Ftse Surges Ahead

[mattyfc]

The FTSE has only just recovered to the level that it started the year at and is hardly surging ahead. With low interest rates and a devalued currency the recession is being slowed down. The VAT cut and will also have helped slightly.

A proper economic crash may have been avoided I think, high levels of personal debt and the falling values of property will prevent any sustained growth in most sectors of the economy. The peak in unemployment should be at least 12 months away and the peak of the recession will occur then.

I don't think a sustained rally will take place until the economy turns the corner which could take 2 years. I would expect the FTSE to end the year around 4500~ and not get back to 2007 levels for at least two years.

[Van]

96% drop in profits from addidas....

I know pubs & businesses that have been around since the 1800's & made it through the last depression that have folded in 2008/9.

more printy printy money in 1 year than in the last 300 years put together.

the top banks in both the UK & US have had to be bailed out.

add in the insurance companies to this as well.

then chuck in a couple of bankrupt countries.

a housing price drop that is equal to & steeper than the 1930's for the same period.

I could go on & on & on.

btw, you have said that it will be a nasty recession. Well a depression is unofficially defined as a severe recession, so how does nasty compare to severe then ?

Well a 100% drop in profits for some companies can be expected. Does that really surprise you? The thing is, shoes wear out. You can put off buying new shoes for a year, but eventually you'll start buying again, and profits will recover.

And we can all give anecdotal evidence of how bad this contraction is, but the bottom line numbers speak for themselves - it's bad, but not cataclysmic. The Dow has NOT lost 95% like in the real depression. Unemployment is nowhere near the 1-in-4 that characterised the depression (even adjusting for the different way in which it is measured). And of course, house prices have fallen more than 1930 - BECAUSE IT WAS A PROPERTY BUBBLE.

[Van]

The FTSE has only just recovered to the level that it started the year at and is hardly surging ahead. With low interest rates and a devalued currency the recession is being slowed down. The VAT cut and will also have helped slightly.

A proper economic crash may have been avoided I think, high levels of personal debt and the falling values of property will prevent any sustained growth in most sectors of the economy. The peak in unemployment should be at least 12 months away and the peak of the recession will occur then.

I don't think a sustained rally will take place until the economy turns the corner which could take 2 years. I would expect the FTSE to end the year around 4500~ and not get back to 2007 levels for at least two years.

So basically, you think the FTSE will go sideways? Is that a way of saying you're on the fence? Looking back historically, the market very rarely goes sideways - it almost always goes up or down. If it's not going down, then chances are it's going to go up.

I agree that the economy still has to batten down the hatches and the recession and rising unemployment has perhaps another year to run, but the market has taken all this into consideration and is looking further ahead now.

[grumpy-old-man-returns]

Although gom is the world's worst stock market forecaster he has a point about 'depression'. Don't rule it out. But also don't look for the visual signals that you might have got in the 30's. All the signs are in the actual numbers. The welfare state and the nature of our employment these days are not good at giving us the visual signals we need to see how serious this has been. I would accept a depression as being simply a 10% slump in gdp.

EDIT: a definition that backs this up...

http://www.economicshelp.org/blog/economic...mic-depression/

hey, I am 1 for 1 at the moment HAM. although my last call was the completely the wrong way. Apparently, 'r' was calling a market rally & I misread & thought he was calling a big drop. Some of the paid subscribers told afterwards. I have openly acknowledged that I am not into the financial markets as such.

I didn't do too bad on all the other stuff though now, did I.

[grumpy-old-man-returns]

Well a 100% drop in profits for some companies can be expected. Does that really surprise you? The thing is, shoes wear out. You can put off buying new shoes for a year, but eventually you'll start buying again, and profits will recover.

And we can all give anecdotal evidence of how bad this contraction is, but the bottom line numbers speak for themselves - it's bad, but not cataclysmic. The Dow has NOT lost 95% like in the real depression. Unemployment is nowhere near the 1-in-4 that characterised the depression (even adjusting for the different way in which it is measured). And of course, house prices have fallen more than 1930 - BECAUSE IT WAS A PROPERTY BUBBLE.

not yet it hasn't.

It WILL though.

[Daft Boy]

the market has taken all this into consideration and is looking further ahead now.

Lets hope the market does a better job of "looking further ahead" than it did in 2006

[mattyfc]

In the short term the market could vary hugely considering how twitchy investors have been. It has been as low as 3460~ and as high as 4600~ in the last 4 months! I can this volatility continuing depending on what is in the news from one day to the next.

In the long term the market has already fallen 30% from peak, most of the bad news should be priced in but there is not real room for sustained growth because the main economy which need to drive the stocks will not show any real growth for about 2 years imo.

[grumpy-old-man-returns]

btw - if a drop of 10% in gdp constitutes a depression then how do we define the inevitable greater than 10% reduction in gdp going forward over the next 20 years and more as a result of all the extra debt taken on to give a near term boost? There is no equivalent word for that.

a severe depression, the likes of 1878 & 1930's combined. You may have seen one or two previous posts of mine mentioning this.

HAM, please DO NOT underestimate this historical juncture we are at right now.

A lot of posters on here are wishing for what they want to suit their particular circumstances.

I am a total realist with no VI.

Edited May 5, 2009 by grumpy-old-man-returns

[grumpy-old-man-returns]

Lets hope the market does a better job of "looking further ahead" than it did in 2006

edited - it's those unknown unknown thingys again.....we are due a few more very soon I feel.

Edited May 5, 2009 by grumpy-old-man-returns

[Quoth]

Don't you mean bear trap?

http://www.google.co.uk/search?hl=en&r...+trap&meta=

I'll admit to be fairly ignorant on stock market issues but doesn't the bull/bear trap definition depend on which direction the market is going?

What Does Bear Trap Mean?

A false signal that the rising trend of a stock or index has reversed when it has not.

What Does Bull Trap Mean?

A false signal indicating that a declining trend in a stock or index has reversed and is heading upwards when, in fact, the security will continue to decline.

So in the context of a falling market, which seems to be the current consensus, the current rise would be a bull trap?

These things are so much clearer in hindsight and when plotted on a graph!

Regards,

Q

[righttoleech]

The peak in 1999 was almost 7000.

[DrGUID]

I'm still an amateur trader, but my trading method isn't finding many stocks to buy (in fact I've found none today) so I suspect a pullback is imminent.

This rally is more convincing than the previous rallies, but a lot of big companies (BP, Shell etc.) seem to be in a long term bear market so I'd guess there is more pain to come.

The credit markets aren't having much of a convincing rally either, and they tend to be a more reliable indicator.

Anecdotally my IT business is slowing considerably, so I don't buy into the theory that tech stocks will escape the downturn. I've also heard that although the oil price has recovered, nobody is actually using much of it, in fact storage space is running out there's such a glut. The same for stuff we dig out of the ground - most of it is being stockpiled by China.

[grumpy-old-man-returns]

I'm still an amateur trader, but my trading method isn't finding many stocks to buy (in fact I've found none today) so I suspect a pullback is imminent.

This rally is more convincing than the previous rallies, but a lot of big companies (BP, Shell etc.) seem to be in a long term bear market so I'd guess there is more pain to come.

The credit markets aren't having much of a convincing rally either, and they tend to be a more reliable indicator.

Anecdotally my IT business is slowing considerably, so I don't buy into the theory that tech stocks will escape the downturn. I've also heard that although the oil price has recovered, nobody is actually using much of it, in fact storage space is running out there's such a glut. The same for stuff we dig out of the ground - most of it is being stockpiled by China.

yep.

TECH will/is get/being hammered.

IT recruitment will be non existent for about 10 years.

People will start turning to making real things again.

IT will always have its place now of course & will boom again to eventually take over everything.

[VeryMeanReversion]

It's all greed and fear rather than rational discounting IMO. If there was a rational, discounting market, there would be low volatility, smooth moves over times.

Personally, I think profits in the last few years have been artificially high due to excess credit, consumers have had as much money as they want to spend. No wonder profits were good.

Now that is no longer true and unlikely to be true for the forseeable, I see profits and divi's being 30-50% of peak levels so I would value FTSE100 to be 2500-3000 for the long-term.

Since there are regular fear/greed swings when investors economic assumptions have been shattered, I expect more bear rallies on the way down. I've caught 2 of the 3 rallies so far and will stay asleep until the next one.

The West is full of debt and I still see nothing happening to address that problem. Until the surplus nations start spending to make up for the Wests shortfall, where is the earnings growth going to come from?

VMR.

[yellerkat]

FT Alphaville: (LINK)

A lack of interest in your own company in the midst of the “green shoots” of economic recovery is a worrying trend. To make matters more worrying, insider buying is now being dwarfed by insider selling, according to another Pragmatic Capitalist post:

The alarm bells are warming up...

[Guest Winnie]

Anyone any idea why the markets are soaring again today?

Is this the last day of irrational exuberance before the stress tests. It smacks of serious market manipulation by the government and traders. Low volume again.

The larger the rise the greater the fall - right now we are at the end of a very long elastic band stretch IMHO.

Anyone any other light to shed?

Why is Bank of America UP???

[Guest Winnie]

This explanation from ritholz.com:

"BoA is skyrocketing in the pre-open trading. C is following. So is the entire market, for that matter.

What is the reason for this, fundamentally speaking? How on Earth could this news be seen as a positive?

Or are the Supplemental Liquidity Providers maintaining a floor that gives the market the appearance of success and relief? If so , this would constitute fraud (false statement aka price, bad intent, desire to have investors rely on false bottom, investors relying on false bottom, and finally, damage when said false bottom eventually disappears and reality eventually returns). Of course, deniability abounds with the SLP program."

[Guest Winnie]

ADP employment figures better than expected.

Only lost c 491k jobs last month.

http://www.bloomberg.com/apps/news?pid=206...&refer=home

Yes! Aren't we seeing usually classified as low priority data magnified massively in importance? The people who do this survey are that well known and trusted profession - HR consultants - can you believe it?!

[R K]

Yes! Aren't we seeing usually classified as low priority data magnified massively in importance? The people who do this survey are that well known and trusted profession - HR consultants - can you believe it?!

Whatever next? A leaked memo from Pandit on next Q's profits? It has the distinct impression that all of a sudden all the fund managers who missed the bottom are piling in. I hope they get totally creamed.

Edit: In fact I'll tell you exactly what this feels like - Jan/Feb '08 in the gold market. Around 950/70. Just when it was about to go to the moon..........

Edited May 6, 2009 by Red Kharma

[Quoth]

I think that is exactly what is happenning. Not just fund managers. All those people whose 'fear of missing out' is now exceeding their 'fear of loss'.

They'll be crying into their cornflakes if it dips back down to 3,600!

Q

[worzel]

They'll be crying into their cornflakes if it dips back down to 3,600!

Q

I hope so, I just doubled my short position, my thinking being that these rises are not sustainable and want to profit from the downward movement to cover some of my losses. Its all small beer really though, so not going to lose sleep over it

[Doctor Gloom]

Lets hope the market does a better job of "looking further ahead" than it did in 2006

Is it me or are all the nutters coming out the woodwork at the moment.

[Doctor Gloom]

You're not one of the 'bulls' that wants higher prices are you?

Surely it's better for everyone for things to become cheaper?

Oh. no he wants higher prices along with the other 7% of influencial people in this country.

[LondonToManchester]

I hope so, I just doubled my short position, my thinking being that these rises are not sustainable and want to profit from the downward movement to cover some of my losses. Its all small beer really though, so not going to lose sleep over it

Little piece of advice never double up on a loosing position! The market will never behave how you think it should

[Quoth]

Well, today's at one point 2.6% gains are all but gone.

Bad news Stateside?

Q