Crash Buyer

I think the lesson here is "never buy what Wall Street sells". There's a long list of downward-sloping price charts for IPOs. Steer clear.

I also think we'll get a very shallow correction. Similar to the run up in spring 2010 & 2011; just rising relentlessly. Beyond that, this analysis suggests further limited upside is highly likely over the next 3 months (probability of being higher is 77% against 62% for all 3 month periods). http://www.bespokeinvest.com/thinkbig/2012/2/27/sp-500-15-gains-in-three-months.html Edit: Link added

Yep, I just selected the short term aspect as it relates to trading. But as you say, this comes near the end of the letter, following more serious concerns regarding long term mis-allocation of resources that most other "market experts" seem oblivious to. An example is this ode to capitalism from Samuel Brittan, which is typical of the narrow, orthodox way of looking at the current economic system. http://www.samuelbrittan.co.uk/text416_p.html Notably: Well only if you exclude industrial democracy, a lack of which renders political freedom essentially pointless. As a citizen you can vote for a political party but as a worker you work in a dictatorship. The narrow financial goals of the organisation result in the massive mis-allocation of resources Grantham refers to. Elsewhere in the article Brittan argues that worker-owned enterprises could be sort-of OK, but he clearly thinks you shouldn't encourage that sort of thing. IMO isn't that the logical extension of providing market incentives? Wouldn't a bottom up economic system be better than the top-down approach of both capitalism & communism? Maybe the average Joe running the company wouldn't be so greedy as Blankfein and co, and therefore might give a sh1t about his grandchildren too. Oh yes, the freedom to starve - always a good one, that. Markets: I was just noting the same lack of progress that you mention in FTSE vs S&P today; FTSE oscillators have unwound somewhat as a result of the lack of continued upward progress whilst S&P still overbought (for a couple of months now). My own reading of the cycles is that a low is not due for another month as I'm measuring from the late Nov lows (of course this is all very subjective). This would allow time for the put/call ratio & sentiment to get further stretched until we get the "snap" you are referring to. I've been lightening up on longs as we go; although it's frustrating to see S&P continue to march on upwards, I think from a risk/reward perspective it's correct.

Thanks RK. Seems to support the view that we can run up a fair bit higher in the short term. Adam Hamilton discussed this in this week's article. http://zealllc.com/2012/spx2012.htm

Anyone interested in Dow Theory? http://www.bespokeinvest.com/thinkbig/2012/2/21/dow-transports-diverge-from-industrials.html

It's this one http://en.wikipedia.org/wiki/Network_(film)

You'd think Cameron would save this rubbish for the inevitable swing to the right, during the inevitable second term for the Tories. Just watching Newsnight with a round table of CEOs defending business along the Cameron lines. Amongst other things, they were talking about the merits of capping CEO pay at 75x lowest pay. 75x!!! Oh, and they spend all their time donating to charity too. And corporation tax is "too high". Out of touch hardly even begins to describe it. A few years ago, the West used to criticise "crony capitalism" in places like Russia and the third world. It was "their" problem. Now it's doing rather well over here too. The facade has been destroyed not only by the bailout, but first the blatant lies used to justify the Iraq war. IMO this was a defining point for the (population of the western) world realising what the US-led political and economic system is really about. Now the corporate elites have a problem, which could be resolved by accommodation (if they feel like sharing the money) or an authoritarian response. Good thing their elected reps spent the past few years taking away civil liberties, eh?

I can't see how the largest ever housing boom could be followed by another without first deflating the original (like has occurred in the US). I think the best outcome for UK HPI optimists is stagnation. Of course the best outcome for me is somewhat less rosy than that.

OK, enough theorising, back to stocks. Nadeem's latest is out, I like his style. http://www.marketoracle.co.uk/Article33237.html My favourite quotes:

Maybe the proles are too busy with bread and circuses (X Factor, Facebook etc) to notice? The middle classes are better educated about the situation and have something to lose? IMO for all the talk of the information revolution, both capitalism & communism advocate top-down control (whether corporate or state) and I just see them as two variants of the same model. If communism didn't work then why should I expect capitalism to work either? CEOs are just bureaucrats employed by shareholders instead of the state.

It's not the actual events such as Lehman that display who is in control (or not), it is the response to those events. I'm not a conspiracy theorist, simply pointing out that the powerful in any market are in a position to manipulate outcomes to their advantage. A process that has accelerated in the past three years. Take Egypt as an example. It all started off with popular protests but I think I can guess what the outcome will be, and it won't be determined by the protesters who are back on the streets now.

That's a very good point and goes beyond the trickle-down aspects of capitalism I referred to above. There have been large scale protests against the existing system since at least Seattle 1999 and 13 years later it's still business as usual. You have to admire the resilience of the system. It proposes all the same remedies (austerity) as 20 years ago, although all the evidence clearly shows there are superior alternatives (e.g. Russian default in 1998). Those countries in control are exempt through the mechanism of QE. These people will not let go easily, then again neither did Hussain or Suharto to name a just a couple. QE seems to be the best option for powerful interest groups to manage the relative economic decline of the west against the east. I think Nadeem's right, there is a very long programme of QE ahead. But I agree that, as you say, the system is no less absurd as that which Adam Curtis described in his article. Edited for clarity

Interesting article from Adam Curtis blog at BBC. Adam produced some excellent series for the BBC including Power of Nightmares, The Trap & The Century of the Self. This article is about Soviet stagnation in the 1970s and 1980s; we all know what happened next. Of course this ties in with (BBC) Paul Mason's "kicking off" thesis with regards to the new crisis of capitalism. One of the main features of capitalism has been the ability to create rapid economic growth, with a least some of the increased wealth being shared with the commoners. Of course now that the benefits are being overwhelmingly concentrated at very high incomes, a continuation of the current stagnation is going to put massive social pressures on the capitalist and political elite. There are alternative economic systems of course but capitalism always seems to succeed by appealing to humanity's worst instincts and tendencies. I can't see the capitalist elite just giving up like the Politburo did. http://www.bbc.co.uk/blogs/adamcurtis/2012/01/the_years_of_stagnation_and_th.html

Social mobility has ground to a halt, so this is exactly correct. The 9-5 is where the corporations provide you with a declining real wage in return for your increasing productivity. I return the favour by spending a significant portion of my time at work reading trading e-books, following the markets in real-time and generally developing my skills and knowledge as a trader. IMO Adam Hamilton is correct - this is a cyclical bull in a secular bear. I think we will probably hit 1400 or so, but as Hamilton warns 1500 is the top of the historical trading range. There's every chance that the 3 year cyclical bull will run out of steam this year. I've been selling into the recent strength and am now looking for short term swing trades only with a mix of longs & shorts.

I did hesitate before posting a link to ZH as I agree they see the world in an excessively biased way - not exactly what you want as a trader. But I didn't want to link to FT because of their policy and that was the first link on Google. I think the industry FTSE 2012 forecasts have generally been quite bearish in tone, although the numbers often manage to be up on 2011. I suppose it's just the usual "forecast what everyone else does so you are one of the crowd" things though. But I see this as a cyclical bull in a secular bear (as Adam Hamilton) and I think we may have one final push to S&P 1400 before the cyclical bear takes effect.

Any of you guys catch this on Stockcharts (Jan 6th)? EUROPEAN STOCK COVERAGE WILL END ON MARCH 1st http://blogs.stockcharts.com/chipanderson/2012/01/european-stock-coverage-will-end-on-march-1st.html Also I couldn't resist posting the latest comments from Bob the Bear, which were mentioned on FT Markets Live a couple of days ago. http://www.zerohedge.com/news/bob-janjuah-ushers-new-year-here-we-go-again So scathing and bearish that I should probably post it in the main forum. Oh, I forgot - Greek default by March and S&P to 800, apparently.

Bullish possibilities over next 2-3 weeks - looks like Santa may be still making deliveries? http://www.tradingtheodds.com/2011/12/high-number-of-52-week-highs-in-december/

Nadeem back on form? Good timing on latest post (Dec 18). Nearly half of that distance to Dow 12,500 was made up today.

IMO this is a good long entry point for gold (drop from 1725 area to 1550-1600 as I've posted previously). Unless it breaks 1500 of course. But I'm guessing we're done here. Although I'm more interested in the FTSE and SPX.

Looking at the evidence so far, I'd have to agree. I originally expected a strongly deflationary recession scenario with nominal house prices falling by up to 50%. However with QE, ZIRP etc, I can't see how prices are going to fall much further. I'm renting and nominal house prices in my area are down only around 10% from peak, so about 25-30% real. I was expecting much more and under normal policy responses, it should have happened, but unfortunately no one in power gives a rat's ass about our generation.

My own view (based on the trend since 2008) is that there is resistance above 1700 and support around 1550-1600. The former has been hit today and if we get an overdue stocks sell off, the latter is within grasp. But I expect a slow resumption of the uptrend from there. IMO there's nothing like diversification and Bubb's strategy is nothing like diversification.

http://www.bespokeinvest.com/thinkbig/2011/9/30/october-and-fourth-quarter-seasonality.html

Sorry to hear about that too. I'd second _w_'s advice, sell some metals and raise some cash. The last thing you need now is more stress mate.

Unfortunately there's more of the same (cut and paste) in Nadeem's latest. http://www.marketoracle.co.uk/Article30666.html