Tuesday, May 05, 2009
Is it time to pile back into the market?
MoneyWeek: Is it time to pile back into the market?
"But what if this really is that start of something bigger? The trouble is that if the world's central banks really have succeeded in somehow short-circuiting the process of shaking out all the bad investments that were made during the boom times, then we're just going to run into the same problems at some point in the near future."
Posted by damien @ 02:36 PM (1359 views) Add Comment
21 Comments
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1. str 2007 said...
I think most of the traders on here are expecting further falls, but I'd be interested to hear your views again on this thread.
Gold doesn't seem to be dropping despite the stock market rally.
2. tyrellcorporation said...
Yeah c'mon you trader types what are we looking at hear? Real return of bull market or bear market rally waiting to trap the unwary?
3. tyrellcorporation said...
or 'here' even...
4. drewster said...
I'm expecting another stockmarket crash within the next three weeks. But then I'm not an expert.
As the article points out, most people can't see where else to put their cash. Property is still falling and savings accounts offer feeble returns. A lot of people are starting to think that the stockmarket looks good. There is still more greed than fear amongst investors.
However another market crash would force people to re-evaulate this logic. A bank account might provide no yield, but at least you won't lose your money. Fear and revulsion would set in. When the shoe-shine boy, taxi driver, or hair stylist tells you that the stockmarket is far too dangerous (with tales of woe of a relative who lost a fortune in shares), that's the time to buy in again.
Where's techieman when you need him? ;-)
5. tyrellcorporation said...
Are the better than expected profits announced by some S&P companies merely a reflection of the savage cuts made to payrolls, investment over the last 6 months? If so these 'savings' are not sustainable and surely corporate earnings will be hammered going forward until real growth picks up.
6. drewster said...
tc, Which companies in particular do you mean?
Banks are fiddling their books because the 'mark-to-market' rules were lifted, allowing them to say they were perfectly solvent, based on 2007 peak valuations.
Other companies I don't know - could you shed some light?
7. Longtermview said...
Shares could still be a good investment if you get a decent yield and can keep the money in the market for 5+ years...
8. tyrellcorporation said...
I haven't got specific names now but I read an article the other day on Bloomberg stating that earnings have been above estimates - which has spurred the rally.
9. doomwatch said...
drewster, MTM is a joke in the first place. PnL derived from a traders "perspective" of future market price curves. Mmm no scope
for abuse there then !!!
10. crash n burn said...
The perfect contrarian signal. Short the f'er
11. drewster said...
doomwatch,
Of course, everyone (except the banks) agrees that mark-to-market is nonsense.
tc,
Here's a Bloomberg article for discussion: U.S. Stocks Advance as S&P 500 Index Erases Decline for Year .
Lots of bullish sentiment in that article.
Let's not forget the fundamentals. US consumers are up to their eyeballs in debt - the cost of servicing that debt has fallen, but the principal is still there. They are losing jobs at a rate of 600,000 a month. Fearful for their jobs, they are repaying debt rather than spending or acquiring new debt.
I know that shares should recover long before employment recovers, but this just seems way too soon yet. Another crash seems due.
An alternative possibility is that the market flattens out around the current level - neither bullish nor bearish.
12. enuii said...
Most people and indeed traders think they are cleverer and wiser than the previous generation which is why they make the same old mistakes and why politicians think they can buck history. As for cutting costs to boost short term profits there comes a point when you can't cut anymore - and what do you do then!
13. techieman said...
As its you STR2007:
1. techieman said...
"ok so we have had the violent bear squeeze which HAS breached 3950. Because it has that then puts the money on the boom boom for a while - after this retracement now which now shouldnt (75% probability) hit new lows. Where this rally ends or will it go sideways for a while - those are the things i am working on. After this more major rally though (the first "proper" bear market rally) my GUESS is that it carries on UNTIL people think its over (the bear market i mean) at that point we start to move down and yes more lows to come before this bear is put to bed.
........Tuesday, March 24, 2009 12:27PM"
So what % are now saying the bear market is over..... a few more than last week. I have taken a small short position @ 4368 (i normally play the middle not the extremes).. I said i was looking for 4315 to short and it went straight through that 4375 was the next idealised level, so as it didnt look like it would breach that quickly i have dipped the toe into the dark side. I have a very large stop - so a small position - on the basis that the S&Ps made an inverse H&S with more upside for the measured target - so we could have more upside before we get a fall [thats the theory].
Therefore i am not saying it wont go higher - i just think that was a good place to go. If it breaks 4300 to the downside then stops to breakevn - if not i build up a bit bigger [short] possition averaging up.
14. techieman said...
enuii - indeedy deedy.`Reminds me of the steelers wheel sometimes.....
15. refusetobuy said...
Look at the 5 months of bull market just after the 1929 crash
16. drewster said...
refusetobuy,
I love that graph. Didn't realise there was as much as five months of bear-rally in 1929/30 - guess this one could easily run for just as long then?
17. refusetobuy said...
@ drewster
I got the link for the graph from you. Thanks :-) It's surprising how long the 1929 bear lasted.
The graph is about 1 month old, so the current crash should be back up to 35%, near the 1973 Oil crisis line. If i were a chartist then I'd be tempted to match the 1929 dead cat bounce to now, and say there is another 2-3% more up to go before it plummets.
But I'm not even a gambler, never mind a chartist :-)
18. drewster said...
rtb,
Welcome :-)
There's a more recent graph at CalculatedRisk blog. The site's blocked at work so I can't post it until later this evening.
19. refusetobuy said...
Actually, That is the latest graph. Ignore my chartist post, my mistake. (or expect about 7% more of rally)
Damn Americans using m/d/yyyy instead of d/m/yyyy. It's just not logical.
20. str 2007 said...
techieman
Thanks for that. If I interpret correctly may well slip back a bit, but very unlikely to go below 3950 now.
There seem to be quite a few office fit out projects getting the go-ahead in the last couple of weeks.
Certainly seems to be a change of optimism about.
Still don't fancy getting a house just yet though.
Interesting graph refusetobuy.
You can't help wondering if the blue graph will end up following a similar line to the grey one of the thirties. But looks as though the bailout has worked - for now.
21. drewster said...
btw shouldn't the Four Bad Bears chart be on a logarithmic scale? The drop from 80% to 90% is a 50% drop, yet on there it looks puny. If it were logarithmic then we would see a lot more resistance to falls and the current crash would resemble the oil crisis more than the great depression.