Hello again August,
I see talking heads on CNBS all day saying LTB&H is the only way to make it in the long haul- but that's an 18 month old story...
It's frustrating for me because I'm better with verbal discussions, but only people I have to bounce ideas off of that was are my brothers and father who swear bt the LTBH...
Uh-oh... Bad news. Guess what? I'm a long term, buy-and-hold investor. I believe in fundamental analysis, and regard technical analysis as so much orange smoke and black magic. However, that said, I do understand TA, charting and the like, and I do understand the short term implications of TA. And I do acknowledge that many folks are quite good at it. Quite a few of them are right here on SI, and I do respect their short term calls based on TA. One need look no further than posters like TLC (or even yourself) to find respectable TA knowledge and application.
I believe that TA and long term, buy-and-hold FA can live and function together, and that the two investment styles may actually complement each other in some situations.
You know, speaking of Japan, I'm dumb, so I mostly just look at charts they seem B&W to me(but have my share of weird voodoo indicators). So I sit here and wonder, is all this gllom and doom an indicator of a bottom...
I sincerely doubt that either the NIKKEI or any of the US markets are currently at or near a bottom, and that opinion is based strictly on fundamental analysis of various representative stocks. Yes, the markets may have some short term rallies, and yes, some people will undoubtedly make some good money riding the rallies up and the declines down. Those investors among us who use a trading mentality (and TA) will likely be the beneficiaries of any market volatility, because LTB&H like myself will ride out the ups and downs by either holding current positions tightly, or by simply exiting the markets and maintaining cash until earnings are improved and more predictable. Institutional investors (mutual funds, pension funds, etc.) may actually be the ones that throw the markets for a big loss when they begin cleaning up their portfolios later this year in anticipation of how their numbers will look at year end. Will they sell off losers for tax purposes? Will they sell winners to lock in gains? Remember, there's a lot of new young faces managing billions of dollars, and they've never ever seen a real bear market, so trying to predict what they will do is a daunting task. My guess is that eventually they'll panic. Human nature to do so, and these young people aren't disciplined enough to hold positions through adverse conditions. Also, they're likely to worry about their own jobs at some point, dog-eat-dog competition to avoid being the low man on the totem pole and stuff like that...
From a fundamentals perspective, the entire US economy is now riding squarely on the back of consumers. To assist consumers (and business), we have seen 7 cuts by the Fed this year in the interest rates, and a considerable Federal tax rebate. To date, none of these actions has had any lasting or long term influence on the equities markets. Consider this. The consumer is in a debt reduction frame of mind. S/he is reducing debt because of (real or imagined) fears of job loss or income reduction (little to no overtime pay). Consumers that are economically better off have taken monies from the markets and are using those funds for debt reduction (paying down mortgages or paying off credit cards) or upgrading their standard of living by buying (read investing) in more expensive housing (which is made more affordable by lower interest rates). Some folks are even taking advantage of the lower rates to buy second homes, either as an investment or for personal use. On the negative side, consumer debt is still at or near record highs, and bankruptcies are a short term certainty for those people that have over-extended their credit (personal loans and credit card debt; mortgages are usually backed to some extent by the collateral value of the home; many people have already sucked out all of the built-up equity in their homes and therefore have no equity to tap to continue financing a lifestyle that is beyond their means). So my best guess is that, at some future point, the consumer is tapped out and the negative news for the markets continues for quite some time to come. No way to borrow to spend and no equity to tap to finance spending. Things grind to a halt (read: recession).
Dow has held up well compared, albeit, but we're also tracking a little behind the Nikkei. So if Japan is dropped some 70% and we're looking at a potential global "recession" to be kind. why can't the dow give up 50%, easily in the next year or so?
I believe you are absolutely correct in your assumption, and that the Dow can and will give up considerable ground over the foreseeable future. I don't know if 50% is an accurate number or not, but I've been calling for the Dow to drop into the lower 7000 range for quite some time now. (The call is based on taking a historical mid-range multiple for the Dow and multiplying it by the reduced combined future earnings figures for all of the companies in the index. Admittedly, this is guesswork as none of us knows with 100% certainty what any company will earn in the future.)
What happens if this "inventory correction" is turns out to be more than just that? Unemployment is aat a 9 year high(?) what happens if tht worsens? IMO, we haven't come full circle yet.
Again, I agree with you 100%, and FA lends credible support to your opinion. My best guess is that global unemployment numbers will indeed worsen (much worse IMO) over the next 4 to 8 quarters. And a worsening employment picture will most definitely impact consumer spending big time. No question about it.
And now I look at Japan, look at thaat chart. Long drawn out winding down. What is from preventing the Dow to come close to the same thing? Even halve if to say 8 years. That's a hell of a frigging bear. The kind that tkes his time to dine, so to speak.
Most certainly a real possibility IMO, but I think you'll have a difficult time getting the average Joe to buy into the possibility of an 8 year bear market...
Normally I'm a cautious optimist, but lately I've been very bearish. I just don't see any evidence that the bear market will end any time soon. Quarter-over-quarter and year-over-year comparisons should be very easy targets for companies right now, and yet we are still seeing many companies failing to beat (or even match) grossly reduced expectations for revenues and earnings. That's not a good indicator.
Well, I've rambled enough for tonight. Catch you later...
KJC |
