Next Time Down? What's taking so long!
A few weeks ago I was absolutely convinced that we were finally at the inflection point in terms of the US Stock Market. The Yen carry trade seemed to be unraveling, the dollar tanking and we had or first 2% drop in the DOW in nearly 1000 trading days.
While we still have tremendous volatility, the market has rallied significantly since and slightly weakened my belief that we have reached that ever elusive 'next time down'.
What do you think? Are we just days or a week or two away from this event, or will the market go on another bull buying binge for another 2 years, wiping out every bear in the room.
I believe we are still on track to the major inflection point (15-20% down in all US stock markets) but wonder how long the bulls can continue to BUY BUY BUY in the face of simply horrendous economic data.
So my best guess is April 23... I think by that time we'll have some real evidence that Alt-A has been compromised... possibly by late May 2007 when I believe the entire RE market will be "frozen" and go into free-fall.
Maybe the FED will prolong the pain once more by attempting to lower rates... even if they do that I believe the effect will be temporary. Probably just enought to destory all my positions.
While we still have tremendous volatility, the market has rallied significantly since and slightly weakened my belief that we have reached that ever elusive 'next time down'.
What do you think? Are we just days or a week or two away from this event, or will the market go on another bull buying binge for another 2 years, wiping out every bear in the room.
I believe we are still on track to the major inflection point (15-20% down in all US stock markets) but wonder how long the bulls can continue to BUY BUY BUY in the face of simply horrendous economic data.
So my best guess is April 23... I think by that time we'll have some real evidence that Alt-A has been compromised... possibly by late May 2007 when I believe the entire RE market will be "frozen" and go into free-fall.
Maybe the FED will prolong the pain once more by attempting to lower rates... even if they do that I believe the effect will be temporary. Probably just enought to destory all my positions.
Comments
I thought we may have been past the point of no return as well. I think the charade may keep up for a while longer. We could see this continued volatility, and up and down days until the end of the year.
Probably going to take a string of bad news to finally turn the market for good. Once it turns, it won't be turning back for a number of years.
Sometime I wish I had a crystal ball, and that I could fast forward about 6-8 months from now.
One of the biggest things to turn the market will probably be how the housing market and consumer spending holds up this spring/summer. We'll probably see increased oil prices as we move into the summer driving season. I don't see inflation subsiding. I see consumer spending dropping in the next few months. Housing obviously will be getting worse. Foreclosures will be adding more and more houses to an already large glut of unsold homes.
The market has been so bullish lately that its going to take a number of things to change the psychology. Hedge fund managers and all the perma bulls on the street have no other option than to keep buying stocks. Where else are they going to match the huge returns they have been promising people the last few years? They will probably keep buying until D day. Then it will be too late.
Credit tightening is already starting. It's going to get worse. Buckle up.
Why the debt bubble hasn't burst -- yet
http://tinyurl.com/ysgb57
I think the bulls were able to ignore the pain because that is what they are conditioned to do. Greenspan has made "the FED will bail us out" a primal reflex in most investors.
The mortgage mess didn't even present itself until March. The March numbers were based upon 4Q-06 data. Wait until the March data works its way through. Even better, wait until the April-Jun numbers work their way through.
Mortgage defaults are not something that has wild swings. They slowly build.
The carry trade is based upon faith in the US consumer. That consumer is tapped out. He can't make his mortgage payment, much less borrow against it in order to buy crap from Asia.
The game is already over. The bulls just don't know it yet.
The more they bid up subprime, alt-A, and the builders, the better it is for me.