bobdark

What's the Fair Value for the Dow Jones Industrial Average?

Maybe the title is a "freudian slip". I think "fail value" might be a more accurate assessment of the long-term market direction...

On Nov 01 10:00 AM Ricard wrote:

> Please change the title of this article. Not only is it misleading,
> it is somewhat offensive as well.

Economic Data Showing Signs of Negative Trends

You blame shorts for the market correction? You think it is realistic that people can borrow beyond their means to repay? You think it is realistic that real estate prices should go up 20% every year? If anybody should be angry it should be the savers who are now watching their hard-earned savings get flushed down the government toilet by the huge tax burden in order to bail out people who were rediculously irresponsible and presumed that they were entitled to wealth through speculation instead of the old-fashioned way of working and saving.

The bottom line is that this crisis was caused by overleverage and rediculous real estate speculation, whether it was pointed out by shorts or scholars or not, the system had to collapse. Just be glad the shorts were there to buffer the downside, otherwise it would have been much worse. In fact, next time around, it will be much worse, because America still has not learned the lesson, that it is wrong to lie and cheat your way to achieve a lifestyle that is beyond a level of income required to sustain it and that eventually there are consequences. Some day, there won't be any money left to bail out all the irresponsible people unless the government simply decides to nationalize everything and eliminate the middle class.


On Nov 01 11:58 AM apppro wrote:

> Old Trader,
>
> Can only speak for what I see, but according to the media and their
> own figures, storewide sales are up. I have to admit that people
> are coming in for sales, but that is to be expected and Macy's knows
> it. We have trained the U.S. consumer to wait for a sale, so like
> Pavlov's dogs they buy only as soon as someone rings the sales bell.
>
>
> We forced everyone to take out a lot of leverage out of our system
> and we fired a lot of people in the process. Those that are lucky
> enough to still be at work want to spend and shop. We allowed a few
> pundits and short sellers to screw the rest. As soon as we realize
> this and allow business to get back to business, we'll all be better
> off. Remember: all that leverage that those shorts and scholars wanted
> us to eliminate - only became bad when all those shorts and scholars
> shoved down our throats that it was bad. (Boy am I going to get yelled
> at for that comment!)

GDP Growth Returns in Q3

I have a hard time seeing how this growth can continue into Q4 since demand for autos is now less as an after-effect of cash-for-clunkers and I think most of the increase from the housing credit was in Q3. So, what's left to keep this up for Q4 this year and Q1 next year?

Tax Loss Carryback: A Stock Bailout for Hard-Hit Companies

This again looks like a case of trading the present for the future. As the debt explodes, the tax revenues continue to look bleaker for 2010. By 2011, our taxes are going to have to be so high to service the national debt, there won't be any money left to invest. The Bush tax cuts including capital gains expire end of 2010, so if you're an investor holding stocks in 2010 that have gains, are you going to hold them into 2011?

Chart of the Day - Inflation Adjusted Dow

I see it differently from the other commenters. A double-top often implies a significant reversal. And, why should we the Dow be going up related to inflation anyways? The most logical long-term direction seems to be retracing down to 5,000.

Failures Friday: Four More

3 more closed after this article, so the total is now 106. wallstreetpit.com/1148...

Relative to Gold, Stocks Are Depressed but Rising

I believe a more accurate assessment is that stocks are wildly overvalued and gold is starting to become more accurately valued. There is a reason for the gap, it is because the dollar faces massive devaluation over the long-term due to the monetization of debt, our economy is wildy out of balance with the only future prospect for paying for the assets through devaluation of the dollar and a standard of living that balances credit and debt correctly (i.e. Americans have been living far beyond their means - i.e. housing bubble).

Even in terms of decline of the dollar, however equity prices are way out of the range of realism in terms of even the most wildly optmistic future P/E ratios. So, expect a correction in the stock market, while Gold may actually continue to appreciate.

On Oct 09 06:29 PM E Nuff Sed wrote:

> Remarkable analysis. Priced in gold the S&P 500 has barely recovered.
>
> Either gold is wildly overvalued or stock very undervalued. As usual
> the truth is somewhere in the middle.
> stockcharts.com/h-sc/u...;p=W&b=5&a...

Banking Sector: Worst Is Yet to Come

I wouldn't base my opinion on health of the banks just based on Paulson's hedge fund. He got preferred shares at a big discount and for all we know he is shorting the common. This was probably mainly just a play on the depressed bank stocks in early Q2. He probably has an exit strategy for Q4.

This is explained in a little more detail in money.cnn.com/news/new...

From the article:

Analysts cautioned that revelations in public filings probably do not tell the whole story.

For example, the 30 hedge funds included in the analysis dropped 44.8 million shares of Citigroup Inc, more than in any other company last quarter, the filings show.

While fears of fresh losses taint Citigroup, analysts have noted that some selling came as investors put on strategies to capitalize on the bank's plans to swap preferred shares into common stock.

To do that, investors bought preferred shares and sold short the common stock.


On Oct 02 09:22 AM truthteller wrote:

> Very interesting read. I definitely disagree with your assessment.
> Little if any of the facts make any sense here. However, I appreciate
> your honesty about being short financials. You should however acknowledge
> that, according to disclosures and as reported on CNBC:
>
> "Hedge fund manager John Paulson, who earned a fortune by betting
> against financial companies after foreseeing the credit crisis, bought
> a $2.7 billion stake in Bank of America and took stakes in other
> lenders during the second quarter, according to a regulatory filing."
>
>
> Here's the link
> www.cnbc.com/id/32392887
>
> So why should I trust your judgement, when the guy who predicted
> this mess says otherwise? You should also talk about the inherent
> danger in purchasing options, both long and short. If you don't know
> what you're doing; you can and will lose a lot of money!

Ten Reasons for an Imminent Stock Market Crash

Qusar71: I"m not sure I'd call the Dow dropping 6 of the last 7 days and 200 points today profit taking. Looks like the author is on the money and the ducks are setting up in a row. Sure, the Fed will probably bounce the market back again over next few days, but it seems that each "profit-taking" drop is getting worse and the dip-buying and pumping less-and-less effective. I wouldn't wait for too many more up-swings to cash out of this market, the next one might be the last chance to get out with your shirt on, assuming we haven't already started the crash as of today. It's been 3 months since the market has had this bad of a drop, and being on the tail-end of the rally rather than only mid-way through makes this more ominous.

Will the Market 'Melt Up'?

The herd will keep following each other right over the cliff. The market has been going up on low volume and pure speculation (AIG, AXL, C, FNM - all practically insolvent companies). Wait until October. The storm clouds are already brewing, Insider selling at all-time high since September, Gold spiking to levels affecting credibility of the dollar, followed by a counter-response to a flight to US Dollar futures today(volume on UUP up 4x).

If we didn't have a second wave of foreclosures of more massive scale than subprime (Alt A Option resets) and a Commercial Real Estate default rate increasing 2x every month and the housing recovery based strictly on banks lowering the supply by holding foreclosures instead of selling, and if our unemployment was reasonable, and if consumer spending wasn't at all time lows, I might agree with you...

There's a big pinch between the downward pressure being put on the dollar and lack of eroding faith in the US currency against the pressure to keep the market high. Low volume shows the market being manipulated up for political reasons and exit purposes of insiders who are now exiting at a fastest rate since last September. When push comes to shove, and serious dollar devaluation is looming as it is now, the Fed will have to protect the dollar, which means trouble for the equities market in the longer-term. Interest rates rise will need to rise, and banks will have to become accountable for government money being used to basically hide trillion in toxic asset losses hiding in the books that can't be inflated away. China and Russia are beginning to call the bluff that we have an economy built on a ponzi money scheme and if they threaten to change out of US currency, it will bring the stock market back into reality where the P/E ratios are justified.

Unemployment is historically only a lagging indicator in the market, when it is moderate. When it is over 10% as even Bernanke admits it is going to, it generally leads to a second dip down.

I don't know when it is coming, but this market doesn't have much more left, and we are headed for correction and stagnation for several years to come as we become relatively weaker compared to other world economies. The only hope for our economy is to have a GDP that is based on real production of goods, not one that 20% of it is based on financial services which provides no benefit to anybody other than wall street.

On Sep 09 11:40 AM Stone Fox Capital wrote:

> Looks like both Cramer and Fitzpatrick agree with us. Market is up
> 4% already since this call.
>
> www.cnbc.com/id/32740744

The Myth of a Jobless Recovery

The latest argument I'm hearing for why Wall Street will continue to rally is that American businesses don't really need American consumers, they can just expand their businesses and sell products overseas. So we now have not only a ""jobless recovery, but a "jobless consumer-less recovery". In fact, American businesses don't even need American investors, foreign investors can invest in American companies, thus continuing to drive the market higher. So, I guess we can go to 15% unemployment, more and more foreclosures, and continued decreasing consumer spending, but the stock market continue to rise because of taking business overseas. I find that hard to believe, what do you think?

Plunging Consumer Credit Makes Recovery More Difficult

I keep hearing from the pundits that decreased consumer spending along with increased unemployment and even growing foreclosure rates don't matter, because American businesses are turning to overseas market to grow their revenue which justifies their P/E ratios and climbing valuations. So, we can have a booming Wall Street recovery and hit DOW 20000 even while more americans are foreclosed upon, unempoyed and hopelessly in debt and our overall standard of living declines. What do you think of that logic?

We're in a Mid-Cap Rally

Do you really expect a 70-day rally with the economic factors out there? Isn't this rally sort of running on hot air?