Buyers Fatigue?
Some 15 weeks after the March 666 lows, indices are 40% higher. After that sprint, might the buyers be suffering from some fatigue? Are the markets now fully reflecting a second half recovery?
Are we priced for perfection?
Those questions are looked at in Barron’s Up & Down Wall Street column this week:
“There were hints, as well, that bullish sentiment, which for a spell remained fairly constrained, had escalated to something approaching euphoria. Investors Intelligence readings of advisory sentiment showed most of these supposed savants, who often function best as contrary indicators, have come a bit late to the party; in recent weeks, the percentage of bulls among them have registered in the mid-40s, compared with the low 20s for the bears.
Moreover, trading took on a distinctly more speculative tone, with small stocks chalking up big gains despite their conspicuous lack of very much in the way of sales and nothing in the way of profits or prospects. And perhaps the most persuasive evidence of the gamier spirit abroad in Wall Street is that, despite the mounting demolition of the commercial-property market, Morgan Stanley plans to sell re-securitized commercial mortgages.
Which, as one portfolio pro acidly observed to Dow Jones Capital Markets, amounts to peddling tarnished assets nicely repackaged with higher ratings. That kind of thing has been going on in residential asset-backed securities in recent months, presumably fueled by the notion that the housing decline has bottomed. But that it now has spread to commercial mortgages when things are getting notably worse is clear indication that the mind-set and, indeed, some of the very stuff that got us into such a jam is back. Alas.”
Hence, the expectation that the rally may have run its course, and is heading south.
That seems to be too pat for Mr. Market, who delights in confounding everyone. A more frustrating course of action would be to back and fill — but not collapse –and keep going up (albeit at a slower pace) after some digestion over the summer months. Sucker some more people in, only to retest the lows in September / October period.
That’s just my guess . . .
>
Source:
Under the Gun
Alan Abelson:
Barron’s June 22, 2009
http://online.barrons.com/article/SB124545077577632639.html
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June 20th, 2009 at 10:26 am
“…only to retest the lows in September / October period”
Not in the October-November period? That seems to be more the norm for fall excitement.
Of course, it will happen once the last bear has thrown in the towel and there are no more people to serve as buyers … so it could be September / October … of 2010.
June 20th, 2009 at 10:34 am
And exactly who is going to be buying? Computers will continue daytrading with each other and some hedgies will try to live up to the image of their talking head personnas. Rumored Fed backed financial programs might add more liquidity via helpful iBanks in an effort to jump start the economy via the wealth effect. A few risk chasers who prefer the stock market over Vegas will stay at it.
Ma and Pa aren’t coming back. Most people who had money just hope to get more of it back. It would take a special kind of stupid to lose 40% of your life savings and then withdraw from the bank account to replenish the brokerage account.
The pumpers are now probably in a maintenance mode. They likely hope green shoots propaganda will bring out the stupid again. Maybe if some magic charts can be jazzed up, people will think they control the world and wealth is assured if they only buy another ticket.
I’ll buy the next big big dip, but not before. Maybe the pumper can run it past S&P 1000 next time. (I bet they’re too chicken shit to manufacturer some ranges to trade). Meanwhile, I am hearing stories of affluent people taking their cash and paying off major debts.
Pundits who are waiting for the mobs to return are disconnected with reality.
June 20th, 2009 at 10:40 am
EJ over at Itulip believes the Fed will cause a market selloff on their first attempt to remove liquidity from the system. But yet feels the averages will end the year more or less where we are now.
June 20th, 2009 at 10:45 am
Anyone who thinks the markets should continue going up without any fundamental economic reason is still thinking ‘Bubble Economy’. That is the real question. Are we just at the start of Bubble III and it’s now institutionalized as a part of Federal fiscal and monetary policy, or are the pundits just not getting it?
Or do the pundits see it as a jobs issue. If the markets become based on reality instead of hype and criminality, then maybe more jobs will be lost. Thus, it’s best to maintain the Fantasy and keep the rubes interested with implications of vast wealth and golden tickets and the ‘Science Of Investing’, as described by people of mythological capabilities.
June 20th, 2009 at 10:53 am
The bears certainly see excessive valuations in equities at the moment…(and I think the S&P has most likely put in an interim top – or very close to it)…
But when I consider the “nature” of the sell-offs during the ’08 – early March ’09 time periods…Much of it was liquidation from over leveraged positions…Which was why the velocity was so high…
Right now, if the system is simply OVERBOUGHT (as opposed to overbought & over levered) – we may not see the severity of declines on pullbacks the way we have in the past year…Although I believe the market will trend lower (and for a long time) from here…
There may be instances where someone gets in trouble (and/or) if there’s an EVENT which prompts a steep selloff, but I see the possibility of opportunistic buying coming in on those events…It’ll most likely be a TRADERS market for the next two years with a downward glidepath…
The other part is going to be the bond market…I see that any time the 10 year gets above 4% (and perhaps on occasion they’ll let it go to 4.5%), then you’ll see money shift there while equities correct, then maybe reverse…
ON PAPER – What I describe above may seem smooth & orderly…The fly in the ointment is going to be how long the economy can actually hang on before a huge crisis in DEFAULTS (on everything – credit cards – CRE – munis – ARM resets) causes the next liquidity squeeze…
So the markets may operate in a fashion that attempts to DENY those problems until they actually start hitting OPERATIONS in the gonads…
June 20th, 2009 at 10:53 am
Uncle Bernie Madoff as the face of Mr Market is not inaccurate at this time.
June 20th, 2009 at 11:07 am
DH-
the run up from 2003 to 2008 was all bubble based bullshit- housing as investment and speculation- don’t underestimate the stupidity of the American people- this time around- however-
I have no idea what the bubble creation play could possibly be in- where would the Fed and the market players direct their attention-
I just don’t see it
June 20th, 2009 at 11:13 am
call me ahab Says:
June 20th, 2009 at 11:07 am
I have no idea what the bubble creation play could possibly be in- where would the Fed and the market players direct their attention-
comment:
—————–
Remember it is official policy and economic dogma that bubbles can not be predicted or even recognized until after they explode. I’m serious. I’m not making that up. Books have been written about the bubble conundrum. While most drunken idiots would have no trouble seeing a bubble in formation, our best and brightest disagree. Thus, huge amounts of liquidity forming commodity asset bubbles at this time don’t officially exist. It’s just Mr Market (aka Uncle Bernie in the oil business)
June 20th, 2009 at 11:16 am
cvienne-
good analysis
June 20th, 2009 at 11:22 am
The market can be expected to fool nearly all of the people nearly all of the time. This is a game where the many losers fund the outsized gains of the few winners.
And the winners have nothing going for them other than dumb, stupid luck.
~~~
BR: Gee, that Jim Simons of Renaissance is pretty lucky — 40% returns for 30 years.
June 20th, 2009 at 11:22 am
dh-
however- commodities will be dependent on a weakening $ and heavy inflation expectations- when it is realized that it is deflation- the air will blow out of commodities- I don’t foresee Americans being able to continue with their excessive ways- and all the the junk that is made has to be bought by someone-
also- I honestly believe that markets are manipulated by the Fed and market players to create bubbles with approval from the USG- if only for the reason to forestall total implosion
June 20th, 2009 at 11:23 am
I’m also in the fall FALL camp. Reality part deux coming to fall near you. Once the summer euphoria and Labor Day has come and gone, the fireworks will begin anew.
June 20th, 2009 at 11:24 am
@ dead hobo 10:45 am
“Anyone who thinks the markets should continue going up without any fundamental economic reason is still thinking ‘Bubble Economy’.”
No disagreement — but I would direct your attention to the 1933-1937 period, wherein there was a major effort on the part of the wealthy, the government and banksters to keep the markets moving upward in an attempt to convince the sheeple that the worst was behind them. It was a tough sell, as living conditions among the sheeple (unemployment, credit availability) remained rotten all the while stocks were marching higher.
These things can be sustained — not forever, but longer than any rational person believes possible — for a VERY long time.
And I’m not predicting that the markets will go up/down/sideways from here. I’m too beat up for that.
June 20th, 2009 at 11:26 am
cvienne:
“…The fly in the ointment is going to be how long the economy can actually hang on before a huge crisis in DEFAULTS (on everything – credit cards – CRE – munis – ARM resets) causes the next liquidity squeeze…”
______________
These are more than flies in the ointment, they’re poison in our well water.
Sometimes I wonder what the inhabitants of Easter island thought when they looked around and saw that there were no longer any trees.
June 20th, 2009 at 11:28 am
call me ahab Says:
June 20th, 2009 at 11:22 am
however- commodities will be dependent on a weakening $ and heavy inflation expectations-
reply:
————
Theoretically, yes. Ceterus paribus, a 100% increase in oil should correspond to a 50% decline in the value of the dollar. Haven’t seen the dollar part. Only the oil part. I’ve also heard babble about ‘weakened dollars’ and ‘inflation trade’ and ‘expectations’. Or ‘summer driving season’ or ‘problems in Nigeria’. I’ve read facts about declining demand for oil products.
You have to learn to separate the sales pitch from the facts.
June 20th, 2009 at 11:33 am
Every bear expects a fall in the fall. Maybe we’ll fall now, to catch everyone off guard?
Jim Rogers says he holds no shorts because he’s worried printing to lead to inflation of all assets. I don’t like disagreeing with Jim Rogers. But, it seems many people — perhaps “too many people” — are worried about inflation and the fall of the dollar, whereas credit deflation “should” continue. (But, will it?)
It’s Mish and “Stebar” (“Steve Barry”) against Jim Rogers and the world!
I don’t know where to place my bets. If only I could bet with OPM and 2&20… (I’m in the wrong biz, I tell ya.)
June 20th, 2009 at 11:36 am
@constantnormal: Great point and something to keep in mind, but we are in a much different world today where things happen a lot more quickly in the markets. The markets have priced in a recovery. Once it becomes apparent that is not happening any time soon (at least not this year), the bottom will likely fall out of this thing once again. There don’t seem to be as many shorts this time around, so the next Fall could be even uglier.
June 20th, 2009 at 11:40 am
There is still some “cash on the sidelines”, like my friend whom I had been telling to cash in for a year until he finally did after losing only 10-20%. If he gets convinced it’s all over, he may put some back into stock funds. I keep sending him discouraging articles, but that didn’t help a great deal until he saw the crash starting himself.
There are also those who sold out near the bottom. While he didn’t talk about people coming back in, Hussman did write an interesting description of the ups and downs of bear markets and the accompanying retail investor psychology.
http://www.hussman.net/html/7374.htm
I have my bets on the short end (unfortunately, some bought too early) and have accumulated a little in the way of 10 year treasury bonds. Am even looking into some 10 or 20 year zeros if I feel really adventurous. The time scale is hard to figure, and I wouldn’t be shocked to see 1000 before some really bad stuff happens. Saw this morning that BAC amd Morgan Stanley are repackaging and going to sell CRE backed securities. I think this is a good example of the mindset that it’s back to business as usual.
My guess is that someone will get into trouble and that will be the signal for the next steep drop. Likely to be caused by losses in leveraged positions in gold, oil, or debt. Could even be a large foreign bankruptcy which breaks the green shoots mindsets.
BTW, was thinking that people are really too bullish on corporates. See charts here:
http://online.barrons.com/article/SB124404221755381515.html
Don’t know that I agree with the article. Actually, think it may be a contrary indicator. Thoughts?
June 20th, 2009 at 11:42 am
marcus-
speaking of Easter Island- have you had a chance to read “Collapse” by Jared Diamond- he explains in detail how that happened- or in theory-
excellent read
June 20th, 2009 at 11:43 am
Let’s see.
With respect to real people …
There’s no sellers because they don’t want to take a loss from 2007 levels. There’s no buyers because the market is toppy and people aren’t as stupid as the pundits would like us to believe. (people can be pretty stupid, but they have this one down ok.) The computers just want to stay busy. The economy doesn’t support a rising market but Fed liquidity does. The Fed is invested in the pump. Reality disagrees.
It’s Ali – Foreman again.
June 20th, 2009 at 11:43 am
I think we slog along with moderate volatility.
The de-leveraging of all private debit continues – for many years.
The rate of the private de-leveraging above will dictate any Fed/Treasury draw down in their programs.
We have a patient now on methadone, attempting to get ‘clean’ gradually without a relapse.
June 20th, 2009 at 11:43 am
mannwich Says-
“Once it becomes apparent that is not happening any time soon (at least not this year)’
mannwich- I don’t see a recovery for a long, long time- unless recovery only means that “where we are right now” is as good as it gets
June 20th, 2009 at 11:45 am
Almost forgot. Instead of Buyer’s Fatigue, the financial media should be crying Buyer Beware!
My target of SPX 150 remains.
June 20th, 2009 at 11:47 am
ahab,
No, I haven’t. But I’ll keep it n mind. I was recently given a set of short books by Christopher Hitchens, and I’m trying to work my way through them, 15 minutes at a time.
June 20th, 2009 at 11:47 am
call me ahab Says:
June 20th, 2009 at 11:07 am
I have no idea what the bubble creation play could possibly be in- where would the Fed and the market players direct their attention-
Its right before our eyes: the government debt bubble. Going by policy moves so far, everything has and will be done. No matter what. The G7 ponzi economies will be rescued at all costs. Not much more complicated than that. And the crap about not being able to recognizing bubble before hand: a 2 year old would have recognized the last 2 bubbles. The FED knows this, but you can’t renounce the central tenet of ponzi economics. So we get the setup for the next crash, but who knows when that will be.
June 20th, 2009 at 11:50 am
What do y’all think of the NK situation? I *really* wonder about this.
June 20th, 2009 at 11:55 am
@Mannwich 11:37 am
So, do you see a re-testing of the established lows, or just a sell-off from the recent highs?
There is so much crap in the wind that I think anything could happen. But most of the short-term performance in the markets is a matter of public mindset, and if J6P’s current situation allows them to see green shoots, they might see green shoots — until they are in the position of Humphrey Bogart at the end of Treasure of the Sierra Madre.
June 20th, 2009 at 11:56 am
We have nothing to fear but fear of fear itself.
June 20th, 2009 at 11:57 am
Marcus-
Can’t go wrong with Hitchens- “God is not Great” – last book I read by him-
sorry to be OT everyone
June 20th, 2009 at 11:58 am
Dollars can do fine relative to other currencies and still be losing value, if all the other shit-paper, er, fiat currencies are simultaneously losing value relative to (IMO, the best metric) an internationally-traded basket of commodities. Oil is the headliner for such a basket, but it would have to include all forms of internationally-traded energy, agricultural products, minerals and metals, and forest products. Nat gas would be an interesting exception. Since it is still not widely transportable across continents, its price movements within a region might be better reflective of the internal economic conditions. In the US, it fell and has stayed mostly down.
But w/ oil holding at $70/barrel (along with other commodities showing similiar price increases) even after real demand decreases, we have pretty good evidence of inflation, i.e., dollar devaluation, as oil (and all commodities) is priced in dollars. It is also evidence of currency devaluation for any currency, like the yuan, that is tied to the dollar, or for any currency that is not appreciating relative to the dollar.
The commodity indexes that Bloomberg tracks are here:
http://www.bloomberg.com/markets/commodities/cfutures.html
It clearly shows a bottom at roughly the same time as stocks.
This:
“Anyone who thinks the markets should continue going up without any fundamental economic reason is still thinking ‘Bubble Economy’. That is the real question. Are we just at the start of Bubble III and it’s now institutionalized as a part of Federal fiscal and monetary policy, or are the pundits just not getting it?”
Yes. We are at the start of Bubble III. My guess is that it will end in roughly 2012, with the onset of fear attendant to an American presidential election. Don’t underestimate the ability of the Federal government to keep a bubble afloat. And never forget, if all else fails, the FG still has the nukes.
Unfortunately, the corruption and fraud that this bubble will have relied upon, as the Federal Government becomes the lender of first and last and everything-in-between resort will mean that this next crash, when it comes, will be for good. The federal government, our savior this first time around, will prove to be as insolvent as Citigroup or Bank of America would be today without its backing. Then things will get interesting. But don’t forget, the Feds still have the nukes.
June 20th, 2009 at 11:59 am
tanman-
then that would truly be the last bubble- or the bubble to end all bubbles
June 20th, 2009 at 12:02 pm
@ wunsacon — WHICH “NK situation” — the threat to launch a missile at Hawaii, or the attempt to move $134B in bogus Treasuries? Or something else entirely?
June 20th, 2009 at 12:04 pm
@constantnormal: I’m a bit perplexed by market action lately (that’s an understatement) but the more I think about it, the more it all makes sense. The whole concerted “green shoots” PR campaign, which has been brilliant (if only our leaders were as adept at actually solving problems as they are with PR/propaganda), has gotten “animal spirits” going just in time for spring/summer, which is when most people simply FEEL better about things. Living in the North Pole, MN, I can attest that there is indeed something to this seasonal phenomenon. People were ready to stop feeling like shit, there was/is a new president, and spring/summer hit just in time for the green shoots campaign. Combine that with the uber-bullish MSM looking for any reason to pile back in on a panic buying spree, trying to induce the marginal buyer (greater fool) to pump up their action before they eventually get out and leave the last and greatest fool holding the steaming pile of shit.
I agree that this could go on a lot longer than people think (myself included), but if we continue to get more job losses (hitting that 10% mark will be a psychological blow, which will happen probably by end of summer) and stay in the double digits on employment, how do corporations, many of which that sell mostly discretionary items in order to make profits, report improving earnings (without accounting shenanigans)? Maybe I’m overthinking this, but I think reality sets back in this fall, and at the latest the early winter, on the markets. Of course, I’ve been wrong before though……..
June 20th, 2009 at 12:06 pm
@ahab
or the “mushroom to end all mushrooms” if curmudgeon’s last sentence comes into play…
June 20th, 2009 at 12:09 pm
every time I hear the name Kim Jong Il- I think of “Team America” -so I want to laugh- but that dude I think is capable of anything
June 20th, 2009 at 12:12 pm
“but that dude I think is capable of anything”
except feeding his people.
NK is no threat to us or anyone else, but might be a useful foil as an attention-diverter.
June 20th, 2009 at 12:12 pm
constantnormal, good question. Then, I guess “both”.
June 20th, 2009 at 12:12 pm
@constant: Sorry, realized I didn’t answer your question. I think we eventually re-test those prior March lows. It may not happen this fall though, but it’s going to happen at some point. We could get a major head fake/pullback this fall, thus bringing out the dip/panic buyers who have been waiting for a better entry point to go “all-in”, have the markets go up again a bit, and then finally retest at some other time, thus inflicting max pain on most of us in the process. It’s going to zig-zag for a while and hurt a lot of people in the process. I’ve already been hurt a bit myself but certainly not obliterated (thankfully).
June 20th, 2009 at 12:20 pm
I’m with cvienne- I think it will be a gradual descent with an occasional large drop or pop- but ultimately down- there is nothing to hold the economy together- I could theoretically see the US nationalizing the whole economy if things get bad enough- with the reason being to protect jobs and the American people from poverty-
if Nixon can order price frezzes- than anything is possible
June 20th, 2009 at 12:25 pm
@curmudgeon
“NK is no threat to us or anyone else, but might be a useful foil as an attention-diverter”
I basically agree…IMO – the most interesting thing about NK, is in watching how our own State Department (& Administration) react to them…
It’s a decent test to see whether we’re war mongers, scared wussies, or some blend in between…
My latest take on the situation is that it seems that we’re trying to hand off to China (as much as possible) the responsibility of keeping them in line…It may not be a bad strategy, but I think it will lead to us getting WALKED ALL OVER by them (& the Russians) in the future…It will take time though…
June 20th, 2009 at 12:34 pm
@cvienne, I should have said “Outside of being a threat to its own population, NK is no threat…”
But you are correct that it will be a test of American hegemony in the region to see which of the great powers deals with the little tyrant. I suspect China will win the right to deal w/ NK. We simply don’t have the will or the money to do much of anything anymore, which will become ever more apparent to our rivals. And China, while not naturally or historically of an imperialistic bent (in their 2000 year history, they’ve only given sea exploration and long-distance power projection a try only once, which failed), seems eager to at least return to their past glory, wherein all the kings of the adjacent kingdoms had to kowtow when visiting the emperor.
June 20th, 2009 at 12:42 pm
A REALITY CHECK ON THE BANKS
http://bit.ly/19f8Av
June 22 Business week
some excerpts:
Even if the recession plays out as expected, the troubled investments ( i.e. the $500B of toxic assets that banks still have not sold or marked down ) will continue to sour, eroding banks’ profits and hampering their ability to lend. “When you have to refill your capital base, you can’t make new loans,” says Elisa Parisi-Capone, the lead finance and banking analyst for RGE Monitor. “This is the definition of a zombie”. The result could be a long, slow recovery.
Critics remain skeptical of some of the tests’ underlying numbers. Under the worst scenario, the government assumed unemployment would average 8.9% in 2009 and hit 10.3% next year. In May the jobless rate reached 9.4%.
Meanwhile, the bad loans and other dubious securities will burden banks–no matter which way the economy goes. By some estimates banks have nearly $500 billion in losses to work through if the recession unfolds more or less as projected. Looming losses will eat into future profits, as banks effectively earn their way out of the problem. In April the International Monetary Fund predicted writedowns at U.S. banks will exceed profits by almost $200 billion through 2010. “Concluding the banks are going to be able to survive is much different than concluding they have a level of soundness that will let them–and encourage them–to step up lending as we need them to do,” says Brookings’ Elliott. “This will be a drag on the recovery.”
June 20th, 2009 at 12:55 pm
@ahab (12:20)
When I get confused in a “macro” sense, I like to go take a VERY LARGE picture of the S&P and make an attempt to retrofit the chart to particular events…
One such case is to take the last “pre-bubble”, pre CREDIT INFLATION low (back in 1982), and get out the old purple crayon and start drawing lines…
I pretty much think that that is how Doug Kass called the 666 March bottom…It was no other hocus pocus other than to say it connected the 1982 low to the 1987 PANIC CRASH low in 1987 (followed through you get 666 in March ’09)…It also happens to be a fibonacci of the same levels…
Kass doesn’t admit to this, but I’ll bet you dollars to doughnuts that he was all over that (and came up with a lot of other reasoning to make himself look smart…
Moving forward…If you then use those levels, and call them “panic” levels…Then you have an idea of how the market prices in PANIC…Moreover, you can subsequently divine where the “euphoria” ends after those lows (hence – buyers fatigue)…
I’d offer this…
If you take the 1987 pre-crash high, and draw a parallel price channel to the aforementioned BASE, it would take you to about 894 as we speak today…Now – understand that should represent a EUPHORIA PRICE…The market was clearly OVER that trendline between 1995 and 2008 (but I consider that to be the BIG BUBBLE brought on by overleverage, and overspeculation)…
Since we’ve dropped BELOW that…My feeling is that the BEST the market is going to do is to maintain the middle ranges of the 1982 to 1987 rise…(That would put us somewhere between 740 – 760 as we speak – with literally a 680 floor in October if the longet term trend held out)…
As far as BREAKING TO A NEW LOW is concerned, one thing has me fascinated…If you look at the 1982 to 1987 chart on a “monthly” basis, and then do a MACD analysis on that you’ll see the following…
The 2007 high on the S&P of 1576 didn’t rise higher on the MACD line than the 2000 highs…That is clearly a “divergence” (and usually is an indication of an impending selloff – which occurred)…On the same token, the MACD low from the March ’09 was actually lower than 2000…
What I’m basically saying is that 2000 was actually the top (not 2007), we’ve been in a bear market since then, and we haven’t yet made the final bottom in this bear market…
I’m under the impression that the next BOTTOM in the market is going to have to create another divergence (yet in the opposite direction of the ’00 – ’07 ones)…In other words, the S&P goes lower than 666, but the MACD dip is “less” than the one in March 2009…That will signal to me that the final low has been put in…
On a scarier note, if the next MACD dip is lower than March ’09…AND…the S&P puts in a new low, we may be in for seeing an S&P much lower than anyone could imagine…
As for bullishness (if one wanted to make that case), it would take at least 4 years to break to new highs…
- In ’95 you had the dot.com euphoria
- In ’03 you had the foothills of the real estate bubble
- In both cases you had leverage
- In both cases you have significantly less USG debt
So I’d say it would be pretty tough to make that elephant fly…
June 20th, 2009 at 12:57 pm
dh-
Re the commodities play- NC has a great article regarding China- easy money- and commodity speculation-
excerpt-
“The international media has been following reports of record commodity imports by China. The surge is being portrayed as reflecting China’s recovering economy. Indeed, the international financial market is portraying China’s perceived recovery as a harbinger for global recovery. It is a major factor pushing up stock prices around the world . . . But China’s imports are mostly for speculative inventories. Bank loans were so cheap and easy to get that many commodity distributors used financing for speculation.”
there we have it
http://www.nakedcapitalism.com/2009/06/xie-chinese-banks-funding-commodities.html
June 20th, 2009 at 1:01 pm
“On the same token, the MACD low from the March ‘09 was actually lower than 2000…”
…sorry – I meant lower than the 2002 low
June 20th, 2009 at 1:07 pm
BR wrote:
Your guess isn’t bad, but wouldn’t it be nice to have it supported by data? Especially when September comes?
June 20th, 2009 at 1:20 pm
@some_guy_in_a_cube 1:22 am
“And the winners have nothing going for them other than dumb, stupid luck.”
I’m not proud. I’ll take “dumb, stupid luck” in a heartbeat.
June 20th, 2009 at 1:36 pm
cvienne Says-
“On the same token, the MACD low from the March ‘09 was actually lower than 2002…”
respect your analysis- question- could that not also mean that it was the low for this bear market?
June 20th, 2009 at 1:48 pm
@ahab
“could that not also mean that it was the low for this bear market?”
Sure it could…
But I’ve seen so many times that when actual tops and bottoms are put in…it is accompanied by MACD divergence…
You can go ahead and backtest your own scenarios (with any charts you care to), but I’ll give you what I feel is a perfect example…
Look at the oil chart…(and when you do – for fun – make the assumption that $40 is a fair price for oil)…
On the “daily” chart, the MACD hit a high in May ’08 (yet oil PEAKED in July on a lower MACD)…Then, during the selloff…The MACD on crude hit a bottom in late October ’08 (yet crude prices didn’t hit bottom until February ’09)…
Very often you see this “divergence” in both directions before you see an ultimate high or low in prices…
Of course that is only one (of many indicators)…but it would suggest to me that the S&P might make a LOWER LOW on less of a MACD dip in the future…
June 20th, 2009 at 1:55 pm
Can we maybe dispense with the “sheeple” and “Stupidity of the average American” comments? We just had a long drawn out exchange yesterday on how lumping brokers in with “greedy bankers”, etc wasn’t cool. We’re all in this together, we all respect each other on this blog and try to keep the name calling to a minimum. Let’s have the same respect for the average Joe.
June 20th, 2009 at 1:56 pm
The pumpers are now probably in a maintenance mode
————–
I think the pumpers have been the ones who were left out of the 2003-2007 bull rally.
June 20th, 2009 at 2:00 pm
thanks cvienne- I see your point-
and the bull market that occurred 2002- 2007? Was there any telltale sign that a temporary bottom was in- in 2002? That the market would most likely go up?
June 20th, 2009 at 2:03 pm
thor-
sheeple and average Americans are alway fair game- this isn’t Sunday School- if it bothers you- frequent another blog
June 20th, 2009 at 2:05 pm
Was there any telltale sign that a temporary bottom was in- in 2002? That the market would most likely go up?
————
Greenspan cut the rate from 7% to 1% in a short time span. Consumers enver slowed down despite a recession. House prices were still going up.
June 20th, 2009 at 2:05 pm
Ahab – it’s a very short hop from that kind of mindset to bigotry and racism – clearly you don’t see the distinction which says a lot about your own narrow ignorant mindset. I will call you out on that bullshit every time you do it. If you don’t like that then YOU frequent a different blog.
June 20th, 2009 at 2:13 pm
thor-
well you may want to take it up with almost everyone on this blog including BR himself- who often refect on the average American as sheeple-
I am pretty sure if this was unacceptable to Barry Ritholtz- then he would delete such posts and would refrain from such posts himself
June 20th, 2009 at 2:14 pm
thor — in my view, if you’re not a predator, then you’re a sheeple — that includes most (all?) of the posters here, including myself. Human beings are hard-wired to follow the herd, it’s not derogatory to recognize that.
YMMV.
June 20th, 2009 at 2:19 pm
Ahab – All I was asking was for a decent amount of respect for people who don’t share the same opinion. Clearly you see name calling and disdain for a population as “fair game”. That you would even defend calling the average American “stupid”, or try to differentiate yourself from this population, given the obvious thought you put into most of your posts is again, very telling.
June 20th, 2009 at 2:20 pm
danm-
thanks man- I am with you on that- but I was prying into cvienne’s technical expertise- always trying to learn how these cat’s think
June 20th, 2009 at 2:21 pm
Constantnormal – I see your point with the sheeple comment, if what you’re telling me is that you don’t mean it as a derogatory description for everyone not sharing the point of view of the average poster here on TBP then I apologize.
June 20th, 2009 at 2:23 pm
@ahab (2:00)
I’ll take a shot at saying that FED FUNDS rates at 1% allowed the market to bottom…
Notice that there was basically a FULL RETEST of that bottom…The market started to rise at the very onset of the Iraq War…
THE LAST THING I WANT TO DO IS TO GET ANOTHER THREAD STARTED ON THE IRAQ SUBJECT…So I’m providing the next points for “speculative” purposes and NOT posturing about the “right’s or “wrongs” regarding Iraq…PLEASE LET ME BE CLEAR ON THAT…
Anyway, the following might provide some answers (or they’re complete bullshit)…
- Thinking back to that time, 9/11/2001 was still fresh in the mind of a lot of people…So maybe the idea of “regime change” gave the markets a sense of relief with regards to the terrorist argument…I’m just trying to think of things, NOT make political statements…
- Perhaps some thought back then that by invading Iraq we could get cheap oil going forward…
- At the same time, Greenie was slow in taking rates off of 1%
- So by the time the “fire started”, the markets had a life of their own…
- Creativity in the “securitization” markets led to the housing bubble
- The interenet finally got monetized to some degree…
- Etc, etc…
So I think if everyone really stopped to PAUSE, they’d have seen that things weren’t really that good…But when a HOUSING BUBBLE exists, it’s hard to extinguish…It “floats ALL boats” in an economy in that it provides JOBS on many levels of the economy (from bankers, to servicers, to construction, to manufacturers, to 2nd derivatives)…The STOCK MARKET was just an underlying reflection of that strength…
What I’m trying to say is that if there had not been the credit bubble (which led to the housing bubble), the S&P would NEVER have taken out the 2000 highs…
So now we’re basically deflating TWO bubbles…OR, on the contrary…we’re creating the GOVERNMENT DEBT BUBBLE…Which will mean that we have to deflate “3″ bubbles going forward, which will kill equities…
June 20th, 2009 at 2:23 pm
Buyer’s Fatigue?
http://jessescrossroadscafe.blogspot.com/2009/06/ennui.html
Ennui. That sums it up for me.
“Our boredom, our insipid customs, are the result of the political system.” – Balzac
Individual initiative is dead for now.
June 20th, 2009 at 2:27 pm
@Thor
IMO – the term “sheeple” has been tossed about so much on this site it’s not derogatory in the least…
Kind of like saying “Darn”…
Actually, I love hearing new terms that clever “TBP” bloggers toss out…My current favorites…
“Green Chutes”
& “Presstitutes”
I think I have to give leftback & MEH trademarks on those ;-)
June 20th, 2009 at 2:27 pm
thor-
so . . . if I said- “don’t underestimate the stupidity of some bloggers”- would that offend? Also- do you have an actual thought or question on economics are finance?
June 20th, 2009 at 2:42 pm
cvienne @ 2:23
but no real TA marker per se?
June 20th, 2009 at 2:50 pm
@ahab (2:27)
…in terms of technical analysis marker, please identify what sort of answer you’re looking for…
- Timeframe?
- market levels?
- economic output?
I have my opinions on all, but I need to focus your question…
June 20th, 2009 at 2:56 pm
cvienne,
see: http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=presstitutes
“Presstitute(s)” slipped into common usage/the public sphere, moons ago.. (:
June 20th, 2009 at 3:05 pm
@Thor 2:21 pm
actually, pretty much equal parts derogatory and self-deprecating. I can handle derogatory comments directed at me, especially when I do/have done something completely clueless (a not uncommon occurrence).
June 20th, 2009 at 3:07 pm
cvienne-
you had indicated there was a divergence for the low 2007 vs 2000 (MACD vs index) and that the same has not yet occurred for the low in 2009- I guess my question- and I know Karen is a candlestick watcher- is- was their a particular TA marker showing a correction in 2002 so that it would be assumed the market was most likely to go up???
and I guess the reason I ask is there were then and still are many bears who didn’t buy the run-up to Sep 2007 (Shilling for one I believe)- so maybe I am answering my own question- in that a true bear believed the market would come crashing donw becuase there was no confirmation that bear market was over?
whew! did that make sense at all?- if anyone else wants to give their opinions as well- much appreciated- I’m always trying to learn
June 20th, 2009 at 3:08 pm
Re: “sheeple” and the stupidity of the average American.
We, in aggregate, have behaved, and are behaving, like sheep. Launch a once appalling idea like torturing prisoners, or even holding a person without trial, and very few people will stand up against the pigs who want such policies enacted – despite well-reasoned arguments and laws enacted specifically against such behavior. In the world of finance, we trust our leaders when they tell us that redistribution of wealth is a bad thing, even as they redistribute the wealth of the lower classes to the very top 1% of the wealthy in our population. We all know that more punishment is in tore for us, as healthy but noxious green shoots grow from the fiscal policy and official negligence we’ve sown over the past decade or several decades, yet we continue as a culture, blissfully and willfully ignorant as our “superiors” water and fertilize them. We are told, and we accept, that we cannot have universal public health care (a mark of an well-run and wealthy society, BTW), because such a thing is too costly, unachieveable, and evil, despite the fact that every other industrialized nation on earth already has such a system, in one form or another (we don’t even have to design it, all we need to do is adopt one of those models already being used). We are prone to accepting the most obvious of lies — told in the public forum by people who do not deserve the respect of anyone employing even a modicum of intellectual honesty — as the gospel truth.
Sheeple is too mild a criticism.
June 20th, 2009 at 3:38 pm
@ahab (3:07)
It’s always an oversimplification to use one technical indicator as a market turn (especially when referring to “generational lows”)…That’s why I liked when Kass called a bottom in March, but I didn’t like the term “generational low”…
In any case…while we’re on the subject of 2002…
If you look at the MACD divergence versus the S&P, you’ll see that the WATERSHED actually came during the period just after 9/11/01…But the market continued to make successive lows thereafter (in July ’02 & October ’02)…Both lows were made on less of a dip in MACD (which constitutes a divergence)…
The best way I can explain the phenomenon is that every once in a while something comes along that SCARES THE SHIT out of investors…9/11 was once case…The October ’08 low (also, a HIGH VOLUME event that came in the aftermath of the Lehman collapse) was another one…
My feeling is that “post” such events, a predatory investment environment exists (which is CCOMPLETELY DIFFERENT from fundamentals)…So, since October ’08, there have been two more LOWS put in (each one with less of a MACD dip)…
The “monthly” MACD cross is a better indicator of major UP/DOWN swings in the market…As we speak, those lines are converging, but if they cannot cross, I’d expect another leg down…Currently, the “vector” on that cross would occur just about the last week in July ’09…So earnings are going to have to be pretty impressive, and/or some concrete data that the recession is over needs to take hold before then…OTHERWISE…This ‘priced for perfection’ market is going to start pricing in some fear again…
I think the behavior of the lower beta players is already reflecting that given the fact that it’s coming up on 1H’09 end and MM’s want to get the 1st Q & 1st H in the books with as little damage as possible…
I think it’s noteworthy to remember that 903 was the opening print on the S&P for ’09…In this economy, I’d consider that a FLAT 1st half could be considered a WIN…
June 20th, 2009 at 3:54 pm
cvienne-
thanks for the insight
June 20th, 2009 at 4:55 pm
@Thor: I can see why the “sheeple” term bothers you. I, for one, have mixed feelings about it becuase it sounds pedantic and self-righteous, but think that term is just one of frustration at those who don’t seem to THINK critically for themselves a little, or even at all, about highly important issues that affect their lives and all of our lives. We the People only have real power if we think a little and act together to demand real change. I realize that thinking can be hard, but let’s face it, in this day and age where a slew of information is at anyone’s fingertips who own a computer, there really isn’t much of an excuse for most people to be more informed. Heck, people today spend far more time planning their vacations than they do their own finances. There’s no excuse for that. The evil side of my Gemini dual persona almost thinks these folks deserve to be fleeced. I realize there are always going to be people who just don’t care about this stuff, but here’s the thing – - that’s how free democracies are destroyed – - the lack of a critcially thinking populace who are subject to being manipulated by all sorts of sheisters at every turn. The fact that I can literally to to just about any party in almost any social setting and most of the people there don’t have a damn clue about what’s going on (or what has gone on right under their noses) and don’t seem to really care as long as “American Idol” or their favorite sports team is on that night bothers me and others here a bit. Doesn’t it bother you at all? Again, this how countries are ultimately destroyed.
June 20th, 2009 at 4:56 pm
The only thing “generational” here is the distribution. We are near record levels of stock issuance and buybacks have plummetted. All the while, insider selling has notched up. This is a setup for a crash.
June 20th, 2009 at 5:05 pm
Not to mention the generational bond issuance next week. I guess they think there is no end to the appetitte for investment products.
http://www.cnbc.com/id/31454369
June 20th, 2009 at 5:12 pm
@Steve Barry: It’s all one big, no, one MASSIVE, double down bet, nothing more, nothing less. Banana Ben is hoping they don’t pull a two from the deck, while the dealer has 21.
June 20th, 2009 at 5:18 pm
mannwich-
good analogy
SB
won’t the big banks be instructed to buy? – with all the free money . . .er. . . liquidity
June 20th, 2009 at 5:42 pm
@ahab “won’t the big banks be instructed to buy? – with all the free money . . .er. . . liquidity”
SB says – “We are near record levels of stock issuance and buybacks have plummetted. All the while, insider selling has notched up. This is a setup for a crash.”
& “Not to mention the generational bond issuance next week. I guess they think there is no end to the appetitte for investment products.”
Good points…It seems to me that we have reached the point that every assect class on the planet is OVERVALUED compared to fundamental pricing levels…
In the past, it was usually fairly easy to spot the asset class (real estate, stocks, bonds, commodities), that was undervalued versus the rest…Since this great pump of money into the system, they’ve managed to inflate ALL classes at the same time…Whereas before, you could squeeze the water balloon and the water inside would slosh to another area, now, the balloon is so full of water that it is inflexible and has no room to slosh anywhere…
So probably the only thing that can happen is an outright burst…
June 20th, 2009 at 6:08 pm
Manwich – Totally understand – sheeple makes total sense when it refers to the “we” as global term rather than “them”. I was mistaken by assuming people who use the term were excluding themselves from the term. We’re all “sheeple” to a certain degree.
And yes, I’m am as mortified by you that the average American would rather text in their pick for this weeks American Idol than pay attention to the four foreclosure notices sitting on the coffee table. especially since on my way to work I drive by the studio it’s filmed at and see people lining up a day in advance to get in. I have traveled a fair amount in the last 10 years though and I see a lot of the same kind of behavior going on all over the world. Spain and Ireland’s fall from grace has been worse than ours, that means their behavior on the way up was just as bad as ours. Pick any country, China, Brazil, Russia, Canada – they all have their problems, both economic and social.
The unending “stupid American” comments from Ahab are just getting old. Yeah, it’s an open blog and it’s a free world, but jesus, we all know he thinks the average American is triumphantly stupid. Just give it a rest every once in awhile, it’s like a broken record. Nevermind the face that BH makes media appearances where they mention his blog – people see that, they log in here, and every post has at least one or two comments about how stupid Americans are. It brings the blog down.
And Ahab – to answer your question”Also- do you have an actual thought or question on economics are finance?”
What is the point of that question? Sometimes I do, sometimes I don’t, you’ve been on this blog a lot longer than I am and it’s pretty obvious that people often go on tangents, and people and posters don’t all have the same background or understand of economics and finance. Again, what’s the point of your question? Was that supposed to be a dig about how little I know on this topic? I think it’s pretty clear I’m a novice but I do at least make an effort to add to the conversation when I can. If my off topic and non-economic posts bother you and all the other posters on here then by all means, let me know and I’ll stop. I certainly don’t want to waste mine or anyone elses time.
June 20th, 2009 at 6:12 pm
And pardon me for making the suggestion in the first place. Clearly it’s a sore subject :-P
June 20th, 2009 at 6:31 pm
cvienne,
As a longtime reader and fan of Doug Kass I find the statement that he called the March bottom a gross oversimplification. He had some preliminary forays on the long side that were hideous. It all depended how much you allocated and when. If you bought a bunch of base metal stocks, like FCX, when he recommended them, you were down 25% in a couple of days. If you used 10%, no real harm. If 50%, you had to hold on even though they were going straight down. And had been for weeks. I was buying some of his picks that checked out, but there for awhile I thought I was toast. I didn’t get back to even until the rally was 20% off the bottom. Kass probably made a ton, but that old geezer has cast iron balls. I’m just glad I’m still standing.
June 20th, 2009 at 6:41 pm
thor-
dude- I don’t really give a damn what you say- that’s your biz- you jumped in on the thread with no added content- but instead you were telling us what the decorum should be- my suggestion would be to hang out on the blog a while and see how we all interact- then jump in and converse- but don’t presume to know how we should act-
all I have to say
June 20th, 2009 at 6:56 pm
Ahab – I made a suggestion not a demand, it provoked a lively debate. It cleared up the term “sheeple” for anyone new to the blog who might not be clear on it’s meaning and might take offense to it. Whether or not you and I agree that calling the average American stupid qualifies as verbal diarrhea, there’s a very good chance that you’ll at least be more aware that it’s going to give offense.
And that’s all I have to say
Cheers
June 20th, 2009 at 7:07 pm
@thetanman (6:31)
I’ve often been a fan of Kass myself…
I am quoting him by saying that he called the March low “a generational low” at the time…That kind of raised my eyebrows…
Subsequently, (about mid-April) he came out and was warning about a pullback…That was when the S&P was around 840…I don’t blame him for making that call, it seemed obvious (and has flummoxed a lot of value investors for two months now, as the S&P has continued to rise)…Soon thereafter, Kass bounced back to suggesting a 1k level on the S&P by the end of the summer (which was in line with his early March prediction)…
So here you have Kass saying “S&P 1k in July”…followed by “pullback at 840″, followed by return to original prediction…
It must be nice to be Doug Kass who now gets to be right on ANY call between, say 750 and 1,000 for the rest of the summer…
June 20th, 2009 at 7:19 pm
@thetanman
PART DEUX
But may main premise for referring to Kass was that 666 on the S&P was an utterly technical level…
1576 (S&P high) – 102 (1982 S&P low) = 1,474…x .618 = 911…1,576 – 911 = 665…
It also is the tangent line of the purple crayon that starts from the 1982 low and connects the 1987 low (if you look it on a regular channel – instead of a logrhythmic one)…
That being said…
One might preseume that the S&P could never ever trade below 666 if you wanted to assume the fibonacci levels always hold…But that sure wasn’t the case with ther NASDAQ which took out 2,059 to the downside rather easily in 2001 (and has only peeked ABOVE that level for brief instances since)…
…or the Nikkei…or crude…
June 20th, 2009 at 7:34 pm
logrythmic…TYPO
June 20th, 2009 at 7:36 pm
logarithmic…jeez…I can’t get that damn word out
June 20th, 2009 at 8:07 pm
thor-
bite me
June 20th, 2009 at 8:21 pm
I agree with Barry here though probably more with Steve Barry that when it does head down again that we will see new lows, not just a re-test. I think we will be lucky if we are out of recession by early 2010. Clearly from any of my recent comments I’m not buying into the second half recovery talk. I don’t think that real downturn (in stocks) is starting right now as BR noted, this looks more like back and fill, I wouldn’t be surprised to see stocks trend lower this week(s) as in the next couple, but before this rally is over I agree that more buyers will come in and I’m still expecting higher levels before the real turn down. Look for extremes in all the sentiment survey’s etc. My target there remains in the 965-1k range. We’ll see how we trend here though. I still think the credit deflation aspect trumps everything so a strong push below 880-840 would make me drop that higher level idea.
Interesting to read this whole brawl over the sheeple comment. I see both sides.
I’ve seen a lot of people complain also about American Idol on here over the last few months. If you really stop and think about why shows like this are popular it might make more sense and also help you understand the markets. There is an aspect of American Idol that can be compared to Ultimate Fighting which is “every man for himself”. You hear the hosts on the American Idol always say things like “you have to fight for your spot” or “battle” for the top. On a backdrop of a more negative social mood, it should be no surprise things like this are attractive for folks that feel that same struggle (high medical bills, gasoline, etc.)
I’ve also been thinking about this idea that there will be a new bubble. One problem that I have with the thesis that says the bubble will be blown in commodities/or stocks is that it seems you need mass cooperation from the (sorry) “sheeple” to make bubbles really work. Can you force folks to do that with commodities or stocks, I think the debt loads negate that. Won’t be as easy as housing with the mtg payment schemes and no money down purchases. I’m failing to see how a bubble in either would work and so far I’m not smart enough to see where else the bubble could happen. Stocks have been in a bubble anyway for a long time. In the end, it seems to me that credit deflation is going to make all the markets trade down, just like we saw last year.
Sorry if none of this makes any sense, been drinking for a few hours.
June 20th, 2009 at 8:38 pm
I see a tremendous amount of ideological desperation in the markets actions – all the Reaganites, Bushmeisters , and Supply Sliders (sic intentional) are in denial mode, still believing that all we have to do is fix the bad banks and voila’, we pick up where we left off, no more recession, back on the fast track to Nirvana-land.
They do not grasp deflation – even after Japan showed us the way.
It reminds me of the movie, Stand And Deliver, teaching the inner city L.A. high schoolers math:
“A negative (deflation) plus a positive (the Fed) equals? Fill the hole. C’mon. This is easy. This is baby stuff. What’s the matter with you guys? A negative plus a positive equals? Fill the hole.”
“Zero?”
“Yes. Zero.”
June 20th, 2009 at 8:42 pm
@ben22
Ben you make perfect sense…
Actually you sound just as coherent as when you’re stone cold sober…(I’m not being facetious there, I mean that)…
You have pretty much stuck to your 965 – 1k all along…then pullback…eventually LOWER LOW…credit deflation story…for as long as I can remember…
I think it’s nice to stick to your story…You seem sensible enough to me to allow yourself just enough flexibility to change if the tape dictates so…
So let’s use an example as say that the market HAS put in the top for 2009…If that were the case, it seems like a breakdown here under 880 would cause you to consider removing ONE FACET of your thesis 9the 965 -1k part)…But that wouldn’t change the subsequent ideas ( in fact it might expedite them)…
I’ll admit that I’ve been with you most of the way…However, as BR mentions in this thread, the tape hasn’t been behaving all that well this past week…It’s not technically broken yet, but coming into the end of the 1st half i’d expect the volatility to increase just a bit (between bears starting to smell blood and attack wolves trying to prey on using that to squeeze the market higher)…
It’ll be interesting…
June 20th, 2009 at 8:45 pm
@Winston Munn
“Fill the hole. C’mon. This is easy.”…
All I know is this…
“A flute WITHOUT a hole is not a flute…and a donut without a hole is, a DANISH”
I know this as well…
Two wrongs don’t make a right…But 3 rights makes, a LEFT!
June 20th, 2009 at 8:49 pm
It makes a lot of sense ben! And I’m impressed that you can be so lucid after imbibing for so long. :)
A pull back seems to be in the cards now. It almost seems as if it’s desired now, even by the bull camp (to a large degree). A continued relentless march upwards with no real “correction” makes everybody leery, except for the sheeple ( :) ). The question is whether the sentiment can stay positive during that process, or if people really start to get scared again. A lot depends upon the news/economic flow during that time frame. We all know there are lots of investors chomping at the bit to jump in after a correction. They’ll feel so smart to get in then and participate in the “new bull market.”
As to a new bubble, I agree with you. We’re too overloaded with debt at this point to make that happen again. Some are characterizing the govt debt rise as a new bubble, but I don’t think it really qualifies as a bubble in the way we usually talk about it. It’s not some great thing that everybody’s dying to get into, bidding up to the sky, with a subsequent unraveling when the gig’s up. It’s just an ever growing debt overhang that will bog us down for many, many moons. It’s not going to pop. It’s just going to weigh us down.
I also think that the whole idea that this market run up is a liquidity event is not accurate either. Far be it for me to argue with the likes of Faber, Fleckenstein, et al, but I think that Dr. Hussman’s explanation is much more plausible –
quote: “I’m similarly convinced that Wall Street has no idea what it’s talking about when it uses the word “liquidity.” While using the phrase “global liquidity” lends a further element of worldly sophistication, Wall Street still hasn’t the slightest idea what it’s talking about. The phenomenon that’s being called “liquidity” is nothing more than a combination of fiscal irresponsibility and risk blindness, and will ultimately prove itself to be the time-bomb that it is when investors begin to “re-price” that risk.”
http://www.hussmanfunds.com/wmc/wmc090615.htm
I think it’s just a good old fashioned bear market rally in stocks (very large due to the extremes of the market drop) and speculation in commodities due to the overwhelming “consensus” that inflation is upon us, and due to the false signals in the market caused by China’s stocking up process and stimulus program. But they’re going to be all dressed up with no place to go (no demand for all that production they want to do).
June 20th, 2009 at 9:06 pm
@cvienne
Anyone who quotes the Zen philosopher Basho surely must be taken seriously. (And I know. Quit calling you, Shirley, right?)
June 20th, 2009 at 9:12 pm
@OT
It’s funny that you used the comment “But they’re going to be all dressed up with no place to go “…
That was exactly the comment that I’d been thinking of when I wrote this comment before…
Then, in the middle of writing it, I forgot the phrase I was going to use to tie it all together…
That’s what I think of QE right now…It has made ALL ASSET CLASSES “all dressed up with nowhere to go”…Try to think of a time when you can remember where the FED basically had a ZIRP, yet all asset classes were overvalued…If you can’t, you have company, because I don’t either…
And yet if the Fed tightens now, YOU KNOW there will be a race to the exits (and probabaly precipitate the next leg of the crisis)…I don’t feel sorry for helicopter Ben…His choice to work out his “anti-depression” thesis helped get us where we are…
Some things are inevitable…
June 20th, 2009 at 9:24 pm
I still think all the “liquidity” is going to prop up bad debts. I speculated that the economy can probably support 150% Total Credit to GDP…that means 21 Trillion in credit. We are at 52 Trillion, so there is an excess of 30 Trillion in debt. If I am off by a lot, let’s say an excess of “only” 10 Trillion. That must be paid off, restructured or default. I doubt it will be paid off. The Fed may take it on, prop up zombie institutions and we have another Japan, but with worse fundamentals.
June 20th, 2009 at 9:37 pm
That’s not a bad guess…
June 20th, 2009 at 10:48 pm
ahab:
Off topic, but I thought of you when I read this. It’s a rather extreme example of what can happen to the unwary in NOLA. The housing project mentioned is next to the cemetary with Marie Laveau’s tomb. It’s generally pretty safe in the French Quarter if you stay where the people are.
http://www.nola.com/news/index.ssf/2009/06/man_gets_49_12_years_for_touri.html
Note the name of the sister at the end of the article.
June 20th, 2009 at 11:20 pm
Winston Munn Says:
June 20th, 2009 at 8:38 pm
I see a tremendous amount of ideological desperation in the markets actions – all the Reaganites, Bushmeisters , and Supply Sliders (sic intentional) are in denial mode, still believing that all we have to do is fix the bad banks and voila’, we pick up where we left off, no more recession, back on the fast track to Nirvana-land.
…but Winston…isn’t that exactly what Obama is doing? Are you calling him a Reaganite?
June 20th, 2009 at 11:20 pm
There’s been a question about what could be the “trigger” for the next leg down in the market. It just might be a popping of the China lending bubble:
http://www.nakedcapitalism.com/2009/06/xie-chinese-banks-funding-commodities.html
Some pretty ugly over lending leading to speculation in commodities and overbuilding of real estate. Where have I heard of that before? :)
June 20th, 2009 at 11:25 pm
The problem I’m seeing with the thesis of the market moving to 1000 or so by end of summer is that it has become such a widely accepted consensus, it seems. I mean just about everywhere, even among a very large part of the bearish crowd. Just how plausible is it that the market follows this script so predictably? I don’t know, maybe it is just that easy, but I seem to think it’s just too pat an answer.
June 20th, 2009 at 11:36 pm
“A more frustrating course of action would be to back and fill — but not collapse –and keep going up (albeit at a slower pace) after some digestion over the summer months. ”
My sense is folks are mostly already alligned with the above scenario: the market takes a breather, makes a run to 1050, breaks to new lows and THEN, as real value emerges, we may finally commence the next economic renaissance.
Perhaps the more vexing price action would be a sudden, strong, persisting move . Down seems logical but logic has long since departed. I’m going with Magic 8 Ball….
June 20th, 2009 at 11:52 pm
Tom
That’s my sense too. “Everybody” is thinking the same thing about the market’s course into the fall. The bears then think it’ll take a fall, while the bulls think, well I don’t know what they think. I guess they think it’ll just keep going up as the wonderful new economy arises from the ashes. It always does, doesn’t it? ;-)
June 20th, 2009 at 11:59 pm
Bruce wrote: “…but Winston…isn’t that exactly what Obama is doing? Are you calling him a Reaganite?”
I’m saying he buys into prevailing thinking is all – and relies on “experts” for his information.
My problem with Obama is that his inexperience forces him to rely on those whom he believes to hold solid pedigrees, such as Timmy (The Wiesel) Geithner and Larry (The Lip) Summers. They are both prime examples of the prevailing thinking, and as such do not seem to grasp that once the debt egg falls off the wall, no amount of super glue can restructure the loans to make Humpty a full-fledged Dumpty again.
John Mauldin has it right. We are searching for the new normal. And the new normal will have a 10+% savings rate and a 10% reduction in consumerism. All those 55+ year-olds getting new jobs aren’t doing it to buy a second home, a new Cadillac, or to buy a new laptop for the kids.
I’m betting the next bubble will be Soylent Green.
June 21st, 2009 at 12:36 am
I”m long and strong. Dow 12,000, corrects down to 9,500. Shorts lose their shirts (and pants).
Bernanke’s Boy
June 21st, 2009 at 12:43 am
Thor,
>> Ahab – it’s a very short hop from that kind of mindset to bigotry and racism
We do not pre-judge anyone on the basis of some immutable characteristic but observe people’s behavior. Many Americans jumped into Option ARM mortgages on homes they couldn’t afford and followed a lot of bad financial advice. Do you think “sheeple” isn’t descriptive?
If we don’t acknowledge that a great many people can be fooled, then by definition “there is no problem” and, in turn, there is “nothing to solve”. I’d say that’s doing the next generation of “sheeple” a disservice.
June 21st, 2009 at 6:23 am
Why is this time different so far and is still only a bear market rally at best?
First is that the S&P crosses above both the 50 and 200 day moving averages. Paramount is that the S&P then goes back and retests the lows, and if that happens, the the next year produces on average, a return of the magnitude of
An analysis of the prior twelve historical lows in the S&P reveals that it can be identified as a substantive low if certain conditions are met.
First is that the S&P crosses above both the 50 and 200 day moving averages. Paramount is that the S&P then goes back and retests the lows, and if that happens, and if that happens, the the next year produces on average, a return of the magnitude of about 25%.
So based on this historical data, this year we should be seeing the S&P around the 1200 level. Well then, why is this year different so far than the prior twleve historical lows when we have the major crossover as described above?
Because since achieving the conditions mentioned above, this year we have failed to go back and retest the lows.
The following are of interest as well:
June 21st, 2009 at 10:46 am
I went to a popular regional outlet mall yesterday. The parking lot had a multitude of good parking places close in and the spaces further out were substantially empty except in the most popular parking areas. The food court was mostly empty at lunch time. Had a great Vienna Sausage though.
I didn’t see a lot of people.
Some stores, such as Van Huesen, Izod, Bass and a couple others had drastic reductions (such as 50% off after 50% base discount). They had the most traffic. Eddie Bauer was still open but the merchandise looked thin and the prices were only so so. Others had minimal reductions, for an outlet mall, and looked empty.
The weather was fine. People don’t shop for recreation like they used to.
June 21st, 2009 at 2:02 pm
Goldman Sachs to make all-time record bonus payouts
http://www.guardian.co.uk/business/2009/jun/21/goldman-sachs-bonus-payments
Soup kitchen queues grow as US teeters on brink of new downturn
http://www.guardian.co.uk/business/2009/jun/21/surge-in-demand-us-soup-kitchens
Gotta love the juxtaposition of these two stories, eh? Ah yes, it’s good to be a bankster. Especially with Goldman Sachs.
June 21st, 2009 at 6:55 pm
Thor: you’re new, so am I, so instead of lecturing you I’ll just give my two cents.
“Sheeple” is a shoe that fits, although it does not fit everyone equally — most of the commenters here definitely should be excluded. Saying this does not make anyone a bigot. We’re not identifying any group with “sheeple”. Too many individual fellow-citizens fit, unfortunately.
Mannwich’s point about how countries are lost seems on target if you look at failed states of the past, long ago and more recent examples.
I’m a middle-aged American (very late boomer who identifies with Generation X), who went to public schools (some of the best in their areas), got technical degrees, and have had some success in my career. I observe that those same public schools are terrible now; the SAT was “recentered” in the early 90s, the teachers’ monopoly has indulged in three-year plan fads in cahoots with the textbook publishing cartel, and po-mo “PC” has taken its toll too.
After grade school, debt-fueled overpriced college education, even for those completely unsuited to scholarly life, has become almost an entitlement. The corporate comp model for administrators based on inflated and debt-fueled and -subsidized college prices is just one sign of the degree of this rip-off. This abuse of universities (and the consequent deprecation of vocational training) has degraded the value of higher education for everyone.
Then one gets a “career”, and finds (assuming stable households for children are formed) that one income is not enough, and kids are too expensive, too easy to defer. The corporations and the state favors everyone working, but since child labor is “out” in our part of the world — although just peachy for our exporter trade partners — we need to warehouse our future workers, keep them dumb enough to control, induce them to conform (this control system was the original purpose for public schools, not a beneficent desire for an educated electorate), then get them to work.
In short, the American people have been dumbed down, intentionally by many generations of elites and it seems all too willingly on the part of the victims. The sheeple have been hooked on debt-financed over-consumption, “me.com” isolation from traditional family and group connections, and junk TV/music/food.
China is coupled to us in a bad way, but its much larger population has proportionately more trained scientists and engineers. We can’t even build the Saturn V rocket, and we did it less than 40 years ago!
After the deflation from this biggest bubble ever ends, if I had to pick the country to put men on Mars, I’d pick China. The U.S. is pretty much finished, certainly as it was originally conceived, and in any case finished as the dollar empire, the sole superpower in the “unipolar moment.” We’ll have years if not decades before this is crystal clear to everyone of course.
So yeah, buyers fatigue. And “sheeple”.
- M2P
June 21st, 2009 at 7:36 pm
Wow, that was too long. Sorry.
Too negative too? My point is that things have gotten worse, not better, over the long, debt-fueled fake-growth era since the mid eighties (when Americans’ savings rates first hit zero). This seems obvious to me, perhaps others do not agree. Sure, we have DVD players and giant flat screens. But is our quality of life better?
The corporations who’ve maximized returns while benefiting from global wage arbitrage have not shared the wealth equitably — I write this as a committed anti-statist.
The government, which should at best be impartial umpire, or at worst the countervailing force sticking up for “the little guy”, has acted as the biggest corporation of all, and worse through the Fed and Treasury Department: as the ultimate Ponzi scheme enabler.
The sheeple have been shorn, or to be less inflammatory, the middle class has been degraded, in my lifetime and before my eyes. This cannot be good for the elites in the long run, although Latin America’s concentrated elites may disagree.
- M2P
June 22nd, 2009 at 3:36 pm
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