Who among you were formerly bullish, but has now turned bearish, why, and what do you see? Give some substance to your response in terms of causality and time lines. Thanks.
I must admit, the lending stuff has me worried(sort of, I plan on capitalizing off of it.) that we'll see a huge amount of money vanish. I think we've not even seen a hint of how ugly this can be and it's only really dawned on me recently. Yes, I knew about the housing slowdown. No, I didn't realize that the lending practices were so risky and widespread. There are too many jobs that have been created and too much wealth in real estate now. If you ask anyone with a smile on their face and a sports car or SUV in their garage you'll probably find that a lot them bought those things by refinancing their house. One thing Americans don't seem good at to me is decreasing their expenses or managing debt. If you look at a singular company such as Countrywide. They wrote $600 billion in Alt-A loans last year. They wrote about $600 bore million in prime loans. Their books have $145 billion or so in long term investments. That means they sold most of those loans, and they sell less than a lot of others. So Wall St., pension funds, banks, etc. bought these loans and are holding them. The company only has so much to give back to investors and with falling house prices, lending tightening, high inventory, I think a lot of wealth is going to disappear due to defaults. Even if, as Countrywide says, they get 10%(I think they'll get more) defaults, that's about $120 billion in defaults! Ha, that's like 6 times their market cap in defaults! It's also likely that bonds will be rerated due to the higher risks of default that is being predicted. All of this coupled with the jobs that are in the homebuilding industry, realtors, mortgage brokers, bankers, etc. and I think we'll see it spill over massively into the economy. People will have less to spend and be spending less. These companies have been running on credit and it's going to vanish as people are given less to use. And all the credit usage in the market in China has me scared too...but that's all government managed I believe and so I think they'll keep that pigger afloat.
Blast, there are a lot of economists coming out with dire warnings. It's not just a 'wall of worry' they seem to be staking claim to, but something far more systemic. Normally, I post but ignore much of what I read, because opinion is so evenly divided (typically). But there don't seem to be a lot of bulls making strong cases lately, as I perceive it. I'd feel less unnerved if we had a better mix of opinion, because the durable goods' data and similar data doesn't look that promising, especially in conjunction with the endless doom about the mortgage/housing/lending markets. Until someone develops a crystal ball, steel balls will have to suffice.
Still a bear... I'm guessing that the underlying theme of the upcoming earnings season will be one that vindicates the bears. Slowing corporate profits and, more importantly, downside earnings revisions across the board. Then, of course, there's the ongoing lending fiasco that worsens by the day. Additionally, home values throughout the country are depreciating at an ever-quickening pace, with the exception of a handful of select cities. Oil prices are on the rise again, which is a recipe for disaster when coupled with an economy that's "cooling down." As long as the Mad Maniacal Mahmoud remains in power, the instability will persist. (BTW, if we attack that crazy son of a goat, I'll quickly turn bullish. ) And then there's China. We got a taste of the effects of globalization (for lack of a better descriptor) on capital markets recently, when China's 9% drop shook markets throughout the globe. The Shanghai Composite has been SOARING and it WILL reverse its ways, if only temporarily. Perhaps today's news about subjecting the commies to capitalist restrictions will suffice to shake their confidence. After all, they have long reaped the rewards of capitalism and global integration while ignoring the rules by which the rest of the world must abide. Were there any balls left in Washington, we would have slapped China with sanctions long ago. Etc., etc., etc...
I have a headache. Yes I joke ALOT. However last time I had a headache we underwent a good drubbing. What am I doing about it. Taking some tylenol. Alot of neutral parties involved no pun intended. Lastly I need a vacation.
Next week will be the test. Although I am certain we are at the beginning of a bear market from hell. Not to late to by DOG, QID etc.
I have been bearish but I'm amazed at how the market is discounting all the bad news. A close above 1428 in S&P will make me bullish.
I think we tank after next week. The beginning of April is a seasonally strong period due to tax season and end of quarter. Funds chasing performance. But this last week had strong signs of consolidation. Someone big sells hard until they liquidate what they needed to, then the bulls jump in and mark it up. It happened all week. The smart money has been getting out, dumping onto the perma bulls. The economy hasn't even tasted an appetizer of what the homebuilding sector will do. It has fallen off a cliff, and the only thing to save it would be for the dollar to get so cheap that foreign investors come in and buy to prop it up. Similar to the Asians in the 80's.