I'm capitulating

V

Vishnu

I'm capitulating. I can't take it anymore despite the mountain of evidence that one should be long this market.

a. the average guy on the street is shorting. I'm not kidding: a cabdriver asked me what he should short.
b. put/call ratios are higher than ever
c. a ton of companies are trading for less than 10 P/Es with no debt
d. in fact, many reasonable companies are trading at cash values.
e. VIX is at a high
f. up/down volume is > 10-1.
g. asensio can't find anything to short

and yet the mkt still flirts with death. Even a double-dip recession is not so bad for the market (because we always get out of it) and the only economist who thinks the chances of recession are > 50% is Stephen Roach at Morgan Stanley. The economy is still growing at this very moment. Nobody disputes it.

The market is baking in a depression right now. Big difference betw now and 1930:

a. banking system collapsed. Today its insured.
b. tarrifs were super high in 1930. no world trade at all.
c. unemployment was 30%. right now its less than 6%

Is this a mirror image of Feb 2000? Or is it the middle of the end?
 
This is a return to normal markets after the 90s boom.

PEs of many, many stocks are STILL at unreasonable levels. Especially since most big-cap techs are not growing revenues, but shrinking. MSFT announced 2 weeks ago that the next quarter would be "weak" as well.

The thing that sticks in my mind is that drug companies and biotechs still have above-average PE's - remember when that used to be considered "ok" for those companies? The bottom line isn't what's "ok" and what isn't - the bottom line is how much money you make and how much growth there is - not which industry you're in. You don't make any money - your stock is worth sh!t.

Those little knick-knack facts about VIX readings, and "if Maria tells you to short, it must be a bottom" are all complete bullsh!t.

TRADE WHAT YOU SEE AND NOT WHAT YOU THINK. That means shorting when the market goes down; not just buying when it goes up.

PS - 1987 was also alot different than 1930, program trading aside. And the market still crashed.
 
As part of fraternity hazing (I eventually quit. They were a bunch of losers) we were locked in a sauna and forced to listen to this song over and over and over......


This is the end
Beautiful friend
This is the end
My only friend, the end

Of our elaborate plans, the end
Of everything that stands, the end
No safety or surprise, the end
I'll never look into your eyes...again

Can you picture what will be
So limitless and free
Desperately in need...of some...stranger's hand
In a...desperate land

Lost in a Roman...wilderness of pain
And all the children are insane
All the children are insane
Waiting for the summer rain, yeah

There's danger on the edge of town
Ride the King's highway, baby
Weird scenes inside the gold mine
Ride the highway west, baby

Ride the snake, ride the snake
To the lake, the ancient lake, baby
The snake is long, seven miles
Ride the snake...he's old, and his skin is cold

The west is the best
The west is the best
Get here, and we'll do the rest

The blue bus is callin' us
The blue bus is callin' us
Driver, where you taken' us

The killer awoke before dawn, he put his boots on
He took a face from the ancient gallery
And he walked on down the hall
He went into the room where his sister lived, and...then he
Paid a visit to his brother, and then he
He walked on down the hall, and
And he came to a door...and he looked inside
Father, yes son, I want to kill you
Mother...I want to...f*ck you

C'mon baby, take a chance with us
C'mon baby, take a chance with us
C'mon baby, take a chance with us
And meet me at the back of the blue bus
Doin' a blue rock
On a blue bus
Doin' a blue rock
C'mon, yeah

Kill, kill, kill, kill, kill, kill

This is the end
Beautiful friend
This is the end
My only friend, the end

It hurts to set you free
But you'll never follow me
The end of laughter and soft lies
The end of nights we tried to die

This is the end
 
All good points. I'm not really arguing for the bull side. I'm just confused and playing the devil's advocate to the bear side.

You say: >>PEs of many, many stocks are STILL at unreasonable levels.

My response: The S&P 500 is going to make $50-55/share this year. All of the big guys have reaffirmed and its safe to say that that range is pretty accurate. With the S&P at 830 thats a P/E of 16 or an earnings yield of 6.2% compared to a 10 yr T-bill rate of 4.29%. This is the largest that spread has been since 1982. If you take out tech the P/E gets much lower.


>>Those little knick-knack facts about VIX readings, and "if Maria tells you to short, it must be a bottom" are all complete bullsh!t.

Maybe you are right. Certainly put/call ratios > 1 and VIX > 50 have called bottoms historically. But, "maybe this time is different".

>>PS - 1987 was also alot different than 1930, program trading aside. And the market still crashed.

I agree, 1987 was a lot different. It was the top of a bull market, combined with increased worries over trade tarrifs. Also, you cannot discount the important role that program trading had in that crash (or the recovery that immediately followed).
 
With the S&P at 830 thats a P/E of 16 or an earnings yield of 6.2% compared to a 10 yr T-bill rate of 4.29%. This is the largest that spread has been since 1982. If you take out tech the P/E gets much lower.

The yield on the S&P is WAY lower than 6.2%. Where did you get that number. I bet it is closer to 1.5%.
 
Originally posted by Thug_Life
As part of fraternity hazing (I eventually quit. They were a bunch of losers) we were locked in a sauna and forced to listen to this song over and over and over......
More...
You had it good. I had to listen to "Goldfinger". I quit too! (But I made friends there I still have).

Apocalypse Now! The End!
 
Hey, thanks for that link. Thats a cool looking chart. If you look at trailing 12 months you are absolutely right that the P/E of the S&P 500 is too high. Thats why the market has dropped for the past 6 months.

A couple of points:

a. over 80% of the S&P 500 have now reported earnings and given guidance for the remainder of the year. Year over year earnings growth is over 5% (first growth since Dec 2000) and almost every company has upped or reaffirmed guidance. So a slightly forward P/E for 2002 is looking like 16 right now on the S&P 500. Markets anticpate earnings, they don't look backwards.

b. the market had the highest P/Es ever in 1920, 1932, and 1982 - the three best times in the past century to buy stocks.

c. the real question is related to allocation of capital. Is it better to put money in 10 year T-bills at 4.29% or with companies that are earning 6.2% and are growing? Low interest rates makes this the easiest decision since 1982, the beginning of the last bull market.

Please convince me I'm wrong. I want to capitulate and have all the fun that the shorts are undoubtedly having. But I can't do it when all indications point to the fact that the bottom is here or near.
 
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