Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Markets Attempting to Bottom Against Grim Economic Background

Stock-Markets / Stocks Bear Market Nov 09, 2008 - 04:54 PM GMT

By: Richard_Shaw

Stock-Markets

Best Financial Markets Analysis ArticlePretty grim out there.  Where is the basis for current optimistic stock market views?

Markets may anticipate recovery, but how soon could that recovery be, given the depth of the problem?  How many more stimulus programs are needed? How many more can be paid for now or later? Are we sowing the seeds of greater disaster later by adding more easy money to a problem that was caused in substantial part by easy money in the first place?


The US stock market (proxy SPY or IVV) and some others are working hard to form a bottom, but against an ugly economic backdrop.

Top banks became illiquid and needed a bailout (proxy KBE). Debt instruments wouldn't trade.  Daily volatility is at unprecedented levels.  Intra-day moves resemble monthly or even yearly changes on some days.  Whipsaw effects for traders are daily events.

Hedge funds failed and more are expected.  Leading investment banks failed. AIG, our largest insurance company needed a bailout.

California (proxy CMF), our largest state says it doesn't have enough cash to meet obligations in the near future and seeks federal assistance.

GM, our largest automaker says they don't have enough cash to complete next year, and seeks federal assistance.  Chrysler is searching for a white knight.

GE, our largest industrial company needed a capital infusion.

Former Fed Chairman, Greenspan, said he never could have imagined our current economic situation.  Current European Central Bank Chairman Trichet said this is worst economic crisis since World War II.  Major central bank overnight rates are at historic lows with little more benefit cutting can provide.

Unemployment is at a 14 year high.  Retail sales last month were at multi-decade lows.

House prices continue to fall, mortgage foreclosures continue to climb, financing is harder to obtain.  Even China is now worried about house price declines there.

Major pension plans are suspected of being underfunded and needing more capital than the PBGIC has — a federal bailout may be needed.  The FDIC says they have enough money now, but may need more — the source would be a federal bailout.

The US economic relief packages have ballooned from a few hundred billion (imagine talking about a few hundred billion in the diminutive) to a few trillion, yet more is planed and requested.

The IMF is bailing out emerging countries.  Iceland's financial system collapsed.  Argentina nationalized private pensions to capture liquid assets, replacing them with IOU's.

Oil's decline (proxy USO) provides some relief, but creates stress bordering on crisis in producing countries that built up cost structures and capital funding commitments they cannot support at current oil prices.

This year, the last month and the last few days reached multi-decade record decline levels. Yet, P/E multiples are above long-term norms and are not bargains.

Emerging countries have not been shown to be decoupled from the US and other developed world economies.  They are suffering too.

An ebbing economic tide is lowering all boats.

The new Congress and the new President will come at the problem in the US with renewed vigor, and other nations are doing much of the same, but it is beginning to seem like pushing on a string.

We certainly hold out hope for a swift and good outcome. Only time will tell.

We prefer to stay behind the skirmish line, and to move forward only after the current Bull/Bear battle is over and the Bull is the last one standing.

Right now it is a serious struggle.  The Bull knocks the Bear down, but the Bear gets back up.  The Bear knocks the Bull down, but the Bull gets back up.  Both are bleeding, battered and tired.

We are probably in the 8th or 9th round of this fight.  We just don't know if it's a 10 round fight or a 15 round fight.  That's a key question and nobody knows the answer.

By Richard Shaw 
http://www.qvmgroup.com

Richard Shaw leads the QVM team as President of QVM Group. Richard has extensive investment industry experience including serving on the board of directors of two large investment management companies, including Aberdeen Asset Management (listed London Stock Exchange) and as a charter investor and director of Lending Tree ( download short professional profile ). He provides portfolio design and management services to individual and corporate clients. He also edits the QVM investment blog. His writings are generally republished by SeekingAlpha and Reuters and are linked to sites such as Kiplinger and Yahoo Finance and other sites. He is a 1970 graduate of Dartmouth College.

Copyright 2006-2008 by QVM Group LLC All rights reserved.

Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Do your own due diligence.

Richard Shaw Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in