Market Outlook: Trendless Consolidation Will Give Way to Major Move [View article]
Thanks for a comprehensive analysis and set of charts.
The notion that we had a "generational financial panic", or that the market drop to March had "priced in a total economic collapse" never made any sense to me. It seems absurd that the very same market participants, who expected civilization to end in the first week of March, somehow realized that civilization will prosper by the third week of March; and just because of some talk about "green shoots". If collapse hade been truly a threat, the markets would have dropped far below 666 on the S&P 500.
All that happened is that stocks have returned to their pre-bubble era trendline, as one of your charts showed. That a return from the bubblesphere to reality would occur sharply and traumatically is to have been expected, since the bubble heights were absurd, as the long-term trendline shows.
Now that we are boack to long-term trends, expect a period of relative stability, S&P 500 hovering along long-term trend in the 750 +/- 20% range. I doubt that the market will break out from this range in a sustainable way, on either side, unless exceptional economic developments occur. The move above 900 was short lived, and even a burst up to over 1000 is unlikely to last more than a few weeks and would present a great selling opportunity. On the other hand, a move back to 600 should not be ruled out, and it would not be due to any "collapse scenario" or "multi-generational panic", just be a normal dip below trendline due to a deeper than usual recession, poor earnings, and decimated dividends.
You are right. P&G looked good in the mid-40's and JNJ looked good in the high-40's. I had owned both for many years but had gotten out of both in 2007, when I thought them too overvalued. I bought both a few weeks ago, when I considered them reasonable. Regarding PG's cousin CL, I also got out in 2007, and it has remained too expensive for my way of thinking, even in the recent rout.
To carry on with your analogy, in February and early March you could "buy a Mercedes for its fair price", whereas in 2006-2007 you were buying a Mercedes C-class for the price of an S-class.
Good luck with your investments.
On Apr 10 10:12 AM E Nuff Sed wrote:
> You can't spend your life looking in the rear view mirror. The banking > system has stabilized and life is coming back into the economy. Earnings > and employment are lagging indicators. By the time they come back > the major rallies will be over and it will be time to start selling > again. > > I suspect history would say that we were idiots if we bought and > held stocks in the 2005 - mid 2008 period when stocks were expensive. > We will look like bigger idiots if we do not buy now when stocks > are cheap. I think you will have to wait and long long time to find > stocks like PG in the 40's and JNJ in the low 50's. You are getting > a Mercedes for the price of a Kia.
Chris, thanks for an informative and logical discussion. Yes, I fully agree that inflation cannot be reined in once it starts, because we don't have another Volcker doing what's necessary, instead we have pop star central bankers doing what's popular, i.e. doling out candy.
The pundits who are saying we won't have inflation because what the fed is now printing merely replaces "lost wealth" are oblivious of the fact that we had an inflationalry asset bubble that naturally burst, not earned accumulated wealth that was accidentally "lost". My guess is that the fed will eventually succeed in creating inflation, but the current manipulative and interventionary policies will not lead to any real, sustainable growth, so the result will be stagflation.
I am beginning to suspect that the rumor about the PPT may be true after all. I've noticed that at the end of October, November, and December, we had brief rallies, perhaps driven by an "invisible hand", in time to dress up the mutual funds statements. In each case, some coordinated positive spin is propagated, followed by a spark to scare the shorts out. This attempt appeared to have failed at the end of January, so lets see what happens this month.
Global Markets in Review: Economy, Markets [View article]
Thanks for the interesting link. the "quote" does indeed seem phony. Prieur, can you tell us where you got it from?
On Jan 25 12:02 PM G G H van de Weerd / Rebelo wrote:
> This quote is not from Karl Marx. In 1867 he wrote his first book > Das Kapital 1 in 1867 in which he does not mention the credit system. > He did in part 3, published in 1883 after his death. The working > class had not access to bank credit in that time. The "quote" is > invented. More: meganmcardle.theatlant...
Evidence That Big Inflation Is Coming [View article]
Yes, inflation is coming, courtesy of the central banks all over the world. It is the only way out of the asset bubbles they've created.
However, they will have to phase it in carefully, both in the US and Europe, because inflation in prices is likely to both precede and exceed inflation in wages.
Global Markets in Review: Economy, Markets [View article]
Prieur,
In looking at the Karl Marx quote again, I notice the word "technology". I am a bit surprised to see this word used in 1867, especially in the context of consumer purchases.
The rest of the language also implies a modern translation, and it would be interesting if you gave us the reference.
Global Markets in Review: Economy, Markets [View article]
Thank you for an excellent summary.
I am intrigued by your quote of Karl Marx:
"Owners of capital will stimulate the working class to buy more and more expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and the State will have to take the road which will eventually lead to communism."
Seems uncannily familiar. Could he have foreseen the present events 140 years before they happen?
Market Outlook: Trendless Consolidation Will Give Way to Major Move [View article]
The notion that we had a "generational financial panic", or that the market drop to March had "priced in a total economic collapse" never made any sense to me. It seems absurd that the very same market participants, who expected civilization to end in the first week of March, somehow realized that civilization will prosper by the third week of March; and just because of some talk about "green shoots". If collapse hade been truly a threat, the markets would have dropped far below 666 on the S&P 500.
All that happened is that stocks have returned to their pre-bubble era trendline, as one of your charts showed. That a return from the bubblesphere to reality would occur sharply and traumatically is to have been expected, since the bubble heights were absurd, as the long-term trendline shows.
Now that we are boack to long-term trends, expect a period of relative stability, S&P 500 hovering along long-term trend in the 750 +/- 20% range. I doubt that the market will break out from this range in a sustainable way, on either side, unless exceptional economic developments occur. The move above 900 was short lived, and even a burst up to over 1000 is unlikely to last more than a few weeks and would present a great selling opportunity. On the other hand, a move back to 600 should not be ruled out, and it would not be due to any "collapse scenario" or "multi-generational panic", just be a normal dip below trendline due to a deeper than usual recession, poor earnings, and decimated dividends.
The Tide Is Turning [View article]
Regarding PG's cousin CL, I also got out in 2007, and it has remained too expensive for my way of thinking, even in the recent rout.
To carry on with your analogy, in February and early March you could "buy a Mercedes for its fair price", whereas in 2006-2007 you were buying a Mercedes C-class for the price of an S-class.
Good luck with your investments.
On Apr 10 10:12 AM E Nuff Sed wrote:
> You can't spend your life looking in the rear view mirror. The banking
> system has stabilized and life is coming back into the economy. Earnings
> and employment are lagging indicators. By the time they come back
> the major rallies will be over and it will be time to start selling
> again.
>
> I suspect history would say that we were idiots if we bought and
> held stocks in the 2005 - mid 2008 period when stocks were expensive.
> We will look like bigger idiots if we do not buy now when stocks
> are cheap. I think you will have to wait and long long time to find
> stocks like PG in the 40's and JNJ in the low 50's. You are getting
> a Mercedes for the price of a Kia.
The Rally Is at a Crossroads [View article]
The pundits who are saying we won't have inflation because what the fed is now printing merely replaces "lost wealth" are oblivious of the fact that we had an inflationalry asset bubble that naturally burst, not earned accumulated wealth that was accidentally "lost". My guess is that the fed will eventually succeed in creating inflation, but the current manipulative and interventionary policies will not lead to any real, sustainable growth, so the result will be stagflation.
Wednesday Outlook: Commodities, Emerging Markets [View article]
Global Markets in Review: Economy, Markets [View article]
On Jan 25 12:02 PM G G H van de Weerd / Rebelo wrote:
> This quote is not from Karl Marx. In 1867 he wrote his first book
> Das Kapital 1 in 1867 in which he does not mention the credit system.
> He did in part 3, published in 1883 after his death. The working
> class had not access to bank credit in that time. The "quote" is
> invented. More: meganmcardle.theatlant...
Evidence That Big Inflation Is Coming [View article]
However, they will have to phase it in carefully, both in the US and Europe, because inflation in prices is likely to both precede and exceed inflation in wages.
Global Markets in Review: Economy, Markets [View article]
In looking at the Karl Marx quote again, I notice the word "technology". I am a bit surprised to see this word used in 1867, especially in the context of consumer purchases.
The rest of the language also implies a modern translation, and it would be interesting if you gave us the reference.
Global Markets in Review: Economy, Markets [View article]
I am intrigued by your quote of Karl Marx:
"Owners of capital will stimulate the working class to buy more and more expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and the State will have to take the road which will eventually lead to communism."
Seems uncannily familiar. Could he have foreseen the present events 140 years before they happen?