The markets are discounting a recovery in V? Or maybe it's proof that it is still a bear market rally similar to those of 1930 and 1970?
Ah, the V-shaped recovery, as I doubt. We count the ways ...
But first, we notice something about how to make money in the markets. (Because, really, is what it is here, right?)
Just as the first business models, successful companies, there are many profitable ways of the mountain market. Butone of the proven, reliable methods to do well in the markets over time is a great location (often after having tested the waters with small positions) ... This position in the saddle significant gains ... and then to protect those profits when the market turns.
Simple, no? It 'easier said than done, of course. There are quite a few 'that goes into it. But this is the essence.
And there in spirit, one could say that an entrepreneur or investor job description falls into fourCategories:
or minimize losses from positions that do not work.
or maximize profits on profitable open positions (to know when to add the position).
or protection of the profits earned by a significant number of profit.
o Keep an eye out for the next big investment and trade.
This list of activities shows that we are at a critical stage.
For those who have gone to great gains in 2009 Rally, the dilemma is whether to protect the openingProfits with a fence (similar to buying fire insurance on a portfolio) ... if "some off the table" and may pay for part ... or fully to cash. (Despite the fourth option of simply "you can drive.")
For those who do not sit on the profits the long side (and also for those who are) to come is an important issue in the next big opportunity. E 'on my head ... or disadvantages? Will be "risk-loving" activity (most of) ...or "anti-risk (changing the status quo)? How long can cause the change?
From a practical point of view, these questions underscore the importance of "what's next" question. So now, without further ado, let's take a closer look at some reasons to doubt the wisdom "V".
reason to doubt, # 1: Parallels to 1930
"There's a lot of money on the sidelines waiting for investment opportunities, this should be felt in the market, if" the mood is happierheavily on [sic]. "Economists point out that banks and insurance companies" has never so much money lying idle. "
Sound familiar? The title above feels like 2009, but actually was born in 1930 (courtesy of "News from 1930" Web site).
Those who forget to take the rally to present as conclusive evidence of a revival V, something important. Investors in 1930 condemned the brim with a similar confidence.
Comparing today's arrival in a post-crashthen fixed, fund manager John Hussman, that 'the market by a percentage almost identical after the fall of 1929 and reached in April 1930, after which he suffered a subsequent decline in minimum fresh. "
The point is not to say that today looks the same since 1930, Hussman adds, but remember that when it comes to prospects of economic recovery, is a major event does not prove much.
reason to question # 2: The biggest rally are Bear MarketRallies
The Wall Street Journal on Monday:
Rarely has the stock market has seen a six-month rally as only a 46% increase in the Dow Jones Industrial Average is on was one of only six of these dimensions in the last 100 years. And that's exactly what many analysts worried.
All meetings earlier this magnitude was in 1930 and 1970, according to Ned Davis Research. They were turbulent times for the economy and markets, and none of theThe gains were sustainable.
Many analysts believe that stocks again as a turbulent period, and that this rally could lead to another break-in. Stocks enjoyed a rally of 40% in 1982, the beginning of a prolonged period of stock market wealth. The rally was not of the same magnitude as the others, but. E 'come as the economic problems, particularly inflation, were finally expelled from the economy.
reason to doubt, # 3: It's not 1982
In a piece Taipan Dailya few months ago, titled "This is not 1982," we found many reasons why the current environment is similar at all to early 1980.
In short, 1982 was the first year to use for a boom of 25 years, and credit. Fed Chairman Paul Volcker had just "broken the back of inflation" has been (at a cost of great economic hardship) and America on the tip of the longest binge of debt (for consumers, businesses and public authorities), within history.
At the same time,Consumer savings rates went into a steady decline from double digits below zero, as America bought and purchased. Meanwhile, it has brought decades of aggressive financial innovation (in a smug Alan Greenspan), the founding of the shadow banking system "semi-official half to pump the economy to take full advantage of the credit even more by investment banks, swimming pools private investment, and so on.
Now we are at the tail end of it all. After a quarter century ofBuilding is a great "debt cancellation" at hand. The consumer is flat on the back of the shadow banking system is in shambles, and consumer access to credit has gone from a flood to a trickle.
reason to doubt, # 4: Mega banks are like Rotten Ever
Each year the World Economic Forum (WEF) released its annual "Global Competitiveness Report". Among the factors examined by the WEF, the soundness of the banks of a country. With this measure, America ranks 108th, one placebehind Tanzania. You could probably trust you make a deposit at the Bank of Burundi, like many institutions in the United States or the United Kingdom
And despite hundreds of billions (billions?) Paid in several arrests, guarantees and capital injections, some of the big banks still look like bombs. For example: Dick Bove, banking analyst with over the long decades of experience on the road, Wells Fargo has today described as a "volcano, with a series of tremors,that may be about to blow the air. "
The new concern is Wells Fargo (Wells Bank swallowed up a defect) for the large Wachovia merger. In taking over Wachovia, it turns out, Wells Fargo may also have downward a series of live hand grenades in the form of unsecured and is swallowed account for derivatives. Surprise, Wells Fargo management was that less than open about the enabled display disturbing.
This is just the tip of the iceberg. The real problem isbanks have not changed much ... The only significant difference, in fact, is that the big got bigger. Tens of billions of dollars of derivative contracts unstable so concentrated in the hands of rogue. And to demonstrate how the latest Wells Fargo about the mega banks have been anything but open.
With the blessing of the Fed and the Treasury, the strategy of the mega banks' was to use every accounting trick in the book to present the appearance of large gains- The created most of those gains in the form of bailout funds of the state - while the remaining toxic time bombs buried so deeply in the balance as possible.
This strategy of "Snake" hinges entirely in the hope that nothing will blow up the air before the patchwork of quick fixes is the time to work. It is, in other words, one hundred percent, "business as usual.
reason to doubt, # 5: More banks fail hundreds
As I write, 94 failed banks2009th Banking analyst Meredith Whitney (the credit for calling the collapse of Citigroup purchased in advance) said it expects at least 300 banks to fail. Institutional Risk Analytics, a top banking analyst in the country, which should be more than 1,000 banks in the course of the cycle.
The banks lend to consumers and businesses through the form of mortgages, auto loans, credit cards, loans and the like. If banks fail, credit agreements,making it harder for consumers to spend and businesses to stay afloat. reduce costs following the reduction of credit leads to more layoffs and loss of jobs in a vicious circle. The vicious circle closes, as banks pull back even more in a difficult economic situation.
Not only fail to bring hundreds of banks, the FDIC's (Federal Deposit Insurance Corporation) on the edge of a public relations disaster, as it assumes the money. There is no way the FDIC can handle everythingBankruptcy. Based on their projections, thinks Institutional Risk Analytics, the FDIC is on the hook for $ 400 billion to 500 billion $, if not more. (It is not even taking into account a recent mega banking debacle, Wells Fargo as a blow-up).
Where in the world, the FDIC is going to get $ 500,000,000,000? John Mauldin writes,
The FDIC may borrow 100 billion dollars in emergency credit line, and by 2010 you can get another 500 billion dollars. But if and when money is borrowed, ismust be repaid. Remember, the money that was years ago, lost in the savings and loan crisis of the 20? The FDIC had to borrow a mere $ 15000000000. We're still paying that loan back 30 years.
If the FDIC is forced out of the Treasury, Congress (and America's creditors) will scream bloody murder on loan. Alternatively, as Mauldin also noted the FDIC is to use more "special charges" against the banks.
But you know what? If the FDIC has tried to squeeze blood from aBuilt in the shape of target banks, means that the surviving banks pulling in their horns on ... to give even less. This is another heart attack waiting for consumer loans and loans to small businesses happen - in an economy driven by private consumption by 70% and managed largely by small businesses.
reason to doubt, # 6: The housing bubble burst is not completely
U.S. mortgage losses set a new record in July with 7.58% of the loan (about one out of 13)at least 30 days late on payments. According to Reuters and Equifax, subprime mortgage failures have hit a huge 41%.
And now the banks have to worry about a new problem: As reported, the Los Angeles Times, "Strategic insolvent."
Who is more likely to walk by a house and a mortgage - a person with super-prime credit scores or someone with lower scores?
Research with the help of a representative sample of 24 million individual credit files showed that the homeowners with the highest scoreswhen they apply for a loan are 50% more "strategic default" - suddenly and deliberately pull the plug and abandon the mortgage - compared to the lowest scoring borrower.
The Los Angeles Times reported that there were more than half a million (588,000) "strategic debt" at national level in 2008.
These are people with high credit quality financial resources that are technically continuing to make payments on your mortgage, but just not the logic of the pumpsThe money in an activity more or less permanently to the head.
The argument is something like: "Why throw good money after bad in the residence, a house worth less than $ 200,000 that I paid for it, bound, where the ruling is on foot (damaged credit) less painful than throwing money future in a hole of 10 or 20 years. "
Meanwhile, Iowa Attorney General Tom Miller recently went on record saying "weapons of payment [adjustable-rate mortgages] are about to explode ...This is the next wave of potential foreclosures in the country. "
Homeowners and banks have just begun to fight with the problem loans "reset", in which the monthly payments due to a sudden doubling or tripling (or worse) in accordance with the schedules of small print. As a matter of option ARM is serious, because seeing the number of "strategic debt" to shoot even higher.
This is terrible news for banks, already weak ... and no wonder Meredith Whitney previously mentioned forecastersthink house prices could further 25% before falling.
reason to doubt, # 7: Uncle Sam is borrowing a Fiend
If you thought America was a "borrowed money and" country first, you is not seen nothin 'about. Last four quarters have all the recent efforts by the U.S. government loaned the shadows, and this is a trend that is guaranteed to continue.
Was fortsetzen wahrscheinlich nicht, jedoch ist die Fed die Fähigkeit, Hundert Milliarden von kaufen direkt von US-Treasuries- Effective "monetization" of the debt - without having to either 1) a possible collapse of the dollar or 2) a possible collapse in bond prices and the subsequent hike in interest rates. We ran a heavy atmosphere of rules, higher taxes and more government control of the economy in a time when they can afford cable and headlong into debt to pay for all the abyss.
reason to doubt, # 8: black boxes and punk band
Finally, a big reasonto doubt this rally is the alarming lack of volume. Bull markets are generally healthy and trends in volume growth characterized as more and more investors decide to participate in the market. That's not what we see here.
Instead of trading stock as it has dominated, High Frequency Trading (HFT) stores and other "black box" type clothes as legitimate sources of supply. Not only that, but the volume was concentrated in a handful of scarySuper-speculative shares. Reuters recently reported that a week's worth trading a full 40% of the volume of trade has been exchanged with only four (!): Bank of America (BAC), Citigroup (C), Fannie Mae (FNM) and Freddie Mac ( FRE).
So not only have a low volume with suspicion when these big names are eliminated speculative (Citigroup - 491 million shares a day average volume), we see heavy activity of quants and other "black box" type commercial systems,concentrated most of the casino-oriented activities in the corners of the market.
These are some (but not all) of the reasons why your humble editor tips a hat to the craze, but remains doubtful.
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