Comments on: Are the markets set for a pullback?

By: Dow 4,000 still in the cards? - Credit Writedowns

Dow 4,000 still in the cards? - Credit Writedowns — Tue, 12 May 2009 13:07:22 +0000

[...] I am not saying a multi-year recovery and rally is impossible. I AM saying that the fundamentals do not justify a secular bull market.So, if you think this is a bear market rally you will be interested in the four posts below. Chart [...]

By: Wag the Dog

Wag the Dog — Sat, 09 May 2009 19:47:28 +0000

“Rallying global stock markets will likely reverse trend later this year when weak earnings and economic news surprise investors, Nouriel Roubini, a well-known economist who predicted the credit crisis, said on Wednesday.”
http://www.guardian.co.uk/business/feedarticle/...

We can always count on Dr. Doom to spoil the fun.

By: Wag the Dog

Wag the Dog — Sat, 09 May 2009 15:47:28 +0000

We can always count on Dr. Doom to spoil the fun.

By: Edward Harrison

Edward Harrison — Fri, 08 May 2009 13:56:02 +0000

pwm, CRE and prime defaults are serious headwinds going forward along with credit cards. If we can get through those (helped by a rebounding economy and fewer job cuts) I think we are in the clear.

As for first derivatives, they all look much better than a few months back actually. I would concentrate more on third derivatives really i.e. how quickly is the change in economic variables proceeding. For instance, if the decrease in jobless claims is accelerating, then you can see this feeding through into consumption.

Finally, with regard to Debt to GDP, I expect to write a post about inflation soon. My general thinking is that Bernanke is looking for inflation, seeking inflation, if you will. Inflating away debt may be the least worst option for policy makers and I think they are onto that already.

By: pwm

pwm — Fri, 08 May 2009 08:19:36 +0000

Defaults have not peaked. They probably have a way to go. Hard to see a bottom put in before that happens. And first derivatives remain pretty ugly. In the context of such weak financial institutions and such high levels of junky debt across the economy, this probably matters more than in past recessions.

Also, I'd be interested in hearing your thoughts about how the US will ultimately delever. Debt to GDP is still growing and at unprecedented levels. Just the slow down in debt growth caused a major decline in GDP and employment. What will happen when we actually start to delever, and how will it happen? Jeremy Grantham laid out his expectation: more saving, debt destruction, and some inflation. What is your view on how we will return to sustainable levels of debt to GDP?

By: Edward Harrison

Edward Harrison — Thu, 07 May 2009 22:09:37 +0000

No bull market, huh? I knew I could count on you two to give the bearish scenario :)

By: Stevie b.

Stevie b. — Thu, 07 May 2009 22:04:22 +0000

Ed – for the reasons given as well as those we've talked about before, I'm basically with Aitrader. I was hoping for 9000 on the Dow, but we know the fate of most pigs. If you're right and it's the start of some sort of cyclical bull market, it's going to be based on smoke and mirrors.
You cannot prop-up the unproppable-uppable.

By: aitrader

aitrader — Thu, 07 May 2009 21:43:15 +0000

China no longer buying US treasuries.

US deficit at a post-WWII record.

Europe on the brink of freefall.

2/3 of US mortgagess underwater.

Global trade collapsing (check the Baltic Dry Index)

Hmmm.....I may suck at timing but I can name the overall trend. Still down, down, down. The bottom has not yet been discovered. Folks buying into the rally will be cannon fodder IMO.