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The Endless Bear Market?
Via Pension Pulse.
Bob
Prechter was on Yahoo Tech Ticker on Thursday warning that "We
Are On Schedule for a Very, Very Long Bear Market":
The global selloff in
stocks accelerated Thursday, sending the Dow down 3.6% to 10,068 while
the S&P 500 lost 3.9% to 1,071.59 and the Nasdaq shed 4.1% to
2,204.All major U.S. averages are now down for the year and at
least 10% below their 2010 highs, meaning the downturn has officially
entered "correction" territory.
Unfortunately (for bulls),
there's much more selling ahead, according to Robert Prechter,
president of Elliott Wave International and author of Conquer
the Crash.
"We should be in for
[another] week or two of pretty serious selling," Prechter says.
"They'll be bounces along the way...but I think this should last a long
time. We should be on schedule for a very, very long bear market
period."
In the near-term, the veteran market watcher predicts a
"dramatic increase in volatility," beyond what's already occurred. The
CBOE Volatility Index (VIX)
rose another 30% today and is now up about 180% from its late April
lows.
Notably, today's selling
occurred despite a rally in the euro amid reports of central bank
intervention. Joe Brusuelas of Brusuelas Analytics says, "The
capitulation in today's market has more to do with the unwinding of the
easy money [carry] trade on commodities," which fell again today, with
notable weakness in energy and palladium.
Meanwhile, Treasury
prices continued to benefit from the "risk aversion" trade with the
yield on the benchmark 10-year note falling to 3.21%.
Broken
Record or Market Sage?
Other than to say "a long way down,"
Prechter wouldn't say how much further he thinks the market will fall,
suggesting a repeat of the 1930-32 scenario when "extremely sharp
rallies" kept investors interested and "feeling like a bottom [was]
forming."
Anyone familiar with Prechter knows he's been
predicting doom for a long time so it's tempting to dismiss his latest
warning -- a veritable repeat of what
he said here in February. But he's not a perma-bear and did turn
bullish ahead of the bottom in March 2009.
More dramatically, in
1978 he co-authored Elliott
Wave Principle - Key To Market Behavior, which predicted a great
bull market similar to the 1942-1966 rally. By his own admission,
Prechter underestimated the extent of that historic rally, which ran
from 1982-2000 and saw the Dow rise 1,500% from 777 to 11,723.
Prechter
says the market has spent the past 10 years building a "major head and
shoulders" top from those 2000 highs, even though they were exceeded
in 2007. Ultimately, he expects a "corrective mode that's going to
retrace virtually the entire" 1982-2000 bull market.
"The best
place for most people to be is in cash" and equivalents, he says. "You
want maximum liquidity until this thing blows over."
Editor's
note: We did NOT interview Prechter because the market was
tumbling; today's appearance was scheduled earlier this week. Sometimes
it's better to be lucky than good...
I had lunch
with a fixed income manager and we talked markets. "The market wants
more quantitative easing," he said. I told him "sure but Trichet said
the
ECB does not engage in quantitative easing". We both chuckled.
I
told him in a zero interest policy world (ZIRP), the only way to
stimulate your economy is through your exchange rate. "That's why
quantitative easing is bearish for the euro". He agreed with me that the
euro is heading towards parity.
On specific "conviction trades",
he told me he's short Canadian Real Return Bonds, feeling that inflation
expectations will wane and real rates will rise once the Bank of Canada
raises interests rates in June or July. "Fundamentals are strong in
Canada and inflation is not an issue".
Interestingly, the WSJ
carried an article on Brian Weinstein, who manages $3.1 billion
BlackRock Inflation Protected Bond, the company's flagship TIPS fund,
stating that he is short TIPS. Mr. Weinstein said "investors are
mistaking inflation volatility for inflation -- inflation volatility
means we have both inflation and deflation risk."
Right now,
everyone is worried about a protracted deflationary wave. There are
those who fear a major crash is coming in stocks. The fixed income
manager I met today told me "it's all hedge funds right now". I agreed
telling him "the extreme volatility is driven by the top hedge funds who
are loading up again, preparing for the next move up".
Where do I
see the best value going forward? The euro's demise has hammered
the solar sector, so I used this as an opportunity to load up more
shares. You can listen to Bob Prechter and wait for the "ultimate
bottom", but my hunch is that the big hedgies are having fun toying with
retail and weak institutional clients. I've had enough of doom &
gloom, and I'm looking forward to the solar boom. It might not happen
next week, but my bet is that solar will be the next big bubble, so I
stay cool and use these sharp selloffs as a buying opportunity. Bring it on big hedgies!!!
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is that bear yawning...? looks like he may go to sleep soon.
Bob is often one wave ahead or one wave behind....i would not listen to him or probably...do the opposite of what he is saying.
For your unerring optimism in the face of adversity.
I dub thee "The Black Knight"
http://www.youtube.com/watch?v=zKhEw7nD9C4
good money after bad, is not an investment strategy..Solar stocks are an illusion to satisfy the masturbatory dreams of the eco chumps, when they have the PE's of XOM let me know.
Without forced government and utility subsidies, there would be about 1 in a 100K homes with solar panels. The government subsidies will stop (they need the cash) and utilities will do the bare minimum to keep the franchise boards happy. When solar reaches some sort of unsubsidized parity with coal/gas/nuke electric, people may buy solar panels in mass.
BTW, Dow 26,000 may have to wait.
Chinese solars...why not just buy time shares in Miami beach? At least that kind of solar action feels good when you are flushing your money.
How do you say 'pump and dump' in Mandarin?
Leo,
Seriously, TSL? Been doing well selling calls against it, thinking of doing it again for the next 6 months.
Thumb up or down?
And that bear isn't really a grizzly, it's just a constipated chipmunk real, real close up.
your advice is harmful. why don't you stop giving it.
There will be a commodity bubble over the next 2-3 years. Then it will be stopped, or central banks, and finance ministries risk global stagflation from cost-push inflation, and high global unemployment. So why not load up on base metal, and agri stocks now. Then, the commodity bubble will make way to the green tech bubble, who's multi trilion dollar market will be used to soak up all the excess liquidity of the previous bubble--which is when you should buy into solar
My thinking exactly.
"I tend to get a little frisky at large scale DX inflections and always get a kick out of how visceral and/or derisive folks are about Bob."
Prechter is great because he gets such a rise out of both the bulls AND the gold bugs. Meanwhile he just sits down in Atlanta, quietly biding his time and warning anyone who will listen that the entire credit bubble built over the last 30 years is going to collapse dramatically, the same way every credit bubble in history has unwound.
Chopshop,
European woes have hammered solars, and in my opinion it's an extreme overreaction. I can't prove it (yet), but the pickup in volume lately tells me some big funds are buying solars at these levels. I know all about trader's risk management, but tight stop losses will kill you in solars. Instead, I just use very sharp selloffs as an opportunity to accumulate more, effectively averaging down (traders will squirm at this notion). And I do not budge. This is money I do not need tomorrow.
But forget about solars. Look at oil. In two weeks, it got hammered. Look at currency pairs like AUD/YEN or commodity currencies like CAD. Risk "OFF" has hammered high beta stocks, including tech stocks that are announcing great earnings.
In this environment, you have to always think who is behind these moves? What do they want? More quantitative easing? Why? How is liquidity? Are hedge funds really deleveraging or ramping it up? Always question market moves and leave the Prechters of this world with their five minute slots on Tech Ticker.
Leo, great research as usual. You cited how many opinions in this piece?
Leo, Old Wall Street expression, After getting beaten up in the market one day a guy says,"It's not about the money. It's about the money."
Stupid saying. It means don't get emotional about this. It is about the money. That is all that matters.
I am not emotional but these big hedge funds are pissing me off. I know they're all colluding, driving these sharp market moves. I say "f*ck em". Let them have their fun now, but in the end, their arrogance will ensure even more massive regulation.
lol you still haven't realized that the solar bubble popped almost 2 years ago have you?
Really? News to me...2 yrs ago nobody even knew about solar companies. Wait, what is going to happen in solars in the next five years will make the Nasdaq bubble look like a spec of dust. It will be like nothing you've ever seen before.
Could it be that solar power suffers from the fact that it is an expensive and inefficient boondoggle? For example, Spain has suffered greatly from spending more than 10 times as much for solar as it has for conventional power.
You don't know what you're talking about. Solar will reach grid parity by 2020 and in some countries, like Singapore, much sooner. Moreover, according to IEA, solar will be providing nearly a quarter of the world's power by 2050. Solar is the future. Period.
The credit crisis is not resolved, and in fact worsening. Where is the investment money going to come from? Government expenditure? Governments are broke. With deflation - oil and gas will be cheap again and likely sideline things for awhile. In 30years, I see your solar shining - but for now the fundamentals look rather poor.
Oh please, I've heard that argument a thousand times. Fact is VCs, pension funds, sovereign wealth funds, development banks are lending tons of money, especially for renewable energy projects. It's simply false to think the credit crisis will destroy a growing industry like solar. It won't happen.
Leo,
"I am not emotional but these big hedge funds are pissing me off. I know they're all colluding, driving these sharp market moves".
You don't know shit, and your above statement proves it 1000%
Completely agree with you El Hosel.
Leo is apparently frustrated with his losing bets and now wants to double down and urges others to do the same. Who's the lemming that will follow him off a cliff?
The whole article is disjointed, a seeming flight of ideas. First, he presents a major proponent of deflation, an esteemed researcher of the markets, Bob Prechter, who by the way has won a U.S. investing/trading championship and who correctly called the most recent bull market/bear market rally back over 14 months ago.
One would think that an author presenting Prechter would either analyze his points and agree with him or dissect and argue against them. He does neither and then, suddenly, recommends Solar which has been in a bubble what with all the government subsidies.
The $64,000 question: Are we in a normal (10-25%) correction; or is this the start of major problems ahead such as a deflationary spiral as experienced by Japan; or are the gold worshippers right and are we on the road to currencies collapsing and hyperinflation?
My leanings? If all the banks and governments around the world have helped to create this mother of all credit bubbles with massive leveraged bets by individuals and institutions, how will it end? We can't keep inflating. Who is going to bail out sovereign defaults? A world government? A Galactic or Star War Empire's death star? Nope. Sorry to quash your "hop-on-the-next-bubble" dreams.
The Housing-Titanic continues to sink and the EU-Titanic, China-Titanic, and the U.S.-Titanic have all hit the same iceberg. The bulkheads are failing and everyone can still sing and dance while the band plays on, but there is no stopping the inevitable conclusion to this grand charade. The ship is going down...down...down...
Tell 'em Lenny, "Everybody knows that the ship is sinking ... , Everybody knows that the captain lied!"
Thanks for the laugh, I enjoyed your silly comment. By the way, I am not pumping solars. I am accumulating them on every sharp selloff. You don't have to do what I'm doing. Listen to Prechter. He'll make you money. LOL!
On this one point, you're right, Leo.
Given the malodorous quality of this article and your pathetic attempt at a rejoinder, I will not follow your advice, not in a million years.
Yes, keep on doing what you're doing. Continuing to fight the market with your limited funds is a sure way to make money. You must be a disciple of the Hunt Brothers. I'd like to see you win a U.S. investing/trading championship.
You're becoming delusional on top of psychotic, "you poor unfortunate soul..., in pain..., in need."
Delusional? Really? At least I have the balls to put my limited funds where my mouth is. Now, stop blowing smoke, and tell us all where a "trading champion" (lol) like you places his money. Let me guess, you're another hedge fund clown who rapes his clients, charging them 2 & 20 for leveraged beta. You're all beyond pathetic.
Excuse me, Leo.
You're starting to rant and rave now. Symptoms seem to be accelerating; rapidly progressing soon to blithering nonsense.
Oh, I forgot, you were there already with this article.
Blah blah blah, go back on your screen and pretend you're a "champion trader"...LOL! That's a good one! So what are you trading now, champ? LOL!
Did you even notice that he referred to Prechter as having won (and actually set a record, incidentally) in a trading championship, and not himself?
It's funny that you continue to look for "the next bubble." Prechter & Co. have been noting recently that the uptick in references to bubbles is a sort of "uh-oh" recognition behavior which occurs while a deflationary unwind is in progress. It's a symptom of an encroaching skepticism that will actually make further bubbles nearly impossible, because you're not going to find any greater fools to sell to.
Leo Kolivakis
Stops are for myopic traders who twitch all day long. I am proud to tell you that I doubled and tripled down on some of my long-term solar positions after they fell 50% because I knew they were being manipulated by the big hedge funds. That's called conviction and knowing where the big macro picture lies.on Fri, 12/04/2009 - 10:15
#152527
Knew that how? The same way you knew that a bankrupt and criminal Greek government was being injured by a conspiracy of speculators?
"knowing where the big macro picture lies".... Chinese solars! LOL!
As energy costs rise, solar energy becomes more viable. Since people are getting out of commodities to pay their margin calls, oil will fall. That makes solar energy less viable, and puts downward pressure on solar stocks.
Took me some time to browse through all the comments, but I really like the post. It proved to be very helpful . It's always neat when you can be informed and entertained. thanks for this nice article.
Regards,
van insurance quotes
Agree!
Can you say deflationary collapse boys and girls...
Pick up your chips and walk out of the casino. It worked for me.