7 replies to this topic

[A-ha]

Since Alan Greenspan now agrees with me , let me remind you a few things that buyers and holders and coin traders clueless about: 1- Stocks trade above past market multiples. 2- The last recession occurred in 2000 and 2001. Business expansions don't last forever. The boom-and-bust pattern of an economic cycle has not been repealed. This is a cyclical fact as well as a fundamental one. 3- An inverted yield curve almost always points to a deep business slowdown. This has been clearly foreseen by the market so far as the growth oriented sectors like Technology underperformed the overall market significantly, in fact some sectors like Semiconductors have been in a bear market for 12 months now ! The Fed publicly claims there's a 40% chance of a recession at the moment. However, a model of the Federal Reserve Bank of New York is essentially forecasting an outright recession. 4- Double-digit corporate earnings growth will be a thing of the past. Companies should consider themselves fortunate to experience single-digit growth going forward. Market is forward looking, and the time is rapidly approaching. 5- The housing industry remains on the verge of a massive collapse. 6- With all the frenzy, mania and froth, Wall Street failed to take note of how corporate insider selling has increased to its highest pace in 20 years. Furthermore, cash levels of mutual funds are near record lows. 7- U.S. budget deficit is the lowest in four years. That is one of the invincible trends that can not be altered in weeks months, even years 8- Sentiment is at an extreme level. Unfortunately, it's a very bearish one. You need not look far for the evidence of the euphoria in today's market. Here I am not talking about daily market sentiment, ripples in opio data or same sort. My read on sentiment is a trend that developed in media and investors' behavior.

Edited by xD&Cox, 26 February 2007 - 01:51 PM.

[snorkels4]

http://biz.yahoo.com...55931.html?.v=1

[hiker]

i was just now thinking about AG and you being on the same page re: recession that was a fantastic trading decision last week to remain short during heat combined with limited upside movement in the averages

[denleo]

I think the market will respond to Greenspan's statement in the typical market way: f... you old man, you are not the boss any more, we are buying stocks here, and the new boss told us we are in the goldilocks. Should be good for 15 S&P points on the upside. Denleo

[constanza]

None of these things matter ! Stock market is very loosely correlated with real economy, believe it or not.. Facts : - The "friction" that's needed for market's existence has to come from somewhere, Hamptons houses cost way too much money, without public participation the market cannot exist ! - Public is not excited about markets right now, no participation. They only get excited when they see some people make money. - Hedge funds have become the "chic" vehicles and way way too popular, they "pride" themselves in being short which MFs can not do. - Very few people make money in "bear markets". - It's all fiat money, it's a confidence game anyway.. - Inflating the markets are the only way to get out of social security timing bomb.. CONCLUSION ... Draw your own conclusions.. I expect markets to go way way up and starting soon and blood of short hedge funds will carry it up..

[johngeorge]

From BC

Why It's Different This Time

"As to why the yield curve is not only not forecasting a recession, but a boom instead, it's really simple and something we should have recognized long ago:



The reason the yield curve was a good predictor of recession in pre-21st century times was that banks didn't have the flexibility to borrow outside the domestic banking system. Due to the advent of the so-called "yen-carry" trade, banks and other financial entities now have the ability to borrow money from Japanese banks at ½% interest, convert those funds into US Dollars (by selling Japanese Yen) and loan that money out at domestic rates.

In pre-21st century times, banks were forced to pay for funds at the overnight rate, currently running around 5¼%, and lend them longer term at lower rates when the yield curve was inverted. This created losses, or at least loss of profits, to the banks. But, in today's world, they can borrow short term from Japan, lend long term domestically and still make a good (even excellent) profit margin on the transaction. Of course, they have to worry about the Japanese Yen appreciating and wiping out some or all of their profits due to currency conversion. As we've seen, though, the danger of a rising Yen is negligible, especially when the yen-carry trade is viable. This is because they sell Yen to buy US Dollars, putting downward pressure on the Yen and upward pressure on the USD. So long as the Japanese interest rate is far below the rate the banks can receive on lending in the US, there will continue to be downward pressure on the Yen. This keeps the currency tightly bound within a range. Sometimes things are different. Now is one of those times."

[A-ha]

That is an old story... long end of the rates , yeah...i buy it. Every move has its own unique excuse. According to that scenario, I can tell you today what they will tell you tomorrow... you ready? When the market starts cratering, they will tell you that this is a temporary pressure till fed is done with the rates. They will even give 95 scenario as an example. Yes the market will soon be under tremendous pressure when "benny hill show" starts but it aint gonna be like 95 or any other pre-bubble shakeout. what you going to witness is a unique bear market, fast and powerful enough to create crash-like moves.

Edited by xD&Cox, 26 February 2007 - 11:36 PM.

[johngeorge]

That is an old story... long end of the rates , yeah...i buy it.
Every move has its own unique excuse.
According to that scenario, I can tell you today what they will tell you tomorrow... you ready?

When the market starts cratering, they will tell you that this is a temporary pressure till fed is done with the rates. They will even give 95 scenario as an example.

Yes the market will soon be under tremendous pressure when "benny hill show" starts but it aint gonna be like 95 or any other pre-bubble shakeout. what you going to witness is a unique bear market, fast and powerful enough to create crash-like moves.

XD&Cox

I read many of your posts and like your work. Although probably not as bearish as you a correction is coming soon IMO as early as March. See my FF post here. A 10% correction in the SP(cant recall the last time I saw one that large) would be a great buying opportunity I believe.