As much of the eternal optimist as I am... Thank god.
I can never remember if I've talked out more negative scenarios. One can suggest a nice V bounce like we see out of the market more times than not. Out of what I see as an exaggerated typical down move, by a couple of circumstances... that sort of exacerbated themselves. The Psychological effects....could have long term damage.
If you look at the 1987 chart
To me it's a mistake to be either over optimistic or overly pessimistic... but extended 1 quarter to 2 quarter weakness, is probable.... The question is what kind of bounce and will we make new lows. There is still a ton of damage, and it will take that long to sort out "Where we are"
D-fence in the next 6 months will win the game.... If we don't know... This game Just got VERY HARD.
The horror.... Stock trading for deaf people owns on of my stocks.... UGH!!!!!!
Let me also point out that the hedge funds are through the first week of possible redemptions, and still have another week to raise money.
Tuesday, October 14, 2008
Eternal optimisum
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5 comments:
I agree with you and was heartened to read Teresa Lo's commentary today spelling out the sobering details in her "observations."
The giddiness of Monday was eerie to me. This will still be a hellacious recession and may end with an "inflationary holocaust" as Jimmy Rogers has said.
I appreciate the chartology that you do, as well as Brian and TK, because at times like these it is the only way to see the short and medium term trends.
You want to see us set an uptrend before moving in. This market is just in Churn mode, and it may just need to resort and shake out.
But.. the examples she through out are the nasty ones... she didn't show the 74 where we bounced through november till Dec/Jan set a higher low and were off to the races.
I have a hard time thinking we will correct more that a Severe recession 40%... but maybe this feels bigger and we need a 50%.
Also... many people are too ignorant to realize that the 54 Trillion CDS market only means 1 trillion on transfers... assuming Armageddon.
Jim Rodgers and Schiff have been wrong plenty... schiff called for economic armageddon in 2000 too and hyperinflation... and Rogers.. though smart... lets his mouth get the best of him sometimes.
You can't have economic collapse and higher commodities
I'm not sure, but Rogers' thesis is that the world fiat currencies will be devalued and equities will be devalued due to lack of confidence.
As the central banks and governemnts pump in more liquidity, the only thing that will hold value (relatively) are commodities-- things. Things with inherent value. Things that people need to live: grain, corn, oil, etc.
I know you understand this, so I'm not sure why I'm explaining it. The Mad Max trade. It makes sense as the mayhem ensues about gov't taking over banks. Can the dollar really hold up in this environment.
Anecdotally, I hear a lot of colleagues, neighbors, etc, talking about getting out of the market. There may be liquidity sloshing around but I doubt much of it will go back into equities any time soon. And more of it will be needed to pay for food and fuel (and ammo, baby!)
Which of the following asset classes will outperform?
1) US dollar
2) Swiss Franc
3) basket of grain options
4) bank stocks
5) real estate
6) other
Where is the store of value?
The problem is that every Producer is prepared to produce commodities at rates comenserate with a growing global economy.
Instead of Scaling back production, they will scale it up, bring more supply into the market in a death spiral that should do some damage to all the industries.
With Credit in a tailspin and the desire for cash at the highest I've ever seen it, this is smelling Like Deflation Near term. The real store of value could be CASH
Cash... in which currency? Teresa Lo seems to like Swiss Francs.
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