I sold all but 1,000 shares of MNI in the last few days. I have also sold my positions in Wells fargo, Citigroup, Home depot, Valassis ( a 6 bagger), GE, Gannett, Microsoft, and Yahoo.
I kept my positions in Google and CA.
I am at 95% cash right now, a position I haven't been at since last September.
The market internals are not looking good to me. This market has bounced tremendously since March and I look for the overall market to get hammered in the next 60 days. Yes, we are coming out of a recession, but retail sales are not picking up (other than clunkers program) and it appears to me that we are due for a quick, big correction.
S&P could go to 790, Dow could drop to 6900 in my opinion. I am taking the months of September and October to evaluate, as eventually we'll cycle the bad news from last fall and all things will look rosy.
For what it's worth, I am also now short AIG as the rally in that stock appears to be smoke and mirrors. The long term value of that stock, in my opinion, is $5 at best.
you guys have an interesting debate going on here and sorry to interject ... but the v-shaped recoveries cited were not debt bubbles. we're having trouble borrowing our way out of this, consumer appetite/capability for debt is sinking (record contraction reported yesterday) and/or banks willingness to lend. consumers are jobless at 16.8%, still holding record debt while simultaneously possessing record low equity, and now that credit is contracting, the %gdp @ 70% will need to come down in a corresponding fashion. pull up a chart of consumer spending as a fraction of gdp along with credit expansion and tell me if it doesn't look like the bubble has yet to bust. the only thing we've done is mask a recovery by borrowing money, rolling corporate debt onto public debt, and this is simply an overhang for any recovery.
the fundamentals of this economy are probably worse than the gd. we have more debt, and are not in the beginning of burgeoning new markets powered by electricity (eg radio) and manufacturing. consumer spending at 70% gdp is still at bubble levels, given that consumer debt is still at highs, and record credit is being reined in. a lot of people think we live in a vacuum and the only thing that matters is what the talking heads say, but this could get a lot worse.
My short position in AIG is with the jan 10 puts at 45. I'm hoping reality sets in and this dog goes back down to 10 in the next few months.
After a phone call with Longtimefollower, I want to restate that I believe the market correction is here, and that the S and P could go to 790, and the Dow could go to 6900, and if they get that low, then both indexes could test the market lows set in early March.
I cleared out all nearly all my positions and plan on being out of pocket for a few weeks traveling and on a cruise. Don;t want to mess with the daily check-ins as I am in margaritaville!
'81-'82, and '74-'75 were the 2 harshest recessions, and really the 2 most comperable to current, since the Depression. '81-'82 had a character all its own, as far as the stock market went, but as you can see here...
....the Dow went from 777 to 1287, and then went back to 1086...giving up only 40% of the initial rally gains....before moving to new highs. I'm sure there were a lot of people like you, when the market went up 65% initially, who thought it had gone too far too fast, and I guess they would have been right. But keep in mind that we are ONLY up 50% from our lows this time, not the more heady 65% of 1982-1983.
If we gave back 40% of the gains to date (40% of the move from Dow 6500 to Dow 9500), that would take us down to Dow 8300. Such a scenario is at least REASONABLE. Your scenario of a broad retracement, all the way to the March bottom for Dow, S&P, Nasdaq and Russell, is frankly, patently absurd. The financial panic is largely over. The economy is RECOVERING. Why a thorough retrace. What catalyst.
I love you to pieces, again, and you're incredibly talented in so many regards...but, on this one, you're simply out of your mind, and acting PRIMARILY on emotion.
Get back in, I say, because with China down 7%, and the rest of Asia, and Europe, and now the U.S. only down MARGINALLY today, that's a pretty bullish sign, in my book. Furthermore, we have the M&A "machine" cranking up BIGTIME today, and that is going to provide a MAJOR 2ND LEG to this bull market.
I think you are making a mistake. You could have reasonably cut back by up to 1/3. But cutting back 95% is, again, ludicrous.
This is my favorite chart site of historical Dow Jones. This is period from 1960-1980. You can get other periods at the bottom. You can see how it validates my points about 3 major declines in the 1970's....and also what happened in 1987. The snapbacks were essentially IMMEDIATE...reflecting an economy that came roaring back, or, in the case of 1987, an economy that never collapsed (which everyone feared WOULD happen, and when it didn't, the market came roaring back).
Longtime, excellent work on the historical numbers of the market after recessions. You do mention how poorly the market reacted in the late 20's and early 30's, and this scenario will repeat this fall. The recession we are in, and continue to be in, is as bad as any since the 30's.
Some of these recessions you mention with V's were really not too harsh. How did the market react in the 81-83 time frame.
It's not logical to me to continue to go straight up, while the underlying economy is doing so poorly. Car sales have slowed tremendously now that the clunkers program is finished.
The new home starts you mention are in the starter home category, luxury home builders like Toll have cut the size and price of their average product. The $8,000 new home purchase tax credit is working, but that's a thin market. Inventory of homes is so low because no one wants to sell their's at 35% less than 3 years ago. The move up market is dead due to wipeout in equity in homes. I think 35% of all mortgages are underwater.
What homes are selling? Foreclosed homes at 1/2 or 1/3 the going price three years ago. For every one of these that sells, it clears inventory but has a resultant negative impact on surrounding home values.
The underlying economy may be slightly improving, but there has to be a correction of monumental proportion in order for the base to be set before the next move up. I know you can feel the stall. Don't over-analyze, ACT!
Yeah, thanks. Anything that would give us some kinda proxy for how larger cities are doing in newspaper revs, even though we can't get specific MNI #s? There's gotta be something we can track as a rough gauge. Thanks!
One thing you SHOULD do, when looking at the market "surge," is THROW OUT the decline from Dow 8000 to Dow 6500 last Feb./Mar. It was irrational; it was panic based; it is was quickly corrected. If you ignore that sell off, the Dow was otherwise finding "support" around 8000-8250, from mid-September through early Feb. In that context, a move in the Dow from 8000 last fall to early winter, 9500 now, is HARDLY excessive, or something to worry about, when such a move is ONLY 20%. I know it is somewhat different for the other indices, but not dramatically so. The reality is that the risk of a Depression, which could have been as high as 20-30%, perhaps, from Nov. through April, as been DRAMATICALLY reduced to as low as 1-3% now. In that context, there is EVERY REASON for the markets to be trading at where they are now. (Although we do agree on one thing; a correction of SOME kind would be desirable and HEALTHY at this time. But I would NOT expect more than 5-10% on the downside. And probably 5%.)