All major stock indices closed up for a third session in a row today, hinting at a bit of a rally in response to the bloody diarrhea streak of the last couple of weeks. Still, etfguide.com’s Daryl Montgomery is not impressed, penning a very compelling argument that places us squarely between dip #1 and dip #2 of a recession with bad table manners and etiquette that leaves much to be desired.
Montgomery makes some excellent points, as do his detractors and opponents. What I’m getting at is this: with so many facts, figures, indicators and studies out there, how does one separate the music from the noise? The meat from the gristle? The banker semen from the hooker blood?
My experience in retail brokerage taught me to pick a side, completely arbitrarily if need be, and then pluck at the facts and figures that support that position. That’s why I bailed. Now I need to find the stuff that actually works. Any tips?
I enjoy reading Montgomery, and yes, he has been making some compelling arguments about this market being a bear for a few months now. I've been a bear since the start of the March 09 rally (I've never really been convinced that the recovery is real... and to be honest, I still don't think it is). I also have a big time crush on Dave Rosenberg (I highly recommend him). Fact is, we've seen or are close to seeing dark crosses on most equity indices (or at least ones that people care about). We've seen consumer credit fall, money supply shrink, jobless claims are still high, ECRI is falling (and quickly), housing in the shitter (new home starts, pending sales, mortgage apps except for refis, etc) yada yada yada you get my drift. I say this rally is just a technical bounce, and would probably be a great time to get in short, or to get into long treasuries.
Also, I love the picture... the double dip!! hahahahahaah
Money Supply Shrink? I still believe the fed funds rate has not changed.. and the discount rate has barely moved... so money is still there
Companies are literally are swimming in cash.. we have not seen cash ratios like this in 20 years...
I do agree credit is not looking good and job creation while I do not believe unemployment will increase... I do not believe there will be true effort to hire people to see a dramatic movement down in the unemployment rate. Housing is down and in several months I believe we will see more foreclosures.. The housing downfall was priced into the market over a year ago..
I don't know if I will agree with Goldman Sachs that Dow will be 13000 by the end of the year but I believe it will be up, but not much and the true rally will be later in the year.
Yah, take a look at the monetary base, its been pretty much steady for a year but it would be falling if it weren't for M1... banks are borrowing from the Fed but they are just putting it into treasuries so I don't see how you can argue that the money supply hasn't changed just because fed funds/discount rate haven't changed
And housing still has another leg down, and I don't think that is priced in. Banks aren't initiating the foreclosure process because they don't want to take the write downs. Mark-to-make believe is what they call it. You can make up whatever value you think a property is worth!
Everyone knows that the bulk of GDP growth in Q4 09 and Q1 10 came from inventory build ups, and not real final sales.
And finally, don't look at sell side research. Its the sell side for a reason. Dave Rosenberg mentioned this last week, how CS is predicting the chance for a double dip is at 0%. He also said they had the same call in March of 08, three months after the recession of 07 started.
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