by ilene - December 7th, 2009 1:16 pm
Courtesy of Edward Harrison at Credit Writedowns
John Mauldin believes we have just seen a pretty amazing trading rally aka cyclical bull/bear market rally. Stocks are more than 60% above March lows. But many stocks are at “nosebleed” valuation levels and that makes him suspect this is not an opportune entry point for stock market investors.
See the video below for John’s comments in full (Hat tip Barry Ritholtz).
by ilene - October 16th, 2009 11:56 pm
How long, O Lord, how long? It’s always good to remember that the stock market is not the economy. Every day I come into the office to find literally dozens of emails complaining that the market is ignoring the relentlessly bearish news flow. But that doesn’t bother me. What will bother me is when we start getting good news. Markets tend to reach exhaustion on good news, not bad. And these days it’s hard to discern between what’s merely bad and what’s actually disastrous. So, let’s take a look at what the difference between the two really is, and what it means going forward.
A recently released Societe Generale report outlined a "Worst-Case Debt Scenario," one which they believe is a very low probability. Their central scenario assumes a slow global recovery, with private debt being transferred to governments. Fair enough. We’re well on our way there.
Comparing US and Japan, albeit from SocGen’s more sanguine standpoint, there’s some reason to believe the US could feasibly accommodate a Japan-esque 200% of GDP debt burden, which would essentially double 2010′s projected 100% of GDP debt burden. The reason this might not collapse the dollar is because there are no attractive alternatives. Government debt is a global problem, and when you look at the US government debt on a comparative basis, the figures, while high, aren’t extraordinary — at least within that context. More on this momentarily.
As a brief digression, I don’t believe that all government debt is bad by definition. Some are dogmatic on that point. While I do find a framework for understanding economics through the Austrian school, the reality is that no one is going to be able to squeeze pure, free-market toothpaste back into the tube. In fact, Ron Paul’s quixotic quest to end the Federal Reserve could actually succeed… only I can promise you it would soon be replaced by a similar central bank mechanism with a different name, slightly altered agenda, and new cast members. In other words, more of the same; let’s be realistic.
Also, remember that governments worldwide have a long history of supporting failed industries only to turn around and re-privatize them at a later date. It’s the government version of the private-equity game (buy ‘em, repackage ‘em, sell…
by Chart School - September 2nd, 2009 3:02 pm
Courtesy of Charles Hugh Smith, Of Two Minds
The six-month long global stock market is losing steam, which begs the question: how low can we go?
Is this a new Bull market or just another typical Bear Market rally? Let’s look at two charts for clues.
First, read the HUGE GIANT BIG FAT DISCLAIMER below: these are the free rantings of an amateur ignoramous, etc. etc.
Before we glance at the charts, let’s ask: has anything really been fixed in the global financial markets and economy, or have all the problems just been papered over with trillions in central bank bail-outs, loan guarantees, stimulus and bogus accounting/statistical lies?
The VIX is one measure of volatility or what is sometimes called "the fear index." When confidence reigns supreme (with an emphasis on the "con") then the market players see no reason to bid up options to protect themselves from potential drops into the abyss. So when confidence is high then the VIX is low and stable:
When the wheels finally fell off the MSM/central bank fantasy that "subprime is under control" then fear sprouted wings and the VIX soared.
Judging by the VIX’s return to the low-to-mid 20s, then confidence has returned in full force and the fears of a global meltdown have vanished.
Nice, but what if nothing has really been fixed? What if market participants sniff out that everything’s just been swept under the rug? What if the $7 trillion commercial real estate market in the U.S. is about to slip into the abyss of domino defaults?
The Shanghai market’s sudden 10% drop in only two days suggests not all global players are convinced.
The MACD on the VIX is crossing at a very low level, suggesting a lengthy period of rising volatility could be upon us. The stochastic has been rising for awhile now, having made a bullish cross last month.
In sum: the VIX seems to be warning us low volatility may be giving way to higher volatility.
Here’s a chart of the Dow Jones Industrial Average:
One fairly predictable pattern in any market chart is that price tends to oscillate between the upper and lower Bollinger band. I’ve marked this trait with small blue lines.
by Zero Hedge - May 15th, 2009 11:49 pm
Courtesy of Tyler Durden at ZH