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Bottom calling



October 30, 2008 – Comments (5)

I have not seen the kind of capitulation selling marked by volume that would lead a technician to think the bottom was at hand.  I think there is a bottom, and I don't think we've seen it yet.  The reflexivity market is hard to time; I do not know when it will occur.  I do know that there will be no catalyst.

I am starting to see some stocks that look fairly valued based on historical multiples and trailing earnings.  This is not fundamental analysis; this is another kind of technical analysis that masquerades as fundamental analysis.

Fundamental analysis is hard to do when everyone says the bottom is falling out of the global, labor- and asset-based real economy.  Fundamental analysis says that some of these companies I'm looking at are reasonably valued even if they take a 15% earnings miss for 2009.  However, the same analysis finds they're overvalued if they are going to be taking 15% earnings misses consecutively for 3 years, or if they take a 30% miss in 2009 and struggle to rebound.

If concerns about a global slowdown are overblown and the current recession is single-dip and single-digit, the broad market is undervalued right now.  But the market is supposed to well overshoot the 'correct' value when it finds bottoms or tops, and it's supposed to do it for a good while, on significant volumes.  No matter what you think the true value of the broad market is, that hasn't happened yet. 

I am all in, in my tiny retirement portfolio, and collecting some fat dividends on some fancy industrial names, real companies that produce real products.  I am not touching it for a while.  If I had some money to play with, I'd be very cautious now with all the churn going on.  Butter floats to the top - but so does scum.

Don't catch any falling knives, friends!  When the bottom hits, I will call it, just like I called the top last October 4th. 

5 Comments – Post Your Own

#1) On October 30, 2008 at 1:22 AM, awallejr (38.93) wrote:

Why do people refuse to accept the intraday lows of Oct 10 as the bottom?  We have retested it many times (the DOW part)and have stayed above it. You had massive volume that day to more than equate to a capitulation.  Personally, I think that was the bottom and we are now gyrating towards eventual stability.

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#2) On October 30, 2008 at 2:10 AM, Jhana9 (20.71) wrote:

You totally called it last year. And I want to know when you see the bottom.

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#3) On October 30, 2008 at 2:17 AM, Tastylunch (28.52) wrote:

Falling knife market w/o a doubt. I don't think the next bottom is the capitulation bottom

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#4) On October 30, 2008 at 10:28 AM, oldfashionedway (34.65) wrote:

Regular unleaded gasoline was $1.99 / gallon at the local Kroger last night.  Is this a BOTTOM in the price of gas/crude or just possibly a pre-election GIFT from Bush/Cheney et. al. to the McCain/Palin ticket?  Thoughts?

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#5) On November 06, 2008 at 8:32 PM, ikkyu2 (98.21) wrote:

awallejr, you asked why?  I don't have a good answer.  It is just my gut talking.  We will see if I am right this week - time will tell.

oldfashionedway: The market price of things like gas is being distorted, I think, and I think a lot of the distortions depend on intricacies of our markets that I do not pretend to understand.  But I don't think anyone doubts that demand is slowing for commodities and gas is one of them.

Really funny things are happening to money supplies worldwide.  I don't mean funny ha-ha; I mean funny peculiar.  I do not think anyone quite knows what a dollar is worth any more - that sounds funny, but I mean it in the market sense, not as a joke - I think that volatility in the perceived worth of a dollar recently is similar to the volatility we're seeing in the stock and commodities markets - and that is affecting prices in every market in every good and service that exist. 

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