I'm wondering (maybe that should be hoping) that yesterday's action revealed some selling exhaustion.After a lot (a ridiculous amount really) of selling we know that the selling will exhaust.
That will happen.
It doesn't have to signal a bottom (short term or otherwise) but it might. There have been past instances where a rally has come right away with much velocity and other times where there was some meandering.
I don't really have a sense of what will happen on this go around (I get hunches sometimes) and of course the selling may not in fact be showing signs of exhaustion.
The things you have read about investing being difficult, well they are talking about right here right now.
Difficulty means different things for different people. Some folks are panicked and either have or on the verge of selling a lot of stock at a point where history shows is a horrible idea. Some folks are literally having trouble sleeping as they know they should hold but struggle mightily to do so. Some folks are getting hurt trying to catch falling knives (let's face it there are a lot of companies that have been sold down in ways that don't make sense). My difficulty is mentioned above; no great feel for the next few days and so nothing great to tell someone.
There has been some commentary about SPX 800 as being a stopping point. I don't think it will go that low, but it could. That would be tough for a lot of people but after it hits the real bottom, what comes next? After the bottom what is next? You know the answer.
It will recover. You don't know the price level form where a recovery starts, you don't know when it starts and you don't know how long it will take but it will happen. A few days ago I said "we'll look back and say it took X years to make it back." I doubt it will be one year but I doubt it will take ten either. However long it takes in the US, there will be other countries that come back much faster.
Another repeat is that it is times like now where both huge fortunes and huge mistakes are made. What direction do you want to lean?
24 comments:
Roger - I really like your perspectives, thank you for the blog. With respect to your thought that different markets might recover sooner, would you think that China and India in particular are likely to come back sooner on the back of higher GDP growth rates in those countries (given the stage of development)?
Thanks.
- Sandeep
Thanks for adding some perspective to the generic advice that gets tossed out during periods like this. Difficulty DOES mean different things to different people. I'm tossing and turning, but my 30-something kids shrug all this off (as they should) with a yeah, how 'bout it attitude. Very few "experts" add any context to their prognostications.
Just to put a little more perspective on things, looking at the futures this morning ... there was a day when the Dow futures being up 200 points meant a big rally day. Now we wonder if it'll close in the black. Funny stuff.
I think S&P 800 is a done deal. If it doesn't stop there, the next stop on the charts is around 500. I know it seems unlikely, but I would have thought the same about being below 1000 at the start of this year.
Bottom line is that even though there has been a significant sell off, there is still no panic. Too many people are still calling the bottom and looking to get in. The bottom will be in when everyone is ignoring stocks. Unfortunitely, I don't think we're even close to being there.
And you base this on ..........
"Wall St. Terminolgy
CEO --Chief Embezzlement Officer
CFO-- Corporate Fraud Officer
BULL MARKET -- A random market movement causing an investor to mistake himself for a financial genius
BEAR MARKET -- A 6 to 18-month period when the kids get no allowance ; the wife gets no jewelry, and the husband gets no sex
VALUE INVESTING -- The art of buying low and selling lower
P/E RATIO -- The percentage of investors wetting their pants as the market keeps crashing
BROKER -- What my broker has made me
STANDARD & POOR -- Your life in a nutshell
STOCK ANALYST -- Idiot who just downgraded your stock
STOCK SPLIT -- When your ex-wife and her lawyer split your assets equally between themselves
FINANCIAL PLANNER -- A guy whose phone has just been disconnected
MARKET CORRECTION -- The day after you buy stocks
CASH FLOW -- The movement your money makes as it disappears down the toilet
YAHOO -- What you yell after selling it to some poor sucker for $240 per share
WINDOWS -- What you jump out of when you're the sucker who bought Yahoo @ $240 per share
INSTITUTIONAL INVESTOR -- Past year investor who's now locked up in a nuthouse
PROFIT -- An archaic word no longer in use"
this was posted on the Cara blog..
thought we could use a LOL.
Roger,
Any thoughts on the expiration of the short selling ban today?
How about the TED spread maintaining/achieving new "wides"?
Finally, is "this time different" insofar as there is an internet full of blogging financial analysts? Are we going to (could we) extend the fall (in your guesstimation) as a result of so many commenting that (A) the first leg up from a bear market can be very large (translation, don't sell! translation, delay inevitable capitulation...?), and (B) the government is (central banks are) proactively addressing this..
My thought is that we have sped up the process so that there are now too many opportunities for "false starts". Or are these false starts (bear rallies?) common in all bear markets, but we're going to see more of them because of the speed and depth of information transfer?
My fear is that this process will be extended and protracted as there are more "weak hands" than ever convinced that the "first big leg up" is just around the corner.
Even the main stream media has been blathering on about how we might be "forming a bottom" (suggesting it's still too early to buy). When everyone is able to be "smart" about their response, the potential for a head fake seems enormous.
R in NY
Roger - off point, but would like your feedback. In order to work our way out of this financial tsunami, what if Fannie & Freddie were directed to provide direct 3.5 - 4% 30yr mortgage paper directly to the homeowner. If refinancing, the current obligation would need to be financed but at a much lower rate, which would lower monthly payments. Fannie & Freddie can sell this paper to other banks with a government guarantee or perhaps can be sold directly to the public. Perhaps this could run as a 2 year program.
Does this seem like a plausible idea?
Here's a prediction for you, Roger....
http://www.noeltyl.com/cgi-bin/webbbs/webbbs_config.pl?read=184354
I second R in NY, with the amount of information in media and blogs vastly exceeding similar episodes in the past will it change the market dynamics this time? For example it is now official that Monday was not capitulation. I don't see how to how to invest in this environment full of opinions masquerading as information, except by using some kind of stochastic model.
PS:
It looks like we are in for a long period of "negative growth".
Also, the US dollar may become "increasingly worthless."
This quote from Nouriel Roubini yesterday gets a "minus plus":
"... at this point, I don't think there is much reason to be optimistic, I'm afraid."
Jim
anon 653 - I base it on the fact that no one has any faith in the financial system right now, house prices continue to decline, consumer and government debt is out of control, unemployment is rising, etc, etc, etc.
s&p 800 is a done deal. it might not happen next week or even next month, but the low will be around that level, if not a lot further down
This could be an interesting change to the government's bailout plan. Give the capital directly to banks instead of taking their crappy assets.
It's a schizophrenic feeling: trading is proceeding, not entirely normally but working none-the-less, and yet there is a strong sense we are not in Kansas anymore, that literally anything could happen. I'll work the fields until it gets too muddy and then go home, prop my feet up and wait for things to dry out; some seasons are tougher than others but the cycle goes on (shrug).
From a macroeconomic perspective there is still more bad news than good out there but markets are anticipatory (not predictive unfortunately) so what is known has been pretty well discounted in current prices. Whether this sets any kind of bottom depends on whether the respective governments and central banks can keep the credit wheel from completely freezing up or flying apart; if not then S&P 800 or even 500 may appear optimistic, if so then a new cyclical bull becomes highly likely (Bill Cara suspects we may already be there but even though I am making some trades in that direction I'm not that confident). JMO, FWIW and all that.
Regardless it has been an interesting week thus far.
Going out on a limb - as of the today, the bottom is in.
Very busy morning, which i'll blog about tomorrow, so just catching up now.
Sandeep, China is easier for me to see than India. I also think the surplus countries and commodity countries look good, as always I am talking moderation.
S&P 800? Flackdoodle! The logic from a TA standpoint is actually very easy to see however I do think there are other stopping points, and I do not think it will go that low.
Wall Street terminology, a friend emailed that to me, I hope to not be too much of a CIO; chief idiotic officer.
the short selling ban, imo impeded liquidity at exactly the wrong time, bringing back that liquidity seems like a good idea to me.
blogs influencing sentiment? i think the readership is simply too small for that to be the case. we have clients that do not know about this blog (a detail they just don't hold onto). Think of all the 401k participants at all the companies doing hard work all day, they don't have time for blogs. JMO. if the bear meanders as you fear (which is possible of course) it won't be because of blogs, we are not in the stream of consciousness like that yet.
winslow, sounds like the Hubbard plan but he came up with 5.25%. how much would people really save? would it be enough? it could help some folsk at the margin but in refinancing, what kind of demand would there be for 4% paper with a long maturity. using your number, the duration would go way up because if you can get a 3.5% mortgage you will never refi.
RW, what you say is true in a bigger picture sense for sure; the turn will not be recognized. interesting week? I might expand time horizon for that statement.
TomK, you ignorant slut. Seriously, good for for sticking your neck out. Very few a comfortable saying anything definitive.
Tom K. Jim Cramer called a bottom on July 30. Heck, I thought the market bottomed in Jan. Hope your call is right. JCarr
Not really a normal bear market, is it? Closer to 73-74 when it took 6 years to get even. That where I think we're headed. Tough to be retired when you don't know how much you're investments will be worth.
the 1970's? you think it could be the 1970's?
we already that this decade. the high made in 2007 took 7.5 years from the 2000 peak. you might be right but there is nothing new about that at all.
Flackdoodle? Maybe....but my target is 800 at a MINIMUM. I think there is a real possibility that we eventually trade down to the 500 - 600 range on the S&P. Not quite as bad as the great depression, but still the second worst drop is US history.
flackdoodle was a humor attempt
this is no laughing matter
* my humor attempt as well *
Unfortunately I think we still have a ways to go. We're looking at a systematic crisis here, not a normal bear market or a cyclical loss of consumer and business confidence. We submerged ourselves in debt, and we're trying to borrow our way out. And unfortunately for us, history has a way of proving that all economic systems based on fractional reserve banking and fiat currency will end up in disaster and collapse. Unless we can force some serious changes, like sound banking and money and interest rates set naturally by the market instead of by quasi-governmental manipulation, our path will be the same.
The Truth Shall Set You Free - There goes the floor
Well, so far I'm still leaning the right way, but it never felt so wrong.
'73-'74...well, maybe this is the '74 year.
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