Down goes the Dow

POTO,

Yes, I do have a serious problem, reading this thread long enough to collect on our bet.

In case you haven't noticed the market is moving in my direction.

Igy

Ghot of Igloi wrote:

POTO,

Yes, I do have a serious problem, reading this thread long enough to collect on our bet.

In case you haven't noticed the market is moving in my direction.

Igy

It is? Which direction is that? And what was our bet again?

Ghost of Igloi wrote:

POTO>0,

Evidently I have something some don't have, it is called character and self-respect.

In my world principle does matter.

Igy

That's WAY cool!

I just offer another reminder that POTO is a handle I registered long ago after my previous one was usurped by the troll. I again kindly ask those of you possessing "character and self-respect" to refrain from referring to the troll(s) with my registered handle. Thank you.

POTO wrote:

I just offer another reminder that POTO is a handle I registered long ago after my previous one was usurped by the troll. I again kindly ask those of you possessing "character and self-respect" to refrain from referring to the troll(s) with my registered handle. Thank you.

Except of course that we all know that the handle thief is you.

Nice try, though.

Biotech down 5% on the day! Not good for the mo mo stock at any price buyers. It will get worse.

Igy

agip,

It is shocking to me that most people who should be informed about the market are clueless to where we are headed. One can clearly see that the trend is in place and it is down. I don't think that even Janet can save us now.

In my view Dow 13,000 is an easy marker.

Igy

Meh. The market is in the same place it was last October. That's flat, not down, in that time frame. And there's no way, imho, the Dow drops over 20% in the next 11 months to get to 13,000. The good outweighs the bad.

[quote]Big Dog Investments wrote:

Meh. The market is in the same place it was last October. That's flat, not down, in that time frame. And there's no way, imho, the Dow drops over 20% in the next 11 months to get to 13,000.

Any way the Dow drops below 13,000 beyond the next 12 months?

Ghost of Igloi wrote:

Biotech down 5% on the day! Not good for the mo mo stock at any price buyers. It will get worse.

Igy

I'll ante up another 'meh'

biotech is a strange little universe

this selloff was triggered by hrc's denouncing that hedge fund guy who jacked up pill prices by 10 thousand percent or whatever

Big Dog,

If one is a technical follower the outlook is not good. Rather than looking at a year view the last six months. Up trends are sold and not bought.

If one is a fundamental investor earnings are deteriorating and margins are in decline. Last Twelve Months (LTM) S&P earnings peaked 3rd quarter 2014.

Here is how we get to Dow 13,000. Distribution is taking place, where strong hands (institutions) are selling to weak hands (individuals). In the next phase buyer volume dries up as potential sellers wait for better prices that never come. Discouraged traders and novice investors cash in their chips at the bottom. It is simply the opposite process of what we have experienced since about 2011. Typically it occurs in a shorter time sequence.

Igy

agip,

Here is where you and I disagree. HRC\'s comment may be a trigger but not the cuase. Biotechs are clearly overvalued and at some point almost any reason leads to a large decline.

In my view, the only way this market moves higher is on the back of high multiple stocks. Clearly since August these stocks have lost a bit of their mojo. The question remains is the game up? I am betting it is and I will remain short S&P, Tech and Biotech.

Igy

Ghost of Igloi wrote:

agip,

Here is where you and I disagree. HRC's comment may be a trigger but not the cuase. Biotechs are clearly overvalued and at some point almost any reason leads to a large decline.

In my view, the only way this market moves higher is on the back of high multiple stocks. Clearly since August these stocks have lost a bit of their mojo. The question remains is the game up? I am betting it is and I will remain short S&P, Tech and Biotech.

Igy

why can't value lead the market up?

my point about biotech is that they are a universe unto themselves - they don't tell you much about the broad market.

Ghost of Igloi wrote:

Big Dog,

If one is a technical follower the outlook is not good. Rather than looking at a year view the last six months. Up trends are sold and not bought.

If one is a fundamental investor earnings are deteriorating and margins are in decline. Last Twelve Months (LTM) S&P earnings peaked 3rd quarter 2014.

Here is how we get to Dow 13,000. Distribution is taking place, where strong hands (institutions) are selling to weak hands (individuals). In the next phase buyer volume dries up as potential sellers wait for better prices that never come. Discouraged traders and novice investors cash in their chips at the bottom. It is simply the opposite process of what we have experienced since about 2011. Typically it occurs in a shorter time sequence.

Igy

why not give the full picture, igy? why always leave out key info?

as you well know, the problem with sp500 earnings is energy. Leave out energy and there is solid Sp500 earnigns growth.

Here is earnings growth broken out by sp500 sector - you'll see energy is the problem. And energy is a strange sector - not reliant on econ growth, but the price of oil.

earnings growth Q2 2015

Health care: +15.3%

Consumer discretionary: +8.8%

Telecom: +8.5%

Financials: +6.8%

Utilities: +6.5%

Info Tech: +4.4%

Materials: +4.2%

Consumer Staples; +2.7%

SP 500: -0.7%

Industrials: -4.7%

Energy: -55.6%

source factset - page 15 of this link:

agip,

Value could leas the market higher, but I don't think it is likely. Investors have bought value stocks as bond proxies. So, if interest rates move higher the dividend yields look less attractive. Furthermore, many of the high quality dividend yielders have been serial buyers of their own stock as well as increased their dividend distribution. My sense is this activity has peaked.

I disagree on Biotech, I think like Social Media, Story Stocks, Mergers, Aquisitions, IPOs, they are all part of the Zeitgeist of this business cycle. Biotechs are representative of quick, easy, and cheap money seeking a speculative return. Many investors don't realize or have forgotten that Biotechs were a part of the Tech Bubble of the late 1990s.

Igy

agip,

I would refer you back to the first page summary of the document you referenced. In summary the trend is down and revision to earnings moving in the same direction. I hear the Bullish view that energy and China can be segregated from a growing American economy. I don't see anything other than an uninformed optimism that supports that view.

Igy

Ghost of Igloi wrote:

agip,

It is shocking to me that most people who should be informed about the market are clueless to where we are headed. One can clearly see that the trend is in place and it is down. I don't think that even Janet can save us now.

In my view Dow 13,000 is an easy marker.

Igy

Iggy,

It is shocking to me that anyone who has any familiarity with the market is clueless as to the reality that nobody knows where we are headed.

Do you seriously know nothing about efficient markets, random walks, market clearing prices...?

Yo,

You should not be shocked or surprised. First off, everything that you have referenced as fact is theory. Secondly, predicting that the market will go down may be bolder, but is no different, other than direction, than those that predict the market is headed higher.

Theoretical work of Graham and Dodd in 1934 and later refinements like CAPE 10, Tobin's Q, Buffett Indicator and Market Cap / Gross Value Added are recognized models for stock valuation. All the referenced models show stock valuation near two sandard deviations above the norm. The models referenced have more predictabilty than the theories you mentioned. The only question is whether stocks become more over valued and that can be determined by investor risk preferences. Lately investors have been more risk adverse than at any point in the past five years.

Any investment can be valued based upon the revenue stream that is expected to be delivered to investors over time. It is common sense that the more one pays for an investment is inversely correlated to the expected return. Therefore as stocks move higher the return investors should expect is reduced going forward. Most people miss this elementary point.

One can blindly throw money into an investment and hope that it all turns out well in the end. If one has a sufficient time horizon, then one has time to correct their mistakes. There are many people that were seduced into believing that technology stocks and housing investments would grow to the sky. The loss of wealth has never be recouped.

If you wish to be enlightened beyond your current point of view read the Office of Financial Research (OFR) document "Quicksilver Markets" by Ted Berg. The OFR was authorized by the Dodd Frank Bill and is in the Department of Treasury.

Igy

Yo,

Here is another piece this time from Jim Grant you might find interesting:

http://tablet.fuw.ch/article/the-next-thing-might-be-helicopter-money/

Igy