Down goes the Dow

agip wrote:

well bigfoot has shown me a few things on this thread - could be you, I dunno.

ok - I will try to get my head around what you are saying.

That's all I ask, Master of the Thread and Best Poster on LRC.

Cheers

Age of Innocence wrote:

Now she decides to learn enough about what drives markets so as to be able to guess correctly most of the time whether a particular year will be better for large caps or better for small caps.

If she knew that she'd be the richest person on earth.

R2D3 wrote:

Age of Innocence wrote:

Now she decides to learn enough about what drives markets so as to be able to guess correctly most of the time whether a particular year will be better for large caps or better for small caps.

If she knew that she'd be the richest person on earth.

I can only hope that you are joking.

Most: More than half

There are LOTS of folks (including a fair number on this thread) who believe (rightly or wrongly) that they can tell with greater than 50% accuracy which market segment will outperform in the near future. Indeed, if you took away this fact there wouldn't really be much to talk about.

Joe: Large caps average 10% annually

Steve: Small caps average 11.5

Joe: You think this will be a good year for small caps?

Steve: No idea

Joe: Me neither

Steve: Let's order a pizza

Now, many of these folks may be fools. You may even argue that most of them are. But I would posit that many are not complete fools. And if only one is right (that they have a better than 50% prediction success rate on market segment winners) then your statement is simply false (unless of course you think that Bill Gates is posting here).

agip wrote:

I noticed an unusual situation today -

large caps: down big: 0.94%

small caps: down less: just 0.40%

usually when the market sells off, small caps go down more than large caps. They are more volatile that way.

Anecdotally, I've noticed that when there is a fear based sell off - like today about Putin - and small caps don't sell off much - then the broad market selling is probably over. And the market will rally for at least a few days.

I'm not betting any money on this, but let's see if it works. I'll check back on Thursday.

one month since perhaps my only short term market call ever on lrc and...the SP500 is up 4.0% since. I intend to milk this one pretty much forever. I should stop here, do a mic drop and walk away from short predictions.

anyway, just to show how hard investing is - the europeans make an emergency drop in interest rates - you would think that would be helpful to european bond funds in the us, right? well no, because the euro dropped in value, taking away your gain.

So the beneficiary? apparently emerging market bonds, since they offer a higher relative interest rate now, compared to europe.

it's a tough biz - makes sense in retrospect, but this was not my plan.

Milk it, man--MILK IT!

Glad to see you have realized some gains, I hope you manage to hold onto them.

Down 98 today to 17,014, still sticking above that 17k mark, if only just.

Still haven't heard anything from our resident technicals guys...fisky?

Maserati wrote:

Still haven't heard anything from our resident technicals guys...fisky?

From Richard Russell... a technical guy:

“‘US stocks could head higher in coming months,’ say Wall Street’s top strategists” in this week's Barron’s.

“Not so fast,” warns the stock market in its incredible wisdom. Remember, the Transportation Average rose to an unconfirmed record high last week. Occasionally what the market fails to do can be as important as what the market succeeds in doing.

Last week despite a new record high in the S&P Composite, the D-J Industrial Average refused to rally to a new record high. All that was needed was a close above 17,138.20 (July 16th close) to confirm the Transports high. So what’s holding the Industrials back? What does the stock market know that Barron’s ten experts may not know? Ah, the fascination of the markets, the uncanny wisdom of the markets!

Last Friday the Dow closed at 17,137, only a point below its record high of 17,138.20. Just a few points higher on the close today, and the Industrials will confirm the Transports. If this happens, the stock market would bullishly agree with the Barron’s experts. Therefore, this could well be a critical and historic week. Will Industrials confirm or won‘t they?

........................................

Late Notes -- The Dow needed to close just one point higher to rise to a record high and confirm the Transports. Sadly, that was not to be. Twenty minutes before the close, the Industrials are down 16 points with a fading Transportation average down 25 points. Gold, sitting comfortably above its 1200 support, was down 13 to 1254. Silver, acting miserably, is down 12 cents to 19.04.

In the face of widespread bullishness, the stock market in its incredible wisdom thumbed its nose at the Industrial average. At the close, the Dow is down 26 points with Transports going along for the ride, down 27.

So will the Dow close above 17,138.20 or is that a lost cause?

We can now look forward to October when the Fed will announce the elimination of QE. If I had to guess, I would guess that 2nd quarter GDP will be disappointing and the Fed will have to eat its words about closing down QE. In my opinion, we are moving into one of the most dramatic and surprising periods of recent years.

When the market turns down from an unconfirmed high, only the Gods know what lies ahead.

Given the history I mentioned upstream of the market during mid-term election years, I've slowly started to take some profits. I need to do some rebalancing as I'm heavy in large caps and this seems to be to be a good time to increase my cash balance prior to the expected downturn.

that giant sucking sound you hear is money torrenting out of Europe toward the USA - they are down 5% from their highs while the US is down just 0.8%.

And the dollar is surging of course.

Probably this will go on until after the scotland vote - I'm thinking about bringing some money back home - the US market is expensive but at least good things are happening here.

all time highs today for the dow but nothing else

agip wrote:

all time highs today for the dow but nothing else

Interesting that it's still shy of the 17,138.20 closing high Richard Russell was focused on, a few posts back.

Should be fun to see if it can take that out soon. Mildly fascinating that it's passed it multiple times intra-day but still no closes.

Also, a bit of an eerie silence has decended on this thread the last week, considering a new high in the DJIA today.

I still love this thread.

"Also, a bit of an eerie silence has decended on this thread the last week..."

Not just in this thread.

I wish to state that I am unequivocally happy for those who have realized gains in the market so far this year--good for you guys.

But there are those of us who are now in a waiting period, the calm before the storm. When it will begin and how bad it will be remains to be seen, with varying forecasts depending on the model used. There is now nothing to do except batten down the hatches, build up essential supplies, and watch the clouds build.

Alibaba will be a distraction from the bigger issues, like margin debt. I called for some s to hit the fan in the 4th quarter of this year. Some now feel it could take until early 2015, because everybody wants a merry christmas and a happy hanukkah.

The talking heads are still yammering, but what they are saying increasingly sounds like they are scrambling. Things are confused, there are contrary indicators, and IMHO there is no particular or definitive direction to the market, or to US society, at this moment.

So I, personally, am quiet...and waiting.

I think the weirdness is that the US economy is building momentum and looking good, while Europe is slowing and might go to recession and China's growth rate is falling to recent lows.

So what's it going to be, world? Will you catch back up to the US or will the US sag along with Europe?

Then there is all the tension - Scotland, Iraq, Syria, Ebola.

And people have decent gains for the year - they are probably just looking for a reason to cash out.

But on the other side is trillions of uninvested cash waiting for lower prices.

See my point - countercurrents make right now difficult.

agip, you're getting rich! Good for you.

17,247 Thursday morning, up 90 so far on the day.

SP500 up 8 to 2009. Woo-hoo!

I will officially say it for the record: the market is crazy.

DJIA up 61 Friday mid-morning to 17,327.

Although I still believe it will drop within the next 4 months, I didn't think that we would see that kind of number, even intraday.

Market performance is now very close to my own this year, outside the markets. This hiatus for me might end up having been another neutral one, all things considered. If it continues to climb with no loss, it would have been a lot less work for me just to have stayed in.

No regrets, just a bit of surprise.

Meanwhile, it's interesting to see. I still believe the weak structural factors exist, but I also believe that there are rising consumer classes in developing economies, if not in emerging ones.

No doubt guys like agip and Flagpole, who are still completely in, are taking this Friday to enjoy the view! Good for you guys.

I'm fully invested, but that means just 70% in stocks, 30% cash and bonds. And I had the genius idea to buy some cheap, broken down european stocks - that bet is not working at all. Global portfolios aren't doing great - just sort of so so.

year to date:

The US is up 9.5%

Global stocks up 6.7%

ouch

It'll all even out over the long run, but I sure wish I had just bought the SP500 and forgotten all this clever stuff.

so every once in a while I put in my calendar what I view as particularly audacious predictions. One just came up, from Marc Faber, who is a real guy - been around forever, uses actual analysis, often has interesting things to say.

From Sept 2009 - just as global economies were getting their footing:

___________________

In this month's issue of The Gloom, Boom & Doom Report, Marc Faber issued one of the gloomiest, most depressing takes on the financial crisis and its impact. Faber said that the future, "will be a total disaster, with a collapse of our capitalistic system as we know it today, wars, massive government debt defaults and the impoverishment of large segments of Western society."

Keep in mind this is coming from a man who writes something called "The Gloom Boom & Doom Report." But Faber's analysis, however macabre, is widely followed. He upheld his prediction in an interview with Yahoo's Tech Ticker, arguing that, with the government's stimulus package, "the problems haven't been solved, but they've been postponed."

Faber added that he has a "high confidence prediction" that "total collapse will come." Yikes.

____________

he is a bearish guy and I am sure we would just say that the Fed has merely postponed this by printing trillions of fiat dollars, but still. We are already starting to forget the drama of those days.

Yes, Faber is famous.

DJIA up only 10 now, at noon.

I dislike thinking about that kind of stuff, as is probably the case with most sane people.

But, I believe that there are serious problems, and that they are worsening. I haven't yet found a very attractive solution regarding what to do with money now, assuming a type of crash is on the horizon.

What Faber seems to ignore is that there is a lot of inertia in the system at the moment, and inertia goes a long way. Quick changes require 1 of 2 things:

1) bold human decisions, like Putin cutting off gas supplies

2) sudden failure of critical infrastructure, as a result of years of deterioration.

Quick and significant change may happen, and would disproportionately affect the weak and non-strategic/non-diversified. The weakest and most non-strategic are those who rely most on stability, and those who have the most limited supply sources.

It's a tough issue. I agree with Faber on his point that QE has only bought some time, but I disagree about total collapse. Even when things do collapse in certain parts of the world, the everyman finds himself doing today the same thing that he did yesterday. Total collapse would require the effective governmental/military imposition of collapse, to overcome the inertia of the everyman citizen. I don't think it would be enough for the government to just do nothing, they would have to actively shut things down.

Can they do that? Yes, even in the western world. Would they? In the east/mideast, absolutely. In the west, unknown--but trade is sufficiently global now that such action would effectively shut down the west as well, including the USA.

I think that, rather than a sustained total collapse, there will be a dislocation--not everything will grind to a halt, but existing relationships will not survive, and there will be re-alignments, both politically and socially.

Quadruple witching, SP500 rebalancing, Alibaba.

More artifacts.

agip wrote:

I'm fully invested, but that means just 70% in stocks, 30% cash and bonds. And I had the genius idea to buy some cheap, broken down european stocks - that bet is not working at all. Global portfolios aren't doing great - just sort of so so.

year to date:

The US is up 9.5%

Global stocks up 6.7%

ouch

It'll all even out over the long run, but I sure wish I had just bought the SP500 and forgotten all this clever stuff.

I have some cash, but I don't include that in my "investment" allocation. Main reason is that I don't keep a certain percentage in cash. It's my emergency fund and today sits at about 10 months of expenses.

That said, I'm 87% stocks and 13% bonds (though I really might LESSEN my bonds rather than the traditional INCREASE in them as I get closer to retirement). I'm thinking I will get rid of bonds completely and just keep 3 YEARS of expenses in cash when in retirement to protect against a horrible stock market. Not 100% sure about that yet, but that's the plan.

I'm up right on 6% this calendar year so far, so not great, but I'll take it.