Why Only Fools Think the Bottom Is In

[rjwjr]

Re: Why Only Fools Think the Bottom Is In

Lukester, you are probably the most open-minded participant on this sight. It's a compliment, but sometimes it frustrates the hell out of me.

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.

I agree that the deals look good looking backward. I just think they're not as cheap as they're going to get. I'm watching Vegas real estate myself. At the very least, even if values don't slide much further, there appears to be little chance that this train is leaving the station anytime in the near future. I'm keeping my real estate investment funds active elsewhere for the forseeable future, while continuing to monitor the situation.

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".

Careful here as there is also a school of thought that "the higher the bubble, the deeper the fall". Typically, corrections seem to overshoot the median/historical norm, not undershoot. It seems prudent to go beyond current valuations so as to compare inflation adjusted values, historical ratios, and the like.

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.

Low risk, perhaps, but also low return, perhaps. I agree that inflation will cause housing values to rise, but IMHO that money is better parked in precious metals, oil, or some other liquid investment that is a better inflation hedge than real estate is likely to be this time around.

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.

A very valid point. In the end, the final decision is yours, based on your circumstances, your market, your risk tolerance, and your personal goals. Best of success to you.

[nero3]

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).

I posted this in another thread to.

http://finance.yahoo.com/echarts?s=U...urce=undefined

UDN (inverse dollar index) DBA, agriculture fund
Certainly explains the rationale to guys like Jim Rogers and his take on agriculture. they just need to print enough to bring back the tide into the market, sort of to keep the bubble inflating, the carry trades going, the music playing, not to fill an imaginary deflationary hole based on the fatalism that the music have permanently stopped. That's the difference between the liquidity side, or solvency side. The fed is treating it as a liquidity issue, and I suspect it is. Well, other than that, it could also be like june 2008, was like early 1980, who knows really, or 1990 for that matter, and that things now instead of inflationary, turns booming with a strong dollar and low commodity prices, anything is possible really. I just buy quality companies at low prices. That's simpler than trying to figure out what the market is doing tomorrow. Because market's change like that from time to time, it's much better over the long run to be invested in good companies, than very sector specific things like gold mining companies.even if stocks might do poor for long times, like from 1965-1982, the money comes back when the next bull set in.

One thing that I think is important, is that after a structural inflationary bear. It comes a deflationary bull. That's how the cycles work. It have been a inflationary structural bear (on the dow, but not emerging markets ,and commodity exchanges) of course from 2003. After a structural bear, comes a deflationary bull, not a deflationary bear. But I suspect, you will have two boom bust cyles, within each structural period. At least.

[rjwjr]

Re: Why Only Fools Think the Bottom Is In

I posted this in another thread to.

http://finance.yahoo.com/echarts?s=U...urce=undefined

UDN (inverse dollar index) DBA, agriculture fund

Thanks for posting this nero3. I own both of these; UDN and DBA. I had never looked at it from the perspective of your ovelapping chart before, but now that I have, I'm selling my UDN and using the proceeds to buy more DBA. The DBA looks like it will provide me higher gains when the dollar loses value (without corresponding lower lows if the dollar gains strength).

That wasn't your reason for posting the chart, but it sure provided me some insight.

[c1ue]

Re: Why Only Fools Think the Bottom Is In

Again, more lovely graphs and talk - all from the era of the last bubble. That bubble? The US losing the last fig leaf of Bretton Woods.

Yet I still fail to see any counterpoints to the basic iTulip thesis.

Just believing something different is great, but just bulling ahead with your own arguments without considering anything that came before shows either extreme naivete or a hidden agenda.

I nominate the title "Chief Bubble Blower" to Nero3.

[nero3]

Re: Why Only Fools Think the Bottom Is In

, tha

Thanks for posting this nero3. I own both of these; UDN and DBA. I had never looked at it from the perspective of your ovelapping chart before, but now that I have, I'm selling my UDN and using the proceeds to buy more DBA. The DBA looks like it will provide me higher gains when the dollar loses value (without corresponding lower lows if the dollar gains strength).

That wasn't your reason for posting the chart, but it sure provided me some insight.

You could just as well buy UNP or BNI, that's why I like these stocks over DBA or gold as they work in both strong and weak dollar. when you get a trend shift as after 1980. and get dividends as well. If the dollar turns, it will benefit BNI more than UNP, BNI will have wider profit margins on the lower fuel costs, if the dollar get strong. Or buy some oil, coal, steel or whatever company. I think the DBA is a little to defensive, but it should work. There is endless opportunities in this market now. Some Russian stocks have gotten slaughtered, it's almost to late to buy in. It's still cheap, but not dirt cheap anymore.

patriot coal should work very well, from todays stock price, if the US economy enters a weak dollar boom, and then overheats at the end.

http://finance.yahoo.com/echarts?s=U...urce=undefined

[metalman]

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.

or as itulip put it when still battling the pathetic deflationsts...

[Guest]

Re: Why Only Fools Think the Bottom Is In

That is a very wry summary indeed Metalman.

[stockman]

Re: Why Only Fools Think the Bottom Is In

, tha


patriot coal should work very well, from todays stock price, if the US economy enters a weak dollar boom, and then overheats at the end.

http://finance.yahoo.com/echarts?s=U...urce=undefined

Dang NERO I'm startin' to like you. That's not a stock, that's an option! 80 to nothing (almost) in a few months. Amazing what a broadly accepted theme can do on the way up- and on the way down.


long PCX

[Guest]

Re: Why Only Fools Think the Bottom Is In

Clue - what you overlook is that Nero3's committing to this bet is not in some nebulous future, but in the very next year, with market proofs to be emitted right in the next two quarters. In case you missed it, he's putting himself in a position to be flat wrong. All you need do is await the results of the next twelve to eighteen months for a more substantive response to this than all of this back and forth with the indignation.

What's all this fuss and bother about "naivete'" or "hidden agenda"? Lot of people kicking up a stink and squawking here about a guy's call, to which he's committed and which he may turn out very publicly wrong about if all your comments are correct. If you have this supreme assurance in the outcome, you need merely await it to then deliver a sermon on blatant folly. Meanwhile a lot of "prove it" comments are flying around, which seem to miss that simple yet substantive point.

I actually think the commodities are going to take a real drubbing correction down right in the next month or two as we get into the summer. They are coming off the first rebound of one of the largest commodities bears ever and are going to bounce around hard. EJ's bouncing ball is entirely appropriate. The only divergence of opinion or "heresy" here is what ensues thereafter (next three years).

And BTW, if I get "nominated" something here, does that mean I have any option to merely decline the nomination, or is not optional?

Again, more lovely graphs and talk - all from the era of the last bubble. That bubble? The US losing the last fig leaf of Bretton Woods.

Yet I still fail to see any counterpoints to the basic iTulip thesis.

Just believing something different is great, but just bulling ahead with your own arguments without considering anything that came before shows either extreme naivete or a hidden agenda.

I nominate the title "Chief Bubble Blower" to Nero3.

[ThePythonicCow]

Re: Why Only Fools Think the Bottom Is In

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.

Sometimes the truth comes cloaked in careful analysis of reliable data.

Sometimes the truth comes cloaked in a "pre-emptory arm wave".

The form of the presentation does not determine its validity.

Stepping back (easier for me to do as I only skimmed a small fraction of this thread), this thread seems to me like the proverbial tale of the Blind Men and an Elephant. We are each trying to glimpse into the future, but since we lack clear understanding and agreement into what will be the very nature of that beast called the Future, the discussion is difficult.

Occassionally in our economic history some big changes have held powerful sway. Such changes included connecting the North American midwest to its Atlantic ports by rail, or the development and impact of computer technology over the last fifty years, or now the FIRE economy.

We stand here now, watching a big wave of the FIRE economy break and wash ashore. Quite possibly it is the Last Big Wave. Perhaps it is not.

Each of us, from our own vantage points, with our individual biases, is trying to answer a few questions:

• Is this the Last Big Wave of the FIRE economy?
• If it is not, then when and where do we catch the next wave?
• If it is, what will the shoreline look like after that wave washes out to sea?
• If if is, what will be the nature and form of the next series of waves? Will they even be in our lifetime?

Detailed analysis of housing costs and real estate prices works, in an economy where that has been and remains an important factor.

The iTulip message, from my quite limited understanding, is that recently, especially for the last decade or three, the FIRE economy has come to be the "Big Thing", the high order bit. The real estate market was a secondary affect of that, as the ravenous debt machine beast created more debt paper to feed its increasing hunger.

There are three Doors out of this room

1. The American real estate market continues to matter, perhaps as your analysis suggests.
2. The FIRE economy continues to hold sway, but metamorphises such that California real estate prices matter little more than rural China real estate prices (or even rural Texas real estate prices, which have gone no where slow this last decade.)
3. The FIRE economy blows up and goes the way of the horse mounted cavalry, in which case more or less all non-local financial or economic bets are off.

That you have pinned an informed, readable and detailed analysis on Door 1 does not mean we will exit through Door 1.

[Guest]

Re: Why Only Fools Think the Bottom Is In

Rjwjr - it almost certainly isn't true, but thanks for your kind words. It sounds great, real catchy and has a snappy sound to it. "Most open minded participant". Neato.

Lukester, you are probably the most open-minded participant on this sight. It's a compliment, but sometimes it frustrates the hell out of me..

[ThePythonicCow]

Re: Why Only Fools Think the Bottom Is In

I'm selling my UDN and using the proceeds to buy more DBA.

Personally, I wouldn't touch DBA (agriculture) with a barge pole.

I'm expecting the market to fall out of world wide agriculture, perhaps in the fall of 2009, as it fell out of shipping of oil and durable goods earlier. I'm spending my spare change on food stocks for my pantry, not on DBA.

[cjppjc]

Re: Why Only Fools Think the Bottom Is In

Great thread. This IS what makes a market.

[Guest]

Re: Why Only Fools Think the Bottom Is In

Nero3 - short term I have read that all the agriculturals are due for a sharpish correction (down significantly, likely starting at end of May). Significant further weakness across the board in the commodities according to that view (exceptions such as copper may correct less). Grains are discussed as candidates for shorting in another newsletter (I think it does decent work). I don't trade, and I'd probably thoroughly mess up 3/4 of any trades all you other guys are discussing, but this is what I've read. We'll see if that's a good call within 2-4 months.

I posted this in another thread to.

http://finance.yahoo.com/echarts?s=U...urce=undefined

UDN (inverse dollar index) DBA, agriculture fund
Certainly explains the rationale to guys like Jim Rogers and his take on agriculture. they just need to print enough to bring back the tide into the market, sort of to keep the bubble inflating, the carry trades going, the music playing, not to fill an imaginary deflationary hole based on the fatalism that the music have permanently stopped. That's the difference between the liquidity side, or solvency side. The fed is treating it as a liquidity issue, and I suspect it is. Well, other than that, it could also be like june 2008, was like early 1980, who knows really, or 1990 for that matter, and that things now instead of inflationary, turns booming with a strong dollar and low commodity prices, anything is possible really. I just buy quality companies at low prices. That's simpler than trying to figure out what the market is doing tomorrow. Because market's change like that from time to time, it's much better over the long run to be invested in good companies, than very sector specific things like gold mining companies.even if stocks might do poor for long times, like from 1965-1982, the money comes back when the next bull set in.

One thing that I think is important, is that after a structural inflationary bear. It comes a deflationary bull. That's how the cycles work. It have been a inflationary structural bear (on the dow, but not emerging markets ,and commodity exchanges) of course from 2003. After a structural bear, comes a deflationary bull, not a deflationary bear. But I suspect, you will have two boom bust cyles, within each structural period. At least.

[pwcmba]

Re: Why Only Fools Think the Bottom Is In

At least our current President told us it was time to buy. Carter just told us to turn down our thermostat! I guess the man downstairs put his number of 666 SPX on the low too.

http://www.foxnews.com/politics/firs...me-buy-stocks/

http://www.britannica.com/blogs/2009...us-presidents/