There Is Plenty to Fear in This Market

The markets are being manipulated by hedge funds probably a little more than usual. Thursday’s move in the Cara 100 US-traded ADRs in India were given a huge boost, and Friday the BSE 30 (India’s main equity index) was up +2.42% to 17126. The same thing occurred with the main US-traded Japanese stocks, and Friday the Nikkei 225 of Japan was up +2.38% to 13863. Yet, the consumer and business confidence is tracking the economic and corporate profits lower.

Friday morning I watched with amazement as Bloomberg trotted out some old-timer money manager to say he thought that GE (GE) was in fine shape, headed to 50. I saw the same thing in 1999 at the market top.

I do not accept market leadership from Financials or Consumer Discretionary (many of the US retailers really popped Thursday) during an extreme credit market contraction, particularly when inflation is roaring, and the housing industry sinking. I suspect that these markets are being promoted while organized networks of bankers and their Friends and Family are selling and shorting.

I have said all along that the world’s other major G-7 economies of Japan, Europe and the UK are in dreadful shape and that when the news started to sink in, the Euro would sink against the US dollar, causing a massive sell-off of commodities. We have seen that last week in precious metals.

Gold stocks are the caboose in the market train and the last car over the roller-coaster peak. The Toronto Composite index took a hammering last week, down Thursday -103 (-0.74%) to 13966 and the Toronto Venture index was even worse, falling -38 -1.50% to 2479.

Some of the junior miners have been beaten up, and the picture is no different than the stock charts of 1981-2. I suspect it will get worse, and the high-cost, high-burn rate, weakly-financed juniors are in for more downside. This is the time in the market when even stock promoters for the juniors have to look themselves in the mirror and decide to stop drinking their lemonade. I wouldn’t want to be in many of these stocks without (i) confidence the picture was going to change, and (ii) my margin was cleared, and my outlook was long-term.

That’s how I see it anyway. I only point this out because I cannot stand to see another brain-dead or massively conflicted Wall Streeter tell the TV audience there is nothing to fear in this market. I think the NASDAQ has about -15% downside risk and the DJIA possibly double that.

That’s just one person’s view.

Comments

[whisperonth...:]

Well, there's one sure way to find the bottom. Everyone just sell. Sell it all, everything you have, get out of the market, dump the stocks and get out. Pretty soon, we'll find that bottom. Sound drastic? It is. Stupid, too. Those who are IN when the bottom is reached will make more afterward. Those who wait until they're sure we aren't going down the tubes... will make less.

2008 Apr 27 05:25 PM

[Ker:]

It is impossible to nasdaq to be 15% down. It is up 13% from the last bottom in march. So if it goes down, it goes down 50%, but not 15%, because 15% would be a doble bottom and again everybody buying. With current fundamentals there is no bottom at 15% down from todays 1919. I think it will fall before reaching 2000

2008 Apr 27 06:41 PM

[Voice of Re...:]

Memo to wsigler: I can spot a blowhard when I read his garbage.

Too many of today's investors...oops I mean wannabe traders pay too much attention to charts trying to find tops, bottoms, reading tea leaves and assorted other witchcraft. I don't.

2008 Apr 27 10:23 PM

[bewise:]

Memo to Voice:- Your foul language and mutterings is a disservice to Bill C. Please go somewhere to spill your "rots" because that's exactly what u r. If u disagree with Bill C or any of the bloggers then u should express yourself and lets us judge whether u make more sense than others. No personal attacks please. That's not necessary.

2008 Apr 28 12:19 AM

[User 165175:]

Agree with Bill completely. The U.S. consumer is resource constrained. S/he has limited access to credit primarily b/c there is no MEW available. As 70% of U.S. GDP and a big chunk of world consumption, we have yet to observe the full impact of this weakness. In addiotna to lack of MEW, banks are tightening lending standards and new regulatory requirements will continue to constrain their ROEs. The effects of the credit turmoil we just experienced will be far reaching. I believe multiples will continue to contract as we are still on our way into the trough. The current rally in U.S. equities is a head fake, as well, and earnings will continue to deteriorate throughout the year. How can they improve with $120/bl oil and other input prices like steel and copper near all time highs. Commodity prices need not accelerate further to continue to place pressure on margins. Again, all of this in the face of flagging consumer demand. The Fed’s hyper inflationary monetary policy will prove to be a disaster, but perhaps it was necessary in order to save the financial system. The opportunities (when they come) will be awesome! Right now, I think patience is the operative word.

P.S. - Newsflow has clearly been manipulate over the past few weeks.

2008 Apr 28 08:26 AM

[ussmls7:]

340 Trillion reasons & counting! Wow

2008 Apr 28 09:33 AM

[Voice of Re...:]

Memo to bewise: Chill out. Like I said, If you can't spot the BS coming from the same contributors who are always spreading gloom and doom for what seems at best border line nefarious reasons I truly feel sorry for you and others that are gulliable enough to swallow it unquestioned.

2008 Apr 28 10:44 AM

[fxtrader07:]

@voice: as usual you are long voice, short reason.
@bill cara. appreciate your insights (doesn't mean i agree on each and everything) and i wonder whether those guys branding you "permabear" have ever read more from you than just 2 or 3 articles. funny, indeed

2008 Apr 28 10:46 AM

[bewise:]

Memo to Voice:- Why r u here "yapping" your head off and not offering any better views other than your own rants. If u truly disagree with Bill C views then pl do all of us a favor - Leave and rant elsewhere.

I am not going to reply to your rantings further.

2008 Apr 28 01:57 PM

[vaduz:]

a rather gloomy view - but probably true

2008 Apr 28 04:57 PM

[Voice of Re...:]

Memo to bewise... You just can't stand to see other people expressing views contrary to somebody who you and others obviously worship. I've had a belly full of Bill Cara and his ilk and guess what, this is a forum to express views either pro or con. You don't like what I have to say, you don't have to. Trust me, I couldn't care less what you think.

2008 Apr 28 07:09 PM

[karchad:]

Those people trying to pick a bottom will pick their nose and do nothing until the market is up 40%. I've been investing for 40 years, and that's what happens. Just buy at cheap prices, and wait, and you can profit greatly. Voice of Reason, you really are a voice of reason here. Oh, a great definition of "technical analysis" given to me by a Wall-Streeter: a mathematical system that has 100% accuracy in picking the tops/bottoms, 6 months after they happen.

2008 Apr 28 09:47 PM

[karchad:]

i think i'm taking Seeking Alpha out of my bookmarks. I've already un-RSS'ed it. The columnnists are amateurs. I prefer Marketwatch.

2008 Apr 28 09:48 PM

[jjason:]

This tread has become like the Yahoo message board. Lots of BS and no good, intelligent commentary.

Bill Cara is right on. I have an S&P report dated July 3, 2007 that gives Wachovia Bank a 5 Star rating with a 12 month target price of $67.00.

So, does anyone think that WB will be above $60.00 anytime soon?

2008 Apr 29 07:57 AM

[MSmailbox:]

The "bottom" occurred on March 17, 2008 (St. Patrick's Day), but that does not mean we're ready to start up some new mountain... I fear that we may have to hike some distance, to reach the base of the next range. Those who dislike volatility, may be in for a treat. Returns on CD's will soon appear exotic, like during the early eighties. 11.5% - 12.0% guaranteed return, anyone?

2008 Apr 29 09:07 AM

[Jeff Roundy:]

Bill: For the first time that I can ever observe in the market, there seems to be an attitude that whatever may be coming in terms of a recession, the Feds. will be there to bail us out.

The market runs on greed and fear. Up until the Federal Reserve opened access to borrowing by non-regulated banks from the Federal Reserve, something not allowed since the depression, the market was in the fear mode. Now everything has changed. The market has taken on the "what's me worry" mind set, which will last, hopefully only so long and fear and prudence will start to take hold eventually.

2008 Apr 29 12:36 PM

[raising4dau...:]

Lots of hat, no cattle.

2008 Apr 29 12:52 PM

[proseadvocate:]

All you bull-market geniuses will be eating crow and asking why the stock market does not always go up, [as the manipulators have told you]? In the long term, we're all dead. If you have profits, take them. If wishes were horses, all beggars would ride. Don't spurn caution.

2008 Apr 29 06:14 PM

[engineer1:]

I do not understand why bullish investors get so persnickety ( is that spelled right?) when the bearish view is presented. The market cannot go up if everyone who might be interested in buying stock has allready bought it. If everybody was bulls the market would crash tomorrow for we would all have 100 percent of our money in stock. The idea is to persuade the other side, not verbally beat them, present a rosy view that makes all the bears feel like Teddy bears and want to change sides and go long for a while. On a more serious note name one good reason the market should go up right now. The reasons it should go down are too many to list. JJ

2008 Apr 29 10:24 PM

[cebu sun:]

The explanation why Voicereason is so EMOTIONAL is that he is full of FEAR. He cannot reason, but wants to blow one away with the force of his emotion (rather than reason). "If I scream loud enough maybe they will be impressed or go away."

When you are long and afraid each market twitch is cause for fear. Uh-oh is tomorrow the other shoe? If you are short and afraid you merely will cover and jump on the train.

2008 May 13 01:48 AM