Iqbal bhai, a few clarifications since you have been lurking here for only a few days. Yes there were discussions about deflation, inflation and comparisons to 1987 and 1929. But the main focus of this thread is overwhelmingly one thing - insane valuations of stocks, unrealistic expectaions of the public and a despise towards "momentum investing" ran amock in the shield of low inflation and low interest rates and decent coprorate profits. I say 'decent profits' because some of them are really good and a good many of them are financially engineered. It is not as if the market hasn't priced these past and future (expected, as I might add) earnings.
As a matter of fact, most regulars on this tread are bullish on the long bond and bearish on stocks. a.k.a. They support stocks and bonds divergence theory. I for one is long on bonds at ~6.55 and waiting to load the truck at 6.75-6.8 range if it ever gets there. I too do not see how 1987 or 1929 crashes can be replayed exactly. But a vertical rise we have seen from April to August should beget a vertical fall, sould Greenspan doesn't flood the market with liquidity like he did in September. And many of the folks here have a few longs and most of them were long till June-July time-frame.
In short, should there be a brutal crash in the remaining part of this year, it will be like the crash of 1997 and it may or may not be exactly like 1987 or 1929. An alternative is that it would be a long but brutal bear market ala early 70's, in case if the Fed goes in the path of pumping liquidity to prevent a stock market crash.
I strongly believe that this was liquidity driven market for most part of the last 18 months. Fundamental justification given was an eye wash. I find it hard to believe that a market that priced KO at a trailing PE of 50 is efficient enough to price overall market indexes at right valuations.
As I pointed to you a couple of months ago, once the drying liquidity poses a threat we will see serious multiple contractions. That will happen regardless of the 'displayed' strength in corporate profits. When you are running on a tight rope with sails, all you need a gentle wind to topple you. you don't need hurricane speed winds.
As with technicals, I know that the supports are not taken out. Yet, no breakout has occured, or did it? I agree with you in some respect that the small European rate hikes sould not have such an adverse impact on US bonds. But it does seem to have some effect. May be this is the gentle wind some bears are hoping.
Regards.
-Mohan
As always, I reserve the right to be wrong. -g- |
