Stocks took a rollercoaster ride yesterday – not because traders were racked with uncertainty, but because the mysterious cyclical forces that drive the markets evidently are not quite ready to capitulate in favor of bears. That will happen soon enough, we think, but in the meantime there was bound to be some squabbling between shorts positioned to benefit from a downturn and portfolio managers keen on distributing as much stock as possible before They pull the plug. That’s how it works, and if you think it is “hopeful” investors that drive shares higher, you should avoid anyone who approaches you with a solid-gold brick or a “good-faith” envelope filled with money.
Concerning the rollercoaster ride, we doubt that anyone could be even mildly uncertain at this point about what the foreseeable future holds for the U.S. economy. All the indicators that matter are pointing down, aren’t they? Oh, right. There’s that price blip in the housing sector. Chalk it up to marginally qualified buyers driving the low end of the market with FHA (read, “subprime”) loans and an $8000 tax credit. That might continue for a while, incidentally, since our elected representatives are talking about extending the credit till who-knows-when. There have been reports of widespread fraud in connection with this giveaway, but that wouldn’t trouble any of the Keynesians in Congress, since the good Lord’s supposedly great idea was to put as much money into circulation as possible — and who cares whether it has been honestly earned or wisely spent.
Blast Survivors
Meanwhile, we give The Real Estate Roundtable credit for not trying to put too much lipstick on their pig. In fact, Roundtable evidently sees no end to the depression-like conditions developing in the U.S. commercial real estate market. Even though sentiment indicators have waxed since the market’s collapse last year, the statistical improvement suggests not optimism, but relief at having survived the initial blast. “The problems now are more clearly defined and there’s a grim sense of reality setting in, but that’s a long way from saying markets are stabilizing or that conditions are on the mend,” Roundtable President and Chief Executive Jeffrey DeBoer said in a statement.
Can you imagine President Obama saying something like that? Although it accurately describes the condition of the U.S. economy as a whole, the news media would just shake their heads in disbelief. The chattering classes would be so completely dumbfounded and despairing — “What on earth did he mean by that!?” — that they might forgo their Christmas shopping.
Let’s hope it doesn’t come to that. We’ll likely be okay as long as no one breaks faith with The Guvvamint and looks to see what’s in his good-faith envelope.
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Rick,
I basically agree with you that the deflation/debt/depression scenario is coming. I even think its coming very soon. What I do not expect is it to happen this month simply because the “pattern” is not established yet. Most analysts and pundits have a habit of projecting their emotional take on the situation. It should be approached on a more sound basis. You yourself were pretty darn skeptical 5 months ago when I suggested we will have a big rally before any more damage gets done.
I have used history as a guide during such dramatic times simply because emotional swings are what drive the markets during those times. Sentiment is just not there yet. As a fibonacci follower the retracement lines have not hit. Seasonallity is against any big down moves going into the Holidays.
As for Buffett he has been out of the market, holding over 60 percent of B.Hathaways money in cash assets for a very long time. Thats why his loses were half the averages. He was ridiculed last year for doing so. He also blasted the Bush administrations policy of dumping the dollar to prop up corporate profits; he and Soros made a major issue of this over 2 years ago. As a result of the dollar policy Buffett bought GOLD. Smart man.
His recent big purchases indicate to me that he thinks the worse is behind us. I hope so but my gut tells me it’s just not likely.
I hope I didn’t ruffle any feathers with my remarks. I try very hard not to make it personal.
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I assumed Buffett had avoided gold like the plague, Gary — or that he certainly had not scooped it up, as his his custom, when it was cheap and out of style. What is your source for saying that he bought gold? RA