Anyone that has half a clue regarding credit card payments in relation to an economic cycle knows that credit card payments are likely to be the last loan to improve because a hard-up consumer will first stop paying off unsecured deblt like credit card borrowings. Hence, people will pay off their secured debt before they pay off their unsecured debt. Thus, Trend Faders example of credit card delinquencies jumping to a new high is meaningless. It is old news that has no bearing whatsoever on how the Economy is performing right now.
Absolutely incorrect. Has major bearing... we have just seen the greatest stimulus in fiancial history.. we have the lowest rates in history.. and consumers still cant find jobs nor can they pay off their debt. Besides low interest rates which will move upwards sooner than most think... what is the catalyst to buy stocks right now? One thing u will learn is that not every economic cycle is the same nor can u use past economic cycles to forecast current and future cycles. --MIKE
You are such a "Gloom & Doomer" that your tunnel-vision cannot allow you to do anything else but look for things that you interpret and twist into being bearish. Last time I checked, the National unemployment level stood at 5.6% which continues to be below the averages of the 1970's, 1980's, and 1990's. And of course you forgot to mention the fact that Bankruptcy filings also fell in the 4th quarter from the year before, the first decline since the end of 2000. The Economy has been improving. Yet, you don't want to see that because you are a Perma-Bear The kind of guy that as a high school basketball player could only dribble to his right, but not also to his left. Poor Trend Fader.
5.6% may be the jobless claims numbers but unemployment is at disturbing levels. read somewhere today that close to 15 million are unemployed...appx 10.9%.
Tell me this, What exactly is the difference between today and a year ago right before the rally started? Consumer Debt & Bankruptcies have been rising year after year for a decade now. Cheap money has been in play for a few years. The job situation has been absolutely horrible for years and corporate profits are still dissapointing comparing to pre-2000 crash. Cost-cutting are not real profits, especially when they are manipulated numbers. As much as I agree with your points, the same stuff I've believed even while this rally was in full drive, I cannot ignore the fact that these statistics meant crap a year ago and certainly do not mean much now. If anything, the "recovering" economy and "improving" job numbers should spur this market to the upside again. But I think smart money has fully recognized that the economic numbers have been basically bullshit for over a year now. I'm very well informed about the credit card situation so I can argue you to the death on that issue. I've been dealing with my own personal CC issues for 4 years now so I am fully aware of what is really going on. I am truly amazed at what is and has been going on with consumer debt since the late 1990s but if I know this, I'm sure real life super traders know it and apparently that info did not have an effect on the rally from last April.
The difference is simply that now valuations are much higher than they were before. Also now people are realizing that the fed will have to start raising sooner than later. Also people were expecting jobs to fully recover as the fed and bush predicted but this failed to materialize. A year ago the stock market was in the shit hole making new multi year lows.. everyone was bearish.. and we just won the war with Iraq.. we were in the midst of getting those tax cuts ... crude was in the low 30's after the war in iraq... also the fed really started pumping money into the economy. As you can tell things were much different. Now we are in the after party waiting to see how alll of this stimulus will play out. And the smart money realizes that the whole thing was a flop because we have almost no jobs created and the high price of energy will negate 50% of the tax cuts. The main difference is perception and expectations. The market is discounting the next 3-6 months down the line... and there are a lot of more risks than there were right after we won the war in iraq last year. --MIKE
The entire rally was based on corporate profits rebounding which they did and we had a lot of positive catalysts in the market. Every single one of the catalyst that laed the rally in 2003 is pretty much over and discounted into the market. Now we are looking 3-6 months down the line.. the main catalyst right now is terrorism which is why the market is hurting. Look at what lead the rally... homebuilders and financials. Homebuilders is a pure interest play which the fed itself hinted is just a waiting game. No one in their right mind managing billions of dollars would start buying up those stocks right now.. its way to late in the game... the risk to reward is not as good as it once was. Financials are also an interest rate play and many have already doubled like Goldman Sachs. The easy money has been made. The stock even came out today with great earnings and its trading well off its highs. The question is whats gonna lead the next bull market? What will be its catalyst? The answer is nothing. Inflationary stocks will continue to do well.. and stocks related to interest rates and consumer demand are topping out. Couple all of this with a major terrorist attack or the possibilty of Saudi Family being ousted or even a dollar crisis.. which would cause inflation be rampant.. and would force the feds to raise rates faster than expected. The greatest risk to America Economy is if the Fed is forced to raise rates much faster than expected. Many banks and lending institutions are not setup to handle this... and real estate bubble would finally burst. --MIKE
Now I would like someone to tell me the bullish case that will take this market to new highs and beyond? We catch bin laden... terrorist fears just quiet down and we dont get any serious attacks. Jobs finally pick up and the entire economy manifests itself off the major stimilus and growth. Crude comes back to earth because OPEC caves into pressure and raises production. FED ends up raising rates really slowly allowing the consumer more time to take out loans and make major purchases. --- Bottom line... I dont buy it. --MIKE
I'm neither Bearish nor Bullish, but a TRADER. So, being that I am still somewhat interested in "economics" and the big picture, .. . and I have quite a bit of free time on my hand this evening it seems . . . . Q1: Have any of the "informed" economists posting here considered that the lower jobless claims might be the result of more self-employed people in the labor market as a result of the mass layoffs and cutbacks over the past several years. I know when I lost my job in '94, I did not file for unempoyment assistance, etc. I found a part time job and started my own business (still chuggin' along nine years later after leaving the part time job). I know of others (some who lost jobs in association with ENRON), that after 12 months+ of looking they finally got there own business off and running. Wouldn't this explain a big part of why the economic numbers can continue to improve without new jobs being created (ie, low jobs reports) and still lower unemployment numbers. To me, this seems to be quite logical in theory. But then again, I'm just thinking about it outside the box. Also, want to ask (here's the technical analyst side) if anyone here has much faith in Fibonacci numbers? Ran an interesting line from the peak of 2000 to the bottom in October 2002, (NASDAQ MONTHLY) and it seems that this March 2004, at our highs, we have retraced 25% of that big drop. So, by this, we could see some more upside, right? But how much? 38% retracement? 50%? Or . .. or . . . . or . . . are we done. Perhaps this October 2002 to March 2004 rally really was just a bear market rally and we will sink further below the October 2002 lows by March of next year and actually see Nasdaq 500 again (any one remember those days - with the following NASDAQ - the next generation commercials :+)). Anyway, the consumer credit crunch has been played a bit imo. I can't see that sinkin' us. I mean as hot as the housing market is. We can borrow borrow and borrow more and stick it to our great great grand children right? All we need is a decent rally right now (if your long). But really, I am interested in the big picture, but the more I listen to everyone "in the know" . . . it seem like the "less I know." So I'll continue to scrimp and scalp in the mean time, but I'd sure like to hear from someone who can tell me if my Fib theory above is something to pay attention to - - meaning, I think we are headed to Nas 500 sometime in the next 1 year to year and a half. Also, what do you think about the self-employed people keeping this economy chuggin. I know I contribute to STAPLES and BEST BUY quite frequently. I pay estimated taxes on time. etc. Perhaps the Self-employed people are contributing to a stealth recovery and we are really headed for DOW 32,000!!!! what do you think?
Actually the lower job growth is being created by outsourcing. It sure would be nice if all those people went to start a home business... lol The major problem is that when Nafta came along the fed told everyone to get high tech jobs.. now that we have these jobs we will end up losing them to cheap labor in emerging markets. THe only competitive advantage and real edge we have in the US is our banking system.. everything else will be diminished. Even the fed and bush admit that we are not growing jobs the way we are normally supposed to at this point of a recovery. Regarding fibs and retracements. Thats why the whole thing is a bunch of bullshit.. u dont know which retracement level is the right one until after the fact. Where the market finally bottoms no one really knows. The market correcting 32.8 or 1/3 is really the same thing... every market has to correct at some point.. whether it will be 1/3 or 2/3 doesnt matter... it has to be somewhere close to there so thats why people believe in that junk. Between 1/3 to 2/3 is pretty wide enough to capture the realm of a correction... stretch it out to 68.2 and its even a lil further.. lol Sure we sold off pretty hard and are due for a bounce.. but its a shortable bounce. --MIKE