Stocks, Banks, Gold-This board has all been wrong.

[poorgradstudent]

-Market is still undervalued

-Recessions are impossible to time

-Recessions don’t mean you lose all your money

I’m not saying you should rush into the market right now. While there are individual exceptions, overall the market is very HOLD to me. I think there’s still a little gas in the tank yet. But of course, watch it closely and sell any positions that are overvalued.

[Chris Scoreboard Johnston]

[Chris Scoreboard Johnston]

Thanks sddude for giving me credit for calling this bull market. It is amazing all of the heat I took for telling people I was looking for a rally at the end of this year. The lesson to be learned from this has been commented on by colombo, the effect interest rates have on stock prices.

This big rally that we have had in bonds has been so powerful, that it even kick started the mid-term election rally earlier than it normally starts. Divergences between bonds and stocks have occurred at most major high and low we have had in the stock market, just look at some charts.

I mentioned in my blog at the time, and in here, that bonds were breaking their downtrend when the price was at 10814 and now we are at 11100. I have also warned many people in here about the GOLD market as well. This has always looked to me like a speculative top, accompanied with all the standard media BS that goes along with such events. Oil is a bit different, but again I made many comments about this as well. The trends in these markets are both heavily down at this point. RSeiser can back me on this as well. When we had lunch up here, I told him I was looking for a downside break in GOLD, this was a few weeks ago. He at the time I recall was looking for an upside breakout.

I mentioned repeatedly the importance of 574.50 which just broke. The last line in the sand is probably somewhere in the 520’s which is where moving averages come in on monthly charts. The biggest problem GOLD has is an overly bullish sentiment, which is bearish.

I am no economist, and my opinion about long term macro economic cycles is no better than anyone else’s in here. However, I think we have seen enough examples of economists being the wrong people to listen to about timing investment decisions. These people are very smart, but not necessarily correct.

I also do not share the dire economic view alot of people have in here. I do not think a severe recession/depression is coming. It may happen, but it has not yet. You can always exit on short notice in stocks if this start to look bad. I do think mid next year, say between my-June and the fall we will have a sharp drop in stocks due to cycles.

Also, the one thing that concerns me about this rally in stocks is the prominent divergence between the S&P 500 and the DOW. This rally is very narrow, which makes me think a sharp pullback could occur. I am hoping or that to load the boat on the longside. With bonds being this strong, I think this pullback, if it happens will be short in nature.

Some of my friends in the trading world are perplexed at how far this rally has gone, with some of the internal weaknesses at hand. I also am surprised, and have not gotten nearly the profit out of this that I should have because it occured in advance of my model by a couple of months.

[rseiser]

Yes, ChrisJ has been exactly warning of this gold breakdown when it was slightly above $600. Also, he mentioned $574.5 as support, where it exactly bounced the first time (How did he know? Is he the biggest player in the gold market, haha?). Now it broke below $574.5. Does this mean it will go lower and that it will take a long time before it goes above $600 again? I am not acting on any of this, since I don’t see any value anywhere else to put my money. But I am certainly curious how one can so well predict these trading rallies.
Regarding the stock rally and bonds accompanying it. Yes, after the fact we can see that both went together, but how could we tell that bonds would rally so far in the first place? Trust Bill Gross more often? Going forward, would a break in bonds signal that the stock market rally is over?

[Chris Scoreboard Johnston]

Correction of my above post, bonds are at 11300 not 11100 a 20 basis point typo!

Rs – there is a very strong seasonal rally tendency for bonds starting in July (lower rates). That did not tell us we would get 1000 Dow Points or 100 s&P points. It did tell us to look for it to happen, and if it did, look to the long side, or at the very least pass on shorts. Normally, we get a lag of a month to 4 months between the bond market moves, and stocks following. This time they occurred simultaneously which made this tougher to enter.

I am watching the bonds very closely, if they were to break down tommorrow on the non-farm report and break the uptrend, that would be bad news for stocks eventually. I hope they hold up and we get a stock dip, for the buy spot.

Nobody can predict the future all any of us can do is make educated guesses about what is likely to happen based on historical relationships.

[sdduuuude]

privatebanker – hahahaha. I totally agree. You can find great and bad investment advice here. Problem is knowing which is which.

[Wiley]

The German market also went up during the Weimer Republic (but you still got creamed).

So in the last six years gold has doubled while the Dow clawed its way back to even. And only one Dow stock actually made a new high.

Anyone can usually bias their arguement based on which time reference you want to use and look good.

Fundamentals support precious metals, not equities. Fundamentals always win in the end. Just my take.

[(former)FormerSanDiegan]

“This board” is always right and always wrong. Every possible conjecture about the direction of the stock market, interest rates, the direction of the price of gold and inflation has been made at some point in the last 3 months. Saying that “this board” has been wrong is probably a valid statement and is as valid as saying “this board” has been spot on. In fact it has been both. It simply depends on which contributor made the right (or lucky) call.

[powayseller]

privatebanker, what is the annual return of the average CFP, or the one that you recommend? Their track records are no better than the average Joe.

I believe Chris was talking about a stock market rally off a low, begining in October/November, and lasting for one year or two years. What we have here is not the mid-year election cycle rally at all. First, only a few Dow stocks are making the highs, while the rest of the market is flat. Second, it is highly likely that this rally will die in the next month or so, because it is going counter to business profits.

This is not a true all-stock rally scenario, and it cannot last. Bernanke is warning about a slowdown, profits are down, sales are slowing, the economy is definitely slowing by all accounts, and a few Dow stocks rally: that is not a stock market rally! It’s a delusion by those who think that the Fed is going to lower interest rates and save this economy. As Roubini said, any lowering the do will be too late, and the stock market will go down down down….

Buying stocks now is like buying a condo in July 2005. It seemed like such a good idea at the time…. Getting in at the end, holding at the end, is where you lose your money.

[(former)FormerSanDiegan]

I beg to differ that this is not a mid-year election cycle rally. There have been cases in the past where the low occurs earlier than October. In addition it is only October 5th. We may yet re-test the lows in the S&P 500 range of ~1250 this month or next. Please do not jump to conclusions before the game is over.

Just to show how silly short-term prognostications are, here’s mine : Stocks sell-off about 7.5% starting somewhere between Oct 12 and October 23, then rebound to current levels (as measured by S&P 500) . If I’m right, I’m a genius and you can subscribe to my newsletter “Random Predictions”. If I’m wrong, then somebody can claim that “this board” was wrong on stocks again.

[rseiser]

Poway, I agree with all you say, but since I have been proven wrong a few times, I better shut up and see what happens.
Regarding the rally though, the S&P (and mutual funds I assume) really had an incredible rally since June/July. So far so good, but I don’t remember anybody calling this rally, except a few stock perma-bulls. I have covered a few shorts in July, so that was a good move, too. We shall see how long the rally lasts, but predicting a rally to start now (after this move) is as useful as starting to short in July.
I am still learning a lot here, and I am trying to see if we could have something like 1973, it certainly would fit the script perfectly. What was going on then in terms of signs?
What I have heard on this board makes me believe that maybe an end (permanent end) to the bond-rally might initiate a dramatic change in direction (20 year bull-market in stocks/bonds being over).

[Chris Scoreboard Johnston]

This is a mid term congressional election rally, there is no way of disputing that. The premise is that the market will rally for 2 years from a low made this year. It is clearly doing that. The month that it starts is just fine tuning, the basic theory does not require a specific month.

Whether or not the rally will last that long is anyone’s guess, but clearly it has begun. Watch the bonds, if the uptrend breaks there this rally may not go much farther, if it holds the sky is the limit itleast until mid next year.

[powayseller]

The Dow index is not representative of the market. It is the oldest index, but “the Dow counts every stock equally. Many people on Wall Street say this makes the Dow less valuable as a market barometer.” It only represents the 30 most safe stocks, so the fact it is hitting records is not necessarily a sign of strength.

“the Dow rallied 20 percent during the first third of 2001 — at a time when the U.S. economy was falling into a recession.” ; – NPR

I stand by my recession call. We’re heading into a recession, led by the housing market decline. Anybody remember the housing bubble? Or did you all get swept off your feet by a few weeks of a sucker’s rally?

This is precisely why investors lose money in investing; they forget to look at the long-term picture. They get swept up in the emotion of the highs, and then they sell when it’s low.

Do you all remember why we are on piggington? We realize there’s a housing bubble, that housing drove the economy, and that the housing collapse will lead to a recession? This is a bubble economy, and the bubble is popping.

Don’t be fooled by this rally. The stock market loses an average of 28% heading into a recession, starting the decline by 1 – 2 quarters before the recession starts. That should make it Q3 06 – Q1 07 for the decline to start, so any day now…

[privatebanker]

“privatebanker, what is the annual return of the average CFP, or the one that you recommend? Their track records are no better than the average Joe.”

First of all a CFP is not a fund or a security. There is no CFP index or average rate of return. Each portfolio recommendation is unique to the individual that they are creating for. A CFP or Certified Financial Planner should be someone that can provide you with a holistic perspective of where you are with your money and where you want to be with respect to your comfort towards risk. Clearly not for someone with a myopic perspective such as yourself. You clearly have a lot to learn. Good luck.

CFP Website:
http://www.cfp.net/learn/

[powayseller]

privatebanker, why don’t you answer the question, instead of playing word games?

What is the return you earned for your clients the last 10 years? What is the portfolio and investment allocation you are recommending for a typical American, earning $60K/year, with $120K in their IRA? Where should they put that money? (Assume that all insurance and disability and trusts are in place). Teach me, Oh Wise One.

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