Dow Joke 15,000; 16,000 By Friday?

[mikthe20]

Just saw a financial product advertised on TV which I thought we'd never see again for many years - the margin account with big leverage. Got Bloomberg TV (UK version on Virgin cable) on in the background and advert for Interactive Brokers came on along these lines:

"Central banks have been distributing cash in order to boost the economy at low interest to banks and brokers. That means that we can lend to you at very favourable rates. For every $200,000 you have in your margin account with us, we will lend you up to $1million at only 2.4%. There are many stocks yielding 5% per annum. [you'd be stupid not to take us up on this]". As most of the ads on that channel are targeted at the UK I presume it's available here too.

Absolute madness!!!!

Can't see anything on the Interactive Brokers web site on this though, but sure I've got the gist of it right.

ETA: Most of the editorial on Bloomberg today seems to be is the market in a bubble.

Edited May 9, 2013 by mikthe20

[The Masked Tulip]

One bit caveat - I follow UK markets, not the US, so my thinking is much more focussed here. Again, fundamentals are much better for UK stocks anyway for numerous reasons.

But isn't the problem for the FTSE is that when the US markets go south they inevitably take the FTSE along with them?

The thing that makes me pause and wonder about where the FTSE might go is the arrival of Carney in the summer - and the belief that he will do Japan style printing.

If he does then surely the results will be:

1. Sterling gets hammered.

2. Hard assets (houses) increase in price.

3. FTSE rises as that money printing finds itself in stocks (and houses)

Perhaps the FTSE is already factoring his arrival into current prices?

[The Masked Tulip]

ETA: Most of the editorial on Bloomberg today seems to be is the market in a bubble.

What? Commenting that the market is NOW a bubble and warning that it IS a bubble? Or excitedly ramping the bubble?

[Dorkins]

Bernanke Fed comment from around 21st of March - he was asked about how high the DOW was and responded that he did not think it was high when you took into account inflation.

Of course he would deny asset prices being too high. If he admitted he was creating bubbles, people might start to hold him responsible. Much easier just to deny the existence of bubbles in the first place.

[mikthe20]

What? Commenting that the market is NOW a bubble and warning that it IS a bubble? Or excitedly ramping the bubble?

Presenters asking a succession of "experts" if the market is in a bubble. Most either say it isn't or "it is but we have to ride with the crowd". One or two saying yes it is a bubble. The fact the question is being asked so much of course means it's a bubble - a bit like the "am I being scammed?" threads. However, the gist is there's so much momentum that hardly anyone wants to pull out.

[bearwithasorehead]

But isn't the problem for the FTSE is that when the US markets go south they inevitably take the FTSE along with them?

The thing that makes me pause and wonder about where the FTSE might go is the arrival of Carney in the summer - and the belief that he will do Japan style printing.

If he does then surely the results will be:

1. Sterling gets hammered.

2. Hard assets (houses) increase in price.

3. FTSE rises as that money printing finds itself in stocks (and houses)

Perhaps the FTSE is already factoring his arrival into current prices?

Good points. Yes, there is connect between US and UK market. In my view (in terms of trading strategy which is mainly about value investing for me) if you pick on fundamentals and a number of other 'safety' factors then this connection becomes a disconnect. For example, for my portfolio in 'value' and safety, I haven't seen a huge rise since Jan. In fact somewhat the opposite. However, I'm simplifying again.

Carney I think is not priced in. I think there will be a lot of volatility, and that there may be a few big falls between now and mid 2014. But I do, as you can see from previous comments, think that this is the beginning of a secular bull.

However, I think sterling is not going to fall much more regardless as more QE is still factored in (despite today).

It's kind of interesting that people focus on the headline rate of the DOW or FTSE. I NEVER even notice it! and I sit at a computer for 10 hours a day with a stocks browser open. It isn't the sum that interests me. It's the particular constituents that are important.

FTSE could go back to sub 5000 and I wouldn't worry - of course some of my portfolio would suffer.....

Wanna know why I am convinced it's a bull? 'Cos I'm still mainly in cash. Perfect contrarian indicator!

Edited May 9, 2013 by bearwithasorehead

[The Masked Tulip]

Presenters asking a succession of "experts" if the market is in a bubble. Most either say it isn't or "it is but we have to ride with the crowd". One or two saying yes it is a bubble. The fact the question is being asked so much of course means it's a bubble - a bit like the "am I being scammed?" threads. However, the gist is there's so much momentum that hardly anyone wants to pull out.

Thanks.

[The Masked Tulip]

Wanna know why I am convinced it's a bull? 'Cos I'm still mainly in cash. Perfect contrarian indicator!

[R K]

Final thought - bull markets usually begin when no one thinks we are in a bull market.

6th March 2009.

I don't recall too many takers at the time and many still seem to be in abject denial 4 years later.

[zugzwang]

6th March 2009.

I don't recall too many takers at the time and many still seem to be in abject denial 4 years later.

FTSE All-share is up nearly 20% year-on-year. The S&P 500 a fraction more. The Nikkei is up 63% in six months.

How much confirmation do you need to be persuaded that QE = higher prices?

[justthisbloke]

6th March 2009.

I don't recall too many takers at the time and many still seem to be in abject denial 4 years later.

What's significant about March 6th 2009?

My records tell me I bought VOD, BAE, ULVR & NG during that month.

[zugzwang]

What's significant about March 6th 2009?

My records tell me I bought VOD, BAE, ULVR & NG during that month.

Bottom of the market.

I took a signifcant hit in 2009, couldn't believe the turnaround and stayed short.

[justthisbloke]

Bottom of the market.

I took a signifcant hit in 2009, couldn't believe the turnaround and stayed short.

Your post prompted me to look at my notes (as I'm in it for divis, I try not to keep looking at prices paid) and I'm gobsmacked at how little I paid for ULVR.

I'm not so surprised at the recovery from bottom but more by the rally since last summer. Fearing (or awaiting) a post Grexit sell off, I stopped buying and have been pilling up cash since then. Now, of course, I'm scared to start buying again.

However, I will steel myself over the next few Weeks. Don't like cash!

[crashmonitor]

6th March 2009.

I don't recall too many takers at the time and many still seem to be in abject denial 4 years later.

We all got a second bite of the cherry during the Greek elections last year where it stayed sub 5300 for about six weeks and was similar in real terms to the price three years before unless you got the absolute bottom in 2009. The 2009 dip was a bit of an icicle on the chart (the final capitulation)) and in reality timing would have had to be perfect to better the 2012 buying opportunity.

Edited May 10, 2013 by crashmonitor

[bearwithasorehead]

Your post prompted me to look at my notes (as I'm in it for divis, I try not to keep looking at prices paid) and I'm gobsmacked at how little I paid for ULVR.

I'm not so surprised at the recovery from bottom but more by the rally since last summer. Fearing (or awaiting) a post Grexit sell off, I stopped buying and have been pilling up cash since then. Now, of course, I'm scared to start buying again.

However, I will steel myself over the next few Weeks. Don't like cash!

Funny you say that. I'm itching to buy ULVR NOW, even at these highs.

Must..... not....... trade.....

[justthisbloke]

Funny you say that. I'm itching to buy ULVR NOW, even at these highs.

Must..... not....... trade.....

I know it's bad form to have "favourite" shares but ULVR is mine. My last purchase was Jan 2012 at 2039p - wish I'd bought a few more! Good consistent divi payer, growth markets, brands are a good "economic moat" - what more do you want?

[zugzwang]

I know it's bad form to have "favourite" shares but ULVR is mine. My last purchase was Jan 2012 at 2039p - wish I'd bought a few more! Good consistent divi payer, growth markets, brands are a good "economic moat" - what more do you want?

I don't trade individual stocks any more but I've owned it in the past and it was kinder than most.

[The Masked Tulip]

We all got a second bite of the cherry during the Greek elections last year where it stayed sub 5300 for about six weeks and was similar in real terms to the price three years before unless you got the absolute bottom in 2009. The 2009 dip was a bit of an icicle on the chart (the final capitulation)) and in reality timing would have had to be perfect to better the 2012 buying opportunity.

Problem is, if Greece had walked out of the Euro at that time I doubt very much whether any of the stock markets would be where they are now.

There would have been all sorts of repercussions from stock markets falling considerably to perhaps a domino affect of others leaving the Euro, banks going bust, etc. It could have easily been 2008 all over again.

No one in or out of shares at that time could have predicted the outcome. It was a complete unknown.

[bearwithasorehead]

I know it's bad form to have "favourite" shares but ULVR is mine. My last purchase was Jan 2012 at 2039p - wish I'd bought a few more! Good consistent divi payer, growth markets, brands are a good "economic moat" - what more do you want?

I want it to be cheaper!

[zugzwang]

Problem is, if Greece had walked out of the Euro at that time I doubt very much whether any of the stock markets would be where they are now.

There would have been all sorts of repercussions from stock markets falling considerably to perhaps a domino affect of others leaving the Euro, banks going bust, etc. It could have easily been 2008 all over again.

No one in or out of shares at that time could have predicted the outcome. It was a complete unknown.

Not sure I agree. How big is the Greek economy, about the size of Indiana? The Germans could have thrown the Greeks under the bus and walked away with barely a scratch. There would have been far less stress on Spain and Italy without Greece in the EZ. In the immediate aftermath Bernanke would have done more printing to backstop the markets, Draghi would have done more LTRO, King would have done more QE. I'd say the collective intention has been fairly transparent since Gordo organised the G20 summit in 2009: massive, coordinated liquidity expansion. The problem they have is that they're trying to treat a solvency crisis as if it were a liquidity crisis: the new money is as likely to inflate fresh asset bubbles as it is to patch up the holes in those that have burst.

[pl1]

Not sure I agree. How big is the Greek economy, about the size of Indiana? The Germans could have thrown the Greeks under the bus and walked away with barely a scratch. There would have been far less stress on Spain and Italy without Greece in the EZ. In the immediate aftermath Bernanke would have done more printing to backstop the markets, Draghi would have done more LTRO, King would have done more QE. I'd say the collective intention has been fairly transparent since Gordo organised the G20 summit in 2009: massive, coordinated liquidity expansion. The problem they have is that they're trying to treat a solvency crisis as if it were a liquidity crisis: the new money is as likely to inflate fresh asset bubbles as it is to patch up the holes in those that have burst.

If all that would've happened, why'd the markets tank then? I'm with MT, it's a different story when it's your own money on the table. Your post is just blinded hindsight, sorry.

Edited May 11, 2013 by pl1

[wonderpup]

When people - like Groucho Marx - questioned how prices could just keep going higher, they were told that America was now part of "a global market."

Weird how that comment seems so similar to the Globalisation meme we hear so much today- I guess there's always a rational explanation for being irrational- otherwise no one would do it.

[zugzwang]

If all that would've happened, why'd the markets tank then? I'm with MT, it's a different story when it's your own money on the table. Your post is just blinded hindsight, sorry.

No hindsight bias. I've been long equities for the last three+ years, massively so in recent months. Bernanke caused the stock market crash in 2008 by withdrawing cash from Primary Dealer accounts to pay for the TARP. Realising his mistake, but not admitting to it, he reversed course early in 2009 and has since more than quadrupled the Fed's balance sheet.

Here:

[Harry Monk]

Of all the Marx brothers, Groucho was the most financially conservative. In 1929, he took his life’s savings and put it in a sure thing, the stock market.

What the original quote forgot to say was that he also borrowed an enormous amount of money to play the stock market.

[papag]

Down over 300 tonight first sign of alls not well ?