Imminent and severe market correction

[Wysiwyg]

When things like this happen, you start to wonder though.

That blokes a nutter isn`t he.

 

[moXJO]

That blokes a nutter isn`t he.

Mayor Nutter

 

[Uncle Festivus]

i agree dhukka

the problem is, is that the market is pricing in short term earnings recovery. but the numbers on short term earnings recovery just dont add up... most of those being the big weights in the ASX200: i.e. CBA WBC ANZ WES WOW

and all of these coys have indicated worse than expected earnings for FY10

but market is pricing in FY11 earnings forecasts

We are already back to pe trend, but probably overshoot to the upside?

https://www.aussiestockforums.com/f...attachmentid=32986&stc=1&thumb=1&d=1252287724

Many companies are now running a lot leaner than they were, something that was highlighted during the last US reporting season especially.

A lot of companies beat expectations as the bottom line was better than was expected and we rallied accordingly.

This was met with laughter and derision by many who believed the world was being fooled as expectations were not based on revenue growth but cost cutting.(They must have thought they were the only ones that could see this )

Isn't 'running a lot leaner' meaning that they have sacked people and cut inventories simply because nobody is buying their stuff? There was simply no revenue growth at all from the majority of SP500 companies.

'Beating expectations' & 'better than expected' is an economists way of saying they stuffed up with their projections - "so now we will lower our expectations so low that even a loss will be 'better-than-expected'"

The market has continued to rally with hardly a blip on the radar since then.

A lot of companies have the possibility (And that is what it is, not a guarantee but a possibility or maybe opportunity is a better word) to produce excellent results from greater margins, less competition, bargain based purchases etc etc.

Conversely they have headwinds as well, of course, especially reduced consumer spending and increased debt costs etc

I don't agree that companies have indicated worse earnings than last year but imo they have been cautiously optimistic.

You don't know what the market is pricing in nor do i or anyone else but i believe that many that query the sustainability of this rally and believe that the next reporting season will see disappointing results will be disappointed once again.

Of course like everything in life, time will tell.

They will still have to sell things to people who have jobs, but unfortunately the jobs lost have been exported to places like China who has huge excess productive capacity (and about 30 million unemployed?) and can make things for cheaper than the US. These jobless consumers won't be consuming again any time soon, if at all. It's a major structural shift in the US consuming middle class?

The transition from being too pessimistic to being too optimistic?

The blended earnings growth rate for the S&P 500 for Q3 2009, combining actual numbers for companies that have reported, and estimates for companies yet to report has improved from -21.9% from -22% in the last week.
As of July 1st, the earnings growth rate was -20.9%.Of the 499 S&P 500 companies who have reported Q2, 73% beat estimates, 8% were in-line, and 19% were below estimates. The blended earnings growth rate for the S&P 500 for Q2 2009 remains unchanged at -27.3%.

 

[Gordon Gekko]

I'm more of a bear than ever!!!

http://www.businessinsider.com/the-journey-into-deflation-video-2009-9

http://www.zerohedge.com/article/full-blown-deflationary-episode-coming

"The media's desire to ignore this metric, which convincingly indicates that deflation is among us, despite the wanton destruction of US Dollars by Chairman Ben, is not surprising: the last thing US consumers need to know is that a dollar today may be worth less than a dollar tomorrow, and thus drive them to save even more, further crippling the Ponzi monster that the US economy has become."

“Once again, equity participants are missing the big picture. For despite clear signs from the business surveys of some sort of second half recovery, firm evidence is emerging that the global economy is sliding towards a full-blown deflationary episode once this recovery falters."

“We heartily concur with GMO’s Jeremy Grantham who remarked recently that after 20 years of more or less permanent overvaluation of US equities, we saw just five months of under-pricing through the March trough. Do bursting global equity valuation bubbles really end like this? Of course they don’t.”

Best

G

 

[Real1ty]

Isn't 'running a lot leaner' meaning that they have sacked people and cut inventories simply because nobody is buying their stuff? There was simply no revenue growth at all from the majority of SP500 companies.

'Beating expectations' & 'better than expected' is an economists way of saying they stuffed up with their projections - "so now we will lower our expectations so low that even a loss will be 'better-than-expected'"


They will still have to sell things to people who have jobs, but unfortunately the jobs lost have been exported to places like China who has huge excess productive capacity (and about 30 million unemployed?) and can make things for cheaper than the US. These jobless consumers won't be consuming again any time soon, if at all. It's a major structural shift in the US consuming middle class?

The transition from being too pessimistic to being too optimistic?

Isn't 'running a lot leaner' meaning that they have sacked people and cut inventories simply because nobody is buying their stuff? There was simply no revenue growth at all from the majority of SP500 companies.

Nobody?

You either missed it or chose to ignore it but part of my argument highlighted reduced consumer spending, i can see both sides.

You are highlighting lagging indicators and the market is clearly pricing in improved revenue and what ever else it deems necessary to justify its pricing.

What you don't take into account is the possibility, which again i mentioned, of increased revenue due to reduced competition.

'Beating expectations' & 'better than expected' is an economists way of saying they stuffed up with their projections - "so now we will lower our expectations so low that even a loss will be 'better-than-expected'"

It makes no difference, and they are usually wrong, as all that matters is the expectations of the majority of the money.

 

[Uncle Festivus]

Nobody?

You either missed it or chose to ignore it but part of my argument highlighted reduced consumer spending, i can see both sides.

You are highlighting lagging indicators and the market is clearly pricing in improved revenue and what ever else it deems necessary to justify its pricing.

What you don't take into account is the possibility, which again i mentioned, of increased revenue due to reduced competition.



It makes no difference, and they are usually wrong, as all that matters is the expectations of the majority of the money.

Yes, sorry I don't follow your logic there. You say 'reduced consumer spending' but then say 'improved revenue'? You can't have one without the other, unless you increase efficiency, which I think is happening now via job cuts, but this too will eventually have reduced impact on earnings?

In a deflationary depression, which it is despite what they say, unemployment is a leading indicator of things to come? Combine this with still high debt levels and the current program of bringing forward future consumption, again payed for out of debt, and we have yet to see the full impact of the so called GFC ie we are still firmly 'in the woods' as Glorious Leaders keep telling us.

The 'metric' to watch is tax revenues - still falling even in the seasonal surplus months so far. How else are they gonna pay for it in the end?

Sept. 18 (Bloomberg) -- Britain posted the biggest budget deficit for any August since modern records began in 1993 as the recession destroyed tax revenue and welfare costs soared.
The 16.1 billion-pound ($26.3 billion) shortfall compared with a deficit of 9.9 billion pounds a year earlier, the Office for National Statistics said in London today. The median of 16 forecasts in a Bloomberg News survey was 17.6 billion pounds.
Britain will have to cut spending at the fastest pace since the 1970s to repair the damage the slump has inflicted on the public finances, economists warned this week. The International Monetary Fund expects the budget deficit to exceed 13 percent of gross domestic product next year, the most in the Group of 20.
“We have a huge underlying deficit caused by a collapse in tax revenues,” said Richard Snook, senior economist at the Centre for Economics and Business Research. “There is an enormous black hole in the public finances which only major spending cuts can fill.”

http://www.bloomberg.com.au/apps/news?pid=20601068&sid=a19rKWZ8GxFM

The Reserve Bank of India (RBI) today said that revenue deficit would be at its highest-level ever while primary deficit would both be at its highest in India's post-reform period.

WASHINGTON – The federal government’s tax revenue is on track to drop 18 percent this year, the biggest annual decline since the depths of the Great Depression, according to an analysis by The Associated Press.
Individual income tax revenue is down 22 percent and corporate income tax receipts have fallen 57 percent compared with 2008, according to the AP. Social Security tax revenue might have only its second year-over-year decline since 1940, and Medicare tax receipts could fall for only the third time since they started being collected in the 1960s.

 

[swm79]

add to that the fact that they've lost 6.9million jobs since the US recession began in Dec 2007.... and the fact that that number is STILL increasing - 42 states in the US reported job losses rising in August vs 29 states in July

then add that to the fact that 65-70% of US GDP is consumer spending

then add that the 93rd and 94th (FEDERALLY INSURED) US banks have gone under and that the "dead bank" list has risen from 305 MORE baks to go under to 416 more banks to go under!!!

THEN that the spending etc that has gone on since the stimuli was just re-stocking (which is now ending - and which is where your increased revenue has come from) in china (who are now fully stocked)

and there is SOME mess to be sorted out!

 

[Real1ty]

Yes, sorry I don't follow your logic there. You say 'reduced consumer spending' but then say 'improved revenue'? You can't have one without the other, unless you increase efficiency, which I think is happening now via job cuts, but this too will eventually have reduced impact on earnings?

I acknowledged that there is now reduced spending, that is obvious to everyone whether you are bullish or bearish.

However some businesses, and some sectors more than others, will offset some of this reduced spending due to their competitors going out of business.
Some have also had the opportunity to pick up distressed assets at bargain based prices or mergers/takeovers, hence increased revenue and possible margin gains.

And yes i believe that we will see improved revenue going forward as it has most likely bottomed out and will improve, and obviously the market is pricing this in.

Yes your revenue example is a lagging indicator as it is past revenue, not future.

My point is that all these things are known and the market is pricing in what it is expecting and what you, I or others minorities think, is irrelevant.

The only relevant thing is the expectations of the majority of money.

 

[Knobby22]

What if this is a corrective wave from an overshooting fall? Where do you go from there?

 

[Uncle Festivus]

An interesting read....

http://www.foolingsomepeople.com/main/about-david/recent-talks.html

May 27 2009 speech

 

[swm79]

The only relevant thing is the expectations of the majority of money.

thats true, but do you think the big players tell you where ALL their money is???

its easier to hedge and make FAR more money than purely investing!

 

[marketmania]

This is what could send the market down:

"New regulations from G-20 could hurt banks, brokerages
PLI SmartBrief | 09/21/2009

A major push on banking regulation planned for the G-20 meeting this week could hit profits at major banks and brokerages. Many of the leaders who will be at the meeting, including President Barack Obama, are committed to forcing banks to keep larger capital reserves, to control risks more carefully, and to limit executive compensation. "Regulation will make banks less profitable by increasing the cost of doing business," said Andrew Clare, a professor at Cass Business School in London and a former Bank of England official,"if banks are going to benefit from taxpayer largesse then they need to act in a way that doesn't hurt taxpayers or the economy." Bloomberg (09/21) "


FTSE 100 and NIkkei shows an interesting cycle of 800 days reversal.
Ftse also has a smaller cycle of 187 days. Major turning points have occurred when 187 and 800 both are close. We are in such a situation NOW.

Nikkei also at long term resistance level.

Check out my other posts on ASX where I've show that the 1987 crash was on a 800 Days cycle !!!! and BHP which tells its own bearish story

I am not a scare monger. This is just my observation. And history repeats in the market so its time to be careful.

Cheers

 

[sinner]

Hi guys,

Have you missed me?

It's October so I am back posting on ASF Bears come out of their cave and all that.

Here is the snippet of an article from August 08:

http://www.hussmanfunds.com/wmc/wmc080825.htm

Years ago, Larry Williams used to look for a situation he called the
“Jaws of Death” – noting that when bond prices were weakening but
stock prices were strengthening, the two differing trends opened a set
of “jaws” that tended to snap shut, usually due to abrupt weakness in
stocks. On that note, Bill Hester sent a chart over the weekend noting
“I thought this was an interesting graph. The blue line is the 5-Yr
Swap Spread, and the red line is the VIX. Credit investors are getting
very nervous while equity investors are mostly whistling Dixie. It
looks like a variation on the jaws of death that you've mentioned to
me before….”

The comment my friend gave when he sent me this article:

In short, the markets are presently trading on a theme that largely
overlooks the potential (and in my view, the reality) of a significant
U.S. recession.

So in Aug 08, the signs were there as plain as day for anyone to see.

Anyone wondering how the Jaws of Death look today? Do you really want to see?

 

[sinner]

The above was jaws from 2008.

How does 2009 look?

That is one mean lookin' set of chompers...looks like it is starting to close too.

 

[GumbyLearner]

Good to hear you're back Sinner.

http://abcnews.go.com/Business/lied-watchdog-treasury-fed-knew-bailed-banks-healthy/story?id=8748299


They Lied: Watchdog Says Treasury and Fed Knew Bailed-Out Banks Were Not 'Healthy'
Before the $700B Bailout, Senior Government Officials Had Financial Concerns About Nine Bank Instiutions Receiving TARP Funds


By MATTHEW JAFFE
WASHINGTON, Oct. 5, 2009

The Treasury Department and the Federal Reserve lied to the American public last fall when they said that the first nine banks to receive government bailout funds were healthy, a government watchdog states in a new report released today.
PHOTO In a new report obtained by ABC News, the chief watchdog for the government's $700 billion bailout program refutes the Treasury Department's claim that banks cannot be asked to account for their use of taxpayer money.
The chief watchdog for the government's $700 billion bailout program says federal officials were... Expand
The chief watchdog for the government's $700 billion bailout program says federal officials were trying to contain the worst financial crisis in decades last year with the Troubled Asset Relief Program, but they had concerns about the bank institutions' financial health. Collapse
(ABC News Photo Illustration)

Neil Barofsky, the special inspector general for the Troubled Asset Relief Program (SIGTARP), says that despite multiple statements on Oct. 14 of last year that these nine banks were healthy and only receiving government funds for the good of the country's economy, federal officials knew otherwise.

"Contemporaneous reports and officials' statements to SIGTARP during this audit indicate that there were concerns about the health of several of the nine institutions at that time...

 

[GumbyLearner]

and another from ABC

http://abcnews.go.com/Business/Politics/story?id=8127005&page=1

$23.7 Trillion to Fix Financial System?

Sitting down?

"The total potential federal government support could reach up to $23.7 trillion," says Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, in a new report obtained Monday by ABC News on the government's efforts to fix the financial system.

Yes, $23.7 trillion.

"The potential financial commitment the American taxpayers could be responsible for is of a size and scope that isn't even imaginable," said Rep. Darrell Issa, R-Calif., ranking member on the House Oversight and Government Reform Committee. "If you spent a million dollars a day going back to the birth of Christ, that wouldn't even come close to just $1 trillion -- $23.7 trillion is a staggering figure

 

[Edwood]

careful, the bears are revolting....


An American woman has been mauled to death by her pet black bear as she cleaned its cage.

Pennsylvania police said 37-year-old Kelly Ann Walz was killed on Sunday by the 350lb (160kg) beast.

The victim had been keeping the animal inside a 15ft by 15ft steel cage near her house in Ross Township.

Ms Walz had thrown some dog food to one side of the enclosure to distract the bear while she cleaned the other side, officials said.

But, at some point, it turned and attacked her. The beast was shot and killed.

Tim Conway, of the Pennsylvania Game Commission, told the Morning Call local newspaper: "These animals, even though they may be very docile one day, you never know.

"They are wild animals and they're very powerful and they could easily destroy your day."

"I don't know what makes an individual want to have a pet or animal like this in captivity. I just don't," Mr Conway said.

An investigation into the bear attack is continuing, police said.

 

[satanoperca]

Yes, $23.7 trillion.

WTF - green shoots my ****. When will the world realise that America has fooled us all.

The victim had been keeping the animal inside a 15ft by 15ft steel cage near her house in Ross Township.

Why shoot the bear, lock me up in a cage that size and I too would maul my captor.

 

[Uncle Festivus]

Anyone wondering how the Jaws of Death look today? Do you really want to see?

Jaws Of Death eh? Is that a ride at the US Fed Theme park?

Here's another JOD chart -

 

[swm79]

Jaws Of Death eh? Is that a ride at the US Fed Theme park?

Here's another JOD chart -

and the only reason they crossed over in early 2000 (i.e. surplus) is because Clintons admin counted certain amounts as income that no other administration has ever done... or done since.