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semper77 (< 20)

Are you a Bull or a Bear? A GoldmiingXpert or a DeerHunter?



May 21, 2009 – Comments (16)

Couldn't help but devote this week's blog to the debate going at present on GoldminingXpert's blog between himself and DeerHunter73. As most of you know GMX has been calling for a market turn for a little while now, while today DeerHunter posted to him :

"I like this post but again I disagree. I’m not sure how old you and it doesn’t matter. I know your in college and don’t have YEARS of experience in this market.  Yesterday on Cnn, Headline news, Bloomberg, Cnbc, Msnbc, Fox Business and fox news, YES I usually have all of those channels on at the same time.  Every single analyst stated they all see the S&P gaining ground and closing the year at or near1100. One of them stated and I quote” The S&P could easily be at 1700 in the next 2 years. Not one of them said the S&P would sell off and go back to the 600s as a few on here want to think. Few of them said they saw a SMALL correction down to 825 and then another huge rally back to the high 900s. My comment is simple Yes I like your post it gives me something to read while having my coffee and reading the WSJ. However I’m a little more inclined to listen to guys who manage billions on a daily basis and who have been involved in the market for years some as many as 40 then a college student. Had I followed your advice back when you said the market was going to plunge and bulls should sell, I would have lost 10s of thousands in profits."

So, the lines are clearly drawn. Who do you side with? The exposure and experience of the TV financial analysts, or GMX and his superior CAPS score. 

Me? I'm siding with GMX (as I often do, even if I do think he's sometimes a little early on calls like these). I think he's dead-on for the following reasons:

1. There's currently a backlog of home inventory of approximately 2.4 million homes (down from 2.8 a year ago). In order for the housing downturn to stabilize and for prices to start going up again, the supply and demand for these homes will need to normalize. Based on the pace at which we're working off inventory, it will be another 4-5 years before this happens.

2. A housing bill signed by President Obama on Wednesday gives the FDIC a temporary blank check for $500 billion, which is a clear warning that U.S. regulators are worried about a tsunami of bank failures in the not-too-distant future.

3.  Community and regional banks still have $550 billion in Construction & Development Loans on their books as of this writing. These loans represent a hidden inventory of about three million new homes planned, partially completed and partially funded. Again, this doesn't bode well for a housing or credit market stabilization.

4. The Builder confidence for newly built, single-family homes improved to 16 in May to the highest level since September of 2008, up two points from April. This was celebrated in the headlines, but it hid the fact that this is still a long way off from the historically neutral rating of 50.

4. The SPX has been showing declining momentum since the May 8th high at 930.17.

5. Market rallies of nearly 40% never happen without at least a significant correction.

Bottom line, this market is going back down again. Probably to retest the lows set in March.

If you're a bull planning to stay long, at least do yourself a favor and do so with a hedge.

Either that, or grab something to bite down hard on. 




16 Comments – Post Your Own

#1) On May 21, 2009 at 5:59 PM, UKIAHED (31.85) wrote:

Nice key point summaries.  Maybe add a line for unemployment numbers?  REC from me.

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#2) On May 21, 2009 at 6:02 PM, alstry (< 20) wrote:

Guess who Alstry is siding if I can only pass his score....but he recently acted in such a way that made such a possibilty unlikely........but maybe one day he will make a mistake....but not too many so far.

Sometimes Techno Faries can be annoying.

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#3) On May 21, 2009 at 6:17 PM, masterN17 (< 20) wrote:

While I would never dream of siding with anyone on TV (and thus I have weighed in on the debate), I wonder if the markets have already priced in all this future uncertainty, or whether the markets are simply operating in a different world.  Do stock prices have to reflect economic reality?  We have already seen how disconnected they can be from business valuation (see 1999 tech bubble).  Why should they be any more connected to a valuation of a national or international economy?

Just my ruminations...

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#4) On May 21, 2009 at 6:21 PM, XMFSinchiruna (26.50) wrote:

The talking heads on the tv screens that DeerHunter refers to are often the same guys who were completely blindsided by the entire financial crisis in the first place.

Is there not something to be said for listening to the guys that have been right all along?

GMX and I have disagreed more times than I can count, but when it comes to understanding that this rally is a complete fantasy, he is 100% correct.

Meredith Whitney has called it this the "government momentum rally", noting that the "core earnings power of the banks remains negligible".

Peter Schiff: "the premature conclusion ... that the crash of 2008/2009 is now a fading memory, is just as delusional as [the] failure to see it coming in the first place."

Jim Sinclair predicted that a rally of this nature would coincide with the reinstatement of the uptick rule... and it did.

This entire rally was nothing more than a means to pump up share prices long enough for banks and corporations to raise capital from the already beleaguered shareholders. There was never a fundamental basis for it. We'll call it a stage in the capitulation process, but nothing more. TARP is a sham.

With the mountain of evidence pointing to deteriorating fundamentals of the domestic economy, I remain bearish on the indeces until such time as inflation kicks in in earnest. From there forward, all bets are off as to predicting market flows, though I can still predict the long-term trajectory of the U.S. dollar... and it's not pretty.

All of this is very sad, and I take no pleasure in holding these views... but these are the conclusions I've drawn from the massive volume of evidence I've reviewed.

I will not label myself a bear, since I look forward to turning bullish sometime hopefully this decade. :) 

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#5) On May 21, 2009 at 6:23 PM, throwerw (28.40) wrote:

since when are tv analysts that all agree with each other ever right?

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#6) On May 21, 2009 at 6:34 PM, kdakota630 (29.49) wrote:


Thanks.  You saved me from having to type that.

The fundamentals of the economy haven't changed from what caused the problems in the first place.  If anything, they've continue to get worse despite the market going up.

No surprise, I'm with GMX on this one.

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#7) On May 21, 2009 at 7:14 PM, ralphmachio (< 20) wrote:

Bulls depend on a failing system. Remember, the rancher doesn't keep you guys around forever. He fattens you up, and then it's new york strips! Bears just realize that it's better to be free then depend on the rancher, who clearly could not have your best interests in mind.  

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#8) On May 21, 2009 at 7:48 PM, bridgeboy0 (28.97) wrote:

Just as TMFSinchiruna  will not label himself a bull, I will not label myself a bear.  That being said, I think the market is going to be pulling back.  Not like those here have previously expressed (retesting the lows) but instead, I'm waiting for the S&P 500 to get back down to the 800-850 range.

Long term, I still think that stocks go up.

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#9) On May 21, 2009 at 8:08 PM, binve (< 20) wrote:

Not much to add here. GMXs call is on the money. Sinch's comment above in #4 is perfect.

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#10) On May 21, 2009 at 8:08 PM, checklist34 (99.05) wrote:

i'm with bridgeboy

it took wildly irrational pessimism to get under, or even to, S&P 700s.  if we hit S&P 700s i will use leverage to go long the market, in real life, with my entire nest egg, not on the CAPs game for points

But every week that the market goes sideways... my anticipation for a big dip one of these days is tempered.  6 weeks sideways = 1 big dip.  So wondereth I.

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#11) On May 21, 2009 at 10:53 PM, RootnToot (29.48) wrote:

How many weeks of 600k job loss numbers and months of increasing forclosures will it take to realize that this is far, far from over? My money is with GMX. Two fools up and a rec from me.

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#12) On May 22, 2009 at 10:30 AM, Gingerbreadman55 (26.43) wrote:

American News is mostly to blame when it comes to our general apathy and lack of common sense. The only "economists" they have on their shows are either Keynsian or total loonies who don't represent the general beliefs.

Most "experts" on these news programs really have very few true credentials to back them up. The news stations continually encourage immediate and quick reactions when the public would be much better off getting the facts in without the spin.

This immediate reacting news media plus generally low education creates a witches brew of sheeple who know nothing but to blindly follow without question.

 Making a statement that is based solely on experience and "what has happened in the last recessions" with no supporting economic data is incredibly naive. Anyone who believes they can invest this way is in for a wakeup call when an economic shock like what we have just experienced plays out. I wish them luck, because that is the basis of their argument.

 Obviously I side with GMX

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#13) On May 22, 2009 at 12:32 PM, ocsurf (< 20) wrote:

TMFSinchiruna hit the nail in the head.

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#14) On May 22, 2009 at 2:56 PM, GenericMike (< 20) wrote:

I'm Extremely Bearish, so I agree with GMX.

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#15) On May 25, 2009 at 12:04 PM, GraemesPSP (99.76) wrote:

"Yesterday on Cnn, Headline news, Bloomberg, Cnbc, Msnbc, Fox Business and fox news, YES I usually have all of those channels on at the same time.  Every single analyst stated they all see the S&P gaining ground and closing the year at or near1100".

Seriously this is a really, really bad way to lose a lot of money.  Quite a few studies have shown that mainstream media are strong contrarian indicators.  When all the heads on tv are saying run to the port side of the ship, then it's a pretty good idea to move to the starboard, because that's where everyone will be running the next time the boat tilts.

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#16) On May 25, 2009 at 3:49 PM, semper77 (< 20) wrote:

I agree Graemes. What's more, alot of the talking heads that go on TV do so to simply talk their own books so that they'll have someone to sell to.

If I had a dollar for each one of my friends and co-workers that have told me recently how crazy I am to move to the sidelines after the bad move up from S&P 666, I would have no need to follow the markets. 

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