> at a disadvantage. As Peter Shiff has stated "we are not the engine.
> We are the caboose and we are being cut loose".
> Japan will have company on their road of stagnant deflation with
> little or no economic growth for years, as the rest of the world
> moves on.
On Aug 15 06:19 PM Marvin Clark wrote:
> Let's not forget that the stock market has increasingly become a
> casino detached from the economy. The severe market drop in 2008
> was the market's fear of the soured credit markets. The same macroeconomic
> trends, that existed in 2008, are in place in 2009 yet the major
> averages up some 50% from the March lows.
>
> Once the intoxication of cash and momentum wears off, this market
> will head lower. The continuing contraction in the economy will
> exacerbate the next leg down, too. The next decade will witness
> the S&P 500 bounce between 600 and 1,500 several times.
On Aug 16 08:00 AM rick12345 wrote:
> The beauty of sites like this is the ability to go gather hindsight
> from past inane comments. On May 28 of this year your headline article
> was titled "Market's Upside Potential Is Still Limited ". At the
> time the DJIA sat at 8400 and you made the following conclusion in
> the abovementioned article , "Sometime in the near future stocks
> will undergo a sizeable correction, possibly retesting the March
> lows in the process. Until that correction is out of the way, the
> market’s upside potential is likely rather limited". Almost three
> months on and 900 points later, we're still waiting for this correction
> to take place. I'm glad I didn't take your view of "limited upside"
> as being gospel.
The computer can't, obviously, by itself predict a short-term market opportunity. But humans programming the computer can -- because the comptuer program is simply the extension of human thought, very similar to fundamental or technical parameters used to buy and/or sell. A short-term market is much easier to predict than a long-term market.
Look at the second item on the list of stocks/indexes we said were giving a sell signal. The Shanghai Index. Look below at an updated chart of the same, showing the trading system we used to predict it was a good time to sell.
home.mindspring.com/~mclark7/81509SSEC_D.jpg
On Aug 12 09:25 PM rick12345 wrote:
> I'm not having a go at you or anything Michael. I'm just curious
> to see if a computer program can predict a short term market opportunity.
>
htt://
home.mindspring.com/~
mclark7/81509SSEC_D.jpg
I hope this works.
Thanks, and glad you were able to follow as I tend to ramble at times. I am long DUG (also FXP and EEV), positioned last week. I posted it in a comment here and hope it links to it as I am not good with links either: seekingalpha.com/user/... before market open last Friday. Moving and keeping the stops very tight again, a higher open Monday will likely blow me out of these positions. Playing the inverses on either an intraday or very short term daily chart has been holding up provided stops are kept very tight and positions small. If the SPX doesn't fail here then, we have upside to 1050, 1120.
On Aug 13 12:56 AM adamnb wrote:
> Compliments on an excellent and clear-headed analysis. Question:
>
> Why not hedge the downside in commodities, i.e, examples like DUG.
>
On Aug 12 11:57 PM secmaven wrote:
> I used to be a subscriber to Lee's Compleat Investor...that was before
> I lost all of my capital following this bonehead's advice...both
> long and short.
If the U.S. does horribly, then yes, EMs will be dragged down (to an extent). But if the U.S. manages to limp along, growth in Asia will drive commodities prices higher. China is consuming enormous quantities of steel, copper, aluminum, oil, and foodstuffs, and the roughly 50% of the planet (including India) that live here will be increasingly driving commodity prices in the future.
Kirk (Bangkok, TH)
On Aug 11 11:40 AM Charles Lieberman wrote:
> If the economy does badly, then how can commodities do well? That
> makes little sense. Commodities have rallied because investors expect
> demand from China and other buyers of commodities to continue buying,
> which can happen only if the global economy recovers. Also, it makes
> little sense to get into emerging markets, if you think the U.S.
> economy will do poorly. The de-coupling argument was disproven last
> year. If the U.S. economy lapses into recession, it will take down
> demand for exports from emerging markets, which are also highly vulnerable
> to credit market conditions. Emerging markets will do well only
> on the premise of a global economic recovery.
M0, M1, M2, M3?
M1 is up big year on year I think over 12%
M2 is up around 6%
M3 is up around 4%
But all of these metrics are trending down in terms of rate of change
M1 multiplier is down big.
Velocity is still down big
What this means is that banks are stockpiling cash. Until very recently they were mostly turning around and sticking the cash back into the Fed.
For inflation to be a problem you need to see the M1 Mutliplier get rise and velocity to go up.
You don't need to beleive me - hell what do I know I am so on the outside I actually look at SA :) Check out Shadow Government Stats and Daily Markets.com
The other issue is that the Euro and most other currencies are experiencing similar. Therefore in terms of US dollar relative to others is complicated.
On Aug 13 12:08 AM gordo39 wrote:
> You fail to consider the potential effects of inflation/weak dollar
> on commodity prices. Inflation isnt solely caused by demand...what
> about a weak dollar? Do you know how much the money supply has grown
> since September 2008??
(> 2 years) the inflationists arguments will prove to be correct....
For good articles go to Iamned.... hahahaha KIDDING!!!!