fnu149

Economic Data: Good News vs Bad News?

If you sit back and think about the market & economy now, there are several questions you should ask your self.

1. Consumption has only been declining for a very short period of time (just a few months). Do you think it makes sense that the consumers can quickly recover and lead us out with more consumptions? Or, do you think the temporarily increase of consumption is just a head fake?

2. Notice that recent rise in the market is primarily based on
a. gov't saying that they see "recession is easing"
b. pace of decline has slowed somewhat compared to last year
c. earnings is not as bad in the 1st quarter relative to expectation
d. banks said they are okay.
Do you think the above reason are enough to pull us out?

3. Related to point 2 above.
a. the next 2 to 4 months, it will be important that the true economic data can back up what the gov't is saying. If it doesn't we will head back down very quickly
b. what if pace of decline picks up again or they continue to decline to a lower level?
c. compared to the current top line revenue of many major companies, if top line revenue falls another 10 to 20% from the current level, what will happen to the overall market?
d. regarding the banks, it is very hard to dissect their problems because of the complexity of the balance sheet and how they do their accounting.

I think from May to September, we will see big movement. My view is that we will head back down.

John Hussman: It's Not Over Yet

Seems like Cetin is very optimistic. I agree that in the Long run, when you are talking about 5+ years, it is no doubt that stocks are your best choice. It's because stocks mimics the overall improvement in the world economy. Unless you think the world is not going to resolve & improve, then you can be as bearish as you want.

As an investor, trader, or whatever you call it, I believe you just have to choose a strategy that fits you. You can pick your investing/trading strategy long term, short term, or medium term. It doesn't matter. You just have to have a strategy that you believe it will work.

Personally, I think the real economy won't recover this year, but the stock market may bottom out end of this year or beginning of next year. Again, this is my pick.

There are many surprising element that can kill the market in a matter of months. The two key points are:

1. The market finally got disappointed. What gov't done is not yielding the result that the market wants. In a way, market expect continuance of improvement statistic. But reality is that we will probably see more negative statistics once again.

2. This is a question you will need to ask yourself. Why does a slow down pace in decline means the next movement is automatically UP? What if the pace of decline is just temporarily slowing down and then falls again to another level? My theory is that declination doesn't have to be a straight line. We will probably see another wave of consumer spending pulling back starting very soon especially due to the continuous unemployment, over-leverage, + credit line cuts. This will affect the stock market tremendously.

Overall, I am expecting a major pull back in the stock market. Perhaps dow below 6000 by September.

The Die Is Cast

Basic economics: Demand vs. Supply. If you think about it, demand on a vast majority of goods will continue to go down, therefore, we will be in for some pains ahead. Previous years earnings and growth in prior years will need to be adjusted to reflect the current situation. The demand curve won't improve because we're just in the beginning cycles of consumers demanding less.

I believe when you see a great deal of companies report "same stores sales growth" are negative, then the system is probably in the cleaning process.