I have to come clean. I’ve been watching CNBC-TV with the sound “on” for a few weeks now (forgive me Father). Throughout the vicious sell-off, one perma-bull ( That’s someone you throw off the top of the Empire State Building and all the way down they say “so far so good”) after another says it’s a buying opportunity (Don’t believe me, just watch, they roll them out every few minutes). Now after all these “buying opportunities” I’m not sure what the average person would have left but just like a clock is right twice a day, so will these folks be one of these days.
As you know I’ve been waiting to see if the lows of October 10th could be tested and hold before considering some “trading” capital to the long side (remember, trading is really gambling, nothing more). The last couple of trading days, the U.S. market has fared better than overseas and looked like it may finally take a breather to the downside, but ends up selling off in the final hour. Make no mistake about it the final hour is the most important hour in the whole trading day. One of the reasons I believe this is occurring is if you want to buy or sell mutual funds, your order must be in before 3PM. It appears there are still net redemptions so funds sell what they need to in the final hour. Technically, this is also bearish. Today we fell like a rock in the final 30 minutes. Stay tuned.
U. S. Dollar – One day does not make a trend but we need to watch closely if today was a key reversal. The dollar is way off its highs of the day. I believe it has risen mostly because of various previous strategies of shorting it and going long foreign currencies and/or foreign stocks are being unwound. One never knows how long this can take but how could anyone think the U.S. Dollar is better off than the Euro, Yen or Loonie long term.
Gold – A significant drop in jewelry sales, hedgefund liquidations, a rising U.S. dollar, falling oil prices and the usual games played on the Crimenex (Comex) have brought gold to key support of $700-$725. I think we should hold, especially if we had a reversal in the dollar.
Base Metals – Still watching them from the sidelines but another 10% or so lower and I think I’ll fall in love with them again after two years of living apart.
Mining and Exploration Shares – I continue with daily prayer vigils.
Please note I will be travelling to Vancouver on Wednesday and be speaking at Michael Campbell’s conference on Saturday (www.moneytalks.net) I hope to be around the conference from noon to my speaking time at 3:30PM and hang around after it ends. I hope to see many of you there. Remember, no guns or knives.
Hey Peter,
Any plans to visit us in Toronto, ON?! The first time I had heard of you was at the Financial Forum two years ago… you planning to come again?
Thanks and Best Regards!
Just was at a show at the Convention Center a few weeks ago. As of now, not until PDAC in March.
Peter,
CNBC is wonderful to watch in a bear market. Some of the best shorting ideas may be picked, in a contrarian fashion, from CNBC bulls. The trick is .when thet talk about someting, to ask: can I short it? or Get Ready to short it?
piazzi
http://markettime.blogspot.com/
Posted on the CSG bulletin board as “Long term adjustment near complete” … hoping a broader audience will find the analysis worth reading and of use … if it helps one other investor … mission accomplished.
Orgy
If you look on a chart for 30+ years … the long term growth curve is near back to where it should never have strayed if the policy makers and regulatory bodies in the US had not been asleep for the last 15 years. In fact the Dow is a little low from where they should be and the TSK remains slightyly high to correct.
If this is in fact where the market should find its equilibrium as I would contend, then the markets should stabilize. (I’ll explain below why I don’t think they will)
Case 1 – Equilibrium has been reached and normalization will occur
Given the current recessionary pressure … it would not be surprising to see a mild pull back in stock prices … followed by a cautious rally with the weak dying and the strong getting stringer over the next two years. There is no justification to a sizable bouce back given the likelihood of a global recession. There is also no justification for much of a correction or drop because we have reached the longer term curve for the markets.
Case 2 – A further decline
The shift in the curve that has brought back the current levels of the Dow and TSX was inevitable under normal conditions. This begs the question: Are today’s conditions normal? Given the debt level of the US govt and consumers and now the US banking institutions …NO … in fact I would contend if the market had never skewed off with the irrational exuberance it showed from 95ish to 2007, we would be in for a marked decline caused by what I would have considered to be excessive debt levels and normal influences in the market that existed in 95.
These consitions were masked by regulators and policy makers who regardless of their intent … attempted to manage the economy for accelerated growth at a time when the North American economies were really hitting their maturity (that is the super growth rate caused by an emerging nation was coming to an end .. i.e. birth rates were in decline, there was no new sources of employees … women were now a strong and essential component of maintaining NA competitiveness… etc)
The mismanagement of the regulators and policy makers instead of creating an environment for growth created an environment for greed and corruption … I think we will all agree with that! Now its will be time to pay the piper and it won’t be the ones who stole the money from an unsuspecting public … it will be all of us with a continued decline in the asset values we hold in various forms in the market until such time as the excessive debt levels are cleaned up and like people and gov’t did in the 40’s through to the 70’s primarily lived within their means … there is no market panacea that can correct that one simple fact.
Excess spending can not go on indefinitely and those including govt’s who overspent beyond their means and capacity for re-payment (which by all accounts is 80%+ of the population) will have no choice but retract into a lifestyle more suitable for their income levels and ability to generate wealth. In the meantime contraction which will result from the need for gov’t to repay its own debts and once again begin acting responsibly will accentuate the downward lifestyle which we are destined to endure.
Like it or not the orgy of spending is over and we will pay the piper. I remain convinced that as a minimum we will hit the 4000 range (which may indeed be a more correct range over a 80 year growth chart) … but just as the expansion was excessive so to will be the contraction. ( I maintain 1000 …a 90%+ contraction in the market)
I exhort you all to be very cautious …. keep cash for a rainy day … and plan for the worse …. you will either be prepared or like myself be pleasantly surpised.
Orgy
Loved the “Crimenex (Comex)” dig! I just looked at the current price of gold with ExactPrice and I see it’s at $748.70. Trying to regain some of that lost ground over the last several weeks. Silver and Platinum both up, also. It seems to me that’s been a bit of a trend over night though so will see what happens come tomorrow. Though I wonder at platinum, perhaps the US automakers asking for fed money is helping it rise.
I usually have CNBC on in the background too. Though I can only take it in small junks.