# This market has to go backwards



## stocksontheblock (30 July 2009)

I have put some thought into the latest rally, and for what it’s worth it’s going to go backwards - I don’t know by how much, nor the sectors it will effect.

My reasoning is:

1. 12 months ago the world was going to be sucked into a black hole from which there was no return, hence profits and earnings were decimated and any forward looking statements reflected the end of days for which many predicated. So, no money to borrow, no money to invest, no money to pay people, put people off, produce less product as no one is buying and cant afford to keep employees means no money coming in and very bad results.

So ... why is the market going ahead on the most silliest of pretences?

My reasoning is:

2. If the world doesn’t sink into a black hole, as many predicated, then it means borrowing has increased (by whatever amount), people are buying the product, hence the product is being produced and therefore there is a cash flow coming in and people (some) are keeping their jobs, which means people (some) have cash (some) to spend on those products - and so the wheel keeps turning.

So ... why are all the Mickey Mouse analysts surprised at all the earnings from these companies when it is more than their 'forecasts'?

We all know many of these analysts couldn’t forecast rain even if they were standing in it, yet why seemed so surprised?

My reasoning is:

3. World doesn’t end. Things (generally) stabilise and pull back from the end of day’s predication and hence earnings can’t be as bad as first thought when we were sinking into the black hole, and thus earnings/revenue has to be better than first thought.

However, getting or missing the forecast is one thing, yet this is my thought on why it has to go backwards:

My reasoning is:

4. World is going to collapse. Earnings and outlook very very bad. World doesn’t end. Earnings look better than first thought. However, if in the process of ensuring the world doesn’t end you cut production, reduce prices, cut staff, don’t put as much into R&D or any sort of innovation then your cost base has suitably reduced, yet because of a lack of buying 12 months previous you have a stockpile of stock/goods, hence lots of goods to sell when things pick-up and due to little production and little staff and massive savings in cost means your balance sheet/profits look amazing.

This is just rubbish! So why are people so ready to believe that things have turned? I think they have bottomed, yet turned? You have to be kidding me. Maybe when these companies reduce their goods stockpile, produce more to replace the reduction, hire back some of the staff they put-off, invest in advertising and innovation again and they still manage to make these 'nice' and 'unexpected' earnings upgrades I might believe that we are once again on a true upward trend.

Don’t kid yourself people. Sell now, and buy later, if you think by not buying in now you are missing the move up, just think again. Think, why is it really moving up?


----------



## skyQuake (30 July 2009)

Its moving up cause insto money is flowing in, and retail punters are still staying put; and of course, many bears trying to pick the top of this move.


----------



## Sean K (30 July 2009)

stocksontheblock said:


> Don’t kid yourself people. Sell now, and buy later,



Thanks. Just dumped everything. Cheers.


----------



## beerwm (30 July 2009)

skyQuake said:


> Its moving up cause insto money is flowing in, and retail punters are still staying put; and of course, many bears trying to pick the top of this move.




how can you know this for sure, do u have a source?


----------



## vincent191 (30 July 2009)

The name of the game is to get into the lift on the ground floor. Hopefully the lift is going up otherwise it will be an unpleasant experience when we hit the basement.

It is all about EXPECTATIONS. Obama said this morning that he thinks the decline in the US economy is slowing. Many observers are saying that green shoots are starting to appear. 

Punters like myself wants to get in first. I realise the risk that the worst is yet to come but my EXPECTATIONS are things will start to get better.

It is not about who is right and who is wrong, it is more to do with my appetite for risk which is greater than yours.


----------



## skyQuake (30 July 2009)

beerwm said:


> how can you know this for sure, do u have a source?




Retail traders - Look at OP

Instos - none that i can disclose. But you can generally see which way its going. Eg. CEY large spurt one arvo a few days ago. Insto buying. Big4 upgraded by Citi today, obv some clients will be buying.
AUD inflows, brks yadaa yadda


----------



## Trembling Hand (30 July 2009)

beerwm said:


> how can you know this for sure, do u have a source?




LOL.

Mate everyone has the source. Prices. Look at the AUD, breakout in Asian indexes, NASDAQ leading S&P, lagging gold etc etc.

Funds are in risk taking mode. Been glaringly obvious for weeks.


----------



## skyQuake (30 July 2009)

Also fwiw, Materials and Energy sectors lagging. 

Similar to the Financials led rally a few years ago (after 06 correction i think)


----------



## Aussiest (30 July 2009)

But surely if earnings stay the same for next qtr or two, market keeps going up because results "exceed expectations", we can't keep trading on expectations? In other words, are we creating a bubble by trading on expectations - if earnings do not improve significantly over the next 12 months?


----------



## jonnycage (30 July 2009)

kennas said:


> Thanks. Just dumped everything. Cheers.




just did the same,  please advise when to jump back in.

jc


----------



## beerwm (30 July 2009)

skyQuake said:


> Also fwiw, Materials and Energy sectors lagging.
> 
> Similar to the Financials led rally a few years ago (after 06 correction i think)






skyQuake said:


> Retail traders - Look at OP
> 
> Instos - none that i can disclose. But you can generally see which way its going. Eg. CEY large spurt one arvo a few days ago. Insto buying. Big4 upgraded by Citi today, obv some clients will be buying.
> AUD inflows, brks yadaa yadda




thanks


----------



## Sunder (30 July 2009)

jonnycage said:


> just did the same,  please advise when to jump back in.
> 
> jc




Since everyone is going that way, I'm gonna be contrarian and stay in.


----------



## beerwm (30 July 2009)

Trembling Hand said:


> breakout in Asian indexes, NASDAQ leading S&P, lagging gold etc etc.




can u go into detail about those?


----------



## Trembling Hand (30 July 2009)

beerwm said:


> can u go into detail about those?




bit busy but,

https://www.aussiestockforums.com/forums/showpost.php?p=463936&postcount=6735


----------



## Sean K (30 July 2009)

Sunder said:


> Since everyone is going that way, I'm gonna be contrarian and stay in.



Ooo, I've just bought everything back, cheers.

lol


----------



## beerwm (30 July 2009)

yeh,

but how does this:


Trembling Hand said:


> breakout in Asian indexes, NASDAQ leading S&P, lagging gold etc etc.




tell you that:
"insto money is flowing in, and retail punters are still staying put"


----------



## Real1ty (30 July 2009)

Aussiest said:


> But surely if earnings stay the same for next qtr or two, market keeps going up because results "exceed expectations", we can't keep trading on expectations? In other words, are we creating a bubble by trading on expectations - if earnings do not improve significantly over the next 12 months?




Why can't we continue to trade on expectations?

What do we normally trade on?

Why won't/can't earnings improve?


----------



## stocksontheblock (30 July 2009)

Well, I didnt expect anyone to read my little rant this morning, however I do have to say:



vincent191 said:


> The name of the game is to get into the lift on the ground floor. Hopefully the lift is going up otherwise it will be an unpleasant experience when we hit the basement.
> 
> It is all about EXPECTATIONS. Obama said this morning that he thinks the decline in the US economy is slowing. Many observers are saying that green shoots are starting to appear.
> 
> ...




Vincent191, your right. Obama did say he thinks the US economy is in better shape/slowing down than previous months. Yet come on, this one is like shooting fish in a barrell. Its such a simple comment. When has Obama not come out and said it was slowing and not all going to hell? His job, is to reassure us all that all is good with the world and everyone will be fine. Do you really believe for a second that if it wasnt he would come out and say, "everyone the world is about the end and you should all just take that pill with your loved ones"? Of course not. The Fed Chairman in the last 4 weeks alone has contridicated himself at least 3 times that I am aware of saying the green shots are green, then there brown, and then they have a greenish tinge to them.

Everytime I turn on the idiot box and listen to equally idiot analysts there are green shoots, then no shoots. Show me someone who says they are green and I will offer up another who says there arent. Their guess is as good as mine, or yours.

I completely agree with you however, that its nice to be getting in the lift at the ground floor, yet a smoother and more controlled ride up gives a better feeling than racing up and having a bit to much friction to snap the wires and we all come hurtling down.

My risk is great at the moment. Yet it has a slight element of calculation to it - right or wrong, I just dont need to be part of the heard, we know what happened to them last time.



Aussiest said:


> But surely if earnings stay the same for next qtr or two, market keeps going up because results "exceed expectations", we can't keep trading on expectations? In other words, are we creating a bubble by trading on expectations - if earnings do not improve significantly over the next 12 months?




Completely agreed. Tech bubble? Anyone remember that one? Housing bubble? Anyone remember that one - you should, thats the mess right now!

I am not trying to suggest the market is going to crash and burn, yet - and I know this is only a dream - some responsibility would be great when it comes to avoiding this 'bloody and horrible' mess in the future. I dont have millions to lose, and if I did, I still wouldnt want to lose it in this haphazard and irresponsible fashion.


----------



## Trembling Hand (30 July 2009)

beerwm said:


> yeh,
> 
> but how does this:
> 
> ...




I don't care what retail traders think or do. Just have a look at the H & S thread to see how clueless they are!!

The only thing that moves markets in sync with currencies are insto. That's why the AUD got F up big time last year along with the XAO. Global funds where retiring, *risk adverse*. The only thing that will move Indexes and currencies is global funds *seeking risk* or retreating from it.

Have a look at what is moving relative to other things,

safe USD to commodities Currencies. Don't argue with me about the safe bit.

Tech stocks vs old industrial (nasdaq v sp500).

Asian stock index vs Euro indices.

This is the basis of trading, funds are global and very fast in nature. They move quickly and they leave footprints forget TA, FA, and everything else. First learn why markets move ...... it isn't because a stochastic has reached oversold. Its because elephants decided to stampede


----------



## beerwm (30 July 2009)

Trembling Hand said:


> I don't care what retail traders think or do. Just have a look at the H & S thread to see how clueless they are!!
> 
> The only thing that moves markets in sync with currencies are insto. That's why the AUD got F up big time last year along with the XAO. Global funds where retiring, *risk adverse*. The only thing that will move Indexes and currencies is global funds *seeking risk* or retreating from it.
> 
> ...




nice, well explained


----------



## Sean K (30 July 2009)

Trembling Hand said:


> Its because elephants decided to stampede



I haven't read this in any technical analysis document before. I must do a google on 'stampeding elephants' and adjust my trading and investing accordingly.


----------



## Timmy (30 July 2009)

Trembling Hand said:


> I don't care what retail traders think or do. Just have a look at the H & S thread to see how clueless they are!!
> 
> The only thing that moves markets in sync with currencies are insto. That's why the AUD got F up big time last year along with the XAO. Global funds where retiring, *risk adverse*. The only thing that will move Indexes and currencies is global funds *seeking risk* or retreating from it.
> 
> ...




Thanks TH.  Your blood is worth bottling.


----------



## trainspotter (30 July 2009)

Try typing "Lemmings off a cliff" for a better result


----------



## trainspotter (30 July 2009)

Hmmmmm ... not sure what happened there? Elephant stampede did not pass GO nor collect $200.

Thanks TH ... I modified my response accordingly.


----------



## Trembling Hand (30 July 2009)

trainspotter said:


> Hmmmmm ... not sure what happened there? Elephant stampede did not pass GO nor collect $200




I actually deleted it because on further considerations it may of upset the kiddies


----------



## Real1ty (30 July 2009)

trainspotter said:


> Try typing "Lemmings off a cliff" for a better result




I remember the call of lemmings on this forum in December 07 by nioka, when i sold out of all my holdings, he called it a good time to buy 

From memory my biggest holding sold was MAH at about 1.87, it's .41 now.


----------



## MRC & Co (31 July 2009)

Trembling Hand said:


> This is the basis of trading, funds are global and very fast in nature. They move quickly and they leave footprints forget TA, FA, and everything else. First learn why markets move ...... it isn't because a stochastic has reached oversold. Its because elephants decided to stampede




This is something that is NEVER talked about on forums.

Wonder why?  

Why markets move.


----------



## tech/a (31 July 2009)

MRC & Co said:


> This is something that is NEVER talked about on forums.
> 
> Wonder why?
> 
> Why markets move.




Of course it is.
Software has even been developed to attempt to track the big players.
Works well.


----------



## Frogacle (31 July 2009)

stocksontheblock said:


> I have put some thought into the latest rally, and for what it’s worth it’s going to go backwards - I don’t know by how much, nor the sectors it will effect.




I'm new here and this is probably a silly question, but are you saying that markets go both up AND down?


----------



## Sean K (31 July 2009)

Frogacle said:


> I'm new here and this is probably a silly question, but are you saying that markets go both up AND down?



I'm still trying to work out how a rally goes backwards.


----------



## wayneL (31 July 2009)

kennas said:


> I'm still trying to work out how a rally goes backwards.



I suppose it's a bit like negative growth.


----------



## stocksontheblock (31 July 2009)

kennas said:


> I'm still trying to work out how a rally goes backwards.




I don’t think for a minute that I am suggesting a market goes down when there is a rally - upwards! I am asking why there is a rally, apart from the obvious, that people want to have some good news and move up, rather than down.

What I am suggesting is that this rally has no basis if all it is based on is company earnings.

Assume the market is bad, and I have $100, and my costs are $90 then in theory I have a cash flow position of $10. Not very good when I report it, is it? However, if I cut some production, reduce product costs (retail end), put some staff off, ease back on development I can reduce my costs to say $50. Just because I can now report a cash flow position of $50 doesn’t mean I have excess cash and hence my balance sheet looks better.

At some point, to remain a viable business I will need to produce more - assumption based on market getting better - employ some more staff and hence costs increase, and I go back to TRUE economies of scale, which might not be as bad as $90 for production costs, yet it wont remain at $50, so earnings will have to decrease later.

All in all, a bubble is created and we - possibly - end up no better off than where we are now! Just because you pump prime an economy doesn’t mean it will prove fruitful. If I recall, some 80% of the money of Government handouts was kept or not spent on anything that would prime an economy. The real world theory is: if I might lose my job, discretion spending can be tightened and I need to save more, and in real terms I am not saving to spend big later, I am saving to cover my a$s and reduce personal debt, then the rubbery market figures are just that, rubbery.

I would also add that what has surprised me is that very few people seem to have taken into account the VERY high increase in credit card debt. This will come back to bite, and could be the catalyst to start all this mess again. The US is experiencing just this, as well as Europe, with particular focus on the UK with personal debt ratio's, the last time I saw anything that suggested that it ran at some 130% to income – not including mortgages. Now this can’t be good, or can it?

HOWEVER, as always ride the wave up and make some money, yet I am merely suggesting that this is not the end of the bad news, bad results and extreme volatility in the market. I hope I am wrong!


----------



## skyQuake (31 July 2009)

Agree somewhat in theory but stockmarkets lead by 6 months or so.

Thats why economists get it wrong so often


----------



## Timmy (31 July 2009)

stocksontheblock said:


> this is not the end of the bad news, bad results and extreme volatility in the market. I hope I am wrong!




There is always going to be bad news, bad results and, from time-to-time, extreme volatility.  So don't worry, if you keep saying what you are saying you will, at some stage, be able to say you were not wrong (thus endeth the lesson in how to be a market commentator).


----------



## Beej (31 July 2009)

stocksontheblock said:


> What I am suggesting is that this rally has no basis if all it is based on is company earnings.




 What else do you think it is you are actually buying when you buy a share in a company on the open market???



> Assume the market is bad, and I have $100, and my costs are $90 then in theory I have a cash flow position of $10. Not very good when I report it, is it? However, if I cut some production, reduce product costs (retail end), put some staff off, ease back on development I can reduce my costs to say $50. Just because I can now report a cash flow position of $50 doesn’t mean I have excess cash and hence my balance sheet looks better.
> 
> At some point, to remain a viable business I will need to produce more - assumption based on market getting better - employ some more staff and hence costs increase, and I go back to TRUE economies of scale, which might not be as bad as $90 for production costs, yet it wont remain at $50, so earnings will have to decrease later.




This logic is flawed. If a business has been able to restructure it's cost base and production output such that it is able to satisfy a change in demand (downwards) without going bust, and can now generate a consistent profit at the new demand level, then they are sweet! You seem to presume than an individual business must have growth to remain viable/profitable - that is simply not correct.

The big killer in recessions for earnings is normally a surprise drop in demand, leaving businesses with loads of inventory that they can't clear and so have to write it off and get rid of it below cost = big earnings hit. Added to that of course they are geared up for higher production than what is now required (too many staff, too many factories, too much debt or whatever = costs too high to be profitable = burn cash and go out backwards). In this current case, I think because the crisis started o/s, a lot of business saw a severe downturn coming, and had time to scale back costs, clear inventory etc, such they were ready for the down turn to some extent. That's why earnings now are not as bad as many forecast.

The only reason we need a return to growth is if investors want to see capital appreciation in our shares via earning growth. But in the absence of growth (or in a contraction), I'll take steady reliable profits anytime over a bankrupt enterprise and the loss of all value in my shares!



> All in all, a bubble is created and we - possibly - end up no better off than where we are now!




IMO I don't think the current rally is a bubble - the market overshot to the downside massively pricing in a scenario far worse than what it appears we actually have, so the market is just re-adjusting accordingly as earnings and other data confirms this.

Cheers,

Beej


----------



## Trembling Hand (31 July 2009)

Timmy said:


> So don't worry, if you keep saying what you are saying you will, at some stage, be able to say you were not wrong (thus endeth the lesson in how to be a market commentator).




LOL. Subtle


----------



## Timmy (31 July 2009)

kennas said:


> I'm still trying to work out how a rally goes backwards.




yllar


----------



## stocksontheblock (31 July 2009)

skyQuake said:


> Agree somewhat in theory but stockmarkets lead by 6 months or so.
> 
> Thats why economists get it wrong so often




I keep hearing this one, and I hope your right.



Timmy said:


> There is always going to be bad news, bad results and, from time-to-time, extreme volatility.  So don't worry, if you keep saying what you are saying you will, at some stage, be able to say you were not wrong (thus endeth the lesson in how to be a market commentator).




Yep, bad news in a good market is one thing, yet good news in a bad market is not always as good as it might seem.

Ohhh, and look out Alan K, I'm after your job!


----------



## stocksontheblock (31 July 2009)

Beej said:


> This logic is flawed. If a business has been able to restructure it's cost base and production output such that it is able to satisfy a change in demand (downwards) without going bust, and can now generate a consistent profit at the new demand level, then they are sweet! You seem to presume than an individual business must have growth to remain viable/profitable - that is simply not correct.




Maybe if I run a corner store I am not so much interested in growth, thats for sure, yet if I run say, BHP etc then I am in the business of growth. My product is finite and I must find more, or other products that I can diversify into, otherwise when I dig the last lot of 'stuff' out of the ground its the end of me.

As with many businesses in great times they have a tendency to have more staff than they need yet the business can carry it. Further, in mining particulary it costs more to close operations than it does to continue to run them. So, cut staff, run the plant and operation to maintain a baseline level of production and you still produce - yet not sell as much, cut costs in the short term and your books look better. This is fantasy reporting, not actual reporting for many businesses.

I would also suggest that these companies are not, "generate a consistent profit at the new demand level" as you suggested. My whole point about the lastest reporting season is that they have excess cash yet they have not generated or provided a new level of profit based on their products, the 'profit' is based on cost cutting, which is very different. If sales had stayed equal or increased then you would be right, however they have declined - possibly not in line with cost cutting, hence cutting outweights sales and sales - as a headline figure look better than what they are.



Beej said:


> The big killer in recessions for earnings is normally a surprise drop in demand, leaving businesses with loads of inventory that they can't clear and so have to write it off and get rid of it below cost = big earnings hit. Added to that of course they are geared up for higher production than what is now required (too many staff, too many factories, too much debt or whatever = costs too high to be profitable = burn cash and go out backwards). In this current case, I think because the crisis started o/s, a lot of business saw a severe downturn coming, and had time to scale back costs, clear inventory etc, such they were ready for the down turn to some extent. That's why earnings now are not as bad as many forecast.




Yes, however this only applies to specific industries. Housing, retail, and mining certainly dont fit into this one, well not that can I see.



Beej said:


> The only reason we need a return to growth is if investors want to see capital appreciation in our shares via earning growth. But in the absence of growth (or in a contraction), I'll take steady reliable profits anytime over a bankrupt enterprise and the loss of all value in my shares!




I completely agree. Great statement, however are these 'profit reports' really PROFIT's, or just excess cash from cutting/scaling back so much, and not driven by real sales. Thats my whole point in starting this thread, I cant see - with much of the market - how this is a sales driven profit, its a cost cutting driven profit?!?!


----------



## Beej (31 July 2009)

stocksontheblock said:


> I completely agree. Great statement, however are these 'profit reports' really PROFIT's, or just excess cash from cutting/scaling back so much, and not driven by real sales. Thats my whole point in starting this thread, I cant see - with much of the market - how this is a sales driven profit, its a cost cutting driven profit?!?!




There is no difference. If anything profits delivered after cutbacks are "better" as they have to be made after accounting for a whole lot of one time costs like inventory/plant write-off, staff reductions, debt adjustments etc etc.

Cheers,

Beej


----------



## Sean K (31 July 2009)

stocksontheblock, I think you are generally misinterpreting the stockmarket for the economy.


----------



## prawn_86 (31 July 2009)

kennas said:


> stocksontheblock, I think you are generally misinterpreting the stockmarket for the economy.




Very good post. As many others have said, the stockmarket is more of a forward looking 'prediction' mechanism in the longer term. It prices what it thinks will happen, not what does, or 'should' happen.

The economy is what does happen, but the figures are on ever lagging due to the nature of the reporting.


----------



## Real1ty (31 July 2009)

stocksontheblock said:


> I would also suggest that these companies are not, "generate a consistent profit at the new demand level" as you suggested. My whole point about the lastest reporting season is that they have excess cash yet they have not generated or provided a new level of profit based on their products, the 'profit' is based on cost cutting, which is very different. If sales had stayed equal or increased then you would be right, however they have declined - possibly not in line with cost cutting, hence cutting outweights sales and sales - as a headline figure look better than what they are.
> 
> I completely agree. Great statement, *however are these 'profit reports' really PROFIT's, or just excess cash from cutting/scaling back so much, and not driven by real sales*. Thats my whole point in starting this thread, I cant see - with much of the market - how this is a sales driven profit, its a cost cutting driven profit?!?!




Do you think that instos that pour million after million into the market (and as has been pointed out are the ones that move the market) do not know this?

What you are not taking into account in your lagging view is the room for improved revenue.

Yes, the profits have exceeded expectations mainly on running tighter ships but that is in the past.

The market is clearly looking forward and seeing businesses running leaner and with the possibility of an improvement in economic conditions, as many indicators GLOBALLY are pointing to, as the next expectation for revenue growth.


----------



## So_Cynical (31 July 2009)

Aussiest said:


> But surely if earnings stay the same for next qtr or two, market keeps going up because results "exceed expectations", we can't keep trading on expectations? In other words, are we creating a bubble by trading on expectations - if earnings do not improve significantly over the next 12 months?




Yep and perfectly summed up....just look at some of the dividend yields, buying at today's prices...its woeful EG : CSR under 2% TOL under 3.5% MQG under 1%, not to mention most of the real estate stocks that have simply stopped paying them.


----------



## doctorj (31 July 2009)

This is doing the rounds via email here..


> "post the initial crash of 1929-1930 equity rally lasted 147 days and the market was up 46% from it's low before the apocalypse kicked everyone in the teeth and we went to the all time low! Now we're 145 days off the March 6th low this year and the market is up 46%..."


----------



## Julia (31 July 2009)

So_Cynical said:


> Yep and perfectly summed up....just look at some of the dividend yields, buying at today's prices...its woeful EG : CSR under 2% TOL under 3.5% MQG under 1%, not to mention most of the real estate stocks that have simply stopped paying them.



Where did those yields come from?  E-trade has MQG with a div yield of 4.3% with 60% franking.


----------



## So_Cynical (31 July 2009)

Julia said:


> Where did those yields come from?  E-trade has MQG with a div yield of 4.3% with 60% franking.




I'm simply assuming the last dividend will be carried forward....goes for anything in life, your 
only ever as good as what u did last.

MQG closed today at 44.02 last divi was 40c...annualized that 80 cents per year for a return 
of under 1.9% ~ sorry for the miscalculation...maths is not my strong point.


----------



## MRC & Co (1 August 2009)

tech/a said:


> Of course it is.
> Software has even been developed to attempt to track the big players.
> Works well.




Are you talking about tradeguider?

If so, I think you misunderstand what I am talking about.


----------



## Uncle Festivus (2 August 2009)

Real1ty said:


> Do you think that instos that pour million after million into the market (and as has been pointed out are the ones that move the market) do not know this?
> 
> What you are not taking into account in your lagging view is the room for improved revenue.
> 
> ...




These insto's 'do it' because they have to, or miss out on 'being in the market', not because their research department suddenly puts out a buy rec on a bunch of stocks based on forward revenue projections or fundamentals? It then becomes a self fulfiling positive feedback loop until - it isn't? You want to hope that there isn't another pullback or battle weary investors will give up on equities as an investment for good. Perhaps they could buy property - woops, bubble already happening - all pile in creating momentum and a bubble then wack, interest rates go up! Stevo has as much said this loud and clear last week.

The current rally is based on 2 things - fear of missing out on a rising market after what appears to be the effects of government stimulis packages taking effect in varoius ways? What happens after the ephemeral stimulis runs dry, like the cash for clunckers scheme? Will we be left with a solid productive base or have we only just 'bought-it-forward', bringing forward consumption to the present and leaving a vacuum for the future consumers?

There is evidence that the Japanese are hanging by a thread as to whether companies start sacking idle 'career-for-life' type employees in the hope that in the meantime the economy picks up. This is similar to most economies also waiting on borrowed time (literally!) to see if they can ride through to the other side. The only problem is, because companies so called 'better-than-expected' earnings are based on cost cutting & sackings, and even the odd divestment, they have inflicted collateral damage by eliminating the very consumer base required to buy their products for a sustainable future - a negative fb loop?

Expectation & hope funded by Trillion dollar debt - an interesting experiment if it works, if the new bubbles growing around the globe don't pop first.

Before we had massive private debt - now we have massive private debt AND massive government debt - noyce one humans


----------

