The options expiration manipulation out of the way and the euphoria around the government bailout gone, the market can now concentrate on its unfinished business. I think the market looks ready to break the lows of last week. Next stop should be the 2002 lows. The market has a chance of bouncing from that level. I doubt that the PPT (plunge protection team) will let the market crack the 2002 lows in the very first attempt. What can they possibly do now? Haven't they run out of tricks by now? I am sure they will come up with something!
The talking heads in the media were trumpeting that Buffet started buying shares in his personal account this week. His investing mantra, be fearful when others are greedy and be greedy when others are fearful. I agree but where is the fear? At least I don't sense it. People are not fearful of loosing money but fearful of missing the next leg up. When people follow Buffet, they conveniently forget that he can sleep on his investments for the rest of his life but an ordinary mortal doesn't have that luxury.
I am amused at the preoccupation of these talking heads with bottom calling after each and every rally. Did any one ever hear any of them declare that the market has topped out? May be they are only good at predicting bottoms. May be they are okay with irrational exuberance but not with rational fear.
4 comments:
Is there a top? Fundamentally the bottom has an end - The big fat round 0. As for the top, it's anyone's guess! With the last two attempts it seems to be jinxed at the 14K level.
As reported today: "The mood was upbeat overseas as investors cheered the latest moves in the worldwide effort to strengthen the banking sector. Shares in Europe and Asia advanced." You are absolutely correct in noting that the fear does seem to be absent... So much for Buffetology ;-)
True but if these so called smart folks can hazard a guess in calling a bottom before 0 then why not a top?
I agree that there is nothing but pain for longs for many a long months. To make money not only they have to be lucky to catch a "local minima" but also be smart to exit quickly if in the money. It is going to be easier for the shorts to make money as the stock market trend is clearly lower. I did not hear of any broad-based buying by retail or institutional investors today. Really no reason to get excited after such shallow rallies.
What fundamental reasons can one cite for being long here -
a) deflation - it is a result of underlying weakness in economy rather than cause of anything. Remember Japan?
b) earnings - corporations are just beginning to realize the extent of the economic malaise and have only begun to make painful adjustments.
c) government actions - have started in right direction. they will have to continuously keep treating the patient". many more doses will be required before impact is seen. In Japan central bank balance sheet grew to nearly 31% of GDP before it started shrinking. Fed balance sheet is not even 10% of US GDP currently.
So, stay away from stcoks. Buy treasuries. Just like you call for 2002 lows to be seen in stocks, I call for 2002 highs in bonds to be seen.
thanks for writing.
"May be they are okay with irrational exuberance but not with rational fear."
Well said!! Below is a worth reading article I came across.
We had to burn the village to save it.
The title of this diary is a quote from the Vietnam era that sums up for many the arrogance and pointlessness of American aggression in Asia two generations ago. It keeps coming to mind each time I read President Bush’s (paraphrased) statement this week: We had to nationalise the banks “to preserve the free market.”
http://londonbanker.blogspot.com/2008/10/we-had-to-burn-village-to-save-it.html
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