Up, Up And Away - The Dow Is Soaring

[SurgeonGeneral]

This is disguised panic by the FED.

Meltdown must be upon us.

Bank runs etc. to follow, stocks will fall off a cliff.

[Rover]

Yes it is. Dow 15000 is the main target. Not this month of course but that is where we feel it is going - and all (most) other stock markets will follow.

You're not the 'FP' for nothing! Still don't trust your assertion or the fundamentals behind the DOW/FTSE, but I'm not privvy to your knowledge - all seems counter-intuitive to me.

I reckon I'll be leaving my house purchase money depreciating in the bank

[Confounded]

Yes it is. Dow 15000 is the main target. Not this month of course but that is where we feel it is going - and all (most) other stock markets will follow.

FP, the only way the DOW will get to 15,000 is if the FED succeeds in crating this false bottom at 12,000 and moral hazard starts to creep in. They are taking a big gamble to achieve this and there are chances that they will miss judge it and your 15,000 target could be breached very quickly.

I am still hopeful the market will win and we get the crash needed to purge the rottenness out of our financial system, but equally if I see moral hazard taking effect I am not going to be on the sidelines!

[Killer Bunny]

One has to go with the flow. The flow is on the side of the banks and the banks make up 25% of the S&P. They led the market down and they are leading the market up.

They can borrow $100 at 3% and lend $1000 at 6%... Next week they may be able to borrow at 2.5%.

[Rover]

I understand sentiment and fully expect the FTSE to bolt up today, as has Asia.

But I cannot understand why confidence would be so high, when it is patently obvious the markets are being artificially inflated by central banks intervention. Surely the piper has to be paid ultimately, whether that's rampant inflation, massively overpriced commodities, job losses et all. It's like giving the terminal patient morphine, he'll be all smiles temporarily, but eventually he'll keel over.

What am I missing? Or are investors that stupid? Or is it a case of buy now, pocket the 'in effect' public money, then dump before the heart attack?

Edited March 12, 2008 by Rover

[Lasertrip]

The old advice has always been not to buy gold unless you want to wear it. If you want to protect yourself from inflation there are better ways - index linked bonds for example.

I find it a little bit amusing that a number of this site's members that can't believe people's stupidity in not spotting the housing bubble can't see the gold price rise for what it is.

[Dr House]

We have had gold rampers on this site, and thankfully they have now been put back in a box. It seems we now have stock market/share rampers, like Financial Planner. It is a very sad day when the people who are on here because they want to see a sense of fairness and proportion return to the housing market suddenly realise that the financial world is just full of rampers.

Even someone with the most basic grasp of reality could say that a 15000 DOW would be delusional on a scale which would presage the most apocalyptic market collapse since the stone age - making the Great Depression look mild.

FP - as you have a lot to do with this site, I associate you with it. This sort of unreasoned with no real rationale or back-up just makes me very concerned.

[The Masked Tulip]

I tend to go along with the "they must know something we don't know" when looking at this 100 billion central bank funding.

I suspect, short-term, it will push up the markets but in a few days, a week or a month everything will start to slide back down as the bankers make their short-term profits and others use the slight rise as an opportunity to sell out. People will remember that the fundamentals are still dangerously weak.

I haven't a clue how to look at shares so can someone tell me here whether today's FTSE rise has been led by the same banks that in the last 2 - 3 weeks have lost alot of their value - HBOS, B&B, A&L, etc? Just curious as whether they are being bought or not.

[Cptkernow]

these fed interventions are awesome. allow many people to get short at better and better prices

[mew too]

One has to go with the flow. The flow is on the side of the banks and the banks make up 25% of the S&P. They led the market down and they are leading the market up.

They can borrow $100 at 3% and lend $1000 at 6%... Next week they may be able to borrow at 2.5%.

From Krugman: $200 billion may sound like a lot of money, but when you compare it with the size of the markets that are melting down — there are $11 trillion in U.S. mortgages outstanding — it’s a drop in the bucket.

the credit contagion is spreading, stocks will get cheaper still

[The Masked Tulip]

these fed interventions are awesome. allow many people to get short at better and better prices

Foreign language to me I am afraid. The above may as well be baboon! In English please Data!

[Methinkshe]

From Sudden Debt Blog.

History Rhymes in Slow Motion

Wednesday, March 12, 2008

History Rhymes in Slow Motion

The repeated attempts by the Fed to arrest the credit contraction and prevent equity markets from going into a tailspin look to me like a repeat of what happened in October 1929, albeit in extra-slow motion.

As an avid student of market history (... "it rhymes"), I highly recommend the careful reading of Galbraith's The Great Crash of 1929. Within it are described concerted attempts to forestall the inevitable. As the market swooned in late September and early October 1929, "great men" from Morgan and National City Bank were sent to walk the floor of the New York Stock Exchange. They made a grand show of providing money at the broker call-loan post (margin funds) and of supporting a variety of blue chips like Steel and Radio with repeated buy orders.

Their actions cheered speculators, who ramped up prices sharply for a few days. But when conditions worsened once again, the "great men" had to give up in order to protect their own institutions.

This time the "action" is taking weeks rather than days to play out, because:

The "great men" have been replaced by the Fed, which has more resources at its disposal and less inhibitions to using them. It has no shareholders or depositors to protect (except for millions of taxpayers, but that's too amorphous a group) and the man at the helm is stubbornly certain he is following the right course.

Markets are far more diverse and complex today than the simple stocks, bonds and trusts of 1929. While the overall leverage may in fact be far greater today, there are also more dominoes at play, i.e. more products (e.g. derivatives) and more players (e.g. all sorts of funds). Starting as always with the "bad debt" domino, it takes more time now for the whole series of them to drop before the final "equity" domino is hit a decisive blow.

After 25 years of successful Fed action that averted or contained financial crises, its abilities have become an article of faith with most speculators, investors and - most unfortunately - politicians. This past performance has created widespread complacency; time and again I hear the same adage from "sophisticated" market participants: "They won't let it get out of hand". The Greenspan put has morphed into the Bernanke put, even though conditions are far more dangerous now.

To summarize, events are proceeding more or less along the same path as 1929 but with more fits and starts. The experience is akin to watching a football game entirely in slow motion - it may take a while to get to the end, but the outcome won't likely be any different.

Posted by Hellasious at Wednesday, March 12, 2008 1 comments Links to this post

[rondy]

Yes it is. Dow 15000 is the main target. Not this month of course but that is where we feel it is going - and all (most) other stock markets will follow.

Yeah, right.

Man (or should I say little child?), the cash injection of the FED will last 3 days. The DOW will go under 12K in no time.

[Cptkernow]

Foreign language to me I am afraid. The above may as well be baboon! In English please Data!

Ok to give some reasons for my opinion rather than just trying to assert the truth as many on this forum do.

This is a better time to short imo than to buy. (Though the end of the week will likely be an even better time)

all of these short term fixes the fed has come up with have resulted in spikes in market valuations followed by downward price moves. the underlying issues are:

1) tight credit from banks in consumer products (which these facilities will not be likely to materially change)

2) falling employment

3) rising prices

4) likely to be shrinking corporate profit margins (also related to this are the leveraged situations companies and IBs have found themselves in as a result of the LBO boom AND the difficulty now linked with fundraising and the costs therein)

5) slowing or negative real growth

6) falling consumer confidence.

7) falling other important economic indicators (labor costs growing faster than productivity growth)

these factors all point towards a bad scenario for equities. i had a small sell signa (~25-35% averaged in at 1375 or so in the S&P500) and i'd still have a similar short signal at 1300. the fundamentals here clearly justify further decreases in equity prices.

i can't even thinik of that many scenarios where this is anywhere near a bottom for equity prices. there is just so much to work through at this point.

Edited March 12, 2008 by Cptkernow

[REP013]

Ok to give some reasons for my opinion rather than just trying to assert the truth as many on this forum do.

This is a better time to short imo than to buy. (Though the end of the week will likely be an even better time)

all of these short term fixes the fed has come up with have resulted in spikes in market valuations followed by downward price moves. the underlying issues are:

1) tight credit from banks in consumer products (which these facilities will not be likely to materially change)

2) falling employment

3) rising prices

4) likely to be shrinking corporate profit margins (also related to this are the leveraged situations companies and IBs have found themselves in as a result of the LBO boom AND the difficulty now linked with fundraising and the costs therein)

5) slowing or negative real growth

6) falling consumer confidence.

7) falling other important economic indicators (labor costs growing faster than productivity growth)

these factors all point towards a bad scenario for equities. i had a small sell signa (~25-35% averaged in at 1375 or so in the S&P500) and i'd still have a similar short signal at 1300. the fundamentals here clearly justify further decreases in equity prices.

i can't even thinik of that many scenarios where this is anywhere near a bottom for equity prices. there is just so much to work through at this point.

Thanks for taking the time to explain your thoughts, it is greatly appreciated.

[Killer Bunny]

We have had gold rampers on this site, and thankfully they have now been put back in a box. It seems we now have stock market/share rampers, like Financial Planner. It is a very sad day when the people who are on here because they want to see a sense of fairness and proportion return to the housing market suddenly realise that the financial world is just full of rampers.

Even someone with the most basic grasp of reality could say that a 15000 DOW would be delusional on a scale which would presage the most apocalyptic market collapse since the stone age - making the Great Depression look mild.

FP - as you have a lot to do with this site, I associate you with it. This sort of unreasoned with no real rationale or back-up just makes me very concerned.

Watch over the coming months...and learn. Markets do not follow economies in the short term.

I have been ultra bearish on the stock market through 2007. I am now bullish and very happy with it. Dr H - we'll see who's right.

[REP013]

Watch over the coming months...and learn. Markets do not follow economies in the short term.

I have been ultra bearish on the stock market through 2007. I am now bullish and very happy with it. Dr H - we'll see who's right.

FP, what is really your thinking behind this, I can't believe it is your previous comment on banks. Even if they are good value and oversold how will they boost the DOW by 25% in the next few months?

To help us "learn" a little more in the way of reasoning would be appreciated.

[silver surfer]

We have had gold rampers on this site, and thankfully they have now been put back in a box. It seems we now have stock market/share rampers, like Financial Planner. It is a very sad day when the people who are on here because they want to see a sense of fairness and proportion return to the housing market suddenly realise that the financial world is just full of rampers.

Even someone with the most basic grasp of reality could say that a 15000 DOW would be delusional on a scale which would presage the most apocalyptic market collapse since the stone age - making the Great Depression look mild.

FP - as you have a lot to do with this site, I associate you with it. This sort of unreasoned with no real rationale or back-up just makes me very concerned.

Dr H, with respect, you're ramping cash. By saying "the people who are on here because they want to see a sense of fairness and proportion return to the housing market" you are in effect advocating go long cash and go short property, because these two investment alternatives are about to diverge.

Fact is everyone of us has an agenda. I'm an STR'r, but that doesn't neccesarily make me heroic or wholesome, it could mean I'm every bit as greedy as the worst BTL landlord, but I'm just employing a different strategy!

[Realistbear]

Watch over the coming months...and learn. Markets do not follow economies in the short term.

I have been ultra bearish on the stock market through 2007. I am now bullish and very happy with it. Dr H - we'll see who's right.

And you know your stuff! I am a little more bulish too as stocks seem to be basing themselves on what WILL happen in the 2nd H as opposed to the current dire state of the market. I moved a little money into Fidelity Energy Fund recently but didn't make a very good calll on SE Asian funds I bought into in December (way too late IMO). I am still 100% in cash in my current account and only dabble in the markets in my long term retirement accounts. My current account is waiting for a house purchase in about 2 year's time after a 50-60% discount on peak prices.

Going forward, I like GE and Honeywell on the DOW and still like UKC (coal) on the FTSE.

I have a feeling that Gold will not even get close to its 1980's peak--inflation adjusted--before taking a huge 30% + tumble. I remain bearish in the extreme on sterling medium to long term as the storm has yet to hit us with full force and the traders are still happy to risk their bets on nothing dramatic happening until then. 3 months maybe before the big sterling sell off vs. the US$. Dr. Bubb's estimate of a 18 month lag with the US seems to be about right.

Most important Q though: Is it to be inflation of deflation? Get that right and you will be rich.

Keep up the good work in the MEDJA.

[The Masked Tulip]

Dow recovery seems to have stopped - downhill tomorrow?

[Realistbear]

Dow recovery seems to have stopped - downhill tomorrow?

After a 419 point gain yesterday I wouldn't be surprised if it closes 100 down today.

The psychology of the market seems to be short term thinking with a big blank as to what is going to happen next week. The Fed and CBs may pull it off and stabilise the markets and allow the world to deflate back to sanity again. Short to medium term recession, imploding asset prices but opotimism about the long term. Pain yes, but the medicine will work if we go with the force and don't try to resist it.

There is only one certainty in the marketplace right now. House prices are going down and the world econmies are going to slow down commensurate with the size of the bubble that has to be popped. Gordon's miracle ecnomy is heading for some rough times.

[yaakov]

Watch over the coming months...and learn. Markets do not follow economies in the short term.

I have been ultra bearish on the stock market through 2007. I am now bullish and very happy with it. Dr H - we'll see who's right.

yes, interesting viewpoint and we need some balance here. The stock market should in theory be a leading indicator. If this was a normal recession I would agree we should now be bullish, however I think there are good reasons to think this is going to be a lot worse than that.

[Assurbanipal]

During bear markets sometimes sharp rally can happen - but it si eroded quickly.

[The Masked Tulip]

During bear markets sometimes sharp rally can happen - but it si eroded quickly.

Si, it can eroded quickly senor.

[Killer Bunny]

FP, what is really your thinking behind this, I can't believe it is your previous comment on banks. Even if they are good value and oversold how will they boost the DOW by 25% in the next few months?

I have never said 'the next few months'. It could be 6 months, 1 year or 2.

Yes, I believe the banks will make money hand over fist - as the Fed is giving them everything to do so. They are 25% of the S&P. As I have repeatedly stated, they led the mkt down and they are leading the mkt up.

Also, the $:¥ has stopped the ¥ rise at c ¥101: $1. Yen heading for 125 - in time.

It will not be straight up but 15000 is our target. Markets are not economies.

My real thinking is exactly as I have written several times in the last week or so.