25 replies to this topic

[milbank]

Both are 50% rallies. Ultimately the 1929 market fell a full 92%. If this was to happen this time the SPX will end up at 126 and have a PE of about 5 based on 2009 GAAP earnings. A PE under 10 is where all of the major bear markets this century eventually bottomed (1942 = PE of 9, 1951 PE=7, 1982 PE=8). At a PE=10 the SPX will be under 300 assuming EPS holds. Also, from the peak in 1930, the bottom came 27 months later in July 1932. I'm not saying the markets are going all the way to these numbers, just doing the math.

The video takes less than five minutes and shows via a chart of the 1929-32 market where it went and how, so far, this market is matching it to a "T."

http://www.youtube.c...player_embedded

Edited by milbank, 15 August 2009 - 09:20 PM.

[porsche911sg]

Both are 50% rallies. Ultimately the 1929 market fell a full 92%. If this was to happen this time the SPX will end up at 126 and have a PE of about 5 based on 2009 GAAP earnings. A PE under 10 is where all of the major bear markets this century eventually bottomed (1942 = PE of 9, 1951 PE=7, 1982 PE=8). At a PE=10 the SPX will be under 300 assuming EPS holds. Also, from the peak in 1930, the bottom came 27 months later in July 1932. I'm not saying the markets are going all the way to these numbers, just doing the math.

The video takes less than five minutes and shows via a chart of the 1929-32 market where it went and how, so far, this market is matching it to a "T."

http://www.youtube.c...player_embedded

I am suspecting something is gonna happen from here.

My gut feel is that it is going to plunge through. Ok don't take my words. I ve got no short position currently as I just cleared my longs this friday.

I am not going to take part on monday on the long side. I am staying flat till tue. There will be a big rebound i suspect than ka boom if this 1929 senario plays out.

[milbank]

Specifics are, of course, different but, the massive economic broadside that hit both markets has always made me think from the beginning of the collapse that this was going to be "the big one" so far the course has been running on schedule to the early thirties collapse. Taking into account that when you get away from the government and media jawboning, nothing has really changed except the FED printed trillions of dollars, lent it to the treasury, and the treasury either lent it to the banks or just gave it to them so that they wouldn't default on their outstanding loans. The banks still have most of those loans, and the assets are depreciating. Commercial real estate and prime loans are now a problem not yet faced. The FASB rule change was designed to allow them to postpone taking the losses on their books for a bit, but now FASB is realizing that was a mistake and they are about to reverse this decision (or revise it) causing banks to be back in trouble. The banks have run up the stock market using this money (rather than lending it out) to generate capital for themselves to help themselves out, but that has about run its course. It was government intervention that ran up the market in 1930 and it's government intervention doing it now. I do believe the recent rally will be entirely erased as there really isn't a fundamental base case to sustain it. Major bear markets have always based-out at a PE under 10 on GAAP earnings. The SP500 GAAP earnings for 2009 is about 35, so that says that the SP500 will very likely fall much in the same way it did in 1930, erasing the rally and much more. We shall see.

[goldswinger]

You'are absolutely right Milbank, just take a look at the volume on SPY since March, straight down, and that's with government intervention and high frequency trading from GS and others, if you subtract their volume, the volume is even more pathetic....you don't launch a new bull in this manner, it looks more like a sick bison or maybe a fish market swimming on liquidity...

http://stockcharts.c...amp;a=171470184

GS.

[MikeyG]

The difference between operating earnings and actual earnings is at a historical high, so the real PE is very difficult to determine at this juncture and depends very much on if you use operating or actual earnings... Most analysts like to use operating earnings but in the current situation it seems to me that actual earnings would be more appropriate due to the massive write-downs recently and the effect it has on a company's liquidity position...

[inamosa]

I guess everyone still wants to ignore this, huh?

Attached Thumbnails

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[Russ]

There are major differences between now and 1929, the big rally in the video from in 29 came from a much higher level than we are at now, the 29 chart looks like it had only fallen less than 25% whereas in march of this year the spx had already fallen over 50%.

[MikeyG]

I guess everyone still wants to ignore this, huh?

So, you expect the Nasdaq to top here and retest the lows...

[MikeyG]

There are major differences between now and 1929, the big rally in the video from in 29 came from a much higher level than we are at now, the 29 chart looks like it had only fallen less than 25% whereas in march of this year the spx had already fallen over 50%.

Actually it went down about 48% from 381 to 198...

[inamosa]

I guess everyone still wants to ignore this, huh?

So, you expect the Nasdaq to top here and retest the lows...

Can you tell me where I said that? Thanks

P.S. I've never said that so good luck.

I've already communicated my views on the above fractal in an earlier thread I made this month...by the way what you're seeing above is only the past 9.5 years - you're missing what could potentially be the next 3.5-4.5 years

Edited by alysomji, 16 August 2009 - 12:28 AM.