jb32 wrote:
I have to chime in and disagree with Trader1 here. The market in March was priced for armagedon, which did not happen. And there have been so called 'green shoots' in the markets lately. I believe the rally was based on some fundamentals in the economy. Not good news per se, but less bad news. The rally was in large part because many economic indicators are not still plunging, but have rather gained stability.
Consumer Confidence has doubled in the past 2 months based on the future expectations component. People see things getting better in the future and not worse as things were in April. Consumer Spending has flatlined over the past 2 months and is no longer declining. Retail Sales have also reached a floor. Durable Goods orders have also stabalized and are no longer falling. In addition, housing seems to have reached a trough. Both New and Existing Home Sales have stopped falling and appear to have reached the floor. The Baltic Dry Index, which is a measure of international trade, is up 377% since its December low. TED spreads are back near there historical norms. The VIX index is back to more normal levels. Commodities are up across the board. Oil and metals are up. Dr. Copper is up significantly in the past few months. Treasuries yields are rallying as investors are moving into more risky asset classes. Banks have been able to raise capital in the public equity markets.
These are all examples of the 'green shoots' of a recovery and show the market rally does have some legs to stand on.
I've been on hiatus for a while, but disagreement is good. Things would be real boring if we can't share our different opinions.
I will grant that on the surface, less bad news is good news. But, we're passing through the eye of the hurricane when everything seems calm, but when it will actually get worse again very soon.
What I see as troubling signs that the market rally is not sustainable:
1. Insider Selling at extreme levels
https://www.bloomberg.com/apps/news?pid= ... lROe0Pe0QMhttps://www.forbes.com/2009/05/05/inside ... argin.htmlIf insiders actually see things getting worse (which I think it will), then they have been acting smart to free up cash now into a nice bear market rally before the markets resume the next leg downward. If they are actually de-leveraging their personal financial positions along with everyone else, this is understandable but still points to continued weakness in spending and investment, which will be essential for a full recovery.
2. Currency crisis in the US dollar and an epic financial crisis in OTC derivatives still unresolved.
https://network.nationalpost.com/np/blog ... fault.aspxhttps://money.cnn.com/2009/06/22/news/ec ... 20090624103. Decline in access to credit and availability of loans for consumers will hamper any economic recovery.
https://online.wsj.com/article/BT-CO-200 ... 16178.htmlhttps://www.forbes.com/2009/06/16/whitne ... quity.html"We expect further line reductions and $2.7 trillion in credit card pulled from the system by 2010," Whitney said.4. Businesses are continuing to cut capex, unemployment is still rising, mortgages and credit defaults are still rising, and consumers/businesses are still deleveraging.
https://www.forbes.com/feeds/reuters/200 ... USIVE.htmlhttps://www.bloomberg.com/apps/news?pid= ... 1S8bp1DPiAhttps://www.reuters.com/article/rbssFina ... 4020090624https://retailtrafficmag.com/charts/comm ... high-0609/https://industry.bnet.com/financial-serv ... tensifies/https://www.msnbc.msn.com/id/31064583/ Recently, I have been humbled after reading Taleb's The Black Swan. Instead of trying to perfectly time the markets (which is more luck than anything, but still something that I have fun in trying to do), the best thing we can do is keep a steady head on our shoulders and prepare ourselves for the highly improbable events, both positive and negative, that have been so powerful in shaping world history. I highly recommend the book for anyone that is into the financial markets, history, and philosophy.