Market Getting Dangerous?

MrMatisse

Just wondering does anyone else feel that the market is beginning to loose the run of itself again?

Looking at the front page of the FT today there is a huge amount of retail money from very small investors jumping in and out driving the market.

It says that the level of trading by small investors is now the same as it was at the peak of the .com boom.

In addition the threads in this forum are getting more and more speculative, reminiscint of the property threads of days gone by with people who are only starting out in the investment game looking for advice on very exotic topics immediatly.

pearcider

<Bear mode>The relief rally is overbought since rising unemployment will continue to undermine earnings. The consumer is broke. The Central Banks are nearly out of ammo. $10 trillion spent and wasted globally so far fighting the credit crunch. Rest assured the fundamentals are even worse now than last year. There are many more bankruptcies ahead. I'd be amazed if the market doesn't crash over the winter. The catalyst will probably be a currency crisis. Be careful out there folks. :pac: <Bear mode>

DublinWriter

pearcider wrote: »

The catalyst will probably be a currency crisis.

Agreed, watch the USD like a hawk, any significant movement downwards might be a precursor to a meltdown in the markets.

di2772

And there was me thinking the market was always dangerous

lucky-colm

DublinWriter wrote: »

Agreed, watch the USD like a hawk, any significant movement downwards might be a precursor to a meltdown in the markets.

and when it does drop you can allways make a buck by buying usd:D

Chrysostomos

di2772 wrote: »

And there was me thinking the market was always dangerous

lol same here,

It's clearly no more dangerous now than it is any other time.

As for people investing in the Irish banks, well, I wouldn't do it myself is all I have to say on that one.

Lexus1976

I'd hardly classify the stockmarket as ever been safe/thrustworthy

As far as the threads getting more and more speculative, well it is an investment forum.

MrMatisse

The forum used to have people giving well thought out opinions and views in the main now it feels like a bulgarian property thread of bygone days.

Yes the market is always risky but at the moment it feels REALLY REALLY risky.

seven-iron

As far as the threads getting more and more speculative, well it is an investment forum.

well said.

watch the USD like a hawk, any significant movement downwards might be a precursor to a meltdown in the markets.

Not neccessarily. A weaking dollar = bullish markets.

daveirl

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Raskolnikov

daveirl wrote: »

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Any areas in particular? Small-cap or large cap? Retail, pharma or natural resources?

For me, the market does seme overbought, but markets have a way of tricking people. I mean, everyone at the start of the year thought the market would finish down on 2008.

daveirl

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Rocket!

"The markets can remain irrational alot longer than you can remain solvent" - Keynes was it? Something like that anyways.

The markets will always contain risk, just trade your plan as always. Proper Money management will take care of risk.

Personally I'm of the opinion will see the March lows again < 6 months... but luckily I don't trade opinions!:D

pocketdooz

well the WSJ agrees with you and so do I . . . .

http://online.wsj.com/article/SB125348077553125915.html#mod=WSJ_hps_LEFTWhatsNews

daveirl

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Bullish

Here are some interesting charts showing the DOW inflation adjusted. but the trend lines in the chart would lean towards the argument that the lows are not even in yet.
The inflation rate calculated could be complete bull.
http://home.earthlink.net/~intelligentbear/com-dj-infl.htm

Raskolnikov

http://ftalphaville.ft.com/blog/2009/09/23/73556/chinas-looming-credit-crisis/China worries me.

We've heard all these recent stories about equity markets soaring there. Not only that, but there are reports about apartments in Hong Kong acheiving world record prices and farmers hoarding copper in the interior. This economic activity however, does not seem to be export-led (electricity growth in China has been sluggish).

When I look at the above chart, it would only seem to confirm that China has decided to go on a borrowing binge like the USA did after the Dot-Com crash. This speculation has driven up commodity prices worldwide and indeed, bolstered all this talk of a recovery.

My (open) question to people here is, how long can China keep continuing to induce the private sector to take on debt?

Rocket!

daveirl wrote: »

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Indeed thats a valid point and 800-900 is a very high possibility. But I still think we're in for worse tbh.

Theres just something about this bull run that screams of bubble.
I mean, this kind of % increase in the broader market in such a short space of time after a huge drop has only taken place during the 30s and 70s and each of those runs lead to bigger drops taking out the original lows. That being said, just because it happened before doesn't mean it has to happen again, its just worth noting.

The huge run in commodities(which has fuelled much of the run in equities) has been reliant on the falling USD. With the USD making lower and lower lows what happens when the correlation decouples and the falling dollar becomes a bad thing for the stock market? Much in the same vain as Oils spike last summer. Or else the dollar could recover and the correlation would remain intact and hence equities would fall(more likely scenario)...

Also, a lot of emphasis was put on the positive Q2 results many companies had this summer. It was unexpected and caused a huge buying splurge accross American equities. Especially amongst the financials(AIG - a nearly bust bank - up 600%!?!). But with the new Mark to Market ruling how can any of these results be taken seriously!? Even results from stocks which represent the broader economy such as Home Depot for example have to be taken with a pinch of salt. Sure profits were up, but revenue was down in almost all cases. Where'd the profit come from? A major spring cleaning on the balance sheet with wages taking a fairly hefty whack! That keeps the unemployment numbers nice and healthy.:D

Oh, and whats the deal with all the failing U.S. banks - these barely get reported these days! With the number of U.S. banks going bankrupt steadily increasing from 3 to 4 and now to 5 a week over the last few months, I don't really feel like shouting from the rooftops, "The recession is over! Loans for all!!"

I'm sorry if I sound like a big old bear but I'm a naturally negative person!:D haha! In my opinion, it ain't looking much prettier than pre-Lehman levels... In fairness the same fear isn't there...but it could be just around the corner! (nice pin on S&P yday by the way. Could be a top...)

MrMatisse

Interesting article.

http://www.ft.com/cms/s/0/defff18e-aa07-11de-a3ce-00144feabdc0.html?nclick_check=1

daveirl

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silverharp

RIMM was interesting this week, its back to where it was in April. If the dollar turns here we could have a significant top in place. That's the view from the bear camp

daveirl

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pocketdooz

daveirl wrote: »

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IMO alot of the cashflow profitability of the past earnings season was driven by companies quoting EBITDA figures pre-restructuring costs and by companies cutting capex heavily.

The easy headcount reductions are done (bonuses cut/part timers and contract workers cut etc) and alot of companies are already running at a maintenance capex figure.

If we don't see top-line figures growing in 3Q and 4Q there will be little to no flow-throughs to the bottom line in this earning season because costs have already been cut to the bone.

In my opinion we will not see topline growth return in 2009 (this is based on various conversations with CFOs and IR departments in major companies in the UK and the US). I think the rebound is overdone and I would be looking to get out of positions now and take profits with a view to getting back in early next year.

Then again I trade in a very different manner than you Dave so what I consider to be fundamental for long term equity and debt investment differs from your short-term priorities.

.

Bullish

Hi pocketdooz,
If you recon the rebound is overdone, What would you think the retrenchment levels will be. I only ask an estimate to see what your feelings on the market are,I dont expect an oracle prediction ;-)
I fully agree the rally is overdone and would be looking for a 10 - 20% correction in the next few weeks.There are those in the bear camp who are calling for a retest of march lows and perma bears calling for below those levels.

silverharp

I agree with Pocketdooz's points but from a broader perspective past bear markets tend to end with very low P/E ratios, we simply didnt get there even with the March lows, back out the stimulus......cash for clunkers (which only pulled demand from the future) and there is alot of air under the market. There is also still a huge mark to market issue in US banks. At best you have a Japan scenario but I'd be expecting worse.
The only question is do we get the big move down in the next few months or does the market hang in there until 2010/2011. Technically the market is very week as we have had something like 5 month of higher prices on lower volume, normal bull markets breakout on higher volumes.



Still some Bears out there:D

daveirl

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Bullish

Hi Dave,
The air pockets will only be bigger due to the previous ramp, There is no support under a lot of the recent gains since July and even there is is minor support IMHO,

What is your thoughts generally on Earnings season starting will they in general beat estimates or not ??

daveirl

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ranger4

daveirl wrote: »

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hope we doint see expected correction during october, Market could trade sideways for 4th quarter.

boomshackala

For anyone looking to shorts looks like money is starting to be made.
The blue line is a short on China market.
China led the way down and up in the last trend changes

Comments?

MrMatisse

Another big kick down today

http://www.ft.com/cms/s/015a8d98-af17-11de-ba1c-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F015a8d98-af17-11de-ba1c-00144feabdc0.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Feurope

ranger4

Not too worried, Probably will see 10-20% correction during october with start of next leg up during nov-dec, im holding for 2-5 year term but will defo buy if we see very large fall.

Économiste Monétaire

In support of bears like Really-Stressed & silverharp:

Please do feed the bears.

silverharp

Économiste Monétaire wrote: »

In support of bears like Really-Stressed & silverharp:

Please do feed the bears.

Legend!:D

"Legend has it that Roman generals, when making their triumphal marches, were followed by a slave whispering “Remember, you are mortal.” The bears play that role for investors. Their arguments should be countered with reason, not ridicule. And the right to sell short should not be restricted arbitrarily. If regulators want to prevent future bubbles, they need to let the bears roam as freely as possible."

daveirl

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silverharp

daveirl wrote: »

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thats fair , although I'm expecting a top and we may have had it , I would want to see the credit markets crack first, if corporate bonds keep going gangbusters then the stock market aint going down.

Lexus1976

Another doom and gloom thread. The more you post the more chances you have of actually getting it right some day :rolleyes:#

Run for the hills, sell sell sell ........

Idu

Lexus1976 wrote: »

Another doom and gloom thread. The more you post the more chances you have of actually getting it right some day :rolleyes:#

Run for the hills, sell sell sell ........

You do know that the market goes up and down don't you? It's hardly doom and gloom to use the fundamentals staring you in the face and use that to cover longs and be prepared to buy on dips if thats what the market is telling you. 6 months of a rally and already the previous 2 years have been forgotten

daveirl

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Sonderval

I've my finger on the trigger at the moment - thinking this may be a good time to lock in what I've made in the last 6 months. Mind you, I'm holding AAPL mostly, a funny stock as always...

MrMatisse

big drops the last few days.

silverharp

My working assumption is that the top is in now. Markets can crash from oversold like now or there maybe a decent retrace next week, no idea. But the dollar looks like it has found a longer term bottom, and once that sell the dollar and buy anything trade is over the second phase of the bear market will commence.