Quote:
Originally Posted by Guy
nmap:
Are you buying or just commenting on the subject of the economy?
The reason I'm asking is...I work with a Senior Economics Advisor and he comments ALL the time on the economy/stock market yet; I'm the person buying and jumping into it.
Kinda reminds me of when...I'm sweating like SOB with all this gear on, in the back of MRAP that the A/C does not work in; and some person in the rear is telling me..."The stuff was delivered!" While I'm standing right there, where the stuff was supposed too be delivered at yelling..."IT AIN'T F@*KING HERE!" 
Stay safe. |
Sir, I am
NOT buying here. We may be approaching a bottom, and the level of fear is beginning to be noticeable - but the market and the general economy have some problems.
First, Lowry's statistics. I get these indirectly through a newsletter; the selling pressure is
increasing, and has increased to record highs. This despite repeated 90% down days. (These are defined as days where downside volume equaled 90.% or more of the sum of Upside plus Downside volume). This simply means that selling has not been exhausted. Rallies are likely to be crushed under a wave of selling.
Second, Barron's confidence index. It can be found in the market lab, under bond statistics. Here's the latest:
Confidence Index
(High-grade index divided by intermediate-grade index; decline in latter vs. former generally indicates rising confidence, pointing to higher stocks.)
last week = 58.1
previous week = 53.7
one year ago = 81.8
Levels like this suggest that bond buyers - who tend to be more sophisticated than stock buyers - are willing to sacrifice yield for safety. The numbers suggest a recession. And, the numbers at this level are bearish. There is one tiny little glimmer of light in that last week is better than the previous week.
Next, global trade as measured by the cost of shipping dry goods has fallen through the floor. The index is the Baltic Dry Index - I've attached a chart. The fall in global trade is suggestive of poor economic fundamentals.
The failure of Iceland and the risk of further failures among the East European block is problematic. Likewise the possibility that the U.S. bailout will extend to insurance companies.
Fear is present - but not the wild-eyed, gibbering, quaking in the boots panic I'm looking for. People are holding onto their stocks, assuring each other that every ting will come back and life will be good. Panic is where people look at their depreciated assets, swear never to invest again, and sell no matter what the price. Back in 1974, I saw ads in the Wall Street Journal that suggested the Dow would fall to 300 or lower. I don't see those yet.
Anecdotal evidence. This is of dubious (at best) quality, but it sounds as if a lot of businesses are getting hammered. On the other hand, such reports can be deceptive.
Finally, stocks are not yet great values according to historic measures. We have high PE ratios and low dividends - and that is using current earnings. The problem is, we have yet to see earnings reports that include the rapid slowdown in various sectors of the economy. If those reports show sharp declines, then stocks
remain expensive according to historic valuation measures.
So, I'm not ready to buy. I wish those who choose to do so the very best of luck, and perhaps I will miss a great opportunity, but I think we have more discomfort coming. It appears you are buying - perhaps you have some information I've overlooked?
And if you come across any data or observations you care to mention, I would very much appreciate the chance to see them!