Don’t count your chickens before they hatch.

Don’t count your chickens before they hatch.

I’m not short financials, nor long gold or commodities.

Here’s a couple of things I know, however:

1. Stocks are volatile.
2. This market, specifically, has “no memory” – that is, what happened yesterday is irrelevant. It’s all about what’s happening today. That’s not healthy long term.
3. It’s hard to believe that either the January or Bear Stearns bottoms were the last bottoms in this cycle seeing as we never even actually entered bear market territory (20% down from the peak) and we’re in the midst of the biggest credit crisis since the Great Depression. The average bear market decline is 30% from the prior peak.
4. Market action implies clearly that participants are STILL more worried about “missing the rally” than about protecting capital during an economic downturn.
5. Earnings estimates are still way too high for 2008. As we get deeper into the recession they’ll be scaled back significantly. Non-financial earnings fall by an average of 15%-20% during recessions. 2008 estimates still reflect 10%+ growth over 2007 (and extraordinarily high profit margins, which generally mean revert during recessions). Possible? Yes. Likely? Hardly.
6. This is one of those moments when bad news is deemed company specific (GE, Fed Ex, UPS, Seagate, AMD) but good news (Intel, IBM, Google) is deemed good for the whole planet. This reflects extreme bullishness.
7. Most of the biggest up days (in percentage terms) in the history of the stock market have been in the midst of bear market rallies that later failed.
8. See 1 again: Stocks are volatile.

I don’t know how low we’ll go (1000-1100 perhaps on the S&P?), but I think we’ll blow through the prior lows sometime during 2008. The current rally notwithstanding.

I’m not short financials, nor long gold or commodities.

Here’s a couple of things I know, however:

1. Stocks are volatile.
2. This market, specifically, has “no memory” – that is, what happened yesterday is irrelevant. It’s all about what’s happening today. That’s not healthy long term.
3. It’s hard to believe that either the January or Bear Stearns bottoms were the last bottoms in this cycle seeing as we never even actually entered bear market territory (20% down from the peak) and we’re in the midst of the biggest credit crisis since the Great Depression. The average bear market decline is 30% from the prior peak.
4. Market action implies clearly that participants are STILL more worried about “missing the rally” than about protecting capital during an economic downturn.
5. Earnings estimates are still way too high for 2008. As we get deeper into the recession they’ll be scaled back significantly. Non-financial earnings fall by an average of 15%-20% during recessions. 2008 estimates still reflect 10%+ growth over 2007 (and extraordinarily high profit margins, which generally mean revert during recessions). Possible? Yes. Likely? Hardly.
6. This is one of those moments when bad news is deemed company specific (GE, Fed Ex, UPS, Seagate, AMD) but good news (Intel, IBM, Google) is deemed good for the whole planet. This reflects extreme bullishness.
7. Most of the biggest up days (in percentage terms) in the history of the stock market have been in the midst of bear market rallies that later failed.
8. See 1 again: Stocks are volatile.

I don’t know how low we’ll go (1000-1100 perhaps on the S&P?), but I think we’ll blow through the prior lows sometime during 2008. The current rally notwithstanding.

I’m not short financials, nor long gold or commodities.

Here’s a couple of things I know, however:

1. Stocks are volatile.
2. This market, specifically, has “no memory” – that is, what happened yesterday is irrelevant. It’s all about what’s happening today. That’s not healthy long term.
3. It’s hard to believe that either the January or Bear Stearns bottoms were the last bottoms in this cycle seeing as we never even actually entered bear market territory (20% down from the peak) and we’re in the midst of the biggest credit crisis since the Great Depression. The average bear market decline is 30% from the prior peak.
4. Market action implies clearly that participants are STILL more worried about “missing the rally” than about protecting capital during an economic downturn.
5. Earnings estimates are still way too high for 2008. As we get deeper into the recession they’ll be scaled back significantly. Non-financial earnings fall by an average of 15%-20% during recessions. 2008 estimates still reflect 10%+ growth over 2007 (and extraordinarily high profit margins, which generally mean revert during recessions). Possible? Yes. Likely? Hardly.
6. This is one of those moments when bad news is deemed company specific (GE, Fed Ex, UPS, Seagate, AMD) but good news (Intel, IBM, Google) is deemed good for the whole planet. This reflects extreme bullishness.
7. Most of the biggest up days (in percentage terms) in the history of the stock market have been in the midst of bear market rallies that later failed.
8. See 1 again: Stocks are volatile.

I don’t know how low we’ll go (1000-1100 perhaps on the S&P?), but I think we’ll blow through the prior lows sometime during 2008. The current rally notwithstanding.

What are you so excited about? Companies continue to lay off employees, oil is at $116, food prices set new records daily, banks continue to write off billions, no one knows how bad the recession is gonna be, and there is no bottom in sight for housing… hmm maybe I am missing the good news.

I’d say enjoy the rally while you can, and if you think that the worst is over, and that main street American Jane and Joe are gonna be OK, go ahead and stay long the market.

BTW, while gold is down today, commodities in general have been SMOKING just about everything else out there.
check out MOO, GSG, XLE, USO… all at or near 52 week highs. Many piggs have recommended these stocks, and if GLD is having a pullback, no need to bash piggie advice. BTW I never recommended shorting anything here. The euro did hit a new high yesterday vs. the dollar, and while the dollar is stronger today, who know where it may be in 6 months.

Nothing worth gloating about anyways…

What are you so excited about? Companies continue to lay off employees, oil is at $116, food prices set new records daily, banks continue to write off billions, no one knows how bad the recession is gonna be, and there is no bottom in sight for housing… hmm maybe I am missing the good news.

I’d say enjoy the rally while you can, and if you think that the worst is over, and that main street American Jane and Joe are gonna be OK, go ahead and stay long the market.

BTW, while gold is down today, commodities in general have been SMOKING just about everything else out there.
check out MOO, GSG, XLE, USO… all at or near 52 week highs. Many piggs have recommended these stocks, and if GLD is having a pullback, no need to bash piggie advice. BTW I never recommended shorting anything here. The euro did hit a new high yesterday vs. the dollar, and while the dollar is stronger today, who know where it may be in 6 months.

Nothing worth gloating about anyways…