Bearish Information

[Jim Nickerson]

Re: Bearish Information Re. Abelson's column Barron's

http://online.barrons.com/article/SB...olumns&page=sp [subscription]

The credit crunch, despite the strenuous exertions of Bernanke & Co, shows little sign of easing, much less ending. Yet, financial shares have risen from the grave and are enjoying a dandy whirl. As Stephanie Pomboy, the perspicacious proprietor of MacroMavens, points out, this pop amid dauntingly ugly corporate reports by the banks and the rest of the financial gang is something we've seen before, and often.

"Since the wheels first started falling off last summer," she relates, "the financials have posted no fewer than 12 rallies of 5% or more.... It bears note that none of these stints, separate or combined, have precluded the financial sector from shedding 28% over the stretch."

Maybe 13 will prove the lucky number. Stephanie, though, sounds more than a bit skeptical, and so are we. At some point, we suspect, investors are going to sober up and stop popping the cork to celebrate the latest lender to take a multibillion-dollar bath.

OUR FRIENDS DAVID AND JAY LEVY, the astute duo who put out the insightful Levy Forecast, dismiss all the talk about the worst being over as wishful thinking. The worst, they insist, is yet to come, and real recovery might take its own sweet time in making an appearance. And they wouldn't advise anyone to hold their breath awaiting a propitious moment to go bottom-fishing.

The time for bottom fishing, they declare, "will be after a long, deep recession, when employment is down sharply and still falling, commodity prices have plunged, the scent of general price deflation fills the air and global financial and economic conditions are in turmoil. The risk pendulum, which reached extremes of complacency in 2006 before starting to swing back, will be near the other extreme, paranoia, not just in mortgage-related markets, but in asset markets generally. Fire sales to meet liquidity needs will abound."

We're not there yet, and there are many days, sleepless nights and wearing miles to go. And, the Levys counsel, stoutly resist the temptation to take the plunge prematurely, for even when we start scraping that magic bottom, there'll be no great rush. On that score, they reckon "the period of great opportunity," which they envision coming out of "fear, uncertainty and illiquidity," will likely last for a few years. But when it finally dawns, they're firmly confident, it'll prove very much worth the wait. All the more so since investments in what they dub "exciting long-term growth areas" such as natural resources, alternative energy and rapidly developing markets in emerging economies are likely to be there for the taking at "great long-term entry points."

If one missed it by chance, check out the Lehman report posted here .

[Jim Nickerson]

Re: Bearish Information Re: John Hussman

http://hussmanfunds.com/wmc/wmc080421.htm

My personal bias is that the equity markets are set up for a rally, already being in that mode since March 10th. The biggest weakness in the rally so far has been absence of volume, upon which Hussman also comments.

Hussman's weekly note tonight should offer some encouragement to any bears were their feeling to be hurt now and possibly moreso in the coming days.

Investors overly tied to the commodity boom and “global demand” as drivers of investment positions would do well to examine that behavior.[/B] It is often initially painful, but ultimately worthwhile to remember that it's best to panic before everyone else does.

I have frequently noted that one of the uses of “market action” is to gauge the extent to which investors have a willingness to speculate. Given the affection of investors for risk last week, it is natural to ask why we don't take that at face value and immediately accept a speculative exposure to market risk. The reason is that the recent shift toward greater speculation continues to appear very fragile. Trading volume has become dull when it should be expanding, the spread between commercial paper and Treasury bills has widened to the highest spread year-to-date (despite modest improvement in CDS spreads), and unlike robust speculative markets, we continue to observe divergent industry group behavior and selective leadership (still primarily materials and cyclicals).
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Divergent internals have historically been unfavorable for the overall market - sustained advances typically feature broad uniformity across industry groups and security types and price/volume behavior indicative of strong demand and conviction – not simply a “backing off” of sellers in the face of short-covering.

As I've often noted, about the only point where I have an opinion about near-term market action is when the market is either overbought in an unfavorable Market Climate, or oversold in a favorable Climate. Given that the market is once again overbought in an unfavorable Market Climate, my impression is that the risk of a free-fall is significant. Aside from short-term speculative pressures (largely driven by relief about Bear Stearns), nothing in recent data suggests a material abatement of recession risk, mortgage risk, profit margin risk, or dollar risk.
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Periods of rich valuations are frustrating because they prevent us from taking unhedged or leveraged investment positions. This is normally very comfortable to do for a significant portion of market cycle. Because the 2003 lows occurred at the highest valuations of any prior bear market trough in history, we were only able to remove 70% of our hedges. If the market trough a few weeks ago represented a final bear market low, it would be yet again at the highest level of valuation in history for a bear market trough, and the lack of compelling improvement in market action from the recent low will also have delayed a favorable shift in the Market Climate beyond what we normally observe at the start of a new bull market cycle.

Frankly, it's difficult to believe that we've observed the market's final low. Bear markets associated with recessions tend to be deeper and longer in duration than average, particularly in periods of “secular” revaluation (which I believe we've been in since 2000). It bears repeating that the total return of the S&P 500 has lagged Treasury bill returns since July 1998 – both about 3.3% annually, though with T-bills doing slightly better. The S&P 500 has also lagged Treasury bills over the past 18 months even with the recent advance. My impression is that by the time the present market cycle is complete, 2003 will be the only bull market year for which the returns of the S&P 500 in excess of Treasury bills will be preserved.
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Meanwhile, we are gradually clipping our exposure to precious metals shares (currently just over 15% of assets in Strategic Total Return) on periodic strength. I don't expect commodities prices to weaken immediately, but once we observe a shift toward positive real interest rates (particularly if inflation rates abate somewhat while Treasury yields remain in the current range), even a favorable valuation in terms of say, the gold/XAU ratio, won't forestall weakness in precious metals shares. Suffice it to say that we remain constructive for now, but are using any unusual strength to lighten our remaining exposure.

Bold emphasis JN

His entire comment is well worth reading I do believe, plus there is a bit of entertainment in it suggested for you business TV watchers.

[Jim Nickerson]

Re: Bearish Information Re. Carl Swenlin

I just posted a comment by Richard Russell in the Bullish Information thread, which I took as a significant comment. To offset that here is a bearish impression of the markets by Carl Swenlin. It is my impression, which is limited, that Swenlin does not nearly enjoy the prestige of Russell, but to me Swenlin is not an off-the-wall sort of fellow, that is unless one totally dismisses technical analysis as having any validity.

http://www.decisionpoint.com/ChartSp...80418_gap.html

Suspicious Gaps
by Carl Swenlin
April 18, 2008
On Wednesday and Friday of this week the market opened up with large gaps from the previous closing price, and I think this activity is suspicious, possibly contrived. It is, after all, options expiration week, and weird market action can be expected. This week it is likely that the big money wanted to stick it to the bears and put holders, as usual, and they did so quite skillfully.

These large up gaps can be contrived by heavy buying of S&P futures just before the market opens. There is usually a bullish cover story available to use as justification for the initial buying spree. When the market opens, many bears are forced to cover in order to limit losses, so the price advance is supported by real buying. Next, the reluctant bulls are sucked into the move as they begin chasing the market.




While I tend to believe that price action speaks for itself, we are in a bear market, and I expect that volume should confirm such enthusiastic price moves. In these two cases, I don't think it does. As you can see on the chart below, volume is only average, not explosive like price movement. So what we have is a breakout on modest volume, and strong overhead resistance dead ahead in the form of the 200-EMA, the declining tops line, and the long-term rising trend line.




Bottom Line: We are in a bear market, and the 6-month period of negative seasonality begins at the end of this month, so we should expect bearish outcomes. In this case, the rally should fail before it penetrates the 1450 level. Having said that, you will note that all but one of the 27 market and sector indexes are on intermediate-term buy signals. That is because our primary model is designed to enter rallies relatively early. Because the long-term model is still on a sell, we should expect that the intermediate-term signals will fail in a short time. When the PMOs (Price Momentum Oscillators) begin to reverse downward, that would be a good time to consider closing long positions.

We rely on the mechanical trend models to determine our market posture. Below is a recent snapshot of our primary trend-following timing model status for the major indexes and sectors we track. Note that we have included the nine Rydex Equal Weight ETF versions of the S&P Spider Sectors. This may seem redundant, but the equal weighted indexes most often do not perform the same as their cap-weighted counterparts, and they provide a way to diversify exposure.

Technical analysis is a windsock, not a crystal ball. Be prepared to adjust your tactics and strategy if conditions change.

Swenlin's actual note contains what he calls a "market posture" table, which shows the buy signals that are in effect and from what date.

[Jim Nickerson]

Re: Bearish Information Re. $ and commodities

http://www.decisionpoint.com/TAC/HARDING.html

Sy Harding provides no answers, suggests that something will occur that will burst what he sees as a "commodites bubble" and reverse the decline of the dollar.

I don't know what will be done, but something must be done.
The most obvious is intervention in currency markets by global central banks, buying dollars and selling their own currencies. That might not only help the cause of lowering inflation, and the bloated level of their own currencies against the dollar, so their trade situation would be improved. Buying the dollar at such depressed levels might also be great investment timing, if their actions then launch the dollar into a new upleg. In the late 1990's, central banks sold huge amounts of gold from their reserves, in effect buying dollars. That took some of the steam out of commodity speculators, helping to drive inflation down, and the dollar up. The high-priced gold they sold dropped in price and the beaten down dollars they took in rose in value. Buying low and selling high? And if the With their recent decline, No one could see what the catalysts would be that would burst the stock market bubble, or the real estate bubble (or any previous bubble in history). But it could be known that they would burst. I don't know what will burst the commodities bubble, and reverse the decline in the dollar. But I am convinced they will be the next major reversals to take place, the next situations investors will soon need to re-positioned for to be ahead of the curve.

Are commodities in a bubble or are their prices all high because of the dollar being in the crapper? At least for the moment something is happening to the dollar. Check out FXF, FXE, and particularly FXY. First two have negative RSI's and MACD's for any of you who don't eschew technical indicators.

Here's a starter chart:

http://bigcharts.marketwatch.com/int....x=52&draw.y=7

And here is one for $USD, indicators look favorable to dollar strengthening as the price action has gone sideways.

http://stockcharts.com/h-sc/ui?s=$US...40&a=132940973

[Jim Nickerson]

Re: Bearish Information Re. Delusion

http://www.telegraph.co.uk/money/mai...bcngold114.xml


Snips.

Mr Kostin, who replaced the ever-bullish Abby Cohen as chief strategist in December, expects the S&P index to reach 1,160, which would amount to a fall of 27pc from the bull market peak of 1,576 in September and enter the annals as a relatively severe bear market.



Scott Anderson, chief economist at Wells Fargo, is equally pessimistic, describing the bullish views of some market players as "bordering on delusional".

"The equity markets have not yet priced in a prolonged downturn in economic growth in my opinion. We are still in the early stages of the credit crunch. Earnings estimates for the second half of the year are likely still far too high," he said.

Mr Anderson said investors should pay attention when the International Monetary Fund cuts its global growth forecast for 2008 three times in less than five months. The Fund has put the odds of a world recession at 25pc and predicted $945bn in losses from the credit debacle spread across banks, hedge funds, pension funds, and insurers.

"Even more alarming, the IMF estimates that only a quarter of these potential losses have been recognized," he said.

"Rarely do we ever see such uncertainty surrounding the economic and financial outlook. The forecasts for GDP growth in the second quarter of 2008 are currently all over the map. If you feel you must wade into equities at the present time, I would suggest spreading your bets widely," he said.

Whose that Fat Lady singing? I don't hear no Fat Lady.

Re: Bearish Information Re. Roubini

Two observations strike me: decoupling is bunk, commodities will not be immune. If commodities come down, will it be because the bonar is strengthening or demand is lessening? I take it that demand will lessen.

Jim - how many years you been following this prof? He's an academic. It does not pay to follow academics. The guys that have had lots of skin in the game, in the markets - they have better instincts. I think you are winding up with some potentially flawed conclusions as a result of following this guy's ruminations.. and he sounds awfully similar to his own views all the time.

The very fact you've been running two parallel threads, "Bearish Information" and "Bullish Information" - to my view there is something paralyzing about that. An excess of information analysis is paralyzing. Purposely polarizing your information threads into "Bearish" and Bullish" concurrently and plugging into BOTH daily is profoundly paralyzing, to my view.

If I were in your shoes, I would switch all the investment chatter and thoughts of completely for a month, then come back and do the first thing I decided I really wanted to do. The rest is noise.

[Jim Nickerson]

Re: Bearish Information Re. Roubini

http://www.financialpost.com/story.html?id=433862

Wall St bear may be gloomy but he's often right

Jacqueline Thorpe, Financial Post Published: Wednesday, April 09, 2008

Nouriel Roubini says the United States is facing a 12- to 18-month recession that will make a mockery of the recent stock market bounce and the notion of global economic decoupling, cause commodity prices to slide 20% to 30%, and hit Canada hard.

"I see the stock market rally as being the last leg of a sucker's rally -- essentially people believing the Fed can rescue the economy," Mr. Roubini said in an interview Wednesday. "Once the flow of market and financial news gets worse and worse, the expectation of the Fed rescuing the economy is going to be dashed, and the stock market is going to plunge
much more."


Mr. Roubini first forecast a slowdown in the fall of 2005 and said the U.S. housing bubble was heading for a bust in early 2006 just as housing starts peaked. By August 2006, while many economists were still forecasting a soft landing, he said the recession of 2007 would be nasty, brutish and long.

This February, Mr. Roubini predicted "one or two large and systemically important broker dealers" would "go belly up," and credit market losses stemming from the subprime meltdown could top US$1-trillion.

A few weeks later, Bear Stearns collapsed and the International Monetary Fund came up with a remarkably similar prediction of losses: US$945-billion. It must be pointed out, however, the IMF estimate is only an estimate of losses that might be realized if distressed securities had to be sold or marked-to-market at current prices. Some of the assets are now attracting buyers.

In that view then, the estimates are still a worst-case scenario. Mr. Roubini has, in fact, recently raised his credit loss forecast to US$1.7-trillion as corporate losses pile on.

He says the stock market is following the same pattern it did in the 2001 recession. It started in March and by April the S&P 500 rose 18% on the view Fed interest rate cuts would stave off a recession. When it couldn't, the market eventually fell off a cliff, dropping 42%.

The S&P 500 typically drops 28% in a recession, Mr. Roubini says, and having only come off 12% so far, it has a long way to go, he said.
Canada will not be immune. A U.S. recession of the duration he is predicting will drag down growth in China and the rest of the world and the idea the rest of the world can decouple from the United States goes out the window, Mr. Roubini said.

That could knock commodity prices back 20% to 30% and remove a significant strut of the Canadian economy.

Mr. Roubini is basing his prediction that the U.S. is facing the worst recession in decades on the view house prices will tumble a total of 30% -- they have dropped 10% so far -- wiping out US$6-trillion in home equity and putting 21 million households, or 40% of all mortgage-holders, in a negative equity position. Corporate America will be the next to suffer and the credit crisis will continue to spread, Mr. Roubini said.

But as usually the case in economic forecasting, neither the best case nor the worst case scenario works out but usually somewhere in the middle.

Things have been rather sanquine on iTulip recently. ;) Ole Roubini is not letting up.

Two observations strike me: decoupling is bunk, commodities will not be immune.

If commodities come down, will it be because the bonar is strengthening or demand is lessening? I take it that demand will lessen.

[Jim Nickerson]

Re: Bearish Information Re. John Hussman

Hussman explains what's wrong with the BSC debacle as it stands and from his perspective which is written it seems to me from a lawyer's perspective.

http://hussmanfunds.com/wmc/wmc080331.htm

As of last week, the Market Climate for stocks remained characterized by unfavorable valuations and unfavorable market action on our measures, holding the Strategic Growth Fund to a fully-hedged investment stance. Though the stock market has rebounded somewhat from the oversold levels of a few weeks ago, conditions can't be considered “overbought” at present either. As I've frequently noted, about the only time I have pointed short-term views about near term direction is when stocks are overbought in an unfavorable Market Climate (a situation typically followed by steep losses) and when stocks are oversold in a favorable Market Climate (typically followed by strong recoveries). At present, we have neither, so while we are defensive based on the average return/risk profile that similar conditions have historically produced, I have no particular expectations regarding near-term direction.

Generally speaking, it is true that the stock market has tended to bottom about 4-5 months before the end of a recession. It is quite dangerous, however, to assume that the current downturn in the market or the economy will be of a specific duration, and to start “looking for a bottom” on that basis. Just as market tops are marked by expectations that economic strength will persist indefinitely, stock markets hit bottom when an economic downturn is taken as full fact, when conditions are widely expected to get substantially worse, and when investors have largely given up on any hope that the economy will improve in the foreseeable future.

My impression is that the early calls for a bottom ignore a realistic sense of history about how market peaks and troughs are formed. Once an ongoing and worsening recession is taken as a matter of common knowledge, it will be reasonable to talk about durable market lows. Until then, investors should recognize that a standard run-of-the-mill bear market averages a loss of about 30%.

I feel comfortable that Hussman considers a 1000 things to every one that I might think about; nevertheless, again referencing Maund's chart a few posts up of the SPX:XSF, it has corrected from 19.10 at end of 2Q07 to 12.41 just recently. That is a 35% correction. I suppose had the US$ been stable over these past 9 months, would the corrections in the DJI and SPX not reflect greater percentage losses? Intuitively, I think they would, but I don't know how to demonstrate it.

I often wonder is the reality of the correction of the SPX, for example, shown when measured in dollars, or is the reality shown when it is measured in gold, oil, Euros, or Swiss Francs?

Similarly if real inflation is worse than CPI inflation, why isn't that reality manifested in the bond market; conversely does the bond market show that in reality inflation is not that severe?

[Jim Nickerson]

Re: Bearish Information Re: Commodities

http://www.investmentpostcards.com/ 3/30/08 from du Plessis some varying perspectives on commodities.

Commodities
A combination of US dollar weakness and supply concerns triggered a rebound in commodities from the previous week’s losses, resulting in the Dow Jones-AIG Commodity Index gaining 3.9% for the week.

Recoveries were staged across the spectrum of commodities: crude oil (+3.7%) gold (+1.8%), platinum (+8.8%), silver (+6.5%), copper (+7.2%), nickel (+6.6%), corn (+8.6%) and soya beans (+4.4%).

West Texas Intermediate oil jumped to $108.22 a barrel on Thursday after an attack on Thursday on the Basra export terminal in Iraq, but retreated to $105.62 a barrel by the close of the week.

Precious metals were unable to regain their record highs and David Fuller, author of Fullermoney, cautioned: “… despite the recent bounces, it would be premature to assume that we have seen the reaction lows, for what on past evidence is a multi-month shakeout within the long-term bull markets for precious metals”.
Monday’s release of the Prospective Plantings report from the US Department of Agriculture is eagerly awaited as soft commodities have been the major recipients of commodity investments over the past few months.

Rice prices jumped by 30% to an all-time high on Thursday, raising fears of fresh outbreaks of social unrest across Asia where the grain is a staple food for more than 2.5 billion people. Global rice stocks are at their lowest since 1976.

“I maintain that most agricultural commodities are currently in medium-term corrections and will be joined in this process by those that are still accelerating, such as rough rice. Consequently, investors should expect a period of underperformance by agricultural commodities and shares, which have run ahead of their current potential,” said Fuller.


GaveKal: Start increasing risk in portfolios
“In recent weeks, we have often highlighted how commodity markets and bond markets were dislocating, and how this dislocation had created forced selling on the equity markets. However, over the last few days, there have been some positive signs that markets are perhaps starting to return to a slightly more normal state.

• Bond markets. Yesterday, yields on the US ten-year benchmark bond jumped by +22 bp to 3.56%, the biggest one-day increase since April 2004. This sell-off on government bonds came after US existing home sales rose +2.9% in February (expected –0.4%), the first positive reading in seven months, sparking hopes that the US housing meltdown is now slowly stabilizing. On the corporate side, credit-default swaps on the Markit CDX North America investment grade index dropped by -18.5 bp to 140.7 bp, the lowest level in a month This CDX index has now dropped more than -51 bp since the Fed’s March 16th decision to back JPMorgan’s purchase of Bear Stearns and allow investment banks to borrow directly from the Fed through a new lending facility. While corporate bond spreads are still at a very high level, this new trend of narrowing spreads, if sustained, is a very positive sign for the financial markets in general.

• Commodities. Commodity markets have been dominated by investors and financial speculators, rather than real physical demand and supply. This has caused commodity markets to price the underlying goods at levels which far exceed any fundamental justification. However, over the past two weeks, we have seen commodity prices come down markedly: Wheat prices have lost -20%, copper is down -5.1%, nickel has lost -10.3%, and – most importantly – crude oil has shed -8.2%. So what does this mean? Our perma-bear friends will be quick to point out that this is simply a result of markets adapting to a recessionary scenario. But as we see it, the ongoing correction on commodities probably has a lot more to do with the internal market structure than any external factors. What we are seeing now is most likely a result of financial speculators being taken out and commodity markets slowly returning to a more normal state of affairs.

“We have made the case that global stock markets have been held hostage by the major dislocations occurring in the bond markets and in the commodity markets. If these markets are now starting to normalize, then maybe stock markets will be able to find some relief. As such, it might make sense to start increasing risk in the portfolios.”


Source: GaveKal – Checking the Boxes, March 25, 2008.

Richard Cookson (HSBC): Commodity slide has further to go
“Whether commodity prices continue their slide depends on the reasons behind the fall, says Richard Cookson, global head of asset allocation at HSBC.
“He says the weakness of the dollar provides some explanation for the strength of commodities over the past few years, and last week’s turnaround in the US currency would point to a reversal of that trend. However, he notes that commodity prices have also gone up in currencies that have risen a lot, such as the euro, and adds that the dollar’s recent rally has been limited.

“Mr Cookson also says commodities have risen in spite of the US economy’s having slowed sharply and the eurozone, the UK and Japan are probably on the verge of doing so.

“‘Previous commodity rallies would have been brought to a sticky end by such a slowdown. The reason for continued strength this time is that demand from China – and from emerging economies in general – were thought to compensate for a shortfall from the developed world.’

“But Mr Cookson says the emerging world is unlikely entirely to escape a slowdown in the developed world. He adds that many investors fear that, worried about rising inflation, the Chinese authorities need to slow growth.

“‘All this is unlikely to be anything other than bad for commodity prices. How bad depends on how much growth does, in fact, slow. It also depends on how much speculative excess there is in commodities.”

Source: Richard Cookson, HSBC (via Financial Times), March 25, 2008.



Financial Times: Industrial demand behind boom for metals
“As speculators and investors attract blame for driving up commodity costs, new research shows demand from industrial users has spurred a price boom in a range of metals.

“Prices of metals such as iron ore and cobalt that are bought and sold privately between producers and customers have risen faster than others such as copper that are traded on exchanges, says Lehman Brothers. The investment bank says this lends weight to the argument that supply and demand factors rather than just financial flows are behind the boom in prices.

“Its new index of non-exchange traded metals rose by 598% from January 2002 to early this year. During the same time, an index of exchange traded metals rose 246%. The diverging trend has gained pace in the past year with non-exchange traded metals rising 94% and exchange traded metals gaining 26%.

“Michael Widmer of Lehman Brothers said speculators had difficulty gaining access to non-exchanged metals, meaning their price surge should reflect fundamentals more closely. ‘Keeping in mind the price gains in non-exchange traded metals, we believe that the recent appreciation of base metals is not entirely driven by speculators … but by fundamentals,’ Mr Widmer said.”

Source: Javier Blas, Financial Times, March 25, 2008.



MoneyNews: Food prices rising sharply
“… consumers worldwide face rising food prices in what analysts call a perfect storm of conditions. Freak weather is a factor. But so are dramatic changes in the global economy, including higher oil prices, lower food reserves and growing consumer demand in China and India.

“The world’s poorest nations still harbor the greatest hunger risk. Clashes over bread in Egypt killed at least two people last week, and similar food riots broke out in Burkina Faso and Cameroon this month. But food protests now crop up even in Italy.
“What’s rare is that the spikes are hitting all major foods in most countries at once. Food prices rose 4% in the US last year, the highest rise since 1990, and are expected to climb as much again this year, according to the US Department of Agriculture.

“As of December, 37 countries faced food crises, and 20 had imposed some sort of food-price controls.

“For many, it’s a disaster. The UN’s World Food Program says it’s facing a $500 million shortfall in funding this year to feed 89 million needy people. On Monday, it appealed to donor countries to step up contributions, saying its efforts otherwise have to be scaled back.”

Source: MoneyNews, March 24, 2008.



Financial Times: Jump in rice price fuels fears of unrest
“Rice prices jumped 30% to an all-time high on Thursday, raising fears of fresh outbreaks of social unrest across Asia where the grain is a staple food for more than 2.5 billion people.

“The increase came after Egypt, a leading exporter, imposed a formal ban on selling rice abroad to keep local prices down, and the Philippines announced plans for a major purchase of the grain in the international market to boost supplies. Global rice stocks are at their lowest since 1976.

“On Friday the Indian government imposed further restrictions on the exports of rice to combat rising local inflation, with traders warning that the new regime would de facto stop all India’s non-basmati rice sales.

“While prices of wheat, corn and other agricultural commodities have surged since late 2006, the increase in rice prices only started in January.

“… foreign sales restrictions have removed about a third of the rice traded in the international market. ‘I have no idea how importing countries will get rice,’ said Chookiat Ophaswongse, president of the Thai Rice Exporters Association. He forecast that prices would rise further.
”
Source: Javier Blas and Daniel Ten Kate, Financial Times, March 27, 2008.

David Fuller (Fullermoney): Agricultural commodities in medium-term correction
“Fullermoney has been a vociferous advocate of the commodity supercycle hypothesis over the last six years. However, our technical discipline causes us to be very cautious following dramatic upward accelerations in prices.

“These are invariably unsustainable because prices run ahead of events on a wave of frenzied, climactic and speculative buying. Even within secular bull markets, medium-term corrections follow dramatic price spikes. These can last from several months to a couple of years, and occasionally longer.

“I maintain that most agricultural commodities are currently in medium-term corrections, as indicated by the DJ Agricultural Index, and will be joined in this process by those that are still accelerating, such as rough rice.

“Consequently, investors should expect a period of underperformance by agricultural commodities and shares, which have run ahead of their current potential. Medium-term corrections will provide renewed buying opportunities within these secular bull markets.”

Source: David Fuller, Fullermoney, March 28, 2008.

[Jim Nickerson]

Re: Bearish Information Re. Maund Negative, Negative, Negative

Good news: we fixed the stock trading system.

Bad news: we're all starting from ground zero with our portfolios going forward.

FRED,

I like the notion of individuals having a place to put up their investments as so-called Top Investors allowed, but there are some real problems with that feature. One, there has never been a thread attached to it that would allow comments by those who put in investments or from others to those who post their investments. That to me is a significant shortcoming. Another problem is there is no tracking in that system once a position is liquidated. A lot of reality is lost there no doubt, though some of us might like not showing our losses.

If there were a thread attached or dedicated to those who put trades into the system, then traders could note their profits or losses from liquidations in the attached OR dedicated thread. That would be good.

It would also be good, in my opinion, if those putting up investments do so with some respect to reality, vs. putting something that they might someday do, etc. Hell, whether or not people actually put in the real amounts they invest, it would be nice if they put in amounts that were correct in percentage terms relative to their investment portfolios.

As much as I like the idea of seeing how people are invested, I am not going to do it this time unless a thread is dedicated to discussion by those who choose to put up their positions in Top Investors.

[Jim Nickerson]

Re: Bearish Information Re: Comment on Maund's article and SPX:XSF

First, a bit of something else. Below is a chart from http://www.investmentpostcards.com/2...-highs-part-2/ in article by du Plessis. It gives a nice comparison of how world markets have done and by dividing the US markets by the price of the EURO it brings their levels of correction into better alignment with the percentage corrections of the rest of the world. That point has been made elsewhere on iTulip I'm sure.




Now look at the chart in Maund's article of SPX:XSF (Swiss Franc).




Maund wrote:

The S&P500 index in Swiss Francs chart, which is similar to the Euro chart, shows that the Precious Metals sector can expect little help from the broad stockmarket in the near future. The general stockmarket has embarked on another downtrend, and despite the talk of it rising from a "base area" on the straight dollar chart, there is no sign of a base on this chart.

Emphasis JN with apologies to WDCRob. Note that the chart above covers 10 years in daily candlesticks, I guess they are, and the RSI and MACD indicators are squished up to use a "technical analytical" term.

Here is a 1 year line-chart of the same thing above. http://stockcharts.com/h-sc/ui?s=$SP...d=p19644092088 Sorry anyone has to click that link to see the image.

If one understands positive divergences as seen in indicators, i.e. RSI top panel and MACD bottom panel, despite Maund's opinion "there is no sign of a base on this chart" (refencing his chart above), on the chart I linked there are clearly positive divergences in the RSI beginning in early March 08 with a higher low in the RSI in mid-March that diverges from the lower low in the SPX:XSF chart shown at the value of 12.60.

The MACD also shows positive divergence from mid-to-late Jan. 08 to its last low in mid-March. In my opinion, despite what I see an near 100% bearishness in the world, this is a good looking chart with regard to the possibility of a bottom of some sort being put in already in the SPX.

I am not saying it is a bottom or the bottom, but if I were made to make a $10 bet one way or the other, I would definitely not bet against it being a bottom. $10 is not much money.

There is also interesting discussion of there being a bottom occurring now by Mike Burk http://www.safehaven.com/article-9820.htm. What Burk does in analyze breadth data. He has been writing over several weeks now that a new low in equities or a test of the existing lows still seems to be in the offing, such that were a retest to occur it would support the notion of a bottom if there were fewer new lows.

In his note above he wrote

On October 8, 1998 there were 1326 new lows on the NASDAQ. That was the highest number recorded during that decline and also the price low for the decline. Then like now the FED was increasing the money supply as fast as they could. So it is not absolutely necessary to have a retest.

and he notes his opinion that "There will not be a sustained rally until downside volume (He's referencing Nasdaq volumes) diminishes."

[FRED]

Re: Bearish Information Re. Maund Negative, Negative, Negative

This article is not for EJ, I don't think, in that is got some technical analytical references in it, but is it not without some fundamental views.

http://www.safehaven.com/article-9829.htm

I've got to eat dinner or would write more. It's worth looking at regarding PM, commodities, Toronto, Shanghai and the SPX valued in SwFr's.

One beneath it too on Silver at safehaven.com which I haven't read yet.

Good news: we fixed the stock trading system.

Bad news: we're all starting from ground zero with our portfolios going forward.

[Jim Nickerson]

Re: Bearish Information Re. Maund Negative, Negative, Negative

This article is not for EJ, I don't think, in that it has some technical analytical references in it, but is it not without some fundamental views.

http://www.safehaven.com/article-9829.htm

I've got to eat dinner or would write more. It's worth looking at regarding PM, commodities, Toronto, Shanghai and the SPX valued in SwFr's.

One beneath it too on Silver at safehaven.com which I haven't read yet.

[Jim Nickerson]

Re: Bearish Information Re: Hussman again

http://hussmanfunds.com/wmc/wmc080324.htm 3/24/08

As of last week, the Market Climate for stocks remained characterized by unfavorable valuations and unfavorable market action. Much has been made of the low percentage of investment advisors who are bullish – a low 31.1% according to Investors Intelligence – with some suggesting that stocks may be near a bottom on the basis of “contrary opinion.” The problem , as I noted years ago (e.g. Law of Large Numbers), is that “before looking at advisory sentiment, we have to factor out the portion that is explained simply by past market movements. Once we've done this, we are left with a much more informative indicator.”

All of the forecasting usefulness of those figures is contained in the “excess” bullishness or bearishness – the extent to which sentiment figures are higher or lower than what you would expect, given recent market movements. Presently, the level of advisory bullishness is not much below where we would expect it to be, given the market decline that we've observed. That's often the case early in bull or bear markets. High bullishness in early bull markets is typically not a negative, because the initial advance is generally very powerful. Likewise, very low bullishness is typically not a negative early in bear markets, because the initial decline is often fairly deep.

In short, aside from some potential for a “clearing rally” to correct the short-term oversold condition of the market, even the low advisory bullishness figures provide little evidence for a “contrary opinion” call on the market. For our part, we don't have enough evidence here to remove hedges, but we are open to the possibility that improved market action could provide at least some basis for a modest speculative exposure to market risk (most likely by covering a portion of our short call options, while leaving our defensive puts in place). Again however, we do not have enough evidence at present to warrant even a limited amount of speculative exposure. We won't observe “investment merit” until we observe significantly lower valuations, but market action by itself could encourage a somewhat more constructive stance. For now, the weight of the evidence continues to demand a strong defense.

[Jim Nickerson]

Re: Bearish Information Re. Hussman

http://hussmanfunds.com/wmc/wmc080324.htm

March 24, 2008 Why is Bear Stearns Trading at $6 Instead of $2?
John P. Hussman, Ph.D.
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Well, the ECRI (one of the more reliable private economic analysis groups) has finally thrown in the towel – “With the Weekly Leading Index having dropped more than 13 points in the last nine months, it is exhibiting a pronounced, pervasive, and persistent decline that is unambiguously recessionary.”

The possibility of a “bear market rally” aside, if the S&P 500 has already set its low, it will have been the first time that the market has responded to a similar economic downturn with less than a 20% loss on a closing basis. If we define the recent downturn as a bear market anyway, the recent low will represent the highest level of valuation that has ever prevailed at the bottom of a bear market. I expect neither of these to be true for long, but as usual, we'll respond to the evidence as it unfolds – without the need to forecast any particular scenario.