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Post G20 in March we have been at economic war and the Media have been in war mode as well, this has been essential in maintaining the period of financial stability we have seen. With this stability we have seen a growth of confidence which has led to a dramatic improvement in the psychological part of the economy. Despite the fundamentals forming a smaller part of the modern financial system it has led many to ignore them, somthing that they will pay for.

A in depth dose of reality in this report that contains a huge resource of graphs.

http://www.zerohedge.com/article/end-end-recession

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Former IMF Chief Economist Ken Rogoff: “The kind of deleveraging we need to see takes six or eight years … The retrenching of the U.S. consumer is a huge adjustment the whole world is going to have to consumer is a huge adjustment the whole world is going to have to absorbâ€.

Over by Xmas then?

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Over by Xmas then?

Did you not know, we are already out of this recession, we just have the risk of another one coming, surely that would be bad luck though?

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Former IMF Chief Economist Ken Rogoff: “The kind of deleveraging we need to see takes six or eight years … The retrenching of the U.S. consumer is a huge adjustment the whole world is going to have to consumer is a huge adjustment the whole world is going to have to absorbâ€.

Over by Xmas then?

Exactly.

This is, first and foremost, a balance sheet recession that has now spilled over into the real economy.

Balance sheets take 5 to 10 years to repair. This is much more complicated than a traditional "overstocking" boom and bust recession which takes 12 to 18 months to repair itself.

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Over by Xmas then?

Exactly.

This is, first and foremost, a balance sheet recession that has now spilled over into the real economy.

Balance sheets take 5 to 10 years to repair. This is much more complicated than a traditional "overstocking" boom and bust recession which takes 12 to 18 months to repair itself.

Hi Luckyone, do you think we have reached the height of survivors euphoria yet?

I am torn atm, they need more punters in the markets to help with the deleveraging but due to the run up of the markets on relative low volume (if you exclude the program trading that has taken up a lot of the volume slack that would have painted a dire picture otherwise), they are killing there chances of getting participants.

As they drive the market higher the risk/rewards diminish rapidly. As I see it atm the very best they could hope for is a rise to 11k on the DOW, a near doubling from the March low but only another 10-15% rise from here. The downside risks you could easily loose 30% + from here so even though they have not fully achieved the passing of the handbag yet I can't see they can support the market at this level. The measures seem to herd people in seem to be getting more comical see below

http://www.bloomberg.com/apps/news?pid=206...id=abcptlNiu65g

Surging Profit Estimates Signal 26% Rally for S&P 500

July 27 (Bloomberg) -- Analysts are raising U.S. profit estimates for the first time since credit markets froze two years ago, reducing valuations even after the steepest rally since the Great Depression.

Wall Street firms raised forecasts on Standard & Poor’s 500 Index companies 896 times in June and lowered 886, according to data compiled by JPMorgan Chase & Co. The last time analysts were bullish on a net basis was in April 2007, before more than $1.5 trillion of bank losses tied to subprime loans spurred the first global recession since World War II, the data show.

The failure to anticipate Goldman Sachs Group Inc.’s record second-quarter profits or Freeport-McMoRan Copper & Gold Inc.’s tripling of bullion sales forced analysts to boost 2010 projections. Wall Street firms estimate the S&P 500 will earn $74.55 a share next year, up from $72.54 in May. Stocks now trade at 13.13 times estimated profit, indicating a 26 percent increase in the S&P 500 should the index return to its five- decade average of 16.54 times annual income.

“There’s a sea change of opinion and it all goes back to the improving economic data,†said Fritz Meyer, the Denver- based senior market strategist for Invesco Aim, which oversees $348 billion. “Expectations got pushed too low in the depths of the recessionary mentality. That translates into upward revisions in earnings estimates and drives stock prices.â€

Earnings Revisions

Analysts lowered profit forecasts at a record pace after the failure of Lehman Brothers Holdings Inc. in September caused overnight borrowing costs for banks to hit an all-time high of 6.88 percent, tipped the U.S. economy into the worst recession in half a century and sent the S&P 500 to a 38 percent decline, the biggest annual retreat since 1937.

Four out of five of the 4,716 earnings revisions in October were decreases, the most ever, JPMorgan data show. Analysts have raised estimates amid growing signs that the global economy has bottomed.

The turnaround in June from October was the biggest since the JPMorgan data started in 2000. The second-largest swing was in October 2002, the beginning of a five-year bull market that doubled the value of U.S. equities.

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Did you not know, we are already out of this recession, we just have the risk of another one coming, surely that would be bad luck though?

They have redefined a recession to be 2 consecutive quarters of accellerating negative growth.

Get with the plan!

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They have redefined a recession to be 2 consecutive quarters of accellerating negative growth.

Get with the plan!

a bankrupt is the new millionaire.

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They have redefined a recession to be 2 consecutive quarters of accellerating negative growth.

Get with the plan!

I guess that is just the reality of the current faith based system, just keep tweaking the rules and hope a majority do not realise it is all a sham.

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Hi Luckyone, do you think we have reached the height of survivors euphoria yet?

I am torn atm, they need more punters in the markets to help with the deleveraging but due to the run up of the markets on relative low volume (if you exclude the program trading that has taken up a lot of the volume slack that would have painted a dire picture otherwise), they are killing there chances of getting participants.

As they drive the market higher the risk/rewards diminish rapidly. As I see it atm the very best they could hope for is a rise to 11k on the DOW, a near doubling from the March low but only another 10-15% rise from here. The downside risks you could easily loose 30% + from here so even though they have not fully achieved the passing of the handbag yet I can't see they can support the market at this level. The measures seem to herd people in seem to be getting more comical see below

http://www.bloomberg.com/apps/news?pid=206...id=abcptlNiu65g

Surging Profit Estimates Signal 26% Rally for S&P 500

July 27 (Bloomberg) -- Analysts are raising U.S. profit estimates for the first time since credit markets froze two years ago, reducing valuations even after the steepest rally since the Great Depression.

Wall Street firms raised forecasts on Standard & Poor’s 500 Index companies 896 times in June and lowered 886, according to data compiled by JPMorgan Chase & Co. The last time analysts were bullish on a net basis was in April 2007, before more than $1.5 trillion of bank losses tied to subprime loans spurred the first global recession since World War II, the data show.

The failure to anticipate Goldman Sachs Group Inc.’s record second-quarter profits or Freeport-McMoRan Copper & Gold Inc.’s tripling of bullion sales forced analysts to boost 2010 projections. Wall Street firms estimate the S&P 500 will earn $74.55 a share next year, up from $72.54 in May. Stocks now trade at 13.13 times estimated profit, indicating a 26 percent increase in the S&P 500 should the index return to its five- decade average of 16.54 times annual income.

“There’s a sea change of opinion and it all goes back to the improving economic data,†said Fritz Meyer, the Denver- based senior market strategist for Invesco Aim, which oversees $348 billion. “Expectations got pushed too low in the depths of the recessionary mentality. That translates into upward revisions in earnings estimates and drives stock prices.â€

Earnings Revisions

Analysts lowered profit forecasts at a record pace after the failure of Lehman Brothers Holdings Inc. in September caused overnight borrowing costs for banks to hit an all-time high of 6.88 percent, tipped the U.S. economy into the worst recession in half a century and sent the S&P 500 to a 38 percent decline, the biggest annual retreat since 1937.

Four out of five of the 4,716 earnings revisions in October were decreases, the most ever, JPMorgan data show. Analysts have raised estimates amid growing signs that the global economy has bottomed.

The turnaround in June from October was the biggest since the JPMorgan data started in 2000. The second-largest swing was in October 2002, the beginning of a five-year bull market that doubled the value of U.S. equities.

I did see the Bloomberg story this morning and had a good laugh.

I like your phrase : "survivors' euphoria". It is a good description of what is going on.

In the last 20 years, market participants have been rewarded for buying dips. Everyone is conditioned to believing that this is a pattern that will be repeated infinitely. There are a lot of people who are pretty happy with themselves as they have caught a big run up from the March lows. I think that some complacency is a good thing as it will help speed up the deleveraging.

The market looks a bit tired to me. It could still run further from here but I am being pretty disciplined about rebalancing my portfolio and getting back to my "base" asset allocations at these levels. It is the only way that I know to buy low and sell high with a degree of accuracy. As you point out, volumes are low which makes me even more inclined to reallocate sharpish.

As I have said before, there are some places that I go to infrequently (once or twice a year). Change is much easier to observe than it is in the places that I see much more often. So far, I can only see evidence that things are getting worse rather than better. While corporate profits, asset prices etc are important, I still place more emphasis on my observations of shop openings and closings, how full restaurants / salons etc are than I do in economic statistics.

Everything that I am seeing still points to another leg lower in the real economy overlaid with a requirement for a lot of deleveraging. The temporary "survivors' euphoria" looks like it will run out of steam in the early autumn (as is traditional) and that we will go on another leg lower.

Markets and fundamentals can become disconnected, sometimes for long periods of time. The March to September period in 2009 seems to be one of the better examples of the disconnect.

Markets are evil. At the moment, I think that Mr Market is still angry and he is going to try to suck as many people in as possible over the next few months before crushing them in the autumn.

I wish that I had a firmer reference but I recall reading that many more people got wiped out in 1932 to 1934 than 1929 to 1931. I expect that this pattern will be repeated. 2007 = 1929, 2009 = 1931, 2010 to 2012 = 1932 to 1934.

While no-one actually knows what will happen ahead of time, I see the risk / reward as 4x larger to the downside than the upside for the last quarter of cal 09.

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I wish that I had a firmer reference but I recall reading that many more people got wiped out in 1932 to 1934 than 1929 to 1931. I expect that this pattern will be repeated. 2007 = 1929, 2009 = 1931, 2010 to 2012 = 1932 to 1934.

This is my understanding as well and why I am still very cautious, if it pans out in a similar way this period will take out a lot of competition, life is all about a competition for resource and if cash becomes king I want to have as much of it as possible.

I have seen nothing other than unfounded hype that points to anything other than deleveraging and continued deflation. As we have discussed before if they can ignite a crack up boom I think there will be sufficient data around to allow for a quick enough move out of cash to capitalise on a majority of the high/hyper inflationary upside. I like having my cards left to play however this period is requiring strong nerves which is why it is the most critical stage yet in this crisis.

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This is my understanding as well and why I am still very cautious, if it pans out in a similar way this period will take out a lot of competition, life is all about a competition for resource and if cash becomes king I want to have as much of it as possible.

I have seen nothing other than unfounded hype that points to anything other than deleveraging and continued deflation. As we have discussed before if they can ignite a crack up boom I think there will be sufficient data around to allow for a quick enough move out of cash to capitalise on a majority of the high/hyper inflationary upside. I like having my cards left to play however this period is requiring strong nerves which is why it is the most critical stage yet in this crisis.

Dennis Gartman has a good way of putting things :

- When markets are rallying, the only positions to have are flat and long.

- When markets are selling off. the only positions to have are flat and short.

The market is clearly rallying at the moment. I disagree with the rally so my position is to be flat (relative to my target long term asset allocation).

Being flat is not always satisfying but it is less destructive than having the wrong position.

I agree that being flat is the best posititon to have at the moment, especially if you can be quick and nimble when the market turns. Falling in love with the current price action will be painful.

I think that a crack pot boom is much more likely than a crack up boom but, as you say, the situation needs to be watched very closely.

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