Real DOW Update: Still looking for a bottom? Eric Janszen

[bart]

Re: Real DOW Update: Still looking for a bottom?

One problem I have with using indices like the DJI, is the fact that they are in fact reconstituted from time to time -- Which may be fine from a theoretical point of view -- But the fact remains that each time a company goes in or out of the DOW, or the S&P or any other index, it in reality represents a discontinuity. Because if in fact those trades were to occur, they would impact the prices at which those stocks are/were traded -- so that replacement of stock is therefore never price neutral -- so in practice, the growth rate of these indices is probably overstated -- particularly given the magnitude of the FTD problem

Indeed - substitution bias colors the returns picture, and then there are the transaction fees and taxes when one buys & sells stock to keep tracking with the actual index stocks. The full picture on long term returns is far from as rosy as Wall St, etc, would have us believe.

[bart]

Re: Real DOW Update: Still looking for a bottom?

Bart was kind enough to let me play with his data to calculate a new chart: deviation from trendline. In the chart below, the CPI+lies adjusted Dow is charted as a multiple of its long term trendline. A value of 1 indicates unity. I found the trendline to be 1.54%, pretty close to EJ's calculation of 1.64%.

As you can see, in the past a value above 1.7 has indicated a long term top and below .5 has indicated an imminent bottom. We are very close to .5 now (6277 nominal). Our last 2 big bottoms, 1932 and 1982, took us down to .34 and .40, respectively for the absolute bottoms. Ratios like that would put us right around EJ's target of 5000, depending on when we get there and what CPI+lies does.

Jimmy

Very interesting... I would have thought we weren't quite as close to a bottom as that data indicates.

And considering the EJ is using CPI and you used "CPI w/o lies", that difference between 1.54% and 1.64% seems about right especially when considering the different periods being compared.

[Rajiv]

Re: Real DOW Update: Still looking for a bottom?

Bart -- what happens if the trend is unsustainable -- (based on the concept of exponential growth vs limited earth?)

[bart]

Re: Real DOW Update: Still looking for a bottom?

Bart -- what happens if the trend is unsustainable -- (based on the concept of exponential growth vs limited earth?)

That's what that Yogi quote comes in?
"It's tough to make predictions, especially about the future."
-- Yogi Berra
;)


And more seriously and in much uglier mode, there are very dark scenarios that are usually only lightly covered or mentioned that could result. I've hesitated to even mention them for many reasons, not the least of which is how one assigns probabilities to them and also how extremely distasteful they are. But I guess they should be clearly stated, rather than danced around.

The biggest & darkest one includes a massive drop in total world population due to any one of a number of threats like war, pandemics, food supply, peak oil etc... in which case the Dow level wouldn't exactly be terribly important, and would also likely drop well below 1000.

To try & paint a little brighter picture, even if something that awful did come about, its my belief that humanity would bounce back within a few generations based on the concept that the worst vested interests and anti social elements would not survive in significant numbers.

I don't know if you were driving at the worst case scenario, but at least it provides a base or bottom.

[Rajiv]

Re: Real DOW Update: Still looking for a bottom?

I don't know if you were driving at the worst case scenario, but at least it provides a base or bottom.

I am seriously considering it -- most likely cause famine and disease -- will come suddenly when it does -- once the tipping point is reached.

[bart]

Re: Real DOW Update: Still looking for a bottom?

I am seriously considering it -- most likely cause famine and disease -- will come suddenly when it does -- once the tipping point is reached.

Even though I assign it a low probability, I did take it into account on my long term planning too... and then promptly ignored it. I knew a few folk who "lived it" in the '70s and it didn't work out well for them in the sense that I believe that it significantly shortened their lives.

[Guest]

Re: Real DOW Update: Still looking for a bottom? Eric Janszen

Oil and Dr. Copper appear to be sending a broad hint that they want to mak a major turn. Stock market boom cannot be far behind them. Actually these two commodities are not just "hinting" that they want to complete a turn and break out, they already **are** breaking out. April-May-June turn is coming up right on schedule it seems.

All those inclined to smirk at technician's terminology and methods may have to wipe their commiserating smiles away in a hurry in May-June if this unfolds as described. Right? Or will they remember to despite the fact one of these technicians appears to be the earliest to note these budding trend changes below?

So while iTulip's apprehensive observers abandon all hope and begin to wallow in the most apocalyptic, pessimistically abandoned visions of our near term financial future, this humble "navel gazing" technician is pointing out such musings are already looking distinctly passe'. Will the doomers give him credit in June if or when he proves right? Going on past precedent, most likely not.

I've been suggesting this for six months. I am looking forward to all the sheepish comments if it actually unfolds this spring.

Beware short positions going into April.

[jtabeb]

Re: Real DOW Update: Still looking for a bottom?

The economic problems did not come first, it is problems with a society that happen before economic ones.

.

If you turn that statement around COMPLETELY, then it will be correct.

As in:

The problems with society did not come first, it is the problems with an economy that happen before you have societal collapse. Cause and effect.

As in, people don't act like uneducated baffoons when it only takes one worker making median wages to support a family of four, but when it takes 3.5 workers making median wages to support a family of four your get societal problems.

Don't try any historical revisionism on this, it's just a bold face lie to claim otherwise.

(please read ANY study of socio-economics over the past 29 years to get a idea of what I'm talking about)

Put simply, your premise is ass-backwards.

[Rajiv]

Re: Real DOW Update: Still looking for a bottom?

I will assign a very low probablity for its occurence in North America (and I include Mexico in that geographic area) -- I think the probability is much higher in other parts of the world -- but that will have its ripple effects in North America as well.

[Rajiv]

Re: Real DOW Update: Still looking for a bottom?

My posts here should add weight to your comment particularly my figures using shadowstat CPI and the discussion following it.

[bart]

Re: Real DOW Update: Still looking for a bottom?

My posts here should add weight to your comment particularly my figures using shadowstat CPI and the discussion following it.

Excellent points, and I especially "like" those tax tables too. Nothing like the raw data to show those who weren't there what was actually happening - geezers need love too... ;)

[metalman]

Re: Real DOW Update: Still looking for a bottom? Eric Janszen

put the hocus pocus charts away and think a minute.

what has to happen for the markets to rally?

- oligarchs roll over and take a huge loss so the banking system comes back
- some genius in the oligarch's machine room on wall street invents a brand new securitized debt thingy or other to make more credit
- $10 trillion in vanished money appears from no where

all that's gonna happen to stocks is... sooner or later... they'll stop falling like a bag of turds out a high rise window and finally hit the ground and go.... 'splat!'

then we'll spend 10 years cleaning it up.

you've been chasing this allusive stock rally all year.

here's a better use of a pan with a handle...

[jtabeb]

Re: Real DOW Update: Still looking for a bottom?

Excellent points, and I especially "like" those tax tables too. Nothing like the raw data to show those who weren't there what was actually happening - geezers need love too... ;)

Like I said, SO BOLDFACE so as to be a waste of time.

You know how you refute someone who says that 2+2 =7. You don't, it's a waste of time!

[kartius919]

Re: Real DOW Update: Still looking for a bottom? Eric Janszen

My worst case scenario is nuclear armageddon with famine and radiation poisoning quickly thereafter. We then get a mad max crossed with the hills have eyes scenario. On the bright side, no more bankers. Odds are uncomfortably more than 0% and with the end of days evangelical christians and zionist jews, who really knows. Palin '12!!!!!

[cjppjc]

Re: Real DOW Update: Still looking for a bottom? Eric Janszen

My worst case scenario is nuclear armageddon with famine and radiation poisoning quickly thereafter. We then get a mad max crossed with the hills have eyes scenario. On the bright side, no more bankers. Odds are uncomfortably more than 0% and with the end of days evangelical christians and zionist jews, who really knows. Palin '12!!!!!

Something to look forward to.:eek: