Saturday, May 9, 2009

History says fill your boots, sell your wife, dive in.

Investors bet that worst of recession is over and predict new bull market

Anthony Bolton, a respected financial adviser and stock-picker in London, predicted: “All the things are in place for the bear market to have ended . . . If you wait for things to get better, you’ll miss the rally.” David Schwartz, a prominent stock market historian, said that lessons from the past century of share price ups and downs pointed decisively to a new bull market. “History says fill your boots, sell your wife, dive in,” he told The Times.

Posted by devo @ 12:12 AM (2895 views)
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30 thoughts on “History says fill your boots, sell your wife, dive in.

  • Pleased to note the long overdue Acid House revival, though…

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  • @devo

    Brilliant! Lol!

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  • Narrowescape says:

    Absolutely astonishing.

    To those thinking of piling in, I strongly suggest that you Google “april 1930 dow rally”

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  • “If you wait for things to get better, you’ll miss the rally.”

    Or as people said back in early 2007, “If you don’t buy a house now you’ll never get on the housng ladder!”

    I just don’t see the fundamentals in this rally. Employment is down, asset values are down; it’s a global reduction in demand. Where are the income streams to support jobs growth?

    I’m happy to be proved wrong. I know I’m a bit of a perma-bear, so feel free to come back with logical arguments etc.

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  • Beartil2010 says:

    History actually says, if you look closely at other similar sized market failures (Great depression, 70s Oil Crisis and others), that there is always a long sucker rally up to 5 months in duration following the initial bear market, followed by a 2 year+ continuing bear market.

    The ‘History’ he is probably quoting is made up of ‘buy low, sell high’ chart reviews of general short term market drops.

    I am with Drewster – there is a big difference between ‘recovery’ and stabilisation. Once the buying frenzy is over, the fundamentals will continue to bring down bank capital, the unemployed will continue to leave their homes and not buy either houses or luxury goods, and companies will continue to fire people.

    I said – ‘what’s my name!’ lol

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  • its being pushed up by certain banks automated trading arms in the US on increasingly poor volume so it will not last……BUT stockmarkets do anticipate a revival in the economy

    False dawn perhaps but that’s what markets can do

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  • I think we should appreciate the contrarian nature of investing. The old stock exchange adage is “buy shares when they are friendless”. In short, buy low, sell high.

    However, contrarian investment is not for the weak ….the Guardian’s front page warns us to “beware of third wave of bank failure”.

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  • “There is no reason anyone would want a computer in their home.”

    — Ken Olson, president, chairman and founder of Digital Equipment Corp. (DEC), maker of big business mainframe computers, arguing against the PC, 1977

    “We don’t like their sound, and guitar music is on the way out anyway.”

    — President of Decca Records, rejecting The Beatles after an audition, 1962

    “Computers in the future may weigh no more than 1.5 tons.”

    — Popular Mechanics, “predicting” the relentless march of technology, 1949

    “If you wait for things to get better, you’ll miss the rally.”

    – David Schwartz, stock market historian, 2009.

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  • @6 debtfree well said!
    Also,
    ” Personally I don’t think these are going to catch on”
    -Presenter on technology programme (Tomorow’s World?) talking about microwave ovens.

    But you just can’t go past our dear PM and ex-Chancellor for false predictions, “No More Boom and Bust” being the obvious. And he then proceeded to cause that very same thing.

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  • The Capitalist says:

    Time in the market is better than timing the market – just ask Warren Buffet

    I’ve discovered a very good stock picker called Don Harrold who is tipping shorting ETFs. He’s mates with sensible people like Peter Schiff and Ron Paul.

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  • Jumping in on rallies is gambling not investing. If this is what’s happening, it’s just another bubble (a small one), which will burst if it can’t be sustained. Despite people’s predictions of a new world order, it appears that nothing has changed.

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  • ……..if they have quoted David Schwartz verbatim then he is a total fool. IMHO. Another example of the bullsh*t attitude that pervades the testosterone fuelled corridors and trading floors of financial centres around the world and the main reason boom and bust cycles will never end.

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  • confused76 says:

    And after the Dutch tulips, Michael Hirtsch “art”, and the 2025 Chateau Margaux… the new bubble:

    “This US coin wholesaler introduced me to the head of the bank’s coin department. “We’re essentially out of US coins,” the banker told us. “We actually go to America to buy US coins. We bring them back to Switzerland to sell, because clients think we’ll have them.”
    The bank had been picked clean. The few coins the bank did have were not desirable. They had mint Swiss Helvetias – but these are widely available. And they had a few particularly old coins from Turkey and Colombia. Our host bought a couple of those for his own collection. I think he was just buying to be polite.”
    http://www.moneyweek.com/news-and-charts/economics/how-to-protect-against-hyperinflation-43411.aspx

    And, of course, this other guy knows what future losses the UK banks will post… sure and I know the weather for the next 600 days… well, on average it will be cloudy with intermittent rain and sunny spells, snow is possible but only if the temperature drops below 0 celsius…
    http://www.moneyweek.com/news-and-charts/economics/the-bad-news-from-banks-is-just-beginning-14760.aspx
    “growth in UK bank lending to private individuals had slowed to just 2% year-on-year by the end of March. That compares with a near-9% annualised increase for the year before.
    And now we know why. Borrowers are defaulting in droves, leaving the banks with no choice but to batten down the hatches”
    YAWWWNNN, sooo boring and sooo wrong. “we know why” sure sure…

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  • britishblue says:

    We should listed very, very carefully.

    In December 2007 Anthony Bolton called the BOTTOM of the commercial property market.

    In May 2008 he said people should move out of commodities into financial.

    http://www.citywire.co.uk/personal/-/blogs/money-blog/content.aspx?ID=304145

    Yes he has made a huge amount of money in the past, but his predictions haven’t helped a lot of people. He is probably shorting the market as well as giving out this propoganda.

    Any one done any work on long term averaging of PE ratios and factored in the current economic conditions?

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  • bellwether says:

    It is not enough to be merely bearish or to keep repeating that things are terrible. You need some level of valuation and certain stocks look genuinely cheap – although not historically cheap although you need to take into account close to zero interest rates etc.

    Funnily enough most of these stocks are only begining to participate in the rally now. I was going to post more than this but probably wasting my time

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  • @confused76
    You appear to understand the market, what confuses me is that in any trade be it stock market or the corner shop, if one gains then there has to be a loser to balance the books. That is what I understand business is. How is it that if investors walk into the stock market to buy a particular stcok and it goes up in value, and then it is sold at a higher price and then the person who bought it at the higher price hope’s to make a profit and pass it on to someone else. Isn’t this another Pyrimid Scheme and when the stock market falls ultimately then the last person holding the stock takes the ultimate loss. This is no different from the property boom or any other boom. When will people realise this. You cannot create wealth of thin air as nothing has been produced.
    Your comment on this would be very appreciated or by bellwether or by anyone else.

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  • letthemfall says:

    I’ve never felt David Schwartz had much insightful to say on markets. Remember his market historian column in the FT? He used to say things along the lines of – past history shows that following such and such event prices rose on 7 occasions and fell on 5 others. This was how he justified his predictions. I’d say he has a 50:50 chance of being right.

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  • Bellwether it is never a waste of time to post your thoughts and up until now you seem to have been very good at it ( this is not a sarcastic remark but a grateful acknowledgement). You have left a carrot or two hanging, would you care to elaborate on which stocks you feel have now joined this rally and why you think this upshift will continue to have legs? I am very interested.

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  • Kind of you bystander, I’m off to buy a car but def some other time

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  • letthemfall says:

    house
    I think it depends on whether one is talking about trading or investment. The whole idea of offering shares in a company is to attract money with which to build the company, creating value. One puts money in by purchasing shares, and receives dividends in return, and assuming the company does well the shares are worth proportionately more. So much so obvious. Day trading strikes me as rather different; that is an attempt to make money, inevitably at someone else’s expense – a transfer rather than creation of value. Traders would probably argue that their activities ensure the proper allocation of resources. But we’ve seen how well that works lately.

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  • I’d be amazed if this really was the start of a bull market. As far as I can see there is no fundamental or technical basis for a lasting bull market. I don’t know any analyst, economist or trader who believes it, so who are these euphoric investors? It is always a dead give away when something like the VIX is quoted. It is a sentiment indicator that professionals stopped using a long time ago. Another give away is that Mandelson and Christina Romer are commenting on the rally. In more sensible times, there was a convention that politicians avoided talking about stock market action, so that they couldn’t be accused of trying to influence the market, even inadvertently. I wonder why they are doing it now?
    The hedge funds certainly aren’t buying into the equities rally which is why they underperformed the indexes this spring. My guess is that the traders involved in the buying are only buying on the basis that some dumb money will get sucked in. This type of situation can go on for an incredibly long time (which is why someone like bellwether can make money using sensible valuation tools) but eventually one group of traders jumps ship and takes a profit. Then another group of traders goes short and all the traders run for the exits. The dumb money will be the last to know.

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  • letthemfall: I’ve never actually met a day trader but they do at least provide liquidity. Without liquidity, investors would often be too scared to put their money into something. Decent liquidity also reduces the spread and trading costs for investors.

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  • Leftukforgood says:

    basically no one knows maybe huge fall was to much and its not so bad so maybe recent gains will slip back somewhat and then
    move sideways as i say its all guesswork but looking at historic dividend yields shares look vary cheap even if dividends in some
    companies half other problem is what to do with your money if you have any cash is not safe since it can be eaten by inflation or
    currency depreciation gold goes up and down so best have something of everything to hedge you wont make a fortune but you wont
    loose your shirt I have gold (but only about 5% of my money) shares (about 20% most bought after crash) cash in US$ GBP Aus$
    Hong Kong$ Can $ (about 30%) rest in property which always rents always has for last 30 years

    Diversify but call me stupid property is still good provided your not banking on capital appreciation allow for vacent rent drops
    make sure you have a cushion of cahs and gold to get over proeprty hard times I remember FTSE crash early 70’s down from
    over 500 to 140 ( 70%) wish id bought then just took long term 10+ years and dont try to make a quick buck If your not a property
    invester and only own 1 place its for living in thats what my house is my other property is for investment

    When people understand they are not gaining if they only have the home they live in things can get to normal and leave investing
    to those who are not in for a quick kill and think long long term

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  • mark wadsworth says:

    Re what Narrow escape and others say, let’s put that Spring Bounce into perspective:

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  • Sorry have all heavily unecessary indepted people stoped defaulting just like that? Are the derivatives waorking again? This is a miracle.

    Fill your boots, sell your wife, dive in.

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  • A couple of months back I wrote on here that I was getting back into market. That decision was correct and I’ve done very nicely. My return is significantly higher than that which I would have got if I had followed the gold bugs ramblings and protestations of that time.

    Did I but back in think we were at the start of a bull run? No, I don’t think we are at all but I still believe I will get better value from stocks over a two year period than anything else. I think FTSE will probably fall-back to around 3800 ish through and towards the end of summer. I’d be happy if it didn’t.

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  • @Letthemfall
    Thank you for your comments. It would mean that ultimately there are loser(s). So this is no different from going to the racecourse. You have confirmed my understanding but I have had people in the past disputed with my analysis.
    Perhaps people out there should be warned of it.
    In my opinion the value of a particular share should be (net assets + goodwill) divided by no.of shares issued. The value of the goodwill would obviously depend upon the profitably of the company. No doubt the P/E ratio comes into play. But whatever way you look at it, IMO the market is over-valued. The speculators are playing the market and the government is encouraging this speculation by keeping the bank rate at 0.5%.
    Also are you saying that the traders actually buy the shares at a price on the hope that there will be a demand from someone to purchase them at a margin. Does that mean that the traders are no different from trading shops like Tesco except that they sell shares.
    I do not have a real market experience as I deal with normal business administration.
    Can you or anybody else please enlighten me on this.

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  • LOL, If you dont like it dont do it!

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  • If it was like a duck , quacks like a duck its ………………. an elephant. Actually Schwartz is ok (he prematurely called the March bottom but was generally in the right area – same as Bolton BTW). In any case if you get the weekend FT look at Dominic to get a more balanced view. Its true the move off the bottom could be sharper and more prolonged than most imagine, as i said near the low – we have boom boom boom until everyone things the bear is dead. Sentiment indicators are a good source.

    While many people thought it was the apocolypse in March sentiment indexes were through the floor (i.e. the Daily Sentiment Index in the US was 90% + bearish) . time to fade. It may well be (and this is against my postion) that a few more bears need to be convinced that the bear is over – although i was looking for a lower DSI level now to get short – thinking that we are due a new low and THEN an even more substantial rally. That rally would be one that no one understood.

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