The Justa and Lars Honors Bob Brinker Investment Club Thread Message Board

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Pastimes : The Justa and Lars Honors Bob Brinker Investment Club Thread

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Jan 8 4:00 PM EST

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To: Mark Davis who wrote (5317)	7/1/2010 4:49:38 AM
From: marc ultra	2 Recommendations Read Replies (2) of 10065

<Any changes to your outlook given this week's dismal market action? Clearly while we're only about 10 S&P points below it, that 1040 level did not hold impressively as had been the case. I also didn't like the retest of it on Tuesday where we had huge negative divergence and big volume so that 1040 thing has come and gone. It's also hard to make a big deal about these levels when the machines seem to be taking over in the afternoon and it's hard to tell if a move means anything or not. I mean they stopped trading on Citi the other day when it fell the 10% trigger limit for no reason and started up again where it was before the fall. So clearly something is still screwed up with the market mechanics that they haven't figured out or fixed or don't want to admit because of implications for lucrative high frequency traders etc. I still feel strongly we're not in a bear market and like 1998 I think we're likely going to reach some new low area around here and maybe test it later. I think though it's also very possible that we could still have an explosive rally particularly off the employment report if it's not as bad as advertised, and someone panicking because we broke 1040 may be unwittingly helping the market fulfill its goal of fooling and screwing the largest amount of investors most of the time. Like 1998 and prior to that once you go over a 10% correction in an ongoing cyclical bull things tend to drag out a long time. A lot of this type of thing was discussed by Bob during the 1998 correction once we got over 10% and as you may have noted he has refused so far to call this correction a gift-horse buying opportunity or say just invest and not dollar cost average. So I suspect he is also thinking in terms of a 1998 type scenario that dragged out before some final correction retest. In terms of fundamentals the issue couldn't be clearer IMO. I think we're going to slow down somewhat in the second half but economic and profit growth should remain adequate. The market is profoundly undervalued even more so if you factor interest rates in as most models do. The Fed is gone except perhaps for a return of a little quantitative easing and sentiment is very bearish so it's hard for me to think of fundamentals being much more bullish. If on the other hand you believe we're going into a true double dip recession then you probably don't want to be long this market. The fact is a double dip is extremely rare and if you listen to a lot of conference calls like I do this macro dreariness we're hearing from pundits is simply not what's going on in corporate America and there's no sign that we're headed for any more than some second half slowing which is also the norm as what has been a V shape recovery takes a breather. So since 1040 isn't as important anymore we could go lower but when all is said and done I think my expectation that any buying done in that 1050 area or below will prove to have been a good purchase even if it takes a little time to get rewarded. We're now at a 15% correction so I (and Bob) are either wrong about this not being a bear market or else the downside is less than 5% even if we get to that 19%+ type correction we saw in 1998.

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