Monday, May 18, 2009

False Dawn for US Stocks – 62% Plunge Likely

Federated’s Tice Says S&P 500 Is Poised to Plunge 62%

Head of successful Federated Investors Inc says current stock market gains are a 'sucker's rally' with stocks overpriced in terms of earnings. Sounds like the rally in house (asking) prices we are seeing here!

Posted by ben6.5 @ 04:16 AM (1329 views)
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8 thoughts on “False Dawn for US Stocks – 62% Plunge Likely

  • It will be interesting if certain American parties take some profits for debts this week.

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  • mountain goat says:

    I don’t disagree that stocks will fall again but the bears have been screaming “suckers rally, sell now” since this began, and they were dead wrong. A year ago stocks were not doing too badly but the facts were the same, housing bust, consumer maxed out on debt. It is only because people thought that the financial world was going to end that stocks fell so sharply. Now that the banking system has been under-written by governments of course there is a relief rally. This rally started with the financial sector. I think it will go on during the summer with different sectors rallying as the world adjusts to a recession. For example uranium mining companies only started rallying 2 weeks ago.

    IMO there will be sharp falls again but it will be when the current solution, government debt, starts to default. But that may be months or years away yet.

    I am not of the view that this is a “plunge protection team” manipulated rally. But if it is a manipulated rally then there is still too much stuff to be sold off at Chrysler, GM and AIG to “allow” falls now.

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  • I agree mountain goat. There is too much benefit at present.

    The worry is when of if they find that it’s not working as the investment money is not true capital built on true capital circulation/growth throughout these dubious companies.

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  • Citywire report on this

    Hyde and seek: False dawn, not light at the end of the tunnel
    By Deborah Hyde | 11:25:00 | 18 May 2009

    As suspected, those green shoots are looking fragile.

    Market confidence took a hit last week as warnings the two-month market rally may not be sustainable appeared to be becoming reality.

    Goldman Sachs said the meteoric rise since March can partly be explained by a short
    squeeze that has nowhere left to go and the future direction of stocks will be reliant on economic news.

    Market losses began to rack up as commentators suggested the pace of rally had been too fast and gains will be limited for the rest of the year, and maybe into next year too.

    All of this meant many market players had steeled themselves for some bad news ahead of the Bank of England’s quarterly inflation report. Talk of a period of consolidation was widespread.

    Positive signs on the economy had been lifting spirits but a slow realisation began to dawn that while the worst is probably behind us the economy is still in a sorry state of affairs.

    At best the pace of decline is slowing. Certainly, there is not yet any sign of a recovery.

    The market has been supported by a widely reported fact that markets always recover before the economy.

    Of course that doesn’t mean there can’t be false starts first and when Bank governor Mervyn King said no-one could say with any certainty where the economy is heading next, people began to fear the rally may have been premature. King suggested the UK economy could continue to shrink into 2010, adding to the nervous mood.

    Worse-than-feared US retail sales for April were yet another timely reminder it is easy to get carried away. Much has been said about whether or not the world’s governments have done enough to keep consumers spending.

    Last week’s data suggested that Americans, like their European counterparts, are tightening their belts. Retail sales growth here showed UK shoppers are happy to make hay while the sun shines. The news from across the Atlantic though sparked fears this may not continue as an ever-rising number of unemployed people begin to run out of spare cash. A number of analysts downgraded the general retail sector, saying it has now priced in a perfect recovery back to growth levels seen before this downturn.

    Banks also took a drubbing as many said current valuations reflect an unrealistic view of the outlook for the sector.

    The view that the global upturn will start well but soon tail off appeared to be taking hold.

    http://www.citywire.co.uk/adviser/-/blogs/the-new-model-adviser-blog/content.aspx?ID=341056&re=5537&ea=118560

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  • Im sort of with MG on this. I think we will have new falls but its looking more likely that so far – in the US at least – the upside move is part of a bigger upside move, but with a fall in the middle. We are at quite an important point on the S&Ps right now (when arent we!). We are at the bottom of an upside channel which should determine if there is some downside – after a break of it.

    That scenario would be quite interesting because there would be “i told you so(s)” all round . I.e. the bears would point to the fall and the bulls would go quiet and then vice vera. My interest is whether we (FTSE) falls to new lows when the S&P retraces. Of course thats all a bit idealised and i could be completely wrong. If the S&Ps convincingly bounce off the bottom of the channel then the short term bull is still intact, and a few more bears will be squeezed by the…. er ….. b[u]lls!

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  • mountain goat says:

    TM brave call, so this is B wave now with C wave up still to come, then 5 wave down from there? Makes sense to me.

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  • MG – its only brave if i have put my money where my gob is. I have a short FTSE position basis cash @ 4375, and i sold some more @ 4500. But its only a small position and was probably a bit premature – the 4375s at least were not really on the basis of anything more than a punt.Also its partially covered with some long S&P as a hedge. Basically because im a bit bored with the financials at the moment to be honest! :-).

    So no i would like to see some downside traction before i firm up the view and take a sensible position. S&Ps off the lows overnight so this session will be of interest!

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  • I’m getting so tired of hearing this BS on all fronts that I am going to take a break untill things get back to normal again.

    Bye for now all.

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