Thursday, November 20, 2008

"The Bottom" Coming Soon To A Market Near You

One of the signs of a bottom according to the IBD is when you start seeing bears on the covers of major news magazines. When the national media (not just CNBC and other 24-hour "news" outlets) become obsessed with the bear and the bottom, the fog will soon clear. So it actually made me feel pretty good this morning to read this article in The Times, that seemed to suggest we were screwed beyond repair.

Below is an excerpt.

But it was financial stocks that bore the brunt of the selling, and, for many analysts, seem the most worrisome. Financial shares are plunging far below the levels plumbed in October, when panic gripped the markets. On Wednesday, Citigroup, the hobbled financial giant, plunged 23.4 percent to a mere $6.40 in an avalanche of sell orders. Once the most valuable financial company in America, Citigroup is now worth less than U.S. Bancorp.

Big banks like Bank of America, JPMorgan Chase and Wells Fargo & — all of which, like Citigroup, have received billions of dollars from the government — fell more than 10 percent.

Goldman Sachs, the former employer of Henry M. Paulson Jr., the Treasury secretary, sank to its lowest level since it went public in 1999. Analysts predicted that Goldman, the most profitable bank in Wall Street history, would suffer its first loss as a public company.

Even Warren E. Buffett’s Berkshire Hathaway, which owns the Geico Corporation and recently invested in Goldman Sachs, fell 12 percent, its steepest decline in more than two decades. The Dow Jones industrial average closed down 427.47 points or 5.07 percent, at 7,997.28. The broader Standard & Poor’s 500-stock index closed down 6.12 percent or 52.54 points at 806.58 while the technology-heavy Nasdaq ended down 6.53 percent at 1,386.42.

But even as markets tumbled, analysts saw few signs of capitulation, that final burst of panicked selling that typically marks a market bottom. If anything, Wednesday’s new lows are a sign that Wall Street has farther to fall.
Another newer sign that Mr. O'Neill and his group might be interested in, is the bearish commentary left on blogs. If you read "the Fly's" blog, you might have noticed that the "head bear" in the comment section, "DevilDog," has been particularly triumphant lately, explaining that he has the perspective of real pain, and therefore knows that we're screwed beyond belief and that this time it's different and that we're never going to bounce and that America is dead forever.

I agree, in many ways we are "fuckified," but these bears assume fear is stronger than greed. It's not. The two are equal and they're what make the market work.

Remember the idiots in 2000 who were saying silly things like "Dow 30,000!" in just a few years? Well, they're cut from the same cloth as the idiots who are now saying Dow 4000 until 2040.

Greed just won't let that happen. This is short-term myopia. The market has been around for hundreds of years and human psychology hasn't changed much since then... why should it now?

And of course, the fact that once again I considered buying a gun and storing grains and water in my basement mean sometime in the next couple of days there's gonna be a massive spike. Hopefully, this time it will hold.

Anyway, the scariest outcome from a trading and investing perspective is what reader "Jawbone" mentioned last night in my comment section. That we could have an "L-shaped" bottom, whereas we decline and just stay there for an extended period of time. That truly scares me, because it would make trading nearly impossible on a short-term basis.

Anyway, for now, I'll take a bet that this time is bad, but no different from past panics we've had, because greed will soon rear its beautiful head again.

NOTE: However, shit like this gives me pause...

4 comments:

newequity said...

Dow 4000-6000 range is a lock for the next 15 years minimum. I blew out all my long accounts and went net short.

Dinosaur Trader said...

Wow, now I'm really getting bullish!

How'd that 70k GNW work out?

-DT

newequity said...

I ended up losing money. You get joy from that, sic.

btw, you still holding the UYG bag?.

Complacent Panda said...

I'm all up for some bullish action, but how can the market go higher when earnings are going lower and lower? The United States debt to GDP ratio scares the hell out of me as well. Too many people with houses they can't afford, cars that have more debt on them than they are worth, credit cards that are being used like atm machines. I'd love to be on your side, but I think the market will have to at least test the 2002 lows, and more than likely, get some debt relief (i.e. better bankruptcy laws to lower our debt to GDP ratio) and find a way to get people in the US to save. China, and other foreigners, aren't going to bail us out of this one.

But we'll see. If I am wrong, I'll be very, very fucking happy! =)

My Grandpa talks about the Great Depression all the time (even without the markets in a mess) and I don't want to experience anything like it.