Recovery or Dead Cat Bounce?

[Beej]

Actually just to get back on topic - attached is an interesting chart I found. It shows the annual percentage returns of the All-Ords Accumulation Index going back to 1900. It is interesting to note that the worst sell-offs (over either a 1 or 2 year period) have almost inevitably been followed by a year of stellar returns.

Cheers,

Beej

 

[ivant]

You know, this comes across as being a little bit jealous and/or bitter towards those who may have been more successful for whatever reason? Eg, not everyone who drives down the street in a sports car, or purchases an "expensive" (maybe for you) house in the inner city, has done so with bucket loads of borrowed money. Many people I know have bought marque sports cars and "expensive" houses for cash, or bulk cash (50-80% of cost) plus very moderate borrowing in the case of houses. That cash is what they saved, earned, and/or gained through returns from other investments etc. Likewise for people that build their dream home out in the burbs - many have saved for years and years, already owned a house that they sold etc. Very few purchase assets of this kind on 100% borrowed funds, yet world views such as that expressed above suggests a view that the majority have done this! If this is what you truly believe, then I would argue that is a very naive view of the world.

Recessions certainly sort out the chafe though! After a recession you could be almost certain that the next expensive sports car you see is owned outright and not on a lease or hire purchase

Anyway back on topic now.....

Cheers,

Beej

agreed on this point! even then, the argument against credit is a little naive. credit/leverage is very powerful. its more a matter of how you use it and how much of it you use. the west has been built on leverage. this does not mean it will fall due to the "deleveraging process". sure we get some falls, and statistically its likely that the 14000 DJIA level wont be passed for another 23 or so years (at least according to Hendry), but that means nothing about the actual use of credit. by the way in terms of that figure, seems to be time to buy japanese stocks.

 

[ivant]

Actually just to get back on topic - attached is an interesting chart I found. It shows the annual percentage returns of the All-Ords Accumulation Index going back to 1900. It is interesting to note that the worst sell-offs (over either a 1 or 2 year period) have almost inevitably been followed by a year of stellar returns.

Cheers,

Beej

Thanks for that, i think i will be dissecting this tonight

 

[helicart]

Actually just to get back on topic - attached is an interesting chart I found. It shows the annual percentage returns of the All-Ords Accumulation Index going back to 1900. It is interesting to note that the worst sell-offs (over either a 1 or 2 year period) have almost inevitably been followed by a year of stellar returns.

Cheers,

Beej

Beej, a couple of gotchas.

- the index doesn't account for companies entering and exiting it....though admittedly, today you could invest in STW and overcome that pitfall.

- check a similar index for the Dow or Nikkei.

- it doesn't pay to totally ignore the fundamentals. there's a lot that is different this time - means of production outsourced overseas, fx, Australia's historically high net foreign liabilities, growing dependency on foreign wholesale borrowing to sustain asset prices at current levels, house prices at >6x median wage, casualization of the workforce, low birth rate etc, etc. There's a lot of obstacles to the US and Australia getting back to previous levels of growth in gdp per capita.

 

[GumbyLearner]

You know, this comes across as being a little bit jealous and/or bitter towards those who may have been more successful for whatever reason? Eg, not everyone who drives down the street in a sports car, or purchases an "expensive" (maybe for you) house in the inner city, has done so with bucket loads of borrowed money. Many people I know have bought marque sports cars and "expensive" houses for cash, or bulk cash (50-80% of cost) plus very moderate borrowing in the case of houses. That cash is what they saved, earned, and/or gained through returns from other investments etc. Likewise for people that build their dream home out in the burbs - many have saved for years and years, already owned a house that they sold etc. Very few purchase assets of this kind on 100% borrowed funds, yet world views such as that expressed above suggests a view that the majority have done this! If this is what you truly believe, then I would argue that is a very naive view of the world.

Recessions certainly sort out the chafe though! After a recession you could be almost certain that the next expensive sports car you see is owned outright and not on a lease or hire purchase

Anyway back on topic now.....

Cheers,

Beej

I can see how the sportscar example is a bit of a generalisation. Point taken Beej.

I can use any number of other examples.
Such as a young person maxing out a credit card on consumer goods they cannot afford. Like a young lady who might want to buy fashion items or a young buck on salary wanting to buy a new holden/ford to impress his mates at the factory. All I'm saying is what happens when these people lose their jobs. The same example could be applied to the business owner who has to call in the receivers because no-one has wages or access to credit to buy his stuff anymore.

All I'm trying to say is this rally has no substance, it has been fueled by US Banks laden with debt.

The property boom has been substantial in the US as well as OZ. Although prosperity in OZ has had a greater connection and run parallel to the mining boom. Also if you look at the FHOG grants over the last few months from ABS stats you will notice the majority have no money down. Also how many households are paying down mortgages with credit cards ATM. A small percentage??

China will continue to buy Aussie Commods real cheap! But our economy is inextricably linked to the US anyway, so when the bear comes growling back look out below!

There is no envy on my part at all. But from my contacts in Melbourne I hear the repossessed luxury car auction trade has done extremely well in the past 12 months. I certainly envy those guys, what a great business to have in times like this.

But just to stay on topic. Still firmly believe this is a Dead Cat and would go short financials if the ban wasn't in place.

Here's a great interview with Jim Rogers telling everyone the reality of bank bailouts. I don't think he is envious of anyone maybe a bit pissed-off at stupid government decisions. Just go 2 minutes into the Youtube link. The bankers keeping their maseratis, lamborghinis or ferraris



If I had the means to buy a Ferrari, I wouldn't buy one anyway because they don't make a model with a cup-holder:

 

[kincella]

the same people involved in the 'manufactored financial crisis" are now manufactoring a financial recovery....
anyone feeling just a little bit duped by this fiasco...its been well organised

oh, and all the old names are still there whether ceo's or pollies....well most of them...

extract........

The strategy of forcing political change through orchestrated crisis. The "Cloward-Piven Strategy" seeks to hasten the fall of capitalism by overloading the government bureaucracy with a flood of impossible demands, thus pushing society into crisis and economic collapse.

http://www.americanthinker.com/2008/09/barack_obama_and_the_strategy.html

 

[GumbyLearner]

the same people involved in the 'manufactored financial crisis" are now manufactoring a financial recovery....
anyone feeling just a little bit duped by this fiasco...its been well organised

oh, and all the old names are still there whether ceo's or pollies....well most of them...

extract........

Precisely kincella

 

[Gordon Gekko]

the same people involved in the 'manufactored financial crisis" are now manufactoring a financial recovery....
anyone feeling just a little bit duped by this fiasco...its been well organised

oh, and all the old names are still there whether ceo's or pollies....well most of them...

extract........

Precisely kincella

Has it every been any different?
Some win some lose.
If your not on the inside your on the outside.

Here is a chart that may bring those of you that are optimistic like myself some relief.

http://static.seekingalpha.com/uploads/2009/4/20/saupload_recession_change.PNG

Best

G

 

[Gordon Gekko]

I can see how the sportscar example is a bit of a generalisation. Point taken Beej.

I can use any number of other examples.
Such as a young person maxing out a credit card on consumer goods they cannot afford. Like a young lady who might want to buy fashion items or a young buck on salary wanting to buy a new holden/ford to impress his mates at the factory. All I'm saying is what happens when these people lose their jobs. The same example could be applied to the business owner who has to call in the receivers because no-one has wages or access to credit to buy his stuff anymore.

All I'm trying to say is this rally has no substance, it has been fueled by US Banks laden with debt.

The property boom has been substantial in the US as well as OZ. Although prosperity in OZ has had a greater connection and run parallel to the mining boom. Also if you look at the FHOG grants over the last few months from ABS stats you will notice the majority have no money down. Also how many households are paying down mortgages with credit cards ATM. A small percentage??

China will continue to buy Aussie Commods real cheap! But our economy is inextricably linked to the US anyway, so when the bear comes growling back look out below!

There is no envy on my part at all. But from my contacts in Melbourne I hear the repossessed luxury car auction trade has done extremely well in the past 12 months. I certainly envy those guys, what a great business to have in times like this.

But just to stay on topic. Still firmly believe this is a Dead Cat and would go short financials if the ban wasn't in place.

Here's a great interview with Jim Rogers telling everyone the reality of bank bailouts. I don't think he is envious of anyone maybe a bit pissed-off at stupid government decisions. Just go 2 minutes into the Youtube link. The bankers keeping their maseratis, lamborghinis or ferraris



If I had the means to buy a Ferrari, I wouldn't buy one anyway because they don't make a model with a cup-holder:

That intervew is like 6 months old.
I like Jim rogers but the information might be a little dated.

Best
G

 

[GumbyLearner]

That intervew is like 6 months old.
I like Jim rogers but the information might be a little dated.

Best
G

Yeah it's about 2 months old.

The abstract has not changed though.
Next will be commercial real estate, prime mortgages, Alt-A's,
credit cards etc..

Unsustainable.

 

[Gordon Gekko]

Yeah it's about 2 months old.

The abstract has not changed though.
Next will be commercial real estate, prime mortgages, Alt-A's,
credit cards etc..

Unsustainable.

Yeah just thought I would mention the date as he says he is shorting IBM in that interview. I believe they are releasing results tomorrow and I would not want anyone to get stuffed around thinking its current. They should realease awesome less worse then expected green shoots yada yada, so shorting may or may not be a good idea on IBM tomorrow.

Best
G

 

[>Apocalypto<]

The ending diagonal has been completed.

Now looking for this to continue down with three minor targets. We have a major support point at 800 and a tad under. The 800 price point is a strong weekly support range and could act as a resistance point if the price moves on to it.

Wether this pattern completion will renew the current over all double top pattern to continue as the major driving pattern is yet to be confirmed now. A move back under 800 with that point acting as resistance to the buying could signal that the double top is still in play and a very low target could be reached like 300!

Time to watch, also to keep in mind reporting in the US is on tonight and expectation is the word of the day.

Cheers,

 

[wonderrman]

Very mixed signals at the moment with the length of this "bounce". On one hand an ascending triangle is forming with what looks to be a consolidation phase before a breakout and advance to ~4400. But there is also some negative divergence with indicators. It is confusing times for the young trading eye I would prefer to be on the side lines until some more readable action occurs. W.

 

[Ardyne]

I pretty much see the same this. Sitting on your hands until the market shows you what its gonna do is a good thing.

 

[GumbyLearner]

Yeah just thought I would mention the date as he says he is shorting IBM in that interview. I believe they are releasing results tomorrow and I would not want anyone to get stuffed around thinking its current. They should realease awesome less worse then expected green shoots yada yada, so shorting may or may not be a good idea on IBM tomorrow.

Best
G

Microsoft announces first ever drop in sales

http://www.vnunet.com/vnunet/news/2241065/microsoft-looses-revenue-first

Microsoft has experienced their worst quarter since they were publicly listed in 1986.

I suppose it's not so bad for a company that has garnered an almost monopolistic protection from consecutive US administrations. And spent a stack on lawyers in intellectual property disputes with other industry players.

Recovery? bull**** *cough*

 

[Aussiest]

I'm actually thinking the 'dead cat bounce' was a correction and that the real dead cat bounce is happening now. The irrationality, buying for no reason. Wait & see

 

[Nero64]

Like most off you I am waivering between bullishness and bearishness. When will this rally end? Will there be a mild correction or depression style engulfing correction? will there be a correction at all?(Hell we're going to 10000 baby)

A couple of sayings might be appropriate:

"History always repeats itself in the Markets"

"Sell in May and go away and don't come back to St Ledger's day"

The similarities between last years rally and this years rally are quite striking.

For instance :

After several months of the DOW market going down it finally bottomed on Monday the 9th March 2008 at 11740 day close.

This year it bottomed on Monday the 10th March at 6547 day close.

The Dow then peaked on Friday 2nd May 2008 at 13058 close

Yesterday, 1st May (A Friday) the market closed at 8212.

2008 Rally went for 54 days
2009 Rally has gone for 54 days.

Next week the US government reveals the results of the bank stress tests. Could this be the turning point? To say yes would be sheer speculation but similarities to last year are there.

My advice is to see how the US markets react to these stress tests. Don't go commiting all your money into longs on Monday.

In the markets and in life it may be sunny in the foreground but the background is dark and scary. Likewise it may be dark and scary in the foreground but sunny and wonderful in the background. To ignore the background would be foolish.

Good luck!

 

[Aussiest]

In the markets and in life it may be sunny in the foreground but the background is dark and scary. Likewise it may be dark and scary in the foreground but sunny and wonderful in the background. To ignore the background would be foolish.
Good luck!

That is great! Although i slightly disagree with the 'history always repeats itself' statement. There are too many human variables at stake to say that with any certainty!

 

[Nyden]

Like most off you I am waivering between bullishness and bearishness. When will this rally end? Will there be a mild correction or depression style engulfing correction? will there be a correction at all?(Hell we're going to 10000 baby)

A couple of sayings might be appropriate:

"History always repeats itself in the Markets"

"Sell in May and go away and don't come back to St Ledger's day"

The similarities between last years rally and this years rally are quite striking.

For instance :

After several months of the DOW market going down it finally bottomed on Monday the 9th March 2008 at 11740 day close.

This year it bottomed on Monday the 10th March at 6547 day close.

The Dow then peaked on Friday 2nd May 2008 at 13058 close

Yesterday, 1st May (A Friday) the market closed at 8212.

2008 Rally went for 54 days
2009 Rally has gone for 54 days.

Next week the US government reveals the results of the bank stress tests. Could this be the turning point? To say yes would be sheer speculation but similarities to last year are there.

My advice is to see how the US markets react to these stress tests. Don't go commiting all your money into longs on Monday.

In the markets and in life it may be sunny in the foreground but the background is dark and scary. Likewise it may be dark and scary in the foreground but sunny and wonderful in the background. To ignore the background would be foolish.

Good luck!

Well, I don't nkow where it's heading; but to eternally follow history is quite foolish as well. Yes, the DOW fell for several months, then rallied, then crashed again - but do you believe this will happen again this time, and next year, and the year after, and so on? Eventually this will obviously break, and eventually the rally will stick. It may well be this time, it may not be. Either way, I'm sitting very pretty, and simply have no need, nor reason to sell :

 

[MACCA350]

What a day on the asx.........up about 3% flying past 3800 points
Futures looking to continue the trend over 3900 points...........things seem bullish, will we continue and hit 4500 points

cheers