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Will Najarian's Prediction of a Stock Market Explosion Come True?

Re "Mad Hedge Fund Trader" comments:

1. The Swiss hedge fund manager who says we entered a bear market in 2000? I think that hedge fund manager got his info from the same source as RBC Global Asset Management who indicates we are in a "secular bear market which started in 2000. Secular bear markets last about 18 years".


2. S&P index valuation. P = Earnings x p/e we all agree on that. About 6-8 weeks ago, investment community was anticipating Earnings of $50 to 60 for the S&P500 companies, and anticipating a p/e more towards the norm of 10 to 15.

IF we take the maximum of those anticipated ranges we get S&Pindex = $60 earnings x 15 p/e = 900.

Quick aside: many insurance companies indicated when they reported Q4 numbers, that they assumed the S&P500 would AVERAGE 900 to 950 in 2009.


Now the reality: actual p/e = 8.03 and Earnings i could not locate but let's, conservatively, say are $55.... then we are at S&P500 index = 55 x 8 p/e = 440

Based on the actual results, sure seems the S&P can go lower from 700. Insurance companies which sell Variable Annuities and assumed 900-950, whoa, it sure seems they have under-estimated the AVERAGE for the year.

Will Najarian's Prediction of a Stock Market Explosion Come True?

I suggest reading Martin Wolf articles (he's raised issues and been correct on outcomes many times on many issues). Latest article, amongst many things, asks whether the US administration is asking/addressing the proper issue. Also, he mentions actions such as conversion of debt into equity will hurt pension funds, insurers, etc.

Re M2M, the G20 has been discussing / taking steps to implement transparency. Also, international accounting standards (IFRS) mandate fair value. Is the USA going to back away from all this forward progress in the world? It would be a significant blow to the USA.

M2M is an emotional item being made into a scape-goat, and is not the cause of the situation, it is just the rules for presenting financial results. Only way it gets suspended is on politics which seems to be against Obama's theme of cutting through red-tape, etc.

This appears to be more hype than of substance. There goes more tax-payer money on involving and debating with Congress.

The technology exists for quick referendums with voting rights available to all people. Why not use it on issues such as bailouts? So much time/money/GDP wasted by politicians.

Wall Street Breakfast: Must-Know News

why do you say ACE beat estimates?

hello, the investment side cannot just be ignored? for example, our sales ok, but we are bleeding on our investments, you know that past money we earned, well, we just lost a huge bunch of it

... sounds like a great business model (to lose what you earned previously)

Great Depression Not Imminent, But Inevitable

Rakesh,

Several comments, and though i will focus on points of disagreement / over-generalization, i do agree that insurance (or assurance) is one (vs the only) ingredient.

1. Inevitability. Suggests certainty, though tht is one scenario...another scenario could be a long drawn out recession.

2. Depression. One government (USA) has stated they will do everything in its ability to prevent certain crises. Seems they will do just about anything to avoid the "D" word, even providing a credit guarantee.

3. Who is the insurer or guarantor of last resort? I asked this question at an industry meeting in 2005 as there was fast consolidation in the reinsurance market. Investment banks had stepped in for some aspects of risk. Really what is needed is an entity to cover all risks of an enterprise (Enterprise Risk Management). Well, not even a government is a guarantor, technically, but entities do put some faith in some governments. So, although market forces/risk pricing would suggest otherwise, governments will find a way...and defer the problem to future generations.

4. Discussion of "non-actuarial" risks. Actuaries (some) are quite versed in analyses/calculations of investment risks, particularly within the past 10 years. Actuaries may not be as prevalent within the investment banking / pricing market, but they do possess knowledge to be so.

5. Pricing of CDS's and other derivatives. These securities are rather illiquid., and with relatively few transactions, pricing may vary widely. Pricing based on a computer/statistical distribution model over several scenarios might be great in theory, but what we are dealing with here are events (and economies) beyond those 2 standard deviations or 95/99% confidence intervals. We have these 'extreme' events which are now moreso the norm (extremes vs norms in weather/climate patterns is an analogy). Pricing needs to be done on an extreme event/scenario basis.

6. Economies will not function without insurance? Yes, insurance is needed for international trade and for certain industries. But some industries in domestic economies may not have such requirement.

7. Credit economy vs Cash economy. Have you visited developing nations? Many of these nations work on a cash basis, and those economies function. Insurance (or assurance) is provided via substantial funding of actual cash/cash equivalents vs. trade credit/ credit derivatives. Yes, there would be a significant hit to economies transitioning to lower-leverage environments and significant change in standard of living, but it may not lead to a Great Depression.


Though i've focused more on points of disagreement, your article is informative, and therefore appreciated.

Always good to hear both sides, and with all these people on CNBC, etc saying, the market has bottomed (and repeating it seemingly several times per hour), there still are significant issues out there. Governments may continue to pump money at the problem, but they haven't resolved the underlying causes, and the problems will be passed to future generations.