Umn..... So... Kevin Ferry talked about closing above the friday close... or so.. We can see the flags here... not really convincing.. but this is the second breakout of the downtrend.... we need a pullback on the trend then a great wave 3 move. I'll be curious what T-Lo says today. I'll say not out of the wood's yet.
But for those of you who are spared the comments between myself and Tony, ans I ramble macro and sentiment. I want to say it's good to stick to My Knitting, because my MODEL says that and has said, that we had a good potential for a turn Friday/Tuesday.. and I've been talking about it for Weeks.. Though I did get hit in some bad trades based on some bad info I had...
And ... we have yet to get good confirmation... Let me also point out T-Lo and her pointing out the sentiment that "Banks have No bottom", as sentiment.
not sure if I blogged about it, but I did mention after the WFC action today, that there was a chance for the sentiment shift to have happened.
I just want to pat myself and my model on the back... for even if this is "Dead cat" it did talk about the potential.
Ok.... I need to run.
Wednesday, January 21, 2009
A little recap
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4 comments:
Nice call on the bounce, which brings up a cryptic comment you made about the market needing the banks to recover in order to make a sustained recovery (correct me if I muddled your thought).
This recent article talks about the need for more *inflation* to show up before the market can recover. Interesting thought.
http://finz.tv/posse/2009/01/21/the-inflation-trade-on-again/
Who knows how it will all work... I'm just trying to be zen like this morning.
I'll say that, the economy needs some kind of Financial backbone, for it to recover. Though, I expect us to see a new Model for the banks, and as I've tried to show over the past few weeks. Many banks are going after the old model. And as USB suggested today "It's a good day to be a Traditional banker" vs... the "international banker"(Citi).
Yesterday I heard on squawk that the economy was going to recover end of 2009. This isn't based on any economic metric, but on the idea that the economy recovers 6-8 months after the stock market recovers.
I can kind of agree that Deflation, certainly won't help the market... so we may need less of that for a recovery.
But remember something that T-Lo and I joked about And there are some comments in the nature of risk.
Investors tend to chase the "Girls that Brought them to the dance"... and as Some investors tried to find the bottom in "Pets.com" in 2000. this is all the old world, and what we need is the new one, we want the new leadership.(whatever that will be)
Without a tremendous amount of wage inflation, oil will not go to 200. And you have to acknowledge that the price of RIG had $200 oil cooked into it's number. The investors still chasing it still anticipate some kind of rebound to $200, and peak oil.
The reality may be that oil will bounce around in the $20-40 range for 3 years.. and we will get some "delvereging" of some of the oil countries. In that situation the growth rate of Rig... will be zero. As rig rates are cut in half, and there is no desire to go after the deep ocean oil. Rigs go idle. They spend half their earnings paying off loans at 8% instead of 4%.... Meaning, Though the PE is 4... earnings could go to $3 per share instead of the current $14.
None of this is cooked into the number.
But all of that is in the range of "unknown".
I will agree, that we will need deflation/disinflation to stop. materials will need to help tus recover. The invivo indicators, aren't good. but that can change. T-Lo isn't optimistic.
What are your thoughts on my "thesis":
http://kalamazoopost.blogspot.com/2009/01/is-this-really-bottom.html
Also, Mamis says that with the recovery the stocks that should do well are the sectors that have relatively underperformed in the previous bull mkt and relatively outperformed in the recent bear mkt.
By my calculation, this would be healthcare and staples, but NOT utilities... similar to your conclusion except for the utilities.
Nice thought, I hadn't gone there.
All I was hitting was that "Safety sectors" like utilities/staples. outperform during the decline, and it's a sign of the bear market.
Though we did see a utilities bull in the late 90's.
your post was spot on...
My Marginal thesis is that that "Real bottom" comes in about a year. at which point we will have a real aversion phase... the reason I say that is because, this is just Too early.
People keep wanting this to be over... and it just isn't and won't... this is a process, and there is nothing you can do to hurry it up.
But ... does that mean we go down to 600 spx in the mean time...
I've been thinking we may get a recovery in Conglomerates/Capital goods/ Health care... I say healthcare because of the baby boomer retirement get on Social security cycle.
And if you want me to suggest the next bubble... It's healthcare.
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