I would not assume that. You are using Bull Market stochastics to arrive at that conclusion. Remember the algorithms used to formulate logic do not apply when the market equilibria breakdown. The new algorithms of deterministic variables apply here, which are more finite and easier to forecast. During Bull Markets everybody and his brother comes up with a formula showing how earnings will grow double digits, growth is coming from everywhere, and they all seem plausible, even the one that showed oil prices hit bottom at 45 last year and can only rise from there, which it did to 60-70 back to 90. All those wide ranging algorithm spouted by analyst is Bull Market Hype, same hype that retailers use on Black Friday in November to sell those carving knives that will cut through re-bar and stay sharp for infinity. Once New Years arrive, the stark reality sets in and Deterministic analysis is done, you realize that those carving knives you paid $199 at Costco that were suppose to be worth $499, can be bought at a dollar store for $2. Deterministic analysis indicates that a rate hike would have sent the markets down 15-20%, now that the markets are down 30% or more, the FED can do two quarter point increases and not worry about stock market valuations, they are already down. The best thing is if the markets could be down 50% by September FED meeting, then they can raise the FED fund rate a whole point or two.
REMEMBER THIS, AND REMEMBER GOOD - Bull Market Highs are very hard to predict or model, because illusion and distortion has a wide range of variables and possible outcomes. But Bear Market Lows are very very easy to predict or model because all the illusion and possible outcomes get flushed and the range of variables if very finite and deterministic (based on natural cause and effect historical norms) whereas Bull Market outcomes are based on Stochastic processes (rampant speculation, math models based on new dogma, this time is different, high PE's are justified, Zero Percent to Infinity), anyone can come up with a new paradigm in a bull market and people will follow. But in a Bear Market, everyone leaves and only the REAL investors like the Kahn Bros., Buffet, Tim Melvin, Klumps, Seidman, Tisch Bros., etc. that come to play and they all play the same playbook, valuation is everything, nothing is new, it is just history repeating.
Seriously, based on deterministic parameters, the S&P 500 average low PE over a long period of time, not during the last 7 distorted years, was 6-7. Why are you using 14X and not 7X, I want to know what the absolute LOW will be during a Bear Market Low, anyone who learned fundamentals of investing, every stock has an average HIGH PE and an average LO PE. Why would I want to use an average 14X high PE, I don't want to be overly optimistic in a Bear Market, I want to be pessimistic and use a model based on natural historical norms and dogma, not on hope that this low will be higher this time around. One thing I know from past bear markets, prices will always hit the AVERAGE LOW PE valuation, always within 5-10%, there is no fluff or mis-pricing in bear markets, all the BULL from a Bull Market gets flushed out and stocks get valued on REALITY. That is where good investors deploy capital, like my purchase of BMNM Bimini Capital at .11/sh.
Yes, yes I am and I am going to Wisconsin Dells this weekend to play on the bubbly waterslides. If anyone has been to Wisconsin Dells, the waterslide capital of the world. I suggest you go there, ask for the biggest one they have and go down it, this will be the best experience to what it will feel like the next 6-12 months in the stock market. It will be a gut-wrench, nauseus, steep slope down.......get ready for historic 500 point and 1000 point down days in the DOW.
Never say never. Remember, you have been living, eating and sleeping in an imaginary world the past 7 years. What you think is natural, doable and impossible, may just be the opposite. When the FED distorts the economy for so long with zero rates, most of the people in this ecosystem experience changes that manifest as permanent errors that are introduced into their deterministic components and their stochastic components, in fact the distortion may lead to new equations of equilibria, when in essence it is just massive imaginary agents at work in a rational endogenous environment, leading to permanent errors in possible outcomes, probability of events and range parameters.
But you did highlight with your second long sentence which was four times bigger than you first sentence, maximizing your belief in the first proposition, and minimalizing your belief in the second way out only improbable possibility. This effect you are displaying is the result of you Deterministic abilities being distorted by endogenous errors that you mis-believe will be here permanently. When, if you objectively analyze the long term variables, with long term doctrine and dogma and use the historical natural cause and effect outcomes, you will see that the ONLY POSSIBILITY IMAGINED POSSIBLE IS THAT INVESTORS ABANDONE ALL REASON AND THREE COIN AT PROSHARES FORCING THAT OVERRUN. What you least expect, has the MOST PROBABILITY OF HAPPENING. I used that model to predict what happened this week on Monday, remember BIG DOWNWARD SLIDE will start this week. I want to lead into next week, so, next week may be a multiplexer of this week, -2X, -3X, get ready for 1,000 - 2,000 point down day possibility.
Hey, it went from 58 to 88, and from 39 to 49, what is wrong with that. If you are holding for the long term like 5 years, why are you comparing the price action of the past 7 months. Five year from now, TBT will be 100-200, like it was before when FED FUND RATE was not zero.
Easy money, but just about anything can be shorted, there is almost no liquidity at the astronomic prices. Remember, use adjusted PE's not reported earnings. Remember, the Zero Percent interest rate factor and the Mark to Market Factor, to adjustment factors to reduce reported earnings per share. After you do that, you will see the real PE ratio is over 60-70 or infinite like in Amazon and Solar City, which have no earnings but stock prices are way over valued. Those are easy easy shorts. There is no liquidity, just bubbles of deflating optimism, this is the easiest bear market shorting ever. This will be better than winning the state lotto.
HISTORY UPDATE: BLACK FRIDAY, AUGUST 21, 2015, DOW DOWN MORE THAN 500 POINTS. This is History.......and I am a part of it.
Where are you from? Today I am preparing a white paper on the topic "Bubbles of Optimism - Living in an Imaginary World". After this week and my very successful forecast of events, I think I may have a book coming. Maybe a movie if this turns into 1929 -1933.
The paper will be a discussion of pricing theory and how to mathematically equate a formula or math model of stock prices in a very very very distorted economy and how to come up with an estimate of a price using free market pricing theory. I've defined and have discovered new variables in this equation.
Imaginary Parameters (Mis-beliefs, irrationality, crowd beliefs)
Real Parameters (Real Fundamentals)
Permanent Errors that can be introduced that could persist indefinitely or a long time like the last 7 years.
I would then define my Rational Price = FC +DBC + SBC
FC = Fundamental Component
DBC = Deterministic Component
SBC = Stochastic Component
Systemic valuation error can persist a long time under a seemingly rational market equilibria, but when endogenous macro uncertainties arise as we recently had, rational economic agents whose expectations are anchored on endogenous distorted variables, could produce some very real transformational pessimism of multiple bubbly equilibria, and pessimism could compound like interest or growth probabilities of earnings, but it would all be in the downward direction.
Have you checked the trading floor, there is almost no buy orders.....liquidity is extremely terrible......lots of mutual funds may not be able to get out in time. Margin calls.......Cash is King Again.......I think we are down over 15% from the highs, maybe over 20% for certain indexes. The average stocks not on the index, just popular held stocks are making new lows. Twitter just fell below it IPO price of $26, these guys just got halved from their high. Apple is not too far behind, one of my BIGGEST shorts when it hit its high. Apparently the trendy followers of IPAD's and the small investor in apple, the analyst and news media just completely ignored or covered up their exposure to China for over a year, and Apple just kept going higher followed by their enormous clan of users. You have to stay objective and realize that was a great opportunity to short something really popular making highs with horrible fundamentals, it was almost like oil stocks a year and half ago that were making new highs with record production and 110-120 per barrel oil, when Janet Yellen was remarking in FED meetings that the FED can't understand why oil was so high with production up 50% over 3 years and US breaking records in that area. If supply increases, price comes down, if demand stays same or stagnant, like we have had for 3-4 years. Oil was an excellent short. So was materials. Restaurants are excellent short, too much capacity in US. Lots of industries are good shorts due to over capacity from easy borrowing and easy money. Easy money kept a lot of dead corporation alive, Corporate Zombies and now we have too much of everything, including stocks.
-500 or more down days.
We may have one today or Monday.
DOW SINKS MORE THAN 500 POINTS:
What day in AUGUST 2015. Lets have a contest. Past history based on my recollection, I remember these days like they were yesterday.
AUGUST 2011 -500
DECEMBER 2008 -521.76
Descending triangles downward slope, any rallies are blown through on extreme volume. My lord, this is really impression, just massive selling, very little buying pressure, fake rallies to try and stop, I wouldn't be surprise to see a DUMP in the last hour.
Why don't you ultra short the telecoms -2X with an etf? Or ultra short the S&P -2X, both these are extremely overvalued and have extreme negative fundamentals. Energy and materials are good short also, only the big companies with the high costs and high dividends that are going to get cut.
I would like to repeat what I said on August 12 and share this again with my mutual friends on the AGNC board. You should all be coining gold in my recent recommendations. UUP, DXD, LARK and shorting mREIT'S, etc. My small bank stock is up over 4% on a huge down day LARK.
August 10 I recommended DXD at $21.02, today it is almost $24.00, a $3 or 16% gain in 11 days. Still a good buy, DXD is ultra short the DOW. Also, I recommended shorting Apple withing $1.00 of its high, both working real well. Every market internal is flashing a 10 ALARM SELL SIGNAL, no liquidity anywhere, margin calls and massive cash raise going on of the likes never seen before. We are no where near a wash out, capitulation.
You have to admit, I am the only one with an accurate record. I predicted a Massive Downturn will start this week on August 17. It is August 21, pretty good prediction, I will have to pat myself on the back. 20-30% descending triangle down, then rally and then another downturn, descending triangles, lower lows and lower highs.
MMA accounts at banks are paying 1.0 -1.25% two years ago it was .05-.10%, interest rates are rising. The FED fund rate is behind the markets, they will have to raise fast, they can't blame the FED for the market downturn, as Greenspan just said, it was a private sector bubble the gov. has nothing to do with rampant speculation.
They have to..there is too much capacity for the demand we have, hence, price cutting etc. Oil will keep dropping the FED needs to raise rates very fast and much higher to liquidate all this excess capacity. The consumer and business is debted out. The consumer borrowed like there was not tomorrow, businesses borrowed to buy back their own stock and inflate stock prices and expand and grow when there is stagnant demand from demographics. Dumb, dumber and dumbest.......MASSIVE CRASH COMING......the whole world needs to purge and get rid of 40-50% excess capacity. Markets will crash 90-99%, there is no liquidity, nada, none, Zero Percent interest did that too.
Not really.....deflation was enhanced with zero interest rates, which led to mal-investment in capacity in various industries to create high yielding securities to replace the passbooks and money market accounts at banks. What we have not is way too much capacity and stagnating demand. YOU NEVER NEVER NEVER promote investment in more capacity (which zero rates did) when demand is stagnant from worldwide demographics, baby boomers retiring and not consuming as much as when they were in the 30's and 40's. Unless someone comes out in with a youth pill that takes 30 years off your age, WE ARE HEADED INTO A MASSIVE DEFLATIONARY DEPRESSION with yields rising. We need to discourage or force into liquidation one massive amount of capacity in almost every industry, much of this was added in the last 6-7 years from the FED's zero percent policy. This is same policy that was promoted by Federal Banks globally in the 1920's, to keep the economy roaring for 9 years without no correction. My how history repeats.