Stocks up, gold down - time for a change in thesis?

[johnnybill45]

Re: Stocks up, gold down - time for a change in thesis?

Voted bear #1.

Gold sometimes up, sometimes down. Overall, still the best performing asset in the last several years.

Tea leaves, bollinger bands, oscillators, mcD, Jim Cramer, Larry Kudlow, etc. Just noise in the big picture. The economy really is broken this time. Many a dying man appears to have a recovery before his last gasp! You guys don't believe it when EJ says the FIRE economy is toast?

If I'm wrong, I will begin to invest again when the long term trend is up for a year or so. What's the rush to make or lose 20%? Right now is a gambler's game, and the big guys are still controlling the market while you're asleep each night.

[johnnybill45]

Re: Stocks up, gold down - time for a change in thesis?

Goadam1 - finally someone with some sense. Hey, I loved that movie They Live. Classic "B" movie.

JB

[metalman]

Re: Stocks up, gold down - time for a change in thesis?

Tea leaves, bollinger bands, oscillators, mcD, Jim Cramer, Larry Kudlow, etc. Just noise in the big picture. The economy really is broken this time. Many a dying man appears to have a recovery before his last gasp! You guys don't believe it when EJ says the FIRE economy is toast?

short attention spans?

[santafe2]

Re: Stocks up, gold down - time for a change in thesis?

Santafe2 - this may be eminently quotable after a little while. It's got "quote me" written all over it.

Luke - If I'm wrong, at least it won't be the first time.... With regard to investing in the market, I really won't care if I'm not invested and it turns out that the bulls are correct. It would be a market that I totally do not understand if it goes up more than another 10-12% from here. That's, certainly possible. These last 4 weeks have provided a great traders market and it may continue to for a few more weeks - maybe even into mid summer. But the next leg down will exact a huge toll from anyone who thinks the bear has gone into hibernation. The market psychology at the 3/9 "bottom" was not what I would expect after the market lost 50%+ value. There should be more a combination of abject fear and market loathing. Not Jim Cramer coming out 2 weeks later to declare the "depression is over!". When this is over he won't go on Jon Stewart's show, he won't have a job, he won't show his face. Then we might be close to the bottom.

[nero3]

Re: Stocks up, gold down - time for a change in thesis?

if you did read all of those articles you have a reading comprehension issue.

the economy cannot improve until the housing market improves. the housing market has 5 years or more to go.

A stock like PG was like 50 % off the 1971 level in terms of valuation, don't fit all all with the graph where the dow is in the sky, you should stop talking about reading comprehension issues,take a look in the mirror, and get off my back, as it's bad for my nervous system. Thanks.



This is where US house prices are. And you could easily get a 75-80 replay from where we are now, don't have to wait 5 years for a recovery, at least I think so, thanks.

[halcyon]

Still Bear, will take advantage of bull traps

Just curious, are all the bears still believers? Or are you going to change up?

Main position: bear.
Reasons: 60 yr. debt bubble, huge housing bubbles all over, problems with CDSes (ref. Satayjit Das), deflationary spiral (probab. 1-3 yrs) believer - for now

Stocks position: Anticipated and participated in the March ongoing rally. Exited some time ago. Watching the rally to test resistance levels, before going back in on the long side (short term), if at all. Will build on short positions if rally fails to build strong legs and does not go above important resistance levels. Watching advance/decline, CBOE and short position accumulations closely + sentiment indicators.

Gold: sold all at near peak in March (cyclical trading channel peak for the past 6 mo). Waiting for price to drop near 200d MA and/or trading channel bottom, or even perhaps some resistance levels. Will buy A LOT when the stock rally ends and believe that gold has at least temporarily stabilized. Willing to tolerate 20-30% drawdown on gold position. Believe it will at minimum double from the entrance levels, although accept that may not come to pass.

Oil: Now exited, I think oil will come down again, at least the ETF prices will. Willing to go into oil with a major stake, if can find something that rolls over nicely (current ETFs are mostly short-term trading papers, imho). Extremely uber-bullish on the long term, unless the whole world economy melts for good.

Def/Inf: Debt deflation and monetary deflation (quantity*velocity) now for 1-3 years on many major markets (will keep an eye out for changes). A believer in high probability of big asset price inflation in years to come (>10% p.a.) in major markets, due to major monetary quantitative easing and upcoming credit expansion (in due time).

Currency: Mostly still in EUR / USD, looking to exit a majority from both currencies probably during 2009 (watching Eastern Europe situation closely). Candidates: AUD (lots of mining, commodities, uranium, currency has taken a hit), RUB (lots of fossils, currency taken a big hit), KRW (not sure, still analyzing, related to shipping/exports), and CNY (very problematic, don't sure I understand, but the major creditor nation and with strong domestic growth potential).

Certainty: not very certain on anything (except oil). Not enough experience, knowledge, skill, contact, inside information. All positions *probabilistic*, some inclusive OR positions. No either/or positions, except oil. Lacking in everything to draw definitive conclusions. Too many possibilities. Willing to be a fox rather than a hedgehog. Only a hedgehog when it comes to oil and how it's production volume limits will strangle the economic growth. That was and will be unavoidable. No substitutes, have looked at everything (for 4 years).

Summary: Still bear until markets and esp. economy prove otherwise. Fundamentals are not changed by rallies in the SP500. Waiting for fundamentals to change to become a bull. This will take longer than most think, I believe.

[stockman]

Re: Stocks up, gold down - time for a change in thesis?

A stock like PG was like 50 % off the 1971 level in terms of valuation, don't fit all all with the graph where the dow is in the sky, you should stop talking about reading comprehension issues,take a look in the mirror, and get off my back, as it's bad for my nervous system. Thanks.

NERO3- I am impressed that you (and Lukester) hang in there and present opposing views to the consensus of this group. It should be healthy for your own trading that you are considering the opposing views of the group. It requires thick skin on your part but it may help some who visit this site avoid the common mistake of biased information filtering.

"Cognitive dissonance is the phenomenon of two cognitive elements – an opinion, new
information – conflicting with each other (Festinger, 1957). People want to reduce cognitive
dissonance in order to avoid the psychological pain of a poor self-image. Therefore, they tend to
ignore, reject or minimize information that suggests that they have made a wrong decision or hold
on to an incorrect belief. The result is that people filter information in a biased manner. Filtering
information is easier when the individual is part of a group whose members hold similar opinions
or have taken similar decisions.4 Therefore, herding may facilitate the reduction of cognitive
dissonance and reinforce biased information filtering. The theory of cognitive dissonance may
explain not only hypes, but also panic in financial markets. For it predicts that if much dissonant
information is released, it becomes more difficult to ignore it. At a certain point the dissonance is
equal to the resistance to revise the existing opinion, and the individual will switch to actively
searching information that confirms that his earlier decision was wrong. If he was part of a group
he will now break away from it. The group becomes smaller, and this increases the dissonance of

the remaining group members. This may lead to a sudden change of direction of the herd.5" -
Henriëtte Prast

INVESTOR PSYCHOLOGY: A BEHAVIOURAL EXPLANATION OF SIX FINANCE PUZZLES

[nero3]

Re: Stocks up, gold down - time for a change in thesis?

NERO3- I am impressed that you (and Lukester) hang in there and present opposing views to the consensus of this group. It should be healthy for your own trading that you are considering the opposing views of the group. It requires thick skin on your part but it may help some who visit this site avoid the common mistake of biased information filtering.

"Cognitive dissonance is the phenomenon of two cognitive elements – an opinion, new
information – conflicting with each other (Festinger, 1957). People want to reduce cognitive
dissonance in order to avoid the psychological pain of a poor self-image. Therefore, they tend to
ignore, reject or minimize information that suggests that they have made a wrong decision or hold
on to an incorrect belief. The result is that people filter information in a biased manner. Filtering
information is easier when the individual is part of a group whose members hold similar opinions
or have taken similar decisions.4 Therefore, herding may facilitate the reduction of cognitive
dissonance and reinforce biased information filtering. The theory of cognitive dissonance may
explain not only hypes, but also panic in financial markets. For it predicts that if much dissonant
information is released, it becomes more difficult to ignore it. At a certain point the dissonance is
equal to the resistance to revise the existing opinion, and the individual will switch to actively
searching information that confirms that his earlier decision was wrong. If he was part of a group
he will now break away from it. The group becomes smaller, and this increases the dissonance of

the remaining group members. This may lead to a sudden change of direction of the herd.5" -
Henriëtte Prast

INVESTOR PSYCHOLOGY: A BEHAVIOURAL EXPLANATION OF SIX FINANCE PUZZLES

Thank you for the information. I can certainly relate to it as I have taken a a full year to study psychology when I was going to the university, I did have a knack for it, but I would never stand the pain to talk to sick , depressed people. I remember this subject from the lectures and when I read about it. I think if you are right, it should not really be threatening if someone say something that totally contradicts your inner system, as you will be sure of why the information that contradicts it is false. If it feels very threatening I think maybe it could be something to the information that contains truth that makes you feel that way. I use other peoples reactions in an active way, to form an opinion of where things are going. This psychology part is one of the main reasons why I am confident that a guy like mish, that runs a blog, is dead wrong. I think peter schiff is more likely to be right in the end, atleast in the debate between the two, however it make take some time to get there.

Another thing, I recall is that once you make a decision you tend to be more sure than before you made the decision. It's to avoid dissonance, same thing. I certainly think that it's much harder to stay neutral when you are taking active positions, or have certain belief system that is morally or ethically grounded. A guy such as Ron Paul, or Peter Schiff is probably prone to be so much in love with gold and the idea of a gold standard, the glitter and the glory, that they will not notice when gold enters a bear market. I think some frustration, can sometimes be a signal you are wrong, it's the subconscious part of the brain that knows it, and the fustration is a signal that should be taken seriously, not to be ignored (similar to the kinetic intuition george soros use, it's this same kind of instinct that helped him escape the nazi germans, that helps him in the market).


That can be seen near the top in bull market's where the permabulls think it's different this time, become aggressive on the notion that it's not that way at all, or near the low of a bear market, as in it's "different this time" bear market, only here it's the bears that can show the same kind of behavior. When there is a framework built, a system, I think the brain develops a certain introverted intuition around that framework. To seek out only information that confirms a previously determined belief system is a dangerous thing to do. It's dangerous to failing to admit failure, or saying the words I was wrong, and even refuse to take in new facts, or distort the new facts so they can fit with the previously held beliefs.


Ideally I think the best thing would be for the analytic person trying to analyze the market to avoid trading, avoid having active positions, and ideally don't have any money other than salary, even be as far away from Wall Street and the US as possible if the goal is to analyze the US. I know a guy like Nourel Roubini is 100 % long stocks. It seems he is able to separate the two, but I think many can't. I can sort of feel it's in the nature of someone like Roubini to be unable to spot when things turn up. I think people have different gifts. Some are good at seeing the glass half full, other see it as half empty, the ideal thing would be to be able to be rather objective or neutral and buy from the pessimist and sell to the optimist.

[c1ue]

Re: Stocks up, gold down - time for a change in thesis?

Cognitive dissonance goes both ways.

What metalman is referring to is that iTulip has spoken at length about why the 1980s recession is different than now: the 80s recession was an engineere one to reduce inflation expectations - after a period of inflation following the final departure from the Bretton Woods gold standard.

Today the recession/depression/banana is far from controlled - the government and Fed are STILL printing like mad, yet the effects on the economy are nil.

Thus drawing parallels between 80s behavior in home prices vs. gold is foolish.

Secondly we've just gone through historic bubbles in both stock markets (2000) and homes (2006). It is another point of disparity that you can somehow infer future performance based on completely different starting points.

To reiterate since you clearly have NOT read or understood what has been posted:

1) US was a net creditor nation in the 70s/80s. Not so today. Why does this matter? Because the debt needed by the US consumer/economy/government is no longer under US control. Interest rates thus are NOT going to be under (US) government fiat.

Or at least if they are for example by the already begun Fed buying of Treasuries - the denominator is going to change value quickly (i.e. dollar collapse). The old adage of you can control interest rates and exchange rates, but not both at the same time.

2) Total US residential real estate values were 0.8x to 1.0x vs. GDP in the 70s and 80s. Today it is something like 1.4x - having peaked at 1.7x or so. Why does this matter? Because GDP is a proxy for ability to pay debt. Massive debt presently accompanies the residential real estate 'value'.

3) Stock market P/Es are still very high. In the 70s and 80s, the numbers are similar to today. But today 'one time events' for accounting purposes happen every quarter. Similarly dividend yields are still fairly low - and more importantly are still dropping.

While it is nice that you seem to think that all is well and the recovery has begun - I have yet to see anything disputing these core facts which iTulip has spoken to at length.

Lukester has been quite thoroughly and notably wrong - but that is ok. Ultimately inflation is on the side of those who think the stock market is going up/housing has bottomed. But unfortunately in that case - the 'gains' made will be entirely consumed (and more) by the losses in everything else.

Please refer to the Weimar housing expenditure chart which bart had put up.

[nero3]

Re: Stocks up, gold down - time for a change in thesis?

Cognitive dissonance goes both ways.

What metalman is referring to is that iTulip has spoken at length about why the 1980s recession is different than now: the 80s recession was an engineere one to reduce inflation expectations - after a period of inflation following the final departure from the Bretton Woods gold standard.

Today the recession/depression/banana is far from controlled - the government and Fed are STILL printing like mad, yet the effects on the economy are nil.

Thus drawing parallels between 80s behavior in home prices vs. gold is foolish.

Secondly we've just gone through historic bubbles in both stock markets (2000) and homes (2006). It is another point of disparity that you can somehow infer future performance based on completely different starting points.

To reiterate since you clearly have NOT read or understood what has been posted:

1) US was a net creditor nation in the 70s/80s. Not so today. Why does this matter? Because the debt needed by the US consumer/economy/government is no longer under US control. Interest rates thus are NOT going to be under (US) government fiat.

Or at least if they are for example by the already begun Fed buying of Treasuries - the denominator is going to change value quickly (i.e. dollar collapse). The old adage of you can control interest rates and exchange rates, but not both at the same time.

2) Total US residential real estate values were 0.8x to 1.0x vs. GDP in the 70s and 80s. Today it is something like 1.4x - having peaked at 1.7x or so. Why does this matter? Because GDP is a proxy for ability to pay debt. Massive debt presently accompanies the residential real estate 'value'.

3) Stock market P/Es are still very high. In the 70s and 80s, the numbers are similar to today. But today 'one time events' for accounting purposes happen every quarter. Similarly dividend yields are still fairly low - and more importantly are still dropping.

While it is nice that you seem to think that all is well and the recovery has begun - I have yet to see anything disputing these core facts which iTulip has spoken to at length.

Lukester has been quite thoroughly and notably wrong - but that is ok. Ultimately inflation is on the side of those who think the stock market is going up/housing has bottomed. But unfortunately in that case - the 'gains' made will be entirely consumed (and more) by the losses in everything else.

Please refer to the Weimar housing expenditure chart which bart had put up.

I know all what you write, the arguments, the foreign creditor vs external debtor argument is of course one of the treasons the US will take a totally different path than japan, but I think the US to eventually break out of it, print enough and it cracks up, in the sense that yields on treasuries will start to move upwards, like in some of the PIGS countries in Europe, and that will cause an inflationary boom, sooner rather than later, maybe similar to the mid, late seventies. The US stock market compared to GDP was at the same level as the debt in 1974, I think during the lows in march. I really don't see the stock market as that expensive.

[tombat1913]

Re: Stocks up, gold down - time for a change in thesis?

Can you refer me to one of those Bears that "market's time" [choice 2].

I never seem to have enough time, and would like to cut a deal to buy some...;)

I've got what you need, the good stuff!

[stockman]

Re: Stocks up, gold down - time for a change in thesis?

ITULIP provides good information/research, well worth reading and considering. However it is not a given that increased information will increase the accuracy of the forecast. It does increase confidence in the forecast however. And confidence is another dangerous place to go for bulls or bears. Self doubt and cynicism arebetter skills to work on for investors.

Valuations- The ultimate destination of stocks may end up being 5-7 times earnings, similar to past major secular low points. They are not likley to travel in a straight line to get there. Trading the opportunities along the way may prove more rewarding than investing based on the ultimate destination for the nimble.

[nero3]

Re: Stocks up, gold down - time for a change in thesis?

ITULIP provides good information/research, well worth reading and considering. However it is not a given that increased information will increase the accuracy of the forecast. It does increase confidence in the forecast however. And confidence is another dangerous place to go for bulls or bears. Self doubt and cynicism arebetter skills to work on for investors.

Valuations- The ultimate destination of stocks may end up being 5-7 times earnings, similar to past major secular low points. They are not likley to travel in a straight line to get there. Trading the opportunities along the way may prove more rewarding than investing based on the ultimate destination for the nimble.

Hah, only my gold and silver stocks that are up today. In the 1930-32 replay scenario, these things are prone to outperform, big time, I think.
I certainly think we can get to around 0,3 GDP , from around 0,6-0,7 now, I just wonder if it will be through another, inflationary boom, or through a debt deflation bear market. I think the debt deflation fears might be overdone, as I don't see a contraction of the money supply, a treasury market that is worth much more now than in 1998, even these papers have lots a lot of value due to higher commodity prices since then. It does not make sense that oil was 8 dollars in 1998, and at around 35 dollars now, with treasuries worth more now than then. Had it not been a bubble, oil should go even below the lows of 1998, not down to the peak of the pre asian crisis boom. There is a lot of talk of Alan Greenspan blowing up the bubble from 2003, but I don't think he was doing that. In my opinion it was much more the Bank of Japan, and general liquidity conditions that just caused a huge bubble to blow up, the role of the US is overdone I think. And in the current enviroment it's less important than before. I think eventually, there will be a new liquidity bubble, even the sentiment in the market is that we are in a new era of no more bubbles, and a new capitalism.

[Master Shake]

Re: Stocks up, gold down - time for a change in thesis?

NERO3- I am impressed that you (and Lukester) hang in there and present opposing views to the consensus of this group. It should be healthy for your own trading that you are considering the opposing views of the group. It requires thick skin on your part but it may help some who visit this site avoid the common mistake of biased information filtering.

"Cognitive dissonance is the phenomenon of two cognitive elements – an opinion, new
information – conflicting with each other (Festinger, 1957). People want to reduce cognitive
dissonance in order to avoid the psychological pain of a poor self-image. Therefore, they tend to
ignore, reject or minimize information that suggests that they have made a wrong decision or hold
on to an incorrect belief. The result is that people filter information in a biased manner. Filtering
information is easier when the individual is part of a group whose members hold similar opinions
or have taken similar decisions.4 Therefore, herding may facilitate the reduction of cognitive
dissonance and reinforce biased information filtering. The theory of cognitive dissonance may
explain not only hypes, but also panic in financial markets. For it predicts that if much dissonant
information is released, it becomes more difficult to ignore it. At a certain point the dissonance is
equal to the resistance to revise the existing opinion, and the individual will switch to actively
searching information that confirms that his earlier decision was wrong. If he was part of a group
he will now break away from it. The group becomes smaller, and this increases the dissonance of

the remaining group members. This may lead to a sudden change of direction of the herd.5" -
Henriëtte Prast

INVESTOR PSYCHOLOGY: A BEHAVIOURAL EXPLANATION OF SIX FINANCE PUZZLES

I'm reading The Black Swan right now, and one of the points that Taleb makes is that you should always be skeptical and true skeptics, instead of seeking to validate their own positions, seek contrary evidence to disprove them. I value the “apostates” here because they present contrary points of view. @#$%, bka “Symbols”, was certainly right on his call on crude last summer, the pettifogging over the definition of “bubble” notwithstanding.

That being said, I don’t see any grounds for a new bull market taking hold. A strong, snap-back rally perhaps, but, imo, Humpty-Dumpty is broken and all the Messiah’s men are not going to put him back together. Hell, they’re the ones who pushed him off the wall in the first place.

As to the comment about Bernanke’s intellect saving the day, remember that it was the Best and Brightest who got us into Vietnam. Taleb, also, has nothing but derision for cloistered academics, like Bernanke, in the social sciences, especially economics, who try to apply mathematical models to subjects that cannot adequately be modeled mathematically.

[nero3]

Re: Stocks up, gold down - time for a change in thesis?

There is a lot of posts on the housing market and how what that means to the economy. I have been following itulip for many years and believe that they have been dead on. From my experience the housing market is showing positive signs of turning. Traffic at our sales centers are up substantially from 6 showings a weekend to over 40. Since traffic leads sales this is a positive sign. Of course prices have been lowered 30% on average from the peak prices and this is driving traffic. I had the opportunity to do some retail sales this weekend filling in for one of the sales managers out for palm sunday. The traffic was well qualified and a mix of young first time home buyers and 30-40 somethings looking to relocate from the expensive city areas. They were excited about the first time buyer tax credit as well as lower financing costs. Those coupled with the price reduction has bought our product to rental prices in the area including common charges and taxes and mortgage. We have had several offers from this weekends traffic. Now is this a head fake or a window of opportunity or change in market behavior I don't know but the retail customer is out pounding the pavement and making offers. Our product is FHA approved and mostly in the conforming price ranges so that might give us some advantage over other developments but the traffic this season has been the best in 18 months.

On the flip side the commercial market is a disaster. Tons of forclosure's and bankruptcy filings. Banks are now realizing the problem and are marketing notes aggressively. We have been offered notes for 40 cents on the dollar. Still not cheap enough for some assets but at least the banks are putting the assets out there for price discovery. Expect substantial commercial writedowns from regional banks in the coming months.

Banks are still not lending. They are very tight and underwritting is tighter then the Obama teams vetting process.

I had pulled all of my money out of the market in September and am now considering entry again. Specifically looking at Natural Gas and Silver plays.

Good luck on natural gas. I am focused on oil, but maybe it's with gas relative to oil, as it is with nickel relative to copper, quite a discount.

I have some russian shares. It seems they have bottomed out. They are just totally inverse to the dollar. Weak dollar would be the life blood for everything