Time To Put 2008 Behind Us

Say farewell to 2008, good riddance. But will 2009 be a better year? So many of the cheerleaders on CNBC enjoy proclaiming that 2009 will be a positive year. I'm not in that camp I'm afraid. This bear market is here for a while. BUT... we will have one rip roaring rally sometime in the first few months of the year that will make everyone think the worst is behind us.

Question of the day... how many retail stores you pass each day today will still be there by the 2nd quarter of 2009? How about only 3 out of 4. 25% of all retail stores closed? It's looking very possible. When the final numbers are crunched after the holidays, a lot of stores will be shutting down. Some overall chains, but mostly just parts and pieces. It'll be realized that we don't need a shopping center on every corner. But what's going to happen when these shopping centers have 25-50% vacancy rates? And malls too. It's going to get ugly. A lot of retailers are already working out new lease agreements with shopping centers and malls to get better rates. A lot of retail jobs are going to be lost in the near future.

What will wave two of the automakers be like? How much will they ask for in the not so distant future? How quick will they burn through that?

Since the markets bottomed on Nov 21 they've tried to rally but there just hasn't been any follow thru. Granted, during the holidays the volume is low but that is usually when some rallies come up. Not this time. I won't be surprised by one last gasp attempt at a rally in the next week, but then we have a leg down. It'll be the final shakeout rally for a while. It'll scare out those remaining nervous folks. Don't fall for it. Hang in there. You've ridden it down this far. THEN the rally to knock your socks off will come. Dow could get back above 10,000 maybe even 11,000. There will be dancing in the streets. For a little while anyway. Then watch here to find out when to get out because the next wave down is going to be The One. Dow 4000-5000. It's coming. Really.

I just wish some movement would happen. These last couple of weeks have been numbing. I'd rather watch paint dry. As long as I didn't have to do the original painting.

Happy New Year!

And here is some reading for you. One of the guys I follow.

http://www.tradingmarkets.com/.site/stocks/commentary/gkitermi/Wrapping-Up-the-Year-79699.cfm

Ho Ho Ho - Sorry, No Santa Claus Rally This Year

Well folks we're down to the final day (half day actually) before Christmas and it doesn't look like Santa will make it this year. I contend that there was a rally, it was the week of Thanksgiving and the week after. However, since that time we've given a good chunk of it back.

So, where are things? Just kind of stuck, like last week. Even with low volume days this week the Dow has had 5 straight losing sessions. There simply isn't any incentive to buy right now. I also anticipated some tax selling to take place. Sell for a loss so you can at least get Uncle Sam to give some of it back.

The chart patterns are still iffy. Half the folks I follow say we're headed for a rally and the other half think we're in a leg down. I'm still hoping for a final down move before a very sizable rally starts up.

Housing numbers came out today and they were UGLY. Average home price is now $181k, down from the peak of $230k. Sales are way down, with the exception of foreclosured homes.

There is a lot of hope that by mid year 2009 things will be turning around. I simply don't see it folks. Everything is still in decline. Remember, the markets look forward 6 months. They don't expect to see things getting better right now. What they want to see is the rate of declines to slow down... home prices, foreclosures, retail sales, etc. But we have a long way to go.

I expect there to be a honeymoon of sorts with Obama taking office. He'll announce even more programs and there will be dancing in the streets... but the reality is no matter how many trillions the gov't throws at the problem, it won't be enough.

In a way a lot of this is a self fulfilling prophecy. As people get scared of losing their job, they stop spending. As spending slows down, companies cut back, including layoffs. You can imagine how this loop can go round and round. But how can you convince people to spend again. Nobody has any money. They borrowed to buy everything they already have.

How about the "customers" of Madoff... lost everything. There will be lawsuits for years. And now they're saying that even people that were fortunate enough to have pulled their money out prior to the shutdown may have to give back all of their profits. What a mess.

If scandals like this keep coming, people will not want to invest in the stock market. Exactly what happened back in the 1930's. People got burned and refused to ever get back in. History doesn't necessarily repeat, but it does rhyme...

Just Go Somewhere Already!!!

Since Dec 2, which is 14 trading days, the Dow has been in a tight range between 8400 and 8900. After 2 full months of incredible swings and volatility, this is almost boring! So, what's the big move going to be? Up or down? Or do we keep going sideways for another month?

The markets have held up very well through a lot of bad news in the past 2 weeks. Can it continue? The buying that's been taking place hasn't been the big boys. The institutional buyers are still on the sidelines. That can't help but lead me to believe they're waiting for a better entry point. It may not come in the next week or two due to the holidays, but it'll be coming soon.

The Santa Claus rally hasn't materialized, unless you count the rally that took place Thanksgiving week and the following week.

This week the Fed lowered short term rates to essentially zero. Wall Street rallied hard on that news. But in the past 2 days has given back most of that. Personally I don't see how 0 percent interest rates are a good thing. It shows desperation and that the fed is running out of ammunition. They now claim to have a couple of things up their sleeve, but again, it'll be out of desperation. I don't see how providing cheap money is going to help in the long run. That's what got us into a lot of this mess to begin with.

And what's up with the automakers? Who knows. The White House is playing it slow. Now the latest word is they'll push for an "orderly or organized bankruptcy", whatever that means. GM has announced they'll be shutting down for a month and Chrysler is doing the same thing starting this Friday I believe. I don't know... I still think if one of the big 3 fails it would be a good thing. We can't let all 3 go down the tubes, we need an automaker to call out own. We can't depend on foreign automakers even if they're building in this country to keep us rolling.

I was at dinner with a couple of coworkers last night and one was telling me he went looking at houses in Florida last week while he was down there and the prices he was seeing were amazing. 2500 sqft house with an inground pool for 100 grand. For that price I might even be willing to move to Florida. Nah, I like the change of seasons.

Alright, we'll see what Friday brings us. It's options expiration day and could be interesting. With 2 short weeks coming up and a lot of the big boys taking time off, it could be boring... or it could be another chance to rally.

Where Are We In The Big Picture?

Of course we won't know the answer to the question of "where are we today in the big picture of this bear market" until it's over and we can look back at it. We can estimate where things will go. But every estimate is nothing more than a guess. The best gauge we probably have is to look at past recessions and bear markets.

Remember one of my favorite sayings especially as it pertains to the stock market... History doesn't necessarily repeat itself, but it often rhymes.

Take a look at this chart. http://www.stocktock.com/wp-content/uploads/2008/12/djia29crash1.gif

It's a month chart of the Dow from the 1921 thru 1940. Notice the big runup to the peak and then the big falloff? Well look closely at 1929. The peak and then the first dropoff point. Look familiar? Looks VERY much like our peak in October 2007 and the plunge we took this past October and November. In the chart, the Dow went from 400 to 200. A 50% haircut. From Oct 2007 to Nov 2008 we went from 14,100 to 7,500. Just shy of 50%.

Now, what I want you to pay particular attention to is that in 1930 there was a very nice rally from Dow 200 to 300. A 50% retracement. Bear market rallies can be very impressive. Then from 1930 thru 1932 the Dow went from 300 to 40.

Now, compare that to what I posted the other day of statements made by various "experts" during the initial downturn during that time.

http://www.gold-eagle.com/editorials_01/seymour062001pv.html

I bring this up only to try to stress to my family and friends that it is highly possible that we are nowhere near the end of this bear market.

There is no good news to be had in the near future. None that would be worthy of a true turnaround. Most people are still in denial that we're headed downward for a while. The deleveraging that still has to take place is beyond most peoples comprehension. From the banks to the common man. Overall we have leveraged beyond our means. We gambled that the good times would continue rolling and we bought more than we could afford to maintain thinking that the gravy train would go on forever.

I have come up with a couple of careers that should do well over the next couple of years or more... Insurance fraud investigator because as people become desperate, they'll either lie about items being stolen or when they can't make payments on their vehicles, they'll mysteriously disappear. The other career I see as being strong is auto mechanic. People are going to hang on to their cars longer than they used to and repairs will be inevitable.

This rally off the Nov 21 low may continue a little bit, but I don't think it'll last much longer. We'll have a drop soon and THEN we'll have what could be one of those 50% rallies. If you've held on to your stocks thus far, THAT will be when you want to get out. It'll be your last chance for quite a while.

Can't Drag The Market Down

The last several pieces of bad news have simply been absorbed by the market. Worst jobless numbers, automakers about to go bust... oh, so what, we don't care... WE WANT TO RALLY!

So on the day where we should have dropped a thousand points because the senate said "No cash for you", not to mention the Madoff ponzi scheme that bilked folks out of 50 BILLION dollars and the SEC never noticed, we opened way down and then rallied the rest of the day with the usual swings along the way.

Beware though... when every guest and talking head on the financial channels is saying "We've seen the bottom, it's time to start buying bargain stocks...", you have to be careful. This is a bear market folks. It doesn't just go down, hit a bottom and go right back up. Did I share this on the blog before? Check out the link, it's pretty funny, interesting and a bit worrisome.

Notice the stock chart and when each statement was said versus where things ended up.

http://www.gold-eagle.com/editorials_01/seymour062001pv.html

Where To From Here? Part 2

Well, it's 2 days later and nothing has really changed. The markets are stuck. I keep trying to kick them but no luck. Actually today was a bit interesting in that there was an actual selloff in the last couple of hours.

The world is waiting for the final decision about the automakers. I don't really know why... they'll get some money, they'll blow it in a couple of months and they'll be back asking for more. Does anybody not know this already? So why stop the earth (Wall Street). But then again, the senate republicans are playing some serious hardball. If this drags on much longer, GM will be bankrupt anyway.

So, the charts, prognosticators and blogs that I read are still right on the fence. From where we closed today, the most likely scenario says a rally tomorrow. I'll try to play it. We'll see how I do.

If the S&P does make it up to the 935-950 range, that'll be the peak and a downdraft to the 780 range is the next stop.

If the S&P continues down tomorrow, we could be in the downdraft already.

I could start talking about planetary alignments and how they affect the markets, but I don't quite buy all that stuff yet. However... I will say that apparently an alignment that only comes around every 40 years is today/tomorrow along with a full moon and one of the guys that swears by this stuff says that a very unexpected event is going to happen in the next 5 days that will devastate the markets. I at least wanted to throw it out there in the off chance something does happen. It'll be fun to watch.

Where To From Here?

I dunno.

And don't believe anyone that says they do know. From now til the end of the month/year, there's no telling what to expect. Will the final announcement of the 15billion dollar loan to the carmakers be positive or negative? Will there be a santa clause rally or have we already seen that in the past 2 weeks since the week of Thanksgiving? Will the fed get access to the other 350billion TARP money? Will I get my Kindle for Christmas? (the answer is yes to that one).

I got lucky with a trade today and went short at just the right time and made 14% in about 3 hours. I should have held overnight but I got nervous and I've gotten my ass kicked so much lately that I wanted to lock in some profits for a change.

Here's my guess for the next few days. S&P down to about 880, bounce up to 940 and then a sizable drop maybe back down to the 750 range by the end of the month. Then a rip-roaring rally for a couple of months that will suck everyone into thinking that we'd finally hit the bottom. But don't believe it. I'll be watching it closely and if I feel confident that a huge plunge is coming I'll embarass myself and send an email to close friends and family warning them.

I have to say something about the general economy... Debra and I went to Southpoint mall on Sunday and we were amazed how few people were there as compared to what we expected for just 2 1/2 weeks before Christmas. And those people that were there weren't carrying many packages. Tonight (Tuesday) we went to Kohl's and the place was DEAD. Every rack and shelf had a 50% or 60% off sign on it. And we live in a pretty stable, solid area of the country. I wonder just how bad the retail numbers will be for December. I think people have really cut back on their spending this year.

Be Careful What and Who You Listen To

Just because famous people speak, doesn't mean they know what they're talking about. Here are some famous quotes made during the stock plunge of the Great Depression. The peak of the Dow was around 400 and it ended up losing 90% down to 40. The quotes are flagged as to when they were said during the decline.

http://www.iamthewitness.com/doc/1927-1933.Chart.of.Pompous.Prognosticators.htm

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Here is a piece of a story I was reading online today. I'm not completely cold hearted, really. No laughing, it's true.

But... here's a 63 year old retired person who did everything right, saved up his million dollar nest egg, enjoying his relaxed life but he kept it all in the stock market and then blames the government? Come on people, where is the personal responsibility???

"Peter Fay, like many of The Unretired, feels angry and betrayed. The 63-year-old built up a $1 million retirement account as an executive at companies including Chiquita Brands International and then at his own high-end flooring company in Scottsdale, Ariz. But with all his money in stocks, he's lost 50% of that this year, at the same time that his house has tumbled in value. He's drawing down his savings and applying for jobs at Lowe's, Home Depot, and Costco. "All the systems we grew up trusting during all those years of work—you save your money, you trust in the government—are no longer valid," he says."

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And while I'm talking about personal responsibility, if the gov't tries to bail out the stupid people that bought houses they shouldn't have and couldn't afford I'm going to raise hell. I bought a house 5 years ago. I could have gotten approved for one worth twice as much as the one I bought, but I knew what I could comfortably afford. If the gov't does something to reward the ones that didn't do the "logical thing" I'm going to be irate.

Unbelievable... really

What a day. Before the opening bell it's announced that the number of new jobless last month was the highest in 30 years (533,000 versus exepected 350,000). On a percentage basis of the overall workforce it was bad, but not the worst in 30 years.

Still the same, the markets were sent reeling early. Then a bit of a turnaround, then back down again and then the rally that defies logic.

As I mentioned yesterday, I felt that the plunge at the end of the day yesterday was in anticipation of worse than expected numbers. Well, chalk one up for me I was right. But the reaction was far more dramatic than I could have imagined. Never would have thought a 300 point rally on the Dow by the end of the day.

So, overall the week was pretty flat with whiplash moments every hour or so every step of the way.

I did take another short position today when I thought the market rally had peaked, but I missed it by a bit. Now I'll just hope that sanity comes back on Monday.

But ya never know what the fed will come up with to try to stimulate things again to try to stop the enevitable meltdown.

Enjoy the weekend my friends.

I Was On The Brink...

I'm working from home this week and have the TV on in the background and I sat here watching as the markets heard more and more bad news all morning and day long in addition to watching the 3 Stooges from Detroit and the markets held on and held on and I couldn't figure out why it wasn't plunging. I was at my wits end and then at the 3:00 hour like clockwork, the plunge came. Finally. But was it for real? Seemed rather weak actually. Sure the Dow fell over 300 points before bouncing back but I don't think today set a new trend down.

I made a nice 12% on a short position I took yesterday that I sold near the low of the day. But I didn't want to hold overnight. The unemployment numbers come out tomorrow and that's what actually caused todays plunge. Anticipating the bad numbers. So remember this, tomorrow when the numbers are released we're likely going to move up. The markets anticipated the bad news and already priced it in.

Short term direction is still going to be choppy. My guess is up tomorrow and then again on Monday and then we'll have another downtrend that may take us to new lows before the 2 or 3 month rally starts up.

Medium term I just keep wondering when this house of cards that keeps growing higher and higher and wobbles more and more will finally just collapse. It's amazing that even after a 50% hair cut in equities that we still aren't where the market "needs to be" or "should be"...

It truly is unimaginable the bubble that was created out there that needs to deflate.

Why is it that the powers that be feel that the solution to an overextended consumer is to try to bait them to buy more things they can't afford? 4 1/2% home loans? Sure, would be nice, but right now that's "only" 1% below where things are right now. And virtually everyone that can truly afford a house and pay for it already bought one in the past 5 years. Who is out there to take advantage of this? Sure, always some new buyers, but that number is small. And those who bought in the last 3 or 4 years with existing home loans can't refinance because their homes are worth less than when they bought them and they're underwater.

We're a long way off from being stable again.

I'm Dizzier!

I need whiplash insurance! The markets are out of control. There are some statistics I've seen recently talking about the average intraday percentage swings and not surprisingly the data for the past 3 months is off the charts. Something ridiculous like an average of 4% swings on average during the course of a day.

Today was down, up, down then right back up again. About 400 point from peak to trough on the Dow.

And after its all said and done, where are we? Right about where we were a week ago. Nothing is moving in a clear direction. We just keep fluctuating.

And how is it we rally so big on days with so much bad news? It still stymies me and aggravates me, but that's what the market enjoys doing... driving traders crazy.

I still see no reason for us to not plummet, but each day it doesn't happen I have to question my analysis. Are we going to rally or drop when it's announced that the auto makers will get their "bridge loans". Who knows... Looking at things from 30,000 feet it's all very ugly. No good news, nothing to hang your hat on that things will turn around soon. So I'm still happy on the sidelines. I do want to be ready to jump in though when the next leg up happens because it will be sizable and last a couple of months.

Hang on to your hats... tomorrow is another fun day for us all.

I'm Dizzy

The moves these days are like cramming a month or a years worth of action into a single day. 15% to 20% up in a week, then down 10% yesterday and what do ya know, back up today.

Which way are we headed? I change my mind every ten minutes and it's crazy. I keep hearing more talking heads and it's about 50/50 right now so you can't even go with a contrarian decision. But one thing that has me thinking is that more and more are saying we have room to go down, which makes me want to play the opposite side.

As soon as "everyone" thinks something, it's time to go in the opposite direction. As soon as "everyone" like your mailman was buying houses to flip, you knew the end of that gravy train was running out of track.

The waves are a mess and there's debate as to what wave and subwave we're in right now.

I'm on the side of the fence that says we're still heading down to test the lows and then we'll rally big for a couple of months before the next big leg down.

I won't waste keystrokes rehashing anything. So much going on with the automakers, the plans Obama has, the bank bailouts, etc that there's no way to guess what will come next.

Bottom line, my retirement is still sitting on the sidelines. I can see a turnaround coming possibly on Friday and that may be when I put it back in for a little while.

A New Month, A New Decline?

For the past couple of months we've seen big declines the first 3 weeks of the month and then a bounce the final week of the month. Will December play out the same way? Now that everyone has noticed the pattern I kind of doubt it, but we'll see.

The rally the past 5 days was very impressive. And as I've mentioned, we'd see some eye opening rallies. One of the headlines I saw said it was the biggest 5 day rally since 1932. If anything, that should scare everyone. The biggest rallies have historically been in the middle of major bear markets and as we all know, 1932 was one of the worst bear markets in history.

If you dig deeper into the rally you'll see that it was small time investors. The big boys stayed on the sidelines. We absolutely will go back down and at least test the recent bottom around Dow 7500. Will we set new lows? Time will tell. I stand by the prediction of Dow 4000-5000 by the time this downturn is over.

Below is yet another article of how tight things are going to become for the average consumer and that of course is the core of our economy. And another article from Meredith Whitney who was one of the first to sound the alarm about the impending credit crisis. She's even more bearish than she was... Yikes.

http://www.cnbc.com/id/27993643

http://www.ft.com/cms/s/0/11344d06-befb-11dd-ae63-0000779fd18c.html?nclick_check=1


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WOW! Closing bell just rang and what a difference a day makes. Last week the markets rally 15% or more and in one day over half of it is wiped out. How do you even start to try to guess what's next?

Some very bad news items, some bad future projections, reality may actually be setting in.

However then you hear that we're "officially" in a recession that began last December and I laughed out loud when I heard some of those fabulous analysts say "Well that means we're 12 months into it already, it's almost done." Idiots. Sure, the "average" recession is about 10 months, but at what point do people realize that what we're going thru isn't AVERAGE! The over leveraging that's still out there is going to make for an ugly period in our national history.