re: How sure are you that it is still a bear market?
A lot of people are seeing some tentative signs of supply/demand coming back into balance (like PC chip inventories getting cleared), and thinking this is the first sign of the end of the downturn in tech stocks. In the last several downturns, this was correct. Today, I don't think it is. I see debt (not oversupply or underconsumption) as the underlying cause of this downturn (in the economy, and in stocks). So, once supply/demand comes back into balance, the bottom still isn't in, because demand will continue to decrease, as businesses and consumers spend less and save more.
If consumers can continue spending at current levels, then supply/demand will come back into balance quite soon (this year), and credit will become available again, and business spending will resume. The problem is, I see an upcoming downturn in consumer spending. I posted my thoughts at: Message 15662633
You're right about the short interest as a significant part of the margin totals.
Old Economy stocks peaked in 4/98, and have been in a bear market ever since. Many of them, after the 10/98 bottom, never regained their previous highs. The New Economy stocks peaked in 3/00, two years later, and have now been in a bear market for over a year now. So, the trend is down. I see events of the last 3 weeks as the third bear rally in this bear market (the first was in mid-2000, and the second was in January 2001). Investors want, very badly, for the bull market to resume. There is too much eagerness to believe good news, too much hope, for me to believe a bottom is in. I think the bottom in stocks will happen during a "disinterest bottom", a period of low volatility, no hope, when large numbers of former stock-holders have permanently put there money elsewhere, and aren't even looking at stocks any more. Like in the 1970s. We need Money magazine off of supermarket shelves, and financial news networks going off the air.
To me, the most important numbers to follow, to understand the macro picture, and decide when the bear market can end, are: consumer sentiment, and consumer spending. If I'm wrong, then consumer spending will hold up, and sometime later this year I'll get out of my put positions (at a loss) and go back to being 100% long and longterm. But, if I'm right, and consumer spending falls off a cliff, then my puts are going to allow me to have cash to go long at prices lower than anything we've seen yet. |
