Posted on 11/30/2009 11:02:07 AM PST by FromLori
I was wrong.
Not about the implosion of the credit markets, which I urgently warned about in 2007 and early 2008. Not about the recession, which we shifted to anticipating in November 2007. Not about the plunge in the stock market, which erased the entire 2002-2007 market gain, which was no surprise. Not about the “ebb and flow” of short-term data, which I frequently noted could produce a powerful (though perhaps abruptly terminated) market advance even in the face of dangerous longer-term cross-currents. I expect not even about the “surprising” second wave of credit distress that we can expect as we move into 2010.
From a long-term perspective, my record is very comfortable. But clearly, I was wrong about the extent to which Wall Street would respond to the ebb-and-flow in the economic data – particularly the obvious and temporary lull in the mortgage reset schedule between March and November 2009 – and drive stocks to the point where they are not only overvalued again, but strikingly dependent on a sustained economic recovery and the achievement and maintenance of record profit margins in the years ahead.
I should have assumed that Wall Street's tendency toward reckless myopia – ingrained over the past decade – would return at the first sign of even temporary stability. The eagerness of investors to chase prevailing trends, and their unwillingness to concern themselves with predictable longer-term risks, drove a successive series of speculative advances and crashes during the past decade – the dot-com bubble, the tech bubble, the mortgage bubble, the private-equity bubble, and the commodities bubble. And here we are again.
(Excerpt) Read more at hussman.net ...
ping
The stock market resurgence sure has amazed me.
What really has improved enough to foster this much confidence?
My take-away quote from Hussman’s commentary was: “””Frankly, I’ve come to believe that the markets are no longer reliable or sound discounting mechanisms.”””
We have created a monster where the public thinks that government can solve all problems. That monster now shows itself in the Dow Jones Averages that have nearly recovered while the fundamentals stink.
As a result of this new stinking-thinking, the stock markets are no longer a reliable indicator of future prosperity. The stock markets are simply an indicator of where the trillions of tax payer dollars created out of thin air were spent.
Thank you interesting observation.
There is no longer any way to know which end is up.
The market does seem to be relying on government spending (bailouts), but my take on the surging market is based on 1) inflation - look at commodities, and 2) programmed trading - algorithms that look at momentum versus fundamentals. Neither of these factors look ahead to market fundamentals - they operate in the second-by-second realities.
Personally I believe the government has intervened in the markets and is a primary buyer in an effort to keep the indexes up and make us believe things are getting better.
I am not the only one nor the 1st to believe this is happening
http://www.informationclearinghouse.info/article10163.htm
I’m just wonder how the government could support the stock market, other than the known examples like GM, Chrysler and the banks etc. I’m wondering what the mechanics would be.
The stock market seems to be floating on
hydrogen gas in a thunderstorm.
They (Treasury) could set up trading accounts using dummy corporations as a front. It can be done at any number of brokerage houses or even as the article claims be done through working hand in glove with the likes of Goldman Sachs etc. In other words GS makes the purchases to prop up the futures and extend the gains and then gets reimbursed for losses, if any, by yours and my money funneled to them by the treasury.
It’s speculation of course but it makes sense because can see absolutely NO reason to purchase equities at this time and I have been in the market (not now) since 1978 and consider myself to be at least reasonably well informed as to what fundamentals need to be in place to sustain a market advance. Currently none of them are in place so there is no reason for the markets to be advancing.
“They (Treasury) could set up trading accounts using dummy corporations as a front.”
We better hope they don’t want to short sell someday.
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