Rally May Only in 6th Inning ?
By Barry Ritholtz - September 15th, 2009, 6:47PM
My interview about the market with Aaron Task at Yahoo Tech Ticker is up at their site:
Rally May Only Be in 6th or 7th Inning, Ritholtz Says
Heesun Wee
Sep 15, 2009 09:12am EDTNoted bear Barry Ritholtz of Fusion IQ has been bullish on the market since March. Stocks have clawed their way back above 1,000 for the S&P 500 and the question remains: How much more to go?
I’ll get the video posted when I get back to the real world . . .
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September 15th, 2009 at 6:59 pm
“Noted bear Barry Ritholtz of Fusion IQ has been bullish on the market since March. ”
really??
wasn’t this supposed to be a bear market rally….gone after 20% or so gain??
since i am a regular reader of this blog, in all the articles, i have seen nothing but disbelief of this rally since april-may…..about how the fundamentals are broken…blah..blah…blah.
I have not seen any outright articles suggesting that market is way overvalued and it has to go down…but to be frank, i have not see any definite article which can give direction of the market(say like doug kass does).
but yes, i have seen hundreds of articles and charts….which suggests that rally was overdone after april/may.
September 15th, 2009 at 7:27 pm
I love it! Thanks, Barry!
“There’s nothing in the technicals that we look at that tell us we’re done,” says Ritholtz, who authors the popular blog, The Big Picture. “Based on history, which is no guarantee, we could be in the sixth or seventh inning of this rally, which means there still could be a ways to go.”
When Harry says this, the whole forum comes down on me. Now the big guy’s saying it. And, if you watch the vid, BR says he bases this on technicals AND fundamentals. Gee, where have I heard this before??
September 15th, 2009 at 7:33 pm
And…my beloved AAPL is flying AH! Looks like another screaming day upward for the COMP tomorrow! Isn’t this a great market? Once in a lifetime opportunity in the spring and yet so many missed it. You got an easy 20% by EOY, jump on board!
September 15th, 2009 at 7:45 pm
I’m confused – I thought you were 40 percent still in cash not that long ago, no?
September 15th, 2009 at 7:54 pm
HW: It is a great market. You buy while I get an opportunity to sell. Biryni feels the same as Barry. I’m not aqs much interested in the market as the economy as are others here. Read S. Das today ( whose work should be in the think tank). It’s a question of where your concern centers. The socio-economic outlook is grim so the markets levitation is time limited- when do you get out? I still remember Gavekal’s callous advice to invest in “platform” companies which was oblivious to the society at large and therefore bound to fail.
September 15th, 2009 at 7:58 pm
zell: I sell 20% higher from here. I’ve said that every day (although now it’s probably closer to 16% from here). After that, a 8-10% pull back to shake out weak hands and the rally continues. With the economy improving and the government guaranteeing it, why would anyone take the opposite side of that??
September 15th, 2009 at 8:00 pm
Harry – do answer Seattle’s question from the earlier thread.
Seattle Chill Says:
September 15th, 2009 at 6:13 pm
Harry, every buy-and-hold zombie looks like a genius when stocks are going up. Where are the posts where you were urging people to sell in August of 2008? If you rode this market all the way down, you are still well below break-even. Something like 20% below, in fact. Hmm…
September 15th, 2009 at 8:06 pm
Nope. I was very bearish heading into last fall. Played DXD, SDS, QID and others as the market cascaded. I wrote that on many different sites – MarketWatch, Yahoo, etc. I would have written it here had I known this blog existed at that time. Was daytrading a ton at that time. Even pulled out a chart I hand wrote for a client/friend from 2005 showing how I thought the Dow would drop to 6500 over the next 3-4 years.
That’s all behind us now. The crisis is over. The economy is on the mend. Even BR thinks stocks are correctly valued here (according to the video). How you could not be bullish since May is beyond me. I understand why people were skittish in March/April but in May it was increasingly apparent that the world wasn’t ending and was on the mend.
September 15th, 2009 at 8:21 pm
Yeah, they say two thousand zero zero party over
Oops out of time
So tonight I’m gonna party like it’s 1999
All we need now is for consumers to start buying, employers start hiring, homebuyers start homebuying and we’ll be fine. OK , who goes first?
September 15th, 2009 at 8:25 pm
wanger Says-
“With the economy improving and the government guaranteeing it, why would anyone take the opposite side of that??”
you are a colossal fucking idiot- don’t take it personally-
there are many of them out there- so i am not singling you out-
market quotes- 1929- 1931
http://www.chartingstocks.net/2009/02/great-depression-quotes-1929-vs-2008-have-we-learned-anything/
the real world always trumps the bullshit world H Wank
September 15th, 2009 at 8:29 pm
ahab: I would love a dollar, just a single dollar, for everyone who has pointed me to that same depression quote site since April. Unbelievable. Just let it go. This ain’t 1929 or 1931 or anything else. It’s 2009. The government has pumped more money into the system than has ever happened in the Western World. How can you even attempt to draw parallels to that? That’s foolish. And anyone who keeps thinking this isn’t for real is naive. Now put the quotes away or start paying me a dollar.
September 15th, 2009 at 8:30 pm
HarryWanger,
“That’s all behind us now. The crisis is over…”
How can the crisis be over and everything can go back to normal, although the deeper cause for the crisis hasn’t been eliminated? The total debt to GDP ratio is still at 375%, and the private debt to GDP ratio still at almost 300%. Nothing has changed with respect to that compared to the year 2007. These are debt levels at which the GDP can’t grow as much to generate enough income to even pay off the interest on the debt. All the “recovery”, which is supposed to happen now, is based on government deficit spending, by adding more debt to the mountain of debt in the economic system. Anyone who thinks this has been it is delusional. Massive debt deflation has been postponed so far, and it might be postponed further into the future by even more government deficit spending, until government debt has reached 200% of GDP or more, but there is even a limit to that. Also government debt can’t increase infinitely w/o causing heavy damage to the economy. Japan has already increased it’s government debt to almost 200% of Japan’s GDP. See how much it has helped them.
rc
September 15th, 2009 at 8:42 pm
h wanger-
man- you are stupid-
good luck when you lose it all-
hopefully- you feel optimistic when you are standing near the overpass with a sign that says “will work for food”
September 15th, 2009 at 8:52 pm
Sadly, BR may be correct.
I say sadly, not out of any desire to see mayhem and destruction, but because the longer we operate under the rules that drove us into the recent state of anxiety, the greater will be the forces that build up to re-enact the exact some thing (but in a different key) — and with the Feral Reserve tapped out (see the definition of Quantitative Easing in the Devil’s Dictionary item earlier in the day), and Uncle Sam unable to count on the Chinese and others to lend to the “lender of last resort”, we are likely to see a collapse that is similar to that of Iceland, but with no player or group of players able to bail out the US of Bananamerica.
And of course, it will all be a “complete surprise and shock, something no one could have predicted”.
Rally on, lemmings — the direction is upward.
Cvienne, will you be taking on any serfs at your plantation?
September 15th, 2009 at 8:59 pm
I thought Andy Xie’s “big down in earlier 2010″ sounded good but fresh voices who weren’t perma bearish have the spotlight now. What do you think HairyWang, is there another big down?
September 15th, 2009 at 9:04 pm
@BR
Hey BR… Did you identify whether or not that was a SOFTBALL GAME or a HIGH SCHOOL BASEBALL game you were referring to when you said “6th or 7th inning”?
September 15th, 2009 at 9:06 pm
Bsideriver: I have stated since the July pullback that the only further pull backs we would see this year would be 2-4%. So far that has been right on the money. The markets will rally through EOY – another (what is now) 16% from where we are. Then I expect an 8-12% pullback, or thereabouts, in early 2010 to shake out weak hands. Then we head higher from there. I think you will all be shocked next year when we are challenging new highs on the indices by EOY 2010.
September 15th, 2009 at 9:08 pm
cvienne: Nice to see you showed up here. Seems like the big guy and I are on the same page here. Now, I’ve been asked over and over why I post here. Well, pretty much seem to post the same thing that Barry is saying. Why is that odd to people? Better question is, since BR and I share the same opinion on the market and economy, why would the rest of the contrarians be posting here? Are they trying desperately to change BR’s mind? Works both way, kids.
September 15th, 2009 at 9:12 pm
@cn
I actually will be taking serfs… I’m an equal opportunity kind of guy, so no “I told you so’s”, or anything like that forthcoming… Just down home friendliness…
There’s even enough room to build a ballfield… It’ll be like “Field of Dreams”… Harry “Shoeless” Wanger will show up and we’ll play 6-7 inning ballgames with ghosts from the past :-)
September 15th, 2009 at 9:16 pm
BR posted his 80% equity allocation long ago.
September 15th, 2009 at 9:25 pm
@Harry
Harry… I’ll say this… I can “see” where you come up with a possible 20% up call (it’s plain and obvious in the technicals – ASSUMING NO BLIPS)…
…and you have to understand something… I SINCERELY HOPE WE GET TO WHERE YOU & BR THINK WE’RE GOING…
I’m simply unwilling to play that scenario… There’s too much downside risk (as I see it)… But understand, I’m actually ‘rooting’ for it to happen… Meanwhile, I do as I did today, put a short on at a technical level, get ‘stopped out’ if it goes just above… I’ll keep doing that, AND losing incrementally in the process…
At some point, there will be too much pressure and the macro picture will reverse… I was thinking about the scenarios just this evening while relaxing with a swim…
- The dollar will gain some traction (somewhere)
- Israel has figured out that Obama has thrown them under the bus and will take out Iran’s reactors
- A European Bank will fail
- Swine Flu
- The FED opens it’s books
- Big bonuses get paid out
- Q3 &4 ’08 earnings get supplanted by Q3&4 ’09 earnings, THEN we pass to REAL comparisons
- Rate Hikes
- Opposition to more stimulus
- & MY FAVORITE… DIVIDEND YIELDS on Treasuries will start looking better than DY’s on equities.
My point? at 1,200 (assuming we get there), your 10% ‘correction’ is going to end up being an AVALANCHE… After all, who wants to make 10% when you’re used to 50% or 60%… The PATH OF LEAST RESISTANCE at 1200 will be to annihilate equities…
September 15th, 2009 at 9:33 pm
cv- you freakin’ bull, i heard they are bookin’ you on CNBC
September 15th, 2009 at 9:37 pm
@Harry
& Harry… regarding this comment…
“Bsideriver: I have stated since the July pullback that the only further pull backs we would see this year would be 2-4%. So far that has been right on the money.”
I’m going off the top of my head right now, but the first time I ever remember seeing you post here was on 8/28/09 (when the market was topping out at 1039)…
I remember, because 2 days later I was goading you to make a BUY call at 1,018 (a 2% dip)… NO REPLY… At 997 (4%)… I asked AGAIN… No reply…
I’ll just assume that you KNEW, that that particular dip was going to take us to 991… (and of course, you bought that)…
September 15th, 2009 at 9:40 pm
@Wes
I’m a “Taurus”… what can I say?… Get Kudlow on the phone! They can but me in an octobox with Wesbury, Luskin, Wanger, & now, BR…
If you see me holding my nose, it’s not because I’ve been into the YAYOE…
September 15th, 2009 at 9:40 pm
Still waiting for a daily reversal. Until then go with the flow. Now if I get a the daily reversal and it starts trending then I’ll be looking for a weekly reversal. Then it’ll be time to start getting short. The halfway point between the 38.2 & 50 is 1067.79. Once the S&P hits that then the market should consolidate for a few days until it breaks out in either direction.
September 15th, 2009 at 9:41 pm
cvienne: I was referring to my posts elsewhere before I found this blog. MW, Yahoo, they all know Harry well and his buy the dips with no more than 2-4% pullbacks along the way. Good night.
September 15th, 2009 at 9:47 pm
this: “The government has pumped more money into the system than has ever happened in the Western World.” –HarryWanger
may be a good point..
though, with those Trillion of U$D, and equiv.s, how does that compare with the ~33+ Tn of ‘gross market value’, ascertained by the BIS for the EOY ’008, for OTC derivatives?
http://www.bis.org/statistics/otcder/dt1920a.pdf
this, note date, is, still, a decent primer http://www.fdic.gov/bank/analytical/fyi/2003/032603fyi.html
on, saidsame, ‘derivatives’..
past that, it should, at the minimum, bring into focus, the Paper v. Things – relative value *Rodeo..
exemplified, singly, here http://quotes.ino.com/chart/?s=NYMEX_SI.Z09.E&v=dmax
September 15th, 2009 at 9:51 pm
cv-
my oldest son is a Taurus – Mateo es toro
but, as far as i can tell, he is nothing like you
but you could be nothing like i think you are – i doubt it though, bro’
September 15th, 2009 at 9:52 pm
Some things to add:
1) No one can predict the future, so when you say this or that “will” happen, that means you are misperceiving the risk and the nature of “reality”. If you think the money pumping guarantees anything, you are wrong. It makes a certain outcome much more probable, not “a given”…
2) After massive declines, it is common for equities to rally massively. In order for another decline to unfold, this has to happen in order to shift the sentiment to a position where people become sure of the rally, thus creating the context for another decline.
3) Even when the S&P was 700, it was possible to look at a long term chart and guess that their was a high probability that there would be a rebound of the price into the declining moving averages at around 1100. That initial fall was too far too fast and the prices were so far blow their moving averages that a mean reversion such as what we are seeing was highly likely. The surprise was not that the market rallied hard, it was that their was no real substantial pullback on the way up.
4) In 1982, the DJIA was 1000. In 2007, the DJIA was 14,000. Yet, the overall prosperity and the purchasing power of the dollar has decreased markedly. The moves we have made and are making in equities are nominal gains… The SP500 can go to 3000, that doesn’t mean things are necessarily getting any better.
5) I have a question for H Wang… I know you consider this unlikely but what happens if we rally into the 1200 area on the S&P500 and then we start declining. When do you sell? Lets say we retrace to 1050, which would then be acting as support. We hold support. Then after a small bounce to 1100, we breakdown. Do you sell at 1000? Do you sell at 950? How about 850? or 750? Can you be wrong? And, where would we have to get to on the S&P500 for you to admit that you were wrong? Assuming, of course that the market does not continue to behave as you suspect it will…
September 15th, 2009 at 9:52 pm
Wes,
cv, prob., has Gemini rising..
September 15th, 2009 at 9:53 pm
Seems like the big guy and I are on the same page here
————
You think the economy is good and the stocks are going up because of the green shoots.
The big guy thinks the economy is wobbly but the stocks are going up because many (like you) think the green shoots are real.
Huge difference.
September 15th, 2009 at 9:57 pm
@MEH
Chris Rock – Horoscope
“Aries – you’re gonna die
Capricorn – you’re gonna die
Gemini – you’re gonna die – TWICE
Leo – you’re gonna die
Scorpio – you’re gonna die, fucking
&
There’s NO SEX IN THE CHAMPAGNE ROOM… NONE… OH, THERE’s CHAMPAGNE, in the CHAMPAGNE ROOM, but you don’t want CHAMPAGNE, You want SEX, & there’s NO SEX IN THE CHAMPAGNE ROOM…”
September 15th, 2009 at 9:58 pm
Eric says,
“I’m confused – I thought you were 40 percent still in cash not that long ago, no?”
You’re correct. He was down to 60% long about a month ago and he was invested primarily in techs(DELL). What I find strange is that Barry now says we may be in the sixth inning which means that the rally may only be 2/3′rds over. This implies the S+P would get up to a level of 1242 even though Barry said in his video from not too long ago that he thought the odds of the S+P getting to 1200 were very low. At the time, I believe he was looking for a top somewhere between 1050 and 1130.
September 15th, 2009 at 10:00 pm
@MEH-
did not click your links, but….
there could be a point when the inflation overtakes the deflation (if it ever was really losing the battle other than housing and wages, hmmm, pretty significant variables there) – but, only if mark-to-make-believe is continued to be allowed
which could result in Harry’s Bull (do i get a TM for that one?, I asked for one last night on the “Devils Bottom” TM – 666, but had not hear back on that – we know LB called that 50 nanosconds before the GS HFT machine, but that is another story…)
September 15th, 2009 at 10:02 pm
This implies the S+P would get up to a level of 1242 even though Barry said in his video from not too long ago that he thought the odds of the S+P getting to 1200 were very low
———
Just like credit scores, everything in finance is a moving target and any portfolio manager with a survival instinct will hedge his bets.
September 15th, 2009 at 10:06 pm
cv and MEH –
I hope no one dies twice, or makes a James Bond movie about it either
You Only Live Twice (1967-Sean Connery)
- Gemini rising…
September 15th, 2009 at 10:07 pm
@danm
well, if we do get to 1242, we’ve got a long wait because the “rising wedge” of that pattern wouldn’t get us there until around March 12th of next year…
September 15th, 2009 at 10:14 pm
Wes,
Singer, here: “4) In 1982, the DJIA was 1000. In 2007, the DJIA was 14,000. Yet, the overall prosperity and the purchasing power of the dollar has decreased markedly. The moves we have made and are making in equities are nominal gains… The SP500 can go to 3000, that doesn’t mean things are necessarily getting any better.” draws out, more fully, the point(s) I was alluding to..
much as you did, w/ “there could be a point when the inflation overtakes the deflation (if it ever was really losing the battle other than housing and wages, hmmm, pretty significant variables there) – but, only if mark-to-make-believe is continued to be allowed..”
past that, re: TM, I was under the impression they were on a ‘first come/first served’-basis ..others, can further clarify, if they wish..
~
cv,
no deets on the rising sign? you know you’re a closet http://astromoney.com/ -fan (;
September 15th, 2009 at 10:25 pm
@cvienne
When I see these targets being thrown around, it’s a get out signal.
I think governments will go bankrupt and assets will be privatized… so my goal is to be a player in that.
September 15th, 2009 at 10:32 pm
H Wank Says-
“I think you will all be shocked next year when we are challenging new highs on the indices by EOY 2010″
admit that you are a joke- a colossal spoof- if not you are as stupid as Brick Tamland in Anchorman-
consider a career in comedy writing
September 15th, 2009 at 10:33 pm
Read Satyajit Das on Prudent Bear- his piece in regard to Green Shoots. Then ponder the inf/deflation question. I don’t think the inflation scenario will win out this time. The printing presses will burn out this time. The currency can’t take the heat.
September 15th, 2009 at 10:35 pm
@danm
“I think governments will go bankrupt and assets will be privatized”
Well now THAT’s change that cvienne can believe in!
September 15th, 2009 at 10:36 pm
@MEH
Now I know where Wanger gets his levels…THANX!
September 15th, 2009 at 10:39 pm
@MEH
You see, I’ve found that when you pull your head out of Uranus, the path seems clearer…
September 15th, 2009 at 10:40 pm
“I think governments will go bankrupt and assets will be privatized’
possible scenario
September 15th, 2009 at 10:41 pm
The more I think about it the more I think the inflation/deflation debate is moot.
With deflation, many with huge houses and huge mortgages will lose their jobs and lose their livelihood.
With inflation, many with huge houses and huge mortgages will lose their jobs as well as their livelihoods.
September 15th, 2009 at 10:42 pm
I’ll bet the second stimulus will be in the works when the banks are forced to come clean (eventually). See: http://seekingalpha.com/article/161347-why-i-m-short-so-many-financials
September 15th, 2009 at 10:45 pm
I can’t wait to see the impact on GDP when rates on short term securities go from 0% to 4%. It should mean a few hundred billion, at the same time government reduces its injections because it figures the economy has bounced back.
September 15th, 2009 at 10:45 pm
@danm
…and with a central bank that insists it can engineer a solution for it all (waffling around back and forth)…
“many with huge houses and huge mortgages will lose their jobs and lose their livelihood”
FOR THE NEXT 20 YEARS (instead of 5)…
September 15th, 2009 at 10:45 pm
Bernanke says recession over. Time to get out of the market ?
Bernanke wrong second time?
Fresbee
September 15th, 2009 at 10:46 pm
but i am glad barry has atleast given the name of the stocks he is long…
of course if the market reverses…he will say his stops took him out.
one thing i have learnt watching the market: smart people make more money by selling advice/products/services than trying to use their advice with their own money .
i still remember doug kass was buying financials in dec 08.
and of course how can i forget barry’s own “bear market rally” is expected any day/week. I did not know bear market rallies may go 50% higher or more.
whats working right now which was a big unknown in Feb/march …govt taking over the private loss into its own balance sheet(couple of trillions…and i can show you profits in future).
if anyone in the world really beleives they can time the market….i would love to pay money to subcribe for some real time advice….if they can make even 6% return in a year, they will be billionaires due to the subscription fee…..but its not going to happen…..since nobody can understand a market which has a margin of error of 50% (it can go down or up 50% with fundamentals remaning the same)
September 15th, 2009 at 10:47 pm
I made some changes to the GA Alpha portfolio last night.
New portfolio as it stands today is posted at:
Portfolio Changes
You can follow the changes to my portfolio on a live basis by subscribing the email at the site investing contrarian.
Fresbee
Fund Manager
September 15th, 2009 at 10:48 pm
cv-
you freakin’ astrologist
ok, should i go for a good comment from the master of cynics? No, I will stick with the James Bond theme…
“The face of the coin has been debased as fast as its value. First the faces of gods were on the coins. Then the faces of kings. Then of presidents. Today it’s only paper. The miracle is that you can still buy things with it.” ~Ian Fleming, From Russia With Love
September 15th, 2009 at 10:56 pm
techy-
good observations
September 15th, 2009 at 10:58 pm
The way I see it… at this point… (ESPECIALLY if you’re someone who is ‘skeptical’ of the fundamentals underlying the rally at this point – but THINK it can go higher because you incorporate things like “momentum” into your models)…
You can WHORE YOURSELF OUT for another 20%… But it’s like buying a whore a hit of crack for a blowjob…
It’s not helping the whore, but at least you get a blowjob out of it… Congratulations!
Kind of reminds me of Mozillo & Company…
September 15th, 2009 at 11:16 pm
Whenever you are in a world where the old laws of valuation are said to no longer apply, where there is now a recoverless recovery, wherer optimistic handwaving seeks to deflect reality, you know you are in a bubble situation. Know what is hapening, play the ride, but don’t believe the hype. Personally, I parachute out at DJIA 10,000. Bueno suerte!
September 15th, 2009 at 11:19 pm
HW Says “I think you will all be shocked next year when we are challenging new highs on the indices by EOY 2010.”
I for one, would not be shocked at ALL if this happens. Is there ANYONE here who does not agree with that statement after what we’ve seen since March?
September 15th, 2009 at 11:23 pm
Cvien, how much more crude are you going to get?! Well, at least you are emphatic and have standards. But why converse with illogical people?
Wes, I’m with you on the James Bond theme… especially Daniel Craig.
September 15th, 2009 at 11:26 pm
Bear Market Rallies Can Go 50% higher or more… SP topped in 1500′s in 2000 went to 700′s in 2003 and then to 1500′s again, then to 700 again in 2009…
Also, see the huge ups and downs in the DJIA b/w 1920-1940
http://stockcharts.com/charts/historical/djia19201940.html
September 15th, 2009 at 11:29 pm
techy,
“whats working right now which was a big unknown in Feb/march …govt taking over the private loss into its own balance sheet(couple of trillions…and i can show you profits in future).”
With 40 trillion US-dollars of private debt out there, moving 2 trillion from private balance sheets onto government’s balance sheet won’t do it at all to solve the debt crisis in United States. They would have to take over a lot, lot more.
If there are “only” 38 trillion dollars of private debt and assuming that 50% (I think, this is a generous assumption) to 75% of this debt is owed by net debtors, further assuming an average interest rate of 5% on this private debt, that still makes required interest payments of 950 billion to 1.42 trillion dollars a year. Now assuming that the whole additional income from GDP-growth goes to the net debtors, which is not realistic at all, a nominal GDP of 14 trillion dollars would have to grow by 6.5 to 10% a year only to pay the interest on the private debt. If 50% of the income from GDP-growth goes to the net debtors, GDP would have to increase by 13 to 20% a year. This whole estimate doesn’t even take into account that interest on government debt has to be paid from GDP-growth as well.
So what about taking over 10 to 20 trillion of the private debt onto government’s balance sheets, instead, to really bring private debt down to sustainable levels? How realistic is that? What would that do to government debt to GDP ratio? I am not even talking about the moral hazard dimension here. Just the math.
rc
September 15th, 2009 at 11:35 pm
I hate to admit it but Harry could have a point, but not his.
Think about it. The old wisdom was the value of a company was the present value of it’s future income stream. The discount factor is pivotal.
When the fed pumps money to its bankster cartel at 0% interest, that’s the discount factor they can work with. Then P/E can become astronomically high and the valuation can still be rational.
Then the banksters play rationally, but anyone that has to play with a rational cost of capital gets F**KED.
BananAmerica.
The only question is when the fed jacks interest rates to reign in inflation? Then the bubble pops.
But the answer is they won’t. Not to the banksters anyway. Other rates can go crazy, while the banksters still get it at 0%.
The economy can tank and everyone else can eat cake, but the c*s*n* is still open bidding equity asset prices up to otherwise irrational levels.
You will never ever see the fed raise rates to the banksters again.
September 15th, 2009 at 11:41 pm
alfred e,
“When the fed pumps money to its bankster cartel at 0% interest, that’s the discount factor they can work with. Then P/E can become astronomically high and the valuation can still be rational.”
If it were as easy, why hasn’t it worked in Japan then?
rc
September 16th, 2009 at 12:05 am
alright- just got done watching last episode of Entourage- poor Lloyd-
season finale of True Blood was good too- bizarre- speaking of bizarre-
there is something to be said for markets continuing on long after the “truth” is out- that’s why the efficient market hypothesis is bogus- it is merely people trying to get in on the action- g a m b l i n g- because in the end- people aren’t too bright- and the dumbest ones get in at the tail end and lose- because they were under the impression that it was a lock- a sure thing- no way to lose-
it is a set-up- a contrived conveyance for money to go from the schmoes to the market makers who have been subsidized by Uncle Sam himself-
without uncle sam- there is no market- collapse- end game
September 16th, 2009 at 12:08 am
5) I have a question for H Wang… I know you consider this unlikely but what happens if we rally into the 1200 area on the S&P500 and then we start declining. When do you sell? Lets say we retrace to 1050, which would then be acting as support. We hold support. Then after a small bounce to 1100, we breakdown. Do you sell at 1000? Do you sell at 950? How about 850? or 750? Can you be wrong? And, where would we have to get to on the S&P500 for you to admit that you were wrong? Assuming, of course that the market does not continue to behave as you suspect it will…
Good questions, but one could also have asked these questions of those who stayed short at the Mar bottom, and have continued to hold to that position as the market marches higher and higher.
I’m with Barry here as I understand his position. I am long-term bearish here based on fundamentals and valuation (I think a multi-year trading range like Japan in the 90s is likely as we deleverage) but it seems obvious as can be the intermediate-term trend is up with no obvious resistance until 1100-1120 (next major Fib level) and 1200 (retracing the entire post-Lehman crash) so 6th to 7th inning sounds about right being at 1050 coming from 666.
FTR, I’m about 60% equities/40% cash here after having trimmed just a bit at S&P 870. I’ll look to trim more at 1100 and even more at 1200. On the downside, I would consider the following levels as it being “wrong” to be intermediate-term bullish. Some things I’ll be watching for. 50 DMA crossing below 200 DMA. Price crossing below 200 DMA several days in a row. Taking out 950ish which was clear resistance recently taken out, and the final line in the sand at 870ish.
Until then, all the BS aside, fact of the matter is Harry is right and has been right. There is definitely a bias in these comments. I don’t recall the same tone towards someone that rhymes with Harry, and that position has to be getting killed.
September 16th, 2009 at 12:14 am
mike c-
and explain why- not just resistance levels- but why should the market go up- putting all the TA bullshit aside
September 16th, 2009 at 12:27 am
and explain why- not just resistance levels- but why should the market go up- putting all the TA bullshit aside
Why does that matter? What are we trying to do here? Make money or win a debate? I don’t know about you, but I’m in the market to make money, not score points with impressive arguments, or snarky comments. Who gives a flying f*** about that?
There is a dichotomy here that is unresolvable in real-time. The market is a forward-looking discounting mechanism. That is why looking at a P/E ratio based on depressed trailing 12-month earnings is not only stupid, but has been a money loser for those clinging to it to justify their positions. The market is clearly discounting a robust profits recovery. Is it right? I don’t think so. I think Rosenberg has it nailed. But there is another view:
http://www.oakmark.com/opencommentary.asp?commentary_id=534&news_from=c&fund_id=0
“1) Valuation
For us, everything starts with valuation. The S&P 500 trades at about 900 with operating earnings in 2009 expected to be in the $60s. Many analysts are using those two numbers to claim that the market has recovered so much that we are already back at a normal mid-teens P/E ratio. I can’t argue with their math. However, the unanswered question is what level of earnings is normal. If 2009 earnings represent a “normal” base from which mid-single digit growth resumes, then expected returns from an investment today would be several percentage points above government bonds, which is consistent with historical averages. On that basis, one could conclude that today’s market level is in the ballpark of fair. But remember that S&P earnings back in 2006 were nearly $90 and that typically when a recession ends, earnings recover much more rapidly than would be implied by normal earnings growth. In our view, the biggest question concerning earnings is when they will recover, not if. Starting from a “normal” P/E level, we believe the market should increase from here more or less as much as earnings recover, which would lead to above-average returns.
3) Lots of skepticism
As value managers, we’re used to having people disagree with us. In fact, we prefer it that way. The consensus opinion, almost by definition, is usually reflected in current prices. So when we differ from consensus, we’re excited by the opportunity. We believe that today’s consensus stock market opinion is that the magnitude of the market increase since March has not been matched by fundamental improvement in the economy.
Now I disagree with that view, but there is the bull fundamental case. Just my opinion, but the comments here are a bearish echo chamber, and I’m getting a kick out of everyone who is questioning when Barry said what and what is exact position is juxtaposed against what blog post he put up when. If there is one thing I’ve learned over the years it is that SUCCESSFUL investors/traders are FLEXIBLE. They don’t get locked into one rigid worldview that cannot ever be changed based on new information.
September 16th, 2009 at 12:39 am
This whole advance off the March lows very much resembles a bear market rally. Bear market rallies are the most vicious rallies for shorts. There are no pullbacks of any degree and it’s just an unrelenting move higher.
This has been a freight train for sure and I’ve not been a part of the last 150 pts higher at all…and it sucks. But, as of right now, there is MUCH more downside risk in this market than upside risk. I’m seeing ever increasing RSI divergence on daily and intraday charts and the longer term Moving averages (20mo. MA and 89 Week MA) are all just overhead. If you’re long this market at this point, I think you’re playing with fire. I’m mostly on the sidelines, but the next trade is going to be a short trade.
This remains a dollar/reflation trade. If you’re long the stocks, you’re basically short the dollar and betting that the government has this all figured out. Good luck with that.
September 16th, 2009 at 12:41 am
Here is the six month chart for DELL. Not too shabby.
http://finance.yahoo.com/q/bc?s=DELL&t=6m&l=on&z=m&q=l&c=
I agree with Mike C. Markets are for trading- the debates are sideline stuff. That said, the markets need the sideline noise and the people in the bleachers- can you say !Carnaval!
September 16th, 2009 at 12:58 am
This whole advance off the March lows very much resembles a bear market rally.
@ Andy T
I’m inclined to agree, but the fact is there is some data that conflicts with that view:
http://www.tradersnarrative.com/new-sp-500-high-greeted-with-breadth-divergence-2978.html
The last time we saw the stock market behave with the same single minded intensity was in the summer of 2003. And that set the stage for a cyclical bull market, of course.
http://www.tradersnarrative.com/timing-the-stock-market-with-discretionary-spending-2935.html
http://www.tradersnarrative.com/coppock-curve-continues-to-give-all-clear-signal-2845.html
http://www.tradersnarrative.com/lowry-researchs-intermediate-trend-buy-signal-2832.html
http://www.tradersnarrative.com/sp-500-buy-signal-thats-worked-since-1950s-2810.html
http://www.tradersnarrative.com/comparing-flag-formations-then-now-2627.html
My own view, trying to make sense out of it all, is that we are probably coming out of the recession but not going into any sort of “normal business cycle” but instead some very short duration “government stimulus cycle”. We could have a 6-18 month cycle where maybe corporate profits continue to surprise to the upside (which is the ONLY THING that matters to stock prices) while statistics like unemployment stay really bad (like the 33-37 rally). Is it long-term sustainable? Most likely not. I just don’t see how you can have an overall economy where most of the pie goes to corporate profits, and the common man is left with “let them eat cake” in terms of unemployment and contracting wages, but it sure could last another 12 months.
September 16th, 2009 at 1:01 am
@MRegan
“That said, the markets need the sideline noise and the people in the bleachers- can you say !Carnaval!”
I never thought I would quote Johnny Rotten but your line made me think about his comment on audiences:
I’m not here for your amusement, you are here for mine.
Goldman Sachs markets are for trading for Goldman Sachs.
September 16th, 2009 at 1:07 am
http://www.bloomberg.com/apps/news?pid=20601087&sid=aw8uTbmuJpwQ
“The next six months seem reasonably easy to anticipate: no inflation, good economic growth,” Greenspan said. “Things are turning and it looks good for the near term.”
We are doomed.
September 16th, 2009 at 1:15 am
Mike C,
“They don’t get locked into one rigid worldview that cannot ever be changed based on new information.”
Actually, I am interested in what “new information” is supposed to be out there that would support a longer-term bullish view on the stock market, i.e., let’s say a time frame of 5 to 10 years. Currently, I only see a strong speculative momentum supported by hope for a strong recovery. This hope is stimulated by growth that has been induced by massive, worldwide deficit spending, but that isn’t self-sustaining, as well as by government propaganda about how everything will be just fine again. The propaganda is reflected here in the views of Harry and likes. How long the speculative momentum will last is very difficult to predict. Perhaps it will last as long until there is a new flood of bad news coming out, e.g. when bad debt can’t be hidden anymore, or unexpectedly weak earnings, or a trigger event so that expectations and reality aren’t reconcilable anymore. For the long-term view, reality regarding the economic state of affairs matters, though.
rc
September 16th, 2009 at 1:21 am
for the benefit of those looking for a fundamentals perspective on why the markets would go higher on negligible earnings, and declining revenues — here is one answer: where else can money go? debt instruments are yielding zilch, commodities are suffering the ravages of deflation and a shrinking global economy.
While a lot of money is doubtless avoiding what it sees as ridiculous risks, the higher the markets rise, and the longer they sit making nothing, the greater the urge to ride the momentum. The constant barrage of green shoots mania is designed to exploit this anxiety.
But as cvienne says, once Treasuries start showing reasonable dividends, the money will flow out of equities at the slightest provocation, in an increasing torrent. And with the USD dropping lower and lower, pretty soon we will start seeing inflation — or at least a reasonable facsimile of inflation, as imported goods rise in price.
And even if the Feral Reserve does not want to raise rates just yet, if the USD is dropping fast enough, Treasuries will follow suit, and voila! Yield sufficient to draw money back from the uncertainty of equities will result. And that is exactly the nature of the club that the Chinese have, with their almost $2T in Treasuries. All they have to do is dump a chunk of them, and the resulting splash should crater the US equities market, and throw all that lovely green shoots nonsense into the dust bin.
That’s one way things could play out (I think). There are doubtless others.
Persons who have a beef with this scenario are welcome to point out the flaws and enlighten me.
September 16th, 2009 at 1:24 am
I also like the Greenspan indicator. He has never been right for very long.
September 16th, 2009 at 1:39 am
constantnormal,
“for the benefit of those looking for a fundamentals perspective on why the markets would go higher on negligible earnings, and declining revenues — here is one answer: where else can money go? debt instruments are yielding zilch, commodities are suffering the ravages of deflation and a shrinking global economy.”
I don’t understand this explanation. What is the exact mechanism supposed to be here that drives prices of stocks higher? When I exchange money for stocks someone else exchanges stocks for the same amount of money at the same time. The holder of stocks and the holder of money just switch places. It’s a zero sum game. Markets aren’t containers in which money is filled or from which money is drained. Markets are just an interface between buyer and seller. Thus, what you say, how can this be a valid explanation?
rc
September 16th, 2009 at 1:42 am
Keep on buyin’ folks. I’ll keep on loading up on SDS puts with expiries in 2010. Call me a contrarian fool if ya want. I was the one who went short on the market in April 2008. Folks laughed. Called me a dingleberry (and worse). Then they became very attentive, at least until last March. Now I’m the dingleberry again.
Gotta love the lemmings. They’re makin’me rich :-)
September 16th, 2009 at 5:50 am
good morning everyone-
from Robert Reich-
“Let’s be clear: The Street today is up to the same tricks it was playing before its near-death experience. Derivatives, derivatives of derivatives, fancy-dance trading schemes, high-risk bets. “Our model really never changed, we’ve said very consistently that our business model remained the same,” says Goldman Sach’s chief financial officer.
The only difference now is that the Street’s biggest banks know for sure they’ll be bailed out by the federal government if their bets turn sour — which means even bigger bets and bigger bucks.
Meanwhile, the banks’ gigantic pile of non-performing loans is also growing bigger, as more and more jobless Americans can’t pay their mortgages, credit card bills, and car loans. So forget any new lending to Main Street.”
http://robertreich.blogspot.com/
September 16th, 2009 at 6:45 am
ahab says @ 12:14
and explain why- not just resistance levels- but why should the market go up- putting all the TA bullshit aside
______________________________________________________________
mike c responds-
“Why does that matter . . . The market is a forward-looking discounting mechanism . . . The market is clearly discounting a robust profits recovery.”
well- if i was fresh from getting my finance degree- which was many moons ago- i would agree with this thought-
but i now view it as being naive –
there is a concerted effort to support asset prices- whether equities or real estate- so you can talk about the market clearly expecting “robust” expectations- but it’s all nonsense-
was the climb to Dow 14,000 in 2007 because of “robust” expectations- ridiculous and laughable- considering that the storm clouds were circling overhead and the dangers were apparent-
my guess is that the market is attracting the likes of people like H Wanger who says-
“With the economy improving and the government guaranteeing it, why would anyone take the opposite side of that??”
so the TBTF precedent has been cast in stone- and people are riding it for what it is worth-
so be honest with yourself and don’t break out tired old lines like the “market is discounting for robust profits”-
next you will be telling me about the EMH-
but i am always up for a good chuckle
September 16th, 2009 at 7:55 am
The only question is when the fed jacks interest rates to reign in inflation? Then the bubble pops.
But the answer is they won’t. Not to the banksters anyway. Other rates can go crazy, while the banksters still get it at 0%.
————–
And if we get to that point, production drops like a rock, companies disappear and inflation soars. The S&P will not go up in such a case because most of it’s value is intangibles, not hard assets.
So gvoernements will have to raise rates at one point, if not, it won’t be pretty.
September 16th, 2009 at 8:02 am
The holder of stocks and the holder of money just switch places. It’s a zero sum game. Markets aren’t containers in which money is filled or from which money is drained. Markets are just an interface between buyer and seller. Thus, what you say, how can this be a valid explanation?
—————-
Yes, and someone is selling and keeping that gain in cash. The others are holding onto paper gains which might not exist if they all tried to sell at the same time.
That’s what happens at peaks. We value all shares at the same price and brag about our wealth when in reality it’s only the last trade that is really worthe that value.
September 16th, 2009 at 8:09 am
from Yahoo .. “taopraxis – Tuesday September 15, 2009 10:39AM EDT .. The bull/bear arguments are very telling. What do they reveal? That the stock market is rife with gamblers who do not understand even the basics, e.g., the number of buyers and sellers (bulls and bears) is always exactly the same: 50%. Every sucker who thinks he’s going to prove smarter than the other suckers has forgotten the first rule of investing: Don’t be a sucker! I was a trader for many years. One fundamental rule is that most trading profits, whether short term or long term, derive from the main trend minus the vig. Stocks have been going nowhere for over ten years. Get it?”
danm “I think governments will go bankrupt and assets will be privatized… so my goal is to be a player in that.”
root-cosmo had to run that one 2or3x
I started a posting window that almost smashed ..
TBP9.5 how about a penny to post
Thor 11:19p wonders/shocked if “new highs on the indices by EOY 2010″
Mike .. me to debate .. here to help kids, mom & pops reading this stuff for nest eggs & replentishment .. good one beaufou
made it to the nightime bottom .. no refresh yet .. 6:45a
I went off to read what Yahooers were thinking/writing .. not always the same thing is it .. “talkin their book” .. one wonders how market research works in this new age .. back to Yahoo capture above “Understand BASICS” .. and then the thread that resulted here at TBP ..
the basic question I’m wondering is owning stocks (in the end game) going to give any of you control over the company? Is that the end game to get a check as/on the BoD, to force dividends on the shares you have? Did that happen for the BigBanks in Sept08? Me thinks that many in here only need the masses to fund their fun cash or as pointed out by someone (not going back up to credit) make a buy/sell commission
now I gotta get into doing something else for me too .. this game – Nope .. and lucky for you’all .. whatever I do is linked to you’all .. what a game .. yuck .. reminds me of a movie too .. ie War Games
September 16th, 2009 at 8:12 am
to be honest as time passes i think more like harry and mike c. , hmmm, learn something new everyday………….someone posted a link about the fall of the roman empire and it got me thinking……..the jist of the fall was the contnious devaluing of coinage thru less and less real silver or gold in the coins and higher taxes………..the rich stayed rich and were the only one with real access to gold bullion which was the real currency………….since for the most part none of us uses coin, gold or dollars just electronic blips it seems to me they are doing it thru ACCOUNTING, they have changed accounting rules for banks, now reits, yet, not the people………….and the USA is not alone in this, so you stay long until they raise rates or raise taxes, which won’t happen until we have most likely job growth, so this thing could go on for a few years……….as a whole can we support the debt, heck no not by a long shot, can they push it out for a few years, hell yes, especially if that is what the world wants, for me it is still copper crude and cash tell the story, it seems big money despises cash and wants copper and crude…………..in the past financial crisis brought about war, perhaps now it’s a war over the last few pieces of prime real estate in a world with 4 billion capitalist
September 16th, 2009 at 8:24 am
here is a graphic concept of this world .. if I fab it .. can’t get paid for it so why .. maybe will anyway
twisted 90degrees (not sure if it turns into some smilee)
top of the pyramid is new money | bottom old money
| is the average joe & jane 6 pack and bill & brenda wine glass
I’m thinking Bill Gates is now in the point of the bottom diamond .. managed to create a system that trickle down is real for Microsoft .. of course this world is fluid and the diamond is spinning all the time
September 16th, 2009 at 8:27 am
now I gotta get into doing something else for me too .. this game – Nope .. and lucky for you’all .. whatever I do is linked to you’all .. what a game .. yuck .. reminds me of a movie too .. ie War Games
————–
Everybody is still focused on the world as it is now and how it has been over the last couple of decades.
I think there is too much capacity in nearly every sector and the longer governments keep rates at 0, the more out of whack the system will get. They are just keeping the dead weight alive longer and this dead weight is stopping efficient companies from being born or thriving.
So in all of this, I just want to stay employed.
I think the US is following the UK’s footsteps. And when the UK hit a wall, Thatcher came into power and sold off public assets. Something tell me that when the paradigm shifts, that’s what we will be going through over the next couple of decades.
September 16th, 2009 at 8:28 am
guess I have to describe it .. no smilee .. just gone
{ | } does this do it .. sorta fat bottom pyramid .. if so perfect
September 16th, 2009 at 8:44 am
greg-
alright- i give up- what are you talking about
September 16th, 2009 at 8:44 am
EricTyson Says:
September 15th, 2009 at 7:45 pm
I’m confused – I thought you were 40 percent still in cash not that long ago, no?
reply:
———–
I have to agree with your tone and raise a question or two here, myself. Surprise … I don’t always disagree with your assertions. I also agreed with your take-down of Case Schiller. My home in the Heartland only recently declined in value and it will recover quickly when the foreclosure inventory burns off in a couple of years. CS is a great index if you live in Crazytown, but not so good elsewhere.
Back to BR: A cynic might see a man responding to a bit of pressure. To his blog trolls, such as you and me, he’s Mr Realism and a sprinkle of Mr Magic Chart. To his current and future customers, he’s a man who recently expanded his investment business. All expanding business needs new customers to make the expansion appear to have been a good idea. Thus cometh the economist speak … It could be only the 6th inning and all this reality based analysis might not be important a this time. Yes, the economy and stock market have decoupled, but the market may run a lot more. And so goes the CNBC business model of ‘read the headline and ignore the story’ starting to take form.
For the record, the only stock tip I took from BR cost me money. Last year I accepted his advice and tiptoes into the waters at precisely the wrong time.
September 16th, 2009 at 9:06 am
@rootless_cosmopolitan September 16th, 2009 at 1:39 am
“The holder of stocks and the holder of money just switch places. It’s a zero sum game. Markets aren’t containers in which money is filled or from which money is drained. Markets are just an interface between buyer and seller. Thus, what you say, how can this be a valid explanation?”
By your model, the equities markets can never change price. However, like all markets, there are more than buyers or sellers, there are also holders. With a more-or-less fixed number of shares out there, when money moves into stocks (i.e., more people buy them than sell them), the price goes up. And wherever the money came from to buy stocks (let’s say they sold gold to buy stock, for the purposes of argument), the price of that goes down (fewer buyers driving prices up) as money leaves that pool.
This is really a ridiculous discussion we’re having. We must be suffering some definitional dissonance.
However, I’m relieved to find, that since it’s all a zero sum game, I can not lose money merely by moving it around. Now I need to work on convincing my spreadsheet of that.
September 16th, 2009 at 9:06 am
For the record:
On one hand you see the Fed still has about $17b in pump money and has stated it will continue with the pump until the end of October. It is still monetizing the debt by buying agencies and other securities from foreign governments with the promise they use the proceeds to purchase UST debt, thus keeping rates down while hiding the direct involvement of the Fed. It has hundreds of $billion for that purpose. As long as new money continues to enter the system, HFT will keep inflating the stock market asset bubble an inch at a time. Plus, the $8ooo house credit ends in November,but, since the house must close by the deadline to collect, it effectively ends much sooner.
So, the question is “will economic growth become organic very soon or will it the economy begin to slump when the pump and stimulus stops? What will HFT play with if the only new money comes from day traders? Where’s the growth coming from?
If there’s no relapse by maybe 2-1-2010 then the market might be real. I think it’s just a bubble and only a gamer would buy into it. I certainly wouldn’t put my elderly relative’s life savings into it today. Or my own.
If the 6th inning is today and 10-31-2009 is the top of the 9th, I might buy into that proposition.
September 16th, 2009 at 9:30 am
a diamond (two opposing pyramids) with a centerline that is the mass of poeple
a new business climbs to the top of the upper pyramid .. while in the process of getting there .. sending trickledown money to the old money side of the bottom pyramid (diamond)
at some point a new business flips (I think Microsoft and maybe moreso Apple) became this .. you wanna do business you have to buy this machine
___
new point* .. why Apple moreso? .. Microsoft is more user generated applets (spreading the diamond) .. maybe I’m not right there .. because Apple is using (encouraging) user generated applets too
___
* coda – thinking out loud with my fingers
September 16th, 2009 at 9:48 am
Greg,
having a fuzzy day mate?
September 16th, 2009 at 9:52 am
@hobo
“I certainly wouldn’t put my elderly relative’s life savings into it today. Or my own”
Wanger told me I should get my 95 year old grandmother into equities for the last 20%… He said so in so many words…
September 16th, 2009 at 10:11 am
constantnormal:
“By your model, the equities markets can never change price. However, like all markets, there are more than buyers or sellers, there are also holders. With a more-or-less fixed number of shares out there, when money moves into stocks (i.e., more people buy them than sell them), the price goes up. And wherever the money came from to buy stocks (let’s say they sold gold to buy stock, for the purposes of argument), the price of that goes down (fewer buyers driving prices up) as money leaves that pool.”
But the money isn’t in a pool/bag/container/balloon. Neither stocks, nor gold are pools, nor any other assets are pools or something like that. The money is held by people or institutions. It just changes it’s owner at the same time as gold/stocks/other assets change their owners during a transaction. The money amount in the system, “at the sidelines”, is still the same after each transaction.
Does this mean, prices can never change? No, it doesn’t. As for equities, let’s assume a company has a value and there is a fixed amount of shares of this company. The price of each share represents an equal fractional value of the company. In the long run, the share price can go up, insofar the value of the company increases because capital is accumulated in the company. Besides that, the big price swings around this long-run average price are just a function of the eagerness to buy/sell shares of the company leading to a momentarily disequilibrium between supply and demand. Th e trading price at the moment is the price where this disequilibrium is resolved for the moment so that a certain money amount and stock amount can switch their holders. There is still no money flowing “into” stocks or “out of” stocks at any transaction. Money is only flowing between its previous and its new holder. Like the equities are flowing between their previous and their new holder at the same time. When you look at it like this, then you can also understand why prices of all assets in all asset classes can fall or rise at the same time, why there isn’t the need to have at least one asset going up/down in price when all other assets are going down/up.
rc
September 16th, 2009 at 10:33 am
dead hobo,
“So, the question is “will economic growth become organic very soon or will it the economy begin to slump when the pump and stimulus stops? What will HFT play with if the only new money comes from day traders? Where’s the growth coming from?”
I already had asked this before, the 40 trillion dollar question is, can there be self-sustaining economic growth and an accelerating private debt deflation at the same time?
I think there is a good chance that private debt deflation will accelerate in coming months. So far, private debt deflation has been overcompensated by government debt inflation. If Q3 2009 shows economic growth then it will be due to government’s deficit spending that has counteracted the drag on GDP-growth due to private debt deflation. However, if private debt deflation accelerates government’s debt inflation will have to accelerate also to generate GDP-growth in coming quarters, if the growth isn’t coming from somewhere else, leading me back to my 40 trillion dollar question.
Tomorrow, the Fed will release its Flow of Funds report for Q2 2009. Let’s see what it says about how total debt and net borrowing have developed in that quarter.
rc
September 16th, 2009 at 10:41 am
@ Greg0658 at 8:09 am
…and I thought Joyce’s Ulysses was a tough read ;^)
September 16th, 2009 at 10:45 am
Once again the economic news this morning shows we are certainly seeing sustained growth with no inflation. Couple the excellent news today with yesterday and we are now ready for the next leg up to begin. Tomorrow the claims number may just be the catalyst to a huge day.
September 16th, 2009 at 1:54 pm
5 year weekly chart
descending trendline from highs of week 10/8/07 to week 5/19/08
fibonacci retracement from week 10/8/07 high to week 3/2/09 low
descending trendline and fibonacci intersect at the 50% retracement – roughly 1121 on the SPX
plus, SPX has been cleanly riding an upchannel since 3/2/09, and on a 5-year monthly chart, we’re in the 7th inning
….but no way I’m long.
September 16th, 2009 at 2:23 pm
Mr. Wanger, would you happen to have any Grey Poupon?
I am in complete agreement with you sir. I too have faith that if we just give our new leader’s economics team a reasonable chance they will most certainly succeed in their plan to make banking profitable for as long as they can have hoi polloi bear it. And let the market rally, rally how it may.
It is fair to say that a measurable effect of the repair they are working to ensure may not be apparent to all the rest of you immediately and it is understandable that you are desirous for some sign as you are footing the tax bill just as I am, but we must be nevertheless be patient.
We must stay the course.
Just remember that all the progress that we have made in Iraq over these past years to prevent another terrorist attack on our nation would have never have been successful if our wise leaders had not fought against public opinion and maintained the course.
Obama’s recent talk was a great relief to all of us. A more aggressive stand on his part for the imposition of substantive regulation on our most productive national sector might have added yet another unnecessary hurdle to the much needed restoration of the means by which our (as celebrated contemporary social scholar Richard Florida calls it) “creative class” has been guiding and protecting our international financial dominance and domestic economic stability. Not a day passes without my humble offering of thanksgiving to the brave men and women of our under-appreciated creative class for their hard work and sacrifice to preserve my tenuous grip on prosperity.
We truly have little to fear for our livelihoods in coming years from the likes of rank populism – Obama, Bernanke and their people have made this unambiguously clear to us. This astute economic team are working around the clock to ensure a decent resale value on our second and third homes in Santa Barbara and Telluride; indeed they have already shown us by their prudent actions that they are truly sincere in their desire to protect us from our poor investment bets too.
Don’t worry about the supposed growing threat of democracy to our libery. No matter what is being tossed around by that which still remains of the free press, don’t believe it. Obama and his team are no more interested in taking heed of populist nonsense in their management of our great nation than were Dear Leader Bush, Clinton the Usurper, Great Leader Bush or even His Imperial Highness, Reagan the Great. Rest assured that we are still far from heading down a bottomless pit of political and economic equality and egalitarianism anytime soon. For proof, just look to the complainers on this blog. The sheer number and length of their bitter grievances gives us plenty of evidence that notions of making some disastrous form of democratic republic out of our cozy little plutocratic arrangement are nothing more than pure fantasies.
Compared to Dear Leader Bush, Obama is much more rhetorically gifted and for that reason alone we have much to be thankful. His obvious rapport with the plebs should prove useful to us during the coming period of “difficult transition” in store for them.
If would add anything to the unprecedented efforts already underway, I would only encourage the further dissemination of those sweet Clinton era team globalization-fanat-e-conomist proverbs, like that old chestnut: “we’ve got to become more competitive – go get yourself into major debt to beef up your skills – education being the key, blah, blah, blah” and all that great nonsense.
The simple genius behind such red herrings, is that they nearly always direct the clock punching masses’ brats search for the solution to their hopeless economic plight in themselves instead of helping them realize they might be better served by some nasty income redistribution project or worse, a drive to hamstring the ability of our minions to bribe politicians to get legislation that permits us exclusive access to foreign financial markets and free international movement of capital in exchange for huge portions of our nation’s job-producing industrial capacity.
In addition, perhaps it might also helpful for the administration to produce some televised round tables of “experts” on the state of the economy and invite eminent apologists for our agenda like Tom Friedman, Fareed Zakaria or Joseph Stiglitz to talk convincingly to each other about flat worlds or some other popular works of political science fiction and economic sophistry to help ease the underclass into the more modest future standard of living we have planned for them, featuring more intense competition for jobs from abroad, reduced government services, higher taxes and crushing inflation. In such fora, public discussion could revolve around touching anecdotes depicting how globalization is rapidly facilitating the “miracle” of entrepreneurship in the developing world and of course, should include those perennially helpful GDP/life satisfaction charts that prove beyond doubt that money is not the means to happiness and that type of thing.
Don’t worry, we’ll be good for another seven years.
September 16th, 2009 at 3:33 pm
The 6th inning of a double header. Right, Barry?
September 16th, 2009 at 8:51 pm
“Noted bear”? Nouriel Roubini is a noted bear who missed the entire rally from 2003 until 2007 and the rally since March. Barry, on the other hand is a realist … arguably the greatest market commentator of the moment …