Why Only Fools Think the Bottom Is In

[metalman]

Re: Why Only Fools Think the Bottom Is In

Think of countries such as Italy, Spain, Ireland, Greece, and their long term interest rates. Right now the differential to the short term rates, is in some cases, in some cases the difference is excessive. I think this is what will happen in the US as well, it's just that yields are suppressed due to the flight to "safety and quality", in reality, I don't see the big difference between the fundamentals of the US and those other countries, it's rather a mini bubble in treasuries, causing the yields on the 10 year to be at least 1-2 % below where it should be. That could go away, as there might be a positive momentum building in the market's and the perceptions about the economy now.

http://www.clevelandfed.org/research...9/01monpol.cfm

This is some of the better research I have seen from the fed

When you add that to where we are now, I'm almost sure house prices will "break out" from their deflationary path, together with other inflation hedges (that seems to already have happened in the markets). House prices have been rising for 3 months in a row in Norway, rose in the UK in march. I think it's most the inventory, that is a pressure on the US market. Not deflationary forces.

in other words, you have no research to back up your claim but one paper by the fed... a couple of months of housing price growth in norway where there was no housing bubble and one month in the uk where there was... the outlandish assertion without any evidence that there is little difference between the fundamentals of the US and those other countries (you're kidding, right? ever hear of the fire economy?)... assertion of a mini bubble in treasuries causing the yields on the 10 year to be at least 1-2 % below where it should be due to flight to saftey. what about the fed monetizing 10 yr bonds? think that makes a difference?

continue to ignore the distinction between asset price inflation/deflation in the fire econ and commodity price inflation/deflation in the p/c economy or educate yourself and read... Saving, Asset-Price Inflation, and Debt-Induced Deflation

keep ignoring 10 yrs of accurate housing forecasts...

• November 1998: Warns on Internet Bubble
• August 1999: No Y2K Disaster
• November 1999: How the Internet Bubble Will End
• March 2000: Internet Bubble Top
• April 2000: A Bear Market is Born
• January 2001: Post-Bubble Recession
• September 2001: Gold Price Bottom at US$270
• August 2002: Warns of Housing Bubble
• January 2004: How Housing Bubble will End
• January 2005: Housing Bubble Correction
• June 2005: Housing Bubble Top
• October 2006: Recession Q4 2007
  
• December 27, 2007: Start of Debt Deflation Bear Market
• September 15, 2008: Fed Funds spread signals crash

and... by all means.... whatever you do, never answer a direct question about how your investments performed in the past based on your own powers of analysis. track record? who cares? to succeed in investing all you need an attidude.

[rjwjr]

Re: Why Only Fools Think the Bottom Is In

and... by all means.... whatever you do, never answer a direct question about how your investments performed in the past based on your own powers of analysis. track record? who cares? to succeed in investing all you need an attidude.

I think you are missing his point...he really, really, double really wants this to be a bull market. Can't you see that? Isn't that enough for you?

[rjwjr]

Re: Why Only Fools Think the Bottom Is In

Here are some interesting comments from a random blog I found while searching historical S&P PE ratios. http://myinvestingnotes.blogspot.com/

"There were four massive stock bubbles in the 20th Century: 1901, 1929, 1966, and 2000. During each of these bubble peaks, the S&P 500 neared or exceeded 25X on professor Robert Shiller's cyclically adjusted P/E ratio.* After the first three of these peaks, the S&P 500 PE did not bottom until it hit 5X-8X. We're still in the middle of the last one."

"Based on Professor Shiller's latest numbers, we're at about a 12X P/E. (Prof. Shiller's last update was at 805 on the S&P 500, which produced a 14X P/E. Plugging in today's 700 on the same earnings number, we get about a 12X P/E). The 12X PE compares favorably to the long-term arithmetic average of 16X, but it's still way above the historical troughs of 5X-8X."

To add my own thoughts to these comments, these observations above pertain to PE's based on trailing earnings, I don't think we have seen the worst of the corporate earnings yet, so the forward situation is likely worse than the historical indicators infer.

I'm happy for nero3 and other traders that are making some money in this dead cat bounce, I just don't agree with them that we're rallying off the bottom and would caution them to lock in the gains along the way.

[metalman]

Re: Why Only Fools Think the Bottom Is In

I think you are missing his point...he really, really, double really wants this to be a bull market. Can't you see that? Isn't that enough for you?

or he really, really, double really needs this to be a bull market because he didn't sell housing in 2006 or stocks in 2007.

now, if he's right i'll be the first to admit i was wrong. but if he's wrong and the market corrects big time in the next new months... i recommend the title 'head reloader'... if he sticks around.

ok, i gotta get back to work.

[nero3]

Re: Why Only Fools Think the Bottom Is In

in other words, you have no research to back up your claim but one paper by the fed... a couple of months of housing price growth in norway where there was no housing bubble and one month in the uk where there was... the outlandish assertion without any evidence that there is little difference between the fundamentals of the US and those other countries (you're kidding, right? ever hear of the fire economy?)... assertion of a mini bubble in treasuries causing the yields on the 10 year to be at least 1-2 % below where it should be due to flight to saftey. what about the fed monetizing 10 yr bonds? think that makes a difference?
and... by all means.... whatever you do, never answer a direct question about how your investments performed in the past based on your own powers of analysis. track record? who cares? to succeed in investing all you need an attidude.

In my opinion you don't have the intelligence to be worthy of my effort to convince you. That's why I don't communicate with you.

[nero3]

Re: Why Only Fools Think the Bottom Is In

Here are some interesting comments from a random blog I found while searching historical S&P PE ratios. http://myinvestingnotes.blogspot.com/

"There were four massive stock bubbles in the 20th Century: 1901, 1929, 1966, and 2000. During each of these bubble peaks, the S&P 500 neared or exceeded 25X on professor Robert Shiller's cyclically adjusted P/E ratio.* After the first three of these peaks, the S&P 500 PE did not bottom until it hit 5X-8X. We're still in the middle of the last one."

"Based on Professor Shiller's latest numbers, we're at about a 12X P/E. (Prof. Shiller's last update was at 805 on the S&P 500, which produced a 14X P/E. Plugging in today's 700 on the same earnings number, we get about a 12X P/E). The 12X PE compares favorably to the long-term arithmetic average of 16X, but it's still way above the historical troughs of 5X-8X."

To add my own thoughts to these comments, these observations above pertain to PE's based on trailing earnings, I don't think we have seen the worst of the corporate earnings yet, so the forward situation is likely worse than the historical indicators infer.

I'm happy for nero3 and other traders that are making some money in this dead cat bounce, I just don't agree with them that we're rallying off the bottom and would caution them to lock in the gains along the way.

I agree that the market will head lower if we indeed are in a 1929-1932 type , or Japan post 1989, type crash scenario. But in those scenarios the market was more than twice the 2007 levels going into the bust. The market's now are as in 2003, just much lower in real terms. And I think the chance of a recovery now, is much better than they was in 2003. I remember, an article by one of the richest billionaires in Norway. It was a rather quick prediction on where the market's would go over the next years, and that was written in 2003. This guy is considered to be the best trader in norway. He was completely predicting the debt deflation scenario to play out, saying this is 1929. And that was just weeks before the market rallied in 2003 as that bubble got going. Now it have been the same thing. He have been all over the media, criticizing the sovereign wealth funds, talking about 1929, hinting that it will take 20-30 years to get even. To me it's just another indicator it's not going to play out.

In many ways, it's similar to 2002-2003, when there was a debate on deflation, and the liquidity trap. Some even brought it up in 1998, guys like Gary Schilling, only to bring it back onto the table now, I think his book in 98 was called deflation, it's a long time since I read it. Guys like Paul Krugman thought it would happen in the crash he saw coming after the dotcom bubble, in a book from 99 called the return of depression economics. I've followed Krugman the whole time, and read most of the articles in his archive. http://web.mit.edu/krugman/www/ Krugman is one of the few in the US, that early on was interested in the things happening in Japan, and understood it's significance to the US. Guys like Bernanke have been worried about this scenario (where nominal interest rates can't be set low enough) the whole time.

Now it's like a finale for those fears. And now it's like it's game over to many.

What really determines the game from here on is if they can stimulate the economy towards a sluggish recovery some time in late 2009, maybe early 2010, where lending and credit starts flowing again, or if it's sort of game over. I take the view that there is a way to get some sort of recovery, but probably more sluggish than the recovery from 2003. However, this correction happened very fast from after the bear sterns collapse, and I think many market's can rebound very quick, even if the real economy in the US will take some time to get up and running.

A company I like is Sony, and they have tracked many bubbles. It's a nice stock to own, just in case any bubbles should develop. Sony gained on the early seventies bubble in japan, that was similar to the shanghai now. It gained on the late seventies inflation fears in the US. It gained during the japanese bubble years, going high in 1989. They gained on the US 90-s boom.

In my opinion, it's now all deflated. By looking at enough individual companies, not the market as a whole, I think the picture will emerge that it's impossible for the market to go below the march lows.

http://www.marketwatch.com/tools/quotes/intchart.asp?submitted=true&intflavor=advanced&symb=SNE&origurl=%2Ftools%2Fquotes%2Fintchart.asp&time=20&freq=1&startdate=&enddate=&hiddenTrue=&comp=Enter+Symbol(s)%3A&compidx=aaaaa~0&compind=aaaaa~0&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=3&optstyle=380

[stockman]

Re: Why Only Fools Think the Bottom Is In

For GOLD bulls there is more at stake than 'just missing' a rally if the nominal lows hold (in stocks) and all this money printing begins to accomplish Irving's Fisher's objective.

Just saying you should TRY to consider both sides, don't be blind to the risk of being WRONG and being caught wih too many chips on the wrong side of the table.

gold and spx 1975.jpg

Even a 'bear market' rally such as that little 1975 rally could be damaging to your p&l if too heavily weighted to gold and avoiding all stock exposure (much less short equities- yikes).

[metalman]

Re: Why Only Fools Think the Bottom Is In

In my opinion you don't have the intelligence to be worthy of my effort to convince you. That's why I don't communicate with you.

...and if you can't refute the analysis here that led to a dozen accurate forecasts over 10 yrs, comprehend the fire econ or other key concepts, or answer a few direct questions about where you're coming from, you can always resort to insulting the intelligence of those asking you the questions. of course that'd make you look weak and foolish, but there's nothing stopping you.

[Guest]

Re: Why Only Fools Think the Bottom Is In

Tree -

Does not surprise me to hear of reports that renters are doubling up down here. To call the local job market soft would be an understatement. However all I can report, is that across San Diego, *residential* vacancy rates remain very small, and I have not heard a single word from anyone in the past two years that they actually captured a rent reduction. Parking spaces on the street are same as they ever were.

I'm old enough to remember the late 1970's and early 1980's recessions. Compared to all that, my gut sense is that there are some astoundingly reasonable deals on homes in central San Diego. This is not a giddy head for diving back into real estate reporting this. Cheap is cheap. These are *cheap*. Having said that, I'm not about to dive back in on an impulse.

But I am looking at these things and thinking of this observation of Nero3's, that the floor for valuations in multiple assets coming out of this recession / depression (whatever you want to call it) will be a higher floor than it was coming out of previous recessions, because the latent inflation occurred to date, and that which we'll get going forward, bear little or no resemblance to any past event going right back to 1900. The monetary distortion occurring is a "one of a kind".

Many of us intuitively understand that going forward, the commodities will have a higher valuation floor because of the extraordinary monetary disorder - yet we filter out housing on the sole argument that it was recently in a big bubble. It will likely be a crappy investment in this inflationary cycle, but to assume that it's valuations will remain thoroughly bombed out as inflation rises seems to me an audacious assumption.

I will grant you that it is extraordinarily illiquid - and this is the largest reason why I'm not taking this idea more actively. But still, a conventional down payment of only $36 thousand US dollars, and a mortgage payment thereafter (30 year fixed) of $900 for a quite good looking detached three bedroom home only blocks from San Diego State University? I can't imagine anyone here who would not be thinking hard about the extremely low risk there.

Construction cost for such a home (the real construction cost) is going to be maybe $80K. Actually with all the permitting I think that's way too low. I'm just using a low number here. After paying 20% down, this example property has a mortgage of $126K. That means you'd be paying $46,000 for 7-8 thousand square feet of freehold land (property cost is $180K), right in the middle of California's second largest city? Oh, and living here does not exactly represent a hardship post.

This is my point - if these deals are out there now (I've seen more than one) then iTulip's "years more to fall" is a position or viewpoint which evidently can be more useful and supple when applied to the many different local markets with a little more modulation, no? Instead I hear a lot of very uniform sounding views here (with a fair bit of indignation thrown in) where everyone is sort of reading from an "all housing is a bad buy right now" script.

Now compare the above described house deal to this thread's headline - "why only fools think the bottom is in". One set of comments represents a carefully modulated look at the landscape, discerning the appearance of what seem to be one or two astonishing deals (by any conventional metric), and the other comment is long on the "peremptory arm wave" where the entire market is summarily consigned to the trash can as a fraudulent illusion of any real values anywhere.

Thanks for your input.

Regarding rents in (attractive) coastal California:
A friend in real estate says that renters there are doubling up to afford apartments, and that this situation is creating street parking problems in neighborhoods where there are mixtures of homes and apartment buildings.

At the same time, another friend in CA real estate--who owns an apartment building in a working-class neighborhood east of Long Beach--is battered by vacancies and having to lower rents.

[cobben]

Re: Why Only Fools Think the Bottom Is In

CA Foreclosures About to Soar
http://www.fieldcheckgroup.com/2009/...about-to-soar/

" . . .
For months prior to March, banks/servicers were on and off of foreclosure moratoria with many on a complete hold awaiting Pres. Obama’s plan to save the housing market and homeowners. We track each foreclosure start through the entire foreclosure process individually and in aggregate — also by originator and servicer — and as soon as the Obama plan was made known, banks/servicer shifted their Notice-of-Default and Notice-of-Trustee Sale machines into overdrive.

Foreclosure start (NOD) and Trustee Sale (NTS) notices are going out at levels not seen since mid 2008. Once an NTS goes out, the property is taken to the courthouse and auctioned within 21-45 days.
. . .
The bottom line is that there is a massive wave of actual foreclosures that will hit beginning in April that can’t be stopped without a national moratorium — this wave is so big I would not put it past them trying it.
. . . "

[nero3]

Re: Why Only Fools Think the Bottom Is In

Does not surprise me to hear of reports that renters are doubling up down here Tree. To call the local job market soft would be an understatement. However all I can report, is that across San Diego, *residential* vacancy rates remain very small, and I have not heard a single word from anyone in the past two years that they actually captured a rent reduction. Parking spaces on the street are same as they ever were.

I'm old enough to remember the late 1970's and early 1980's recessions. Compared to all that, my gut sense is that there are some astoundingly reasonable deals on homes in central San Diego. This is not a giddy head for diving back into real estate reporting this. Cheap is cheap. These are *cheap*. Having said that, I'm not about to dive back in on an impulse.

But I am looking at these things and thinking of this observation of Nero3's, that the floor for valuations in multiple assets coming out of this recession / depression (whatever you want to call it) will be a higher floor than it was coming out of previous recessions, because the latent inflation occurred to date, and that which we'll get going forward, bear little or no resemblance to any past event going right back to 1900. The monetary distortion occurring is a "one of a kind".

Many of us intuitively understand that going forward, the commodities will have a higher valuation floor because of the extraordinary monetary disorder - yet we filter out housing on the sole argument that it was recently in a big bubble. It will likely be a crappy investment in this inflationary cycle, but to assume that it's valuations will remain thoroughly bombed out as inflation rises seems to me an audacious assumption.

I will grant you that it is extraordinarily illiquid - and this is the largest reason why I'm not taking this idea more actively. But still, a conventional down payment of only $36 thousand US dollars, and a mortgage payment thereafter (30 year fixed) of $900 for a quite good looking detached three bedroom home only blocks from San Diego State University? I can't imagine anyone here who would not be thinking hard about the extremely low risk there.

Construction cost for such a home (the real construction cost) is going to be maybe $80K. Actually with all the permitting I think that's way too low. I'm just using a low number here. After paying 20% down, this example property has a mortgage of $126K. That means you'd be paying $46,000 for 7-8 thousand square feet of freehold land (property cost is $180K), right in the middle of California's second largest city? Oh, and living here does not exactly represent a hardship post.

This is my point - if these deals are out there now (I've seen more than one) then iTulip's "years more to fall" is a position or viewpoint which evidently can be more useful and supple when applied to the many different local markets with a little more modulation, no? Instead I hear a lot of very uniform sounding views here (with a fair bit of indignation thrown in) where everyone is sort of reading from an "all housing is a bad buy right now" script.

Now compare the above described house deal to this thread's headline - "why only fools think the bottom is in". One set of comments represents a carefully modulated look at the landscape, discerning the appearance of what seem to be one or two astonishing deals (by any conventional metric), and the other comment is long on the "peremptory arm wave" where the entire market is summarily consigned to the trash can as a fraudulent illusion of any real values anywhere.

Thanks for your input.

If you take the price of the apartment, and divide on the yearly rentals - expenses , to get the P/E ratio, what are we talking about?

I think the fixed rate is starting to get really low. If inflation stay 2,5 %, the real interest paid won't be very much. If inflation, for the next decades averages higher due to supply restraints on oil, or who knows what, maybe debasement of the real pensions of baby boomers through inflation, then it could be a very good deal.

[nero3]

Re: Why Only Fools Think the Bottom Is In

For GOLD bulls there is more at stake than 'just missing' a rally if the nominal lows hold (in stocks) and all this money printing begins to accomplish Irving's Fisher's objective.

Just saying you should TRY to consider both sides, don't be blind to the risk of being WRONG and being caught wih too many chips on the wrong side of the table.

[ATTACH]1397[/ATTACH]

Even a 'bear market' rally such as that little 1975 rally could be damaging to your p&l if too heavily weighted to gold and avoiding all stock exposure (much less short equities- yikes).

Brilliant graphs. Probably shows, what is going to happen. However, there are some silver shares that are completely bombed out. like CDE. I think they might gain, even those stocks like ABX, should retrace. You have the different president cycle now of course. Maybe dow 10-12000 is like dow 1000 in the seventies. Probably is. Who knows really.

[medved]

Re: Why Only Fools Think the Bottom Is In

don't see anyone here arguing that rallies are not possible during a debt deflation... they did 1930 - 1938 and in japan since 1990... but a bull market? do you know what debt deflation is?



in the 2000-2001 near death experience only business debt levels refused to rise with mr greenspam's crazy money games. this time? the only debt not falling is federal debt... and household debt is negative for the first time since wwii.

are you saying timmy and ben and china can turn all of these around... household, biz, state/local govt?

Oh ye, of little faith! Repent and accept the truth! It stares right in your eyes! If the only growing kind of debt is the federal debt, then the federal debt it will be.

We are moving from debt-money to gov’t-money just like we moved from gold-money to debt-money. Everybody accepts it (sheeple, “investors”, “economists”, politicians etc.). We know “the free market does not work”, even if it is heavily manipulated/controlled by the gov’t, so the hell with the “free market”. If private money loves the gov’t cash/bonds and trusts it, why not the new “market” supported by the gov’t.

Of course, it will take more time to reverse the overleveraged and oversupplied real estate, but the stock market is peanuts! Everything depends on the sheeple/investor perception. No fundamentals could justify the internet bubble or housing bubble, yet they lasted for years. Of course, sooner or later stagnation and falling living standards will become obvious, but I would not guess, whether it is gonna happen in 6 month or in 2 years.

The faith in the gov’t (socialism) can work miracles! The only thing it cannot do is improve the real economy, especially, the low-life part of it – the commodities sector. So, eventually, whenever whatever bull market fizzles out, commodities will keep going. You will still need gas to heat your house and bread to put on your table. Obviously, the gov’t will try to regulate commodities’ markets and manipulate it with paper derivatives. This will not be a “speculator cakewalk” either.

Having said all this, I still trust iTulip roadmap, it proved to be pretty accurate over the last decade. I am ready to ride whatever big or small bull is coming, but I am inclined to limit my losses and get off at any sign of trouble. “The Bear” is my first, my middle and my last name.

[Guest]

Re: Why Only Fools Think the Bottom Is In

Of course it is Nero3. That's the whole point I'm trying to put on the table for general examination here. Categorical assertions that these markets don't provide *any* deeply discounted values *anywhere* relative to three years from now, are just being dogmatic (and frightened).

If you take the price of the apartment, and divide on the yearly rentals - expenses , to get the P/E ratio, what are we talking about? I think the fixed rate is starting to get really low. If inflation stay 2,5 %, the real interest paid won't be very much. If inflation, for the next decades averages higher due to supply restraints on oil, or who knows what, maybe debasement of the real pensions of baby boomers through inflation, then it could be a very good deal.

[nero3]

Re: Why Only Fools Think the Bottom Is In

Oh ye, of little faith! Repent and accept the truth! It stares right in your eyes! If the only growing kind of debt is the federal debt, then the federal debt it will be.

We are moving from debt-money to gov’t-money just like we moved from gold-money to debt-money. Everybody accepts it (sheeple, “investors”, “economists”, politicians etc.). We know “the free market does not work”, even if it is heavily manipulated/controlled by the gov’t, so the hell with the “free market”. If private money loves the gov’t cash/bonds and trusts it, why not the new “market” supported by the gov’t.

Of course, it will take more time to reverse the overleveraged and oversupplied real estate, but the stock market is peanuts! Everything depends on the sheeple/investor perception. No fundamentals could justify the internet bubble or housing bubble, yet they lasted for years. Of course, sooner or later stagnation and falling living standards will become obvious, but I would not guess, whether it is gonna happen in 6 month or in 2 years.

The faith in the gov’t (socialism) can work miracles! The only thing it cannot do is improve the real economy, especially, the low-life part of it – the commodities sector. So, eventually, whenever whatever bull market fizzles out, commodities will keep going. You will still need gas to heat your house and bread to put on your table. Obviously, the gov’t will try to regulate commodities’ markets and manipulate it with paper derivatives. This will not be a “speculator cakewalk” either.

Having said all this, I still trust iTulip roadmap, it proved to be pretty accurate over the last decade. I am ready to ride whatever big or small bull is coming, but I am inclined to limit my losses and get off at any sign of trouble. “The Bear” is my first, my middle and my last name.

I disagree with you.

I'll just provide a simple link here: http://finance.yahoo.com/echarts?s=U...urce=undefined

The relationship between the dollar and inflation (and), possible the way for a 2003 like recovery, is pretty much set in stone. Print enough money, the dollar weakens, the economy revive. http://finance.yahoo.com/echarts?s=U...urce=undefined

However, last time the dollar have been kind of advancing with the stock market. Therefore one should not rule out a deflationary boom. All booms in the US stock market have been deflationary. And all nominal gain, real loss periods, like 2000-2007, or the 65-82 era, have been inflationary.