Blair

Is This (Finally) the Bottom? Part II

I wonder how many of the posters have examined the point & figure charts for the dow industrials?

The 2007 downside count still stands at 4,000. This recent rally satisfied the upside rally count to Thursday's close. In addition, the steep down trend still has not been broken.

So, if you are a technician, rather than a fly-by-seat investor, the analysis shows that this market still has a way to go on the downside.

The Final Market Bubble

On Feb 10 11:03 PM derryl wrote:

> Hyperinflation can be stunted by a value added tax (seekingalpha.com/symbo...)
> on everything. A 100% VAT would instantly double the price of everything
> so 1/2 of any money that is spent (rampant spending contributes to
> or causes price inflation, as our recent bubbles experience shows)
> would flow to Treasury, and Treasury could remove that money from
> the economy by using it to buy back its bonds from the Fed. Or Treasury
> could just lock it in a vault.
>
> There is no limit how high the VAT could be set. If it was 500%
> then a $1000 item would cost $6000 and pretty soon even a hyperinflationary
> spending mood would be cooled down because the government would suck
> so much money out of the economy every time anybody spent some money.
>
>
> In hyperinflation the velocity of money reaches warp speed as everyone
> tries to trade their cash for something they think will hold its
> value. So we bid up the prices of everything to get rid of all our
> money before it is worth less.
>
> But if Treasury takes a large slice of that money out of every transaction
> then after purchase #1 for $1000 (with a 100% VAT) the seller only
> has $500 to get rid of, and after purchase #2 for $500 the seller
> only has $250, etc. Pretty soon there is no longer 'too much money'
> in the system. It's a fast way to suck money out of a system where
> too much money is chasing too few goods.
>
> There ARE solutions to these monetary problems. We don't have to
> just sit back and allow arithmetic problems involving money to cause
> the world to end. The solutions would be politically difficult (a
> 500% VAT!!! Raise the guillotines!). Maybe Paul Volcker will be
> the guy who kills hyperinflation.

There is only one problem with this concept: There are such things as black markets. With such a large spread introduced by the VAT, there will be enough 'fat' to enable profitable VAT avoidance transactions. Mankind has always been inventive to avoid taxes and there is no reason to think this situation will be an exception.

Lower Markets Are Still to Come

My put is that a good selling point from a timing consideration is the inauguration.

The principal consideration is that no-one in the government can turn this economy around in a short time. What is going on is will take a considerable amount of time and nothing can be done to reduce this time requirement.

The most important point to be made, which may help with what one should do regarding investments, is the 2 generation change in mindset.

What you are seeing is a reversal of a mindset that started in the 1960s, specifically, with regard to responsibilities. That all of the great things in life are free. Houses, SUVs, great vacations, etc. One will never have to pay for them - housing prices will go up forever and you can always get another equity loan, for example.

From a generational consideration, the baby boomers had children, and these children accepted (why not?) what their parents had told them. So that brings us up to the 1980s. Now those second generation children are having children, who were told that they too could have the great life style. Etc.

So, what is going one is a revision to the real economic world.

To beat the horse real dead, what needs to be cleaned up are two (if not more marginally) generations of a mindset.

I think that this picture now gives an investment forecast. For the indefinite future, the name of the game will be more conservative investments, if for no other reason there isn't any easy money around.

So, keep your money in a capital preservation mode to take advantage of the upswing when it occurs.

As a Discounting Mechanism, the Market Will Rebound Before the Economy

The trillion dollar question is whether this bear market and recession is the same as others since world war two?

I say that it isn't because what needs to be wrung out of the economy are the excesses of leveraged investments and spending that has occurred over the past 60 years.

This will *not* be the typical recession seen in the past decades. The Fed's actions and stimulus spending will do an excellent job of killing the real estate market for the indefinite future because savings will go to federal bonds and the like. What do you think of what has happened in Japan? Over 15 years of slow economy!

Most conservative investors, those that have escaped the bear market in both investments and real estate, are not going to put their money in higher risk investments. In the book, "Unexpected Returns" the author points out that we could be in a 15 year trading range market, starting in 2000.

Keep your gun powder dry!

This Bear Market is Worse Than I Thought

Looking at point & figure charts to do a count as to where one perhaps find a stopping point, based on Friday's trading, we are in a general support area.

This area is interesting because it represents the 2002 bear market low for the major indices: Dow, S&P 500 and QQQ.

So, my assessment is that this area represents a 'clean up' price area based only on the S&P 500. Sad to say, the next down count projects to a level I don't even want to think about. Likewise, the QQQ appears to be in a support area (count and 2002 bear market low).

Regarding the Dow, here the next level down from the 2002 low is in the 4,000 area. There is no obvious pick point, however.

Will McCain's Vice Presidential Selection Help the Markets?

" However, Lincoln was born in Cuba thus Mario who was born in the US would be the more optimal choice. "

It doesn't have any optimal choice -- Lincoln would not be eligible to become president because he is not a native born.

With all of the names mentioned in the article, one is lead to believe that Rothbort is just trying to say that he picked McCain's VP choice.

Not much credibility here.

Dow 30 Price Targets - Too Much Optimism?

My put is that the Dow average is going down to the 2002-03 bear market level, say 7500.

Which stocks are going to be the principal 'droppers' that will cause the above forecast to come true implies those stocks that have not been hit too hard so far.

If the above assumption is correct, the financial stocks will bottom out price wise in the recent levels.

The Current Bear Market: Death by a Thousand Cuts

One can ask whether things are sufficiently different in today's market (a kin - black swan) that one should be prepared for Tan's forecast.

If you do a bearish point and figure count for the Dow, S&P 500 and the NASDAQ, the all count down to the 2002-03 low. Of course, once (and if) the market does go down to that level, one can ask whether there is more to come.

The whole profound change in the availability of easy to get and low interest credit is the big issue. Just because the fed rates are low, it doesn't mean that one can borrow money without trouble.

The whole credit market doesn't make any sense. It is desired to get the housing market off of the floor. However, with the low interest rates that a retail customer can get, which doesn't even cover inflation let alone taxes, means that it will be very difficult to get new retail buyers into buying the homes -- unless the prices drop to unimaginable low prices.

7 Reasons March Was Not the Bottom

What gets me on all of those talking 'value' heads is the lack of what I call foresight.

When they say, "I'm buying for a long term hold," none of the interviewers asks the relevant questions:

1. So you don't care who will be the next president? And he will not have an affect on the market?

2. What about the congress: their approval rating is even lower than Bush's. Could McClain be a winner and have enough coat tails to change the party in control?

3. Okay, you are going to buy Citigroup. The stock is down 50% from its recent prices. So, you are not going to buy at the top. However, if the stock drops another 25% from its recent top prices, you will be down 50% from your buying point. Do you continue to hold the stock, or what? When do you call it quits? ($50 -> $25 (50%), $50 -> $12.50 (75%), but! $25 -> $12.5 = 50% drop.)

6 Reasons U.S. Stocks Will Outperform Foreign Stocks in 2008

Al I know is that there are many technical and fundamental indicators that the market is headed down to the 2002 bear market lows.

Point and figure charts for the Dow, S&P 500 and NASDAQ all count down to that level. Don't know when it will happen, but it will happen.

Has anyone who is bullish read the Wall Street Journal? There was a recent article to the effect that there will be a down rating of Fed Bonds because of the indebtedness. Can you imagine what the market will do if the bond ratings are reduced? Every time you turn around, there is still more spending -- are you for tax increases?

Can you trust anyone in the government anymore? There is no courage around to straiten out the mess, which will bring short term pain, but long term health.