Hi RR (et al),
Well I'm back from my Upper Rio Grand trip. 'Twaz great.
Two weeks ago, in response to a post of mine, you queried
Why would you say the capitulation phase has yet to occur?
Sorry to be so late in responding, but my brief library "logons" precluded the response your question deserves.
Short answer.
Not to be too glib, but your still mooing and snorting and there's no mooing and snorting in capitulation. <gg>
Longer response.
First let's make sure we're "on the same sheet of music". There's capitulation (with a small c) that I'll use to refer to the end of this current (Sept. and Oct.) unpleasantness. And there's Capitulation (with a large C) that "for the sake of this discussion", I'll use to mean the final phase of a bear correction.
I could be wrong (frequently am), but I believe we're near or at capitulation for this phase. My basis for this is my reading of sentiment indicators (put/call, VIX, Rydex, etc.) and my sense of the exhaustion and frustration of the bulls. Earlier this month, I warned of a larger than usual tax loss fund selling this year. Well that's over (remember with settlement times factored in, most of the selling had to be completed yesterday). There's money on the sidelines and we have our necessary "wall of worry" for a sustainable (in the short run) advance. So barring an "exogeneous event" such as an international catastrophe or a domestic political disaster (remember the election), I believe we'll see a rally. In fact my most serious qualm wrt to an upcoming rally is too many others also see one coming.
So much for the small c, now the big C. As I mentioned in my post
Message 14395881
I currently believe we're in the second phase of a bear correction. So to answer your question, bear corrections usually don't end until there is Capitulation. Now anything (or almost anything) is possible, and maybe this particular bear will "end with a whimper, not a bang", but I have me doubts. So with a little side glance at history let's consider what might precipitate the finally (Capitulation with a big C) phase of the correction. In a few months we may (note may not will, I never know for sure) be entering into a recession. If the perception (not the reality, just the perception) is that the fed cannot help out because of inflation "leaking" into the core measures, then this will compound the gloom.
I have only recently returned home and am not "plugged in" yet. However I did come across this post from last weekend
Message 14635605
Pay particular attention to the comments of Bill Gross (the PIMCO guy). Now no one bats a 1000, but it has has been my experience that when Bill talks, one should listen. If he says
"I lean toward a hard landing" for the U.S. economy, says William Gross, of Pacific Investment Management Co., the bond heavyweight.
then the possibility of a "hard landing" and all that that implies should be considered. On of the principal implications is what would be the effect of a recession on the U.S. dollar (down most likely) and what effect that would have on foreign investment (out most likely).
We'll know when we're in Capitulation not only because the averages will be down but also the sentiment measures will be at record extremes. Now I don't expect you to go any further than neutral; everything is relative. <gg>
Now the prickly question of when arises. I don't have any good handle on that. Could be as early as December, but I doubt it. Current "best guess" is first half of '01.
As I'm sure you know, all of this is "blue sky" and is to be taken on a FWIW basis. I offer it only as a cautionary note in the belief that those that are prepared can turn an apparent disaster into a springboard to success. Remember the quote that Volt is fond of regarding "a tide in the affairs of men". Also, last I checked Volt was warning about a drop after the first of the year.
"Time will tell".
,___,
(°v°)
( ^ )
¯¯¯"¯"¯¯¯
the lurqer
|
