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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: marginmike who wrote (37213)	9/15/2005 1:18:19 AM
From: Earlie	Read Replies (2) \| Respond to of 116555

MM: Glad to see your comments as this is what helps get ideas discussed. With respect to a "bull market since 02"..... depends on one's perspective. The NAZ fell from 5000 to 1000 which cratered many bulls. A "weak retracement" back to 2000, no? And about the insiders..... aren't you making my point? Why are they so hugely bearish in the face of a "bull market"? If things were truly improving would they not be buying? I see this as the insiders offloading on to the unsuspecting, but we will have to wait for a judgement on this one. I could dispute the quoted "forward PE ratio" but it isn't nearly as important as the accounting and business practices that created the PE. How many companies wrote down inventory this year to near zero and then sold it at reduced prices in a follow-on quarter, thus jazzing up their bottom lines? And what sectors didn't suck sales from next year (via "incentives")into this year just to "make the number"? "Pro-forma"-based PEs rarely hold up. Your comments about excess printing being good for stock prices in the short term.....are we still in the short term? And if one perceives the reasons for the printing (a worried Fed trying to fend off deflation and/or trying to buck up a sagging economy, etc),.... is this good for stocks..... especially at this stage in an anemic "rebound"? And is a falling dollar really good for stocks? Depends on the perspective. Surely not if you are a foreign holder of US stocks. And if one is a prospective US buyer who has witnessed the discretionary portion of his available funds fall due to reduced buying power (keeping in mind that he spends an inordinate percentage of his available money on imported goods), does he not have reduced dollars with which to buy stocks? Your comments about the federal debt being a non-issue requires one to disregard the enormity of that debt as well as the ability of the globe to finance it. As well it requires that one accept a GDP number that is completely bogus. Not acceptable assumptions at this end, but again, time will tell. US corporate balance sheets are indeed better than they were a few years ago, but for most US corporations, their addressed markets are saturated, and the competition from offshore has intensified. Most face very poor selling environments. Worse, the consumer is (finally) starting to pull in his horns. In the late twenties, corporations also decided to bulk up their respective treasuries, as many realized that their addressed markets were crumbling. Makes sense to do this but an improved balance sheet has nothing to do with future sales whereas forecast PEs depend on them. With respect to investors being aware of the issues and harping about them..... the reality is that most investors are NOT aware of many of them. Yes, many pro investors are, but it is not in their best interests to discuss same with their investors and it sure is a fact that many pros try to "spin" these issues positively even as the government tries to whitewash them. More importantly, it is the act of ignoring a large build up of negative economic trends that typically leads to a nasty implosion rather than a slow grind down. "Priced into the markets"? Not so says I, but we must wait to see who is right on this one. I do know that the day before a crash begins, most folk also labor under the false impression that degenerating conditions were "priced in". The "huge demand for goods coming out of China and India" sure as heck isn't making it to America. Even the falling buck hasn't seemed to do much on this front and the trade deficit with both countries has shown little improvement. Personally, I think China is is deep doo-doo with its bankrupt banking system and its massive manufacturing excess capacity. If China's exports to the US start to fall (and this appears inevitable as US consumers cave), then what? I agree that Japan is finally starting to get its act together, but it has been well over a decade of sliding so it is going to be an uphill battle. And I can't see what an improving Japan does for the US except perhaps increase its ability to finance the US deficits through more Treasury purchases. I note that there are increasing calls within the country for a "decrease in the reserve holdings".... perhaps a warning that they intend to be net treasury sellers? I supose this lengthy diatribe looks like I am nit-picking, which is not the case. I genuinely enjoy good discussion, especially on the topic at hand. It probably has much to do with the darned hairs on the back of my neck being so active of late. (g) Anyway, on the positive side of the leger is the fact that the Fed has the taps open and if this gets us through Sept/Oct., we will cruise well into the Christmas selling season.... at least until it becomes apparent that inventories are.... etc. (g) Thanks for picking up the topic. Very best, Earlie