irondoor91

Bear Market In Its Final Stages?

The stock market is the perfect reflection of the people's mood. When that changes, it will begin to show up in the averages. Check out mutual fund cash politions, dividend yield, a/d line, etc. The banks are loaded with under-performing real estate that is about to get even worse. We are just beginning to enter the worst phases of the economic downturn. The reasons for individuals and businesses accumulation of cash is obvious: They are going to need it.

Thursday's Stock Rally Means Little to Trends

Nice work. It is helpful from time to time to be reminded of the "big trends" in these primary market indicators. The daily noise can sometimes be deafening if you are just watching the screen and clicking the mouse. These are the charts that should be reminding "long term" investors that there are times when "buy and hold" means a real loss of money and purchasing power. There are times when "sell and just get out of the way" is the trade to make. There will always be a better time to buy in the future.

Bracing for Another Round of Credit Related Woes

"This tells me that we've got serious problems. If a prime borrower can't get funds to secure a bargain-basement real estate deal, then you've got to believe credit is tight. And tight credit is deflationary."

Right you are. The reason the banks aren't lending on "bargain basement real estate deals" is that they have plenty of them as collateral on their balance sheets already and the prospects of owning more are increasing daily. They need the cash to invest in low-cost Fed funds and they need to get the current crop of loans off the reservation before they deteroriate any more.

Your real estate friend should hunker down, manage his cash flow , pay down his debt and let the momentary fit of greed pass on by. There will be even greater "bargain basement" opportunitues ahead.

Global Stock Markets: Let the Gains Begin

You can take a trading "stance" without actually executing a trade unless there is a trade to take. Don't trade out of boredom, but be prepared with a plan.

Sometimes you actually have to watch what the market is doing to determine what it is saying. Why try and be a hero? A "long term approach" can also mean "get out and wait for lower prices".

Are Hedge Fund Programs Driving the Market?

If there is "mindless selling" by the funds, cannot there also be "mindless buying" by the public? Cramer is always promising to find a bull market "somewhere". Buy! Buy! Buy!. Never, ever, ever Sell.

Corporate Fraud + Government Intervention = Bailout Nation

How many times have you heard that one of our major problems is our "low savings rate"? For years now it has been close to or less than zero.

Out come the "stimulus checks" and lo and behold we find that about 30% of the money wasn't spent, but was actually saved in a bank account or used to reduce some credit card debt.

The next outcry was bemoaning the fact that people were saving and actually coming to their senses!

The whole world knows that if Americans ever returned to the '60's and saved/invested 5-10% of their incomes the global economy would be down the tubes. The world depends on Americans borrowing and spending themselves and their country into bankruptcy. And they will gladly sell us the junk and loan us the money to do it with.

My question is, where will the world find the next goose to pluck?

News Flash: Forecasting Ain't Perfect

"Even the collective wisdom of the marketplace has been wrong time and again. The stock market, that weathervane for corporate profits and the economy, keeps swinging from fear to greed and back. A glance at the major stock indexes over the past year reveals a host of false bottoms and fools' rallies."

The stock market is a "weathervane" of the collective social mood of millions of investors, which reflect what they see and feel going on around them. If it was a "weathevane" of the economy or of corporate profits, it would merely just flatline until profit announcements come out, make the necessary few cents adjustment, and then go back to hibernation until the next quarter.

Markets trade on the second or third derivative of what most investors think other investors are going to do about the latest "news", such as oil prices, write-downs, or especially the potential arrival of the next round of multi-billion $ Fed delivery.

The Dead Cat Returns to Earth

99% of investors today have never seen anything but a general up market since the 30's. For the first 30+ years of that run, America and its corporations were running hard to build industries and people who knew how to build things, like steel, automobiles, airplanes, appliances, machine tools, computers, etc, and to export them to the rest of the world. We had a strong dollar and a growing, confident knowledge base.

Since the late 60's what have we had? Social unrest, political scandal, a lost war in Vietnam, the rise of terrorism and intolerance around the globe. We became a nation of "servicers", pushing paper and real estate in the era of digitization and ease. Where a family of 4 could live comfortably in a 2,000 sq ft home, now childless couples demand 5,000 sq ft for their primary residence, three cars, boats, a "place at the beach" on and on ad nauseum.

It was all built not on hard work and sacrifice, but on a mountain of credit at the personal and governmental level (FAN and FRED). Literally Trillions of dollars of paper that were sliced and diced and handed out all over the world to "reduce risk". Well, that debt requires something: cash flow and debt service. The holders of that debt want to be paid both interest and principal. They do not want the underlying homes that nobody can afford to pay for, insure, furnish, pay taxes on and commute 2 hrs per day at $4.00 a gallon in their Hummers and other SUV's.

Just when housing had a chance to become affordable again due to 50% discounts, the Treasury steps in a says "no, we got to put a stop to that". Can't have the marketplace setting prices!

We are in the process of turning the clock back to an earlier era. Not 1929, but 1974. That is the Dow at the 4th wave of lesser degree. Unbelieveable, but it will be DOW 400 by 2016.

If not, give me your case for the DOW returning to new highs with the credit engine out of gas.

How Bad Is the Bear? A Technical Look at Current Dow Trading

Oil will probably remain high priced in terms of dollars, but when the big unwind finally gets here and deflationary forces take hold, demand for all things oil-based will fall along with the price of everything else on this planet, and that includes the last and final inflatable, the commodities bubble. No more stock bubbles, no more real estate bubbles, no more derivatives bubbles. Why? No more liquidity available and thus no more leverage.

Traders Brace Themselves for Retest of January Lows

"Depending on the economic and earnings picture at that point, it could very well give investors a chance to take some chips off the table."

Sorry, but I don't follow you. "Investors" are supposed to take some chips off the table? I thought they were "investors" and not "traders". "Investors should have taken their chips off the table in November when the market gave it up after coming to the conclusion that the Fed's continuing band-aids will not work. Lower Fed Funds rates apparently = higher long term rates.

Deflation is what's coming and the housing market is where it first started to manifest itself. Mortgages and all the detrius of leveraged finance was next. Now the US stock market is joining in. The BRIC's are next, followed eventually by the commodity bubble's pop, but perhaps in another 6 months or so.

Is the Market Misreading the Fed?

What do you suggest as a remedy to an undefined problem? The size of your neigbor's bank account, house, automobile, etc. are his business, not yours. The challenge of those "savers" is figuring out a way to improve their own situation, and pulling their neighbor down doesn't pull them up. The issue isn't the "savers", as they have done good work to have saved anything in this society that demands that you spend it all even before you get it.

Anyone who has spent time with the "great unwashed classes" knows that if you confiscated all the wealth of the "top 1% obese" and distributed it among the Dems favorites in the inner city jungles, the money would be back in the pockets of its righful owners within a year. But wouldn't that be a great experiment to watch.

Irrational Exuberance Got Buried Yesterday: Now What?

There is always that "lull me to sleep with soothing words" comfort in holding assets that are not liquid and only occasionally appraised by some "professional". How is it that your illiquid real estate is more valuable than the real estate held in a REIT? Are your tenants paying higher rent than the tenants in REIT real estate? Are your mangers charging lower management fees? Are your lenders giving you better terms?

Perhaps it's just that certain knowledge that, over time, all real estate goes up. Until it doesn't.

Irrational Exuberance Got Buried Yesterday: Now What?

You know, I was just having the same thought about the liquidity issue in the past couple of days. How many times did David Faber (who is acutally the most astute and connected person on CNBC) say that the "world is awash in liquidity". Why, it was sloshing around in every bilge and sesspool from Red China to Goldman to The City to Dubai.

If we suddenly now have a credit crunch, where did all this liquidity go? If the central banks are "injecting liquidity", where did they get it? Did they just happen to have some of this "old" liquidity sitting aside?

Like most, I am truly baffled. But hey, no worries, as the young folks say.

Full-Fledged Market Repricing May Now Be In Place

Re your recent comments on market timing and the 200+ point up-day on the 13th. Looking at my own account history, that day's close was the high for me. The issue isn't market timing per se, but the more important point of risk control (how much of your account do you expose on any individual trade - and that amount is the difference between the entry price and your stop divided by total equity. That $ amount should never exceed 2% of beginning equity). If you have a plan, and follow it by selling when you hit your stops and not re-entering the market during either a downtrend or high-volatility periods, you may have a chance to survive. Investors are human and the tendency of human beings is to avoid a sure loss. Many studies have shown that given the choice between taking a guaranteed $5,000 loss on a trade or an 80%/20% chance of losing either $7,500 or $0, the majority of people will opt for the 20% chance of losing zero, even though the expectancy of the choice is to lose $6,000. On the flip side, most investors will lock in a $5,000 gain while avoiding an 80/20 chance to either make $7,500 or break even. The expectancy of that trade is a $6,000 gain.

Why the difference in choices? Human emotion is not rational. We internally assign about 2.5 times as much signficance to a $10,000 loss as to a $10,000 gain. Because of this emotional pain from the loss, we avoid it as often as possible. Therefore, we hold our losers hoping they wil come back. We take quick gains in order to avoid the possibility of "giving them back".

If you don't understand the significance of these statistics and know the expectancy of your own system rather than trading on your "gut", you need to reexamine what you are doing. The volatility that we are seeing in today's markets is evidence that most investors are trading on their "gut" and that gut tells them to fear the market and the future. Money will always and eventually return to its righful owner.

No-Reason-Rally: Likely to Unwind

Sorry, didn't mean to imply regarding your personal situation. More of a comment on the talking heads that have to fill the airtime or sell the company line.

IMHO, here is my understand of what moves the market short term or long term: seems to me that when you have more buyers willing to pay a higher price than there are sellers at the current price, the market price goes up. When the opposite condition exists, the market price goes down. When the market is going up, you want to be long. When it is going down, you want to be short. In either case, use a stop because you will be wrong about half the time. The best indicator of where the market has been is price, but it doesn't tell you anything about tomorrow.