22 replies to this topic

[arbman]

I think the only thing that can derail the bull are much higher interest rates because this bull has always been about liquidity and easy money and what it has wrought - a boom in private equity buyouts.

The reason of the easy money is the anti trade protectionist policies.

The US allowed its workforce, especially in manufacturing, to be decimated by the Asian cheap labor, and the Asian countries bought the US Treasuries in return. It is as simple as that...

Once you have the easy money supply, making any deals, good or bad, is easy, just like the funding of the stupid internet business deals of late '90s, now they are buying each other just to justify their overblown executive salaries. It is the same low quality business, economically they have low or no real value imho. The mergers are indeed increasing the labor efficiencies and keeping the salaries in check, but then it is coming at a worse time during the real estate deflation...

So, yes trade protectionism will increase the prices --and inflation-- and it will cap the easy money, but Asia will be more effected than the US or other western countries as usual since they still could not build their own consumer base to sustain their own consumption or economic growth. This is why USD is near a secular low, imho.

The moment the Asian economies ask for higher yields --they really can't--, the US Treasuries would crash and USD would initiate an even stronger lasting uptrend; or deflation. In any case, with or without the Asian catalysts, the USD will start to gain against the other currencies since the liquidity boom driven mainly by the real estate is over.

There is no other asset group to inflate as fast as the real estate in US even if the yields move lower gradually from here, imho. Certainly, the stocks will not replace the real estate bubble with the slowing earnings because the pheonomenal earnings growth was sustained by the home equity extraction in the first place. However, a good correction might still help the yields move lower or it might be still too early to talk about the next bear market before the remaining excess liquidity fully spends itself.

I get the clues from the mid and small caps, they are telling me the rates are already too high! But the perceived risk is still low, the next correction will fix that too...

- kisa

[OEXCHAOS]

I think the only thing that can derail the bull are much higher interest rates because this bull has always been about liquidity and easy money and what it has wrought - a boom in private equity buyouts.

Exactly. There's no shortage of cash, but there's beginning to be a shortage of places to put it (i.e. funds earmarked for domestic deployment). Unless you think realestate is likely to be a hot contender.

Can we sell off here? Sure. No problem. But is it likely to go very far or last very long? Nope. Too much money and too many Bears.

M

Mark- I have to credit you for furthering my take on sentiment, BUT, I believe it was you who told me that Joe Sixpack was not the one to fade-no?, which I was feeling like, and have come to embrace. Commercials, visa vie the COT-are not showing a ton of bearishness. So my question is-exactly which "too many bears" do you refer to? Are you reverting, and now counting the Joe Sixpacks in the AAII survey as being important-even though they trade such a tiny slice of the pie? As far as the liquidity issue, gold and especially silver prices point toward liquidity drying up, imho.

The average investor is a smaller part of the pie. They matter, but the market can make them right or wrong rather easily and such can be predictable by looking at Small Specs and Small Hedge funds.

Right now, nobody is all that Bulled up and some are down right Beared up.

There's signs at the edges, mind you. The Street .com has 58% Bulls, and the II numbers are up there, but by themselves, I don't think I'd be looking really Bearish without a serious change in the fundamental picture.

Of course, things can change fast, so I'd not marry the bullish case, either. The real curve could come with a pullback and a sudden switch to dip buying. And I'm not saying that we shouldn't buy dips, but we may want to change our tune quickly if we see that we're getting too much company.

Mark

Thanks for your take Mark, which I truly value. As far as having company buying dips-from the speed of the turnarounds lately,in the face of some pretty bad economic news(GDP, ect.), I'd say the bus has gotten fairly loaded, in terms of dip buyers. I must question though, if "nobody" is all that bulled up how the PC ratio has hit 52 week highs in the past week or so, and is actually heavily leaning to the call side now-it seems "someone" is mooing-no?

Hey, there ARE some signs of Bullishness in the options data, but nothing like 52 week highs or lows in anything other than the equity P/C which is likely aberrated by all the deals that we're seeing.

The one big warning sign isn't coming from the dumb money options (both CBOE and Equity 10-days need to go lower), it's coming from the 10-day OEX. That's flashing a warning sign. I just think it's early.

Mark

[emdemd]

Rates and related bond action is getting worrisome..... Understand China is no longer buying the long bond or notes....buying TBILLS!!!!! And someone said this is causing the Fed to buy up its own bonds and notes.....more PPT action??????? and another oil country moving reserves into other currencies....... this aint no bullish stuff IMHO