Ugly day today — down 2+% across the boards. Not only was all the economic data punk, but the various earnings calls were also ugly. And, the bounce from last week seems to be running out of energy (at least temporarily).
Discuss: Is this the end of the bounce? A breather after running up 700 points? Something else entirely?
What sectors look appealing? Dangerous? Toxic?
What say ye?
Last rally was, be honest, a Paulson special. We may test the recent bottom and consolidate untiil employment and inflation numbers are confirmed, if bad, then down we go to dow 10000 !
Cash looks good.. but for all the credit risk and wealth destruction, you’d think you’d get a beter return on it. Commodities no longer shelter the loose money, no new bubble is apparent yet… it is a sort of odd in-between moment. All roads seem to lead down from here.
It’s a nasty pullback, but the prevailing sentiment is still depressed, and the news is terrible.
Buy the dips — but moderately, with stops. The highs will be retested and probably broken to the upside.
Then we’ll get overbought again.
1987 memorable crash!
1997/8 – Russian/asian currency crisis & LTCM
2001 — 9/11 affecting the markets.
I think it is about time we get a 5-10% down day or a memorable equity market event for equities — that people can remember and talk for years to come (has to be banks, BD, GSE or autos…
Q3 has a better chance if recent history is a guide and the economy seems to be unofolding that way.
GLD! OR I am thinking of investing in mattress companies as people start pulling money out of banks and start stuffing their mattresses.
i thought you triggered a buy signal in early july. Don’t turn around now.
The dead cat bounced. The story behind the story in all of the financial news last week was ugly but the market refused to see it.
This week we did. There’s a lot more pain out there and until that all plays out, the overall trend is going to be down.
I’m thinking that we’re in a period that is much more like what happened from 1/22/08 to 3/17/08, than the rally we got from 3/17/08 to 5/19/08… which means sloppy sideways action with a downward bias. (The fear level was a lot higher on 3/17/08 than now). My bet is that the low in the market for 2008 will occur in September.
As for sectors, I think that the QQQQ has further to fall than the XLF, at least relative to the final low in the market (which I don’t think we’ll see until next year).
Here’s my 2 cents… Capitulation must happen naturally. Neither Cox nor the Fed nor congress can bring it about. Last January was a false one, as was the BSC morning. Traders have to be the one to bring this about via fear and then complete disgust and surrender How will we know we’re getting there? When oil is tumbling along with stocks, when the two do not know the other exists. That will be the key. As it is, everyone continues to look to oil to save the market and the market to save oil. This is the paradigm that must end. The market itself must also be on ‘main street’s’ mind. The chaos must become public.
Here’s another observation: jumbo’s are around 7.5% right now. That means the house you buy must be at least 18% lower to get the same payment you would have owed when your rate was 5.5%.. That means that one needs to take 18% off the price of a house in addition to the depreciation from the popped bubble. in my estimation, houses need to come down around 40% before we’re close to a bottom.
Short-term, anything can happen…but Dow had heavy, heavy resistance in 11650 area as I said before the fact and that is where the rally fizzled. 10 day MA on put/call is under 1 which shows little protection of longs…VIX must rise 50% to get to recent highs…small equity index players are long. I see nothing to indicate short-term fuel to rally market. Short coverage ratio on QQQQ is under 1…so the tech sector is very vulnerable, despite what talking heads say.
Longer term, with housing still to fall 30% or more, why for the life of me does anybody want to be long any stocks?
Funny how thqt works, fed bails GSEs, treasury auctions are cheered but mortgage rates go up. Those inconvenient markets. No problem , interest rate caps on the way.
heading down. next bubble healthcare sector…
Ag, Basic Materials and the Commodity countries are blowing up. They are the last to fall here and they could fall far especially a POT.
I am thinking that a pairs trade that goes long US SPY,DIA,IWM and Short Basic Materials and Commodity producing countries like EWZ and ILF could be had here.
This rebound was basically led by dead financial stocks. Leaders such as GOOG and AAPL virtually disappeared. The roller coaster is reversed v-shaped.
Stocks were oversold before the rebound, now they’re close to overbought and haven’t officially turned bullish.
Oil and gold broke their uptrends and are getting oversold.
All in all, everything’s a gamble at this point. Let’s wait and see (until 1) stocks break over/down or 2) oil and gold rebound)…
S&P500 first stop : 1246
second stop : 1235
market could rally to 1320.
then another sell to 1150.(final)
The fan seeketh poo….
My estimation is that a bottom will not be hit until after the election. there are so many people that fear higher tax rates (you mea we have to pay for living like this)that the rallies will keep coming. Each one will be lower than the last and the bottom will come in “due to a dem victory in Nov”. I was at a dinner party this week and two FCI (formerly considered intelligent) friends, stated that they were not voting for Obama, as he would give all our money to the blacks. I, as calmly as possible with my blood pressure being 500 over 400, asked them what money would he have available to give, since the Bush admin borrowed and spent everything available. They looked at me as tho I was from outer space and I realized that America is dumbed down more than I imagined. Translated there are any number of fools that will get fleeced before we hit bottom.
Bear market rally should continue to 135 on the SPY. Today was a technical consolidation to support.
(Now just keep Bush and Paulson off the TV for a few days and we’ll be all set.)
What does Big Picture’s traffic indicator tell us?
This slow bleed is killing everyone…
Let’s just come to an agreement and knock everything down 40%…(yes & the dollar)
The EU can buy everyone a 6 pack on Friday and we’ll all come back ready for growth on Monday.
Please don’t wake me…this dream is so good!
I thought that we would have a pullback and then the 2nd leg of the little summer rally. However, I was thinking in terms of a lazy pullback that drifted down over a couple of days.
Given the velocity of the decline today, now I’m just unsure if the rally will continue. I am sure that the Bulls just seem to have no balls at all. They face a bit of a resistance and it was just a stampede to get out.
i wasn’t biting on this mini run-up as i think we have further drops to go. i’ll start taking up small positions into the major indicies and select industries such as alternative energies, technology and international ETF’s in the eastern bloc and russia when i see the DOW dip beloe 10,500
continued from above:
s&p500 rally to 1320 after current correction
then sell to 1150
then rally to 1260
then sell to 1050 (mar-apr 2009)
SOX index looks very weak. if it breaks below current level, watch for NASDAQ hitting new lows.
There are some bargains among commodities stocks with the recent pullback. For those who like their stocks big & boring, why not XOM trading at less than 8x next year’s earnings (which will probably be revised upwards soon)? Plus, XOM has $31 billion in net cash and a credit rating higher than most sovereign governments. There are probably also bargains available on some small domestic E&Ps if you are looking for oil companies without refining exposure, with more potential upside, and ones that aren’t prominent political targets.
For the more adventurous, here are a couple of picks & shovels plays on the secular bull markets in metals and agriculture, respectively: AYSI.OB and HEM.TO. I have a GTC limit order to buy more of the first one, Alloy Steel International, at about $2.29. The second one, Hemisphere GPS, is releasing earnings on the 30th.
I am long on Evergreen Solar (ESLR). They are a US based solar cell manufacturer. They are a very speculative stock but they are about to open a new factory and have contracts for 1.6 billion dollars in sales (compared to a market cap of 1.3 billion dollars).
I also like irobot. They have there new military contracts and an aging population could use an automated vacuum cleaner.
In general, I like small cap industrials and tech stocks.
I like speculative small cap stocks right now.
All technials here:
1220-1235 will be the KEY support zone as the 61.8%/78.62% retracement of the recent advance. My gut says we hold this zone and stage one more little bear market rally. The move off the lows looks close enough to a five wave advance that I must give it the benefit of the doubt.
A break of 1220 would be ugly (lower lows).
I’m long 1200 and 1250 puts on the futures, but not as long as I have been in the past.
Remember, theres only two positions to have in a bear market:
1) Really short, or;
2) A little bit short
(Reverse holds in a bull market)
If you want to know what a doji star top looks like in Japanese Candlesticks, the last three days offer a good rendering. FYI.
Woops the contract backlog is 3 billion, not 1.6 billion.
I’m buying ACI, CCJ, GG super near term bounce…
disclosure…I’m long Gold
What Bear markets do, first and foremost, is take money from the majority; the longs and the shorts. The whipsaw of the last couple of weeks for example. The Macro in effect here is quite simple; Baby boomers all have the same expectations; housing and equities and bonds and 401k’s and pensions and anuities and whatever else, will all be there for them in the end, so to speak. The reality is that they are all chasing the same thing, and history is full of examples of what happens to the masses… The DOW will go from 9200 to 2800 like crap through a goose.
larster…lifelong republican here. In 2004 and 2006 I voted straight ticket D.
I will not vote for Obama.
I would have voted for Hillary.
I researched Obama on my own time, and let me tell you there is some real juicy stuff in his hometown paper.
Heck I may even vote for McCain just to vote against him effectively.
I wanted to like the guy, but his record in office, lack of any legislation, extensive present votes and 6 “oops I hit the wrong button(out of 2 buttons) votes, FISA vote, Faith based initiative, and all the other numerous promises he has abandoned and his associations with unsavory radical left people…..so on so forth
People are starting to see him for the politician he is…nothing more, nothing less
Right now, everything feels fake to me. From the rally in financials to commodities falling off a cliff. Seems to me, the second quarter ended unusually. I saw nothing that looked like the usual “window dressing” by mutual funds. Even the volatility spike felt contrived; like,”see, hears what you’re looking for.”
For me, paying attention to the bond market is like eating vegetables. Yeah, I know I should…I even like Santelli…I try to focus… but then I start thinking about the girls in the pit behind him…are they married…why aren’t they working….
The SEC’s “double-secret probation” list was Fannie, Freddie and the primary dealers, who just threw their wallets at TSLF auction today (and that doesn’t feel genuine either). I really believe that this is the most significant thing right now, but it’s just sooooo boring to me.
Frankly, I’m still trying to wrap my brain around “liquidity injection”, no chance I can tell you what this auction means. Hopefully someone will post the explanation below. Please Elmo it up for me.
The meme on wall st. is that if “oil comes down, everything will be OK in the stock market.” I completely disagree with this assertion.
Oil has been gurgling for years because of increased economic activity. A sudden collapse in the price would signal that global activity has hit a wall. This would be very, very, very bearish stocks. Not to mention the fact that S&P500 earnings would be down 23% this year without ‘big oil.’
So, be careful what you wish for with oil.
Bottom line is that in a structural bear market, the Bear will eat you up most of the time unless you stay out of the woods. Perhaps one should mix Treasuries, gold and cash and pretty much forget about stocks for a while. Market peaked March 2000 and the right time to buy in was 3 years later with the higher market low prior to the Iraq invasion, or anytime in Q2 2003. The analogy here is to aim for mid-late 2010 for stocks to be in at least a cyclical uptrend if not a secular bull.
What’s your opinion? This seems awful short for a bear market rally?
I thought last week was engineered by Paulson and Cox, but the market was primed for it, as you predicted and I was too greedy for the last few points to heed.
With my short ETF’s I enjoyed the hell out of today. It was so good that that SRS that leftback got me to buy rose 10% and is back up to where I bought it :) I do think it’s a good long term bet, though.
I think the averages cold still go higher from here before heading back down. The Wall Street/CNBC axis is alwasy able to put on a good show when needed.
It was interesting that DUG moved up along with oil. My recollection is that this had generally only occured nearer the peak when it was becoming clear that higher prices were squeezing refiners also. Maybe it was a sign of panic or just a fluke.
An interesting read by Marc Faber the history of bear market rallies: The treacherous nature of bear market rallies He wrote the article in Jan. 2002., giving the opinion that the current rally was one of those treacherous bear market rallies. The DJ was at about 10,200. It rose another 200 points and then collapsed, winding up 2000 points lower six months later. I guess the moral is to be careful.
bailouts=oceans of liquidity=Zimbabwe=Gold as a store of value in this deleveraging madness
By rights, we should get some kind of consolidation or bull flag that should take us down about 40 S&P points, and then up to resistance at 1320-1350, followed by Elliott Wave 3 of 3 (if you believe such things) once we successfully break the previous lows.
Of course, my gut feel (no forensics behind this AT ALL, except that WaMu fell about 15% both today and yesterday, and where there’s smoke…) is that a few banks are hanging by a thread that could snap at any time, and when that happens, major ugliness will ensue.
I’d also be hearing your opinion with respect to what happens from here. Was that the top of the bear market/summer rally? Or a pause before making a 2nd bullish leg?
In the short term anything can happen, the stock market is manipulated by the usual crooks, including the s ec, treasury, fed, and most financial institutions. In the longer term, the SM will go down in real terms as the world dumps assets in disgust of our fascist markets and obvious failed planning related to the assumption of endless cheap energy. Oh and the dollar tanks.
Go read the American Express earnings call transcript if you think the worst is behind us. Full scale deterioration in even their super prime, long term accounts.
My king – Cash.
“followed by Elliot Wave 3 of 3 (if you believe such things)”….
ha. you must ‘sort of’ believe such things to realize that a third of third looks to be in the offing….
If that’s what this market is setting up for (I think there’s a good chance of it)then…brother…BUCKLE UP…we should see Ben Bernanke jumping out of a window with Hank (Crooked Pinky) Paulson not far behind as the market falls another 20-30%….
I feel the Dow will grind out a bear flag in the short run and then we will see a major “equity event” spike down to 10K in the fall.
It may be as simple as the SEC and Treasury lead short squeeze has run it course… nothing left to hold the XLF et al aloft… except a vacuum. Unintended consequences. If WaMu goes, they have orchestrated the very crash they sought to avoid, the dumb $!@$#ers.
P.S. if WaMu goes, and Mish wrote a great piece on it, it’s a matter of time btw, kiss the FDIC good-bye too. It’ll be crying to Paulson for funding and then the crapola doesn’t just hit the fan, it sends the fan out the window. Confidence will evaporate in a heartbeat.
The SEC, Fed, and Treasury suckered some poor bagholders back into the financials, we need to test the 7500 low on the dow before this bear ends. The boomers are not going to like the way their 3Q 401k statement looks like and they will begin liquidating. Just wait for Lusking and Bowyer to turn bearsish..that will truley be the all clear signal.
How can you vote for McCain?
Perhaps he would have made a decent president in 2000 because of his national security strengths. But now, we need someone whose strength is all economic. And that is NOT McCain. Obama is a very intelligent man and while i have some of the same concerns that you do about him, i have more faith in his intellectual ability than i do McCains. I have faith in his ability to grasp the current economic situation that faces the United States. I have almost zero faith in McCains abilities vis a vie the economy given that his go to guy is/was Phil Gramm.
One of the single largest issues facing the country is energy prices. At least Obama is willing to look at any and all avenues to formulate an energy policy (conservation, alternative energy, ect). McCains energy policy is the same as the current adminstrations (which is NO energy policy).
McCain time has come and gone Hilary was the right person for the “current” job. Obamas time should be in the future. I would rather bet on pre-expiration Obama than post expiration McCain.
Also to add, we continue to move down until the Fed opens up its spigot some more. It’s been draining cash at the same time the Treasury market is crowding out all other markets, sucking liquidity from them. With the Treasury’s funding requirements shooting through the roof, we continue to depend on the kindness of foreigners like a drug junkie and they’re already squawking about holding too many dollars. Dependency from abroad is not sustainable. The markets therefore will continue to face liquidity challenges as the Treasury market continues to crowd them out. We’ll start a bull market when the Treasury market eases its sucking sound.
I don’t think we’ll hit bottom until we have a full open accounting of the mess in the financials and solid reforms of the ratings companies. Right now no one knows what they’re buying so, for the most part, they’re not.
New down bar on my three line break chart. I won’t go long SPX until a break of 1277. Resistance around 1336 and support around 1192 (based on trend lines). Banking fundamentals horrid. Don’t listen to the earnings. Go straight for the Exhibit 99 and look to see if chargeoffs and NPA/NPL are still increasing. Check the footnotes of the 10K and read the proxy statement. Find out what they’re not telling you. Look for accounting changes that paint a better picture for earnings. Never in my wildest dreams did I see myself researching companies like I do now.
Further down to go. The latest S&P earnings estimates are $83.84 for 2008 which translates to a very tepid 1.6% earnings growth with two quarters to go. Expect that number to go down as the year progresses so most likely a negative S&P earnings growth for 2008. I’d sit it out for two more quarters.
“The market itself must also be on ‘main street’s’ mind.”
It’d be refreshing if main street was on the market’s mind every once in a while, too.
Obama’s strength is certainly economic. 4 of his 5 biggest contributors are from Wall Street. I suppose they won’t want anything in return :)
“his associations with unsavory radical left people”
As opposed to McCain’s savory pals, the Armageddon-loving Pastor Hagee, the noble Phil Gramm, and that paragon of virtue, Karl Rove?
Yu want comments? Ok. The market goes up and she comes down. Long term – everything will be perfectly fine.
Volitity is at the upper range. Swings are more pronounced. Rumour mongering takes more weight than facts. Some folks repricing air.
Been here 27 years. Never seen this. Arrogance is now fear. Very much like ’87. Currently 93% in cash. Oh, out of USDs, too. A basket is much more comfortable.
I am probably wrong. But I will sleep good tonight
>>Obama’s strength is certainly economic.
THE ONLY reason Obama is where he is today is because he is a master of being able to relay what he hears them say through the implanted transmitter in his head. Watch him….you’ll see what I mean.
Due to stagflation and a bearish US market I am in a mixture of inflation protected bonds, swiss francs, gold, and silver. I have not made a lot of money, but I have not lost a lot either. China and India have both dropped a lot and the risk of being invested there has dropped so I have added half positions in both those countries and will add again in the next 1-2 months and hold until I see the next peak, etc.
Of course wall street will want something but they are getting a great deal courtesy of Senator Dodd and the mortgage bail out bill written by BANK OF AMERICA.
For the record i don’t believe that Fannie and Freddie can be allowed to fail. But this republican adminstration has spent us into the next century.
We are all behind the 8 ball and i don’t think Phil Gramm is going to come up with anything that is going to help us out of this mess.
I have been long gold for three years and believe it is going to now drop over $200 by November–too many big players in a very small pool. Commodities in general are getting ready to get ‘assfucked’ and should drop precipitously as several are large hedge funds are on the wrong side of the trade. One of them most definitely blows up before September. Decoupling was a nice group fantasy, but the orgy is over, even in commodities and it is going to go South this week or next. I agree with the guy who is all cash. CASH IS KING!
i have no idea if the market will go up or down tomorrow.
too many unknowable factors.
i do know the country is in serious serious financial mess
banks, autos, RE, sky high energy and food costs
longer term stocks get wacked along with the consumer
This is a buying opportunity and the market will rally back tomorrow.
VIX is dropping
TED spread is dropping
Volume on the selloff was light
The news was (relatively) mild compared to what we’ve seen over the past week
This market is rallying on fear. When people are afraid (like after a 280 point drop on the Dow) – be greedy.
Well, Iran just killed the nuke talks, which will probably spike oil, driving the market down…and then there’s WaMu…..thinking Friday should be “interesting”.
“Is this the end of the bounce? A breather after running up 700 points? Something else entirely?”
Short-term, anything can happen. This whole thing is so unstable it’s not even funny.
Long term, I’m with Michael Belkin; in a bear market of this magnitude, once the 200-weeks MA indices’s are broken, look for the 200-months as the target. That is 981 for the S&P 500 Index, 1,771 for the Nasdaq and 8,360 for the Dow industrials.
We’re going to have an interesting ride indeed.
Bernanke suggested in his 2002 deflation speech that the Fed could buy longer term treasuries to anchor long-term rates.
What would be the consequences of such a move? The dollar gets hurt. But what about mortgage rates? Inflation? Gold? The stock market?
I believe this speech lays out Bernanke’s entire playbook. It is well worth reading multiple times:
I find it interesting that folks here are saying that ma and pa main st will be taking their 401k ball and going home in 3Q.
Err, no. I don’t know who you guys hang with, but I’ve been helping friends and family liquidate their investments for the last month. Main St has noticed, and they’re already leaving the theater, before the fire becomes visible.
The 10-year moving average DJIA is 7000.
This summer period has the ominous resemblance of the dot.com bust when all summer long tout tv said ‘no problems that cannot be fixed by labor day when the players come back from vacation.’ We all know what happened when they came back… ~m
“THE ONLY reason Obama is where he is today is because he is a master of being able to relay what he hears them say through the implanted transmitter in his head.”
White folks will persuade themselves of anything in order not to pull the lever for a black man.
This country is going down.
If you think the market is bumpy now, just wait until Phil Gramm is Treasury Sec. Run on the dollar, whee!
Interesting theory about the transmitter, and close to the mark. An article in The Asia Times, not exactly a right wing rag, theorized that he learned from his mother the art of the anthropologist: to live among natives and “pass” as one of them by learning the culture.
Whatever the secret, he seems to have the ability to get those looking for a savior to see in him an answer to their prayers, whatever those prayers might be.
Ugly day today? I thought it was beautiful.
The last depression didnt happen overnight either. It took a couple of years of jawboning, manipulation, fraud and funny money schemes. Gee, where have we seen that recently.
DOW at 8000 by 2010
It’s 1973 all over again.
An article in The Asia Times, not exactly a right wing rag, theorized that …
This intro sort of kills the credibility of anything that might follow it.
But I would appreciate their “theories” on what the price of home heating oil in Maine will be in November. After all, it is The Asia Times.
its a start of the b wave of the wave 2 of 3…. the wave 2 of 3 is in an abc move.
When wave 2 is complete around 1350… down we go.. to new low low lows,,
Good sentiment input — 80 to 90% bearish.
I don’t think the bear market’s over either. But with short-term sentiment this depressed, the market can hurt the most players by bouncing into August.
* puts on CNBC “Dow 12000” hat *
Go, stocks, go!
All of these commodities are bubbles and they are not only going to fall but they are going to crash. We have likely witnessing the ultimate peak for oil………….forever. We are probably living through a historical moment yet no one sees it.
And, therefore, everyone pumping this commodity bubble, in retrospect, will look like the same clowns pumping the tech bubble…….”but this is not a bubble because these companies have earnings”
Bill Gross comments yesterday probably put the nail in the coffin.
He is so well regarded that it will be tough for the mkt to overlook his predictions.
I am utterly clueless.
There I said it.
I’m long in GLD, but nervous about it.
The next leg to get kicked out from under the market will be Commercial Real Estate. An Ohio Investment Group just dropped financial support for a struggling shopping center (Eastland Mall) here (Charlotte) yesterday.
Commercial real estate here has over-built just like homes. In 1999, you could not find a decent house for sale anywhere at least not in Iredell County (Mooresville, NC); but, that is no longer the case. Where in 1999, there was no house. Now entire neighbors have sprung up with all the supporting pizza, home-improvement, fast food and health care facilties.
With everything now unwinding, it could get very ugly over the next few years. Growth in this Country has always gone forward; but, recently advances occurred way too fast and is on the precipice of stalling out and falling back.
This fast build-out of real estate is just one more example of too much credit and too much fast money running around the Country trying to find an investment.
Sounds like the beginning of a real bear attitude to me.
Up until now most of what I’ve heard been cautiously optimistic about the long-run, and stock index cheerleading was still going strong. Not exactly blood running in the streets yet. Can’t wait til people stop believing in stocks and demand plummets. P/Es are still too overpriced for my tastes….
Just remember: Being 100% cash is the same as a 100% bet on the dollar, and long-term, that might not be the best bet.
I think the future will hold international currency baskets (interwoven) up as the holy grail of paper safety/stability. The days of one-currency thinking are at an end for us (so we’ll be catching up to much of the rest of the world in that regard).
The 200 month moving average idea is a new one for me, but there is no reason it couldnt happen. Meanwhile, back at the election Obama is running for leader of the free world. Quite a switch from the current get the fuck away from me crowd. We”ll see.
quote from above “Obama is willing to look at any and all avenues to formulate an energy policy” … and in a good state (Illinois) for pretraining.
Nuclear has been in IL for a long time. Don’t sell the refuse pile short from that industry. I’m not really in favor of Yuca Mtn disposal. Thats allot of power in one place, Darth Cheneys backyard.
Coal in IL is full of sulfur and difficult to scrub and our steel industry knows this. Workin it out.
Ethanol in IL is doing its best to be another fuel source for our addiction.
Super Collider in IL now an overseas venture, thanks to a steal and fireants.
Wind in IL has been testing the currents for at least 5 years.
Hydro has worked for years in my back yard, not so much Chicago.
Obama is pretrained. Sharp witted.
The debate over Obama vs McCain is trivial. The real issue is Republican vs Democratic.
If you are still hoping for good governance from a Republican administration you have not been paying attention. It’s too risky to vote a republican into the WH this November, especially for national security and economic reasons.
Regarding the Asia Times, it’s a great online paper, but the author of the Obama anthopoligist thesis, the psedonemous Spengler, is not a reporter. He’s a right wing mystic with a commitment to conservative political causes. (read his stuff you’ll see) He hatched his Obama is bad thesis to give ‘smart’ people a rationale to hang their objections on.
It’s bunk. Higher Garbage so to speak.
This “bounce” as you term it, could very well be a beginning, not an end. It is likely that inflation will soften (both headline & core). Oil could very well have seen its highs for a rather long time, perhaps at least a few years (and maybe a decade). There will almost certainly be more landmines in financials but that’s old news. Sentiment became extremely bearish and it will take a while to work that off.
There is tons of cash on the sidelines and not a whole lot of places to go other than US equities. The performance chasers haven’t even gotten in on this rally, as their hand has not yet been forced. Perhaps around a 10% rally from the recent lows will force market participants of all stripes to get long exposure for fear of missing out. If that happens, then the strength of the rally, the reaction to news flows and the data will determine the durability beyond. But I am currently long equities and short oil and think that theme can play out for at least a bit longer.
Until everyone starts to believe that we are headed for Dow 8200, we will continue the decline.
(Elliot-wave is predicting the Dow bottoming in 6 years)
McCain on GSE bailouts:
Pretty damn sensible I must say…
I’d be remiss not to note that McCain says he’s upset about “sticking Main Street Americans with Wall Street’s bill”, but he’s actively campaigning to stick Main Street Americans with the wealthiest americans’ tax bill, by making Bush’s skewed tax cuts permanent.
I used to think of McCain as a very rare, different breed of politician. One that says and does what he thinks is right, rather than what he thinks will get him (re-)elected. Unfortunately, he’s recently proven that he’s just another politician. His flip-flops on taxes and torture, as well as his choices of campaign staff (Karl Rove’s guys) made that abundantly clear.
As for the markets, as others have said, I can see a multi-week bounce if a major event doesn’t get in the way. But, also as others have said, I expect WaMu or someone similar to shake it up yet again. Wash, rinse, repeat every few months.
My I’m 100% short at the moment in my brokerage, TIPS and cash in my 401K. Since I’m restricted from “actual” shorting by my employer, I’m using EEV, SKF (and to a lesser extent, SRS).
Back to politics, I’ll be voting for Obama, and though he’s not guaranteed to be great or even good, I do believe he’s intelligent, thoughtful, and wants what’s best for the country. He’ll also help us do a lot of healing internationally, which, like it or not, is something that ought to be done.
The Econ guy in me does worry about a Democratic sweep of congress and the presidency, though. The country clearly needs to get its books in order, or the dollar will continue to free-fall (could recover vs Europe as they fall more ill, but will continue to fall after), causing ever more pain to the regyalur folks. Hard to see how Dems will cut back spending in a recession.
The alternative is worse, though. At least Dems will try to check some of the abuses going fwd.
ADD – Back to markets, if commodities collapse, I’ll prob jump back into gold, silver, and maybe CHF.
I have a very old article in the Economist that I refer to to guide me in whether I should be back in stocks here or not…
They wrote an article called ” THE INVESTMENT CYCLE” several years ago, and the gist of it was that most of us should be in stocks only about 50% of the time..(!)..The criteria one should use, according to the Economist, was whether global liquidity was increasing or decreasing….when liquidity was increasing, it was time to buy and when decreasing, time to stay out until investment money was easier to come by…
It is one of the things I use, and when the housing crash began and money started drying up…I took that as a signal to leave the market…and am still waiting..
As I see it, liquidity is still relatively hard to come by when compared with recent years…
Bruce in Tennessee