Ten Reasons for an Imminent Stock Market Crash 109 comments
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1. Insider Selling: An Oversupply of paper
Insiders have been quick to recognize that the market is hungry for paper. Thus, they are selling shares, and issuing debt and/or equity at an alarming rate. Investment bankers, who were very recently idle, now have a backlog of paper ready to go to market which will eventually flood the market and offset the fragile balance of supply and demand.
Why are they doing this? They are cashing out while they can. Nobody understands a business better than its insiders. Irrespective of what the Wall Street “paper pushers” say, if this is the next bull market, insiders would be buying shares, not selling.
2. A Rally Based on Short Covering, Low Volume, and Bankrupt Companies
The rally since the March lows has been relentless and sharp, and one of the primary catalysts for its vicious move up is the combination of low volume with short covering, especially in high beta, low quality stocks. Liquidity is exiting the system, not entering and for some reason, those who are still trading are infatuated with such names as FNM, FRE, WaMu, AIG and Lehman.
These are not the signs of a healthy system rather it is panic buying similar to that of the NASDAQ in 2000 when investors piled into internet stocks based on “page views” given the absence of revenue as a basis for investing. Even rational investors began to question the old business model of revenues minus expenses equals net income. They did not understand why a solid brick and mortar business would not be as “sexy” of a buy as the profitless internet companies. We all know how that turned out.
3. Bullish Sentiment and Market Psychology
At present date, market consensus is short-term bullish and long-term bearish as a result of the aforementioned buying frenzy. Everyone wants to buy the markets and exit before the bubble pops. Guess what? If you want to participate in this bubble—it’s too late. The time to buy the markets was when everyone was bearish, when the WSJ had an article titled “Dow 5000,” and the S&P was at 666. Even if you missed the move from 666 to 800, you could have bought the markets at S&P 800. But with the S&P at 1100, everybody fully invested, and Wall Street shops paper like there is no tomorrow, right now is the time to sell!
Irrespective of factors like momentum and technical indicators, selling is wise because momentum and technical indicators fail to incorporate deteriorating fundamentals in their formula, and therefore have no way of detecting “market moving” bad news. In an environment where fundamentals deteriorate and equities get more and more overvalued on a daily basis, any taste of bad news can crack the momentum. Being bullish in the “short-term” because of momentum is a flawed rationale and soon the last piece of research from bullish technicians will become obsolete. The market has become delusional and is living in fantasyland in the same way people were dancing in the Titanic on the eve before it crashed into an iceberg.
4. Short the USD, Long Everything Else
The market is crowded in one trade—short the dollar and long everything else—a dollar carry trade. For example, you short the dollar and buy Macy’s (M) shares, Gold, Silver, the Brazilian Bovespa, Venezuelan bonds, New Zealand Kiwi, Washington Mutual, Goldman Sachs (GS), you buy anything and you do not discriminate. With the positioning in the market so concentrated, we have the potential for a moral hazard as when the trend reverses, there will be no one on the other side. This is why markets crash!
Correlation is not causality; we can say the same thing by blaming the USD weakness for every market movement. Is everything bad for the buck or is the dollar bad and everything else is good? The short selling inherent in the dollar carry trade puts added pressure on the dollar and reinforces its inverse link with risk appetite. This also implies a substantial rebound in the dollar once stock markets globally sell off because carry traders will need to unwind their bets by buying back the dollars that they shorted.
5. Deteriorating Fundamentals and Rising Income Dispersion
According to a government report earlier this month, household incomes in the US decreased and more Americans were living in poverty in 2008. The poverty rate climbed to 13.2 percent last year from 12.5 percent in 2007. The number of people living in poverty rose to 39.8 million last year, an increase of 2.6 million from 2007.
Yet the paper pushers on Wall Street continue to accord themselves record businesses and record profits. In the same year that the US reported that 39 million people were living in poverty and a record use of food stamps, Goldman Sachs reported record profits. Now if Goldman Sachs were operating a manufacturing facility that employed thousands and they invented the cure to the common cold and now was selling a billion vaccines to China, their “record profits” would be justifiable. But, instead Goldman Sachs is “trading away” after being bailed out by the government with tax payer money and they get to enrich themselves while the rest of the country impoverishes itself.
This is defined by John Williams of shadowstats.com as a rise in income dispersion. A high level of income dispersion indicates heavier income concentrations in the extremes. Conditions surrounding extremes in income variance usually help to fuel financial-market bubbles, followed by financial panics and economic depressions. The poverty report is enough to clearly depict the economy’s deteriorating fundamentals—we need not mention the state of the country’s commercial real estate business or the slow down in shopping or an infinite other number of things that are deteriorating on the micro front.
6. The Chinese Commodities Bubble
The rapid rise in commodity prices is not because China is growing at a very rapid pace together with its BRIC brothers and other emerging nations—it is quite the opposite. China has inundated its market with excess cash, and this cash is being converted to commodities because they would rather hold physical assets than worthless paper money like the US dollar.
This conversion from dollars to commodities is conveying the message that China is growing. However, China’s business model is as broken as that of the US. They depend on a huge export manufacturing base of gadgets that are to be sold to the US consumers using borrowed funds. For China to grow internally and build its own consumption, it will take years/decades not months. So this theory that the Chinese will get the world out of a recession because they are buying commodities is a fallacy, nothing more than that.
As John Horseman points out, the China story is just how large many of her basic industries such as steel and cement have become and just how much excess capacity now exists. To put this into perspective; China has capacity to produce some 660 million tons of steel per annum, more than the EU, Japan, the US and Russia combined with another 60 million tons of capacity currently under construction. She currently produces around 500 million tons, suggesting that idle capacity exists which is equivalent to the total of Korean and Japanese output. China's consumption of steel is already equal on a per capita basis to the EU and higher than the US, raising the question as to just how much higher steel consumption can go. Despite China's efforts to stimulate, Chinese steel companies are racking up large losses. Much of this surplus represents a severe limit on the prospects for growth. The bottom line here is whether the Chinese government’s growth story while global trade is shrinking can prevent the financial markets from derailing.
7. Trade Protectionism, Socialist Tones, and Government Intervention
The objective of Reaganomics during the 1980’s was to: a) reduce the growth of government spending, b) reduce income and capital gains marginal tax rates, c) reduce government regulation of the economy, and d) control the money supply to reduce inflation. The objective of Obamanomics is exactly the opposite. In addition, the rhetoric between nations cannot be worse. All we need to figure this one out is to read the newspaper—will imposing tariffs on Chinese tires be positive for global growth and trade? No further discussion is necessary.
8. Money Supply and Credit Contraction
The money supply and credit is contracting at an alarming rate. No matter how you spin this it can only lead to bad news for the economy. If credit continues to contract as a result of banks reducing their lending and/or consumers not borrowing, it can reach levels that can disrupt normal day-to-day commerce. Once this happens, the economy hits a brick wall and collapses—i.e. what happened with Lehman Brothers a year ago.
The situation is only getting worse as credit continues to deteriorate. The worse is ahead of us not behind us and if no imminent action is taken by the government to accelerate lending, the country can find itself in the Great Depression—Part II. If the necessary action indeed is taken, it will not be positive for equity markets which are operating under the assumption that the worst of the systemic and financial crisis is behind us and that banks can operate without a hand from the government. Again, Lehman is history and the future is rosy and pretty.
9. Market Complacency
Expanding on the issue addressed above, the market seems to be very complacent. The VIX and all the “fear” indices are at 12-month lows and the market is no longer paying for “protection.” Basically, the market is assuming the system is “risk free” as it was during 2003-2007 when maximum risk taking was rewarded and encouraged. Black swan events were impossible back then.
10. Europe
What happened to all the troubles brewing in Europe? What happened to Latvia’s currency crisis or the Swedish Banks? Are Hungary and Poland ok? Has the Austrian Banks’ exposure to Eastern Europe disappeared? Is Spain back on its feet? Is the UK solvent again? Are Irish banks lending like there is no tomorrow? How about Germany’s manufacturing base—is it solid with a EUR at 1.48 and the US consumer missing-in-action? Is Deutsche Bank’s $3 trillion balance sheet made up of only physical Gold? Are German banks profitable and healthy again? I guess somebody waved a magic wand and fixed all Europe’s problems overnight!
Disclosure: Long SPX Puts
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This article has 109 comments:
In the late 1990s, some stock market commentators were predicting and imminent stock market crash for a couple of years before it actually happened. Even Alan Greenspan coined the phrase 'Irrational Exuberance' to discourage investors from driving up stock prices too much. But at that time, his words had little effect on the market.
Perhaps this time it will take a lot less than a couple of years for the imminent stock market crash to happen. But it still might take a few months.
The stock market has basically priced in a V-shaped recovery in the earnings of companies. And quite possibly this pricing in was done by the big investment banks as a way of intervening in the stock market using free money from the Fed and possibly with the blessing of the Fed.
ftalphaville.ft.com/bl.../
This V-shaped recovery in the earnings of companies is unlikely to happen in the near future due to rising unemployment and poor consumer spending. And sooner or later disappointed investors might sell.
But if it's the Fed in cahoots with the investment banks who has driven up the stock market so much. Then a stock market crash might be engineered too in order to help the government sell US Treasury bonds some time in the future.
The US government is planning to sell an awful lot of bonds. And sooner or later a stock market crash might be just what the doctor has ordered to help the government sell its bonds.
October 1 is the start of the new fiscal year for the US government. And some time after that a stock market crash might be needed to help the government sell its bonds.
1) A near term concern is the valuation of the market. From David Rosenberg: An unprecedented eight-point price/earnings multiple expansion during a six-month faith-based rally has left the market at its most expensive (26 times operating profit, 180 times reported profit) in seven years. On a reported basis, this market is nearly four times overvalued, as it was during the tech bubble! Indeed, when we look at the history books to see what happens after the P/E multiple on trailing earnings pierces the 25 times threshold, the average total return a year out is -0.3 per cent and the median is -6.2 per cent. The total return is negative a year later 60 per cent of the time, so when we say that there is too much growth and too much risk embedded in the equity market right now, we like to think that we have history on our side.
2) An intermediate term threat is the health of the banking sector which has been declared healthy but still suffers from it earlier disease. Malignant assets are plaguing bank balance sheets as seen in rising delinquencies and escalating charge -off rates; after the theatrical stress tests, we simply pretend the cancer is not there. Shrinking loan balances point to hoarding, fear and insider knowledge that bank balance sheets are not healthy. CRE and Option ARM and ALT-A resets will aggravate the underlying problem and refocus attention on the true health of banks.
3) The long-term threat to the economy is its inability to growth from within and produce increases in employment and incomes; there can be no recovery without organic growth. The economy is no longer in a free fall and there are many indications that aggregate economic activity is stabilizing; there is nothing to suggest resumption of internal or organic growth. Virtually all of the growth is attributable to fiscal stimulus and accommodating monetary policy; what will happen when this is withdrawn?
(Some people mistakenly think that a Black Swan is a very low probability event, usually with a negative connotation.) A Black Swan is something you couldn't have, or chose to not be able to, contemplate, given that your head is stuck in that particular paradigm.
See: The Black Swan: The Impact of the Highly Improbable. New York: Random House. ISBN 978-1-4000-6351-2.
On Sep 24 11:51 AM chap08 wrote:
> If there is a "crash", it will not be because of anything on your
> list - because they are all well known. It will be because of something
> we don't know yet.
> If there is a "crash", it will not be because of anything on your
> list - because they are all well known. It will be because of something
> we don't know yet.
Hmmm why is the market breadth so good? Look at a/d line. The Volume is low, but only relative to the ridiculous crash levels of last fall. And alot of the dow companies....not all of which were bankrupt, last I looked....have participated fully in this rally.
If you can't get THOSE facts straight, who cares about the rest of your spiel?
This will flood the system with even more liquidity and propel equity markets higher. Equities and Commodities will go up as the real economy is still weak (and will be weak for some time) to absorb all the excess liquidity.
So given the current liquidity scenario, I expect minor to significant correction. But not a crash.
If the Fed raises the rates and stops the MBS purchase plan too quickly the economy will convulse and go into shock. The challenge going forward will be to wean the economy off its liquidity drip without creating systemic shocks and causing other withdrawal symptoms.
The Fed has essentially chosen to trade recession breadth for depth by incurring future debt obligations today that will weigh on the economy in the out-years. As compared to complete economic collapse, this is probably the lesser of two evils, but is hardly an end to the recession -- rather an extension of it.
The other concern is the danger of a lack of liquidity itself. Money doesn't grow on trees, and the people who ultimately supply the money may grow reluctant to continue to supply it. Taxpayers and Treasury bond holders may revolt at some point causing the liquidity to dry up. Some might say this already occurred in May when the 10 yr treasuries hit 4pc following the Treasury buying $300B of its own paper. But then, the Fed started to secretly purchase treasuries which brought the rates back down again. Either way, at some point the Fed balance sheet may become so badly out of shape that it won't be able to continue these practices. This is probably why the Fed won't allow anyone to see what is really on their balance sheet right now.
We essentially have a zombie economy that died over the course of last fall and this spring but is being maintained in some not-fully-dead but still not-quite-alive state by massive infusions of government stimulus. It goes through the motions of a normal economy but it lacks the vibrancy, vitality, and excitement of a real, living, breathing, free-market economy. Welcome to the unreal state of the new reality!
On Sep 24 02:23 PM Faisal Humayun wrote:
> I would certainly not buy the argument that stock markets would crash.
> The reason is not strong fundamentals of the economy but another
> fundamental factor (liquidity). Moreover, if the Government gets
> a sense of the economy getting weaker again and the markets fall
> 15-20% we will see Stimulus Package -2.
>
> This will flood the system with even more liquidity and propel equity
> markets higher. Equities and Commodities will go up as the real economy
> is still weak (and will be weak for some time) to absorb all the
> excess liquidity.
>
> So given the current liquidity scenario, I expect minor to significant
> correction. But not a crash.
On Sep 24 09:28 PM perceptions_now wrote:
> Based on the following government Budget figures, Corporate Tax will
> drop 50% for 2009 and barely pick up in 2010.
> www.gpoaccess.gov/usbu...
>
> I suspect these govrenment budgets may be overly optimistic, as seems
> prevalent at the moment.
>
> However, even if these figures turn out to be correct, they suggest
> Corporate profits are likely to remain very subdued for some period
> ahead.
>
> Given this and other indications, including -
> 1) The Debt to GDP ratio is heading north quickly, to 100% and beyond.
>
> 2) Consumers have taken a massive hit, via falling housing equity,
> lower share values & reduced access to credit.
> 3) The economy is deleveraging and will do so, for some time to come.
> Derivatives is the other Elephant in the living room!
> 4) Two of the three major growth drivers (Oil & Population),
> have Peaked and are heading south.
> 5) Unemployment and Taxes are both rising.
> 6) Bankruptcies are rising.
> 7) Consumer activity is down.
> 8) Massive increases in Health and Social Security Costs, are on
> the way, again expanding government deficits.
> 9) Problems arising from Climate Change and Food Production are also
> set to interfere with future plans.
> 10) Share Markets have already fallen 50% and have since increased
> some 50%, still leaving a massive reduction in total wealth.
>
> I would consider that markets are currently trading at lofty P/E
> ratios and that the markets will shortly fall into line with more
> realistic earnings!
On Sep 24 10:26 PM ardon wrote:
> Excellent commentary! I'd like to ad that America has been coming
> to this moment in history for the past 30 years. You can't be a prosperous
> country if you outsource your manufacturing base, become the biggest
> debtor nation, run one of the biggest negative trade imbalances,
> make finance and health care your biggest industries. America does
> not make real things anymore, we just shuffle paper from one place
> to another and instead of the products we create financial "products".
So whats the time line for the expiry of this analysis i.e. being wrong ?
Monday 28th Sept ?
I called for an IMMINENT stocks bear market bottom on 8th March - and it bottomed the NEXT DAY.
www.marketoracle.co.uk...
I recently came up with my own list, from a Technical Analysis perspective. For those interested it can be found here:
www.economicgreenfield.../
On Sep 24 10:53 AM Nick36 wrote:
> An imminent stock market crash can stay imminent for a long time
> before the stock market actually crashes.
>
> In the late 1990s, some stock market commentators were predicting
> and imminent stock market crash for a couple of years before it actually
> happened. Even Alan Greenspan coined the phrase 'Irrational Exuberance'
> to discourage investors from driving up stock prices too much. But
> at that time, his words had little effect on the market.
>
> Perhaps this time it will take a lot less than a couple of years
> for the imminent stock market crash to happen. But it still might
> take a few months.
>
> The stock market has basically priced in a V-shaped recovery in the
> earnings of companies. And quite possibly this pricing in was done
> by the big investment banks as a way of intervening in the stock
> market using free money from the Fed and possibly with the blessing
> of the Fed.
> ftalphaville.ft.com/bl.../
>
>
> This V-shaped recovery in the earnings of companies is unlikely to
> happen in the near future due to rising unemployment and poor consumer
> spending. And sooner or later disappointed investors might sell.
>
>
> But if it's the Fed in cahoots with the investment banks who has
> driven up the stock market so much. Then a stock market crash might
> be engineered too in order to help the government sell US Treasury
> bonds some time in the future.
>
> The US government is planning to sell an awful lot of bonds. And
> sooner or later a stock market crash might be just what the doctor
> has ordered to help the government sell its bonds.
>
> October 1 is the start of the new fiscal year for the US government.
> And some time after that a stock market crash might be needed to
> help the government sell its bonds.
"[A] favorable balance, provided it is not too large, will prove extremely stimulating; whilst an unfavorable balance may soon produce a state of persistent depression."
William White, a former chief economist at the Bank for International Settlements, predicts the Great Recession won't end because the world's governments are not addressing the trade imbalances, which caused it. We lack the manufacturing capability to export enough to dig out, even assuming we had enough of a declining dollar to be competitive. We don't manufacture any more and services are more local than exportable.
Finally, Richard Duncan sees the result of so much debt and its expected augmentation over the next several years as leading to an inability to manage and service it except by having the Fed monetize it with the result being serious inflation, in the context of a continuing recession/depression, that could lead to "a fall of Rome scenario" in the United States, as he sees it.
Some of us do not think there is a ready way out. The flow variable of GDP is by no means the whole or even an important part of this picture. Keynesians are too accustomed to looking only at flow variables and in the short run (the quarterly income statement, by analogy). The real issue here is stock variables, like debt and deficit totals, in the longer term (the annual balance sheet). I think we have some real problems that are not being well addressed.
On Sep 25 05:24 AM Nadeem Walayat wrote:
> When I write an article that says imminent this or imminent that,
> that means within a few days.
>
> So whats the time line for the expiry of this analysis i.e. being
> wrong ?
>
> Monday 28th Sept ?
>
> I called for an IMMINENT stocks bear market bottom on 8th March -
> and it bottomed the NEXT DAY.
>
> www.marketoracle.co.uk...
On Sep 30 03:24 AM Alan Young wrote:
> I have been reading articles almost indistinguishable from this one
> since the second or third week of March. That hasn't been very useful,
> and it isn't useful now.
But, one thing is sure. The crash would happen exactly 5 minutes after all the bears have sent in their orders to buy @ market. :)
On Sep 24 11:51 AM chap08 wrote:
> If there is a "crash", it will not be because of anything on your
> list - because they are all well known. It will be because of something
> we don't know yet.
This doesn't mean that this article and others are or were wrong, only that we are avoiding reality and living in denial longer than is healthy or sane. However, that is what brought us to the collapse last Fall, therefore, it makes a perverse kind of sense that the actions taken and the response of the markets have been identical to that which created the problem in the first place.
Real life example: Person drinks and drives and gets away with it. The more they get away with it the more they do it and the more drunk they are. Then...they hit somebody in a terrible accident. There is shock, there is grief, there is guilt, there is blame. Then...the person...in dealing with the crisis says "God I need a drink!" and does it all over again, yet is hoping for a different outcome.
Doesn't tend to work that way...
On Sep 30 03:24 AM Alan Young wrote:
> I have been reading articles almost indistinguishable from this one
> since the second or third week of March. That hasn't been very useful,
> and it isn't useful now.
Read more on the classmates dot com profile page of "alan jacquemotte". also on "alajac" on the u4prez dot com website.
Every day I hear the market pundits, and big guns whine about the "money on the sidelines".
Well , gee , this means the market has been going up WITHOUT said small investor money chasing stocks, so what do you think is going to happen when it does start chasing stocks?
Right, good answer.
The insiders are gradually selling to take profits, buying when there is a dip, then selling, maximizing short and longer term profit; these are not long term investors or retirees.
Free money from the FED (via the taxpayer) has moved the market up on low volume compared to the percentage moves up.
The market may go up more but it is fool's gold; those that buy now who have a time horizon of more than a couple of weeks or months will be the tuna in the net when the correction comes.
On Sep 30 06:41 PM alajac wrote:
> A Black Swan doesn't have to be something you didn't know about:
> it can be something you are vaguely aware of but to which you are
> not attaching enough signifigance. To wit, the obsolescence of the
> need for human labor by the ongoing Cybernetic/Industrial Revolution.
> The job pool is shrinking like a pond of water in the savannah during
> the dry season; the animals will soon turn on each other unless we
> come up with a new way to distribute economic resources. Tom Paine
> suggested compensating everyone equally for the impairment of their
> right to free access to all land; sounds good to me (if the bailout
> money given to the banks had first gone in the form of equal-dollar
> distributions to every legal U.S. resident, it would have been many
> years before we would be having this conversation), and there really
> is no other GOOD choice. What Paine missed was that governments are
> the de facto owners of all the people and property and wealth within
> their domain (as long as it IS their domain), establishing de jure
> ownership as suits their liking, and that the compensation should
> come from the government rather than from the de jure owners as he
> suggested. He also missed that governments, being owners of all,
> never need to borrow anything to meet their obligations; the only
> reason they borrow is to funnel money into the pockets of those they
> serve, in the U.S. case (since the counter-revolution of 1789), that
> is obviously the banking industry; as recent events have exposed,
> the U.S. Federal government is "of, by , and for the banks". The
> only way we can get the government to serve OUR needs (and become,
> for the first time, a government "of , by, and for The People") is
> to take over the House of Representatives with candidates pledged
> to replace the Fed dollar with our own money and to institute equi-dollar
> compensation to every legal resident.
>
> Read more on the classmates dot com profile page of "alan jacquemotte".
> also on "alajac" on the u4prez dot com website.
1) How long have you been bearish?
2) Are you calling this the top?
Once people contemplating a crash (or commenting on a potential bubble) are deemed crazy, heretics, old-world, etc. then we'll get a crash.
Aaaaaaaaaaaaaaaaaaaghh... The sky is falling!!!!
As I understand it; during recovery period the economy and it's fundamentals are still in shambles and cannot be considered healthy (as when you are sick and still recovering, then you are still sick and not healthy).
But that doe'nst mean just because the economy is still sick it will crash. There will be ups and downs as the recovery progresses. The important point is that the economy don't get sicker than it was and the economy as well as the stock markets will get better and better althought the rate of cash flow or profits made may not be commensurate with the rate of recovery (it costs money to be able to recover and a sick person cannot make massive amount of money while still sick and recovering).
Like in 1929 to 1932; Dow Jones crashed down to $42 and it was able to make significant recoveries from the $42 bottom even during the massive bankcrupcies of the 1933 to 1934.
You would'nt expect economic indicators to be at their healthy state during the severe depression years of 1933 to 1935; and companies to be making lots of profits while half of them were going bankcrupt, would you?
But Dow Jones did make significant rallies from 1932's bottom of $42 toward $100 in1935 and onward toward $300 or so into 1939.
Those were recovery rallies of 100's of percent of multiples by a depressedly sick and getting bankcrupt stock markets and economies all over the world at that time.
Dow Jones did make a major but slow downward correction in 1939 to 1944, but that was caused by WW-II and not because of the Great Depression in 1933 to 1935 when it was at it's worst.
That is what I expect will happen again. Even if massive bankcrupcies do happen in 2010 to 2011 or longer or even perhaps we go into another great depression; the stock markets should still be able to run a lot higher above the crash low of 667 for SnP500.
Now, do you want to wait for a lower low perhaps toward Dow Jones 5,000, or buy the dips instead?
My strategy at this stage is to join the recovery rally as it progresses with protective stops and/or corresponding protective puts (I short the ES instead to protect my stock/etf long positions) once each rally completes and undersgoes another minor correction. Then add more long positions after each correction thus I will be able to add my profits during minor rallies after every minor correction.
That way, even if the rally goes on "irrationally exuberant" for years and years, I will not be waiting for Dow Jones to crash and burn toward 5,000 with an empty bag.
Any idiot can see that for the past two decades we have over built, globally, in a number of areas and artificially pumped up demand with ever expanding credit. When Bill Gross talks about being at the top of a credit cycle and massive deleveraging, it is implicit that there is an over supply of the deleveraging assets; otherwise, demand would prop up their value. The top of the credit cycle, the Minsky moment, causes overpriced assets.
President Obama is probably less liberal than Eisenhower in a lot of areas. Eisenhower would have rolled back the Bush tax cuts his first week in office. I wouldn't call President Obama's trying to reform the Health Insurance oligopoly "socialist", 50 years ago we would have broken up those companies and maintained competitive markets. Now according to the DOJ many states have upwards of 70% of their markets controlled by one firm -that's a virtual monopoly. Our banks are another example: too big to fail and we have been warned by TARP inspectors and the business press that the biggest banks have taken on even more risk.
The political climate has the mainstream majority being shut out by most of the media while right wing crackpots lynch census workers and parade guns around town hall meetings. When you have people like Michael Savage calling for a second revolution, it is hardly socialism. It's fascism.
President Obama's stimulus combined with the Fed's intervention transformed us from a 6% contraction rate, to 1% contraction rate. Socialism in this case worked, although, it is hard to call it socialism when the bulk of the trillions in aid have been made to financial institutions which have profited at the expense of main street.
On Oct 01 02:26 AM storm999 wrote:
> re: point 7 I remember when supply side economics was called "voodoo
> ecnomics". The argument was concentating wealth at the top would
> lead to an explosion of new jobs and rising incomes for all. Hahaha.
> 30 years of supply side economic policies have brought us back to
> the kind of seesaw bubble-deflation cycles that plagued the post-bellum
> U.S. with the main twist being we are now a fiat currency. Both the
> income dispersion you mention and the overcapacity in China are symptoms
> of supply side ecnomic policy failures.
>
> Any idiot can see that for the past two decades we have over built,
> globally, in a number of areas and artificially pumped up demand
> with ever expanding credit. When Bill Gross talks about being at
> the top of a credit cycle and massive deleveraging, it is implicit
> that there is an over supply of the deleveraging assets; otherwise,
> demand would prop up their value. The top of the credit cycle, the
> Minsky moment, causes overpriced assets.
>
> President Obama is probably less liberal than Eisenhower in a lot
> of areas. Eisenhower would have rolled back the Bush tax cuts his
> first week in office. I wouldn't call President Obama's trying to
> reform the Health Insurance oligopoly "socialist", 50 years ago we
> would have broken up those companies and maintained competitive markets.
> Now according to the DOJ many states have upwards of 70% of their
> markets controlled by one firm -that's a virtual monopoly. Our banks
> are another example: too big to fail and we have been warned by TARP
> inspectors and the business press that the biggest banks have taken
> on even more risk.
>
> The political climate has the mainstream majority being shut out
> by most of the media while right wing crackpots lynch census workers
> and parade guns around town hall meetings. When you have people like
> Michael Savage calling for a second revolution, it is hardly socialism.
> It's fascism.
>
> President Obama's stimulus combined with the Fed's intervention transformed
> us from a 6% contraction rate, to 1% contraction rate. Socialism
> in this case worked, although, it is hard to call it socialism when
> the bulk of the trillions in aid have been made to financial institutions
> which have profited at the expense of main street.
>
Its a simple equation. Current Valuations ÷ Banks Not Lending + No Pick Up in Final Demand (at the consumer end) = Not Being Adequately Compensated For Taking On Risk.
The fact that a crash or correction could take place at any time highlights the fact that equities carry risk.
It is true that when the general public preserves risk to be at its greatest (ie. nov 08 - vix 90) risk is in fact probably quite low - the inverse is also true.
At the moment there are some signs that Joe Public is starting to view the stock market as 'safer' when of course we all know its actually getting risker (equation above).
What i find most interesting is that you would be very hard pushed to find any bear who would not concede that the markets could go higher. Perhaps even much higher. Perhaps even for the rest of the year.
When all the bears turn bullish...thats usually one of the final seals to be broken...before the apocalyptic horsemen appear.
On Sep 30 11:34 PM 75 Year Old Citizen wrote:
> jJust 6 Months ago GM said Saturn was doing fine , it would be around
> for a long time , well I guess in todays world 6 months is a long
> time ,, lol Penske looked at there Books and said NO Thanks . But
> Not to worry GM says the 12,000 UNION workers will be absorbed into
> other plants . Doing what exactly ?? Making more GM Cars No one wants
> ? GM will Never come out from Goverment ownership , by Mid 2010 they'll
> be giving a $10,000 tax credit to buy a GM . How is Ford and others
> suppose to compete with that ??
The market went down continually after the initial "recovery" in the markets until it was -89% of pre-crash levels.
This would put the DOW at roughly 1,600.
If you want to buy in at the 55% rally in six months, be my guest.
There will be sellers happy to take your money.
On Oct 01 12:37 AM aarc wrote:
> This is still considered a recovery and not actually a rally.
>
> As I understand it; during recovery period the economy and it's fundamentals
> are still in shambles and cannot be considered healthy (as when you
> are sick and still recovering, then you are still sick and not healthy).
>
>
> But that doe'nst mean just because the economy is still sick it will
> crash. There will be ups and downs as the recovery progresses. The
> important point is that the economy don't get sicker than it was
> and the economy as well as the stock markets will get better and
> better althought the rate of cash flow or profits made may not be
> commensurate with the rate of recovery (it costs money to be able
> to recover and a sick person cannot make massive amount of money
> while still sick and recovering).
>
> Like in 1929 to 1932; Dow Jones crashed down to $42 and it was able
> to make significant recoveries from the $42 bottom even during the
> massive bankcrupcies of the 1933 to 1934.
>
> You would'nt expect economic indicators to be at their healthy state
> during the severe depression years of 1933 to 1935; and companies
> to be making lots of profits while half of them were going bankcrupt,
> would you?
>
> But Dow Jones did make significant rallies from 1932's bottom of
> $42 toward $100 in1935 and onward toward $300 or so into 1939. <br/>
>
> Those were recovery rallies of 100's of percent of multiples by a
> depressedly sick and getting bankcrupt stock markets and economies
> all over the world at that time.
>
> Dow Jones did make a major but slow downward correction in 1939 to
> 1944, but that was caused by WW-II and not because of the Great Depression
> in 1933 to 1935 when it was at it's worst.
>
> That is what I expect will happen again. Even if massive bankcrupcies
> do happen in 2010 to 2011 or longer or even perhaps we go into another
> great depression; the stock markets should still be able to run a
> lot higher above the crash low of 667 for SnP500.
>
> Now, do you want to wait for a lower low perhaps toward Dow Jones
> 5,000, or buy the dips instead?
>
> My strategy at this stage is to join the recovery rally as it progresses
> with protective stops and/or corresponding protective puts (I short
> the ES instead to protect my stock/etf long positions) once each
> rally completes and undersgoes another minor correction. Then add
> more long positions after each correction thus I will be able to
> add my profits during minor rallies after every minor correction.
>
>
> That way, even if the rally goes on "irrationally exuberant" for
> years and years, I will not be waiting for Dow Jones to crash and
> burn toward 5,000 with an empty bag.
1. While its true that US manufacturing has dropped relative to services, this is not a bad thing. In fact, from a international finance textbook POV we want this to happen. It's gains from trade 101. Other countries can provide goods at a lower cost than we can, they specialize in it, we pay less for them, our real wage goes up.
2. The US can issue the amount of debt we can because the "collateral" on that debt (US tax dollars) is arguable the biggest in the world and the cash flow is pretty guaranteed. As long as the US continues to generate a $13T GDP and growing, we should be able to issue debt as we please.
3. Every time people say we run a MASSIVE trade balance I immediately understand how inept they are at understanding Int. Trade. First of all, the US CA is ~1.0% of GDP. Are you really saying that if we went from -1.0% of a drag on GDP to -1.5% our economic system would be a wreck?? Laughable. Second, contextually there is NOTHING wrong with a negative CA. It just means that (in the US's case) we didn't value savings very highly because the cost to spending and not save, the interest rate giving up by not saving, was very low for some time. The CA has recently begun to rebalance because Americans are saving again (I wonder WHY?)
4. Oh btw in economic classes, we usually breakdown output of various entities (countries, companies, etc.) into two groups, goods and services. Just because we don't produce goods doesn't mean we cannot have a growing economy. In fact, I would argue since Americans have one the most educated labor forces, we are benefiting by gains of trade by focusing on being the most productive in producing services (health care, financial, legal, etc.). Also reread point #1.
On Sep 24 10:26 PM ardon wrote:
> Excellent commentary! I'd like to ad that America has been coming
> to this moment in history for the past 30 years. You can't be a prosperous
> country if you outsource your manufacturing base, become the biggest
> debtor nation, run one of the biggest negative trade imbalances,
> make finance and health care your biggest industries. America does
> not make real things anymore, we just shuffle paper from one place
> to another and instead of the products we create financial "products".
On Sep 25 07:49 PM Marco Scarpetta wrote:
> If you read carefully, the author is long SPX puts, which expire,
> so he is putting his money where his mouth is.
>
> On Sep 25 05:24 AM Nadeem Walayat wrote:
1. Services are the least sticky in terms of geography - so it's hard to book a long term comparative advantage in services. Moreover, they can be eroded by IT. BTW people aren't coming to the US for services, services (financial, healtcare etc...) are shifting overseas.
2. I agree, US GDP will grow much more than $13T. That's becuase your metric of value is price in USD which is falling.
3. Massive trade IMBALANCE (not balance) you mean. And it's not rebalancing. The rate of growth in the trade gap has slowed, but it's still a gap adding to our debt obligations every quarter. It's like using our credit card to pay our minimum balance on our credit card. Eventually it ends. Here's a lesson though, we can pay for our (fixed) debt if we inflate our obligations away, which is not the point your making.
4. If you're thinking the key to US productivity is its educated labor force, a point that I agree with, you should be alarmed by trends in the comparative strenght of the US labor force. So stop chuckling. And stay in school.
On Oct 01 11:19 AM Peter Iwanowicz wrote:
> I always chuckle a bit when I read statements like this. Mostly because
> they are just that; statements with little to no contextual proof.
>
>
> 1. While its true that US manufacturing has dropped relative to services,
> this is not a bad thing. In fact, from a international finance textbook
> POV we want this to happen. It's gains from trade 101. Other countries
> can provide goods at a lower cost than we can, they specialize in
> it, we pay less for them, our real wage goes up.
>
> 2. The US can issue the amount of debt we can because the "collateral"
> on that debt (US tax dollars) is arguable the biggest in the world
> and the cash flow is pretty guaranteed. As long as the US continues
> to generate a $13T GDP and growing, we should be able to issue debt
> as we please.
>
> 3. Every time people say we run a MASSIVE trade balance I immediately
> understand how inept they are at understanding Int. Trade. First
> of all, the US CA is ~1.0% of GDP. Are you really saying that if
> we went from -1.0% of a drag on GDP to -1.5% our economic system
> would be a wreck?? Laughable. Second, contextually there is NOTHING
> wrong with a negative CA. It just means that (in the US's case) we
> didn't value savings very highly because the cost to spending and
> not save, the interest rate giving up by not saving, was very low
> for some time. The CA has recently begun to rebalance because Americans
> are saving again (I wonder WHY?)
>
> 4. Oh btw in economic classes, we usually breakdown output of various
> entities (countries, companies, etc.) into two groups, goods and
> services. Just because we don't produce goods doesn't mean we cannot
> have a growing economy. In fact, I would argue since Americans have
> one the most educated labor forces, we are benefiting by gains of
> trade by focusing on being the most productive in producing services
> (health care, financial, legal, etc.). Also reread point #1.
Most people with either have gone in long or short into the last week of market action.
The longs:
For those that have been long for a while I suspect they will be very happy and perhaps even feeling that while they have been skillful they have perhaps even been more lucky. The sensible decision is to take profits and clear your head (and count your money) while observing NFP and the upcoming earnings season.
The shorts:
While rather exhausted they will hold on to their positions regardless of what NFP tells them tomorrow. After all why take your losses now?
The sum of this is further downwards pressure. I expect the true test to be what happens after the knee jerk reaction of NFP once the market opens.
On Sep 24 02:11 PM cyclingscholar wrote:
> Short covering, low volume, bankrupt companies?
>
> Hmmm why is the market breadth so good? Look at a/d line. The Volume
> is low, but only relative to the ridiculous crash levels of last
> fall. And alot of the dow companies....not all of which were bankrupt,
> last I looked....have participated fully in this rally.
>
> If you can't get THOSE facts straight, who cares about the rest of
> your spiel?
So you manage a hedge fund. I'd be interested to see the performance of the fund in the last 2-3 years...
On Sep 30 09:59 PM djn21 wrote:
> All the kings horses and all the kings men, and a helluva big printing
> press, are working hard to make sure no crash happens. An up stock
> market encourages confidence, which encourages spending, which is
> our national recipe for a "strong" economy. While the U.S. markets
> do deserve to crash, imho, the gvt will continue to flood banks with
> cash, who will continue to put it to work in the markets. In my
> very uneducated, speculative opinion.
Does a 60% drop in the S&P 500 not qualify as a 'crash'?
Or should we only call it a crash the day we see a Wendy's at 11 Wall Street?
It feels like we should've been reading this article about 2 years ago...
Another example of how great analysts are at predicting the past?...
I would like to note, however, I think it will be very difficult for the Fed and GS to keep this charade up much longer by shilling equity markets, buying worthless paper with worthless paper and printing worthless currency to back all of it up.
Perhaps the Fed would like to consult with Robert G. Mugabe on what the future holds.
On Sep 29 07:34 PM jeeper wrote:
> The market will not crash until the Fed and Goldman Sachs want it
> to crash.
On Oct 01 07:47 PM bobdark wrote:
> Qusar71: I"m not sure I'd call the Dow dropping 6 of the last 7 days
> and 200 points today profit taking. Looks like the author is on the
> money and the ducks are setting up in a row. Sure, the Fed will probably
> bounce the market back again over next few days, but it seems that
> each "profit-taking" drop is getting worse and the dip-buying and
> pumping less-and-less effective. I wouldn't wait for too many more
> up-swings to cash out of this market, the next one might be the last
> chance to get out with your shirt on, assuming we haven't already
> started the crash as of today. It's been 3 months since the market
> has had this bad of a drop, and being on the tail-end of the rally
> rather than only mid-way through makes this more ominous.
Looking at the thumbs up thumbs down scores on the above posts, we can assume they are representative of the investing public as a whole. The scores are roughly even. No reason for any major movements either way, bad and good news to please both optimists and pessimists. The people who will make money are those those that buckle down, do their research and continue to invest in good companies rather than indeces.
On Oct 01 07:31 PM Suma Barlo wrote:
> TO THE AUTHOR:
>
> So you manage a hedge fund. I'd be interested to see the performance
> of the fund in the last 2-3 years...
On Oct 01 08:04 PM L.A. Igrok wrote:
> Technically 3500 level for DJIA looks like a "must reach" on the
> longer run ( within a couple of years, I would guess). After that,
> the price action on the DOW is likely to resemble the NIKKEI longer-term
> chart with pretty extensive consolidation between 3000 and 7000.
Many have cut costs and are at record LOW PES
Its always a stockpickers market
If you are wise and reinvest your dividends you will become financially independent
I know because it happened me in the past 10 years in the supposed lost decade
Now if i made money ina decade where teh Dow is lower what do you think will happen when the Dow will double in the next decade
Many of the things the author says may well be true
But many stocks are great values now,find them
And no, the Dow will not double.
On Oct 01 10:39 PM bobbybutte wrote:
> Does anyone really think the large cap multinational companies are
> hurting?
>
> Many have cut costs and are at record LOW PES
>
> Its always a stockpickers market
>
> If you are wise and reinvest your dividends you will become financially
> independent
>
> I know because it happened me in the past 10 years in the supposed
> lost decade
>
> Now if i made money ina decade where teh Dow is lower what do you
> think will happen when the Dow will double in the next decade
>
> Many of the things the author says may well be true
>
> But many stocks are great values now,find them
Anyway who is this guy? I doubt he's a retired italian footballer from the 90's... Always a problem with these fundamentalists...
As for me the best guidance always comes from the chart... when prices go down I short, when prices go up I follow... easy...
On Oct 01 10:14 PM MSP wrote:
> 14% annualized
The rally continues well into 2010 - say 3rd quarter - before we hit some trouble (legacy of the current situation). Then there's a bearish phase lasting 1-2 years which will bring prices down about 40% percent. After that another rally (1-2 years) to complete this consolidation period, and then we finally start a proper secular bull market - you know one of those that raise the averages by 10x...
On Oct 02 12:24 AM Suma Barlo wrote:
> How about this for an alternative scenario:
>
> The rally continues well into 2010 - say 3rd quarter - before we
> hit some trouble (legacy of the current situation). Then there's
> a bearish phase lasting 1-2 years which will bring prices down about
> 40% percent. After that another rally (1-2 years) to complete this
> consolidation period, and then we finally start a proper secular
> bull market - you know one of those that raise the averages by 10x...
Can you tell me what the big deal is? We've already had a crash - unless you were fast asleep - a correction is in the offing - great - any monkey can tell you that. So what? You're not betting your life on it, are you? This doom and gloom attitude is ridiculous... Just follow the damn market. Sell when it goes down, buy when it goes up... Can you do that? Can you trade? Hmmm... maybe not.
On Oct 02 04:10 AM Marco Scarpetta wrote:
> The odds of your scenario playing out are 0%. I agree with the author,
> we will crash this year. It is the most unlikely play. The shorts
> that are trying to time this market too perfectly are not going to
> make any money. By the time they decide to short, the market will
> be down 30%.
[...] The fact is S&P earnings will be depressed for a very long time and no economic growth will take place in this country. Coupled with all the wealth destruction generated by this excessive, toxic and overly leveraged system. These two variables added together should create a ceiling on the S&P of 600. That would be the bull case. The base case would be 450. And don't forget that there is a bear case, which is very feasible, as the foundation of this economy and country is a phony currency that will eventually be equivalent to toilet paper. Therefore, if you have a dollar crisis, the S&P will trade below 200 (you can adjust for hyperinflation yourself).
Yeah sure... did you short at 600 with a profit target at 450. I bet you were thinking 200, right?
My advice: Get yourself a good charting program and start reading the market. It's all there...
When the U.S. was a strong and vibrant manufacturing-based economy/society.....pa... were comfortable and provided much more than the "essentials" for the average worker. One would pay for food and rent then decide what to do with the extra "discretionary" income. One could take on a loan for that summer cottage, go shopping for a boat, more personal transportation than actual required, motorcycle, snowmobile, and a host of other "American Dream" items. Also, one could invest in stocks and mutual funds at a healthy savings rate. Let us not forgot those generous 401k employer matches along with "defined" pensions. This system allowed for the good life during the working years and a continuation of this standard of living during retirement. This system fed on itself and ensured that all the stuff we make would continue to be made and purchased and all those companies that manufacture all this "stuff" would keep people employed and continue to have profits. Thus, a healthy economy and stock market would ensue. Then a funny thing happened. As the jobs disappeared and a seismic shift in our economy was taking place, we (most of us) ignored this. We still wanted to have it all.....and we did continue this for a while.....with the avaiability of credit. People refused to give up the good life and the US government went along with this. The goverment borrowed as did the consumer....more and more....all the while the fundamentals that provided our standard of living were disappearing. If things slowed down in our economy....we just lowered interest rates to speed up the downfall. The hole just got deeper and deeper until there is no financial ladder long enough to enable us to climb out. The last line of defense that enabled us to continue the good life long after the game was over has also ended. Credit is finally scarce but that does not matter anyhow...for credit repayment is not possible with the barely survivable wages now the norm,. We have exported our manufacturing jobs and technology. Paychecks are mostly linked to low-paying service sector employment....and provide not nearly enough to enable lavish purchases, save (invest), and retire someday. People are divesting of their possesions in order to survive, donwsizing their dwelllings and living standards, disappearing 401k matches, almost non-existant defined pensions, unable and/or unwilling to purchase "American Dream" items.....and most importantly.....will be fortunate if they have enough income to survive at a most basic level during retirement.....if there is a some form of retirment.
This begs the question in my mind: How can it be possble for the stock market not to again implode?
There is nothing wrong with 1050-1200 on the S&P. But the fear of something less and the flash trading could easily set off a big sell off down to 800-900 with a recovery just as fast.
Case of AMSC examined in detail
gudovac1941.blogspot.c...
-----------------
Don't Get Massacred !
Gudovac1941
On Oct 01 10:14 PM MSP wrote:
> 14% annualized
Keep up the good work.
A: Earnings in the last few quarters have been absolutely terrible, along with the rest of the economy.
A: Highly unlikely, how would this work? Helicopter Benanke cutting rates to 0% only has a direct effect on what banks can borrow. If banks believe they will not get paid back they will not loan out their cheap money. There is no reason to believe they will get paid back because according to just about everyrhing you can measure the average American is swamped in debt and unable to pay his bills. The reason this dynamic is so important is that the economy over the last few years was based on CREDIT, not money. What is going to replace all of that credit?
Focus on earnings, stock are just a reflection of the current value of a business and future earnings potential. Everyone makes things so complicated. And yes, I believe the market is waaaaaaaay overvalued.
The question of whether it will crash is a different story though. Stock will drop once a broad enough group of people figure out that business won't be earning near what they use to. It's as simple as that. When will that happen? Who knows?
In your items #7 & #8, is the money supply expanding (because of inflationary gov't spending), or contracting (because of tight fisted banks not lending and consumers not spending).
Which is it?
Thanks
JPS
If the author disagrees, please reply to my comment.
On Oct 02 03:42 PM Jim P. Smith wrote:
> Maybe I'm not as bright as some of the others on here, but I was
> wondering if you might clear up what appears to me to be a contradiction.
>
>
> In your items #7 & #8, is the money supply expanding (because
> of inflationary gov't spending), or contracting (because of tight
> fisted banks not lending and consumers not spending).
>
> Which is it?
> Thanks
> JPS
On Oct 01 10:21 PM Marco Scarpetta wrote:
> Dow 3000 by year-end 2010. Market bulls have NO shot. The economy
> is in shambles and it is made up of paper. Nothing more. No brick
> and mortar.
SPX 584 by next fall.
On Sep 30 03:24 AM Alan Young wrote:
> I have been reading articles almost indistinguishable from this one
> since the second or third week of March. That hasn't been very useful,
> and it isn't useful now.
I have horrible timing.
Point 1.
There has been a lot of talk about insider trading. Recently Ben Siverman of insiderscore.com stated that for some company insiders “stocks are hitting valuation inflection points” when it seems appropriate for executives to take stock off the table. Also some executives get paid with stock and exercise their options according to SEC Rule 10b5-1. Joseph Moglia of Ameritrade comes to mind. In addition, Factset.com shows that insider buying outpaced selling by 2 to 1 in June. The norm is to sell 7 to 1. Factset also indicates very low selling in September. I have the chart if you would like a copy.
Point 2.
I agree that there has been short covering. There must be after such a move down. There always is in a bull market. However, volume has been respectable. The volume of shares traded is in line with 2005 and 2006 levels. Volume increased in 2007 and 2008 naturally because of the mass exodus. I would rather look at the money flow index which indicates that money started flowing into the market in March this year and is still rising.
Point 3.
The idea that everyone is fully vested is quite the opposite of the facts. The money in the market tells us that there is over a trillion dollars on the sidelines that has yet to participate in the rally. Also, momentum is a real phenomenon. It’s mass times velocity. High momentum is hard to get going and hard to stop. I expect to see the S&P reach 1200 by the year’s end.
Under such volatile situations even a hint of negative news will bring down the market like a pack of cards. The market collapses as cash stops flowing in and tumbles down even furiously than it had risen. A situation occurs when everybody is eager to sell and there isn't anybody willing to buy. Bankruptcy prevails widely. The stocks get undervalued once more and ushers in a new cycle. And it's once more time for smart money to accumulate stocks, thus foreboding another market crash in the years to come.
----------------------...
Money without intelligence is like a car without a road.
www.intelligentinvesti...
You state that Europe has fixed itself by "waving a magic wand"? Why don't you take a look at some of the unemployment rates of the EU Member countries: www.randstad.com/the-w...
This article is a piece of pathetic fiction, and you should be ashamed that you wrote it.
Keep running around there Henny-Penny!
(www.authorama.com/engl...)
The author is implying that the problems out of Europe are so severe that he does not understand why the European markets continue to rally. He actually points out to the problem areas in Europe.
I think you need to go back to elementary school.
On Oct 03 09:58 AM CHICAGAWAUKEE wrote:
> What an imagination you have here!
>
> You state that Europe has fixed itself by "waving a magic wand"?
> Why don't you take a look at some of the unemployment rates of the
> EU Member countries: www.randstad.com/the-w...;q=eu+employment
>
>
> This article is a piece of pathetic fiction, and you should be ashamed
> that you wrote it.
>
>
> Keep running around there Henny-Penny!
> (www.authorama.com/engl...)
This... 'article'... is hardly ground-breaking. It's just a superficial summary of the aftermath of a major global economic and financial crisis. It doesn't state anything new, nor it points to any hidden pattern. It's like describing fallen buildings after an earthquake, or overturned vehicles after a flood. It's all there for everyone to see.
This is hardly the kind of 'report' the buy-side would pay a quarter of a million dollars for.
I can see the H. B. Neill's readers who think that to be a contrarian all you have to do is always take - indiscriminately - the 'other' direction; or those who seem to spot 'black swans' in the sky everywhere the look...
To those who think we're going to plunge into hell shortly I would like to remind that we've been here before many a time, and everytime we've found a way out while the doomsayers where shouting 'The end is nigh'.
Every economic crisis is unique because that's the way we are. The causes are different and the faces are different, but the underlying process is astonishingly similar. Banks will start lending again; unemployment will stop rising and start falling; companies will change, adapt to a new climate, re-invent themselves; inflation will start rising and interest rates will have to be adjusted; and the process will continue until another crisis comes along.
It's called 'life', it is neither fair nor predictable, but that's what we have to deal with. So get used to it.
Amen
On Oct 03 11:19 AM Marco Scarpetta wrote:
> You are quite incompetent. Shame on you. You obviously did not undertand
> the author's cynical point on the state of the European economy via
> his question format.
>
> The author is implying that the problems out of Europe are so severe
> that he does not understand why the European markets continue to
> rally. He actually points out to the problem areas in Europe.
>
> I think you need to go back to elementary school.
Reasons for a crash
11. The skill of the financial ruling class to orchestrate "pump and dump" maneuvers
12. The fear and risk aversion of once-burned domestic and international portfolio managers
13. The benefits of a falling stock market and subsequent rising dollar to foreign holders of dollar denominated instruments, who then may be able to unload their depreciating holdings
But, there are valid reasons why a crash may not materialize. Most notably, the decreasing current account deficit the US has with the rest of the world. After peaking in 2006, this trade deficit has been decreasing. This is not because the US is selling more abroad; this is dollars returning home. As the US dollar currency crisis unfolds, the 6+ trillion dollars circulating outside the US may be converted to more tangible assets, such as US businesses. Should this happen, we may see an increase in the various stock market averages, or at least a countermanding force to the points made in this well written article.
My dividends MORE than pay my bills so i dont need to sell
Most large caps have raised their dividends between 6-15% this year and many like MCD and WMT are up inthe past year when the Dow has dropped drastically
I do agree with the author that the high beta stocks like retailers and restaurants and some manufacturers could be overpriced
But stocks XOM KFT and PG and MSFT INTC IBM all do alot of business overseas and are not overvalued at all
The trick is to do build your DIVIDEND MACHINE and everything else will be fine
On Oct 03 04:17 PM Suma Barlo wrote:
> I find this 'debate' quite amusing,...companies will change,
> adapt to a new climate, re-invent themselves... It's called 'life', it is neither fair nor predictable, but that's
> what we have to deal with. So get used to it.
> Amen
Unfortunately, predictability used to be the order of the day before this congress decided to circumvent their constitutional mandate to provide a uniform law of bankruptcy and diliberately replaced GM and Chrysler bondholders with their cohorts in the UAW, SEIR, et al, at the request of their handlers at GS, JPM, BAC, CITI, etc. al and simultaneously sold the American middle class home owner / buyer down the river. So I guess you're right, I should get used to it and fill my toesack with cotton and shut up. Yasuh. Will do.
But just a few weeks later the market turned lower and has been stuck in a bear market ever since. The banking problems multiplied and inflation skyrocketed with oil rising almost double in price now from where it was a year ago. The rate cuts tasted good at first, but are no longer palatable.
When thinking about the financial markets sometimes it is best to take stock of things before trying to look ahead and decide if you need to make changes to your portfolio or figure out where to look for the best investment opportunities. A lot can be learned about looking at where the market was a year ago and comparing it to today.
A year ago from today the DOW, S&P 500, and Nasdaq were all climbing higher. They had experienced a fast and furious correction that took the S&P 500 down over seven percent in February of 2008. The financial media blamed that quick correction on "credit worries," a fast drop in the dollar versus the yen, and a huge correction in the Chinese stock market. Rumors also circulated that some billion dollar Bear Stearns hedge funds were in trouble.
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Money without intelligence is like a car without a road.
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Might wanna check your facts, Chicken Little.
It's sad that this website has become a coven for paranoid wannabe "analysts" and slack-jawed armchair economists. I'm getting so sick and tired of the ill-informed crap that plagues this website that I'm on the verge of canceling my mailing-list subscription. I've enjoyed the news feeds and "Wall Street Breakfast", but my lord ... the articles and commentary here is mostly all crap.
"Fully invested" ... with a largest historic excess of cash on the sidelines in the history of mankind?
Panic buying???? That was especially laughable following the suggestion that this has been a low volume rally.
The author of this nonsense is obviously an inept, self-contradicting dolt.
On Oct 05 02:17 PM User 424918 wrote:
> "Fully invested" ???
>
> Might wanna check your facts, Chicken Little.
>
> It's sad that this website has become a coven for paranoid wannabe
> "analysts" and slack-jawed armchair economists. I'm getting so sick
> and tired of the ill-informed crap that plagues this website that
> I'm on the verge of canceling my mailing-list subscription. I've
> enjoyed the news feeds and "Wall Street Breakfast", but my lord ...
> the articles and commentary here is mostly all crap.
>
> "Fully invested" ... with a largest historic excess of cash on the
> sidelines in the history of mankind?
>
> Panic buying???? That was especially laughable following the suggestion
> that this has been a low volume rally.
>
> The author of this nonsense is obviously an inept, self-contradicting
> dolt.
for example, single payer health care maybe with decent nurse staffing rations would wring 30-50 percent out of the expenses, swing toward prevention and stop a major cause of bankruptcy. We need to go to the metric system if we are to have a shot at a manufacturing base. Infrastructure funding is already started and can be expanded - to the extent it reduces individual transportation expense it make the country more efficient. Banks would lend if they could see some solid jobs.
Eddie, I think you are so stuck on yourself that you can't see what is coming. I only work from common sense and a good bit of experience. I see no way around a crash, we are on the Super Chief, and we are heading 100 miles per hour toward the brick wall, and there will be a crash.
I don't think those idoits in Washington can do anything to stop it, in fact I think they are working toward that goal. You have to remember they are Communists and they want to make us all paupers, and then take the guns and then declare themseves Big Brother and his merry men from here on.
I think this health bill could be the catalyst to really get the Super Chief rolling down the track.
I personally am in a totally defensive mode now, I hold nothing but Inverse Options on the leading ETFs.
I have leaps and I figure Mr. O will manage to crash the market within a year.
M. Johnson