Thursday, September 10, 2009

Bears Are Wrong

Bull Market Deniers

I seem to have began to rethink my bearish stance at more than a superficial level. Actually had a restless night as a consequence. I am thinking specifically in stocks where the survivors eg a few large US banks are going to carve up even a smaller cake amongst fewer people. Anyway the attached article and the related articles are the best attempts I've read at a Bullish stance. NW sees a multi year bull market emerging from here he has also been about right on direction throughout this year. What he is best at though is explaining why bears can get fixed in their own logic like a wasp in amber. Bears may still be right at a basic level, credit growth is ult unsustainable, but we could get a run for a year or 2 before that bites again. My shift in perspective doesn't include houses in uk

Posted by bellwether @ 08:30 AM (3702 views)
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18 thoughts on “Bears Are Wrong

  • I don’t accept that the bears are wrong…..I accept that the market is artificially inflated due to QE money.

    It all depends on whether a currency collapse or severe economic depression is seen as the greater evils…..personally, I think we could be heading toward both.

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  • I think they’ve got the printing bug now and see it as a fix.
    The problem will come when other nations stop their QE.
    But rather than face life without the US & UK consumers, wouldn’t the rest of the world take more QE as the lasser of two evils.

    Some of the European Presidents and Chancellors that have kept their own economies in check must be secretly (I haven’t heard them laying into him publicly) cursing Gordon Brown and his policies.

    There does seem to be a raft of good news, even if alot of it isn’t so great but dressed up to be.

    All this hype keeps the momentum going.

    Also afraid to say that houses at 2007 prices are now getting snapped up within a week. You can’t help thinking it’s going to end in tears, but I’ve yet to see any – except mine of course !

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  • str 2007 – the volumes are currently less than 50% of those in 2007 – if I were in your position I would sit tight (perhaps much easier said than done) because I still think prices overall will fall

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  • HPW this pains no-one more than me and I’ve got the losses to show it. I think the bears are right but markets can detach or be detached from reality for a long time. Also what we bears describe as reality can only really be part of the picture.

    ISTR, I’m thinking of extending my exposure to US equities, Iand think in investment terms this has near to zero risk for someone otherwise in sterling. Stocks go up, great. Stocks go down then no biggie because sterling will be dropping like a stone to compensate

    Not going to go all in and might wait for next correction down.

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  • You have to remember that there can be a disconnect between stock market performance and the economy generally. Notably, this happened in the mid seventies.

    I have been quite bullish about the stock market this year; because it did not overcook in the debt boom years and then fell sharply.

    Although I think that 20% of UK GDP was a product of the debt boom, and that the correction we have seen so far only amounts to about a third of what will eventually pan out; I have also taken a ‘glass half full’ view – that 20% contraction leaves 80% remaining, which, taking a long term perspective, (and keeping a close eye on companies’ debt exposure) made much of the the FTSE look very cheap.

    I have banked some 100% plus gains this year, but my pleasure from doing so has been somewhat sullied by the sight of prices continuing to rocket after I had sold..

    I still have most of my investments in equities, but I’m a little more cautious now. Historically, autumn is a time of city upsets, and the rather surreal situation where the BoE is printing nearly a billion day – yet no-one seems unduly bothered – might suddenly unravel…

    I’m watching carefully – and standing by the door..

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  • I think the bears are right

    Pardon me, but right about what exactly? That we are completely in recovery, and that the boom begins again?

    The real economy is very, very fragile….and there is no recovery. Only an artificial one produced by creative accounting practices….oh, and of course, a determination to create good news.

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  • Agree with Jack on housing. I see nowhere for prices to go in an upwards direction for all the reasons given on site.

    I think the variable is the uk trashing sterling which I actually think more than half likely, given the determination to keep HP’s high.

    This makes little difference to me as I have most of my money out of sterling and intend to keep it that way. The main reason for this is that I earn in sterling and to keep savings in sterling seems like over exposure

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  • NW does a double take on the charts. Bit busy at the moment but will come back around lunchtime to say what i think.

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  • @bellwether – I’ve just posted this on the Halifax 0.8% rise thread – thought it might help

    The current volumes are less than 50% of those in 2007 – it is fairly commonly accepted that there will always be a demand for “quality homes” and I’m guessing that those properties being sold are predominantly family homes. There must be some market segmentation here eg the price on a desirable 3 bed semi/4 bed detached will surely hold up significantly better than an identikit appartment in say Leeds/Manchester/Newcastle/B’ham etc…

    I also know that there have been large outflows of cash at NS&I and they have been asking their customers what they intend doing with the withdrawls – approx 80% of respondents stated they were assisting their immediate family with a property purchase.

    I’m still of the opinion that once the QE/cash buyer/spring bounce etc… subsides then the downward trend will resume

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  • Good points UT, obviously the big question is the consumer, but then I wonder if that’s priced in to a lot of quality stocks already. Prefer the US because its a hedge as per 4 and think the debt fundementals in the UK are truly awful.

    Agree too that it’s wise to be wary right now, suspect the market is due a big correction sometime between now and Xmas but now seeing that as more likely as part of a larger move up, as opposed to a revisit to the lows.

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  • bellwether,

    The key points re,. the US are that

    a) Their house price boom was less extreme than ours (+138% vs +183%)
    b) Their HPC is effectively over now
    c) They are much more self-sufficient as a nation than is often realised
    d) Their fondness for the ‘pioneer spirit’ leads them to react positively in the face of adversity

    In short, I think they will be genuinely out of recession long before we are.

    The downside is that they can devalue the dollar with much less domestic discomfort and inflation than will result from the UK devaluing Sterling. De-valuation of the greenback seems a very tempting solution to many of their current problems, so I am cautious about making further stateside investments at the moment, other than into companies such as Deere, Caterpillar and Boeing; that would benefit from such a move.

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  • UT my hunch is that the UK will push QE further than the states. I agree we have less capacity but then we are probably far more desperate.

    The US have let house prices fall, which I agree is hugely significant in terms of their outlook, while we are doing our utmost to keep prices artificallly high, I suspect we will see an ever greater incidence of our state owned banks refusing to repossess houses on which zero mortgage payments are being made, and effectively looking to the state to top up the difference. Given the scale of the mortgate problem here this would be the ultimate form of QE.

    Then we have the huge commercial property problem, I don’t know the figures but I have never seen such an overcapacity of retail and particularly office space which will never be let but which is presumably leveraged.

    is of course necesssary becausse otherwise the banks are bust, add to that our huge Commercial Prop problem and seems to me the ultimate form of QE – ie cash

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  • market oracle latest capitulating bear…they say when the lasy bull becomes bear the market changes

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  • Taffee, NW has been hugely bullish since Feb 2009 , so not quite.

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  • The author of this report used his charts in June to show us that the new bull market in stocks was about to have a 20% correction in July.

    He was wrong.

    He simply follows market trends and is not always correct. Sorry Nadeem.

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  • BW why did you misquote the title of the article which is “The Crumbliest Flakiest Stocks Bull Market Never Tasted Before”?

    Loose lending in good times, asset price bubbles, old habits. Deflation has been beaten, it’s different this time? Dance on the QE razors edge if you choose, I am shorting this drunken party you are thinking of joining.

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  • “my hunch is that the UK will push QE further than the states”

    A similar hunch on my part is countered by the question “but can they?”

    The dollar’s reserve status gives the US a very big advantage.

    However, I keep coming back to the core issue of why are people so blase about QE? Simple logic suggests that rational investors should now be wanting to hold anything except fixed income, unless the interest rates are fantastically attractive – which they patently aren’t..

    It is entirely logical for the surge in equity prices to suck in additional funds, and as the excess inventory leaves the system, basic commodities could also find favour.

    As fear begins to subside among investors, so interest rate expectations on bonds (and savings rates) could soar. We already have a very wide gulf between bank rate and mortgage rates, and that could widen further.

    A significant further rise in actual interest rates (regardless of the BoE) would trigger round two of the HPC..

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