The American dream used to be, own a house and live comfortably. People rushed to own homes but forgot about the comfortable living part. The establishment oversold the idea of home ownership. People were willing to put common sense aside and jump all in, the truth be damned. Up until about six months or so I had relatives and co-workers who thought it was impossible for home price to drop. People were buying homes not as places to live, but as short term investment vehicles. The market was over bought. I have a couple of co-workers in the 60’s who can’t retire because they can’t sell homes that are now under water because of home equity loans.

There’s a story of stock broker who was on an elevator just before the crash of ‘29. He over heard the elevator operator talking about a stock he had purchased. This broker realized it was time to get out of the market. When elevator operators are buying in, he felt, the market was over bought.

I don’t know about indicators, but when a bunch of people want to sell and nobody’s buying, prices go down.
For the year – wheat prices, down; oil prices, down; housing prices, down; stock market, down. I think this is going to last a while.

The stock markets behavior constantly evolves. Something tells me that this time around, those searching the history books who make postdictive data decisions on how to time the bottom will get worked, even if they get in close to the near term bottom. It will likely be some unforeseen event that sends the indexes on a new leg down, leaving many with no opportunity to get out near the last prior bottom. Moral hazard has stacked up over the years to the point where 40% down in the indexes is not nearly commensurate with what the piper demands. Some inevitability seems to be hiding around the corner. Even the American public senses this, as they are generally opposed to these bailouts. “Having to do something” about the crisis does not necessitate throwing insane amounts of money at each problem. The solution to this problem is not that obvious.

Would be interesting to see the S&P overlayed on the above chart…thx

Barry,

Lakshman’s interpretation of the index — “Weekly Leading Index has fallen to another historical low, indicating that there is no economic recovery in sight” — is wrong, possibly biased and misleading (he is heavily positioned on the short side and lacks objectivity. In addition, he has been in a house of pain since last Friday).

Here is how Geoffrey Moore, the inventor of this index, would interpret it…

The index has fallen to another historical low. It was pushed down by another historical commodity and stock prices drop (commodity and stock prices are part of the index) that resulted from another wave of hedge fund margin calls, retail panic and redemptions, and forced hedge fund liquidations (note, the reasons for the drop were more technical than economic [terrible economic data has already been discounted and discounted and over discounted by the market]). In addition, the index was calculated using last week’s data (last week’s “leading” indicators); therefore, it does not reflect the most recent 15-20% jump up in commodity and stock prices. Next week, the index will be higher, and it is possible that it is a turning point that usually occurs at these levels – it could be the turning point and “the end is in sight”.

P.S. The index is important but as Geoffrey Moore said, “interpreting it requires informed judgment”. It is obvious that Lakshman lacks such judgment. Take what he says with a large grain of salt.

I agree with Trickstar. Very few above have bothered to read what this might mean.

Unfortunately for most, running with the herd means they don’t see what’s going on outside. That includes herds running north or south. Or East or West for that matter.

Chuck Ponzi

“I’ll bet my entire 2008 stock market returns that …”

I’m assuming that they’re in the green.

(I, on the other hand, will happily bet my entire 2008 returns that pigs will fly tomorrow).