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**Jim Nickerson** · November 28, 2009, 01:19 AM

Re: 2009 = 1939 : Then a 34% plunge

Originally posted by icm63 View Post

This is very interesting..

FIRST REVIEW my COMMENTS HERE : EJ SP500 Call: This chart supports it. http://www.itulip.com/forums/showthread.php?t=12859

Then this: http://www.bloomberg.com/apps/news?p...am_SR.8o&pos=4

Sure the fed may not increase rates, but the divergence between the assesment of BOND RISK vs STOCK RISK is NOT GOOD..

So what happened in 1937 - 1939

icm, you and the article you quoted noted what happened in 1937, the Fed raised rates, then the market went down.

Why is the divergence between stocks going up and interest rates not good?

It might only be "not good" if one is short risk assets like stocks and commodities, but it has been and will remain good if one is long those and the market and the Fed (whichever is most responsible for rates) continue to keep rates down. It also might not be good for anyone who after the last two to 300 hundred SPX points up decides they should finally run "to catch train."

David Rosenberg who puts out a free almost-daily assessment of things that he thinks are important has noted for some while that "Ma and Pa Kettle" have most of their investments in the stocks and little in income producing assets, while at the same time noting for some weeks, I suppose, that flows into equities are shrinking and flows into bonds have been rising: from 11/26/09 Rosenberg "Year-to-date, bond funds have attracted $315 billion of new inflow versus $49 billion a year ago, while there has been virtually no inflow into equity funds at all."

There is no doubt that at some point something is going to change with the current market conditions, but when that change occurs, no one I have read leads me to believe they know.

Here's an opinion from a newsletter to which I subscribe from its monthly letter dated 11/25/09. The Chartist www.thechartist.com

"Looking further out, we expect the bull market to
prevail. As we have said many times over the
years, the stock market does not follow
conventional wisdom and that is certainly not [JN: I take it the "not" should not have been written.] the
case now. Despite huge deficits, historically high
unemployment, a housing collapse, a plummeting
U.S. dollar, and a banking crisis, the market simply
refuses to buckle. The rally off of the March lows
has been suspect in the eyes of the investing public
right from the beginning, and it remains so at the
present time.

Market’s usually hit a peak when investor
optimism is at its greatest, and the current
environment is nowhere near these levels, which is
a big plus for the bullish case. It is our contention
that the bull market will not end until the public
comes onboard. Currently the public is moving in
the opposite direction. For the year-to-date, $4.6
billion has been pulled out of conventional mutual
funds that only buy U.S. stocks, while the coffers of
bond funds have increased by $280 billion. Much like
generals who are always fighting the last war, the
majority of investors do not want to get blindsided like
they were last year. That’s the main reason why bear market
funds and long-short mutual funds (formulated to protect
against major losses in bear markets) have raked in a
record-breaking $10 billion through the first ten months
of this year, which is double the previous record set in
2006. Very few investors seem to have any faith in this
bull market, and judging by the way the money is moving,
it appears that the majority feel that the rally is over.
We’re betting that they are wrong. This is a classic
contrary opinion play. Remain fully invested." [emphasis mine]

Talk about a wall of worry. If it has not existed since March, it never will.

Sullivan, the writer of the above quote, could be wrong in his contention that markets do not top until the public comes on board; classically in many instances sentiment polls bear that out, but I am reasonably sure there have been exceptions.

I don't watch financial TV, so I don't know what the talking heads are saying currently about the degree and length of the move off March lows. Reading around here and there it is near impossible to find anyone espousing that the market could even conceivably go up more from where it has been in the last 15 days.

Barton Biggs on Charlie Rose on 11/23/09 noted when asked: http://www.charlierose.com/download/transcript/10724

CHARLIE ROSE: So, where do you think we really are now, and what
gives you a degree of optimism and what gives you a degree of concern?

BARTON BIGGS: Well, I think we’re still all right. And I think that
in the next major move in stocks it’s going to be the upside. But -- and
it could be a 10 percent, 15 percent move. So it’s big enough that you
really want to be there to catch it.

And as I recall Barton was wrong back in March or early April when he was quoted somewhere noting that the markets then could rally 20% or so ("wrong" by 40%).

And here is another perhaps short term indication that market could go higher from here. This article by Hulbert was put up at about the time the DJI futures were down 270 or so points early Friday morning before US markets opened. Nov. 27, 2009, 3:53 a.m. EST http://www.marketwatch.com/story/con...ism-2009-11-27

Contrarians give thanks
Commentary: Average adviser remains surprisingly pessimistic

In that article he also noted:

"Last Friday, furthermore, Richard Russell, editor of Dow Theory Letters, who just a few days previously had declared that the intermediate and primary trends were now bullish, changed his mind.

"I had no specific reason to do so," Russell explained to his clients, "except for my gut-feeling."

This creeping skepticism is evident in the latest reading of the Hulbert Stock Newsletter Sentiment Index (HSNSI). This sentiment index, of course, reflects the average recommended stock market exposure among a subset of the shortest-term stock market timing newsletters tracked by the Hulbert Financial Digest." more at link.

Personally, I think it speaks volumes when "pundits" abandon whatever is their methodology, and for Russell that is Dow Theory. Shit, Russell's gut may be exactly right, I don't know and would not argue with him given the chance.

Several things I note and I believe you noted somewhere else here. That $BKX, $KRX, and financials are and have been failing to keep up with the recent moves up in equities. I note too that the $RUT hit its high from March now 30 market days ago, and that too is not a good sign. Perhaps today started the end of the world in US equities, commodities, emerging markets, but similar drops have occurred in the last eight months, so for now it, as always, remains to be seen how things unfold.

I take it right now that the "conventional wisdom," whateverTF that is, is thinking doom is around the corner, and for all I know it may be.

Here is an interesting alternative scenario of Albert Edwards that goes against the prevailing conventional wisdom as I perceive that wisdom.

http://online.barrons.com/article/SB...552660625.html if non-subscribers cannot access that, then try http://www.zerohedge.com/article/alb...-2010-downturn or http://asianenergy.blogspot.com/2009...ext-black.html

I suppose everyone knows that the markets are in the period of so-called seasonal strength, which isn't a surefire indication of strength, but considering that we are in that period, it lends itself to the time frame, as I understood it, laid out by Edwards when he postulates that the real shit could hit the fan.

P.S. Next time I make a time-consuming post and the MFer gets moved to the subscription area, I am done screwing with putting up any opinions, not that that would be a bad thing. You should ask whoever was the asshole that moved your original thread into the pay-for-view section to move it back into the cheap seats. Looks like more people read the open fora than do people read the pay section.

**MulaMan** · November 28, 2009, 02:33 AM

Re: 2009 = 1939 : Then a 34% plunge

I sometimes scan the titles in the pay section and then google the article if I think it is interesting....

paying for original content ok, paying for links to other articles, not so much.

I don't need opinion, just data, because I invest on my own opinions.

**pmmeaney** · November 28, 2009, 06:31 AM

Re: 2009 = 1939 : Then a 34% plunge

If you're looking for some main stream sentiment, I always love Walter Updegrave (just the name alone gives me chuckles). Here's his little advice column on CNN-Money:

http://money.cnn.com/2009/11/25/pf/e...ymag/index.htm

These guys never tire of being really wrong.

**Serge_Tomiko** · November 28, 2009, 07:38 AM

Re: 2009 = 1939 : Then a 34% plunge

Originally posted by MulaMan View Post

I sometimes scan the titles in the pay section and then google the article if I think it is interesting....

paying for original content ok, paying for links to other articles, not so much.

I don't need opinion, just data, because I invest on my own opinions.

And that's why I didn't renew my subscription to itulip. EJ's 5 or 6 articles a year were simply not worth $250 in my mind!

**Chomsky** · November 28, 2009, 07:59 AM

Re: 2009 = 1939 : Then a 34% plunge

I understand wanting more, but be fair. I went and counted: 17 articles posted by EJ since July 1.

**rjwjr** · November 28, 2009, 10:19 AM

Re: 2009 = 1939 : Then a 34% plunge

Originally posted by Chomsky View Post

I understand wanting more, but be fair. I went and counted: 17 articles posted by EJ since July 1.

Here, here Chomsky. Thanks for checking the facts.

LOL, first of all, it's unfair that icm63's thread has been hijacked. Secondly, it's unbelievable that it has been hijacked by such a foolish discussion. Consider these points...
1] EJ reads these posts. Do you think you are inspiring and motivating him by airing your negative opinions in public? If you have a problem either; a] show some class and communicate it to him more privately, b] don't subscribe, then show some class and keep your f$%king mouth shut about it. Is it any surprise that a classless parasite that refuses to cough-up only $250/year would compain about the cost, then brag about searching the subscriber section headlines and conducting a Google search for the free stuff? What is it Mula, is there value in the content or not? Let me phrase the argument in your typical context...you are being typical cheap ass, entitlement-expecting, it's-all-about-me liberal.
2] EJ has fully explained that his predictions, and the tremendous research and consideration that they entail, can not be rushed. An explanation that was unnecessary for the majority of subscribers. Those of you that are full of "opinions", don't recognize that EJ is not churning-out "opinions" like so many other free and pay prognosticators. EJ is carefully formulating predictions (educated gueses about the future!) that have been uncannily accurate. If you can't see the value in his efforts and accuracy, then you don't deserve to subscribe.
3] The reason the free area is so damn beneficial is because all of the subscribers participate as well. Some day, EJ may tire of the criticism from the cheap seats and make the site subscriber-only. I welcome the move. However, my assumption is that he has a firm grasp on Marketing, like he has a firm grasp on so many concepts, and recognizes that his free section is an incredible feeder step into the subscriber portion. It worked for me, I expect it worked for the majority of loyal subscribers, but very rarely have I ever felt I received so much value for so little investment.

As for you fellow subscribers, and the entire iTulip administration, I wholeheartedly thank you for your contributions. As for you complaining parasites, the phrase penny wise and dollar foolish comes to mind. (So do a lot of other phrases.)

My apologies to icm for continuing the hijack of the thread, but I couldn't let the petty complaining go without a response.

**cjppjc** · November 28, 2009, 12:26 PM

Re: 2009 = 1939 : Then a 34% plunge

Originally posted by rjwjr View Post

then brag about searching the subscriber section headlines and conducting a Google search for the free stuff?

You cannot see anything in the subscriber section. Just a mesage that says:

Sorry...
cjppjc, you do not have permission to access this page. This could be due to one of the following three reasons:

The page content is for iTulip Select paid subscriber only.

To become an iTulip Select premium member, please Subscribe here.
The page contains administrative features that you may not have sufficient privileges to access, edit or view.
You may not be able to post at this time. Your account may be awaiting for administrator's approval, or it may be disabled by the administrator.

Feel free to contact us at forum@itulip.com if you have any question.

If anyone knows a way around this, please don't share it. Free is free. Paid is paid. Although moving from one to the other seems heavy handed.

**flintlock** · November 28, 2009, 01:08 PM

Re: 2009 = 1939 : Then a 34% plunge

Originally posted by rjwjr View Post

Here, here Chomsky. Thanks for checking the facts.

LOL, first of all, it's unfair that icm63's thread has been hijacked. Secondly, it's unbelievable that it has been hijacked by such a foolish discussion. Consider these points...
1] EJ reads these posts. Do you think you are inspiring and motivating him by airing your negative opinions in public? If you have a problem either; a] show some class and communicate it to him more privately, b] don't subscribe, then show some class and keep your f$%king mouth shut about it. Is it any surprise that a classless parasite that refuses to cough-up only $250/year would compain about the cost, then brag about searching the subscriber section headlines and conducting a Google search for the free stuff? What is it Mula, is there value in the content or not? Let me phrase the argument in your typical context...you are being typical cheap ass, entitlement-expecting, it's-all-about-me liberal.
2] EJ has fully explained that his predictions, and the tremendous research and consideration that they entail, can not be rushed. An explanation that was unnecessary for the majority of subscribers. Those of you that are full of "opinions", don't recognize that EJ is not churning-out "opinions" like so many other free and pay prognosticators. EJ is carefully formulating predictions (educated gueses about the future!) that have been uncannily accurate. If you can't see the value in his efforts and accuracy, then you don't deserve to subscribe.
3] The reason the free area is so damn beneficial is because all of the subscribers participate as well. Some day, EJ may tire of the criticism from the cheap seats and make the site subscriber-only. I welcome the move. However, my assumption is that he has a firm grasp on Marketing, like he has a firm grasp on so many concepts, and recognizes that his free section is an incredible feeder step into the subscriber portion. It worked for me, I expect it worked for the majority of loyal subscribers, but very rarely have I ever felt I received so much value for so little investment.

As for you fellow subscribers, and the entire iTulip administration, I wholeheartedly thank you for your contributions. As for you complaining parasites, the phrase penny wise and dollar foolish comes to mind. (So do a lot of other phrases.)

My apologies to icm for continuing the hijack of the thread, but I couldn't let the petty complaining go without a response.

Well said rjwjr.

**jpatter666** · November 28, 2009, 01:16 PM

Re: 2009 = 1939 : Then a 34% plunge

Originally posted by cjppjc View Post

You cannot see anything in the subscriber section. Just a mesage that says:

Sorry...
cjppjc, you do not have permission to access this page. This could be due to one of the following three reasons:

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.

**Verdred** · November 28, 2009, 01:24 PM

Re: 2009 = 1939 : Then a 34% plunge

Originally posted by pmmeaney View Post

If you're looking for some main stream sentiment, I always love Walter Updegrave (just the name alone gives me chuckles). Here's his little advice column on CNN-Money:

http://money.cnn.com/2009/11/25/pf/e...ymag/index.htm

These guys never tire of being really wrong.

Is that anything like "Upderiver" because that's where he's sending that guy.

**Jim Nickerson** · November 28, 2009, 01:33 PM

Re: 2009 = 1939 : Then a 34% plunge

Originally posted by Jim Nickerson View Post

I suppose everyone knows that the markets are in the period of so-called seasonal strength, which isn't a surefire indication of strength, but considering that we are in that period, it lends itself to the time frame, as I understood it, laid out by Edwards when he postulates that the real shit could hit the fan.

Here is a discussion I ran across recently regarding the seasonal patterns of strength and weakness. http://alphaim.net/power_newsletter.html and another discussion by Jerry Minton along the same lines is http://alphaim.net/newsletter_11_5_09.html

Originally posted by Jerry Minton

One of the most reliable gain-and-retain strategies is based on the annual forecasting cycle which "skews" stock returns into the period from late-October to early-May. The strategy of owing stocks only during this annual "power zone" and bonds the rest of the time has delivered excellent returns over the past decade. To see the result of this strategy using the Dow Industrials, the Russell 2000 and the S&P MidCap 400 indexes, go to the Power Indexing section of our website. As you will see, this strategy has worked for the past 60 years. A $1,000 investment in the Dow Industrial Average during the November to early-May period grew to over $82,000 from 1949 to year-end 2008. A $1,000 investment in the Dow from early-May to late-October (the "dead zone") shrank to about $600 over the same period. If that doesn't convince you that there's something structural going on which can be exploited for profit, nothing will.

Minton also notes:

Originally posted by Minton

The market is currently in the "power zone" so the odds are that stocks will be higher in May than they are today. After that, watch out - the "dead zone" of the mid-term election year is historically one of the most dangerous periods. Since 1900, the Dow has lost a total of 3200 points in the third quarter of the mid-term election year.

Regarding how US equity markets perform in relationship to the so-called Presidential Cycles here is an extensive study on them. http://alphaim.net/research/Pres_Cycle/index.html That study is by Mike Burk and here is a reply to me when I asked him today about the average performances related to the Presidential Cycle
"It is the 3^rd year that is the strongest, the 2^nd is the weakest.
I have published a study on the Presidential Cycle that you can read on Alpha’s web site under research. The study was updated early this year."

On 10/1/2007, Burk suggested:

Originally posted by Mike Burk

I think we are in a developing top that is in its final stages. In the next week or two there is likely to be an all time high in the Dow Jones Industrial Average (DJIA) and the S&P 500 (SPX), and a multi year high in the NASDAQ composite (OTC). If my interpretation is correct there will not be a new high in the Russell 2000 (R2K).

http://www.safehaven.com/article-8527.htm

That call by Burk was correct and timely.

Originally posted by Jim Nickerson View Post

Several things I note and I believe you noted somewhere else here. That $BKX, $KRX, and financials are and have been failing to keep up with the recent moves up in equities. I note too that the $RUT hit its high from March now 30 market days ago, and that too is not a good sign. Perhaps today started the end of the world in US equities, commodities, emerging markets, but similar drops have occurred in the last eight months, so for now it, as always, remains to be seen how things unfold.

Today Alan Abelson's closing remark in his weekly Barron's commentary:

Originally posted by Abelson

BEFORE WE EXHAUST BOTH our space and you, we might call your attention to the fact the brokerage stocks have been acting rather crummy even before Dubai. And, hard as it is to believe, that includes the seemingly invincible Goldman Sachs. Whether it's simply the result of investors deciding to cash in their profits on shares that have been in the vanguard of the sizzling rally or bad vibes from Washington about punitive regulation, or a combination of the two, it's hard to say. But we do want to take note of the less than stellar action because often in the past, financial issues have led the way down as well as up.

[JN emphasis]

My conclusion is that the markets worldwide right now are in tenuous positions, but I suppose most days I think that. What sort of follow through that develops in the next few weeks regarding the Dubai BS may be the key to the markets putting in tops already, or not.

Sorry to interrupt you guys' raves/rants.

**icm63** · November 28, 2009, 01:51 PM

Re: 2009 = 1939 : Then a 34% plunge

icm, you and the article you quoted noted what happened in 1937, the Fed raised rates, then the market went down.

Why is the divergence between stocks going up and interest rates not good?

It might only be "not good" if one is short risk assets like stocks and commodities, but it has been and will remain good if one is long those and the market and the Fed (whichever is most responsible for rates) continue to keep rates down. It also might not be good for anyone who after the last two to 300 hundred SPX points up decides they should finally run "to catch train."

Simple reason is: rate of return relative to the general evaluation of market risk.

If you have $1 dollar, and you are a fund manager, you must seek out returns. WHY put that money in to UST (2 year note) and get 0.75% pa compared to stocks at 5% plus ( assume).

Follow the money for the true assessment of the risk vs return in the market. As of today the investing community say NO THANKS to potential higher returns in stocks, and are more concerned about JUST GETTING THEIR MONEY BACK so they place there monies in short term bonds.

If you read my link to post about 'EJ call etc', then you should conclude the market is NOT HEALTHY, sure it may trend up further, but this market is NOT yet a true BULL MARKET as the large players and NOT ONLY the FED induced banks are NOT LONG Stocks. NOTE: Bond market is many times the size of the stock market.

Question
Are short term bonds being skewed by the a single investor, an investor that may be WRONG, therefore the trend of short term money cant be considered as a true representation of the general market evaluation.

Which short term investor could possible be so dominate: hmmmm China, and maybe a few other just as nervous central banks. Maybe these type of investors know more about the likely hood of more Dubai's and UK's with possilbe sovereign debt issues...

Very few investors seem to have any faith in this
bull market, and judging by the way the money is moving,
it appears that the majority feel that the rally is over.
We’re betting that they are wrong. This is a classic
contrary opinion play. Remain fully invested."

Did this newsletter say BUY in mid march or latter on ? Any newsletter saying BUY stocks at the moment is call the FED each day and asking "Are you still fueling this market, please tell me when you will stop, I gotta make a living you know !!"

**Verdred** · November 28, 2009, 01:51 PM

Re: 2009 = 1939 : Then a 34% plunge

Originally posted by Jim Nickerson View Post

Market�s usually hit a peak when investor
optimism is at its greatest, and the current
environment is nowhere near these levels, which is
a big plus for the bullish case. It is our contention
that the bull market will not end until the public
comes onboard. Currently the public is moving in
the opposite direction. For the year-to-date, $4.6
billion has been pulled out of conventional mutual
funds that only buy U.S. stocks, while the coffers of
bond funds have increased by $280 billion. Much like
generals who are always fighting the last war, the
majority of investors do not want to get blindsided like
they were last year. That�s the main reason why bear market
funds and long-short mutual funds (formulated to protect
against major losses in bear markets) have raked in a
record-breaking $10 billion through the first ten months
of this year, which is double the previous record set in
2006. Very few investors seem to have any faith in this
bull market, and judging by the way the money is moving,
it appears that the majority feel that the rally is over.
We�re betting that they are wrong. This is a classic
contrary opinion play. Remain fully invested." [emphasis mine]

Talk about a wall of worry. If it has not existed since March, it never will.

Sullivan, the writer of the above quote, could be wrong in his contention that markets do not top until the public comes on board; classically in many instances sentiment polls bear that out, but I am reasonably sure there have been exceptions.

What is the "it" that has not existed since March?

As far as the psychology behind drawing in the mass-investor I would doubt that the influx of mass-investor in-and-of-itself is the reason it marks the top of a market.

In fighting technique, the feign is the best way to draw in an opponent, and against inexperienced opponents is probably the easiest way to throw them off rhythm and gain an easy victory.

So for the markets, assuming that the real gains to be had in terms of valuations and fundamentals have long-bitten the dust, there is only the feint/feign. So most feints would draw in any number of participants, and the longer that goes the more will be drawn in. Classically, the casual mass investor who only after months of a bull-run in something realize what's going on dive in at the end, drive it up one final time and that is the signal to the bigs to get out.

But, against a very defensive opponent (skilled or unskilled), the feign can be very dangerous, because even though it is only a feign there must be some "real exposure" to attempt to force a committment. There in lies the danger. If the opponent does not jump-in, the feigner is exposed (as a side-note, most feigners are rhythmic even after years of conditioning, and the mind inherently recognizes patterns and can time a feint). If, and that is the big IF, the silent majorities are truly fed up (right-wingers are a stubborn lot, and liberals are nervous nellies, fill in psychological reasoning here) then that classical market-calling technique will be ineffective.

My reasoning for why I don't think the mass investor will be easily lured in I'll leave for another posting.

**Verdred** · November 28, 2009, 02:11 PM

Re: 2009 = 1939 : Then a 34% plunge

Originally posted by Jim Nickerson View Post

Here is a discussion I ran across recently regarding the seasonal patterns of strength and weakness. http://alphaim.net/power_newsletter.html and another discussion by Jerry Minton along the same lines is http://alphaim.net/newsletter_11_5_09.html

Minton also notes:

Regarding how US equity markets perform in relationship to the so-called Presidential Cycles here is an extensive study on them. http://alphaim.net/research/Pres_Cycle/index.html That study is by Mike Burk and here is a reply to me when I asked him today about the average performances related to the Presidential Cycle
"It is the 3^rd year that is the strongest, the 2^nd is the weakest.
I have published a study on the Presidential Cycle that you can read on Alpha’s web site under research. The study was updated early this year."

On 10/1/2007, Burk suggested: http://www.safehaven.com/article-8527.htm

That call by Burk was correct and timely.

Today Alan Abelson's closing remark in his weekly Barron's commentary:

[JN emphasis]

My conclusion is that the markets worldwide right now are in tenuous positions, but I suppose most days I think that. What sort of follow through that develops in the next few weeks regarding the Dubai BS may be the key to the markets putting in tops already, or not.

Sorry to interrupt you guy's raves/rants.

Good stuff.

I wonder, for the seasonal cycles, how much of that gain is based off consumer spending? In other words, has the US depended on consumption going all the way back to 1949 or is that a newer phenomenon? Or was it manufacturing before 1980, consumer spending afterwards? I'm just wondering if there is reason to believe that current events (lack of consumer spending, e.g.) have a chance of breaking long-standing evident cycles.

As for the presidential cycle, again, i wonder if Obama doesn't break the cycle. I know a lot of people who didn't like president Bush, but not too many with a lot of money that felt that if they could pull all their money out of investments and if that submarined the economy which would hurt president bush, etc, you get my thought. I know very wealthy individuals who would rather return to the old country than to have to watch this go on much longer. I'm not particularly for or against Obama, I'm just wondering if he will provide the "unite behind the concept of America" thing that I'm assuming the presidential cycle is somehow founded upon.

But I'm not ranting, just throwing in psycho-mumbo jumbo. Your content is good, keep it coming if you have time.