Current stock market (Nov. 2010) not reflecting reality

By the way, on strong manufacturing, and better-than-expected jobs figures, the Dow has spiked to 11,200 so far this morning, so now we're just 800 points away.

The market will likely settle down, but again, the reasons I've said why the market should be higher are continuing to come out every single day. This economy is not that bad, and it's getting better.

Flagpole wrote:

By the way, on strong manufacturing, and better-than-expected jobs figures, the Dow has spiked to 11,200 so far this morning, so now we're just 800 points away.

The market will likely settle down, but again, the reasons I've said why the market should be higher are continuing to come out every single day. This economy is not that bad, and it's getting better.

Oh, a spike in the DOW, sure makes me wish I hadn't made 36% trading gold this year, +400% since 2005. The economy is great, healthcare is great, yes we can, yes we can, yes we can.

not that it matters at all for anyone's long term investing strategy what the Dow does over the next 4 weeks, but just for fun, FP, I'd like to see you be right on this one.

heh

Well, props to you brother! Seriously. I like seeing people make money, so good for you. Just not for me.BUT, I didn't say the economy was "great" or that health care was "great".Things are way better today than they were 2 years ago though, that's for sure.Before today's run up, I had made 12.6% YTD following 34.7% in 2009, with no gold exposure, so I'm fine with that. I'm risk averse and don't want to chase gold ups and downs. I'll take my almost 11% annual return average since 1989 and be happy with that.

Take Your Dow And Shove It wrote:

Flagpole wrote:

By the way, on strong manufacturing, and better-than-expected jobs figures, the Dow has spiked to 11,200 so far this morning, so now we're just 800 points away.

The market will likely settle down, but again, the reasons I've said why the market should be higher are continuing to come out every single day. This economy is not that bad, and it's getting better.

Oh, a spike in the DOW, sure makes me wish I hadn't made 36% trading gold this year, +400% since 2005. The economy is great, healthcare is great, yes we can, yes we can, yes we can.

Brothers, I'm Fiatpole, I believe whatever I see on the corporate-government news. I'm excited to see the continued and accelerating spread of the "green shoots" of the improving economy over the map of America:

http://www.youtube.com/watch?v=z87XBKNto4Q

agip wrote:

not that it matters at all for anyone's long term investing strategy what the Dow does over the next 4 weeks, but just for fun, FP, I'd like to see you be right on this one.

heh

Well, fun is all this was for me. For some reason people here get so upset about finances. To me this is all fun. Maybe they get upset because they haven't invested as they should have?

You are correct that the next 4 weeks has no bearing on anyone's long-term investments.

I disagree that it's already baked. The Dow went up 200 points this morning on manufacturing and jobs data."O" will extend the tax cuts as early as tomorrow.I am glad to see you admit though that, (even with your other bearish statements) "However, things seem to be improving for now". That is a true statement of course. It is even given with the SAME sentiment that I have. Just because things are "improving" does NOT mean things are great, and I do not think that TODAY things are "great". Improvement is what is necessary to see though, and we are seeing that, and since not everyone is the consistent long-term investor that I am, I need to point out on occasion that they NEED to be in the market, because once the economy is chugging along, it's too late to make the great gains. Of course it would have been better to be in in March 2009, but you have to take the gains you can if you missed that boat. I, of course, was captain of that boat.

Already posted a link to Charles Schwab's short-termoutlook on the market, especially for YOU on a previous thread, which acknowledged a sluggish improvement, however goosed.

Also said the Dow could climb to unrealistic heights given the Fed's counterfeiting operation. They are pulling out all the stops now. It may even work, but odds are against it.

Don't understand your fetish with the Dow or dollar-denominated assets. I've suggested silver, emerging, emerging markets (not BRICS), and other currencies as better plays. Your assets are not working for you in REAL terms. Maybe some VXX & $VIX options in both directions.

As mentioned previously, deleveraging is a 7-10 year process. We are in year three. Your time frame is myopic. Nothing has changed. The Fed is merely swapping toxic assets with the big banks at the behest of the smaller banks and the taxpayer.

It would be good if O extended all tax cuts. The market may be sensing that. Without the recent election, we'd never have seen it. Without extension, a severe weakening is not off the table. Would be good to peel back some of the rest of this Barackratic constipation as well.

the tax cuts could be allowed to lapse and there would not be much of an effect on the economy, but it would solve a lot of the deficit problem. But you just let the tax cuts on the rich lapse, then let's face it: you would not lose much stimulus at all. If 1.03/1 stimulus on tax cuts in general, vs. estimates of 1.60 to 2/1 on unemployment benefits, then how much less stimulus for cuts to the wealthy?

corrected for inflation, gold is still lower than 30 years ago.

God, you guys know just enough to be dangerous. Here's some homework for you.

http://www.hoisingtonmgt.com/pdf/HIM2010Q3NP.pdf

http://www.aeaweb.org/aea/conference/program/retrieve.php?pdfid=460

Well, its an answer but it doesn't give me any confidence. cost cutting actually does provide real earnings and it doesn't necessarily help the balance sheet. A lot of times cost cutting would be good. But not in this environment. You didn't say revenue was up. Yes, maybe cost cutting is on hold now. But I don't see a lot of business investment nor any big growth in revenue. It seems to me companies are reaping the rewards of the cost cutting from a year or two ago, have kept revenue stable and that is the basis for the supposedly great earnings.I did a quick google search of P/E ratios and in fact I did see some links that indeed stocks are over valued. One was Robert Schiller's CAPE10 ratio.

Flagpole wrote:

I don't mean to rip on you here brother, because your question is ONE of the reasons why I believe we will have a decent bull market, but the cutting costs thing is past. What companies are reporting now are REAL earnings, not just better balance sheets based on cost cutting (mainly layoffs).

There is not a glut of "people" or money in the market now. Still MUCH money sitting on the sidelines either in bonds or cash or commodities like Gold. Stocks are always favored, and when the time seems right, people will always go back to stocks in droves. Unfortunately for many of those people, they will make the switch after they've lost money instead of early enough for the move to have made a big difference.[/quote]

1) The Dow is just a measuring stick. I am well diversified which includes LOTS of stocks that are not in the Dow, that are international, etc.2) I wonder if you ever think a stock market is not at "unrealistic" heights (when it is up and not down).3) I don't have a "time frame" brother. My investing strategy has never before been called myopic. Ha! I just find it INTERESTING how the market moves; I don't invest based on those short-term moves, and there is nothing narrow minded about it.4) I'm not as down on Obama as you are, but I do favor a two-party system that allows for checks and balances, even if one of those two parties is filled with wackos.5) I disagree about your 7-10 year process...well, disagree that the health of the markets will need that long if that's what you meant. We will be seeing some effects of the recession even longer than 10 years, but we will not be mired in stagnant growth that long.

Do you work with global businesses? I do. Conference call after conference call of these manufacturing companies I consult with (and manufacturing leads the way brother) are talking about big investment in 2011...equipment and people. You don't even have to be an insider like me to hear this either. Balance sheets are in order, companies have operated on the lean for a while now, and they are talking investment and growth. This WILL happen, and soon. 2011 will be a good year for the job market. Expect the rate to get into the 8s for sure and then perhaps even lower (but likely 2012 before we see 7%).

This is correct.In fact, judging by today's market moves, the timing, genesis and enthusiasm of this thread has resulted in some amazing reflexivity. Who knew this could happen?

Off the Grid wrote:

A market is the sum total of EXPECTATIONS, not reality. It never reflects current conditions.

Flagpole EXPECTS the current market expectations to be too pessimistic, and is placing his bets accordingly.

I AGREE that the market is based on expectations...that's why it is a leading indicator, BUT, knowing that, and knowing what the reality of EXPECTATIONS are, you can look at TODAY'S market and make the statement I made.BUT, today's move was what I've been expecting. Based on the ever-improving job outlook and all the other things I mentioned, I think MORE should happen too...to the tune of 12,000 by end of December. We'll see. Only 744.22 points away.

sponge wrote:

This is correct.

In fact, judging by today's market moves, the timing, genesis and enthusiasm of this thread has resulted in some amazing reflexivity. Who knew this could happen?

Off the Grid wrote:

A market is the sum total of EXPECTATIONS, not reality. It never reflects current conditions.

Flagpole EXPECTS the current market expectations to be too pessimistic, and is placing his bets accordingly.

I read the business news. I don't necessarily disagree with you. But it becomes a question of degrees. Are expectations that low now that the numbers you cite are considered good? 8% unemployment is generally lousy by any historical standard except in relation to deep recessions. I don't know what is the norm for manufacturing output, but I'm reading today that they are at 8 month highs. Which begs the question, So? We are supposed to be coming out of a deep recession when the economy was contracting. Manufacturing levels were horrible months ago, so who cares about an 8-month high. Economic growth is only 2.5%. Thats actually awful given where we have been.

Moreover, we are getting this supposedly good data from enormously high budget deficits and extremely aggressive Fed policies to stimulate the economy. I don't think these policies are bad as many people say, but its not sustainable.

We still have to see if these investments will pay off. A lot of corporations have been sitting on mountains of cash with virtually no return on it. These companies investing in new equipment are likely figuring that at the end of the day they are a business and they have to spend their cash on something. It doesn't exactly make for a positive outlook.

The big problem I see is that a lot of the problems from 2008 are still around and haven't been solved with the bailouts. I foresee that there will continue to be problems with bad debts somewhere in the world. That will continually knock the legs out of any recovery. And there will continue to be a huge lack of trust in people doing business with one another, which is something that cannot me measured in any statistics.

[quote]Flagpole wrote:

Do you work with global businesses? I do. Conference call after conference call of these manufacturing companies I consult with (and manufacturing leads the way brother) are talking about big investment in 2011...equipment and people. You don't even have to be an insider like me to hear this either. Balance sheets are in order, companies have operated on the lean for a while now, and they are talking investment and growth. This WILL happen, and soon. 2011 will be a good year for the job market. Expect the rate to get into the 8s for sure and then perhaps even lower (but likely 2012 before we see 7%).

[quote]

Flagpole - how old are you? Your statement of "stocks are always favored" strikes me as someone who is thinking of only about the last 29 years or so. Yes, stocks have "always" been favored during that time, but these things change. We haven't seen people truly give up on stocks in the past 30 years, but it's happened before. And it will happen again. The above-historical average of P/Es are just one reflection that people are far from having given up on stocks, and that this secular bear market still has a ways to go.

What are you talking about??? What nonsense are you reading, or are you just making crap up?? Read this article. Stock % allocation is 62%. 11-month high. ABOVE the historical average of 60%. Cash (15.9%) is now at the lowest level since 2000. Bonds are above average at 21.8%, but the COMBINED bond & cash allocation is only 37.7% (BELOW historical 40%).

The recent money in gold is so small it's a drop in the bucket of the equity market (for now). The GLD etf (largest by far) has a $57B market cap. Dude, that's like 20% of Apple. You really think the amount going into gold is having much effect on equities? REALLY?

What percent of average investors do you think have ever bought gold? Very, very small (for now). You should research that... or let me know if you need me to look that up for you too. One anecdote is that Jim Rogers recently asked a room full of hundreds of wealth managers how many of them had EVER bought gold or silver for a client. The answer: NONE. Now how many of those guys do you think have bought stocks?

You're optimistic... that's great. But things you say like "housing prices rose for 5 months, and now we've seen a recent pullback" show your bias. A better argument could be made that housing prices have FALLEN for years, and your 5-month rise was the mere "pullback" or bounce due to Fed efforts, and the recent drop is resuming the longer-term trend. (Housing prices are still OVERVALUED based on history (see Shiller's data). You knew that, RIGHT?)

You say "It's all just fun". Ok, have your fun. Perhaps you should add that disclaimer to any "knowing" threads you start like "DOW 12000" to avoid misunderstandings. I just hate to see your biased (and dangerous) statements influence some of the readers on here who see you as a financial guy giving them good advice. They should know you were just "having fun". Like 2+2=13. Wasn't that FUN? Wrong as hell, but FUN!

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