words from waldon

Not gloomy enough to suggest a bottom: Despite a 4,400 point drop in the DJIA, Mark Hulbert's Newsletter Sentiment index - an uncanny indicator of market bottoms - is only -20% vs. the -42.9% seen last July.

I agree with the above post. In particular, if we end up with the dreaded "L" shaped recovery, we could hit several bottoms over a decade or more--some not even arithmetic lows, but ones adjusted for inflation, etc. We are in a brave new world here, and a lot of the traditional metrics that seemed reliable or even just indicative previously may not be so this time around.


On Mar 03 07:38 PM User 283977 wrote:

> It seems to me that sentiment is relative to recent historical performance.
> That big low in the sentiment scale came after a drop from a peak
> performance number. The current sentiment number comes after a drop
> from a much lower performance number. Hence, the less the negative
> change in the sentiment scale. The Sentiment number says that the
> editors of the average short-term marketing timing newsletter are
> a lot less concerned… they are less concerned because the primary
> drop has occurred… So apparently, what counts is not the bottom,
> its how far you are down.
>
> I think one of the big problems with the concept of capitulation
> is that it assumes there is a particular point when everyone throws
> up their hands and sells sells sells. I think a more realistic position
> is that there are different kinds of investors out there, and certainly
> one of those market segments might sell sell sell when they get fed
> up enough. However, there are other market, segments that are smart
> enough to use approaches like stops and shorts. These people, these
> investors, never capitulate! If they go down, they go down swinging!
>

Today's Market: Irrationality at Its Best

I would NOT agree that we are better off in 2009 than in 2008. Did anyone seriously believe--even in October--that today all 3 auto makers, our 2 largest banks, and our largest insurance company would effectively be kept alive by the gov't? And this is just the tip of the iceberg--which is sailing toward us from Japan, the U.K., Eastern Europe and a host of other countries that are well below the "recession" line. The world's banking system is effectively insolvent. When George Soros and Paul Volker say that the decline is steeper and quicker than in the Great Depression, and the PM of the U.K. says his country is in a depression (and his aid says it's worse than the Great Depression) shouldn't we be concerned? Are they so out of touch? Obama is just doing his job: managing expectations. (And apparently most agree with his approach, as today's NY Times poll says even Republicans overwhelmingly agree with his approach.)

Why The Paulson Plan Won’t Work

this is an excellent article, and I pretty much agree with its main points. But I don't think it's a fair comparison between tainted baby milk and these mortgages. No one would/should buy a million cases of baby milk knowing that even one bottle could cause a death. Yet, bankers righly make loans knowing that a certain percentage will fail. That's the risk and part of what goes into interest rates. Now, if there was absolutely no other maker of baby milk, and no other way to feed babies (ahem), then folks would have to take at least weigh the risk, allowing the consumer to know and play the odds. These mortgages have already been struck, and now there's really no other way short of a complete global credit freeze (which almost happened last Wednesday) than for someone to assume all this bad debt. Mr. Bailey author knows this and it's just a question of how best the gov't (and its people) can be protected.

Warren Worship

Mike Steinhardt is one pretty successful investor (and committed philanthropist) himself, and it would be wise to imitate him and follow his advice: don't imitate anyone!