Comments on: Revulsion or Lack of Interest?

By: whosonfirst

whosonfirst — Sun, 16 Nov 2008 15:21:03 +0000

I’m probably less knowledgable about markets than anyone posting here. But in the current environment that may be an advantage rather than a handicap. So, here’s my two cents: the macroeconomic picture is bad and much more likely to deteriorate rather than improve. I suspect there are a lot of sophomores (mostly young) in the market who don’t realize or respect this simple overtrumping fact.

I think the ongoing volatility and sometimes irrationality will continue until most middle class people say “To hell with the market”. From that point forward the market will languish in a range for a long time.

By: harold hecuba

harold hecuba — Sun, 16 Nov 2008 14:08:35 +0000

as richard bernstein points out one of the best contrarian indicators is the wall street asset allocation model (for the life of me i still can’t believe people adhere to that nonsense. wall street is nothing but a sales amachine) generally when this model has a weighting of 60-65% stocks it is a good bet that stocks will have very poor returns over the next few years. an under 50 weighting would be an indicator that equities may offer a decent return. right now the model is 58% which is no where close to atttrative.

By: Mike C

Mike C — Sun, 16 Nov 2008 09:37:15 +0000

<<<<<>>>>>>

******************************************************************

Not sure this is useful as a contrary indicator

http://www.cxoadvisory.com/blog/internal/blog10-08-08/

“In summary, analysis of Ticker Sense Blogger Sentiment Poll results indicates that aggregate blogger sentiment is non-predictive for future stock market direction.”

By: leftback

leftback — Sun, 16 Nov 2008 00:32:29 +0000

BTW, DP, not so fast on the corpys and munis. There are more defalts in our future than any of us has ever seen. It’s not that the deals on bonds aren’t good, it’s that rates are going to rise further than most people believe. Think about the spreads we have now and then think about Treasuries selling off as inflation is rekindled, and what do you have? Monster yields on lower-rated paper, but also losses on bond funds purchased now. I do think it is worth keeping an eye on TIPS though…

By: leftback

leftback — Sun, 16 Nov 2008 00:26:13 +0000

Hey DP: are you a Swiss resident of NYC? Welcome to the TBP community, you will find a host of interesting traders and commentators here. Look forward to another beer. Regards, leftback.

By: DP

DP — Sun, 16 Nov 2008 00:13:23 +0000

“Buyers market with no buyers”

Not sure if I agree with everything in this, but an interesting read:

http://online.wsj.com/article/SB122671161003230223.html#

By: ericholtman

ericholtman — Sat, 15 Nov 2008 14:07:17 +0000

“We are set up in a similar way to some of the big 2002 rallies whereby there are a large number of deep in-the-money puts out there. As these approach expiry, unless they are converted to physical sales rather than cash sales, then there will be a lot of buying needed to happen.”

Can someone explain this?

If person A has a position P in deep-in-the-money puts, and has to execute strategy X upon expiration, isn’t there always a person B with position -P who has to execute strategy -X?

By: Steve Barry

Steve Barry — Sat, 15 Nov 2008 01:51:48 +0000

DP:

If you look at that poll, every time bearishness spiked above bullishness (March 07, March 08, June 08 and Sept. 08), the market rallied strongly within a few weeks. Well, a few weeks ago bearishness hit ZERO. While of course nothing is certain, this is one more data point that tells me we have not had a capitulation low yet.

By: DP

DP — Sat, 15 Nov 2008 01:39:17 +0000

@Steve Barry :

Regarding point #4. Look back to before October 13th – in July and August they were mostly bullish. In September and before the crash, they turned very bearish.

What if, no reverse psychology or contrary plays, they were simply right? What does that say today?

Too much information. Everything moving too fast. I don’t even remember at this point what specific event triggered the massive first sell-off early October (was there even one?)

By: KJ Foehr

KJ Foehr — Sat, 15 Nov 2008 00:43:58 +0000

@Steve Barry
My personal benchmark for the bottom is PE = 7 or thereabout. But I don’t think we are going there in a straight line, so the question is, how long will it take to get there and how high will we rally before then?

Revulsion?
In my amateurish, simplistic view, a 10% intraday rally does not occur in a period of true revulsion. We may be nearing the beginning of this period, but I expect it to last months, not just days or weeks, and I expect the revulsion to increase over time such that the kind of excitement and panic buying we saw yesterday becomes inconceivable – that is true revulsion and, IMO, we have not seen it since 1974.