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Paranormal Activity to Another Black Monday?

Leo Kolivakis's picture




 


Submitted by Leo Kolivakis, publisher of Pension Pulse.

Simon Maierhofer of ETFguide.com writes Whats Next - Minor Correction or Major Collapse?:

Over
the past few months, every attempt by the bears to depress prices has
been met with renewed buying pressure, resulting in even higher prices.
What goes up, however, has to come down and some subtle signs are
indicating that this decline might be more than a simple correction,
much more.

 

It
was after midnight on April 15th, 1912 when the unsinkable did the
unthinkable. Built and labeled as unsinkable, the Titanic was the most
advanced and largest passenger steamship of its time.

 

Even
though the Titanic's crew was aware of the fact that the waters were
iceberg-infested, the ship was heading full-steam for a destination it
would never reach.

Being aware of danger is one thing; acting prudently for protection is another.

 

Today,
investors find themselves in an environment that is infested with
symbolic icebergs. For savvy investors willing to pay attention and
heed warnings, this doesn’t necessarily translate into a financial
shipwreck, while others might soon be reminded of the Titanic when they
look at their account balance.

 

Iceberg cluster #1: Lack of leadership

 

Throughout
the financial meltdown financials, real estate, and homebuilders fell
harder and faster than broad market indexes a la S&P 500 and Dow Jones. Beginning with the miraculous March
revival (more about that in a moment), the broad market rose while
financials, real estate, and homebuilders soared.

 

Those
three sectors led the decline and led the subsequent (mock) recovery.
Since it is reasonable to assume that those sectors will continue to
lead the market throughout this economic cycle, it behooves investors
to watch such leading sectors closely.

The S&P 500 recorded a closing high on October 19th at 1,097. The Financial Select Sector SPDRs reached their closing high a few days earlier on October 15th. Since
their respective closing highs, the S&P 500 has dropped 2.82%,
while XLF has already shed 5.64%.

 

A more pronounced performance slump is visible in the home builders sector. The SPDR S&P Homebuilders ETF
peaked on September 16th and has fallen 9.97% since. Keep in mind that
XHB’s lackluster performance comes on the heels of the biggest monthly
increase in total home sales in ten years.

 

Even
though the inventory of existing homes fell 7.5% month-over month in
September (to 3.6 million units), the shadow inventory of 3.5 million
foreclosed homes is probably weighing heavily on home builders. Shadow
inventory represents foreclosed homes that are vacant, still included
on bank’s balance sheets, but have not hit the market yet. 3.5 million
homes equal about 1 – 2 years worth of supply.

 

Iceberg cluster #2: Non-confirmation in the technology sector

 

Apple,
Wall Street’s new darling, reported block buster earnings and rallied
over 10% to new all-time highs. Microsoft reported better than expected
numbers and spiked 7.4%. Investors loved Amazon’s outlook so much that
they bid up the stock by over 33%. Combined, the three companies
account for nearly 24% of the Nasdaq (Nasdaq: ^IXIC), yet the Nasdaq is
traded lower today than before earnings season on October 14th. The
same is true for the Technology Select Sector SPDRs.

 

If
24% of the Nasdaq’s components rallied between 7 and 33%, without
lifting the index, a lot of tech companies must be hurting. In fact,
the Nasdaq’s performance is masking the decline IBM, Intel, and many other once
high-flying tech companies have seen over the past 1-2 weeks.

 

Iceberg cluster #3: Earnings are a lagging – not leading – indicator

 

Even
though expectations were low to begin with (beating earnings forecasts
was likened to an A student asked to achieve only a C), there is no
arguing that this quarter’s reports were much better than last
quarters.

 

Many
view this as a sign that the economy had hit rock-bottom back in March.
In fact, 80% of economists now believe that the recession is over
(probably the same 80% that didn’t see the recession coming in 2007).
However, as the chart below shows, earnings per share (EPS) are
directly linked to the stock market’s performance at best and a lagging
indicator at worst.


Alcoa, one of the biggest components of the hottest sector – materials,
surprised investors with a positive third quarter. Year-to-date,
however, Alcoa lost $0.75 per share. This compares to a profit of $2.95
per share in 2007. At this point, Alcoa does not even have a P/E ratio,
since Alcoa has no “E” – earnings.

 

Considering the relationship between stocks and earnings, it would be interesting to know what caused the March bottom.


Throughout
February and March, Wall Street was covered by a veil of uncertainty
and worry that the country would slip into another depression. Ever
since the Great Depression, there’ve never been as many articles
referring to the Great Depression as in March.


It
is exactly that kind of pessimism that foreshadows market bottoms of
some significance. Such pessimism rids the market of weak stock holders
and opens the door for buyers to bid up prices. That’s exactly what the
ETF Profit Strategy Newsletter predicted via the March 2nd Trend Change Alert.


Below
is a brief excerpt taken from the Trend Change Alert: “A multi-month
rally, the biggest rally since the October 2007 all-time highs, should
lift the indexes by some 30-40%. Tuesday's (2-23-09) 4% spike may be an
indication of the initial intensity of the rally. Beaten down sectors
like financials, industrials, materials and consumer discretionaries are likely to see the biggest percentage gains over the next few
months.” Many of the recommended ETFs gained triple digits in the
upcoming months.


This
rise in stock prices and consumer sentiment, along with serious
cost-cutting by publicly held corporations, shrank corporate losses and
even created profits for some corporations. But once again, it was
rising stock prices that resulted in better than expected profits, not
vice verse.


Iceberg cluster #4: No demand for products


It
seems like companies have boosted their production. The key question is
whether this uptick is merely due to an effort to restock inventories,
or actual demand by the consumer. Fortunately for investors, there’s an
easy way to find out.


If
there is real demand by consumers, it will be reflected by shipping and
transport companies. Products in demand need to be shipped from the
manufacturer to the consumer or wholesaler. A look at the
transportation/shipping sector providers, therefore, an easy and
logical answer.


UPS
shipments fell for the sevenths consecutive quarter. UPS’ profits fell
43% year over year due to lower demand for packaged deliveries.
Burlington Northern, the biggest component of the Dow Jones
Transportation Average, reported that its freight revenue dropped 27% year over year.


This is exactly the opposite of what you’d expect to happen in a new, sound bull market.


Iceberg cluster #5: (Over) valuation


Would
you buy the Dow Jones at 10,000? It probably depends on where you see
the Dow trade a week, a month, or a year from today. Many investors and
Wall Street gurus are advocating to buy the Dow at current levels.


Let
me ask you this: Did you buy the Dow at 7,000? If you didn’t buy the
Dow a few months ago at 7,000, why would you buy it today at 10,000?
Today’s Dow is 50% more expensive than it was seven months ago, yet
more people are willing to buy now than in March. Aside from the stock
market, there is no other “salesman” able to sell a product for a 50%
premium.


Bait-and switch at its finest


How
can the stock market get away with this? The only difference between
March 2009 and today is perception. Even though it defies logic, stocks
are perceived to be a better deal today than in March.


Imagine
what will happen when the perception changes. Once investors start
believing that they can buy stocks later at a lower price they will
wait, buyers will dry up, and stocks will plummet.


It’s
no stretch to expect lower prices. Even though prices have come off
multi-decade lows, earnings are lower than any other time since the
Great Depression. The S&P 500’s P/E ratio (stock price divided by
annual earnings), based on actual reported earnings have sky-rocketed
to all-time highs.


 

Anybody
buying the S&P 500 at current prices is paying 138 times as much as
reported earnings. In other words, based on this year’s earnings, it
would take 138 years of profits to repay your investment.


Would
you buy a Subway franchise at 138 times its annual profit if you knew
that 15 – 20 is the historical average? 15 – 20 is the average P/E
ratio over the past 100 years. Anybody buying now will have to be
prepared for significantly lower prices.

 

Some things never change


History
teaches us that overvalued markets can’t last forever. History also
teaches us how far the market will have to drop to reach fair values.
The bear markets of the 1930s, 1940s, 1950s, 1970s and 1980s have
provided us with a valuation reset template.

 

Every
bear market bottom has seen P/E ratios drop to historically low levels.
Investors, however, don’t have to rely on P/E ratios alone. Dividend
yields, mutual fund cash levels, and the Dow measured in the only true
currency – gold provide another window into the future – a nearly fail-proof composite indictor.


The October issue of the ETF Profit Strategy Newsletter
plots the historic performance of the stock market against P/E ratios,
dividend yields, mutual fund cash reserves, and the Dow measured in
gold, along with target levels for the ultimate market bottom. A
picture paints a thousand words and those charts speak volumes about
the market’s future.

 

Did
you know that the Titanic received an iceberg warning less than two
hours before an iceberg brushed the ship's starboard side, buckling the
hull in several places? An angry communications officer responded:
“Shut up, shut up, I am busy; I am working.” There are plenty of
indicators warning investors today. Will you heed the warning and avoid
financial shipwreck?

Given
Friday's action in the stock market, you might be worried about that
another Black Monday is right around the corner. Financial journalist
Jon Talton writes Echoes of another great crash -- and the lessons we refuse to learn:

This
is the anniversary of Black Monday, the day in October 1929 when the
stock market crashed. The Dow saw a record drop and things only got
worse as the week progressed (there was a Black Tuesday, too).

 

It's
clear now that the crash of that day was not the beginning of the Great
Depression but its loudest symptom. Other areas of the economy had been
faltering for years and income inequality was near record highs, but
this was cloaked by the mania on Wall Street, back in the day when
banks could engage in highly speculative trading.

 

Of
course, that toxic environment was rekindled in our time by the repeal
of the Depression-era Glass-Steagall Act in 1999, and we got just what
the reformers of the 1930s would have feared.

 

Milton
Friedman made his mark as a great economist (as opposed to a great
polemicist) by work with Anna Schwartz showing how the Federal Reserve
botched its response to the crash, turning what might have been a
short-term panic into a deep depression. This was a lesson current Fed
Chairman Ben Bernanke was determined to implement -- and indeed, Fed
action pulled us back from the brink.


 

Where,
exactly, "back from the brink is" nobody can say with precision.
Average Americans are still hurting and the job market is a disaster,
although nowhere along the lines of the Great Depression. We have yet
to see the unintended consequences of Bernanke's "anything it takes"
strategy, which was not followed by meaningful regulatory reform.

 

Time
will tell. But the severity of the Depression forced major changes,
such as the prohibition of commercial banks from engaging in high-risk
ventures. This time, no such overhaul is happening. None of the
swindlers who created the bubble have been called to account -- Bernie
Madoff is penny-ante -- and the systemic risks that existed before our
crash continue.

 

In other words, this time
things didn't get bad enough. But the risk of new crashes is if
anything higher than ever. And our current predicament seems to have no
quick solution or the will to push one through. So we rattle along on a
bottom -- better, to be sure, than in 1929, but more perilous in its
own ways.

I
don't get too excited when I see one day sell-offs. I was talking to
a trader who told me he thinks hedge funds are unwinding risk trades
going into year-end. Maybe they are or maybe this is another classic
shakedown of nervous investors before they bring this market much
higher.

Either way, enjoy your Halloween weekend and try not to think about the markets. I hear 'Paranormal Activity' is sweeping America. A good horror flick should help keep your mind off the nightmare on Wall Street.

 

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Sun, 11/01/2009 - 00:29 | 116459 Anonymous
Anonymous's picture

Leo,

Your need to be right is blinding you.

Sun, 11/01/2009 - 15:29 | 116706 Leo Kolivakis
Leo Kolivakis's picture

My need to be right is blinding me from what? I do not need to be right and I don't have a crystal ball - nobody does. I just happen to believe there are powerful vested interests that do not want another stock market crash. If you think otherwise, then please explain.

Sat, 10/31/2009 - 22:25 | 116404 time123
time123's picture

Yes, stocks have become much more expensive, and will likely correct further from here. But remember that the P/E ratio always looks the worst at the bottom of the profit cycle, prior to the economy picking up and earnings recovering. 

time123

admin: http://invetrics.com

Sat, 10/31/2009 - 17:07 | 116221 Anonymous
Anonymous's picture

The Zerohedge comments section contingent has been salivating over the prospects of an imminent (for 7 months now) crash that never comes. I don't think what you guys are taking into consideration is all the behind-closed-doors collusion going on between the likes of every major investment bank in the world and the Treasuries of pretty much all the countries in the developed world.

There is a concerted effort by them, a plan - one that we are not privy to - to keep a crash like the one you guys have been drooling in anticipation of from happening. It's as simple as that.

You think they can't do it? You're wrong. There's so much different between now and 1987 that it makes the mind reel to even contemplate. Forget HFT and dark pools and the like. Think unlimited liquidity and all the major players being given a playbook and knowing what's going to happen at any given momment; buy programs being initiated at a prearanged, predetermined time; sell programs being initiated at a prearranged, predetermined time; etc. etc. (What do you think JPM & STT is doing with all that SPY they've accumulated over the last 7 months? Or the huge baskets of DOW 30 stocks that GS has been hoarding?)

They CONTROL the market now. Down to every last pivot point and every last opening/closing number on the major indexes.

Picture some guys on Super Computers at Treasury conferencing on a secure line with traders at GS, JPM, STT BCS, et al. - all on their OWN Super Computers - setting up every. single. movement of the market.

There ain't gonna be no crash. Period.

Sun, 11/01/2009 - 09:08 | 116273 Leo Kolivakis
Leo Kolivakis's picture

As I stated in my post, I think this is a classic shakedown to weed out the weak hands. There is an inordinate amount of liquidity in the system to bring this market much higher. Another crash can happen but I tend to think like you. The power elite do not want a crash. The last thing the financial services industry needs is a crash where investors get turned off of the stock market for decades. The Fed doesn't want a crash either. They want another asset bubble and inflation in the system so they can inflate all that debt away. Pension funds sure don't want a crash because they're heavily exposed to stocks. So can a crash occur? Sure it can but there are plenty of vested interests out there that will be buying the dips hard. The thought of a crash and decades of deflation scares the living daylights out of them.

Sun, 11/01/2009 - 04:02 | 116502 Anonymous
Anonymous's picture

Agree. Massive manipulation. Besides the shakeouts, these corrections only serve to occasionally prop up the dollar. But the market must be propped up now because the larger public now sees its level as some indication of the economy and it makes everyone feel better - despite what they actually may see around them. This can only work so long, but I'll bet that it lasts through the Christmas shopping season at the very least. Wouldn't want to spoil that.

So when would the prime time be for something big, given who's running the show? I would also expect that it will be triggered by some kind of Black Swan event so there will be some external cause to blame.

Of course, they'll never waste a crisis, as Rahm Emmaneul put it.

Sat, 10/31/2009 - 18:43 | 116269 Anonymous
Anonymous's picture

I think you make the mistake in thinking that those
colluding DON'T want the crash. After all, they've
high-frequency pumped this pig up, and they've got to
pull the plug to REALLY profit.

Sat, 10/31/2009 - 13:21 | 116131 agrotera
agrotera's picture

Probably should put a disclaimer above the S&P PE ratio chart, " Viewing this chart may cause you to have a stroke."

 

Sat, 10/31/2009 - 12:14 | 116101 Leo Kolivakis
Leo Kolivakis's picture

Bears and bulls should listen to Tim Knight's Halloween video commentary. He might be right but I think he's underestimating the force of the global liquidity rally.

Sat, 10/31/2009 - 13:01 | 116122 Digital Gunfire
Digital Gunfire's picture

As a 1987 crash veteran I don't buy the 'this time is different' idea. I never do.

Especially when it comes to Program trading. 
Today's black boxes, HFT, the army of daytrader and internet traders topped with massive liquidity and instant drama filled news reporting are very likely to be much worse.

It simply is an accident waiting to happen soon(tm) !
Not necessarily next Monday as many seem to expect though. 

In 1987 the crash was triggered because of serious drops in earnings due to the economy making a 'hard landing'.
Today we have increasing earnings even though it is
very much a result of cost cutting and layoffs.
Furthermore the crash occurred after the indexes had broken their long term moving averages (MA200), bounced back and failed to retake them.

Here we are well above those averages.
Way too far in some cases.
As a result we can expect a drop (a hard smakdown if you prefer) towards these averages but it is too premature to talk about a crash.
And by crash we really mean a minimum 25%
drop on the indexes in 3 days or less.
Stuff that really hurts.

Sat, 10/31/2009 - 14:32 | 116151 heatbarrier
heatbarrier's picture

Same feeling here, DS, not next Monday but one of these days. A couple of large programs bail out and the others will follow with HTF amplifying the move.

Sat, 10/31/2009 - 14:50 | 116161 Tripps
Tripps's picture

the poster above nailed it. also, we already have had huge crashes from late 07 thru 08

 

who is exactly left to cause another mass liquidation??? 100s of hedge funds are shut down. Money has already left via mutual funds poring into bonds

and many of the so called bULLS are really bears....so they are covered with puts on indices and shorts

in other words, people have been calling for a crash for months now and the whole time those who have feared it have used protection the whole time

 

it would take a black swan event to truly crash 20-25% in a few days. you are dreaming if you expect that right now

 

more likely is a 10-15% sell off over the course of weeks. We have seen about 5.5% so far since 10/19

 

and also, the way the market is manic depressive day to day is something you don't see often. because of that there is protection IN PLACER

Sat, 10/31/2009 - 12:00 | 116094 Anonymous
Anonymous's picture

King World News interviews GATA's Douglas on 'imaginary' gold

GATA board member Adrian Douglas, publisher of the Market Force Analysis letter (http://www.MarketForceAnalysis.com), was interviewed for 11 minutes today by Eric King of King World News. Douglas described how the creation of "imaginary" gold -- paper claims to gold that doesn't exist but is never called for delivery -- has prevented the gold price from catching up with inflation in recent years. But, Douglas added, as the fraud increasingly is discovered and people who have purchased "imaginary" gold get suspicious and ask for delivery, the gold price will explode quite without any help from inflation or deflation. You can listen to the interview with Douglas at the King World News Internet site here:

http://tinyurl.com/ycal9vg

Sat, 10/31/2009 - 09:53 | 116048 mrgneiss
mrgneiss's picture

Oops, or go to this link, its in german but you can read the chart:

 

http://immobilienblasen.blogspot.com/2009/08/chart-of-day-todays-rally-vs-rally.html

Sat, 10/31/2009 - 12:21 | 116069 Leo Kolivakis
Leo Kolivakis's picture

That chart comparing this rally to the one of 1929 is scary but misleading. They didn't flood the global financial system with liquidity back then and there were no hedge funds, private equity funds, sovereign wealth funds or internet retail traders back then. Be careful when drawing inferences from historical data. This "Mother of all bear market rallies" that Rosenberg warns us about can go on for a lot longer than you think.

Sat, 10/31/2009 - 14:37 | 116154 Anonymous
Anonymous's picture

It works until it doesn't, Leo. When it doesn't, there's going to be cheerleaders who - all the way down -
will keep saying "It's still good, it's still good."
You can believe it in it and marry yourself to the idea that it can go on and on and on or choose to protect yourself
from when reality eventually hits.

The market is up 7 months and 60% +/-. How much
further do you think this could realistically go? Even
a cheerleader like yourself can admit that there's
a point where the easy money has been made.

Sat, 10/31/2009 - 13:16 | 116128 Silver Bullet
Silver Bullet's picture

Relatively speaking, there was more liquidity in the market during 1929 then one might be inclined to think.

I caught this little video on PBS the other night. I missed the first 20 minutes of it and warched the rest of it thinking the whole time that they were attempting to relate today's rally with the one that happened in 1929. Then I checked the date the show first aired, it was like 1991. Chilling.

Then I saw that chart that Tyler posted indicating, for the first time in a while, that volume is beginning to increase back into the market.

When the little guy gets sucked into the market, run to the exits.

http://www.pbs.org/wgbh/americanexperience/crash/

Sat, 10/31/2009 - 09:51 | 116046 mrgneiss
mrgneiss's picture

Tripps,

If you were being sincere, you may want to take a gander at this chart below:

 

"lets sit back and think a moment....we had a huge crash in 2007-2008 did we not?

to have another crash so soon would truly be an anomoly with no precedent"

 

 

Sat, 10/31/2009 - 11:29 | 116082 RobotTrader
RobotTrader's picture

October 30, 2009

Crash of 2009: Black Days Directly Ahead

by Dan Basch

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In the annals of stock market history, true crashes are marked by what the
media has termed "black days", or days of such intense panic selling that they
have become immortalized throughout history. Deep in the subconscious Mass
Mind, there lies an as yet unborn realization that the markets have become
a trap to the point that the public will do anything to get out, sell at any
price, or face vaporization of capital as the crushing herd storms the fire
exits. These days of legend are nearly upon us as the markets have telegraphed
that they have reached a pregnant moment that such black days of future legend
lie directly ahead, and markets will soon be gripped by a panic selling so
fierce that it will likely ruin both seasoned and nascent investors alike.

In chronicling this event, my previous essay detailed the overlay of the Nasdaq's
Crash of 1987 with the Dow Jones Transportation Index (DJT) to make my case
that the Crash of 2009 is underway. This essay serves as an update and the
news is good for those betting against the market, and about as bad as it gets
for everyone else with market exposure. If the future continues to resemble
the past, massive selling culminating in an outright crash lies directly ahead.

Observe the Nasdaq 1987 crash chart, noting the relative negative divergences
on the oscillators:

As anticipated in last week's essay, the DJT's market action this week aligned
perfectly with the same relative time frame as the Nasdaq's Crash of 1987.
Support was soundly broken on Wednesday, followed by Thursday's "rally", attributed
to a stimulus inflated GDP number in line with estimates. Technical analysis
indicates that this one day flash-in-the-pan was not a rally at all, but a
retest of support-turned-resistance as indicated by the annotated dashed orange
line on the DJT chart below.

Interestingly, an identical retest occurred on the Nasdaq 1987 comparison
chart just before its waterfall decline which leads me to conclude that this
was a purely technical event which just so happened to coincide with near orgiastic
exultations of a recovering economy from the deliberately delusional popular
press. Friday's fresh lows were the confirmation that the market will not suffer
these fools gladly.

And now the updated correlation with today's Dow Jones Transportation Index
superimposed over the Nasdaq 1987 crash chart:

I am not a professional investment advisor, please consult one if you should
so choose. There are no guarantees in the market and anyone with investment
experience knows that it is capable of producing the opposite reaction as one
expects. That said, it would be prudent to sell this market as it has telegraphed
that it is about to crash, quite possibly below the March 2009 lows, as unlikely
as that may seem today.

They will call it a "black swan" event, that no one could have seen it coming,
that it was an out-of-the-blue occurrence like a lightning strike. But the
charts tell a different story altogether. Now is one of those rare times when
Adam Smith's invisible hand has become a cocked-back fist and America's about
to get one hell of a shiner.

I am reminded of an old stock market joke: How many stockbrokers does it take
to change a light bulb? Eleven. Ten to climb the ladder and one to say he wasn't
hurt in the crash.

Which rung are you on?

Sat, 10/31/2009 - 18:22 | 116255 Anonymous
Anonymous's picture

This comment just scared the crap out of me. Most "bearish" and EW blogs are looking for a bounce around 1020 SPX. I was as well, but will be wary of the above scenario.

Sat, 10/31/2009 - 12:22 | 116107 Tripps
Tripps's picture

here we go...more bears DOOMSDAYING

 

wake up...i hope you realized what happened this past week. its was big money taking their profits and locking in the qtr. 

 

you bears are being a gift in the big pull back....almost 6% now from the peak on Oct 19

Break out a list of things you DO want to buy. you can just live on SDS alone

 

 

 

 

Sat, 10/31/2009 - 15:29 | 116180 Alea Iactaest
Alea Iactaest's picture

Not trying to be rude, but the quarter ended a month ago.

Sat, 10/31/2009 - 09:38 | 116044 Shylock81611
Shylock81611's picture

That  happens at my house every night..........

 

The Treasury's PPT will be out in force Mon. The market may not rally, but be assured, they will prop the pig up for quite a while.

Sat, 10/31/2009 - 10:00 | 116051 Miyagi_san
Miyagi_san's picture

main street is catching on to the games being played, we'll see if ignorance turns to arrogance of the law

Sat, 10/31/2009 - 09:20 | 116039 Anonymous
Anonymous's picture

If as many people speculate all the current inflation in the stock market is due to cheap money chasing stocks, commodities etc. The players must know that this is a poker game and someone always loses, so how is the first one to take their money off the table and leave. Not CITI, NOT B of A, not Wells, it would be Chase or Goldman. Could also be a big pension company, CALPers. All the players are nervous especially anyone late to the game. A crash is predictable.

Sat, 10/31/2009 - 05:31 | 115975 Anonymous
Anonymous's picture

so at 143:1 does anyone really think that the denominator is really going to multiply 10 times next quarter? next 4 quarters? next two year?

does anyone have quantified knowledge of earning multiplying 8-10 times in any time frame let alone 1-2 quarters or years?

my question is not rhetorical.....

since 1992 p/e ratios seem to have climbed over previous norms? is this a bubble or a new normal?

Sat, 10/31/2009 - 03:49 | 115963 Anonymous
Anonymous's picture

Add the 20th fib number, 4181 (in weeks) to *Sept 3, 1929 and it returns the date of Oct 20, 2009.

Trick or Treat,
Ponzi_unit

*prices peaked at 381.17 on September 3, 1929

Sat, 10/31/2009 - 02:39 | 115947 brandy night rocks
brandy night rocks's picture

I dunno about the market (completely standing aside at the moment), but if you watched that trailer don't bother going to see Paranormal Activity.  You've actually already seen every scary bit the movie has to offer. 

 

Well, there is one moment towards the end they didn't show in the preview that is frightenting (ie the type of scene that has you running for the covers after you've switched off the lights once you get home from the theater), but other than that there's nothing besides fluffing sheets and some random pounding.  Pretty disappointing.

Sat, 10/31/2009 - 02:17 | 115941 Johnny Cashflow
Johnny Cashflow's picture

Funds rebalancing. There is no imminent crash. Gotta protect those year end bonuses after all.

Sat, 10/31/2009 - 09:36 | 116042 Ned Zeppelin
Ned Zeppelin's picture

Kinda what I thought. Nervous portfolio manager in the equities market because he has no choice but to stay in even though common sense tells him it is way overpriced, but the irrational trend is your friend so he rides it, holds his breath through October, exhales on Friday, October 30 so he beats the rush and takes some profits for year end before the inevitable return to reality takes hold.  Put the money in some high quality corporate bonds to wait out the rest of the eyar, leave some winnings on the table.

My sense is Monday is all about green screens and futures "slighty up" before the open in the US, as the dip is bought. Plenty of QE still sloshing around out there. All hail volatility.

Sat, 10/31/2009 - 01:49 | 115934 Tripps
Tripps's picture

lets sit back and think a moment....we had a huge crash in 2007-2008 did we not?

to have another crash so soon would truly be an anomoly with no precedent

its been a fear on people's minds for sure but many such as myself have puts all over the place unlike what was there before the 07-08 crash period

Sat, 10/31/2009 - 11:07 | 116073 BabaJ
BabaJ's picture

We had quite a crash but we did not see stocks ever get cheap, overshoot to the downside, with "capitulation".

Sat, 10/31/2009 - 09:55 | 116049 Anonymous
Anonymous's picture

without precedent?? have you ever graphed
the djia from 1929 - 42??

Sat, 10/31/2009 - 02:19 | 115942 Anonymous
Anonymous's picture

A S&P PE Ratio of 143 is turluy an anomoly with no precedent. Not even close. Let also not forget that the market rose to close to 1929's high a year later and the proceeded to fall 90%.

So I'll take your anomaly and and subtract one precedent

Since a crash soon after the first Black Monday crash has precedent and a 143 PE has no precedent, logic would suggest, Friday was a excellent day for people to take all the loot they had made or collar profits to defer taxes for another year.If I had not been a disbelieving bear who watched a market shoot up to unprecedented highs with no underlying fundamentals, I may be tempted to buy the dip and sit on my profits.

Alas, after losing my ass on a few fake down days after sitting on my profits from those bubble bursting days that led to 6500, I think this market has run out of steam. The GDP numbers were found "lacking". No market is going to stand still waiting for a companies to "grow into it's valuation', a term frequently used to justify the 5300 on the NASDAQ before it fell 80%.

Sat, 10/31/2009 - 12:18 | 116104 Tripps
Tripps's picture

the PE of 143 is on the PAST Earnings with many BANKS contributing to that terrible PE but now their EPS is on the upswing. my lord u bears are delusional if you don't understand the run rate for P/E now is 19-20 area which is only slightly overvalued historically

 

there is too much volatility of swings in the market. the market needs to Calm down, HFT should be shut down, and let the market consolidate and grow into a proper valuation.

 

i long for the days when you could stock pick and not have to worry about your pick going down because some moronic bears were calling for a crash in every asset class again. '

sheesh

 

Sun, 11/01/2009 - 11:36 | 116586 TRADER1972
TRADER1972's picture

What about the notion common in the past that stocks can only go up? Do you remember how pumped everything was 2 years ago? Overoptimism is not a good thing in the stock market.

Sat, 10/31/2009 - 01:04 | 115928 Anonymous
Anonymous's picture

Your analysis seems very logical. Since consumer spending is around 70% of the GDP, and consumers are not spending because of job losses... I would go as far as to say that the debt spending to prop up the markets isn't going to last forever. We bought some time to figure things out, but the fundamentals haven't changed it seems. So now we have a stagnant economy as well as mind boggling deficits. At the end of the Great Depression we still had a huge industrial revolution to pull us out, but what do we have now to jumpstart things? I don't see a recovery in the near future, I'm sad to say. We are addicted to big oil and bankers. Big icebergs ahead!

Sat, 10/31/2009 - 00:39 | 115919 Anonymous
Anonymous's picture

Wheres that tsunami Leo

Sat, 10/31/2009 - 00:34 | 115916 Cursive
Cursive's picture

"I don't get too excited when I see one on day sell-offs. I was talking to a trader who told me he thinks hedge funds are unwinding risk trades going into year-end."

 

Yeah, they're unwinding the risk trades alright.  I won't be helping them sell their bloated inventories.

Fri, 10/30/2009 - 23:54 | 115886 heatbarrier
heatbarrier's picture

Same frequency here, Leo. Paranormal.  Black Monday, October 19, 1987, 

http://upload.wikimedia.org/wikipedia/commons/a/af/Black_Monday_Dow_Jone...

Iceberg cluster that reminds me of 1987: program trading and now HFT, machines dominating markets.

Sat, 10/31/2009 - 10:09 | 116056 AN0NYM0US
AN0NYM0US's picture

and this video that's been floating around

wall street week October 1987

http://www.youtube.com/watch?v=2MyToTwag34

Sat, 10/31/2009 - 11:21 | 116078 heatbarrier
heatbarrier's picture

Good call by Marty. I was hedging a large pension fund that week and few people saw it coming. Compared to 1987 computers now have a far more dominant presence in the market and the logic of a crash in not built-in in the algos, it's an emergent property.

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