What Was THAT?
The bottom dropped out of the market today. The Financials fell apart, GM hit a 53 year low, the Dow crash through its year-to-date lows. The broader indices posted their worst June since the Depression.
What was this -- the beginning of the end, or the end of the beginning? How bad is it -- are we going to 10,600, like Louis Yamada said?
Or is this a bottom, a great buying opportunity? Barton BIggs said the worst was over for both the economy, stocks (unfortunately, he said it a month ago in the WSJ).
~~~
What say ye?
Thursday, June 26, 2008 | 08:53 PM | Permalink
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Is Reality™ starting to sink in?
I couldn't check in with the alternate universe today as my CNBC feed, and thus Kudlow, was garbled.
Posted by: Espumoso | Jun 26, 2008 8:59:41 PM
I think Louise has it about right. The bottom will be closer to Dow 10,600, and we are not quite there yet. We are almost there, but there are still a few optimists who need to throw in the towel.
Posted by: Larry | Jun 26, 2008 9:04:19 PM
I see some blood running in the streets, but no capitulation. We need a few weeks to really find a bottom, but will it be "the" bottom?
I am scanning now looking for good candidates...
Posted by: dss | Jun 26, 2008 9:11:04 PM
^IXIC 1881 coming to a terminal near you
Posted by: Mich(^IXIC1881) | Jun 26, 2008 9:11:51 PM
the end of the beginning. with the nikkei down 300 points in the first couple minutes of trading, it certainly doesnt look good. the fundamentals for the economy are crap, but every perma bull will still be screaming 'buy buy buy!'
any word on the VIX spiking barry?
Posted by: jhunt | Jun 26, 2008 9:12:51 PM
We're going lower - much lower.
Posted by: Mind | Jun 26, 2008 9:17:14 PM
the train just came uncoupled according to my barometers. the dow will drop to 7500 before christmas. smart money and big money are fleeing quietly.
Posted by: problembear | Jun 26, 2008 9:18:47 PM
What can I say that I have not said before in this space.
The USA and the rest of the world is in dire straits with nowhere to turn. Barry, just because the market is down does not mean anything.
Time. That;s what we need to unwind all the ills of our society. And believe me, it is our society that uses too much energy, saves too little, feels entitles, thinks such sill thoughts as NYC real estate will never go down....too many wealthy Europeans buying those coop bargains. Yuck...how many times have we heard that the only place that I have ever made money is in my house. Wit until no one brags at the next cocktail party about anything other than their kids' Little League team.
As my good friend Herb used to say..."don't confuse a bull market with brains."
Brian Belsky, are you still with Merrill. You are so young and so, shall we say, untried. In January after a road trip to Europe you wrote that it had to be THE bottom because those European investors were shaking in their boots. The next time Merrill sends you there, they may be out of work. And you will no doubt be gone as well. back to Minneapolis.
Merrill Lynch in the good old days in the 1960's and 1970's used to run a full page ad in the Journal and the Times which said that no one rings the bell at the bottom...Barry, I am not sure why you ask if we hit the bottom, because when our money is gone, the volume dries up, and no one cares about the market, that will be the bottom. A 5 billion share day is not the bottom...maybe a year or three from now.
Posted by: Robert | Jun 26, 2008 9:19:03 PM
Two things - with Dow trailing PE at 80, market will either drop in half or churn for the next couple years. Don't believe we will immediately drop in half, but possibly over the next few years... Gee - remember coming out of the last one? Took several years and a 42% drop.
Second, Typical recession is 27% drop on S&P - we aren't even close to that yet. That gives us around 1150 on the S&P - and yeah, that would be for a normal recession. I seriously doubt this as a "normal" recession.
Why not? - simple, negative savings rate, credit tightening, no manufacturing, housing in the squatter.
Spoke to a many financial advisor and asked a simple question - what will bring our economy out of a recession? Not a peep...
The entire financial economy that brought us out of the last recession by securitizing products, mortgages, CDO's, CLO's, etc... and moved financials to 30+% of S&P is gone... finished... ne'er to be heard from again. Most of the financials contained years of fake earnings from those securitizations and are now paying the price for it.
The only thing the US has now is food commodities - beans, corn, wheat... Jim Rogers, Barry Ritholz, and Jeffrey Saut seem prescient concerning the "stuff" stocks.
Also Barry - predict it here and now, Greenspan and Bernanke will go down in history as the "#1 and #2 worst Fed's" in history. Bernanke lowered rates to help out his Wall St buddies and where has it gotten him... American's have a lower dollar, inflation everywhere, and the market's tanked anyway.
The Fed rate should be a constant 4.5% and the Fed should be abolished - sorry for the rant - I should be happy since I am making $$ being short...
Thanks for the hard work BR...
Posted by: Maj Tom | Jun 26, 2008 9:20:11 PM
And this is one reason -
Local oil company offers fixed price contract on heating oil for next season. Last year's contract - $2.79 gallon max and if lower you get the lower price. This year - $4.79 fixed - and if it goes lower, you're locked into the $4.79. For the average N.E. home that's about +$2,000 more than last year for the season (!!!!). That's not chump change for the masses - and they will cut back elsewhere - the consumer's 70% will take a hit, among other issues. Look out below.
Posted by: Mind | Jun 26, 2008 9:20:40 PM
One should only look at a 5 year chart of the DJIA to see how much farther it should drop.
It's kinda like how short of memories do folks have? Folks in California may have bought a house in 2000 for $250K that went to $900K in '06, but today is "only" worth $600K - sob. Same for stocks. Look at the 5 year chart. Get real people, houses, metals, oil and the stock market are all historically overvalued. They just are not all falling/rising at the same time.
Posted by: austincompany | Jun 26, 2008 9:23:06 PM
Is there really any reason to step in on the buy side beyond egotism or a few countertrend ripostes? I just dont see any big money being made on the long side with the long festering problems that are being exposed, day in and day out. Barton Biggs? Jeff Immelt is out a few bucks on the GE he bought. BofA and Countrywide. Citi bailers? Why follow a fleet of submariners.
Posted by: catman | Jun 26, 2008 9:26:30 PM
The same financial conditions still exists as it did 9 months ago. Except less jobs, more foreclosures, the continuation of the fed lending bonanza, inflation, energy, etc. The market is just getting back to reality and blowing off the cheerleading (CNBC) and bottom calling. It's bad out there.
Posted by: bob | Jun 26, 2008 9:28:10 PM
Barry - maybe you have just discovered "The Barton Biggs contrary indicator".
I think he was on CNBC just before the end of the year last year saying that 'we are going to see the biggest short covering rally of all times in January'.
You know what happened to the mkg in January. If he made the prediction you mentioned above a month ago -- maybe the mkt is now a buy ???
Posted by: wabrew | Jun 26, 2008 9:29:10 PM
Don't look now, but it's almost report card day. The folks who actually finance this whole venture are gonna get a clue as to what's going on. Keep in mind, the reality that home values ain't what they used to, is really starting to sink in. They're in no mood...
Like my sister used to say, "Dad's gonna kill you!"
Posted by: mark mchugh | Jun 26, 2008 9:29:46 PM
Nobody knows what to think or who to trust. They're stuffing their money under the mattress. Seriously.
Posted by: Michael F. Martin | Jun 26, 2008 9:30:18 PM
A bottom is a process, not an event.
Posted by: tradeking13 | Jun 26, 2008 9:31:20 PM
We are durable goods rich, but replenishable goods poor.
In other words, we have McMansions and SUVs but we don't have the electricity to run the lights or the fuel to drive around.
Our "wealth" massive as it is, depends on a constant stream of food and water and energy to sustain life.
Austrians were starving to death in 1945 while Mississippi sharecroppers were not. Replenishables matter and are the limiting reagent of global population and the economy.
Posted by: Paul Jones | Jun 26, 2008 9:33:17 PM
Seriously, folks. I bailed on this bubble market in early 2006 when the price of a small, unaffordable two-bedroom condo in Manhattan started to climb from $650,000 to...well, $1 million or more by mid-2007. Ridiculous. I used to walk around my neighborhood wondering, Who can afford these prices? The answer, of course, is no one. (Not even flush Europeans.)
We overshot, big time, on the upside and, as markets do, we will overshoot on the downside. I used to think 10,400 on the Dow would get us back to where we should be be, but I now think we'll go below 10,000 -- and sooner than we think.
Posted by: MitchN | Jun 26, 2008 9:36:28 PM
i fail to understand why is there only end of the world bearish comments?
imagine if we were not so bearish in Jan or march, we would have made some money.
i agree that i dont want to go long with all my money right now....but what about testing the water with 10%?
my reason why market may go up, there is a ton of money which needs to go somewhere....since yield from treasury is not enough to generate enough to beat inflation.
my guess is couple of trillions managed by hedge funds, mutual funds and pension funds.....which are basically OPM....is used to play the market irrespective of the fundamentals and macro conditions.
IMO stocks are way overvalued due to the ponzi scheme that it has been.....and to find a real bottom where investing in a stocks should be equivalent to 15% returns in terms of real cash profit, and the profit is returned to investor rather than wasted by management.
but the big question? where do we put our money to work....being in cash has not yielded much.
Posted by: techy | Jun 26, 2008 9:40:50 PM
I've gotta say, I have been short for the past 6 months, and I still think we have a ways to go, but the fact that every single post on this thread has a bottom 20% below here screams contrarian indicator...
No drop is a smooth one, and this one won't be either.
Posted by: Colin | Jun 26, 2008 9:41:02 PM
- Fed is irrevant but congress can give stimulus packages and bail-outs for Airlines, C, GM, F, AIG, BAC and more if needed.
- Dollar is structurly doomed -- now that the world has seen how the wall street thugs and washington mafias run this country.
- $ One trillion dollars in write-down X some multiplier effect in credit contractions -- and I would cut 30-40% easily -- assuming world economies stay a little better and oil does not sky-rocket further.
- $ One Trillion Dollars in war against conquoring feer/terrorism (which btw planted the seeds of greed here at home in 2002/2003). Meaning rising interest rates in 2009.
# Possibility of a democratic win and hence higher taxes in 2009.
Combine this all and you are back to pre-war levels; and add a little bit of inflation -- I would give 1065 to 1135 as a real possibilty on S&P 500 and Dow 9/10K range sometime in next 6-9 months. Rallies possible from/in July/1180-1250 range in S&P 500 if oil corrects a little bit. Earnings and guidance will be horrible so -- indices can keep kissing the low end of the BB for a while.
-Never felt so confident about the berish side. Perhaps that is the only good news if you are a contrarian/bull.
Posted by: Nihilism | Jun 26, 2008 9:43:29 PM
Stop the presses! Over on Bloomberg Laszlo Birinyi says buy and hold isnt working!
Posted by: catman | Jun 26, 2008 9:43:31 PM
If your looking for cause and effect check out the slosh report.
http://www.gmtfo.com/reporeader/OMOps.aspx
The federal reserve drained 26 from the system .
Posted by: Bitteroldcoot | Jun 26, 2008 9:43:47 PM
Buy and Hold investors are Wall Street's cash crop... plant the seeds, let them grow, fertilize and water, then whack 'em off at the ankles and turn 'em into pig feed.
Posted by: Bob A | Jun 26, 2008 9:50:06 PM
