Is the stock market going to tank?

[Platinum Pete]

Talk this week about the "Double Dip". I sure feel like that's inevitable, but that's mostly based on my casual observations.
This guy thinks the Dow will end the year around 6300: http://www.cnbc.com/id/33179408
He goes on to say that we'll scrape 4200 in 2011. He's probably hyping his own bullshit, trying to sell something, and it's not like I trust CNBC, but I thought it was interesting. Ichan is also warning of a "blood bath" from a double dip - not that his portfolio is full of winners, but the guy put himself on the Forbes 400 list without a huge inheritance so he knows something.
What is going to tip the market into this Double Dip? Q3 results defying the hype and hoopla of the market run up? Horrifying retail numbers over the holidays? Murderous unemployment numbers? What?

[Brock Landers]

Just as many people are saying V shaped recovery that are saying U shaped recovery that are saying W shaped. The hype and hoopla recently isnt as much a run up as it is a recovery...in the economy we see the recovery in a year. In the stock market people get in early and it goes up now. The businesses are still quality businesses that need to certainly adapt but 4200? Are people going to stop buying things? Am I going to grow my own food?

[Benny Profane]

Even if you're born and bred Chicago, you have to learn that the markets don't reflect the economy, especially today. What we have out there is a way too large financial industry that, yeah, lost some jobs the past few years, but is still far too big for it's and the country's good. All those Type A's are in a massive struggle for survival right now and this years bonus, which is their Holy Grail, or, ......... waitaminute, their Golden Calf is more appropriate. They are trading like mad, moving money around, and spewing at the media to buy buy or sell sell, whichever hype works for their profits. And our tax dollars are supporting all this by making too big to fail even much bigger than yesterday to fail.

Anyway, to answer the question, when car sales never rise and Christmas is another disaster and unemployment and foreclosures go up and up and commercial real estate starts to crumble, all by, oh, March, we slide back down the double dip. The only hope is if consumers find 3 credit card offers in their mailbox and they can refi 50 thou out of the homestead for stuff and fun times within the next year. I don't think so.

[Platinum Pete]

Just as many people are saying V shaped recovery that are saying U shaped recovery that are saying W shaped. The hype and hoopla recently isnt as much a run up as it is a recovery...in the economy we see the recovery in a year. In the stock market people get in early and it goes up now. The businesses are still quality businesses that need to certainly adapt but 4200? Are people going to stop buying things? Am I going to grow my own food?

Am I going to grow my own food?

I grew a big garden this year and will grow even more next year, the excess is donated to my local food bank and they are super grateful because they have overwhelming demand.

Are people going to stop buying things?

What are people buying without unsustainable government incentive? I know every shop has some customers, but the expensive stuff we make margin on is on hold for most folks. and fewer jobs means fewer buyers.

More pessimistically, we're also in this hole where folks are still pausing or liquidating their investment accounts to prepare or pay for unemployment or other financial crisis. Then you have the baby boomers pulling money out as part of the retirement plan - that money isn't ever coming back. Then, once people go back to work, they'll have to play catch up on other debts before stocking up on their 401k plans - so that money won't make it into the stock market for a long time.

Where is the money going to come from to drive up the market? I hear about money on the sidelines - but how is that measured? How much is on the sidelines and how do we know it's enough to re-inflate the market?

[AdironRider]

I think the unemployment rate will stay high, and consumer spending will stay low. However, almost every company in the country right now is doing everything possible to shore up their balance sheets and cut costs. Most are running a real tight ship after the past year. Just cant see a complete collapse like last October in the cards. Might go down, but no way it touches 4300.

[4matic]

At this point there's still money to be shaken out of the shorts and wrongsided funds. November could be a pretty good month for the averages. If the Nikkei can start rallying that would be a confirming indicator. Interest rates are very low and the SPY yields almost 3%. Volatility is down. Risk is still for another upside move.

Rally time doomers!

[retirwntm]

unfortunately for america, both sides are probably right. corporate america is pulling away from the deadbeat america that benny is referring to by cutting all the dead weight and leaving them to obama's social welfare programs. winners are being chosen, and they are being chosen internationally, not nationally. international money sees the US markets as cheap and is bidding them up, putting pressure on the US$ and hedge funds and institutions are stretching and mimicing the original yen carry trade writ large with the dollar until central banks flinch and plowing that back into commodities
and equities (perhaps why mkts are fundamentally "rich" from a valuation perspective and you get people talking a new paradigm - multiple expansion- phhhwww) - which the chinese and US won't for quite some time as far as i can tell. europe is certainly pissed though. /end drunk blog

[Lemmiwinks]

It's all about the dollar. The other factors don't' matter right now as "less bad" is seen as good news and even bad news is brushed off. As long as the govt keeps pouring dollars into the system commodities and equities will continue to climb. The govt can only destroy the dollar for so long and will eventually have to raise rates, tightening liquidity and sending the market down again. However I think it will be a long grind down and not the freefall we saw with the Lehman collapse. Look at Japans market the last 10 years and that could be in store for the US with the ridiculous debt the govt is issuing.

When a country's debt expands greater than it's GDP it is a recipe for disaster.

[4matic]

Rally time doomers!



Looking more like SP 1200. After that It will be sketchy on the long term charts. I expect a significant sell-off in January which has been the pattern for several years.

[Benny Profane]

Yeah, all these hedge funds have to get their numbers for the year. Lots of nail biting going on for the next two months.

Best description I heard of the present situation: The eye of the hurricane.

[Benny Profane]

Calvin Trillin is the epitome of dry wit.


http://www.nytimes.com/2009/10/14/op...=1&ref=opinion

October 14, 2009
OP-ED CONTRIBUTOR
Wall Street Smarts

By CALVIN TRILLIN
“IF you really want to know why the financial system nearly collapsed in the fall of 2008, I can tell you in one simple sentence.”

The statement came from a man sitting three or four stools away from me in a sparsely populated Midtown bar, where I was waiting for a friend. “But I have to buy you a drink to hear it?” I asked.

“Absolutely not,” he said. “I can buy my own drinks. My 401(k) is intact. I got out of the market 8 or 10 years ago, when I saw what was happening.”

He did indeed look capable of buying his own drinks — one of which, a dry martini, straight up, was on the bar in front of him. He was a well-preserved, gray-haired man of about retirement age, dressed in the same sort of clothes he must have worn on some Ivy League campus in the late ’50s or early ’60s — a tweed jacket, gray pants, a blue button-down shirt and a club tie that, seen from a distance, seemed adorned with tiny brussels sprouts.

“O.K.,” I said. “Let’s hear it.”

“The financial system nearly collapsed,” he said, “because smart guys had started working on Wall Street.” He took a sip of his martini, and stared straight at the row of bottles behind the bar, as if the conversation was now over.

“But weren’t there smart guys on Wall Street in the first place?” I asked.

He looked at me the way a mathematics teacher might look at a child who, despite heroic efforts by the teacher, seemed incapable of learning the most rudimentary principles of long division. “You are either a lot younger than you look or you don’t have much of a memory,” he said. “One of the speakers at my 25th reunion said that, according to a survey he had done of those attending, income was now precisely in inverse proportion to academic standing in the class, and that was partly because everyone in the lower third of the class had become a Wall Street millionaire.”

I reflected on my own college class, of roughly the same era. The top student had been appointed a federal appeals court judge — earning, by Wall Street standards, tip money. A lot of the people with similarly impressive academic records became professors. I could picture the future titans of Wall Street dozing in the back rows of some gut course like Geology 101, popularly known as Rocks for Jocks.

“That actually sounds more or less accurate,” I said.

“Of course it’s accurate,” he said. “Don’t get me wrong: the guys from the lower third of the class who went to Wall Street had a lot of nice qualities. Most of them were pleasant enough. They made a good impression. And now we realize that by the standards that came later, they weren’t really greedy. They just wanted a nice house in Greenwich and maybe a sailboat. A lot of them were from families that had always been on Wall Street, so they were accustomed to nice houses in Greenwich. They didn’t feel the need to leverage the entire business so they could make the sort of money that easily supports the second oceangoing yacht.”

“So what happened?”

“I told you what happened. Smart guys started going to Wall Street.”

“Why?”

“I thought you’d never ask,” he said, making a practiced gesture with his eyebrows that caused the bartender to get started mixing another martini.

“Two things happened. One is that the amount of money that could be made on Wall Street with hedge fund and private equity operations became just mind-blowing. At the same time, college was getting so expensive that people from reasonably prosperous families were graduating with huge debts. So even the smart guys went to Wall Street, maybe telling themselves that in a few years they’d have so much money they could then become professors or legal-services lawyers or whatever they’d wanted to be in the first place. That’s when you started reading stories about the percentage of the graduating class of Harvard College who planned to go into the financial industry or go to business school so they could then go into the financial industry. That’s when you started reading about these geniuses from M.I.T. and Caltech who instead of going to graduate school in physics went to Wall Street to calculate arbitrage odds.”

“But you still haven’t told me how that brought on the financial crisis.”

“Did you ever hear the word ‘derivatives’?” he said. “Do you think our guys could have invented, say, credit default swaps? Give me a break! They couldn’t have done the math.”

“Why do I get the feeling that there’s one more step in this scenario?” I said.

“Because there is,” he said. “When the smart guys started this business of securitizing things that didn’t even exist in the first place, who was running the firms they worked for? Our guys! The lower third of the class! Guys who didn’t have the foggiest notion of what a credit default swap was. All our guys knew was that they were getting disgustingly rich, and they had gotten to like that. All of that easy money had eaten away at their sense of enoughness.”

“So having smart guys there almost caused Wall Street to collapse.”

“You got it,” he said. “It took you awhile, but you got it.”

The theory sounded too simple to be true, but right offhand I couldn’t find any flaws in it. I found myself contemplating the sort of havoc a horde of smart guys could wreak in other industries. I saw those industries falling one by one, done in by superior intelligence. “I think I need a drink,” I said.

He nodded at my glass and made another one of those eyebrow gestures to the bartender. “Please,” he said. “Allow me.”

Calvin Trillin is the author, most recently, of “Deciding the Next Decider: The 2008 Presidential Race in Rhyme.”

[iceman]

Calvin Trillin is at his best writing about food.

[Benny Profane]

There were a few olives in those martinis, I'll bet.

[iceman]

I'd bet there were no martinis, and no bar and no guy laying out his theory.

[Benny Profane]

We can dream, can't we? Don't steal that from us.

[Platinum Pete]

Rally time doomers!



Looking more like SP 1200. After that It will be sketchy on the long term charts. I expect a significant sell-off in January which has been the pattern for several years.

So I'm not a dumbass to sit on my 2009 Roth contribution money until sometime between Jan1 and April 15 2010? I hope so, because I've been watching this shit run up since late summer and I don't believe it at all. Wall Street wants bonuses, Obama wants to have a State of the Union where he can talk about the stock market returning, and everyone wants to believe that all the money we threw at the meltdown actually solved the problem.

[Brock Landers]

and everyone wants to believe that all the money we threw at the meltdown actually solved the problem.

Not the doom and gloomers. They want you to believe businesses will cease to exist and all businesses should require internal growth, and therefore will fail because people arent going to buy any more cars or people will cease to use toothpaste. Was the problem in the economy something that will lead to a 4200 Dow? More than half of the current economy will disappear? Isnt that a little drastic especially considering the drop it already has taken in March? And that was helped in large part to forced selling, not shitty businesses.

[4matic]

So I'm not a dumbass to sit on my 2009 Roth contribution money until sometime between Jan1 and April 15 2010? I hope so, because I've been watching this shit run up since late summer and I don't believe it at all. Wall Street wants bonuses, Obama wants to have a State of the Union where he can talk about the stock market returning, and everyone wants to believe that all the money we threw at the meltdown actually solved the problem.

No, you are not a dumbass. I wouldn't chase this thing unless you can trade it. The risk reward is too big right now. What's your equity/income/cash ratio? I'm 65/35 equity to income.

[powpig]

“Did you ever hear the word ‘derivatives’?” he said. “Do you think our guys could have invented, say, credit default swaps? Give me a break! They couldn’t have done the math.”

"Regulation of derivatives transactions that are privately negotiated by professionals is unnecessary." - Alan Greenspan, July 30, 1998.

[ass-to-mouth]

And oil keeps climbing, climbing, climbing. I love it. Nothing will kill any perceived economic "recovery" quicker like a return to the good ole' days of $100+ a barrel oil. Keep printing that money Benny!

[4matic]

And oil keeps climbing, climbing, climbing. I love it. Nothing will kill any perceived economic "recovery" quicker like a return to the good ole' days of $100+ a barrel oil. Keep printing that money Benny!

Oil has been in a sideways pattern for months. It might be resuming the uptrend but the increase in front month pricing due contango has skewed the chart.

For the stock market to continue we need oil under $100.

[F#*k you cat]

BING BING BING

10,000

[Benny Profane]

Just like a lot of other things going on, it's hard to find historical analogies for this rally, although there was quite the rally in 1930 before the deep slide.
This is interesting, though, and supports my argument that it's just a bunch of traders and funds acting among themselves. The shoeshine boy with the tip just ain't in the game.





ANNANDALE, Va. (MarketWatch) -- Mutual fund investor behavior just gets curiouser and curiouser, as Alice in Wonderland might say.

From the stock market's low in March through the end of this past August, as I noted in a column a month ago, mutual fund investors invested virtually no new money in the stock market. This suggested that there remained a high level of skepticism about that rally and, from a contrarian point of view, that skepticism was bullish. ( Read my September 18 column.)

Just as contrarians anticipated, the stock market turned in a strong performance during September.

Well, guess what: Despite September's unexpected strength, fund flows actually went negative during the month -- investors pulled more money out of domestic equity mutual funds in September than new money they put in.

Consider the data from TrimTabs Investment Research. The net outflow for the month of September from domestic equity open-end mutual funds was $11 billion -- the biggest monthly outflow since March, the month in which the bear market hit bottom. This trend continued for the first five trading sessions of October (through this last Wednesday, in other words), over which time an additional $4.1 billion was pulled out.

Such a pronounced outflow is really quite amazing. Imagine if, last March, I asked you to imagine what fund investors' reaction would be if, over the next six months, the stock market would undergo one of its strongest rallies since the 1930s -- one in which the S&P 500 index would rise by 59% and the NASDAQ Composite index would gain 69%.

My guess is most of us, myself included, would have predicted that a rally of such proportions would, later if not sooner, seduce skeptical investors back into the market.

How wrong we/I would have been!

This is of more than just passing historical interest. Contrarian analysts argue that major market tops are more often than not accompanied by exuberance and optimism, not the pessimism and despair that is evident in mutual fund investors' recent behavior.

This contrarian perspective doesn't constitute a guarantee that the rally will keep going, needless to say. But if the market were to turn down from here, it would be one of those extremely rare occasions in which such a move was widely anticipated by the typical mutual fund investor.

By the way, the other trend I mentioned in my mid-September column appears to be alive and well and, if anything, getting stronger: I am referring to mutual fund investors' love affair with bonds. According to TrimTabs, open-end bond mutual funds in September had their strongest month of the year in terms of net new cash invested in them. And, if we extrapolate on the data for the first five trading sessions of October, October might be a month of even bigger net inflows.

This is why, as I pointed out a month ago, contrarians are far more worried about bonds right now than stocks.

So far, at least, that worry has proven to either be ungrounded or premature.

But the mutual fund flow data for the last month does nothing to reduce contrarians' concern and, instead, actually heightens it.

[Brock Landers]

People are getting into bonds a bit late...High Yield is up 50% YTD, Investment grade has come back and made up a lot of its ground (around 11% over the 1 year). If the economy is so bad, and these stocks are going to crumble, why point to an article showing people are hopping into bond funds and out of domestic stocks? I dont get why the traders are doing this and the shoeshine guy isnt factoring in...wouldnt these debt-laden companies get hit first?

Also, it isnt a secret the emerging market funds are getting a ton of play lately. The US is in a rut and will take time no get out of...nothing that the govt will let permeate, but there are other sectors of the market that deserve the attention, not just the DOW. Check out China, Brazil, other commodity-based markets (AUST) that serve larger countries needs for growth.

[Rontele]

I sold around 9500 and got back in around 7000. Considering taking some profits at this point.