Fear Will Reign Fear Is Not Good For Stocks

P

Point Man

Since March 12 when stocks bottomed out, the economic data has been horrific. The war is over and the earnings season is nearing its end. The marketplace has ignored the data for the past 6 weeks, HOPING for a rebound in consumer spending. The traders can no longer afford to ignore the data. If you have lost your job, or there is a FEAR of losing your job, there is no money to spend. Two years of bad news, two years of FEAR have taken its toll. FEAR WILL REIGN

Here are the FEARFUL FACTS.

1. The job front is not good. The weekly jobless claims do not lie. They are consistently over 400k, with the previous weeks revised to 461.
2. In Florida, Cypress Gardens, open since 1936 has gone out of business, stating that since 9/11, attendance has decreased.
3. New and Existing Home Sales are down dramatically from a year ago. New York City apartment sales were down in the 1st quarter, citing a reversal from a sellers market to a buyers market.
4. I spoke with a soccer mom last night. Her husband installs sheet metal. He has not had a day off in 14 years. He is working 3 days a week and grateful for that. They are very worried. Like so many working class hero’s, their only asset is their home.
5. My electrician friend is still on 4 days a week, down from 6 days a week a year ago, but up from 3 days a week last month.
6. In this fragile economy, it is very difficult to find a new job that will pay the same amount of money as the old job. When you work for less, you will spend less. The unmanipulated laws of nature will prevail. Less demand will create more supply, and prices will fall. The old nemesis DEFLATION will be the talk of the street soon.
7. Fortunately, the FEAR of WEST NILE VIRUS will not take hold until the end of June.
8. The media has spread the FEAR of SARS through America. Restaurants in New York and Chicago’s Chinatown districts are empty and failing. Only the moon is further away from the USA than China, but paranoia and the FEAR of SARS has taken hold in America.
9. SARS has consumed a whole region as in the Far East, a whole country as in China and a whole city as in Toronto. What region, country or city is the next economic disaster waiting to happen? Lack of media attention in China has caused this outbreak. Nowadays, the media is all over this story, pen in hand, waiting to take down another region, country, or city.
10. SARS will be the straw that broke the camels back. I first wrote about it on March 18 stating, “The few bits and pieces I have read about this new strain of pneumonia/influenza are not as bad as once thought. Only eight have died since last Friday. Two of those were Canadian and the other four members of their family have contracted the disease. In a weeks time we will have a better idea of the actual repercussions to this problem. If this problem persists worldwide, you can kiss the travel and tourism industries good-bye.” SEVEN WEEKS LATER, 6,000 SARS cases worldwide and 460 have died from it. I have kept track of the numbers so far.

Week 1 03-11/03-18 8 deaths
Week 2 03-18/03-25 16 deaths
Week 3 03-25/04-02 32 deaths
Week 4 04-02/04-09 64 deaths
Week 5 04-09/04/16 128 deaths
Week 6 04-16/04-23 256 deaths
Week 7 04-23/04-30 512 deaths

Notice the pattern? The pattern has only over-estimated by 52. FEAR WILL REIGN FEAR IS NOT GOOD FOR STOCKS Do not underestimate the power of the BEAR. The Bear can undo 2 months of hard work in two weeks. This three-year trend will remain your friend. Look to buy all breaks in the securities markets and sell all rallies in the equities markets. It is going to get ugly soon. Patience and Discipline.
 
SARS hasn't "consumed" Toronto. And the WHO's data doesn't jive with yours:

http://www.who.int/csr/sarscountry/2003_05_03/en/

Also note the 2702 who recovered (from the 6234 cases).

It wasn't "lack of media attention" that caused the disaster in China. It was a little thing called the Communist Party who as a tradition, dislike bad news and are loath to push it up the chain of command, lest they lose face (and power). The Chinese media actually were heroes because they reported it (spottily) even though they had been muzzled.

The above is quibbling really. I agree that SARS along with WNV could be a problem. Already in Ontario there have been crows found dead from WNV (they are most sensitive among birds).

However, I doubt that something like diseases can take the market down. News is never important, how the market reacts and what footing it has when it receives the news is the key.
 
Quote from Babak:

SARS hasn't "consumed" Toronto. And the WHO's data doesn't jive with yours:

http://www.who.int/csr/sarscountry/2003_05_03/en/

Also note the 2702 who recovered (from the 6234 cases).
More...

Sorry. Your data is 6,234 cases and 435 death. I missed the total cases by 3% and the death total by 5%. Let us get technical. SARS does not need to consume Toronto. At this time, there are not many American's booking holidays to Toronto. FOOD FOR THOUGHT How many from Toronto are planning trips to America.
 
The stock market (in the short run) absolutly does not respond to economic data and the like at all. The fact that everything has been shit and we are still going up is in and of itself a strong signal.

Brandon
 
You are being sucked in by American media. While people have died from SARS it is nowwhere as bad as media is portraying. Go walk in Toronto, with the exception of the hospitals and the odd idiot in one of Toronto's chinatowns, you won't see even one person wearing a mask. Don't forget 250 people a day die from AIDS every day in the good old USA and 1500 are infected every day with HIV . So take the panic somewhere else.
 
I spent two weeks in Johanusberg in 1987 when Mandela was still in prison and apartheid was alive and well. The media portrayed the riots in Soweto as being major unrest in South Africa. Soweto is 1 square mile. The MEDIA blows everything out of proportion. I just reported the facts. The death total doubles every week. That is a FACT. We are only 7 weeks into this epidemic. The MEDIA will continue to spread FEAR. Fear is not good for stocks.
 
Quote from Babak:


However, I doubt that something like diseases can take the market down. News is never important, how the market reacts and what footing it has when it receives the news is the key. [/B]
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Markets can ignore reality for a while, but the longer they do, the greater the consequences. Remember the internet bubble?

I agree with point man. No doubt the next big move will be down. Doesn't matter for daytraders, does for swing traders and investors.
 
There is a certain amount of fear needed in order to climb the wall of worry. If not, then why would they even call it the wall of *worry.*

I'm neither bullish, nor bearish - I'm just lurking....:D
 
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