Kip Herriage_

Lower Markets Are Still to Come

excellent comments here. This is a technical rally and the ultimate capitulation is going to hit people like a ton of bricks.


On Dec 08 09:07 AM RCA wrote:

> It is, indeed, interesting that the market is showing signs of life.
> But don't put too much faith in any proclamation that the market
> has bottomed. It seems very likely to me that the DJIA will close
> out the year below 8000, and probably below 7400.
>
> There is a popular notion that the market is ruled by greed and fear.
> As greed increases, the bulls gain control and the market rises.
> As fear dominates, the bears are out in force and the market falls.
> There are a couple of other parameters to this equation, however.
>
>
> If you break the market into two distinct sectors, institutional
> investors and individual investors, it becomes apparent that the
> institutional part of the market is ruled by greed and caution, and
> the individual sector is controlled by hope and fear.
>
> The institutions, being in greater control by virtue of size and
> amount of capital, also are privy to more information than the average
> individual. They therefore are not as susceptible to fear. They are
> greedy on the upside, and cautious, not fearful, on the downside.
>
>
> Individuals are a very optimistic and hopeful lot. Their investment
> decisions are motivated more by hope and a belief that the "natural"
> state of affairs is a rising market. When it falters and breaks down,
> their hope gives way to fear. Unlike the institutions which are very
> pragmatic in their decisions, individuals are more emotional, and
> in a down market they become paralyzed by fear. That is why so many
> 401ks get wiped out in a market such as the one we have been experiencing.
>
>
> What does all of this have to do with my feeling that the market
> is destined to be much lower at year end? My prediction is based
> on a belief that the recent rally in the market has been driven not
> by a lot of buying interest, but rather a lack of selling interest.
> The ever-hopeful individual investor still wants to believe in this
> rally, while the greedy institutions are quite willing to oblige
> this fantasy - for short while longer.
>
> When you realize that the institutions, whose market commitments
> will always determine the market direction, are faced with a lot
> of "forced" selling between now an January, they have a vested interest
> in seeing the stock prices rise as much as possible before they put
> in their sell orders.
>
> A simple way to accomplish this is to sit on the sidelines and let
> the small-money, the hopeful money, the imprudent money drive the
> market higher. By postponing their massive sales as much as possible,
> they are engineering a significantly higher market from which to
> extract as much as possible, and they are decoying the individuals
> into a belief that a real rally is under way. After a few more days
> of inaction, they will begin to put in their sell orders.
>
> Since the institutions know when they are going to pull the trigger
> on their exodus, they might even be doing some buying in this bear
> market rally to capture some short term profits before the collapse.
> They are well positioned to fleece the small money on the way up
> before they shear them on the way down.
>
> If this scenario plays out the way I think it will, we will rally
> the first part of this week. Then you will see a market that goes
> sideways for a few days, and then a decline will become obvious.
> At first it will seem like normal profit taking. After all, the pundits
> will say, it is perfectly normal in a rally for investors to claim
> some of their profits and take a look at new opportunities -- new
> stocks and sectors which may being showing leadership, etc.
>
> Then the selling will ramp up to the point that it overwhelms the
> buyers, and we will see another precipitous decline, with the Dow
> undercutting 8000, and perhaps going much lower than that.
>
> There are at least three reasons why heavy institutional selling
> is in the cards for December:
>
> 1. The hedge funds have a lot more redemptions coming before January.
> The hedges are not anywhere near normalization yet. In the interest
> of disclosure, I have to state that this assertion is more hypothesis
> than fact. I do not no have any figures on what reclamations are
> lurking. My gut feel is there are still quite a lot.
>
> 2. The mutual funds need to get their losers off of their prospectuses
> before the end of the year. And they have been holding lots of losers!
> It is a particularly cynical practice in the industry to hide a losing
> year or quarter by showing a raft of good stocks in their stable
> when a snapshot is taken of their holdings. Never mind that most
> of the quarter they were in losing positions, as long as the snapshot
> doesn't show these losers, they can actually look like they are well
> on their way to making money for their investors.
>
> 3. Year-end tax selling by many investors, large and small. There
> are many investors who have lost a lot of money this year, and the
> only way they can deduct those losses on their income taxes is to
> actually realize the losses. In other words they will be highly motivated
> to sell their big losers to establish their losses.
>
> When the year-end selling hits, the hopeful individuals will be caught
> off guard again. Their hope will diminish and fear will again dominate.
> They are being groomed right now to grow the market so that it can
> be more profitably harvested by those in control of the market.
>
>
> At some point we will see a true capitulation (we haven't seen it
> yet). When we do see it, it will be unmistakable. There won't be
> anyone asking "Is this the capitulation?" because it will declare
> itself loud and clear. The year-end selling will cause the markets
> to collapse, and the worsening economy will almost guarantee that
> climbing up from the capitulated bottom will be long and arduous.

Lower Markets Are Still to Come

i agree with your targets....pretty much where i am long term, especially if the govt continues to muck things uo


On Dec 08 08:59 AM investor88 wrote:

> Agree with Kip's article which is that the broader trend is lower
> not higher. However, Dow 11k not out of the question as bear rallies
> are fiercer than bull rallies. Now we are in the Obama/Santa rally
> but since it is a bear rally use it to trade and not buy and hold.
>
>
> Pretchter says Dow 400 before this is all over? Wow that is quite
> a forecast but it not out of the question simply because this is
> the peak of the 1929 Dow bubble. What's wrong with resting on the
> 1929 Dow super bubble as the support? In all seriousness, I don't
> buy this scenario Dow 400 but a 80% decline of peak Dow 14k to Dow
> 3k is possible. Major stock crashes have seen declines of 80% or
> more eg Nikkei 40k to 8k, China index 6k to 1.8k recently etc.

Fire Hank Paulson Now

My biggest concern with your very well-reasoned piece is that the government has yet to show us that they can run anything efficiently.
"I'm from the government and I'll here to help"....words we should all shutter at hearing


On Nov 14 12:53 AM You're Kidding wrote:

> You make it sound like nationalizing the banking system would be
> a bad idea. Here's my take:
>
> Its time to nationalize the banking system!
>
> It should not be in private hands. If it stays this way, we'll repeat
> this meltdown over and over again, every so often, forever.
>
> (Watch "Money as Debt" on YouTube. This is an amazing animation,
> beautifully done, that shows how banking got started and why being
> in private hands will eventually completely ruin the world's economy,
> as we are saddled with an unending avalanche of debt.)
>
> The world's banking system is the epitome of human greed, institutionalized.
> It will never serve our interests. Those of you who are afraid of
> this idea and call it "socialism," should ask yourselves if you think
> that the fire departments, the police departments, and the military
> structure in this country should be privatized. Think about it. These
> are socialized institutions, and nobody in their right mind wants
> to change this because anyone's home can be broken into, or catch
> on fire, or be threatened by outside force. Or shall we turn over
> the Environmental Protection Agency to private hands? How about the
> world's management of rain forests? Would that be a good idea? Do
> you think Blackwater should run the military? When everyone is in
> the same boat, you need a nationalized solution that puts everyone
> on an equal footing.
>
> The problem with our "government" is it is controlled by PRIVATE
> interests, far more than PUBLIC interests. Our government has been
> taken over by the private sector, and what good has this brought
> us? Enjoying the meltdown?
>
> There is nothing wrong with "socialism" per se. The only reason most
> people think there is, is because when we were kids, we were brainwashed
> into thinking it was "bad" by our school system. And socialism IS
> bad when it is forced upon people. But most everything is bad when
> it is forced upon people. Even "unregulated capitalism" is. How about
> that...
>
> Here's the kicker, though:
>
> What is the most fundamental unit of human endeavor on this planet?
>
>
> I'll give you a hint. Its a communistic institution.....Give up?
> Well, here it is...:
>
> The Family Unit: parents and kids.
>
> That's right: "From each according to their ability, to each according
> to their need." The family unit is pure Marxism! (Uh oh, should we
> privatize it?!)
>
> Of course, we really don't mind this because, whether you call it
> marxism, communism, socialism, or whatever, the family unit is based
> on LOVE, and that trumps everything else. Now imagine for a moment
> that human beings actually cared for other human beings that they
> didn't know. Imagine if we as Americans, couldn't stand it when we
> heard that people were starving or being murdered by genocide, and
> cared enough to actually help out and solve the problem. Imagine
> that. Not like today, when no one gives a damn.
>
> But if we were like that, our institutions would be different wouldn't
> they? They wouldn't be set up to help just special interests, they
> would help all who needed help, equally. We would all see ourselves
> as one big family, based on love, and whether you knew someone or
> not, it wouldn't matter. And all the starving people in the world
> wouldn't end up starving because they would be part of the ONE Family
> of human beings on this planet and they would get the food they need,
> rather than us spending the money on other ridiculous, unnecessary
> material things. Hasn't this been the message of all great religious/spiritual
> leaders who have lived?
>
> The problem with our institutions is a reflection of the state of
> spiritual consciousness we humans have attained. And right now that
> level of consciousness is really, really low. Can you feel it?<br/>
>
> But all this CANNOT be forced on people, it must be "realized." And
> that is the essence of what is going on with the current meltdown
> today. We are all "waking up" to a slightly higher level of consciousness,
> and realizing that unregulated capitalism, unregulated banking, and
> self interested, short term greedy thinking, is all a very shortsighted
> way of existing. There's a better way. And now that a lot of people
> are in pain, watching one of their biggest "loves" (money) disappear
> right in front of their eyes, they are opening up to a more logical
> way of thinking: one that is more inclusive (socialistic) than individualistic.
> We are realizing we are all in the same boat when it comes to our
> economic institutions, and fair is fair. And its not fair for self
> interested, ego-centric, skumbags to be running and scamming our
> financial institutions which we are all affected by, because they
> don't have an inclusive vision of human beings as a whole.
>
> We are witnessing the beginning of the end of unregulated capitalism.
> The government is taking a "stake" in the banks, by necessity, because
> they have proven they cannot run themselves in all of our best interests,
> because they have only been interested in THEIR best interests. But
> the banking system must be run in all of OUR best interests, or it
> will eventually fail as we are seeing. The banks aren't loaning right
> now because they are in private hands and concerned only with their
> own interests, and not the "cash flow" of the banking system as a
> whole. Can you imagine the military operating this way? There must
> be a governing force overseeing it all and paying attention to it
> all. This force, for better or worse, is called the "government,"...
> and we should not be afraid of it, because it is us. WE the people
> ARE the government. And we proved that when we won our independence
> from England upon winning the revolutionary war, and we proved it
> when we threw Marie Antoinette out during the French Revolution,
> and we proved it when we knocked the wall down separating East and
> West Berlin, and we proved it when we took to the streets in Russia
> and the Eastern block fascist dictatorships in the early '90's, and
> we will prove it again now, when we take our country back from the
> slimy, shark-eyed ba$tards who have been stealing us blind throughout
> our political and economic systems to this very day.
>
> Its time to turn things around and nationalize the banking system.
> Its OUR political and economic system, not "theirs."

Fire Hank Paulson Now

Exactly...and any confidence in him is history. Goldman would have had him replaced before they were allowed to fail. He actually got down on his knees and begged for the TARP to be passed...and now it's 100% different. All for his master.

On Nov 13 08:26 AM Cellman49 wrote:

> Excellent article. Paulson must go! He is so biased in his decision
> making - just ask any former Lehman employee. Had Goldman Sachs been
> Lehman, it would never have been allowed to fail. That fact alone
> showed Paulson's true colors. Having watched him on C-Span yesterday,
> it's obvious he is a puppet that knows very little.
>
> The DJIA will go to 5K-6K range for sure. The S&amp;P will surely
> go to 650 to 700 range. Markets will win regardless of what the US
> government or any other goverhment does. The only question is: Why
> do taxpayer's have to subsidize CEO greed and businesses that derserve
> to fail?