Over the past few months, I have noted our current bullish posture, along with the reasons for it.

Earlier this week, I noted the disconnect between the economy/markets, and in that post, I promised to further explain my views.

Well, today is the day. I am going to UBS this afternoon to discuss this in more detail, but the key factors that have been contributing to, and may continue adding to, the ongoing rally.


1) Historical Secular Bear Markets: As discussed in August, secular bear markets tend to get massively oversold, then see a huge bounce. The chart below shows a composite of 29 Secular bear markets:

Typical Secular Bear Market and Its Aftermath



2)  Hated Rally: I have noted previously that this is the most hated rally in Wall Street history. Many people — both pros and individuals — all have reasons as to why it must end badly: PPT, hyper-inflation, bad economy, etc.

Most bull moves do not end when they are hated, they come to a halt and reverse when they become over-owned and over-loved.

We are not there yet.


3)  Dollar Selloff: Yet another factor is the weak dollar, mentioned earlier in our Gold discussion. The relationship has been pretty explicit lately. See the FT’s Dollar-adjusted S&P 500.


4) Typical Recession vs Panic Selloff:   From October 2007, when the Dow hit ~14,200, to about September 2008 when it slid to 11,500, we had what looked to me like a standard recession: About 8-10 months long, down about 20%.

That is fairly ordinary length and depth of typical market reactions to recessions.

The next 5000 points of freefall was a panic reaction to an expected end of the economic world. Recall that the widespread belief was that the system was fatally broken, and we were all going to hell. Indeed, the SPX did get down to 666 level.

What we have been experiencing since that low has NOT been an anticipation of earnings improvements, or a V shaped recovery. To be blunt, it is little more than mean reversion, as the aberrational credit panic sell off gets unwound.

We are now returning towards a more typical recessionary sell off. That’s when things make get alot more difficult . . .

Typical Recession Bear Market

DOW 2007 - 09

After 7 months of Hell Purgatory feels pretty good.

Category: Markets, Trading

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

89 Responses to “The Most Hated Rally in Wall Street History”

  1. HarryWanger says:

    All great points, especially #4. We’re not even back to the low end of a typical recession recovery which, oddly enough as I’ve been stating almost daily, would get us back to 11,500 this year. Your analysis supports that beautifully.

    Now add in the following:
    -Great AA earnings
    -Retail sales much better today than anticipated with many raising their forecasts
    -Claims fell sharply.

    There is a great deal of much better economic news, including Japan, Australia, etc., to add in here but you get the general idea.

    Once we get back to 11,500, it becomes difficult but I think we should rally all the way to 12,500 or above before seeing a pullback better than 10%.

  2. rustum says:

    I am still waiting for some correction before buying into. Looks like, we are not going to see any time soon.
    Is gold better investment to go long.

  3. call me ahab says:

    another explanation from Chris Martenson- via ZH-

    “I think we are in a bizarre hybrid world, where deflation should be the order of the day but it currently is not because its impacts are being held in abeyance by the simple expedient of pretending the losses do not exist . . .For now, while I understand, and appreciate the deflationist argument, the only thing that would convert me fully to that camp would be a sudden return to rigorous application of honest accounting. If you derisively snorted at that last sentence, then we share the same assessment of the likelihood of that happening any time soon.”

    all a charade

  4. HarryWanger says:

    rustum: It appears that we will run pretty much unabated through the end of the year to Dow 11,500 or thereabouts. There is a ton of money sitting on the sidelines that must be put in the market lest missing the rally into year’s end. I don’t see any correction until 12,500 which would put us somewhere around 3/10.

    I used to own gold a long time back and did quite well holding it for a few years but for a quick return, go with the momentum run through EOY.

  5. dss says:

    BR – totally concur. The market was pricing in total Armageddon at S&P 666. I believe that much of this rally has been correcting that sell off. The interesting part comes now to see if we can close above the last highs. And it is not inconceivable to trade back to any number of points higher, but this is a function of time and price.

  6. Myr says:

    Barry, are you now saying that 666 was the low? It sure sounds like it. I haven’t heard you say that before…maybe I missed it.


    BR: I am saying it was A low. I have no idea if it is THE low.

  7. Bruce in Tn says:

    Well, since Australia raised rates yesterday, I bought some EWA…

    We’ll see…

    B in T

  8. O, BR, nice post~ and, better, Nice Calls !

    I wonder how many MutFund (di-)vestors, still, haven’t done the Math..

    U$D 50K x 2% ~U$D 1 000
    FusionIQ U$D~40 x 12 ~U$D 480

    and, as a +, one might, actually, learn something while ‘rollin’ their own’..

  9. hbl says:

    “The next 5000 points of freefall was a panic reaction to an expected end of the economic world. “

    I strongly disagree. Stock prices tracked closely to the change in 12 month trailing operating earnings (not even to reported earnings, which would have cratered stocks significantly further!) all the way from October 2007 until March 2009, as is clear in this P/E chart (source). Since March 2009 stock prices have grown far faster than operating earnings (through Q2). So the real question is just whether earnings will follow as the market expects. But the bottom line is stock prices last year simply reflected operating earnings, not panic.


    BR: What Earnings were stocks tracking in 1998-99? How about 2002? How about 2006-08?

    Its pretty clear that markets can and do move independent of earnings.

  10. HarryWanger says:

    Barry: When you bought QID last week on the expected pull back did you sell for the quick gain or end up getting stopped out? Curious.

  11. call me ahab says:


    i still do not think of this as an oridinary recession- the policies and actions put into place are not the normal response to an “ordinary” recession- and how long can they be continued?

    that you and Harry Wanger are seeing a reversion to mean based on an ordinary recession speaks volumes


    BR: The 5000 point sell off might have been the aberration — the move up could be the mean reversion!

  12. Super-Anon says:

    My view differs from yours somewhat (though admittedly it sounds like you’re doing better this year than I am) in that I think liquidity is the primary factor:

    I think hedge fund buying is basically on auto-pilot and will continue with little regard for sentiment or the economy as long as the Fed is providing the easy credit and no major shock comes along. There’s simply no reason any longer for fund managers to care about any other factor than the availability of credit.

    I think if the Fed begins to withdraw liquidity, the market can collapse tomorrow. Otherwise it keeps going up as the automated dollar carry trade leverage binge continues ad infinitum.

    The question IMO is when do the currency fluctuations cause too much political tension or concern about the next crash (another Asian style carry crisis is probably inevitable at this point, the question is now how severe the NEXT crash will be).

    If you have a long term perspective I think you’re betting on when somebody will decide to “switch off” the rally. I think that’s a hard thing to do which is why I focus much more on short-term trading now.

    Will the market be up 3 months from now? Right now it’s working for me to choose a trading style where that doesn’t matter.

  13. HarryWanger says:

    ahab: “that you and Harry Wanger are seeing a reversion to mean based on an ordinary recession speaks volumes”

    Sure does. BR and myself tend to see the true story without the fog of gloom on our glasses. Once the market gets back to correct levels, as stated above, then we’ll see what happens with the economy and market correlation. Until that 12,500 area is reached, it’s all momentum correction back to where the market should be at this time.

  14. call me ahab says:

    yeah Harry- you’re right- you’re one and the same-


  15. wally says:

    Hated or not, I don’t see stocks as a place to put my money. 8 years of zero return isn’t a good record; the alternative is getting in and out based on speculative guesses and that is another game I don’t care to play. When even Warren Buffett’s BRK only averages about 3% compound over a ten year span, that tells me to not go there.

  16. Marcus Aurelius says:

    Did you ever notice you never see HW and BR together?

  17. Mannwich says:

    Wanger sounds a lot like JM Borchers from last year, who would change his mind seemingly every minute. Lo and behold, he disappeared in January never to be heard from again.

    The Wang-man was just soiling his underroos last week and now he’s confidently trumpeting his genius again this week about the DOW “going to 12,500″. Which is it, Wanger? Will you be soiling your drawers again at the hint of any small pullback or are you sticking with your convictions?

    Me-thinks your the type who claims victory after the fact either way. A classic “front-runner” who almost never admits a mistake.

  18. Super-Anon says:

    Until that 12,500 area is reached, it’s all momentum correction back to where the market should be at this time.

    When has the market been where it “should” be in over a decade? By historical comparisons to past recessions the market “should” have fallen much farther than it did from a valuation perspective.

    In my view what “should” happen no longer matters once you begin manipulating the money supply to achieve what you “want” to happen.

  19. HarryWanger says:

    ahab: Thanks. It’s difficult to go against the crowd but I appreciate the congrats!

  20. Mannwich says:

    @ahab: That Martensen post was good and has been my suspicion all along. Am staying in Glendale, CA this week as I hit the ALDS Games 1 and 2 (Sox vs. Angels) and I have to say, nice brand spanking new (and spotless) “lifestyle mall” and condos here, but eerily empty. Brand spanking new (almost feels like a movie set or something) but hardly any actual human life. The stores (mostly high end) are mostly empty too. Just a weird alternative universe that we’re living through. Somebody’s “extending & pretending” on the leverage that’s backing this place because it has “mass default” written all over it. Just a matter of time before developments like this fall apart.

  21. PapaBear says:

    I have been reading the blog for some time, and I am a huge fan. I pass the site along to many people, but this is my first post. Something is structurally wrong with the economy, right? To call it an ordinary recession is perhaps what scares me. We had all of the bailouts and the system isn’t fixed. As if we are condoning it being an ordinary recession. “well back to normal. Just an ordinary recession. We can count on people reading bits of economic data and buying into a new asset to inflate.” It isn’t that I hate the rally, I hate what the rally stands for. Another bubble? Rather than rallies and bubbles, can’t we invest our money in companies that grow at a steady rate. I think of people like my father and siblings who invest in their 401ks because society tells them that is the way to retirement. Really it is people speculating on rallies. I haven’t been in this industry very long at all and already I am depressing myself. How off base am I?


    : The 1st portion was a reflection of an ordinary recession — then we had a Great Recession/Credit Crisis.

    The structural problems are still there . . .

  22. HarryWanger says:

    Mannwich: I guess you didn’t see my posts where I initiated long positions in SSO and DDM on Monday when I saw there was no follow through. Nice dip buy there. Followed my rules. If Dow closed below 9500 I’d close my longs and reevaluate. Well, Monday saw no followthrough so I got back in. Play what the market gives you. It’s rather easy that way.

  23. Mannwich says:

    @HW: No, I saw the post and it was still AFTER the fact during a rally on Monday or Tuesday, not before. The only post that I’ve seen you make BEFORE the fact (RIM), you got smoked.

  24. Thor says:

    Ahab says – “yeah Harry- you’re right- you’re one and the same-”

    Bingo. There is absolutely no way HW is a real person. I wouldn’t take the bait if I were you ;-)

  25. ben22 says:


    The rally is the most hated in history? Where do you get that? YOu just documented not long ago that Mf’s were basically all in, many prop traders have already made enough to get bonus this year, I’d dare say most of these people got killed last year, why would they hate the rally? Consensus is hardly the things you describe, from what I can tell, the consensus call is now for a healthy correction.

    Sure, there are some larger names that describe what you say there, Faber, might come to mind, well, several people come to mind. That said, I hardly think the majority hate the rally, for every 1 marc Faber there are 15 Bob Doll’s. Come on man, you have to know this.

    Not that you care but I do agree with many of your points, especially number 3 as I think it trumps all the others, we will most likely see new highs and lots of articles about such in the next two weeks, but this is hardly an ordinary recession, even now, and I still can’t wrap my head around this mid 70′s idea outside of what the charts look like. The chart pattern from 1921-1929 compared to the one from 1975-1999 is the most accurate imo.

    In any event, you’ve kept a very level head through all of this so just want to pass on some mucho respect to you. Hope you end the year strong. Good luck.

  26. Haters are kindling for the next leg up …

  27. ItalicBold says:

    “… to push the market higher purely as a function of its dollar correlation, the dollar needs to devalue more and more for a measurable impact, alternatively when the dollar rises, the drop in the market is more pronounced than on dollar down days.”


  28. ItalicBold says:

    That’s another way of saying: “Hope you longs are leveraged!”

  29. HarryWanger says:

    Mannwich: Ok, you’re right. Let’s forget about the AAPL calls. Let’s forget about adding as I did and reported. Let’s forget that I continue to follow my rules, as spelled out here, and get back in when the market dictates. You’re right I never said any of those things. I guess you are living proof as to why some people make money in the market and others lose.

  30. HCF says:


    What’s your real purpose posting on this blog? If I were as rich as you should be based on your excellent investment insight, I’d be swimming like Scrooge McDuck in my swimming pool full of gold coins. What are you doing slumming with the rest of us common folk?


  31. SavetheWhales says:

    “Recall that the widespread belief was that the system was fatally broken…”


    The system is still fatally broken. There is nothing normal about QE, ZIRP or TBTF.

    When Bernanke broke the glass and pulled the QE lever – things began to stabilize as a torrent of fresh liquidity washed over the market. Without QE, we would be cruising at sub 500 on the S&P.

    Our current recovery is built on printed money and the confidence that folks have in the purchasing power of printed money.

    What happens in a currency crisis? Do you think financial assets will stay levitated?

  32. Thor says:

    HCF – My guess is that HW’s “roll” here is to liven up a blog that has recently lost many of it’s regular posters. He’s here to play the foil, to blurt out ridiculous statements and make grand predictions, to play the “average idiot investor” so that those more knowledgeable will respond to his nonsense with more in depth discussion.

    He’s the “average Joe” investor who will eventually be “taught” how things really are and how the markets really work. Am I the only one who caught the immediate reversal of his posts last week? Now the old Harry is back, suckered in by the market’s recent move. He’ll get trampled again in the not too distant future and will be predictably humbled. He’ll have “learned” the truth for the more thoughtful and wide posters.

    It’s a game, I don’t believe he’s real.

  33. Bruce in Tn says:

    Love the steering in your car, Harry…not many cars can turn on a dime the way yours just did.

  34. HCF says:


    Perhaps Harry Wanger is about as real as Scrooge McDuck is? Maybe he’s even an anthropomorphic duck!

    Quack quack!


  35. SteveC says:

    Hated? Maybe frustrated? Wall Street is just waiting for everyone to get back in the pool, before pulling the rug out again. The story never changes. BTW: Look at treasuries today..getting crushed!

  36. [...] Picture blogger Barry Ritholtz describes the current run-up as “the most hated rally in Wall Street history,” which is part of [...]

  37. CNBC Sucks says:

    My well-traveled, favor-granting buddy Thor wrote: “My guess is that HW’s ‘roll’ here is to liven up a blog that has recently lost many of it’s regular posters.”

    You wrote that as if you do not know where many of its regular posters are. You know, and I know, where many of its regular posters are. ;)

    That blog of Andy’s is like the traders’ blog equivalent of that orgy house in Eyes Wide Shut, the one with the masks and costumes, secret passwords, and ritualistic sex.

  38. rootless_cosmopolitan says:

    “The Most Hated Rally in Wall Street History” and point #2

    Now, I wonder on what metric this statement is founded and whether Barry actually determined this from any data at all. My impression, which is purely subjective, from what is all over the news is quite different to this. Additionally, that this statement to support a bullish case is made on a blog with a quite bearish reputation is itself already defeating the claim somewhat.

    As for factor #1:

    This graphic reminds me of some old saying: The pond in the village has had a depth of 1 meter on average. Nevertheless, the cow drowned.

    The composite alone w/o any information about the statistical distribution of the ensemble of the 29 secular bear markets and the variability within the distribution is quite useless as basis for determining a probability “where we are” and for investment decisions. As if every one of the bear markets realized the composite trajectory. Just as an example, imagine a symmetric bimodal probability distribution. The composite of all realizations will actually be at a local minimum of the probability distribution and very misleading.

    As for factor #4:

    I disagree with the assumption that this has been an “ordinary recession” only interrupted by a panic drop to the March lows. The economic context isn’t one of an ordinary recession. The economy is in a severe debt crisis instead, but has been re-animated by huge amounts of money infusions w/o eliminating the deeper cause of the crisis.


  39. Rikky says:

    we’re living in Alice in Wonderland right now. everyone is still at that Mad Hatters tea party having a grand olde time even though the tea and crumpets have run out. As Mannwich says it’s only a question of when the charade is exposed for what it is. No the economy will not recover anywhere near to justify the initial investment and continued carrying costs for all this overbuilt capacity. The pertinent question I have is what cracks in the dyke blow out first?

  40. rootless_cosmopolitan says:


    “Great AA earnings”

    What are Alcoa’s last quarter’s earnings? I haven’t found anything in any news reports through which I scrolled what the real earnings of Alcoa are, based on GAAP. I only have found claims about their fake earnings aka “operating earnings”. Do you know more?

    “There is a ton of money sitting on the sidelines that must be put in the market…”

    What is “money on the sidelines”? Where is the money when it’s not “on the sidelines” anymore?

    “Once the market gets back to correct levels”

    How do you determine what the “correct levels” of the markets are?


  41. tradeking13 says:

    At the bottom the market was pricing in $45 earnings with a 15x multiple (~675). True Armageddon.

  42. Andy T says:

    What does the market look like during recessions/depressions brought on by credit collapses versus inventory led recessions? They seem to be different animals….

  43. SavetheWhales says:

    @Andy T,

    That is precisely what all the bulls are missing this time around. We hit peak debt and rang the bell on the top.

  44. SavetheWhales says:

    @Andy T

    You might find this article over at Zero Hedge quite interesting. He argues that there is no deflationary collapse until the losses are recognized – something the Fed is working hard to prevent.


  45. mcHAPPY says:


    I 100% respect your views and opinions however I 100% disagree calling this an ordinary recession. There is nothing ordinary in the financial world today. Few alive today have witnessed the events unfolding over the last couple of years.

    “Most bull moves do not end when they are hated, they come to a halt and reverse when they become over-owned and over-loved. We are not there yet.”

    We will never experience love in this bull/bear market rally because the only people who have profited are the bastards that screwed everyone in the first place. The government has bailed out all private corporations to the tune of nearly 24 TRILLION dollars at the public expense. This has occurred while unemployment has continued in a downward spiral, the public was lied to from the start of this mess, and the public still has no clue what the fuck is going on! Where did TARP money go? For what purpose? This is absolutely insane! This is Animal Farm – the humans (Bush and co.) were kicked out, the pigs (O and co.) took over, and the workers are no better ahead – in fact they are probably worse off.

    I understand the trend. The trend here is the USA has officially become the laughing stock of the world. Obama and all his hope lasted about as a long as a rock in a crack pipe. In fact I propose Obama is crack – the first hit was amazing but now it is destroying us. He had the momentum and ability to create lasting meaningful regulatory change – instead he stayed status quo.

    Those killer earnings were AWESOME* man! Pass the crack pipe!

    *Never mind revenues were down 35%.

  46. HCF says:

    Have to agree with you, mcHAPPY… If this is an ordinary recession, then WWII was a pretty ordinary war!


  47. Cory says:

    It was my understanding that “the” low of a market cycle was accompanied by disgust for all things deemed equity.

    I’ve never seen so many, so bullish after such a dismal 10 year stretch. Has 20 years of Greenspan and now “Bennie and the Feds” made our senses dim?

  48. mcHAPPY says:

    The absolute terms should be revised i.e. “the only people who profited…” should read “most….” etc. My rant for the week.

  49. call me ahab says:

    mchappy says-

    “Obama and all his hope lasted about as a long as a rock in a crack pipe. In fact I propose Obama is crack – the first hit was amazing but now it is destroying us. ”


  50. Gatsby says:

    I could not agree with mcHappy more. For those who have been willing to listen BR has correctly encouraged riding the wave and I don’t think BR has any misconceptions that the current rally is mostly supported by air and it will very likely end in a correction.

    However, riding the wave until you are stopped out is a much better strategy than picking a point and betting agianst the market. And I think this is what BR is adventing (please correct me if I am wrong here).

    For me, am not ready to jump back into stocks until valuations are a little better. We will have to see what Q3 has for earnings but I am thinking it will not be as pretty as AA and I am very very queasy about what Q4 will bring.

    It’s just to hard to ignore a) unemplpoyment b) revenue growth (or lack there of) c) a double dip lending collapse (see commercial real estate) and that fact that today the market is pricing in $83 earnings for the S&P. I think I will wait, but as he is already in BR might as well wait to get stopped out.

  51. rootless_cosmopolitan says:


    “However, riding the wave until you are stopped out is a much better strategy than picking a point and betting agianst the market. And I think this is what BR is adventing (please correct me if I am wrong here).”

    But why the need to make up bogus arguments like “most hated rally in Wall Street history” and trying to support the bullish case with apparently cherry picked and dubious metrics like the graphic with the composite of the secular bear markets then, if it’s just about that?


  52. HCF says:

    I’m watching the “Fast Money Final Call” clip on cnbc.com right now and they are discussing if banks are too anxious to exit TARP. I’m thinking that there should be a one time only “get out of jail free card.” In other words, once you exit TARP, you can NEVER NEVER NEVER get back in. This rally is built purely on government pumping money into the banking system. It makes complete sense: if you’re deemed too big to fail, given billions of money for close to nothing, and have access to trillions more at the price of NOTHING, your operating profits will be reasonably positive unless you are a complete idiot.

    Dead bodies hooked to high voltage lines can be made to dance… It doesn’t mean they’re alive and it doesn’t mean they won’t burn up in a hail of smoke sooner than later…


  53. call me ahab says:

    ‘But why the need to make up bogus arguments like “most hated rally in Wall Street history”’

    that’s BR’s way of describing the blogoshpere’s disgust w/ the rally and the disgust for the reason’s behind the rally-

    accounting charades- i.e. mark to fantasy

    bailouts of large publicly traded companies at taxpayer’s expense- bondholders kept whole

    zero perecent rates- so banks can have huge spreads between cost of money and lending money

    Fed secrecy- zero transparency of the truly bankrupt banks that cannot survive without the Fed’s credit facilities and zero transparancy of the collateral being held by the Fed

    bank’s wanton disregard of public sentiment and payout of multi-million dollar bonuses

    HFT- basically insider trading- but occuring in fractions of seconds- fleecing individual traders

    zero accountability for the perpetrators of the financial crisis- banks protected

    you can add to the list all you want- it’s probably endless- but BR- who knows where his head is at anymore-

    mean reversion- please- this “aint” your ordinary recession

  54. srb says:

    There’s no mention here about the percentage of retail buyers. The NYSE has posted stats that say that sector has disappeared. I mention this because when the writer mentions “they”, to whom is he referring ? More importantly “shorting ” has always been the fuel for market rises and it’s been relentless since March. MMs are not in the habit of losing their money. ETFs have become the killing field and until the buyers of these stop, the rise will continue. ALL of the aforementioned should be sell-evident to someone who has been around the market. It is NOT.

  55. mcHAPPY says:

    I am still in shock BR has referred to this as a typical secular bear market. Statements like this are normally reserved for the talking heads. My world is crumbling…. where to go?… what to do?…. help!

  56. tradeking13 says:

    BR, we’ve seen a 62% rally in 7 mos., so by your chart we should expect another 6-7% over the next 10 mos.? Is this worth saying invested or putting new money to work? Risk/reward right doesn’t look good. No?

  57. Docsimple says:

    Gatsby. I read all the posts and found yours to be the most sensible.

    I think everyone should ask themselves whether it’s more important to provide a sound argument to justify a market move and a current fair value price OR whether it’s more important to make money.

    I’ve seen many good arguments for both the Bull case (at least in the short term – next few months) and the Bear case (possibly unfolding in the first half of next year) but you should choose between the choices below:

    Choice A – If you want to make money, ride the wave. Who cares why it’s going up. That is not important. Everyone has an unique view on things. Just make sure you have a strategy, using stops etc, that will ensure you won’t get killed if the thing suddenly crashes.

    Choice B – If you cannot accept that the market is going higher based on your personal view and want to be hailed for predicting the market will crash again someday, then run the risk of missing another strong leg up and wait till it corrects or crashes again.

    My opinion – Even if the thing crashes as soon as in Q1 of next yr it’s still worthwhile riding the next wave or waves up until that happens with a careful strategy.

  58. wunsacon says:

    Comrades, I feel like we’re getting unnecessarily ad hominem on Harry Wanger. It’s really not necessary.

    Can we please be more civil to the occasional bulls (e.g., Wanger, F411, etc)?

  59. Thor says:

    McHappy – Don’t be McSad! perhaps it was a slip of the tongue on BR’s part.

  60. Ventura2012 says:

    Barry do not your points 2 and 3 contradict one another. You are claiming we continue to rally because the market is so hated and then you are arguing that the weak dollar will continue to prop the rally. You are taking the contrarian view on the market but the consensus on the dollar. If

  61. mcHAPPY says:


    Thanks for the ray of light and hope. Just in case though mcHAPPY did a little reading between the lines and has since turned that frown upside down.

  62. jc says:

    I wouldn’t say anyone hates the rally, they’re just perplexed by a situation where the market goes up 50% and speculators get rewarded (again) with “free” money while savers get punished with 0% savings , unemployment rises to 10%, foreclosures continue to rise and states & municipalities are pushed to the edge of bankruptcy.

    Now that Congress has eliminated COLA for Soc Sec for the next few years Uncle Ben can continue to implement his hyperinflation plan

  63. WaveCatcher says:

    I have hated this rally ever since my timing model went on a BUY signal 3/20. But thank G– that I didn’t follow my instincts, which would have had me going short months ago. Follow the rules, follow the rules, follow the rules.

    My model portfolio stocks haven’t generated any alpha over the past 6 months because the market has been mostly propelled by turkeys flying in the windstorm. Growth stocks (not many around today) have generally underperformed the indices since the March bottom, and are only now beginning to outperform the market. Only a few exceptions such as STEC, SXCI, FUQI, have outperformed the market.

    The mother of all market crashes begets the mother of all bear market rallies.

  64. jc says:

    1930s deja vu all over again!

  65. Barry, sounds interesting but what are reasons that underly the notion of “secular bear market”?

    To be precise, what makes you think that the bear market can last so long, from the peak to the range bound period as you have shown, about 5 years. Add 5-6 years of range bound period, that’s 10 years.

    Also, I understand that China pressing a brake or Fed’s premature tightening can be a trigger. what other “market timing indicators” are you referring to?

    Thanks for your time. As usual, great read!


    BR: Its not what I think, its what has occurred in the past.

    History provides us a range of examples where cyclical bull rallies within longer secular beat markets have lasted 12, 18, 24 months.

    Look at the 1966-82 bear as an example.

    See also:
    Market Cycles: 100 Year DJIA (September 09, 2005)

    Cyclical or Secular Bull ? (June 15th, 2009)

    100 Year Dow Jones Industrials Chart (December 28, 2005)

  66. insaneclownposse says:

    I kind of agree with Super-Anon that the explosion in equities is now being driven by the massive liquidity pump being orchestrated by all of the central banks. I find it remarkable that the rally hasn’t had a 10-20% correction in the last six months. It seems like stocks are completely detached from the fundamentals. I would love to see the Fed raise rates – they are going to have to at some point in order to defend the dollar – because that would probably trigger a nice pullback in equities and provide a good entry point.
    One thing seems clear to me: the central banks have pumped in far too much liquidity using techniques that don’t come equipped with quick exit strategies. This is going to be a HUGE problem sooner rather than later. For all the rate-hike talk the Fed has been blathering on about recently, the central banks are still running the presses as fast as they can. QE doesn’t end until January, right? What’s the point of talking about raising rates while this type of program is still underway?

  67. princess says:

    Thank you Barry, as usual – clear, cogent and lively.

  68. john10 says:

    barry what you’re saying is not correct. the mkt basically fell the same % as earnings and yet earnings have not come back at all and the mkts run 60%. YOU’RE ALSO NOT TAKING INTO ACCOUNT THE 58% DROP WAS AFTER A 5 YEAR BULL MKT. YOU’RE ASLO NOT SAYING THAT THE MKT IS STILL UP 5 FOLD IN 20 YEARS. you’re also ignoring trend line growth in profits and rev’s will be much less going forward than in the past so we’ll ahve multiple contraction as structually the economy is in trouble.WHAT ABOUT JAPAN DOWN 80% IN 20 YEARS. WHY CAN’T THAT BE US?you’re using the same old excuses the bulls on tv have used for months to keep the mkt up like nobody believes it the rslly so it’ll keep running,theres tons of money in the sideline etc etc etc.BARRY YOU’RE LIVING IN THE PAST AND THINK THINGS GO BACK TO THE WAY THEY WERE AND THATS NOT CORRECT. WE’RE INA NEW ERA WITH LESS CONSUMPTION AND A PERMAMENTLY HIGH UNEMPLOYMENT RATE.ti be honest barry i’m gald you’re bullish. EVERY KNOWN BEAR HAS THROWN IN THE TOWEL


    BR: There is lots I am NOT saying in 393 words.

    But what I have said (repeatedly) is that a secular bear market began in 2000, and we are probably 2/3s oif the way through it. This is a cyclical bull w/i that secular bear.

    I can’t speak to other bears (I do not consider myself one) But I warned of a coming “huge bear market rally” back in March 2009 (recorded 3/9/09), and we have played it for an upside trade the whole run. That’s not “throwing in the towel.”

    (also, your cap locks key seems to be sticking. You may want to look into that.)

  69. call me ahab says:


    j10- well said- a bit shrill- but well said

  70. Joe Granville is an old guy. In the world of investments he’s up there. His letter (still faxed) of today included the following:

    A number of prominent Wall Streeters were looking for a crash in September and October. I said if they could be proven wrong in October then the market for the rest of the year would belong to the bulls.

    Tomorrow is the two-year anniversary of Dow 14164.63. It was on October 9, 2007, that I announced here that we are seeing a terminal blowoff in the Dow [got credibility yet?]. Now with equal conviction my numbers see a rising market ahead for the next two years or longer.

  71. mcHAPPY says:

    *after a moment of slack jawed silence – the crowd erupts in applause*

    john10 – I concur with ahab – great truths noted.

  72. IvoZ says:

    I fully agree with john 10.

    Barry, due to your election to ignore a lot of factors (e.g. consumer sales not rebounding, reported EPS even lower than operating EPS, 666 level fairly discounting operating EPS, massive P/E expansion, private credit contraction, thin volume etc.), your call has been right.

    Based on a mean reversion view, this rally has been anticipated by many people – it is its extension beyond July that many people consider overdone. I guess your choice to ignore the facts which are not supporting your view is maybe due to experience or an insight into the perverse ways of Wall Street – but the arguments are not that convincing (except No. 1 and 2).

    Great calls so far though!

  73. LH says:

    The economists like to talk about how historically unemployment is a lagging indicator, and will follow the stock market up in its recent recovery. Its dangerous to infer the future of this recovery (or double dip) from the typical recession – I’ve been through 4 recessions in the US personally, and one in Japan, and this recession is definitely the worst I’ve experienced in the US. If it continues to grow, unemployment will become a leading indicator, as ultimately its employment that drives consumption, not the other way around.

  74. John10, you fail to make a distinction between facts (actual verifiable data and events) and your own predictions (your personal expectations as to what you believe might occur).

    The inability to discern objective reality from expectations is fatal in investing.

    Those of you cheerleading John 10 and his broken keyboard should be aware that we can disagree about futureoutcomes, but we should all recognize whta are facts versus interpretations, spin, etc.

  75. Vermont Trader says:

    i stick with my call from 2 weeks ago that we will see 1000 before 1100, that 9/23 was the high, and it will be a hell of a fight.

    economic data coming in weaker than i had expected, sooner… .

    volatility is indicative of a contunuing bear market.

  76. Vermont Trader says:

    really enjoyed FHFA testimony yesterday… here’s a couple gems..

    PLS = private label securities otherwise known as toxic waste…

    “Federal Home Loan Banks. The FHLBanks have not been immune from mortgage-related credit losses. The most important financial development among the FHLBanks in 2009 is the deterioration of the PLS portfolios held by the FHLBanks. As of June 30, 2009, the FHLBanks held $56.6 billion worth of PLS with an estimated fair value of $46.3 billion, down from a December 31, 2008 carrying value of $73.0 billion and a fair value of $53.7 billion. The decline in the carrying value reflects impairment charges of almost $8.2 billion and principal payments and prepayments of $8.9 billion. However, a change in accounting rules resulted in only $953 million charged against income”

    Citi won’t say it but the govt will… we have only recognized 1/8th of our losses thanks tot he repeal of mark to market..

    “At the end of June, total regulatory capital for the FHLBanks was $60.6 billion, or 5.3 percent of assets. Total retained earnings were $6 billion, but negative accumulated other comprehensive income (AOCI) exceeded retained earnings at the six FHLBanks with the greatest PLS exposure.”

    oh, that pesky negative accumulated other comprehensive income.. some people just call them losses..

  77. flipspiceland says:

    The game doesn’t matter, only how you bet.

    In March if the shorts, with ample rational data to backup their bet had only realized that Lord Blankfein and Jamie Dimon made deals with the devil to pretend they were completely nuts, out of their minds, and insane to orchestrate a global bull market, forget the methods they would employ, they would be celebrating in St. Barth’s today.

    Got to admit I’m envious not to be a FOB&D.

  78. rootless_cosmopolitan says:


    in your reply to John10′s comment,


    you say

    “But what I have said (repeatedly) is that a secular bear market began in 2000, and we are probably 2/3s oif the way through it. This is a cyclical bull w/i that secular bear.”

    Now you are contradicting your own point #1 in your original post. If the secular bear market started in 2000 we can’t be likely at the point of the initial rebound rally you are showing in the graph. Then, the initial rebound rally ended in 2006 or so, and we are already in the trading range, in the second cyclical bull market.

    You can’t have it both ways. This is a major logical flaw in your argument.


  79. flipspiceland says:


    In a rational world you would be right.

    However Reason deserted the quants and, with the imagination of Ponzi, and his disciples at the 5 IBs, the “Master’s of the Universe “, inventing 100x derivatives that idiots gambled on with trillions of dollars of zirp loans.

  80. hbl says:

    Barry said: “What Earnings were stocks tracking in 1998-99? How about 2002? How about 2006-08?”

    Even though it was a rhetorical question, here are the answers since I looked:

    1998-1999: 23x-30x range, then P/E ratio FELL when stocks sold off

    2002: 17x-20x range, and stayed close to there (moving down to 15x in following years)

    2006-2008: 15x-18x range, then P/E ratio ROSE slightly when stocks sold off

    “Its pretty clear that markets can and do move independent of earnings.”

    Agreed. But it makes no sense to me to imply that it was a panicky reaction to look at falling earnings as a reason to sell stocks rather than live with the alternative of a skyrocketing P/E, especially in the context of an unprecedented earnings bubble around 2006-2007, which left little justification for earnings to “bounce back” rapidly once the panic cleared.

    There were definitely many panicked sellers, but I think for every seller there was a non-panicked buyer willing to pay what they considered a fair multiple of earnings.

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