This Is A Suckers' Rally

[The Masked Tulip]

http://www.palluxo.com/index.php?option=co...&Itemid=181

“An individual really has three legs to his financial stool — pay check/bonus, stocks, real estate. In 2008 all these legs to his financial stool declined," he said.

“In a secular bear market, there are always bear market rallies. I’ve never more been convinced than anything in my life that this is a suckers rally. This is a short-term rally that is going to end in tears."

In fact, the survey by financial services technology provider 1st-The Exchange showed earlier this month that 75 percent of 254 independent financial advisors thought the recent stock market gains were no more than a bear market rally.

Recently, Tice also warned that the market will go a lot lower. "This has been a heck of a bear market rally, however, we expect this bear market rally and lots of other bear market rallies. But we think that the market is going to take out to lows. It will take out the 666 level," he said. "The economy is still in a very, very bad shape. This is not a stable, strong economy. The market hasn't priced in this kind of economic carnage, when the market is currently at 22 times forecasted '09 earnings."

There seems to be a consensus growing amongst 'experts' that the longer this rally continues the bigger the eventual collapse will be. Taking out the S&P low will be interesting and perhaps devastating to watch.

[Methinkshe]

http://www.palluxo.com/index.php?option=co...&Itemid=181

There seems to be a consensus growing amongst 'experts' that the longer this rally continues the bigger the eventual collapse will be. Taking out the S&P low will be interesting and perhaps devastating to watch.

From a purely voyeuristic pov, what form do you think such taking out of the S & P low would take? A sudden 100 drop, or something more slow and steady and insidious?

[The Masked Tulip]

From a purely voyeuristic pov, what form do you think such taking out of the S & P low would take? A sudden 100 drop, or something more slow and steady and insidious?

I have no idea. My gut feeling that a shock is now needed to bring the markets down but I am actually beginning to doubt that it would happen. I am not usually one for conspiracy theories but I think the economic news is being heavily manipulated now. Whether this can stop a sudden shock is open to question.

[durhamborn]

http://www.palluxo.com/index.php?option=co...&Itemid=181

There seems to be a consensus growing amongst 'experts' that the longer this rally continues the bigger the eventual collapse will be. Taking out the S&P low will be interesting and perhaps devastating to watch.

The same experts who said the market was cheap 2 years ago.Whatever they say the markets are up.The hang seng over 50%.I stand by what ive said since the markets turned in April.A decade long bull market in stocks.Likely one more big sell off over the summer at some point then up.

The economy doesnt and never has driven stock markets over the short term.The world is printish currency,and there is only one hedge apart from gold.Equities.

I wouldnt touch the S+P because of the ratings,not the economy,they are too high.Japan,and Asia is at around 1.3 book price.1.0 like April is very very cheap,1.3 very cheap.

Il keep buying through any falls for the next several years.The worst invesments IMO at the moment are US treasuries,UK gilts,UK housing in that order.

The best,AUS,KOPSI,Taiwan,Hang Seng UK blues chips in that order.

The price that matters is 10 years,not next thursday,October or March next year.

[The Masked Tulip]

Likely one more big sell off over the summer at some point then up.

How big though? Will be interesting to see.

[The Masked Tulip]

http://www.marketoracle.co.uk/Article10942.html

Moreover, from a valuation perspective, stocks are nowhere near cheap. During the recessions of the early ’70s and ‘80s, stocks fell to trade at single digit Price-to-Earnings (P/E) ratios. With this current recession obliterating earnings every month, P/E ratios are actually rising, NOT falling.

Consider that earnings estimates for the S&P 500 in 2009 currently stand at $28.51. With the S&P 500 trading at 887, this values the stock index at 31! That’s the kind of valuation seen during bubbles, NOT bear markets.

For the S&P 500 to trade at a P/E of 7 (where it did during the last two major bear markets), the S&P 500 would have to fall to 200 (I’m not saying this will happen, but simply pointing out how expensive stocks are). Even a P/E of 15 would put the S&P 500 at 382: a more than 50% decline from where the market trades today.

Of course, this is assuming that the current earnings estimates are accurate: as recently as Feb 9, 2009, earnings estimates for the S&P 500 in 2009 were as high as $42. It’s also worth mentioning that earnings are generally massaged to be higher than real profits via various accounting gimmicks. REAL corporate profits (cash flow) are likely to be even lower.

No, if this bear market goes the way of others, we’ve still got quite a ways to fall. Indeed, as far as bear markets go, we’re currently right in the middle based on the number of weeks declining and the price decline (see the chart below).

If this comes about the shock waves to the wider economy, to banks and to house prices will be simply staggering.

[STRLondon]

For me, I think 20% chance to make new lows. Theres just no where safe for the money to go to. I see it as a ponzi economy and intend to get my money in at the lows. I have about 30% left which I will put into stocks if we do hit new lows, so I am not 100% convinced about my predictions.

[The Masked Tulip]

For me, I think 20% chance to make new lows. Theres just no where safe for the money to go to. I see it as a ponzi economy and intend to get my money in at the lows. I have about 30% left which I will put into stocks if we do hit new lows, so I am not 100% convinced about my predictions.

I was just reading an article by Bill Bonner over at Dailyreckoning who was writing that the US economy is now one giant ponzi scheme luring in suckers - billionairies, countries, corporates - to buy US bonds.

Bill Bonner pointed out that there was not enough money in the World to buy enough US bonds to get the US out of the mess it is in and eventually the above rich people and firms are going to suss out that they have been suckered into the World's biggest ponzi.

Apparently the US tax-payers pay about 1.9 trillion each year in taxes but the US debt is double that so, basically, the US is fecked and so are all of us.

[kilroy]

I have no idea. My gut feeling that a shock is now needed to bring the markets down but I am actually beginning to doubt that it would happen. I am not usually one for conspiracy theories but I think the economic news is being heavily manipulated now. Whether this can stop a sudden shock is open to question.

Cash flow never lies. It does not matter what the Express or Pravda say.

[durhamborn]

For me, I think 20% chance to make new lows. Theres just no where safe for the money to go to. I see it as a ponzi economy and intend to get my money in at the lows. I have about 30% left which I will put into stocks if we do hit new lows, so I am not 100% convinced about my predictions.

Thats my view,no where is safe.In a normal downturn cash would be a safe place,but with printing who knows what could happen.Equities could fall to new lows,but id rather hold stocks than gilts or treasuries with tiny coupons.I wouldnt invest a large lump sum at this point as a crash in the S+P and Dow would drag other markets down,but im very happy to drip in.

If equities were to fall to the levels some are saying every other asset apart from gold will of been ripped to shreds as well.

[The Masked Tulip]

If equities were to fall to the levels some are saying every other asset apart from gold will of been ripped to shreds as well.

Would it - gold I mean?

Not wanting to turn this into a yellow metal thread but none of the gold bulls on here have ever explained to me why gold would hold its price in a market where the DOW/S&P has tanked?

Surely, if the markets crash then it is effectively a deflationary environment, the opposite of the inflationary environment that pushes up the gold price, and hence the gold price would tank also?

[Georgia O'Keeffe]

Would it - gold I mean?

Not wanting to turn this into a yellow metal thread but none of the gold bulls on here have ever explained to me why gold would hold its price in a market where the DOW/S&P has tanked?

Surely, if the markets crash then it is effectively a deflationary environment, the opposite of the inflationary environment that pushes up the gold price, and hence the gold price would tank also?

because they cant because its rubbish, if every asset class tanked like 1929 so would gold because wed be in deflation which is exactly what happened to gold in the great crash, it would however be the first to have a new bull market because high inflation is guaranteed when coming out of deflation

[Stay Beautiful]

because they cant because its rubbish, if every asset class tanked like 1929 so would gold because wed be in deflation which is exactly what happened to gold in the great crash, it would however be the first to have a new bull market because high inflation is guaranteed when coming out of deflation

Gold is a store of wealth not an investment.

[libspero]

The same experts who said the market was cheap 2 years ago.Whatever they say the markets are up.

I am broadly following a similar investment strategy to yourself for my SIPP. One thing that stands out is how you compare different global markets rather than just focusing on the FTSE or DOW.

I would be very interested to know how people think future drops might effect different markets proportionally.. because as DB points out, emerging markets seem to be making the strongest recoveries at the moment.

For interest here are some graphs covering a couple of markets over a longer term:

UK

China

Japan

US

Brazil

[Johnny Storm]

Gold is a store of wealth not an investment.

When the market seems unstable people take their money out and put it into gold increasing the price / demand.

Yes it is a suckers rally, lasting a lot longer than I would have thought too. Its pretty much based on nothing, so I dont know if some bad news would start the crash. Maybe.

[libspero]

When the market seems unstable people take their money out and put it into gold increasing the price / demand.

Yes it is a suckers rally, lasting a lot longer than I would have thought too. Its pretty much based on nothing, so I dont know if some bad news would start the crash. Maybe.

Worldwide, or do you think the West will be hit disproportionately this time? (hypothetically)

Edited May 30, 2009 by libspero

[VedantaTrader]

Would it - gold I mean?

Not wanting to turn this into a yellow metal thread but none of the gold bulls on here have ever explained to me why gold would hold its price in a market where the DOW/S&P has tanked?

Surely, if the markets crash then it is effectively a deflationary environment, the opposite of the inflationary environment that pushes up the gold price, and hence the gold price would tank also?

This is where the greatest confusion about gold occurs. In a deflationary environment, the value of money effectively increases in value, money gains purchasing power...quite the opposite from inflation where money declines in purchasing power.

Gold is money, at least many people use it as money, it is perceived as money, as a medium of exchange...which is the basis of all money. So in a deflationary period, where money increases in its purchasing power, then if gold is money, its purchasing power should increase also, as its true role as money becomes clear...ie, that of sound money, in an inflationary environment (which is coming down the road) gold will act as sound money, it will retain its value and increase alot...and in a deflationary environment gold will retains its value and increase in value.

So yes Uk house prices have even dropped in sterling terms, sterling has increased in value relative to houses, however gold has increased even more in value relative to houses than sterling. Infact gold has increased in value against everything, you can buy more stocks now, more real estate, more food, more raw materials, etc etc...So the debate about inflation and deflation was not always clear in its dynamics. Gold was and is a good hedge in both situations as it comes into its true role as a monetary unit.

So yes, we now have deflation and most currencies have gained in value relative to assets for the time being, however they havent increased as much as gold, as it is still in relative less supply than fiat money.

Gold can of course go down, but in this type of longterm cycle for a couple of decades, it is the right time to own gold. So thats why gold held its price in when the DOW and S+P tanked. Also, in an environment where the markets, DOW etc tank, then that is a time and a sign of deep financial and economic distress and gold is does well in times of economic chaos. People seek refuge in gold at times like this.

Anyone who is a deflationist should have owned gold, and for inflation well, thats obvious.

[The Masked Tulip]

Here they are:

The Great Dow Highs of Summer 2007 - thread starter did so well, he's on a one-year holiday

World Stock Markets 2009

TURNS on Wall Street / DrBubb calls them as they happen - several big Turns called on timely basis

Those links do nothing Dr. B.

[The Masked Tulip]

http://www.gold-prices.biz/the-second-cras...nd-unstoppable/

Tuesday, October 9, 2007 started as a nice day in New York City. A lovely early fall day, with the temperature still a balmy 80° at 2:00 in the morning. By evening, though, the temperature had dropped twenty degrees, the clouds had rolled in, there was thunder and rain.

As with the weather, there were some hints of trouble here and there on Wall Street. But all in all, things could not have seemed better. Little did we know, the stormy end of 10/9/07 signaled a very large bubble that had just popped.

That was the day when the Dow Jones Industrial Average hit its historic peak. From there, it was all downhill — slowly but steadily at first, and then violently after last August — until the Dow bottomed (for now) on March 9 of this year. Over that span, the index lost 54% of its value.

It’s been a crushing blow to just about everyone. But it’s already being referred to as the crash. As if the unpleasantness were now all behind us. More likely, in the future it will be seen as, simply, the first crash.

Don’t believe it? In a moment you will, when you see the scariest graph of the year.

Is the stock market’s next 10/9/07 on the way? Yes. Which day will it be? That’s unknowable. It could be in a week, or not for another year.

But make no mistake about it, the second crash is coming. It can’t be prevented, no matter what desperate measures Obama and his hapless financial advisors come up with. All we can hope for is that, with a little luck, it won’t be as severe as the first one. But it will last longer. We aren’t even in the middle of the woods yet, much less on the way out.

OK, it is a gold pro website but interesting reading nonetheless.