I THINK THE MARKETS HAVE BOTTOMED!!!

There is a great deal of bad news and low expectation priced in to the markets. If the economy does not get much worse, and if company earnings do not continue to disappoint to the downside, the market may be at the bottom. If past history is any indicator, the markets will bottom several months before the economy turns around.
 
[quote author="morekaos" date=1228435609]There, I am putting it out there with a GENERAL market call. Fire away!!!</blockquote>


DOW at time of call(11:06 ET): 8608



DOW 6min later: 8560





Looks like you already lost... sry
 
if the mkt bottoms at -50% ytd and magically the equity mkts revert to their historical norms of ~10% avg returns annually, it'd take 7 yrs before the mkt is back at the level it was at the beg of 2008.



given that:

1) i've been spared from most of the brunt of the downturn,

2) do believe even if the mkt has bottomed, the ride up is going to be as volatile as the ride down,

3) don't believe in magic,



i'm perfectly happy sitting this one out for a while even if it means missing a large chunk of the upturn.



(having said all that, i dont think it'll take 7 yrs to get back to dow 14k/spx 1500)
 
[quote author="morekaos" date=1228437418]Not a trading call. I think the 7450 low will hold as a low.</blockquote>


I had previously called 7500-7600 as the low. I think it will go back to there in the next few months.
 
What!? What do you mean you don't believe in magic? I have all my faith in Hank "The Magician" Paulson.



I dunno about a bottom, but it could be, and if it were I wouldn't call it. However, Morekaos has been right way too many times, and while <a href="http://www.ritholtz.com/blog/2008/12/sp-500-review-2/">Barry isn't saying it is a bottom</a>, we could be in for a nice rally.
 
[quote author="acpme" date=1228437883]if the mkt bottoms at -50% ytd and magically the equity mkts revert to their historical norms of ~10% avg returns annually, it'd take 7 yrs before the mkt is back at the level it was at the beg of 2008.



given that:

1) i've been spared from most of the brunt of the downturn,

2) do believe even if the mkt has bottomed, the ride up is going to be as volatile as the ride down,

3) don't believe in magic,



i'm perfectly happy sitting this one out for a while even if it means missing a large chunk of the upturn.



(having said all that, i dont think it'll take 7 yrs to get back to dow 14k/spx 1500)</blockquote>


acpme,



I am in the in the opinion that we will see a huge dead cat bounce rally going into first quarter of 2009. I do see DOW hitting 11k - 12k into next year, but not making new highs above 14k.
 
<img src="http://dshort.com/charts/bears/four-bears-large.gif" alt="" />



This little graph was posted over at Calculated Risk. One thing I find interesting is the relationship between bear market crashes and broker's margins. Back in the 1920s, margin requirements were 10%. A 90% decline took it down to its cash value. Since then, we have been operating on 50% margins. Look how the crashes since then have tended to bottom near a 50% drop. One can speculate that bear market crashes wipe out all margin players and take us down to cash value. If this is the case, then the 50% drop we just witnessed probably is near the bottom as we are near cash value.



Food for thought...
 
I think you will see the new low around 5500 for the DOW.

Massive Deflation is still in the cards for Home Prices and Stocks.

About 25-30% for both still to come. Massive unwinding for hedge funds

as well as the effect of the automotive business collapse

if this "To Big To Fail" bail out bombs. Which it may.



Hopefully I am wrong.
 
[quote author="skek" date=1228440202]The auto bailout is moving towards a pre-packaged BK for GM and there is political pressure to let at least one of the Big 3 (i.e., Chrysler) fail and be absorbed by the other two. If that happens, the psychological impact is going to push us lower than the current lows, IMO. We'll know by the end of the year.



The hardest part of reading this market is all the government intervention. It's hard to bet against the United States government. Unfortunately, in the case of the massive government spending to keep financials and autos afloat, I think the medicine may end up being worse for the patient than the illness.</blockquote>


I think they are going to try and soft land that BK. regardless I think it may already be in the market....it expects it



<a href="http://www.bloomberg.com/apps/news?pid=20601087&sid=a8NiLMoTo1v8&refer=worldwide#">GM, Chrysler May Accept Bankruptcy to Receive Bailout </a>
 
XLF tells the story. It only needs to fall to under 5 to complete the same descent that the DJIA did in 1929.



In any case, the bond market is far more important and relevant. The 2300 bp gap or so between junk and treasuries is far more alarming than thoughts of DJIA 4000.
 
I will agree with you that we are at the bottom...for the month of December.

P/E ratios are solid for many companies. When reporting starts again towards the end of december till February, the P/E ratios of 5 that look great today, will be revised to P/E's of 25 as profits collapse.



We have created a disaster...this isn't your typical recession. It really is worse this time around...

I don't want to predict a number as it makes no sense to do so other than for fun.

Saying that my fun number is between 4800-6000.
 
[quote author="skek" date=1228445527][quote author="morekaos" date=1228440881][quote author="skek" date=1228440202]The auto bailout is moving towards a pre-packaged BK for GM and there is political pressure to let at least one of the Big 3 (i.e., Chrysler) fail and be absorbed by the other two. If that happens, the psychological impact is going to push us lower than the current lows, IMO. We'll know by the end of the year.



The hardest part of reading this market is all the government intervention. It's hard to bet against the United States government. Unfortunately, in the case of the massive government spending to keep financials and autos afloat, I think the medicine may end up being worse for the patient than the illness.</blockquote>


I think they are going to try and soft land that BK. regardless I think it may already be in the market....it expects it



<a href="http://www.bloomberg.com/apps/news?pid=20601087&sid=a8NiLMoTo1v8&refer=worldwide#">GM, Chrysler May Accept Bankruptcy to Receive Bailout </a></blockquote>


Indeed, but a GM bankruptcy would be equivalent to a run on a bank in the public's eye, many of whom are still not paying attention and figures the government will "fix" this. I suspect it weakens consumer confidence, further suppresses consumer spending and generally provokes the next step down in the death spiral.</blockquote>


I think a lot of perception is based on whether any bankruptcy was a liquidation versus a reorganization.
 
I have to say that the vast majority of what I hear from the public is overwhelmingly negative, dower and otherwise fatalistic. You cannot find one lone optimist amongst all the joe the plumbers. These people are already planning for Armageddon and crouching under their desks to escape the fallout. I know it seems like feel but these low of lows often portends a bottom. Like the unshakable belief just 4 short months ago that we would see $200 oil, that has now transferred to the markets and the economy as a whole.
 
If a bankruptcy filing qualifies as a credit event that results in a payout on the credit default swaps written for their bonds, then Congress will sign off on the loans the automakers are requesting. Ironically, this may cause the cascading effect that Ben and Hank sought to stave off with the AIG & Wall Street bailouts.
 
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