Skip to comments.Now Everyone Thinks The Market's Going To Crash
Posted on 05/30/2010 3:55:39 PM PDT by blam
Now Everyone Thinks The Market's Going To Crash
May 30, 2010, 10:23 AM
A month ago, with the market charging ever higher, climbing the "wall of worry," most bearish voices had been silenced. Now they're back with a vengeance.
(Why? Because, as we saw clearly at the depths of the market crash 15 months ago, what most people expect the market will do in the future is what the market has done in the recent past. The most recent past is a month in which the market has fallen more than 10%. So more people are getting bearish. If the market falls another 30%, people will get REALLY bearish. And the irony is that, by then, stocks will actually be attractively priced--much more so than they are today, and much MUCH more so than they were a month ago, when everyone loved them.).
In any event, Brent Arends in the WSJ observes how people are suddenly paying attention to the bears again. And many of those bears are predicting there's a lot more pain to come:
Some pretty smart people are cautious. Seth Klarman at Baupost Group is worried. John Hussman of the Hussman Funds says all sorts of warning lights have lit up across his screen. Even Ron Muhlenkamp of the Muhlenkamp Fund, who usually takes a sunnier view of things, says he has moved a big chunk of his mutual fund into cash in case there's a plunge.
How far will it go? Mr. Hussman says the technical indicators have only been this bad 19 times before in the last half century -- and on average the market plunged about 20% over the following 12 months. When markets were also high, like now, the picture's even worse.
(Excerpt) Read more at businessinsider.com ...
It will move up and down in equities in hopes of banging out an ROI over time.
Sometimes (although rarely) “everyone” is right.
This week is going to be a blood bath of epic scale
The Pragmatic Capitalist
May 30, 2010, 11:06 AM
JP Morgan thinks weve seen the market bottom. They cite three different factors that lead them to believe this:
1. Analysis Paralysis: Proxy for Buy-Side Capitulation. For the first time since the correction started (April 23rd), we saw demonstrable analysis paralysis from our clients. That is, despite rationally saying valuations are attractive, they were unable to find any stocks they were willing to buy at any price.
2. AAII Diffusion Index (% Bulls less % Bears) fell into negative territory. This fell to -21% this week, reflecting a broad-based decrease in investor confidence. As shown in Figure 1 below, a push into negative territory is historically associated with past correction lows.
3. In past intraday Crashes (a la 5/6s Flash Crash) markets stabilize average 30 days later. It has been 21 days since the intraday decline of 9%. Since 1900, in the 6 prior instances of 9%-plus intraday crashes, markets tend to bottom by day 32.
In case someone is still holding on to long term investment beliefs, I've got a bridge to sell them in Brooklyn.
Glad I’m secure in my poverty.
Short luxury goods companies using LEAP Puts. Good insurance.
Wasn’t it a Rothschild that said “Buy when there’s blood in the streets”?
Was it Buffett who said We are greedy when others are fearful?
Socialism is not good for private companies.
Indeed, but avoid irrational exuberance.
I've been a bit pale lately anyway.
The change will do me good.
Translation: Some Still Bitterly Clinging to Hopey Changey!
“Where else will capital flow? Not bonds. Not CDs. Not real estate.”
It’s going into forclosed homes and buying them for cash.
Almost all sales are cas sales including mine.
I don't understand, could you elaborate a bit?
Wow that is pretty lame. Bull markets are not built on emerging depressions where we may see lots of inflation. You have an islamic marxist working to destroy the USA thanks to idiots who watch TV and have no clue.
JP Morgan was apretty good firm once.
“Glad Im secure in my poverty.”
I’m also secure in my poverty.
I used to laugh at my grandpa’s savings in mason jars and a safe in his closet. Sorry grandpa, you were right. He died not owing a cent and with money for his family.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.