Discussion in 'Trading' started by ShoeshineBoy, Oct 8, 2002.

  1. Question for those who have been trading for awhile. Right now every macro evaluation of the market and economy is weak at best: economic indicators are down, corporations are capital-starved, consumer debt is at a new high, worldcom/enron, earnings are bleak, retirements are depleted, etc., etc. Now the contrarians of the world say, "Perfect! This is the start of the bull!"

    Is there really anything to this? Have you seen the market go nuclear simply because it has imploded on itself? In the past haven't we always needed some fuel to get the institutions re-interested? Or do bulls just happen almost inexplicably?
  2. Miki


    Someone said that the new bull market will be started by the politicians and not the economy.

    Maybe there is some truth in that.
  3. gnome


    NEVER before have we had such high debt all around. Never before have we had such excess capacity all around (=> deflation).

    The economy is likely to stagnate for 10-20 years and maybe more. It's even reasonably possible that capitalism as we've known it will be DESTROYED.

    It would be prudent to play for extreme oversold situations as possibly starting a cyclical bull run of 40%, or so... followed by lower lows... for years and years.

    We are unlikely to see a new, prolonged bull market period in our lifetimes... and there's nothing the Gubmint nor the Fed can do to fix it. Hell, they're the ones that got us into this mess!

    Buy and Hope investors are TOAST. Good traders will survive, even prosper.

    The Gnome's view... :D
  4. At the very bottom of low of the market during the depression, PE ratios where actually very high, not low. Most companies were still losing money when the index hit rock bottom.

    Waiting for a return to low p/es may be a mistake if you want to pick bottoms. Other techniques may be more effective. The first interest rate rise is a good time to invest for the long term, although the market will probably be 30% above its lows by this stage. Sell on the sixth increase.

  5. Bono


    I only apply the Contrary Theory when everybody's bearish/bullish without a specific reason backing their views. As long as we have enough solid reasons for the market to drop, it will drop. Then once all the shocks are absorbed, and the majority remain bearish, it would be the best time to apply the Contrary Theory.

    Then later on, keep in mind that the majority is wrong ONLY at the far end of any trend (peak/trough), but they are mostly right in the middle of the trend.
  6. hahaha! we MUST be getting close to the end of an economic cycle when you start hearing doomsday predictions like that...

    i'll take the part about capitalism being destroyed as a joke, but do you seriously think it's LIKELY the economy will stagnate for 10-20 years? possible, but i'd hardly say likely..

    (oh, and i LOVE the "this time it's different" line.. hmm, what does that remind me of? :D)
  7. gnome


    I think "more" than likely... Inevitable! And this time, it really IS different.