Satyajit Das:Bear Market of epic Proportions

[Lawrence Chan]

Quote from JSSPMK:

Point taken, but I was trying to make a point about volatility.

Understand.

What I implied is that if volatility is going to increase like the 98-00 blow off phrase, and that we are at the starting point only (200 points S&P higher), the new calculation method can have an interesting effect that magnify/dampen the volatility.

 

[Smart Money]

Quote from KK70:

Central banks and governments worldwide are not going to sit by idly while a protracted bear market unfolds. They will do everything they can to ensure robust economies and stock markets.

True, Japan can be cited as an example of prolonged recession but I think it can be argued that the problem there is more of a government unwilling to take bold steps to solve the mess.

Going by the way the US Fed successfully tackled the Asian crisis, LTCM, dot-com bust and even 9/11, I think they can be relied on to avert a potential sub-prime crisis too.

Thats dynamic thinking. If you're going to be a successful doom and gloomer, you're going to have to think more statically. Say for example, if you were driving a car, and started to take a right turn from Park Avenue to Washington Street. During the turn, a doom and gloomer would assume that the car would keep turning through the corner and then would continue the turn into a building, killing innocent bystanders.

I sat next to one on an air flight once. Every time the pilot would decrease his altitude, he would holler out, "We're gonna crash!". It was unnerving.

SM

 

[aeliodon]

With PEs at 15 there is no way we fall more than 30% to a PE of 10 which would be the lowest valuations level in over 25 years. The only risk is the 'value trap.'
Bear market of epic proportions - hell no, I don't think so. We've been in a valuations bear market for over 7 years now.

 

[stock_trad3r]

this guy is an idiot

there will be no bear market

 

[Comanche]

Quote from aeliodon:

With PEs at 15 there is no way we fall more than 30% to a PE of 10 which would be the lowest valuations level in over 25 years. The only risk is the 'value trap.'
Bear market of epic proportions - hell no, I don't think so. We've been in a valuations bear market for over 7 years now.

2 things-

1- the "E" can change substantially in your PE thus allowing a further drop in share price to match it.

2- he said the market could just be flat for an extended period of time, which is very bearish in that the entitlements for the retinring baby boomers were modelled off of long term double digit gains in the S&P. Treasuries will yield more in that instance.

 

[JSSPMK]

Quote from stock_trad3r:

this guy is an idiot

and you are?

 

[stock_trad3r]

Quote from JSSPMK:

and you are?

S-M-R-T! (The Simpsons)

Anyway, this guy is suposedly 'respected' yet he's an idiot.

 

[ASusilovic]

Quote from Lawrence Chan:

There is a reason why the S&P can pop back up that fast since mid-2005.

As I recall, S&P changed its calculation method of the S&P index in mid-2005 to a modified version of the true capitalization weighting method. That means, it is going to weight each stock based on flow, not the true # of outstanding shares.

The old high in S&P 500 has to be recaculated using the new method to give a proper comparison.

S&P 500 Summary Statistics:

The S&P 500 Index is a modified capitalization weighted index. A pure capitalization index is constructed by first multiplying each stock's price by its total number of shares, second adding these cross-products, and third dividing the sum by the index divisor. Originally, the S&P 500 Index was a pure capitalization index. A modified capitalization index is based on something other than the total, actual number of shares outstanding. On September 16, 2005, S&P changed to a modified capitalization index based on each stock's floating number of shares. Specifically, shares held by any company's control groups in excess of a ten percent threshold will be excluded from the index. Accordingly, the table below reflects floating market capitalizations based on each stock's number of floating shares.

http://www.indexarb.com/capitalizationAnalysis.html

 

[ASusilovic]

Quote from Comanche:

2 things-

1- the "E" can change substantially in your PE thus allowing a further drop in share price to match it.

2- he said the market could just be flat for an extended period of time, which is very bearish in that the entitlements for the retinring baby boomers were modelled off of long term double digit gains in the S&P. Treasuries will yield more in that instance.

Sorry, I have to repeat myself - did it several times in other "macro" discussions on this board :

1) What about international growth rates ? As I remember I read an IMF paper citing global growth rate at 5,2 % ! Doesn´t it make the "E" a little bit more "global E" ?? Impact on blue chips ??

2) Cheap money still obtainable. Read => http://www.ft.com/cms/s/0/45ac8020-657f-11dc-bf89-0000779fd2ac.html

Banks are increasingly turning to Japan to raise debt as the credit squeeze in Europe and the US forces them to look to Asia to issue bonds.

This month has seen a 600 per cent rise in financial bond issuance in yen-denominated paper, building on a trend since July when liquidity in the money markets began to dry up.

 

[QuantPlus]

Yawn 1,000,000 times.

You have to get to page 7...
Before they tell you that $300 billion of loans have been "orphaned" so far...
Versus a $65 trillion world economy.

That's 0.5 percent temporarily "orphaned"... big deal.

Another piece up to the standards of Cramer.

It you cannot make money regardless of market direction...
Than you are not much of a trader.

Instead of reading garbage like this...
Learn to trade a market-neutral Portfolio.