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(Hidden Camera) Investor, Do You Realize That the Last 9 Months Was Not the Beginning of a New Bull Market But Just a Large Bear Market Rally?

Recs

34

November 01, 2009 – Comments (10) | RELATED TICKERS: AN , G , RY

Sorry to continue this shtick, but when you are on a roll ... :)

To go along with the jokes that I made in these posts (Sit Ubu Sit .... Ubu?, Knock Knock, If You're Friends With P, Happy Fun Ball and Sometimes the Truest Points are Made Through Humor) here is one last one.

This rally has obfuscated the truth, that we are in a secular bear market. The long term (next several years) direction for the US equity market as a whole is down. But because the rally

a) lasted much longer than most bears thought likely
b) came with Wall St. analysts upgrading everything in sight and
c) was accompanied by Government economists declaring victory and the end of the recession,

it has suckered in a huge number of LTBH retail investors into becoming the bagholders.

See my rant in this post here: VIX Thoughts to Accompany a Few Count Options

So when we start crashing again (and I do not use this term lightly) and investors will realize they were mislead *again* (through Wall St. chicanery or simply outright incompetence) here is the reaction I would expect:

10 Comments – Post Your Own

#1) On November 01, 2009 at 1:03 PM, uclayoda87 (29.14) wrote:

Yes, I do.

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#2) On November 01, 2009 at 1:31 PM, Harold71 (22.70) wrote:

LMAO -- love Chris Farley.

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#3) On November 01, 2009 at 1:33 PM, SamTheHobbit (29.97) wrote:

I have been reading the blogs for a while and an October correction appeared to be a common theme.  There was a belief that the dollar index would rise transiently as the market corrected down.  This would create a potential buying opportunity.  Over the last few months I have saved a cash position anticipating this sell off.  Interesting that the dollar index appears to be falling as stocks and commodities are also falling.  I decided that staying in cash is now too dangerous and I'm not a confident enough stock picker in this market.  I bought in December and March, so I did OK but hitting a trifecta seems unlikely.  After Friday's market, I decided that I would split the cash into equal portions of:  CEF, VGENX, OMNZX, USAGX and cash in equal portions.  Besides the cash position what do you think about these sector bets.  Thanks for the input.

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#4) On November 01, 2009 at 2:33 PM, DarthMaul09 (29.64) wrote:

If fund managers are still sitting in cash, missing the March rally, will they buy into this correction now to window dress their portfolio or will they stay in cash hoping that the current correction will last long enough to buy later, before they have to print out their year end report?

My guess is that they will eventually have to buy the stocks that had big percentage gains since March just to make their portfolios look reasonable.

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#5) On November 01, 2009 at 4:43 PM, binv271828 (< 20) wrote:

uclayoda87, Same here man :)

Harold71, Me too man :)

SamTheHobbit,

Hey man :)

I have been reading the blogs for a while and an October correction appeared to be a common theme.

I have to correct this statement based on the distinction of my postion. I do not believe this is a correction. I believe this is the resumption of the bear market. If this is not the top of this bear market rally, then we are very close. Either way the upside risk is now trivial in comparison to the downside risk.

I also would caution against the "common wisdom" regarding the US Dollar. It is true that for the last 9 months, the market has risen as the dollar has fallen. And for the next few months, the dollar will rise as the markets will fall. But in the not-too-distant future, both the market and the Dollar will resume their normal stance of positive correlation (i.e. the will both fall together). Please read this post for my take on this: Thoughts on the US Dollar, Analysis of the USDX Long Term, Follow up on the Gold Blog

In fact, you may be interested in my whole spiel with regards to the long term direction of several asset classes binve's Long Term View

Thanks for the comment!

DarthMaul09, Perhaps. But I think we are witnessing First-In-First-Out. Alphahorn has a great post showing how speculative money has been going into oversold indices early and leaving them at their peak (BDI, SSEC, the Dollar, and finally US equities). http://alphahorn.blogspot.com/2009/10/two-indices-to-watch-bdi-and-ssec.html.

I think the gains to be had are gone, and the early speculative money is now locking in their gains and selling to the johnny-come-latelys (i.e. the bagholders). That means mom and pop retail investors and I think it means fund managers who were waiting for Wall St. analysts and Government economists to sound the "all-clear" (even though the first group is deceitful and the second group is incompetent)..

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#6) On November 01, 2009 at 5:17 PM, SamTheHobbit (29.97) wrote:

Thanks, fortunately Hobbits already live underground and they grow their own food.

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#7) On November 01, 2009 at 5:37 PM, uclayoda87 (29.14) wrote:

I believe this is the resumption of the bear market.

Domestic or world markets?  Or both?  You mean the US markets, right?

Not metals, right?

What about miners?  Should be profitable if metal prices stay up and energy prices don't go up too much.

What about energy commodities versus producers?  Less domestic demand, but world demand should stay up, if their recovery is real.

Peter Schiff's timing of his updated book, Crash Proof 2.0, appears pretty good.

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#8) On November 02, 2009 at 9:15 AM, jesusfreakinco (28.78) wrote:

Rec +26 for a bit of off topic humor

Here is more in case you missed it.

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#9) On November 02, 2009 at 10:07 AM, outoffocus (22.75) wrote:

Good video, I agree that the reaction will probably be in that ballpark.

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#10) On November 03, 2009 at 5:30 PM, binve (< 20) wrote:

SamTheHobbit, LOL! Good point.

But just to fully flesh out my thesis / position, I am not predicting Armageddon. And for the very long term, I am highly optimistic. From The Gold Blog. Gold/Silver/GSMs (and a little Oil for good measure)

"A response I have written many times regarding investment in Gold, and why I consider investing in Gold an optimistic endeavor.

In my investment account that I am in gold and oil. Why? Because I am bullish on the very long term prospects for the economy of the US and the world.

.... Now that might seem odd, because aren't all the people who invest in gold assuming the world will end? The answer is no, at least for this gold investor. I invest in gold not because the world might end, but I invest because I firmly believe it WILL NOT!!. If I was uber-bearish for the very long term, I would build a bunker underground, stocked with years of food and buy guns. Gold? For the end of the world? It makes no sense. Why would a useless shiny metal rock be something to collect if civilization ends?

It is the same thing with fiat currency (such as the US dollar). If you really thought the world would end, why collect little pieces of green paper with faces on it? How is that possibly useful? If there is no government to give you goods in exchange for it, then there are better items for a bunker mentality.

So I invest in gold because I am an optimist.

I am not bullish on the US government. I think they will inflate the dollar into worthlessness (or devalue it highly at least). But ultimately economies WILL recover, and I want to trade my gold in for something useful. Shares in a profitable alternative energy company, or a company the produces / distributes water from seawater to sustain drought countries, or any number of productive future endeavors.

Gold is simply a way to maintain purchasing power as the worlds economy goes through this large and needed contraction. So as an optimist, you should invest in gold :) Just my $0.02 (silver coins of course, not actual pennies ... :) )
"

Thanks :)

uclayoda87,

US markets for sure and many international markets.

I am very bullish on metals, as you know :) Here are my newest counts: http://caps.fool.com/Blogs/ViewPost.aspx?bpid=287308.

jesusfreakinco, Thanks JFC :)

outoffocus, Thanks :) "How do you feel?" "aannngggrrryyy" :).

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