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>Bottom line is that very little has really changed
>in the big picture during the past several years to
>pave the way for economic and business prosperity.
This isn't completely true. Businesses have done what they always do in
recessions: they cut expenses. So when things do begin to turn up, much
more of the top line will fall to the bottom line. This process have been
going on in businesses for well over a year. It's one reason why capitalism
works so much better than socialism: we cut the fat during recessions.
>Yes, some of the air has come out, but not nearly
>enough to radically alter the bull market belief system
>of continuous, unlimited, and effortless prosperity for all.
Strongly disagree with this. Many people have been forced to put-off or
come out of retirement because of what has been done to their retirement
savings. And many others have had their savings cut in half or worse. Once
burned, twice shy. And many have been badly, badly burned.
>I will remain bearish until a lot more air has been let
>out of the equity, housing, credit, and consumption
>(especially import) markets.
Granted, housing, consumer credit and consumption remain a serious problem.
Consumers typically go into recessions strong as they have in this one and
consumers get weak in the midst of the recovery while businesses begin
growing again. I think the key to the next 2 years will be how severely the
consumers are hit in the next few months. Consumers are way over-extended.
As for imports, imports will remain a problem for decades. As long as the
Democrats keep pushing legislation to export jobs, the United States will
have to keep importing stuff. In the long run, imports may be the undoing
of this country. But that's the long, long run.
>I have mentioned many times here that such a great
>bull market can only be corrected by a combination
>of price and time.
Price and time leaves the option for the market to move sideways for an
extended period. Let's not lose sight of that. We don't have to correct
the excesses of the late 90's by going down further than we have.
>More specifically to the shorter term, I am sensing
>fatigue on the part of the consumer
Granted, this is coming (probably by spring) and the magnitude of the hit
will scope what comes next.
>and there is no other Great Consumer which is going
>to bail out the world by consuming excess goods and
>services.
Not neccessarily true. The excesses in this country weren't experienced
around the world. Some countries will begin to pull out of it. I wouldn't
say there is a Great Consumer, but there will be some increase in global
demand.
>I also believe that military operations in the Middle East
>are going to be far more difficult and prolonged than
>widely believed. The people of Iraq and surrounding
>countries are just not going to kneel down in front of
>the US military even though they may not mount overt
>and concerted resistance.
QED. We cleaned up in Iraq last time (granted that war was heavily slanted
in our favor as we look back on it, but at the time people were saying "Viet
Nam II" and "Iraq has the world's 5 largest army" (they rank much lower
now)). We cleaned house in Afghanistan when people were talking about how
the USSR got it's butt kicked there. I think we may be underestimating the
military effort in Iraq, but I think things will be largely wrapped up in a
few months and we will be down to a police force like we are in Afghanistan
now. And I think it's possible that other countries will help pay for and
provide troops for peace-keeping ops in post-Saddam Iraq.
>A home grown despot is always preferable to foreign
>rule and occupation.
How about freedom? What do people prefer more: a home-grown despot or
freedom? Did you know they held elections in Afghanistan last year? When
is the last time you heard anyone use the word "Taliban"? They aren't
taking women into the soccer stadium on weekends, tying them to a post and
shooting them in the back of the head either. We are a long way from
declaring success in Afghanistan but we are clearly on the road to creating
a stable, self-governing, free country.
>Make no mistake, the plans are to occupy Iraq and
>use it as a platform to carry out operations throughout
>the Middle East while pumping as much oil as possible.
Paranoia. We are going to get in, kill or oust Saddam, set up a government,
and leave. Without question, the global oil companies will go in and bribe
all the newly elected officials to sign huge E&P contracts. The big oil
companies produce oil, not the US military. And there are really almost
more opportunities for exploration and production around the world right now
than they can handle. Iraq is just one more patch of ground that is too big
for any single oil company.
>Need I mention that there is still a lot of crap on the
>corporate books, especially outlandish pension plan
>projections?
This I highly doubt. Although there have been rumors about JPM for a long
time. It wouldn't surprise me if some big bank goes LTCM. The thing is,
they have had a long time to unwind dangerous positions. It's a toss up as
to whether or not they were smart enough to get it done. Expecting more
monkey business on the balance sheets is just pure speculation. And when
CEO's see other CEO's being paraded around in hand-cuffs, things get
straightened out.
The real danger as we both seem to agree is the over-extended consumer.
This could hit the small- and medium-sized banks if the consumers get hit
too hard.
>Bottom line? The next (interim) bear market bottom is probably 3-6 months
>away, although it is possible we could get a major bottom if the policy
>makers leave the market alone. The real bottom of the bear is some
>combination of 500+- SP points and 7 years away. The next major bull market
>is probably 15+- years away. This remains an extremely dangerous equity
>market suitable only for nimble traders.
My bottom line: there's no way in hell we're going down 500 more points on
the S&P. We may retest the July/October lows and may even break them by a
bit. But I think we're going sideways from here for years to come.
Definitely a traders-only market. Bye-bye, Buy-and-Hold.
Kent
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