2009 = 1939 : Then a 34% plunge

[cjppjc]

Re: 2009 = 1939 : Then a 34% plunge

Well, he did say he was looking through the subscriber headlines -- which might give you some information. Areas we are looking at, etc. I know I did that myself before become a subscribing member just to see how much information was out there -- whether it was an active area, etc.

When I saw the answer was not only "yes", but "hell, yes", I signed up. Never regretted it.

Oh I see, I never go to the front page anymore. I just come here. Things that make you go hmmmm.

[charliebrown]

Re: 2009 = 1939 : Then a 34% plunge

I agree with you. Something just isn't right. Have you seen the chart of SHY? Going parabolic since 11/5/09. Either someone knows something, like a return of your money is better than a negative return on your money, or this is the sheeple getting pushed out of 0 return money funds.

I asked a rep from vanguard what happens when their treasury money market fund has higher costs than the interest paid on 90 day t-bill's and they said they don't know anything. Last yield check was .03% Prime money is not far behind at .08%. other fund companies are eating the cost of running money funds, but with the unique structure of vanguard, run not for profit, owned by the share holders, is there any profit to eat? Are actively managed funds in vanguard going to defray their costs to run over and help out the pmm fund?

Tips running up, gold of course up, silver up, oil up, ag up. dollar down, who buys treasuries? Supposedly the fed stopped buying this month. Is it banks selling their MBS to the fed, then buying treas with the proceeds?

The most conservative valuation number I have which compares igrade corp yield to S&P yields says s&p ought to be 870. Other projections based upon fundamentals show a much more dismal picture. profits will have to run up quick. Otherwise there will be a lot of diappointment.

[goadam1]

Re: 2009 = 1939 : Then a 34% plunge

I agree with you. Something just isn't right. Have you seen the chart of SHY? Going parabolic since 11/5/09. Either someone knows something, like a return of your money is better than a negative return on your money, or this is the sheeple getting pushed out of 0 return money funds.

I asked a rep from vanguard what happens when their treasury money market fund has higher costs than the interest paid on 90 day t-bill's and they said they don't know anything. Last yield check was .03% Prime money is not far behind at .08%. other fund companies are eating the cost of running money funds, but with the unique structure of vanguard, run not for profit, owned by the share holders, is there any profit to eat? Are actively managed funds in vanguard going to defray their costs to run over and help out the pmm fund?

Tips running up, gold of course up, silver up, oil up, ag up. dollar down, who buys treasuries? Supposedly the fed stopped buying this month. Is it banks selling their MBS to the fed, then buying treas with the proceeds?

The most conservative valuation number I have which compares igrade corp yield to S&P yields says s&p ought to be 870. Other projections based upon fundamentals show a much more dismal picture. profits will have to run up quick. Otherwise there will be a lot of diappointment.

Hmmm? An 18 month cd gets me 2%. A 30% premium on the s&p isn't shocking. It's not he premium it's the fact that we are half way through going nowhere that is the problem.

[Jim Nickerson]

Re: 2009 = 1939 : Then a 34% plunge

What the dickens, this thread became a tale of two shitties.

For those seeking entertainment on iTulip, this post has to do with the thread's title, so don't don't go wasting time valuable time here.

From Jeffrey Saut, the CIO of Raymond James, is this weekly comment (see attached PDF for FWIW for entire note).

A snip from 11/30/09

The call for this week: Friday’s Dubai-induced selling was exaggerated by the limited audience so that sellers sold into a vacuum.
Consequently, it will be interesting to see what happens the first part of this week when “The Street” returns from its extended
holiday. Still, the shortened session turned out to be a 90% Downside Day. Such days are typically followed by a three- to sevensession
“throwback rally” and then participants can determine if there is more to come on the downside. Yet as the keen Lowry’s
services writes, “Over Lowry’s 76 year history, no major market top has formed without being preceded by at least several months
of rising Selling Pressure. But, currently, Selling Pressure has been recording new lows in a downtrend dating from the Index’s peak
in March. Therefore, absent a sustained rise in Selling Pressure, the probabilities are against the formation of a major top and favor
the continuation of the primary trend higher.” That said, the divergences we have cited for the past month continue to mount.
Most notable has been the lagging performance of the previously market-leading small/mid-cap stocks in favor of the large caps.
This is what typically happens after a “run” like we have seen because portfolio managers don’t want to “bet” their jobs, which they
are not when playing the large cap universe. Over the past few months we have suggested that portfolios be tilted toward large
caps for this reason. We also continue to favor special situations like 5.8%-yielding, Outperform-rated Spectra Energy (SEP/$27.69).

[my emphasis]

I suppose what Saut wrote could be a legitimate explanation for the under performance of the small caps over the past 30-odd days, but it would not explain the lag in the banking and financial stocks/indices.

Below is a table of today's gains in some pertinent indices and the associated ETF's. Banks, regional banks, and the RUT (barely) were the biggest gainers.

[sunskyfan]

Re: 2009 = 1939 : Then a 34% plunge

Just a thought but I find historical analysis, at best, highly questionable considering the totally unique events of the past 18 months and the direct government intervention in the market right down to the President calling a bottom.

[charliebrown]

Re: 2009 = 1939 : Then a 34% plunge

sorry jim, my intent is to speak to icm's concept that it is not normal for both bonds and stocks to rocket upward in price. I believe a lot of this run up has to do with ZIRP, and pushing savers into risk assets to seek return. Something has got to give, and it will get ugly fast, hence the 30%+ correction comming. The ultimate break is when the treasury cant get cheap financing anymore, that I believe is the ultimate lynch pin.

[Jim Nickerson]

Re: 2009 = 1939 : Then a 34% plunge

Just a thought but I find historical analysis, at best, highly questionable considering the totally unique events of the past 18 months and the direct government intervention in the market right down to the President calling a bottom.

By "historical analysis," I suppose you reference the Lowry's Selling Pressure comment by Saut. I've never known how that data is computed, and I've not been willing to subscribe to access it at what last I looked was ~750$/yr. Richard Russell used to refer to it in his daily notes, but I don't read/pay Russell any more. So far I have never found any analysis that could not fail.

sorry jim, my intent is to speak to icm's concept that it is not normal for both bonds and stocks to rocket upward in price. I believe a lot of this run up has to do with ZIRP, and pushing savers into risk assets to seek return. Something has got to give, and it will get ugly fast, hence the 30%+ correction comming. The ultimate break is when the treasury cant get cheap financing anymore, that I believe is the ultimate lynch pin.

I don't get the "sorry" there, cb. You comment seems on topic, good. To my level of thinking, I strongly agree with your perception that very low interest rates have had a tremendous amount, maybe even everything, to do with the run up in equities, commodities.

If something has "got to give," the question is when? I was thinking that same thing in November 1999 with regard to the Nasdaq and NDX and went into inverse funds and got slaughtered in almost no time. When looking back to those times, though the NDX got "ugly fast," the SPX took about 8 months before its final failure.

These days I am spending no time wondering how far the current run up will go, but rather I am focused on what I am going to do when it starts down. A lot of things may already have topped out, or they may not have.

What are you planning with regard to the anticipated 30% downward move?

[Jim Nickerson]

Re: 2009 = 1939 : Then a 34% plunge

In addition to the lagging performance over the past month or so of the financials and the small caps, it has been widely appreciated that the volume on US exchanges has been poor or even terrible, you choose.

Mark Hulbert commented on this in his article posted early today 12/1/09.

http://www.marketwatch.com/story/low...ern-2009-12-01

Dec. 1, 2009, 1:10 a.m. EST
Is it too quiet out there?

Commentary: Price doesn't always follow volume

He writes "Is this trend of lower and lower volume a source of concern? Is it becoming dangerously quiet out there? "Yes" is the answer from many of the advisers I monitor, on the oft-quoted technical theory that "price follows volume."

But then he references Ned Davis Research on this problem.

Not everyone agrees, however. In a communication sent to clients earlier this week, Ned Davis, president of Ned Davis Research, argued that, while the trend towards lower volume is something that deserves close attention, it is not yet a reason to give up on the rally.

For example, Davis pointed out, it is entirely normal for volume to back off during the earliest stages of a new bull market, since during the panic selling that typically takes place at a bear market bottom, there usually is extraordinarily high volume.

This was certainly the case for the stock market at the March 9 lows, by the way. Average daily trading volume over the week leading up to the low, for example, was 1.77 billion -- 30% more than the average daily volume since then.

To be sure, lower volume becomes increasingly a source of concern as the length of time since the bottom grows. Even so, Davis argues, it doesn't have to be bearish -- provided that most of the volume that does remain is concentrated in stocks that are rising. And that has been the case throughout this rally.

Are there are flies in the ointment? Of course; there always are.
One, according to Davis: Demand for stocks, as evidenced by advancing volume, peaked two months ago -- suggesting a "tiring uptrend."

The bottom line? The technical picture would improve if the trend of trading volume were to reverse and start rising again -- and especially so if it is concentrated in advancing stocks.

But recent volumes trends, in and of themselves, do not appear to have immediately doomed the rally.

[Jim Nickerson]

Re: 2009 = 1939 : Then a 34% plunge

The small caps outperformed today among the equity indices, but the banks, financials, and regional banks were back to being the laggards. Below is for today 12/01/09



According to Bespoke, December has the best record for gains in the DJI over the past 100 years. I suppose with interest rates being so low, that favors this month being positive. http://bespokeinvest.typepad.com/bespoke/



David Rosenberg [see attached PDF] today regarding "some major non-confirmations" of the up move from March lows mentioned among others the following:

•Financials peaking out nearly two months ago and rolling over
•Divergences in both the small-cap stocks and emerging markets

If one is not already hyped enough about gold, read Goldberg's (Rosie's) comments in the PDF too.

Gold is not the only thing that has done well over the past month. Below are some ETF's (and a stock CSX) I track with their performances from 10/30/09 to the close 12/01/09.

[metalman]

Re: 2009 = 1939 : Then a 34% plunge

if i haven't said so lately, i much appreciate your informative & data-heavy posts, jim.

[Jim Nickerson]

Re: 2009 = 1939 : Then a 34% plunge

Good to see that you are back on your meds and that at least to me they seem to be working, metalman. It is the season to be jolly, so jolly good.

Here's a comment by Bruce Krasting http://brucekrasting.blogspot.com/20...and.html#links

In late September the weak dollar and strong gold story were becoming obvious on the charts. I made a comment on someone’s blog:

“IF gold gets to 1200 and the Euro reaches 1.5 and the Yen is at 85, then Bernanke will be forced to give up the QE policy and reverse the emergency zero interest rates.”

I could not have been more wrong on that call. We have achieved the levels that I thought would be a, “Threshold of Pain” for the Fed. As of today the likelihood of the Fed amending its monetary stance anytime soon is nil.

For me this means that the pressure on the $ and gold has to continue. We are already at some galactic levels for gold and the dollar.would have thought we would be in a “panic mode” if the screen read 1.51 and 1200. But there is no sense of panic at all.

I am revising my forecast for the threshold of pain: IF the Euro gets to 1.55 and gold goes to 1400 Bernanke will be forced to accelerate the timetable for reversing the emergency monetary measures. (I think the Yen is now a side show, it may add to $/Euro weakness)


Note: It is not possible to forecast short-term currency/gold movements. I have learned that a number of times. Therefore do not read this as a prediction of the next currency blow up. Rather it is a prediction that the Fed bows to the market to avoid a currency blow up. If we do see 1.55 and 1400 there will be a sense of panic.

[jn emphasis]

From what I've read and remember (I never take notes) it would appear that the Fed says (if one believe what it "says," and one of them once stated something to the effect that their job was to lie) that it will be in no hurry to raise interest rates. icm63 pointed out in the opening of this thread where in the 30's it appears to have been over exuberance of the FED to stifle perceived inflation that led to the 34% (or whatever) decline from the top then in 1937--if icm's chart is correct and I assume it is.

Bernanke being the student he is of the depression would seem unlikely to commit that mistake again. What Krasting is suggesting is that the FED could be forced into stopping QE and raising rates (or the market would raise them and the FED would follow). And by "pressure on the $ and gold" that suggests to me that the trade in risk assets could continue (stocks, gold, PM's, commodities).

Who knows what exactly lies ahead, but there is an old saw something like "three jumps and a stumble" which refers to the FED hiking rates three times and then a fall in equities. If the future path of the FED and markets continue to reflect history, then even were the FED to raise rates tomorrow, it might well not end the current run up, assuming the saw retains some validity.

My comments in this thread have never been to convince anyone that the markets will continue to go up here for a while, but I think for the sake of sanity, people should entertain the possibility that markets do not always behave as many very smart people figure they should be behaving, and to my abilities to discern the current run up has been one of those times where market action has disregarded fundamentals.

If interest rates and QE (emergency monetary measures) are to continue as they have been for months more then that may well get us into at least the middle of next year, which again coincidentally would be the end of the Oct-May favorable seasonality period.

[icm63]

Re: 2009 = 1939 : Then a 34% plunge

UPDATE2: This analysis suggest interest rates to rise sooner than latter
http://www.youtube.com/watch?v=Oe3AEN1IqlQ

See pdf file in first thread posting

[goadam1]

Re: 2009 = 1939 : Then a 34% plunge

UPDATE2: This analysis suggest interest rates to rise sooner than latter
http://www.youtube.com/watch?v=Oe3AEN1IqlQ

See pdf file in first thread posting

When this happens, will I be able to take a more affordable trip to Europe?

[icm63]

Re: 2009 = 1939 : Then a 34% plunge

YES, and how can it not, unless the FED spends another $1.2 T...

Does the fed want GOLD at $5000 once by XMAS 09..

I bet the FED wants to POP the gold rally, just to show whos the big ugly beast in the room.

Central Banks dont like gold rallies !

[llanlad2]

Re: 2009 = 1939 : Then a 34% plunge

Why the hell would they raise interest rates before a sustainable recovery is in place? They want the dollar to weaken so why should they care if gold goes up? With unemployment still shooting up there is no way that they are going to raise rates as the whole fragile economy would crash instantly.
If they raised now it would mean they've truly lost control in my opinion and the rest of the world would know it.