Comments on: 8th Bear Market Rally Since October 2007

By: ottovbvs

ottovbvs — Thu, 04 Dec 2008 15:13:11 +0000

ChickenDinner Says:

December 3rd, 2008 at 9:17 pm

Actually I think you’re wrong about the Obama effect. It’s partly political but mainly economic. The govt has clearly chosen to become the spender of last resort and they’ll bail out the auto companies. There’s still a huge appetite for US debt, it’s premature to bet against it as anyone who bet against the dollar a year ago will tell you. What you’re losing sight of is that all things are relative so that while the US economy and the British one for that matter have huge problems, relative to a lot of the emerging economies they are still perceived as safer. Would you rather own US/British debt or Indonesian/ Chinese/Malaysian/South Korean. In the land of the blind the one eyed man is king.

By: ottovbvs

ottovbvs — Thu, 04 Dec 2008 15:02:25 +0000

It’s hard to believe most of the bad news is not priced in. That said I’m expecting some more volatility as we head to the year end and and books are closed out. The bottom which has been tested frequently as this piece suggests is surely around 8000 on the Dow. Clearly this recession is only half over, there’s lots more bad employment news. GDP revised was down 0.5 in third quarter, fourth is probably going to be much much worse and I’m expecting substantial further contractions in at least the first two quarters of next year. We’re probably trading in the bottom ranges but surely there’s plenty of time take advantage of this situation.

By: ChickenDinner

ChickenDinner — Thu, 04 Dec 2008 02:17:05 +0000

Don’t worry shorts. Reality will be setting in soon. Mass layoffs starting after the holidays, and once Obama’s face is on the tele for a few weeks, the hope rally will start to fade too. And if appetite for U.K. or U.S. debt should diminish … lookout. The question is when really, not if, but U.K.. will get hit before U.S. and will be the canary in the coal mine for U.S. equities.

http://globaleconomicanalysis.blogspot.com/2008/12/prepare-for-depression-level.html

By: mudpuppy

mudpuppy — Wed, 03 Dec 2008 16:29:38 +0000

harold hecuba you make some valid points. However I must quetion you on deflation. There are those who believe, and I am one of them, that the massive money printing we are now seeing will cause inflation. Some think hyper inflation.
When you say housing prices will fall for years because they are still overpriced relative to income, what metric are you using. Should ones monthly payment be 20% of earnings? 25%? 30%? 35? What?
And what is the current ratio between housing prices and incomes?
And finally, how do you know what earnings will be one to two years out.
China’s not going to grow? India’s not going to grow? Brazil? Russia?

By: harold hecuba

harold hecuba — Wed, 03 Dec 2008 11:35:27 +0000

my apologies trickstar. what i meant were assets that individuals have come to rely on as the illusion of wealth took hold. when we mutated to a consumption based society during the early 1990’s savings rates continued to fall and were placed on the illusion that stocks would go up forever. alan greespan and robert rubin fostered this environment with the targetting of asset prices. i believe most felt that stocks would go up forever and everyone believed retirement was going to be utopia. when this illusion of wealth cratered it was replaced by the even bigger bubble in housing. no need to worry alan was on the job and my retirement was safe, my house will continue to gain in value and i can continue to pull equity from it. retirement will be a utopia no need to save. now that stocks and housing have come down in value the illusion of wealth has been shattered. i believe the prices of homes will continue to fall for years. they are still overpriced relative to incomes and i don’t see inccreases in wages in this deflationary environment. i also don’t believe stocks are at the bottom of the cycle and will fall further in the next 1 to 2 years as earnings will continue to get hit and pe multiples will contract to bear market levles. we are in a period of MASSIVE deflation that only the destruction of debt will solve. gov is simply making things worse or dragging the process out.

By: texasradio

texasradio — Wed, 03 Dec 2008 05:19:43 +0000

Perhaps the best way to think of which asset classes might fall for years is to consider them by ‘quantity extant’ against ‘liquidity needs’.

Furthermore, the only difference between months and years is a divisor of 12.

And finally, there is no more “sideline cash” today than there was in 1931.

By: TrickStar

TrickStar — Wed, 03 Dec 2008 04:39:58 +0000

sorry harold. the grammatical thing was me just being a grammar nerd.

I poorly attempted to make a few points: i don’t understand your main point – what does “the reliance on an asset based economy” actually mean? I’m inclined to think I completely disagree

First, the whole world (financial markets included) is based on valuing tangible and intangible assets. Status, boobs, Mercedes, education, water, and animal crackers can be and are viewed as assets upon which different people place different values.

Second, the list of things I put above suggests that people do comprehend the gravity of the situation. No once claims to know where all the bodies are buried, but most (including dumb old me) recognizes that there’s lots of carnage to come.

As for asset prices falling for YEARS, well, as noted, there are lots of asset classes out there. And for many of them, the fundamentals haven’t changed. US housing, metals, rice, coffee, soybeans, livestock, and more aren’t going to fall for years. Some of them will fall for months, some will trade sideways for months, but not years.

Which assets do you believe will fall for years and why?

By: harold hecuba

harold hecuba — Wed, 03 Dec 2008 01:53:05 +0000

trickstar
and your point is? and sorry i don’t look over to correct grammatical errors as i could care less. i guess it should have read the reliance on an asset based economy is over.

By: jakester

jakester — Wed, 03 Dec 2008 00:23:48 +0000

stay short until next Friday.

By: TrickStar

TrickStar — Tue, 02 Dec 2008 22:50:07 +0000

I don’t understand what Harold Hecuba means:

“the reliance of an asset based finance economy is over.”

Is that actually a sentence?

And I don’t know what he’s reading, but it seems like most people/banks/gov’t/companies are scared Shiteless – which might explain:

1) the freezing of the credit markets
2) the huge selloff of all asset classes
3) the tightening of consumer purse strings across the WORLD
4) multibillion dollar bailouts
5) multinational coordination from central banks
6) massive layoffs and drastic reductions in revenue forecasts
7) incredible VIX numbers
a return of the USD strength
9) anything else I missed.

So, Harold, here’s to your profound grasp of the obvious. Welcome to the party.