After some indepth research, I have come to believe that we are playing with a house of cards. This house of cards is about to come crashing down and when it does.....hello to the worst downturn since the depression. I must point out, im a Bull and not a die hard bear. However, two things are comming our way. First, another terrorist attact so big that it will shock our system. This is a fact, by which the CIA/and many in the government are now admitting to. Time and Place are the uncertain variables, but the attact itself is a certain event. Second, consumers are out spening themselves. The rate of consumption is far greater than what many are earning. In fact the figuer shows that the average consumer is in debt by 10,000 on credit cards. This is not including House, car, bills. The market has not displayed strength. It has only limped along and this is after massive cash injections by the fed reserve and stimulas by Bush. The War is not producing jobs and income, infact the war is draining cash resources. Tax cut has limited the amount of state and federal income, thus, soon state and fed employees will be fired. Many, including Chicago, are already starting to call for layoffs on the local, state and federal level. No, "very little new money" has flowed into funds the last eight quarters, if anything, massive outflow has occured. I think something is on the horizon, a storm is brewing and we have only felt a small gust of wind, the smell is in the Air, the ocean is starting to churn......nobody knows when the Great Storm is comming but very few are preparing.
I hate to be a bear, its much more fun to be a bull. People are making more money, the go go days are here and its just generally more pleasant. I have been a bear since the March of 2000 and while there have been periods of short term bullishness, over all we still have a lot of lower or sideways action to go. My guestimation would be 3-5 years of sideways or Nasdaq 700, but what do I know. Here are a few stats though: Ned Riley research: Bear Markets don't end until consumer debt levels reach points that are at or near record lows. Last I checked we are a hell of a lot closer to the highs than the lows. The average PE at the end of a bear market is 5.5, the current PE of the value line market index is something over 20 I think. I know, I know, things are different this time right . We have the internet, we have instant communications, we have advances in medicine like we have never seen before. Just like before "the big one", look at all the new stuff we had, Trains that connect us, Telegraph's (that can travel much faster than poney express and smoke signals) and automobiles...so much cool stuff. Brandon
Geopolitical events are making the picture more uncertain... yes, the productivity figures, consumer numbers and recent spate of corporate results have been very encouraging... and yes there is scope for a US-mediated resolution between Israel and the palestinians... However, look further East and you see real danger for a flare-up between 2 nuclear rivals... India has just purchased some sophisticated gun-seeking equipment from the USA, radar technology from Israel and tanks from Russia... the Indians are highly likely to cross the Pakistani border to eliminate the combined terrorism of the Pakistan military dictatorship and its Al-Quaeda and Taliban buddies hiding there from the USA... if it was just a conventional war, analysis has shown that India could take out Pakistan within 72 hours... however, both sides have nuclear technologies and the means to deliver these technologies... in the event of such a deployment, no stockmarket in the world could maintain even a semblance of bullishness... Another area of geopolitical concern leading to stockmarket repurcussions is of course a deterioration in the Middle Eastern situation... should Arafat succumb to an "accident" (or should there be any other event of similar magnitude), hardcore terrorist groupings such as Hamas and Hezbollah could effectively take over the reins from the Palestinian Authority (PA), leading to swift Israeli retaliation... contingent on the result of this retaliation, other Arab countries could be drawn in... In a worst case geopolitical situation, it is conceivable that both Israel and India could be simultaneously fighting a war against terrorism (probably co-operating with eachother, given the international nature of terrorist groupings)... If that were to happen, even the most longside players of us would have to get used to using the Short entry order... (not forgetting of course that Israeli and Indian tech companies pepper the Nasdaq)... However, I do agree with the comments of Brandon regarding consumer debt levels... in effect, there could be some useful sector plays coming out of even the worst geopolitcal degradation...for example, consumer staples could be an avenue of defensiveness for instititional money.. additionally areas such as precious metal stocks could benefit as 'safe haven' areas... in any case, enhanced volatility will inevitably result from any major global events, making things eminently more playable, especially through the traditionally narrow range Summer months...
Energies will be a viable option for trading IMHO. NYMEX volume is skyrocketing. Seat prices are close to a million dollars. The liquidity and volatility seem to be there. If the equities go to hell, energies might remain a trading option. Perhaps the bond market as well. I just don't think this worst case scenario thinking helps. All we can do is just do each day the best we can and that's preparation enough.
The money I've got tied up in trading I really expect to lose eventually. Not from trading losses but from some sort of disaster. All of the scenarios outlined above seem more of a certainty to me than a possibility. I continue to play the game because its the only thing that interests me and in the event of a financial collapse money is not going to be worth much anyhow.
If this sentiment is collectively shared by most of us-which it seems to be-then I would venture to say we are close to or at the bottom.
I agree about a massive downturn - however, you certainly have time on your side (everything is inevitable over the long run) - and as for consumer debt - go long the credit card co's.... As for the terrorist attack, I, for one, am getting sick and tired about people whining about it...THERE ARE ATTACKS EVERY DAY, IN ALMOST EVERY COUNTRY OF THE WORLD - GET OVER IT. LIFE IS TOUGH AND THAT IS THE END OF THE STORY. Seriously, the way you're acting is the cause of the problem - you're giving the terrorists what they want, and that, obviously is not a good thing. We have very competent armed forces, and even though a bunch of lunatics may blow some shit up, rest assured that those lunatics will eventually be executed or caged with the other animals at lovely camp X-ray.
Here is an excerpt from the Daily Reckoning ( www.dailyreckoning.com ) a daily depressing email (and website) giving reasons why we won't see a bull market in the next few years. Has good info from the Bears point of view. Not Your "Garden-Variety" Recession - Dr. Kurt Richebacher "...Pondering the U.S. economy's prospects, we deem two features to be of foremost importance. One is the prolonged profit implosion, which has hit the manufacturing sector with devastating force. The other is the fact that the recession was not caused, as usual, by money and credit stringency. For the first time in history, the economy and stock market have slumped against the backdrop of rampant money and credit creation. These unprecedented experiences raise some highly critical questions: Why has the deluge of money and credit failed to boost the economy and financial markets in any significant way? And what, exactly, is behind the U.S. economy's miserable profit performance? These are the two most important questions to scrutinize. All previous postwar recessions were of the so-called "garden-variety" pattern, in that they mainly reflected a temporary inventory liquidation. Once this had been accomplished and the Fed eased in response to lower inflation rates, the economy promptly took off in a steep trajectory. Inventory liquidations did contribute substantially to the U.S. economy's downturn last year. Yet its overwhelming source was an unusually steep plunge of business fixed capital investment. Looking for the cause of the unfolding capital spending crisis amid double-digit money and credit growth, there is but one reasonable explanation: the profits implosion. It began in the fourth quarter of 2000, while the dive of fixed capital investment began just two quarters later. Corporate profits of the nonfinancial sector as a whole peaked in the second quarter of 2000 at $518 billion, annualized. By the fourth quarter of 2001, they were down 44.4%, to $287.7 billion. Manufacturing, meanwhile, earned $175 billion during the second quarter of 2000. That dropped 71.2% - to $50.3 billion - by the fourth quarter of last year. During the same period, however, retail-trade profits edged up from $83 billion to $84.3 billion. This profits pattern is, of course, the exact mirror image of what has been happening in the economy. The worst-ever profits crisis in production coincides with debt-fueled booming consumption. Conspicuously, the consumption boom failed to prevent the profits disaster..."
I stayed out of the bull market because I always thought it was smoke and mirrors ... now I see real opportunity for substantial profit all the way down to wherever ... No one has a crystal ball and every effort at prognostication at a micro level is doomed to failure IMO, but at the macro level there are some tremendously obvious signs that not only is this not even close to the bottom in terms of price points, but that the bottom is not to be reached for many years. One of my guiding lights over the last 5 years or so has been an excellent book titled : The Fourth Turning (by Strauss & Howe) : http://www.fourthturning.com In a nutshell, the authors theorize that there is a socio-political cycle of roughly 80 years (corresponding to a long human life) and that history tends to repeat itself along these lines and the subsequently every 80 years there is a significant crisis which envelopes society (in the USA : 1940 : WWII ; 1860 : Civil War : 1776 : American Revolution) and that we are due for another crisis sometime in the next 20 years. Along with this they, IMHO, correclty predicted the timing and resulting swing to conservatism of the 9-11 event. My father, and avid follower of this theory was right in the middle of explaining that this concept to one of his coffee shop buddies, when the first plane slammed into a WTC tower ... his buddy turned to him and told him with a look of stunned surprise, 'How did you do that ???' Hope springs eternal and I hope to make a boatload of money shorting every dead cat bounce in the coming years. God bless you optimists ...
I will ck the book out by Strauss & Howe. As far as being a "wimp" about another terrorist attack. Im sure you live in some remote cow town with on doctor and a bunch of inbreeding. Because if grew up in the Largest City in the Nation, to watch the twins fall, and now live in the second largest Nation, chicago, i highly doubt you would call yourself "wimpy" Unlike you I am at the next ground Zero, its only a matter of time, I play and live in the middle of the city. So, the terrorist have not goten to me. Im just aware of a fact that many will not come to grip or even feel unless you walk by 110 story buildings everyday. Untill that happens, i suggest you go on and live your martha Stewart life, because you have no idea what my world is like and nor could you handle it. Two interesting factors, Gold, all time intrest into gold and gold mininig companies. Second, India and Pakastain are the unstable atom in the entire structure of what is to be WWWIII. They natives are getting a little restless......