The Economy and Stock Market

[TimC]

The time to get truly stressed was a year and a half ago--at that stage we were truly on the brink. As much as popular opinion hates the bank bailout and the stimulus plan, they may very well have delayed us from another collapse of Great Depression magnitude.

 

FYP. I wanna snuggle up with you at night with your optomistic outlook that it's all over. Must be the tenure talking.

[cre8tiff]

This thread makes me miss irish.

[SEC=UGA]

There's nothing like a cold, smooth Busch Light after a rape and/or robbery.

 

Fixed

[SEC=UGA]

Is this the start of a new bear market?

 

NEW YORK (CNNMoney.com) -- Sell in May and go away may seem like a silly Wall Street saying. But if you actually followed those words of wisdom, you'd be breathing a lot easier right now.

 

Stocks were mixed Monday as a better-than-expected jump in existing home sales in April seemed to outweigh fears about the debt crisis in Europe. Still, the S&P 500 is now down about 9% in May.

 

So what now? Is the May malaise merely a long-awaited correction or the start of a new bear market that could last months or years? Is it time to buy in June and sing a happy tune?

 

Several market experts are guardedly optimistic that things won't get significantly worse. That's the good news.

 

"The most immediate concerns are transitory. They are important but they will get resolved soon," said David Joy, chief market strategist with Columbia Management in Boston. "It's important to have a well diversified portfolio and be prudent. But there's no need to exit the stock market."

 

Bruce McCain, chief investment strategist with Key Private Bank in Cleveland, added that he thinks there is little room left for stocks to fall from here. In fact, he said it's possible the market may have already hit bottom.

 

"This could be a surprisingly short correction," he said.

 

The bad news though is that the market may remain choppy for the foreseeable future.

 

"Volatility is a given. As far as Europe is concerned, there is a lot going on and many questions that are unanswered," said Matt O'Reilly, chief investment strategist with People's United Wealth Management in Bridgeport, Conn.

 

O'Reilly is confident that stocks will eventually bounce back, but he said it's no surprise that many individual investors are still sitting on the sidelines. The memory of 2008's meltdown is still fresh and events like the May 6 flash crash do little to help restore faith in the markets.

 

"Investors have still yet to recognize what their tolerance for risk is. Every time there is a rapid response in the markets to news, it undermines their confidence and makes them more wary," he said.

 

The biggest problem is that Europe is a big massive unknown. Are the issues facing the PIIGS nations a mere hiccup on the road to economic rebound or a precursor to another worldwide downturn?

 

"The one thing we don't know is what impact the decline in Europe will have on the global recovery. I don't think we are going to have a double-dip recession. But the pace of growth may slow," said Phil Dow, director of equity strategy RBC Capital Markets in Minneapolis.

 

But overall, Dow said he thinks some of the broader fears are overblown. He thinks that energy, tech and health care stocks could be due for a comeback once investors realize that Europe 2010 may not be a sequel to Lehman Brothers 2008.

 

McCain agreed. He said that some hard hit stocks have been oversold as investors got too gloomy and added that the rush into U.S. Treasurys this month is a crystal clear sign that investors may be overreacting to Europe's problems. People are flocking too much into so-called safe havens, he said.

 

"Bonds may be a successor bubble to real estate. Everybody is putting money into them and historically when people all rush into one asset, that doesn't come to a good end," he said.

 

Still, the Europe crisis has proven to be a reality check for investors. Jeff Applegate, chief investment officer with Morgan Stanley Smith Barney in New York, said that this month's market decline was necessary.

 

"We were a little concerned about stocks having such an enormous run. This sell-off, given the big move up since the March 2009 lows is a healthy development," he said. "I don't think it's anything more than that. It's not the start of a new bear market."

 

So when push comes to shove, investors probably should just simply expect more of the same for the coming months. It appears unlikely that Europe is going to create another extended global economic meltdown.

 

But that doesn't mean the U.S. economy or stock market is likely to come roaring back anytime soon either.

 

"The crisis in Europe got the sleep out of investors' eyes. It gave people a reason to sell," said John Norris, managing director of wealth management with Oakworth Capital Bank in Birmingham, Ala. "This isn't a precursor to a financial panic but it's a realization that the economic recovery will be tepid."

 

http://money.cnn.com/2010/05/24/markets/thebuzz/index.htm

[TimC]

even Peter Schiff, someone who is obviously bullish on gold/silver thinks we'll see a 1:1 ratio of gold to the DOW just as it was at one time in 1980....

 

now, I argue that these are different times, possible leading to worse times but that's not the point....my question is "what will gold and the DOW be if and when this does happen?" $5,000, $10,000? - hopefully we won't have to see that again...

 

Ran across this video from Peter Schiff before the market dropped. Amazing how he nailed it and fought off the "eckspurts". One even claimed the Dow would hit $16k and they all said to buy GS, Bear Stearns, etc, etc.

 

This is a 10 minutes video, but worth a watch:

 

http://www.youtube.com/watch?v=2I0QN-FYkpw...player_embedded

Edited May 26, 2010 by TimC

[Azazello1313]

[Avernus]

Ran across this video from Peter Schiff before the market dropped. Amazing how he nailed it and fought off the "eckspurts". One even claimed the Dow would hit $16k and they all said to buy GS, Bear Stearns, etc, etc.

 

This is a 10 minutes video, but worth a watch:

 

http://www.youtube.com/watch?v=2I0QN-FYkpw...player_embedded

 

definitely, I posted a link to this before but nobody really checked it out...

[Avernus]

 

 

this is a great video....hilarious and truthful...

[CaP'N GRuNGe]

 

[Avernus]

Ran across this video from Peter Schiff before the market dropped. Amazing how he nailed it and fought off the "eckspurts". One even claimed the Dow would hit $16k and they all said to buy GS, Bear Stearns, etc, etc.

 

This is a 10 minutes video, but worth a watch:

 

http://www.youtube.com/watch?v=2I0QN-FYkpw...player_embedded

 

 

here's a bit of deja vu here...

[wiegie]

In case anyone cares, the Dow just crossed 12,000 for the first time since June, 2008.

[SEC=UGA]

In case anyone cares, the Dow just crossed 12,000 for the first time since June, 2008.

 

It was the speech, it had to be the speech.

 

What does this mean? Is the market overvalued right now or are things starting to turn a corner?

[wiegie]

What does this mean? Is the market overvalued right now or are things starting to turn a corner?

I think we are in subwave z of primewave 3 of the upwave alpha in the Lusitania cycle.

 

I hope this helps.

[SEC=UGA]

I think we are in subwave z of primewave 3 of the upwave alpha in the Lusitania cycle.

 

I hope this helps.

 

You could at least have added a to your response.

[TimC]

In case anyone cares, the Dow just crossed 12,000 for the first time since June, 2008.

 

No one should care. Using the Dow as an indicator on just about anything is a fool's chase.

[Perchoutofwater]

In case anyone cares, the Dow just crossed 12,000 for the first time since June, 2008.

 

Just out of curiosity, what would the Dow be at if the same companies made up the Dow today that made it up in 2008?

[wiegie]

No one should care. Using the Dow as an indicator on just about anything is a fool's chase.

the only thing I am using it as an indicator of is Brentastic's condescending ignorance

 

(now having said that, the Dow is back below 12,000--the collapse is upon us )

[wiegie]

Just out of curiosity, what would the Dow be at if the same companies made up the Dow today that made it up in 2008?

I don't know. I eyeballed it and it seems like the change wouldn't be all that much. This might seem strange since companies like AIG and Citibank were replaced with Kraft and Travelers, but remember that the major collapses of AIG and Citibank occured while they were still part of the Dow and these companies have been mostly as steady as the companies that replaced them.

 

(Somebody who follows this stuff more than I do can add a better answer.)

[Brentastic]

I've been patiently waiting for a short opportunity in the stock market the last 2 weeks. There was a big fibonacci point at 1306 in the S&P and I had a plan to short the S&P futures at 1300ish. This morning I put a sell order in at 1299 in the ES (S&P futures) and the high was 1299.50 - which means I'm in again (short) at 1299. The market is now down about 1.4% from the high and it's waaaayyyyyy to early to make any significant long-term conclusions from this move today. Afterall, the market needs a correction no matter if your bullish or bearish. in other words, I'm not ready to proclaim the top is in on this market yet but I do feel good about my entry, especially after seeing wiegie's braggert post about reaching 12k on the dow. I do believe there is a very good chance the top is in, however. I have a tight stop, meaning if I'm wrong I will lose a small amount of money and wait for another opportunity to short.

 

In the end I'm extremely confident that my bearish calls will come to pass and I will continue to stress safety (ie... being out of the stock market). I keep harping on the flaws of a short-term outlook which is what many get caught up in. It's great that many made money in 2010 but if the market tanks in 2011 (or begins it's descent) and you don't take your profit then your short-term accuracy means nothing.

 

At the end of the day IF the top is in and IF the dow is trading at 5k or lower five years from now, I'm not going to be disappointed that I was off by a year on calling the top. That's the benefit of viewing the market in the long-term or the big picture - it removes the short-term irrationalities of price. The 'correct' price will manifest eventually and I will either be right or dead-wrong. But we need to give it time before the truth is known.

 

Again, this post is not an "I told you so" post. But in case anyone is following, I want to be honest with my position and I want people to know that I'm practicing what I'm preaching. You will all know if I'm wrong or right - which isn't even the point. Mainly I want people to understand the volatility of this market (evidenced by the violent swings startint in late 2007). Even if there is an entire year of steady growth, it doesn't mean the long-term result will be as such. Be safe, stay nimble and do what you think is right. My opinion, afterall, is mainly contrarian and nobody can predict the direction of the stock market with 100% accuracy or certainty. I look at everything from fundamental analysis, technical analysis and EWT. All of these used together are what help me to my conclusion (that we have begun another Great depression).

 

Best of luck to all.

[Jackass]

I've been patiently waiting for a short opportunity in the stock market the last 2 weeks. There was a big fibonacci point at 1306 in the S&P and I had a plan to short the S&P futures at 1300ish. This morning I put a sell order in at 1299 in the ES (S&P futures) and the high was 1299.50 - which means I'm in again (short) at 1299. The market is now down about 1.4% from the high and it's waaaayyyyyy to early to make any significant long-term conclusions from this move today. Afterall, the market needs a correction no matter if your bullish or bearish. in other words, I'm not ready to proclaim the top is in on this market yet but I do feel good about my entry, especially after seeing wiegie's braggert post about reaching 12k on the dow. I do believe there is a very good chance the top is in, however. I have a tight stop, meaning if I'm wrong I will lose a small amount of money and wait for another opportunity to short.

 

In the end I'm extremely confident that my bearish calls will come to pass and I will continue to stress safety (ie... being out of the stock market). I keep harping on the flaws of a short-term outlook which is what many get caught up in. It's great that many made money in 2010 but if the market tanks in 2011 (or begins it's descent) and you don't take your profit then your short-term accuracy means nothing.

 

At the end of the day IF the top is in and IF the dow is trading at 5k or lower five years from now, I'm not going to be disappointed that I was off by a year on calling the top. That's the benefit of viewing the market in the long-term or the big picture - it removes the short-term irrationalities of price. The 'correct' price will manifest eventually and I will either be right or dead-wrong. But we need to give it time before the truth is known.

 

Again, this post is not an "I told you so" post. But in case anyone is following, I want to be honest with my position and I want people to know that I'm practicing what I'm preaching. You will all know if I'm wrong or right - which isn't even the point. Mainly I want people to understand the volatility of this market (evidenced by the violent swings startint in late 2007). Even if there is an entire year of steady growth, it doesn't mean the long-term result will be as such. Be safe, stay nimble and do what you think is right. My opinion, afterall, is mainly contrarian and nobody can predict the direction of the stock market with 100% accuracy or certainty. I look at everything from fundamental analysis, technical analysis and EWT. All of these used together are what help me to my conclusion (that we have begun another Great depression).

 

Best of luck to all.

 

The market was volatile in 2007, but it is now 2011. The VIX is at the lowest level in 3 years.

 

http://finance.yahoo.com/echarts?s=%5EVIX+...ource=undefined

[Brentastic]

The market was volatile in 2007, but it is now 2011. The VIX is at the lowest level in 3 years.

 

http://finance.yahoo.com/echarts?s=%5EVIX+...ource=undefined

I'm well aware of what levels the VIX is trading at now (the last 6 months per your assertion). Again, short-term thinking like that limits what you can see in the market which also limits your preparation. The volatility in general for the last 4 years can be described as a roller-coaster at best. Hell, just last May the VIX was above 40. In fact, the spike in volatility as measured by the VIX reached it's highest peak in at least 20 years (that's the longest time frame on my charts) just 2.5 years ago in the fall of 2008. So while the VIX is currently low, it doesn't mean the overall environment is not volatile. In fact the opposite is true, we are in the most volatile period in at least 20 years. Being at the bottom of that range now emphasizes the need for safety even more.

[wiegie]

At the end of the day IF the top is in and IF the dow is trading at 5k or lower five years from now,

uh, you can't keep pushing your prediction horizon out to five years with each new post, so you are down to four years

[Big Country]

All fun stuff this world we are in. FWIW, I have been increasing my cash position, waiting for a dip to happen to up my equity exposure. (Convincing my wife to allow me to do what I think we should, should a fairly large dip happen is another matter, but unfortunately she falls into the trap that many do which is to sell when she sees we have lost some money and then, in her case, to not do much or be more agreeable t ogetting in when it is going up).

 

Basically just doing my normal dollar cost averaging with my 401k and IRA (I figure the more the mainstram media cries that buy and hold is dead, the more likely it is the best approach) and holding back a little extra cash to jump in with should a dip come. I don't see (nor does the main person I go to for financial advice not named muck) a full blown recession like Brentastic, but I could see a decent sized correction in the market and a decent period of time where it is down fairly significantly which would bode well for holding back some extra cash to get in with. And if that doesn't happen, my wife is happy as we have even more sitting in reserve. Either way I win.

[Brentastic]

uh, you can't keep pushing your prediction horizon out to five years with each new post, so you are down to four years

You can back check this but I've said on several occasions that I expect a bottom sometime in 2016. But you're just going to singularize posts that make your stance stronger. I mean really, if the stock market bottoms in 2017 or 2013, does it mean my forecasts were wrong? I don't see it that way but if you micro-manage every detail that's how you will spin it. My point is not to directly nail the stock market. I'm giving general input on where I think we're headed, which is down below the 2009 levels. Now, if I'm 20 years off then my forecasts hold no water. But a year here or there doesn't matter in the end. The only thing that matters and the only reason I post my take, is to either make money or preserve what you have, i.e. not lose your ass!!

 

On a sidenote, have you seen this? I put in a donation because I'd really like to see this debate. It's sad though that Krugman can't stand behind his views without the incentive of looking like an insensitive jerk!

[Brentastic]

All fun stuff this world we are in. FWIW, I have been increasing my cash position, waiting for a dip to happen to up my equity exposure. (Convincing my wife to allow me to do what I think we should, should a fairly large dip happen is another matter, but unfortunately she falls into the trap that many do which is to sell when she sees we have lost some money and then, in her case, to not do much or be more agreeable t ogetting in when it is going up).

 

Basically just doing my normal dollar cost averaging with my 401k and IRA (I figure the more the mainstram media cries that buy and hold is dead, the more likely it is the best approach) and holding back a little extra cash to jump in with should a dip come. I don't see (nor does the main person I go to for financial advice not named muck) a full blown recession like Brentastic, but I could see a decent sized correction in the market and a decent period of time where it is down fairly significantly which would bode well for holding back some extra cash to get in with. And if that doesn't happen, my wife is happy as we have even more sitting in reserve. Either way I win.

Curious, if you see a sizeable correction but not a depression like myself - where do you see the market bottoming? I mean, the dow was just at 9600 (S&P 1010) at the end of June. So you must see a lower level or else we would just be sideways trading.

 

Serious question.