Nobel Laureatte Economist Paul Krugman was Bill Moyers guest. He opined spending is needed to keep employment. Debt cliff not important. Fed can print money and keep interest rates low. May weaken dollar. But that will increase US exports. Hence Krugman expects interest rates to remain low. He stated investors are sticking to bonds.
While our staff respects Dr. Krugman greatly, and agree with his vision re: increased spending to stimulate the economy, we humbly suggest the 10 yr Treasury is not the place to be. The train has left the station, the horses have left the stable, throw your favorite cliche here.
To add to above, history is littered with investors getting sucked in at the top. In other threads, folks have been positive on gold at or near its peak, bullish on Apple when it was close to 600, bearishness on Europe at the wrong time. Outside this forum, there is ample evidence people lost their shirt in April 2000 and Aug 2007.
So while it obvious to state markets do not remain bullish or bearishness permanently, few show the discipline to stay away at frothy levels and buy when there is gloom and doom.
We believe in keeping things simple. Investing is not rocket science.
Bond King Bill Gross of PIMCO is an example of how experts can get it wrong. In April 2012 he thought bonds are expensive and lightened up. Bond kept moving higher. In abt Nov 2012 he bought bonds. Since then bond yields moved higher. There are otter bond gurus who suffered same fate.
Now big banks are making news. They had loaded on bonds for extra income. As interest rates move up their losses mount. The top 4 us banks hold 1.13 trillion dollars in bonds. If interest rates move up 3% points amt of capital held reduced by 225 billion dollars. Resulting in reduction of 2 trillion dollars lending capacity.
Source wsj Aug 1.
So yes. It is important to recognize overvaluation. Before the event. Not after the fact. This is not market timing. Just common sense.
17 months ago, when we hinted at the end of the 30 yr bond bull market, we were in the minority. We stopped getting invited to parties. Now our call looks pretty good. The 10-yr yield is at 2.85.
Thanks to our faithful readers for sticking with us.
Technical analysis is voodoo. Junk. Using two data pts 2000 and 2007 drop they draw asinine conclusions.
queer would have had a field day
Not to defend this so called "analysis", but aren't many stock prices, indices are pushed up/down or get stuck based on "support" (which I believe is also based on some analysis)?
Not to defend this so called "analysis", but aren't many stock prices, indices are pushed up/down or get stuck based on "support" (which I believe is also based on some analysis)?
Look amma, there is some traffic!!!!
Support levels, resistance levels are also part of Technical Analysis. Say a stock is at 10o. Analysts will look at charts and assign following resistance levels - 110, 120. If it breaks thru 110, it can go on to 120. If it breaks thru 120, sky is the limit. Buy buy buy.
Following support levels. 91, 82. If it goes below 1st support level it could go to 82. And belie 82, roof will cave in. Sell sell sell.
They use 2000 and 2007 bubbles to scare us into putting stop loss orders etc. IMO, fundamental analysis is the only game in town for the long term investor.
Ironically, the video heading was Investor 101 I think. Should have been Trader 101.
Sow Alamelu, Annadorai's odapirundhaal, pointed out it would be appropriate to provide a reference for our 10-15% drop prediction. She was kind enough to dig thus up. Post #8 of "Can this Market be Moral" thread.
I don’t think this was anywhere close to what they meant, but these guys were one of many doomsayers who want to scare people into selling so they can buy.
I agree. They were predicting a huge drop based on some mumbo jumbo. May happen. May not happen. All we can do is if a huge drop comes and we have spare cash, be ready to invest.
While you were busy sipping tea the last 6+ months, we are happy to report our erstwhile Sow Alamelu had a status change to Smt. This was an affair of the heart. Met someone from a competing firm it seems.
Smt. Alamelu will continue to serve us after a nearly 6 month break. She reports you had a query onmarket valuation in the Undervalued thread. Suffice to say she is all over it.
We do regret to inform you that Annadorai, Alamelu’s kooda pirandavan, has left our organization.
It's all hedge funds and some big global players keeping the market afloat. the day of the small investor helping rop up the markets are long gone. They get chewed up and spit out by the big boys.
to Sow for such a wonderful job 