Yappy Bears Continued....
May 17, 2009
– Comments (18)
I'm making a follow up to my previous blog because that one got out of control. The last comment I wish to follow up on is #38 from MichaelinWA.
"No fundamental reason for deflation?
How about tight credit, capital destruction, and massive deleveraging? Looks fundamental to me."
Perhaps I should have said no FURTHER fundamental reason for deflation. Tight credit and deleveraging are valid reasons. That's why something like CENX went from $80 to $5.50. But in between that it was less than $2 so people are taking their 300% return and running. Not a bad idea if you're risk averse or an older guy who just recovered his IRA and got his retirement back. I'm neither of those types.
The only reason for further deflation is if you expect further tightening of credit and further deleveraging. By the actions of Mr socialist president I find this very hard to beleive that it will take place. That would be against his entire socialist agenda of spend and debt, nor is he stupid enough to accidentally go against his cause ie like Bush and his record levels of debt despite being one of those fiscally conservative republicans.
As far as capital destruction, not sure what you mean. Capital is buildings, machinery etc. If those get destroyed you have to spend to replace them, a bullish indicator. I think you meant something else.
Then there is #27, the infamous chart where S&P earnings drop below 1935 levels. http://www.chartoftheday.com/20090515.htm?T. Its a beautiful, well timed piece of propaganda, similar to bullish propaganda that was bantering around in Oct 2007. There are a couple problems with it though:
1. It has no comparison to expectations. Apparently every company was priced to bankruptcy 6 months ago, so should that chart not be well into the negatives?
2. Earnings, like I said before are very leveraged. I'm sure there's a chart of Price to Book value that looks absolutely crazy cheap right now. If THAT chart was being copied and pasted onto my blog I might be a little worried about the bull run being over, but no its THIS one being pasted in so all the bearish sheep can feed off of each other.
3. I'm assuming this is net income and not EBITDA so its building in those billions of dollars of writeoffs from the banks that really should be normalised and applied to all earnings throughout the last decade and the billions of dollars of losses from deadweight like GM. For baseball fans, its kind of like Yankees being at the bottom in pitching ERA right now, but most of that is due to Wang. we know that the Yankees pitching isn't really that bad and their ERA should get better.
There's another group of bearish sheep that just annoy me...these belong to the whole group of Elliot Wave/1929 depression/the "big" boys just propped up prices so they can get out or sell bank stocks to raise capital at decent prices camp. These people all have this 2012 destruction/planet Nibiru/Illuminatti conspiracy theorist feel to their posts, rather than having their analysis based on rational thought. These theories make no sense, for instance isn't America's wealth distribution something like the top 5% own 50% of the wealth? So how are they propping up asset prices so they can all get out/sell stock to recapitalize and then leave the general public sheep holding the bag? It doesn't make any sense because the general public doesn't own enough capital to buy all the big boy's stuff. Even if the capitalist system did fail, the argument there is to buy gold and silver, not short sell the market. What good will your FAZ do if we are in an agrarian society where the US dollar is worthless?
One of the bears, goldminingxpert, went to my old blogs and made a point that I was a bear at one time. It was an attempt to undermine me as I was calling him out in my blog, but I think it just lends me credibility. Check this blog out where I said the DOW will be at 7500 for 2008:
http://caps.fool.com/Blogs/ViewPost.aspx?bpid=5780&t=01006636850306521864
I got a grand total of one rec, yet my blog was eerily correct for something from March 2007. I do not spout popular opinions yet the blogs prediction speaks for itself. My basic argument there was that the pigs were irrational idiots in a bull market, and now I predict the same for these bears. The things that I said in the blog happened and the sheep got slaughtered. Now that the sheep are fearful, or they are thanking their lucky stars that they made 300% on CENX or similar stocks and took their money and run, this is the perfect environment for the market to shoot up further.
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