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Why I’m Not Buying the US Stock Rally
Tempt me all you want, you seductive vixen, but I’m not buying into yesterday’s rally in the US stock market. You can whisper sweet nothings into my ear all you want about the trillions of dollars sitting on the sidelines, the low PE multiples, and cash laden corporate balance sheets. Slip some of those low interest rates in my drink and it will do you no good. You can even wear that low cut blouse that reveals your hidden assets.
All I see is your paltry volume, structural deficiencies, and overuse by professionals. And as much as a try to avert my eyes from such things, your technical position sucks.
It all paints a picture of a weak summer rally in a bear market, something to be avoided like the clap. You know who’s outing you for the low life strumpet that you really are? Those 3% yields on the ten year Treasuries, which have been a far better judge of character than your equity oriented pals.
Change your slumming ways, and I might take a second look. A surreptitious visit to the local free clinic might help too.
Until then, I’d rather take my chances with the acne faced nerd I met on Match.com, who wears glasses thicker than Coke bottle bottoms, and lists herself as “Debbie Downer,” but scored 800 on her math SAT’s.
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two and a half years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.
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DOW chart update :
http://stockmarket618.wordpress.com
Dude, where is your awesome scary clown avatar? I loved it.
Everyone knows the fundamentals are bad, and if you visit this site then you're obviously a bear in the longer run.
The fact is, whether people like it or not the Fed can keep this market as high as it wants to for as long as it wants to. When does the Fed want the market to crash? When will a crash be of utmost profitability to the big banks?
When will the MOST DUMB MONEY get wiped out due to 'allowing' the crash to happen? These are the questions we need to be answering.
Honestly, there won't be another crash until the majority of people start to believe that buying stocks will make them money, and THAT won't happen til DJ gets to 11300. I'd say buy the dips man, it's not profitable to the big banks for an apocalypse just yet.
Wow, you don't buy the rally?!? You're really smart, man...
MHFT,
You might want to work out some of those adolescent issues in counseling.
This DCB isn't going anywhere if it can't cross and hold 1090.
DOW 10K is the only relevant market marker apparently, I dont give any of it more credibility than that. All hands on deck to somehow maintain magical DOW 10K. + or - it wont be much either direction, well until world depression is acknowledged at whatever point is somehow politically the least damaging, or nuclear exchange in the mid east, which may in fact be tomorrow for all we know.
Keep an eye on the Canadian banks. They're not coming back and keep sliding.
BOC raised overnight rates 25 bps citing growth but has revised growth outlook downward.
Something is not adding up in the Canadian economy which is supposed to be the canary that either got out of the coal mine first or flew straight passed it.
Australia is choked under massive personal debt levels as well.
When those countries show stress in their banking sectors, we have all the facts we need to document that a double dip is being priced in.
Canada is so absolutely fucked. The housing bubble there is crazy...avg home in Vancouver is something like $1m CAD. The only place w $1m crackhouses
NO - Canada is sitting fat & pretty with the soundest banks on the planet ... the US is ABSOLUTELY FUCKED.
Just ask Benny ... the US economy faces "unusually uncertain" prospects !!
if the BOC keeps raising rates, the ARMs will fall off the cliff in Canada as well.
the reset blues will play like a broken record.
houses are overvalued, Canadians are overleveraged and the economy is stalling - again.
the US actually is just 2 years ahead of the Canadian deflation schedule.
buddy of mine in Vancycouver says it feels alot like So-Cal in early 2008... don't think he was refering to the weather but I could ask to make sure..
No - Canadians are NOT overleveraged ...
Canadian tax code does NOT allow mortgage interest deductions for primary residence, so Canadians have little incentive to leverage-up in an effort maximize interest deductions!
This is a huge divergence from the US real estate market ... especially in an acute deflationary cycle.
Their labor data last month blew everyone away.
Analysts expected 15,000 new jobs and their report indicated 93,000 jobs which is why the BOC justified the rate increase.
I'm hearing the case for interest rates jumps as we saw in the Eighties again. Can't honestly see how that would be possible for the US but the argument is that rates can't go lower, and low rates didn't stimulate the economy so maybe higher rates will?
Anyone care to chime in and make a case for why rates in the US could jump to anywhere between 5 and 10% over next 3 years?
From Krugman ... No Exit.
http://krugman.blogs.nytimes.com/2009/11/25/no-exit/
If we apply the Rudebusch version of the Taylor rule to the mean Fed forecasts, I get the following for what the Fed funds rate should be:
End 2009: -6.3%
End 2010: -5.4%
End 2011: -3.3%
End 2012: -0.6%
Yep: three years from now, we’re still in a liquidity trap, with no reason to raise rates above zero and a continuing need for quantitative easing and fiscal expansion.
I havent seen anyone making the case for higher rates myself. Yesterday a ZH piece said theyre actually considering dropping the .25 to .12. Who knows with these insane Batman villains running the show...they tried all-time low mortgage rates to create another housing bubble which hasnt worked in the least so maybe now the maniacs figure higher rates will cause panic credit consumerism. Personally, I think theyre all full of shit.
What I have realized is the articles this guy posts on ZH are old ones he picks from the archives. You can see it when he puts in price data. I don't know why he bothers.
The other thing is this guy is my favorite reverse indicator, but then that may be because the articles are old and therefore he appears to be prescient , but is merely making a comment at the end of a trend.
Of course the fair value of stocks is below current levels, but Benny needs to show Washington he can restore faith in the markets....
Awesome post... I fear that a retrace to 1200 will suck in many a weaker man.
Watch how the market closes today, should be interesting.
Ben Bernanke's comment that the economy faces "unusually uncertain" prospects unsettled already skittish investors ... duh!!
Buy the dips - LOL.
Miss out on the easy money,but keep your position safe when we start musical markets again but the game won,t be the same as there will be far fewer golden chairs to survive on.
Finally MHFT, a commentary that meets the mark.
Well done.
Market engines in reverse at accelerating throttle...
Agreed. Not always sure where this guy's coming from (talking his book, mostly?) but spot-on for the moment.
The blind hog and stopped clock syndrome?
Short acorns and time?
Apple's 50 dma is declining.
Pink Floyd is playing "Time". Very suitable for this market.
what rally?
was thinking the same.. is a bit premature to call it a "rally".
It does smell, doesn't it?
I've even dumped some golds after yesterday's rise. NOT sustainable. When I see the shorts holding steady, coiling for the attack and those dam banks and REITS looking sickly, ready to plunge...
Watch the S&P...now in the red. Been heading that way for an hour. I bet we end up down 1.4-1.5%.
With Benny cued up for the afternoon ramp. You can't be serious about expecting a 1.5% drop, can you?
I’d rather take my chances with the acne faced nerd I met on Match.com
oh dewd, don't do it
+1
Your comment gets me all bulled up. Think I'll just be stupid and be long - after all I have a profit in the trade. Anybody who is short will have to cover soon, or start updating their CV.
That's why you and other portfolio managers are going to get caught with your pants down this fall. Watch, I see 'Big Money' suffering from another bout of performance anxiety this fall. They will all be chasing the indexes higher.
But don't most active managers wind up chasing the indices most of the time, since indices outperform nearly all of them in a given year and over a span of years? The 'chasing the indices higher' argument would apply to practically any year in the last 30.
From Vanguard: from 1997 - 2007, 84% of actively-managed large-cap funds underperformed the S&P. Among funds that did outperform in a particular year, 91% failed to do so over a 3-year period.
Leo, do you have other elements to your thesis besides a potential positive feedback loop IF stocks go higher?
What if stocks go lower - wouldn't there be a negative feedback loop as money managers want to demonstrate that they can avoid bear markets?
We've had parts of this discussion before. What do you think is actually going to happen with the economy? It seems a part of your reasoning is that pensions et all need to generate returns, therefore they have to be invested in stocks? Do believe in the possibility of a liquidity/solvency event that could change the prevailing view of the economy?
traderjoe,
Bubble Ben will keep rates at historic lows for as long as possible, allowing banks to bid up risks assets. There is a tremendous amount of liquidity out there, which is positive for stocks. Big banks, funds, sovereign wealth funds, just keep buying the dips. Economic news won't be as bad as people think.
Can you explain what you mean by "a tremendous amount of liquidity"? It's a great sound bite, but I've never heard anyone explain that phrase (or similar ones) in any way that is satisfactory.
Liquidity: banks borrowing at zero, investing in risk assets, pensions buying stocks to make required actuarial returns, sovereign wealth funds plowing into equity markets, pensions pouring billions into hedge funds & PE funds who in turn leverage up to buy risks assets. These are a few examples of what I mean by "tremendous amount of liquidity".
So where is the money coming from? Something has to be sold in order for the money to be invested in something else. And the entity/person who bought whatever was sold then had to get their money from somewhere (i.e. - sell something). Seems like a net $0 to me.
Who's talking about Fall fall?...
what part of "totally controlled by a currency-based G7 bankster program" don't you understand?
this market is a total fraud
and when I say total I mean 100%
The amusing thing is that both you and Leo may be right.
It has made the VIX nice and cheap. Buy that instead.