Down goes the Dow

Maserati,

The market has been trending down since the spring of 2015. Would be sellers keep looking for a bounce, when they occur the selling begets more selling. We are experiencing the mirror image of buying on the dips. I find it hard to imagine with earnings headed down what the catalyst could be to move the market higher. The markets have lost confidence in the magic of central banks. Falling energy, commodities and European banks are symptoms and not the cause of the infection. We will reach my targets as extreme as they still sound today.

Igy

Meanwhile, the gold I bought continues to rally, even in defiance of coach d's shorts. Plus, it's just so darn shiny! I will sell it in a heartbeat if the time is right.

These are troubled times, no doubt. People buying gold is a fear response, and there is little that can be done to prevent it, other than fiddling with the gold market and distribution channels, or withholding supply.

The bad thing is that Goldman came out and said that gold has vast headroom.

Maserati,

I have the precious metals base covered and have been for some time. Certainly is working better than stocks right now. If the monetary debasement continues it is hard to see it not doing well.

Igy

Ghost of Igloi wrote:

Falling energy, commodities and European banks are symptoms and not the cause of the infection.

Disagree slightly on the European banks.

While US banks did their homework after 2008 it seems like the Euro banks (particularly Deutsche Bank) did not.

What's troublesome is that Greece is not looking good again either (again, missed homework). The whole Greek stock market cap is less than Apple's quarterly profits. That's insane.

Other Guy,

My view is, central banks have tried to stabilize the global financial system through various policies. They went too far, there should have been entities that were allowed to fail for the betterment of the whole. The prolonged period of intervention led to mal-investment. Easy and plentiful money, like too much sugar, has an unpleasant ending.

Igy

Ghost of Igloi wrote:

My view is, central banks have tried to stabilize the global financial system through various policies. They went too far

Certainly. Look at the housing bubble in Europe (or the US for that matter). Just like 2008 was than over correction, the subsequent 15-30% increase year after year is not sustainable.

Euro,

We have crazy commercial real estate construction in our town, far more than demand. Hot money chasing a return. I don't see an easy way out. We never seem to learn. The tortoise is behind the hare for the moment, but gaining daily.

Igy

"We have crazy commercial real estate construction in our town, far more than demand. Hot money chasing a return."

Same where I am. We bought the condo next door, and will absorb half of it into our existing one, and rent out the other half. Fortunately I don't need to make money on it, so I can undercut others, if necessary (which it shouldn't be)...BUT there is an enormous amount of rental housing being built around us, in the heart of downtown, by far the highest rent in the city.

There are literally dozens of big apartment buildings going up (hotels also), and only 1 condo building (there will soon be another by the same developer). I have inquired at some that are complete, and they claim 94-100% occupancy. Right. I can see into the units of one that claims 96%, and there's no way. Complete b.s. They are just scooping up RE and developing it, and hoping that their long-term plans pan out.

It's incredible what cheap money can do.

Maserati,

REITs, both public and private, attracted a lot of money searching for yield. The REIT managers then have to put that money to work. Construction workers move into the new apartments and hotels hiding the bubble until the construction stops. The negative feedback loop begins. It is all pretty simple once you analyze it.

Igy

I said stocks were superior to bonds and you said I was wrong. Now you have flip flopped. Are you thinking of getting into politics?

Sally V,

You have been wrong from the very point you said it.

Igy

Maserati,

From JP Morgan on Bloomberg this morning:

“To a certain extent, the damage in markets represents an unwind of the interconnected "QE trades" that built up over the years and have fared well since monetary policymakers began emptying their bazookas. As such, the feedback loop in progress makes it nearly impossible to discern when we'll see a light at the end of the tunnel.”

http://www.bloomberg.com/news/articles/2016-02-11/jpmorgan-this-morning-we-re-seeing-the-two-things-that-markets-hate-the-most

Igy

Not sure if Mark Cuban is a Republican nut-job, but he is buying gold:

http://www.cnbc.com/2016/02/11/mark-cuban-like-everybody-else-im-confused.html

So the giant JPM, which I'm sure "earns" big fees for advice is basically saying "we don't know what the hell we're doing"??

When I see stuff like that, the contrarian in me says, "It's a great time to buy." So, with the market at support earlier and that support at 1810-1812 appearing quite strong, I reentered the long SP500 position that I closed on the Friday before the FED meeting in December. A close of 1780 or lower would say I'm wrong. I think if this support breaks, we have to look at something different from major problems in oil and banking but minor contagion in the broad market. But definitely a good time to be short those big banks that Bernie Sanders hates.

Maserati wrote:

The bad thing is that Goldman came out and said that gold has vast headroom.

Goldman is in the gold market big time. Anything they say is an effort to manipulate that market. Do not trust them.

coach d,

There is a Wall Street dope on CNBC telling people to buy the value in social media and biotechnology. So much for your contrarian indicator. I will add to my shorts if we get a bounce.

Igy

No, I was 100% at the time I wrote that. Why do you continually feel the need to lie? Is your position that weak?

Dow Watchers:

Dow closes at a two year low of 15,660.18 triggering a Dow Theory sell signal. S&P closes at a new low going back to April 2014 of 18.29.09. Intra-day low on the S&P goes to a level last seen since 2/11/2014, exactly two years ago. One can look for strength off a floor but I see only weakness off quick sand.

Igy

Buyer beware wrote:

Maserati wrote:

The bad thing is that Goldman came out and said that gold has vast headroom.

Goldman is in the gold market big time. Anything they say is an effort to manipulate that market. Do not trust them.

Yes, I know they have a heck of a lot. OF COURSE they're talking their book, but one would think that they do have enough pull to affect things.

Cuban buying gold, he must have read my letsrun posts.

Coach d, it has been tempting to get back into a long position. Look at the market rally today, that super-quick spike upward. To me it smacks of intervention, but it might also be automatically triggered buying, for the same reason you bought.

However tempting it is, though, things are starting to unravel, and by that, I mean the actual fabric of economies. A big question is how the reorganization of national banks (not central banks) and large banks--i.e. "the banking sector"--would affect the markets.

Basel III, with its tiers...it is common knowledge that banks have had a tough time finding assets that meet the criteria of the higher tiers, and so have begun to dumb-down their criteria, with the blessing of regulators. That's fine, as long as bank health is never seriously tested, or stressed; however, large-scale defaults might do it. They will, and have, come from various sources such as sovereign, corporate, housing, EM, etc.

A sector re-organization is not an impossibility, but the likely effect on "the economic system" would be devastation, which would make your long position a weakness. Only time will tell. IMO there will be a shock, and a few, with maybe one significant one, will go under, then the rest will be re-jiggered. I'm not prepared to go long again just yet.