Seeking Advice

Tuesday Outlook: Commodities, Global Markets

Dave,
Happy for you that Francie's surgery seems a success. I'm sure that brings relief. Have seen a fox eat a squirrel in the morning here in the suburbs of Boston.

I'm sitting with less than 50% equities, though as the market powers upward and not making any moves, the % keeps rising. I fear getting swept up in the euphoria and finally adding to equity positions just as the market turns downward again. Timing tends to work that way. As you note, this appears to be a market for professionals, which I am not.

Thursday Outlook: Commodities, Global Markets

Dave, hope all goes as smoothly as possible for your wife tomorrow. Like 'Boom_Bust' above, I've had trouble with the recent persistent optimism on the economy. The consumer is weak and has to be - they've had real wealth loss in terms of home values and investments and for many the loss of a job or reduced salaries. Consumers have to save more to make up for these real losses and to be prepared for a poor economy going forward. How could this can lead to a return to prosperity as we knew it (which it seemed as if the stock market was looking for)?

I apparently don't know much about markets, but I get uncomfortable when I see such a dichotomy between what seems intuitive about the state of the economy versus the recent performance of the equity markets (which in theory are tied to that economy).

Tuesday Outlook: Commodities, Global Markets

Dave, I didn't expect to hear from you for a while. I appreciate you keeping the charts and analysis going given all the distractions (putting it mildly, I suppose) in your life, right now.

So many of the charts seem so synchronized. Makes diversification a more difficult task. I started investing in individual stocks in the late 90s (thuoght I was pretty smart) then went to buy-and-hold indexing after getting smashed by the early 2000s. But index investing diversification has often meant a mix of U.S. large, mid and small caps plus maybe 20% international stocks (plus some bonds and cash). That's been considered sufficient in the past. However, If everything continues to be fairly synchronized, index investors will have to look to expand into these other ETFs like USL, UNG, DBA. Of course, these can be far more volatile and not all that suited to buy-and-hold.

Respect the Bear, Beware the Bull

We have an interesting set of competing forces. The government has poured in a lot of stimulus from the bank bailouts to direct investment and it's still filtering through the economy. Banks are still weak and there is not a lot of lending. Personal indebtedness is still a problem and unemployment numbers are still trending up, and wages are stagnating or declining. 401(k)'s are down considerably as are home values, so real personal wealth is down -- not a recipe for sustained or increasing consumer spending.

Meanwhile the stock market continues it's steady upward move and remains overbought or close to overbought levels. Who wins this battle? I hold equities though less as a percentage than a year ago, as I just don't know. Like many others, I suspect, I'm afraid to be out f the market but also very concerned that reality may have to eventually take hold of the market again.

Wednesday Outlook: Commodities, Global Markets

So, Dave, do we just give up on fundamentals? Can 'we' just keep talking up the economy and the markets go up... indefinitely? Can we remain on the top side of the overbough/oversold chart indefinitely and not have any significant correction? I would love to believe the the 'all clear' bell has rung but I fail to see what's changed. Unemployment is high and likely to continue higher as there's no catalyst for that to change. Wages aren't going to increase in this environment. Home prices are declining and foreclosures remain severly elevated.

Personal debt also remains high and people still have to save more to make up for their lower home values and smaller 401(k)'s, neither of which are likely to leap up to their former trejectory.

I fail to see how we can just jump back to where things were. The way things were was/is part of the problem, it was demonstrated to be an unsustainable model. I admit being confused but still holding stocks, albeit at a little lower percentage.

Tuesday Outlook: Commodities, Global Markets

So what's driving the market? Still missing an "engine" to drive the economy forward, IMHO. The last several years, it was home prices and home equity loans that drove consumer buying while incomes remained flat. Another normally key piece to drive the economy is rising employment or incomes. Neither of these is present or appears to be coming soon. The government of the past and present administrations has looked to fill the "gap" with government money. Are we seeing some results of that?

I continue to hold equities (though less than 1 or 2 years ago) and am enjoying the upturn. But I still have trouble making the case for a return to a sustainable bull market when I can't make a case for sustainable economic growth, I can only make a case for this slow down to ease somewhat. How long can the market seperate itself from the apparent underlying economic fundamentals? I admit I don't know. I just don't want to get caught too severely on the wrong side - whichever way it's going to go next.

Tuesday Outlook: Commodities, Global Markets

"We’re paying a big price for past excesses, primarily from bubbles caused by easy money policies of the past combined with the demise of Glass-Steagall in 1999. So the lying and cover-ups just continue apace since, given the election cycle, politicians would just as soon inflate as admit mistakes and make the hard choices."

I guess that about says it all, Dave. It makes it very hard to believe in this rally. I guess my growing concern is that "we" eventually reflate a portion of the economy and equities come along for the ride only to be crushed on the next downside when the stimulus runs dry. If, by then, many small investors have jumped back in, this may do at least as much damage to investors as the initial downturn in equities. I'm afraid I could even become too complacent just in time for the next big leg down.

Friday Outlook: Commodities, Global Markets

Keep those charts and analysis coming, Dave. So, we appear to be in agreement that the markets are manipulated by... some combination of gov't and GS and maybe other large traders/funds? We also seem to agree that the "green shoots" being touted by some are mostly intended to cheer up the market. And some data shows a slowing down of the deterioration, but that's a far cry from anything resembling an upturn. Granted, you need to slow down prior to stopping and reversing direction but there are no real elements of the economy to actually draw strength from:
Unemployment numbers still rising (few finding work)
Unemployment new claims (fairly steady at a very elevated number)
Corporate earnings poor (unless you count beating horrendous expectations as "good").
Real Estate still slumping and prices still dropping y-o-y
Other world economies experiencing their own crises

Yet the market has been climbing. How is one to intelligently invest when there seems to be such divergence between economic fundamentals and the markets actions? Just thinking out loud, I guess.

Thursday Outlook: Commodities, Global Markets

David - I second and third everyone here hoping that your family crises are abating and welcome you back.

As you say, "Earnings aren’t good and neither are outlooks...". To me the market remains confusing. It obviously benefits many to talk of "green shoots" to attract investors back in and surely many investors having lost a great deal want to grasp onto any signs that they're about to get their chance to make up a portion of what they lost. But, I'm pretty suspicious of a market rally that has had this much force and staying power when the underlying economic fundamentals have merely changed from getting worse rapidly to getting worse a little more slowly (at best).

It seems a long way off to "good times" for the economy. And with perhaps the main engine of the consumer-driven past decade-plus being removed from the equation (home equity lines of credit), I can't see an outcome other than slower economic growth going forward even after we stop "recessing" - whenever that is.

Wednesday Outlook: Commodities, Global Markets

"This is what has been troubling me so much — light volume giving you a sense of artificiality and manipulation by the hedgies and trading desks. The public is hardly involved. "

Yes, Dave and "Dr. O", this has been on my mind lately, too. How does one invest in a market that seems more driven by manipulation than underlying fundamentals. Seems too easy that this rally marks a new beginning of "good times". Especially when the economic data doesn't really reflect any sort of turnaround (despite some cheerleading by the majority of media outlets). A recent credible projection I saw of 2010 earnings/share is slightly less than the projected 2008 earnings. How can that sustain a rally? In the words of another blogger I respect (Barry Ritholtz), people may be confusing "an economy that's getting worse more slowly with one that's actually improving". There may be some relief in the market from the acceleration slowing somewhat... but signs of actual structural improvements aren't there IMHO.

Wednesday Outlook: Commodities, Global Markets

Dave, as always your charts and analysis are invaluable to understanding underlying trends. I'm primarily an index investor, not a trader, but believe that buy-and-hold must be applied with a very liberal (definitely not your type of word - I think you'd prefer 'flexible') approach. Believing, as you said that "...prices [are] still extended from the previous rally", I sold a small amount of equities and moved that to money markets. I never move much at a time as it's too easy to find the trend is not your friend... Thanks again for your charts and analysis.

Tuesday Outlook: Commodities, Global Markets

On your EEM chart, you ask "Is the US an EM yet?" To that I say, probably just the opposite. What would be the opposite of an emerging market be... maybe a retreating market (RM)?

Friday Outlook: Commodities, Global Markets

Great analysis again. I'm also somewhat long and holding my nose. I see no changes (improvements) on the horizon, economically (wish I did). Housing prices still going down, home sales still way down year over year (What's that? Feb home sales were up 4.7% from Jan... and that was... a 'surprise'?). The mark-to-fantasy rule change concerns me as well. But, I guess the banks will be O.K. now that we've suddenly raised the value of their assets. Right? Hmm... I'd like the power to do that with some of my assets, too, just don't tax me on it.

Thursday Outlook: Commodities, Global Markets

Dave, I always appreciate your charts and accompanying analysis and agree that this rally does not seem sustainable given a lack of fundamental economic improvements, but if I have to read one more of your "The One" quips, I'm gonna puke. Repect your technical analysis but too much of the snarky political comentary makes me start to doubt the unbiased analysis that I'm counting on.

Friday Outlook: Commodities, Global Markets

I've never loved technical analysis, but the patterns do seem to have meaning. My current feeling is that a combination of fundamental analysis of economic conditions combined with TA is necessary or at least very helpful in deciding what to do.

Economically, I'm not convinced that we've solved anything as David says, but the market was longer term oversold and ready to rally. I'm leaning towards adding a little to my low equity position but awaiting that overbought indicator to come down to earth. In the past, I've foolishly ignored the indicator and not been happy. I intend to be more respectful of it in the future.