Matt Blackman

Five Challenges Ahead as the Corporate Soup Lines Grow

Daniel;
I wish you luck because history is not on your side. I have done some fairly extensive research on the election cycle and the two years after a US election are hard on all markets and stocks pretty much world wide. The ratio for the Dow/SPX since 1902 works out to 93% of the gains occurred in the 26 months leading up to each election versus just 7% in the 22 months after. As well with the exception of the relatively short-lived Oct 1987 meltdown, every single major bear market and recession since WWII has occurred in the 2 years after a US election. The ratio of the Toronto TSX for the 2 years pre-election versus post-election since 1950 is 97:3 or 32:1. Not a very attractive probability (see tradesystemguru.com/co... )

Five Challenges Ahead as the Corporate Soup Lines Grow

Daniel K. just reading your website and compared to you I'm downright giddy! ;-O worldworststockpicker..../

Good job though and an interesting analysis! So are you giving away Cramer's book for giggles and laughs?

Five Challenges Ahead as the Corporate Soup Lines Grow

Daniel K. I am a trader, not an investor. My research tells me that fundamentals, while useful in a longer-term trend to confirm the move (i.e. if fundamentals are supportive of the move its a good thing), do a lousy job of getting you out in time especially at turning points. Right now the fundamentals longer-term like real earnings, election cycle, increasing debt and increasing reliance on foreign buyers of debt look bearish. We are now in the process of breaking the largest number and size of asset bubbles in history which I have seen coming since 2005.... (My first published article on the US housing bubble was in the Oct 2004 issue of SFO...) In my opinion, buy and hold investors are taking a tremendous risk by staying in long-term stock positions.... as I think I said in my Two-Ton Wall Street Conflict of Interest article seekingalpha.com/artic...

However, my primary approach to markets is technical: I watch the charts, take a quick look at the fundamentals to see if they support the trade and make my buying and selling decisions accordingly...

But you bring up an interesting point. Larry Williams once said in a seminar that he is pessimistic every time he enters a trade, and he expects to lose. That way he won't overstay his welcome and ignore his stop loss. In other words, if his trade hits his stop, he quickly exits and doesn't ignore the signal because that is what he is expecting..... Its counter-intuitive when you think about it. Traders by nature are generally optimistic. But that can keep you in a trade longer than you should be and bankrupt you.

Nukldrager - Good point. I need to check the latest BIS (Bank of International Settlements) derivatives data. The problem is that is lags by about 6 months. But from the data I have been seeing, the size of the derivatives market began shrinking in late 2007.... Will take a look at it an do an article update when I have the info....

Cheers,
Matt

GSE Bailout Likely Marks a Bottom in Financials

Don't know why fundamental value investors have such a compelling need to continually call a bottom. They've been doing it since the market topped in October and even though these calls have been way wrong, still continue to do it. Granted, sooner or later they will get it right but by then anyone who listened to them will be broke.

Here is what I think of the practice... seekingalpha.com/artic...

Residential Real Estate: How Much More Pain?

Dr. H, I'll take that bet! The rate of change (negative) may have declined month to month but it is still accelerating year-over-year. Unless the bubble is done breaking, which would be an historic miracle, the Case-Shiller home price index should see values well below 150 before the declines are finally over. Take a look at the chart.. tradesystemguru.com/co...

History tells us that bubble aftermaths generally see prices return to well below their historic trendlines. The dashed orange line is a linear regression line so weighted for the later data. The longterm trendline sits around 130 for the 20-city composite...

Residential Real Estate: How Much More Pain?

Unless I have missed something, David has neglected to discuss a key component of bear markets: they are littered with bear market rallies in which the asset class (index, future, currency etc) experiences a dramatic rally only to end and subsequently put in a lower low.

The best example I've seen is the Japanese Nikkei 225 that has put in at least 5 bear market rallies of 50% of more since it peaked in 1990 ( see tradesystemguru.com/co... ).

The Philadelphia Housing Sector Index is another great example. After peaking in Aug-Sept 2005 near 600, the index has continued to fall and rallied more than 25% from July 2006 through Feb 2007. Since, it has fallen to around 130... www.quotemedia.com/res...=^HGX

So is it at a bottom? Maybe, maybe not. But they equate bottom picking to trying to catch a falling knife for good reason....