The 60% Rally In Perspective
Our stock markets are now well into 60% rally territory. Which begs the question: how does this rally stack up with previous ones based on such arcane concepts as economic fundamentals. We present some of the key criteria of how previous 60% rallies have looked like when analyzed across 10 different key economic dimensions (which are completely irrelevant now). Data courtesy of Contrary Investor.
- Year over Year Retail Sales: 9.3% average in prior 60% rallies versus -5.3% in the current one
- Consumer Confidence: 95.5 average; 53.1 now
- Capacity Utilization: 79.9% average; 66.6% now
- Year over Year Industrial Production: 4.1% avereage; -10.7% now
- ISM: 53.9 average; 52.6 now
- Payroll employment gains over period: 2.2% average; -2.0% now
- Decline in continued unemployment claims from cycle peak: -26.3 average; -11.6% now
- Year over Year growth in total credit market debt: 9.3% average; 3.0% now
- Year over Year growth in household debt: 8.8% average; -0.1% now
- P/E Multiple: 16.8x average; 20.0x now
With the exception of ISM, this 60% rally is completely nonsensical. On 9 out of the key 10 economic dimensions we are cruising purely on hope and on expectations that Uncle Sam will continue printing trillions of dollars simply to get us out of this mess. Or not even that, but merely the excess hundreds of billions in liquidity courtesy of Ben Bernanke, are following the path of least resistance straight to equities. Whatever the reason, the current rally, at least when juxtaposed with previous ones, is a complete sham. Anyone who believes there is any ounce of economic fundamental credibility to it needs to take a careful look at the data. Unfortunately, all will be happy to be blissfully ignorant until, as always, it is too late.
Full comparison data table below.
Data courtesy of Contrary Investor
(9 votes)
on Mon, 10/19/2009 - 19:53
#103969
"hope and ... expectations "
Hope and Change!
on Mon, 10/19/2009 - 23:17
#104125
With gov't complicity post 911 in underpinning the hyperspeculation on the land, structures, and debt instruments of the USA, and now with the breathtaking coverup via the rally, AND the refusal to reform or prosecute wrongdoers, one must conclude...
THIS GOVERNMENT MEANS TO DRIVE THE PEOPLE TO A MASS EVENT; REVOLUTION, REVOLT, OR SIZEABLE SOCIAL UPHEAVAL.
IT MUST PLAY TO THEIR AGENDA WITH THE EFFECTS BEING ANTITHETICAL TO THE RIGHTS OF MAN, THE US CONSTITUTION, ECONOMIC FREEDOM AND PROSPERITY, PROPERTY RIGHTS, AND RULE OF LAW.
THIS MAY WELL BE THE MOST SEVERE THREAT THE REPUBLIC HAS EVER FACED.
And few even recognize the danger, fewer less know how to combat it.
on Tue, 10/20/2009 - 06:49
#104205
"And few even recognize the danger, fewer less know how to combat it."
I for one, welcome our new Indian Overlords.
on Tue, 10/20/2009 - 08:22
#104254
How you conquer a population?
Make them beg for it.
on Tue, 10/20/2009 - 10:57
#104401
Give them religion
on Tue, 10/20/2009 - 12:11
#104499
Proverbs 9:11
..."In those days Alan Grayson arose, and ye he spake, he sayeth, where is our goddamned money motherfuckers, so sayeth the Alan Grayson".
on Tue, 10/20/2009 - 09:19
#104311
I could not agree with you more. ?Our currption
The Federal Government and Wall
Corruption is going without even
a whimper from the public. when
will we wake up and take our
country back from the two elitist
political parties!!!
on Tue, 10/20/2009 - 03:31
#104182
Alright everyone, listen up, I haven't seen this reported anywhere else...
The banks can buy stocks that pay dividends or bonds that pay interest payments from the same companies that they have made loans to. If the big loans to the big companies go belly up the banks are done anyway, so why not increase exposure to those same names by borrowing at .25% from the fed and buying dividend paying stocks plus bonds at greater than a .25% return to capture a guaranteed spread using your (taxpayer) money. The banks have borrowing covenants and access to these companies books (because of loans to them), so they know how close they are to bankruptcy - they could play this out to collect the near term dividends and in some cases also sell out before bankruptcy, in other cases encourage secondary offerings (credit ratings, market pump) for those companies that are nearest to defaulting on their loans (to pay back the banks).
They want to reinflate the bubble, and the latest acceptance by JPM to securitize gold by using it as collateral for margin accounts is telling. The threat is deflation and people are taking their money out of the system and buying gold which acts as a money divider (usually called a money multiplier with velocity when credit expands). If the powers that be can convince "smart" investors that they can have their yellow cake and eat the rally too, the big banks might just avert a non-delivery event of gold on the comex exchange.
My theory is that they need to keep the market return near or greater than the same return as gold now, since gold is getting so much attention - if everyone notices the "return" on a riskless asset relative to the most expensive index in history (highest risk) and piles into PHYSICAL gold the game is over.
on Tue, 10/20/2009 - 05:19
#104198
Your theory is in line with observable facts. Stocks have to go up faster then gold, in other words, the DOW/gold ratio has to go up. On a weekly chart the ratio is flat to up since April.
http://stockcharts.com/h-sc/ui?c=$INDU:$GOLD,uu[h,a]waclyyay[pb40!f][vc60][iue6,12,9!lj[$spx]]
For gold, go physical seems to be not enough, take delivery is necessary too. Moreover, make sure that the bar is not tungsten with plating.
"On Thursday, it was disclosed by Rob Kirby that in an "Asian depository" , gold bricks were found to have been filled with Tungsten.
[…]
There is no doubt that the source of the "tungsten" is the Bank of England. "
http://harveyorgan.blogspot.com/2009/10/oct-1709-commentaryimportant.html
on Tue, 10/20/2009 - 07:45
#104228
I am not an Engineer, but it would seen that there is a difference of capacitance and magnetism that can be measured between Tungston and Gold.
http://www.stormingmedia.us/77/7735/A773592.html
Also there is some good work being done with auto digital xray machines that are computer controlled. Even with density issues, you should be able to pick out tamper lines. Apparently you can already pick out color..
http://www.telegraph.co.uk/news/worldnews/europe/netherlands/2475365/New-X-ray-technique-reveals-colour-of-hidden-van-Gogh.html
and rock of the same density..
http://www.4nsi.com/industrial-x-ray-news/science-museum-of-minnesota-uses-nsi-ct-scans-to-examine-ancient-crocodile-fossil
You could scan by pallet as it comes in..edit* gonna (tm) that.hehe
on Tue, 10/20/2009 - 09:20
#104314
There are several non-destructive ways to test for gold or tungsten.
The easiest is sound; hit the bar with a little hammer and the and gold and tungsten sound different.
More technical, ultrasound is used to find cracks in metals. The contact gold/tungsten shows up as crack.
Gold is diamagnetic, tungsten paramagnetic. That difference could be used to detect tungsten too; but a simple magnet does NOT detect tungsten.
X-ray is another possibility but the thick bars and high density of both metals require high energy X-ray to get through.
To be sure testing will have to be done likely bar by bar but at half a million $ per piece that seems appropriate.
Testing methods are available, it has to be done.
Some testing methods are translated from a recent discussion of the topic at hartgeld.com and properties of the metals are from the German wikipedia.
on Tue, 10/20/2009 - 15:04
#104785
Good illustration of folly...
on Mon, 10/19/2009 - 19:56
#103972
This shows the market rally is based on other than fundamental reasons. When I clicked on the article I was hoping for a TTM as reported earnings comparison. Still, a good summary.
on Mon, 10/19/2009 - 20:00
#103978
Stocks are not valued on Fundementals - they are priced on what someone thinks they can resell them for.
A lot of money has been flowing into Equities (what else can the banks do with all that excess liquidity? Lend it out!! Shock! Horror! - Perish the thought) and so equity prices have been going up.
Once the money stops flowing in then stocks will start to revert to a real value (i.e. something based on Yield) - at that point the house of cards will fall. My guess is that we are close to that stage.
on Mon, 10/19/2009 - 20:02
#103980
"Anyone who believes there is any ounce of economic fundamental credibility to it needs to take a careful look at the data." er - that would be Larry Kudlow, CNBC
on Mon, 10/19/2009 - 21:02
#104019
Bullshit... there are lot's of people who look at the data... just from a different perspective that's all.
For those who missed this over the weekend... the trailer for "Wall Street II" the sequel is in.
Heres a sneak peek...
http://www.youtube.com/watch?v=M1owcncKCHg
on Mon, 10/19/2009 - 21:14
#104043
Nice....the one lighting up with the Bernanke Fiatsco is my fav.
Reminded me of a few commercials from back in the day--We need a pack of Trunk Monkeys to take care of the nation's bankster problem...
http://www.youtube.com/watch?v=geynA-JYDHE
on Tue, 10/20/2009 - 12:13
#104503
Awesome... can't even charge a trunk monkey with anything... I love it.
on Mon, 10/19/2009 - 21:45
#104066
lol
on Tue, 10/20/2009 - 01:00
#104161
That's awesome--great re-application of that video.
on Tue, 10/20/2009 - 12:05
#104484
Seemed fitting... thx.
on Mon, 10/19/2009 - 20:10
#103987
Bulls eat green shoots and prosper. Bears eat meat.
on Mon, 10/19/2009 - 20:23
#104000
Something about this market reminds me of jonestown.I think it is the mandatory kool-aid.That and ending badly.
on Mon, 10/19/2009 - 20:23
#104001
Money printed to buy MBS:
$0 average; $1.25T now.
on Mon, 10/19/2009 - 21:45
#104068
+10
on Mon, 10/19/2009 - 22:39
#104097
That's it!
Remember the story about Roman silver coins and repeatedly reduced amount of silver in it, and what happens after? =)
on Mon, 10/19/2009 - 23:25
#104131
Yes, I believe the Roman stock exchange went up triple digits. Cue the Vandals!
on Tue, 10/20/2009 - 12:10
#104494
The Romulus and Remus 500 hit an all time high of MMDCLXXVIII if memory serves...
on Mon, 10/19/2009 - 20:32
#104004
perspective is a curious thing, not only in economics but also in politics, consider these recent headlines:
Administration to engage Taliban
Administration to engage Sudan
Historian Niall Ferguson will be on Bloomberg with Rogoff at 6pm this Weds discussing the economy etc...
in the interim and apropos of nothing this little gem comes to mind:
http://www.youtube.com/watch?v=xQIJkgpP1hg
on Mon, 10/19/2009 - 20:34
#104005
Stocks are irelevant. Stop worrying about it.. Ignore it until companies are reporting cash flow problems, then short some.
on Mon, 10/19/2009 - 20:37
#104006
Glad to see the nonsense knows no bounds. This stock is well above its pre-Lehman price (+50%). It drops this bomb today, and loses a *whopping* 9%. I think this is very telling, but wouldn't be surprised if it's at new highs tomorrow on 'cost savings.'
http://www.reuters.com/article/marketsNews/idAFBNG50622820091019?rpc=44
UPDATE 2-Twin Disc posts surprise Q1 loss, shares fall Mon Oct 19, 2009 12:41pm EDT
* Q1 loss $0.22/shr vs est EPS $0.17
* Q1 rev $47.1 mln vs est $59.9 mln
* Shares down as much as 16 pct (Adds analyst comments, updates share movement)
By Fareha Khan
BANGALORE, Oct 19 (Reuters) - Power transmission equipment maker Twin Disc Inc (TWIN.O: Quote, Profile, Research, Stock Buzz) posted a surprise quarterly loss, hurt by weak shipments and plant shutdowns, sending its shares down as much as 16 percent.
The company shutting down its Italian and Belgian facilities was unexpected and the impact was not taken into consideration by the market, Sidoti & Co analyst Paul Joseph Mammola said by phone.
"I think that cost more in fixed-cost absorption than what the analysts have expected," he said.
For the first quarter ended Sept. 25, the company reported net loss of $2.4 million, or 22 cents a share, compared with earnings of $2.5 million, or 22 cents a share, a year ago.
Revenue for the quarter fell 35 percent to $47.1 million.
Analysts on average were expecting the company to earn 17 cents a share, before special items, on revenue of $59.9 million, according to Thomson Reuters I/B/E/S.
Gross margins were severely impacted by the combination of plant closings for the equivalent of two months at the European facilities and the one-month closing of the Racine, Wisconsin, facilities, the company said in a statement.
Shipments to the industrial oil and gas markets remained weak during the quarter, the company said.
on Mon, 10/19/2009 - 20:59
#104022
"Bulls eat green shoots and prosper"
you mean bulls eat green shoots and poop BullShit
on Mon, 10/19/2009 - 21:03
#104029
Excellent perspective!
Just imagine what credit contraction would show!
"With the exception of ISM, this 60% rally is completely nonsensical."
It could also read as: With the exception of ISM, a survey of subjective expectations based on a questionnaire sent to a 1,000 participants of which 300 or so take the time to complete and submit....
"the excess hundreds of billions in liquidity courtesy of Ben Bernanke, are following the path of least resistance straight to equities."
IMHO, this is not demonstrated or supported by volume.
Hell, C is responsible half of what little volume there is.
The absence of the normal collection of market participants (despite MSM's constant pleading to join) leaves those that remain with the ability to chase their own tails, and I mean that in a literal candlestick kind of way.
Money may soon be worthless, but it will always be better than paper profits.
Escalator up, elevator down.
Elevator up, bungee jump to follow.
on Mon, 10/19/2009 - 21:11
#104039
Tyler, markets are forward-looking so this rally makes perfect sense. By my calculations, they are currently discounting economic growth in 2132.
on Mon, 10/19/2009 - 21:15
#104045
Or discounting Zimbabwe style inflation in 2012.
on Mon, 10/19/2009 - 21:47
#104070
hahaha, +10 both
on Mon, 10/19/2009 - 22:41
#104102
A freind from Africa gave presented me with a 25 Bn note from Z today. It has an issue date of May 15, 2008 and an expiration date of December 31, 2008, at which time even the Z government acknowledged it became worthless.
Sad.
on Tue, 10/20/2009 - 01:11
#104164
Perhaps the thugs ought nought to have stolen the farm land from the farmers. Atlas Shrugged in real life. I will eventually happen in the U.S. I hope I live long enough to see it.
on Tue, 10/20/2009 - 13:52
#104666
By god, you've found the canary in the coal mine. Keep you eyes peeled for a FRN with an expiration date printed on it. It'll give you the runs just like milk 5 days after expiration
on Mon, 10/19/2009 - 23:11
#104120
i think i calculated that at the rate of growth we've seen over the last couple of days, the dow will close near 30,000 by the end of the year.
on Tue, 10/20/2009 - 01:08
#104163
No kidding, we're trotting along at a 60%ish annual rise in stock value in the last few months...maybe that's supposed to keep us at 'break even' when discounted against the falling dollar.
on Mon, 10/19/2009 - 21:14
#104044
http://begthequestion.info please
on Mon, 10/19/2009 - 21:30
#104054
TD--
I'd be interested to see the updated figures after 3q09 earnings season.
-Capacity Utilization announced 10/16 at 70.5%.
-PEs will probably come closer to earth after 3q numbers increase the E.
Those are interesting checkpoints you provided for a 60% rally, but then again they are just the "average."
I'm at the point where I'm trying to sniff out what they'll come out with next re: bullish indicators. Just don't bet against the US government until we top out on the Investor Cycle of Psychology. O, and figure out what's the next sacrificial lamb after the USD.
on Tue, 10/20/2009 - 08:31
#104267
My favorite part is how quarterly earnings make the front page, but 2 months later - revised quarterly losses are under the personal ads.
Oh, and speaking of personal ads. Sooner or later the Dow will no longer accept Dollars as a sacrifice. It has developed a taste for virgins.
on Mon, 10/19/2009 - 21:30
#104055
Change you can believe in . . . . .
on Tue, 10/20/2009 - 12:49
#104574
"Chains you can bereave in...."
on Mon, 10/19/2009 - 21:31
#104056
Stop trying to explain what cannot be explained. S&P 666 to 1096. Surf the wave and let the intellectuals invent their own reasons for it. Traders trade.
on Mon, 10/19/2009 - 22:17
#104088
I like that. +1
on Tue, 10/20/2009 - 04:49
#104192
There was a quote on here that articulates that, something like: I would rather be on the right side of an irrational market than be 'correct' and lose money.
on Mon, 10/19/2009 - 21:33
#104057
I wonder if those P/E measurements are comparing apples to apples. How were the previous P/E's computed, and how about the actual earnings P/E, not the projected.
I try not get too tinfoil, but stuff like this makes you think otherwise. It has PPT written all over it.
on Mon, 10/19/2009 - 21:34
#104061
Interesting. The flow of funds into US domestic equity mutual funds has been negative for about 6 weeks now, which is usually the kiss of death. Not this time.
Have you ever considered that money market mutual funds operators are misallocating funds into the equities markets, with a wink and a nod from Treasury? Since this is retirement money, who the hell would know?
on Mon, 10/19/2009 - 21:55
#104074
Proverbs 9:11
..."In those days Alan Grayson arose, and ya he spake, he sayeth, where is our goddamned money ? , so sayeth the Alan Grayson".
on Mon, 10/19/2009 - 23:35
#104136
My friend Rusy, I laughed that I literally choked
on Mon, 10/19/2009 - 22:23
#104089
Insiders are orchestrating this rally with taxpayer money so they can sell their shares.
on Mon, 10/19/2009 - 22:35
#104094
I feel your pain Tyler - it really sucks to be right but then to constantly find oneself on the wrong side of the tape. I'm not being facetious here - blogger myself and have been shorting this tape over the past two months - it's been painful.
on Tue, 10/20/2009 - 04:52
#104193
Give up and get on board. It still has another 20% to rip this year- you know why.
on Tue, 10/20/2009 - 08:20
#104195
i don't know why the fuck do you people think that we are losing money if we preach doom and gloom, i am short term bullish and play the tape, but on the long run, say 2-5 years i am extremely bearish, and not only that, but I'm also thinking world changing events that will rock the shit out of everything bearish. It is a completely different thing to have opinions based on facts about this market, and to be a moron and not play the tape.
.
on Tue, 10/20/2009 - 08:11
#104248
shutup you cheeky bastard nobody cares what you think
on Tue, 10/20/2009 - 16:44
#104934
cheeky bastard
most of your posts are so retarded that i find it hard to believe you have ever been on the right side of the tape
Btw one perspective is that the rally has been overdone....but another is that the crash was overdone and we are now renormalising...
on Tue, 10/20/2009 - 16:47
#104937
my bank statement tells me otherwise .....
on Tue, 10/20/2009 - 17:37
#105024
If you are on the wrong side, how are you right? It's a serious question. I've been long and short plenty over the past few months, and my shorts have been overall money losers. I find it more constructive to think of my losing trades as being "wrong" while the market just "is".
on Mon, 10/19/2009 - 22:38
#104096
Harvard on Corporate Governance and Financial Regulation » Credit Derivatives Are Not ‘Insurance’http://ow.ly/vmE6
on Tue, 10/20/2009 - 03:46
#104185
Cheeky Bastard on Harvard University: " Yeah, basically, its a LOL-University "
on Tue, 10/20/2009 - 16:46
#104936
phone home, fanboy daytrader, phone home
on Mon, 10/19/2009 - 23:00
#104111
ZeroHedge contemplated a week or so ago whither if AA would mark the market top because its low marked the market bottom back around March/April 2009.
History Rhymes instead: ergo, AAPL should mark the market top.
AA
AAPL
Bradley Siderograph's turn date loom this week 10/22-26/2009. See also George Ure's web-bots discussing 10/25/2009 turning point.
on Mon, 10/19/2009 - 23:01
#104112
ZeroHedge contemplated a week or so ago whither if AA would mark the market top because its low marked the market bottom back around March/April 2009.
History Rhymes instead: ergo, AAPL should mark the market top.
AA
AAPL
Bradley Siderograph's turn date loom this week 10/22-26/2009. See also George Ure's web-bots discussing 10/25/2009 turning point.
on Mon, 10/19/2009 - 23:02
#104114
Yes, stocks have become much more expensive,and may consolidate a bit from where they are now.
However, using a good market timing system can help an investor profit both from the upside and downside of this market.
Consider http://invetrics.com
Its daily DJIA index trading signal is up a respectable 64.84% for the year (as of October 19, 2009) and it is free of charge for individual investors.
on Mon, 10/19/2009 - 23:02
#104115
Tyler - you have to stop....you have so many good posts, but you write faster than I can read....i have some other blogs to read too, and some of your stuff requires thinking, so I have to read slowly
Like this post, short and all-bullet pointed....
on Tue, 10/20/2009 - 00:59
#104160
Dam it feels good to be a banksta!
on Tue, 10/20/2009 - 03:39
#104184
Here's what we're doing in Arizona to create growth:
As reported yesterday by the Arizona Republic in "State now in race to home-grow, recruit jobs", the small city of Surprise Arizona has created a $5.6million fund for biotech start ups. The Arizona Economic Resource Organization, an economic development support group, just announced plans for a $200 million fund to finance startups. Now, that's cool.
The solution for America is laughably simple. Every state should follow Arizona's lead. Get behind business creation and innovation. Stop lamenting the state of the world and proffer solutions. Create what Arizona is doing in every state and you'll create ten thousand new incredibly dynamic, brilliant companies every year.
http://www.azcentral.com/arizonarepublic/news/articles/2009/10/18/200910...
on Wed, 10/21/2009 - 01:18
#105350
Nice Blue, with thinking like that we might avert the apocalypse.
Much like the tobacco companies having to sponsor anti-smoking campaigns, politicians should tax monopolists but use that (95% monopoly tax mentioned on a different post) not to increase their own spending but sponsor their startup competition. Without a new S curve there is no future, and we have seen nothing but rent seeking behavior blocking new technology from the monopolists. Likewise, they should provide tax incentives for new business startups and this is more important than the housing credit.
This is the core to escape short term thinking, and the only way the politicians will pay for their salaries in the future as the monopolists have found ways to avoid taxes - the small & medium businesses pay much of the taxes.
If we don't have policies to spur job growth (and small/medium sized businesses have all the growth) it is apocalypse now guaranteed, and I can smell the napalm.
on Tue, 10/20/2009 - 04:11
#104189
How about a different take on this market.
Lets say that in 2 years the dollar of today is worth 5 cents.
What happens to people holding 1230 dollars, 10 shares of IBM (1230), or 1230 of gold?
The dollar devalued 20 to 1 (~61.50). 100 shares of IBM would hold up far better than that dollar (slower sales vs cheaper inventory and loan servicing costs - I would guess those 100 shares would be worth 10x or ~12300). Probably not as well as the gold (~24600 - but then gold has some hedge built into the price and post devaluation it will sink in value as people sell it).
Maybe this rally is as simple as the perception of a rediculously devalued currency.
on Tue, 10/20/2009 - 07:01
#104207
What makes it even more bizarre is the last 30% up is basically on minimal volume.
You can be bearish and hold out in this environment. You just have to be patient and liquid. The payoff will come at some point but certainly playing the tape is easier money.
on Tue, 10/20/2009 - 07:05
#104209
minimal volume on levitation is a classic bear market rally sign
on Tue, 10/20/2009 - 07:14
#104211
+1
on Tue, 10/20/2009 - 08:10
#104247
Markets are nonsensical, but that's nothing new. I think it was Hugh Hendry who said that stock markets make the impossible possible.
on Tue, 10/20/2009 - 14:41
#104743
This rally for about the last 60 days has been all about distribution days followed by a large upside low volume rally to push the market to new highs. Very difficult to trade without anxiety...in either direction.
on Fri, 10/23/2009 - 13:59
#108490
who really cares what it is based on...bull side or bear side, i'd prefer to be on the RIGHT side...since that's where the money is made.
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