quote:

Originally posted by Shakka Thoughts? Duck and cover. Your mattress never looked so good. Stay on the sidelines and get ready for some great buying opportunities. No need to try to be a hero and call the precise bottom.

I wanna be a hero so I'll try.



Dark blue is slope of the yield curve (seen as an indication of risk premium) and the light blue is the s&p, both on the left axis. Yellow is unemployment, purple is fed funds rate. Given how little the s&p has come down in the grand scheme of things, relative to 01 and given how 01 technically wasn't even a "recession" - and see how little the dark blue line has gone up (again, a possible measure of the market's perception of risk premium), I would say we've got a long long way to go before it's time to buy.

Another good article that compares sub prime to the 18 previous banking crises in the developed world:

http://www.economics.harvard.edu/fa...o_Different.pdf

Estimates are that it'll be 2 maybe 3 years before normal growth resumes.

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Retro ...

My stop losses have me sitting on around 65-70% equity to cash, and I'm glad. Limiting my losses, while building up a reserve ready to enter the market after Q4 2007 earnings reports come out.

I have been believing for about a month now that we are 100% going to be in a recession. This is why...

1. Inflationary pressures on commodities.
2. Credit contraction among financial sector.
3. Unemployment increasing.
4. Declining equity values.
5. Decreasing "risk free rate" yields.

Technical data, in my opinion showed me last month a "triple top" chart pattern in the major indices like the Dow, Nasdaq, and S&P. This was a bearish pattern. My sentiment is bearish for at least the first half of 2008. The chart has confirmed my bearish tone indicated by triple top pattern. ++++The 50 day moving average has dropped below the 200 day moving average indicated an official index DOWNTREND is now in effect++++

Forgive my lack of knowledge on the subject, but how would a complete market crash in the US affect the rest of the world's economy? See there is a small panic here in Australia, but our economy is booming like never before so I don't see how it wold affect us. Our mining resources are going through the roof and in Western Australia anyone that wants to earn $120k a year can because the Mining Companies simply can't employ enough people. Hence our unemployment rate is around 3%. They claim there is still 150+ years of heavy mining left in Australia.

Blocks of vacant land have gone up over 400% and house prices have doubled in most suburbs all through the country in no time at all. Why? because EVERYONE can afford it.

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We are the music makers. We are the dreamers of dreams....

I have been a bear for a few years now but even these prices are tempting me. Markets always forecast 6-9 months ahead, and I can't help but think it has already priced in a recession and we are now near the bottom. Most stocks have been killed and it seems there is crazy value out there right now. The p/e, dividend yield, etc for stocks looks very good but everybody is throwing their hands up and selling. There are no bulls to be found.

This makes the contrarian in me scream "buy buy buy!" but I'm too chickensh!t to pull the trigger..

been getting all the silver I can afford on Ebay though

woo!

Last edited by Capitalizt on Jan-18-2008 at 16:09

quote:

Originally posted by Blahzaay Blocks of vacant land have gone up over 400% and house prices have doubled in most suburbs all through the country in no time at all. Why? because EVERYONE can afford it.

sounds familiar

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quote:

Originally posted by pkcRAISTLIN dont argue with the yanks nutter, they know best!

quote:

Forgive my lack of knowledge on the subject, but how would a complete market crash in the US affect the rest of the world's economy? See there is a small panic here in Australia, but our economy is booming like never before so I don't see how it wold affect us. Our mining resources are going through the roof and in Western Australia anyone that wants to earn $120k a year can because the Mining Companies simply can't employ enough people. Hence our unemployment rate is around 3%. They claim there is still 150+ years of heavy mining left in Australia. Blocks of vacant land have gone up over 400% and house prices have doubled in most suburbs all through the country in no time at all. Why? because EVERYONE can afford it.

The Australian market shouldn't be affected by a US recession. The US market has had a 100 billion dollar writeoff on subprime loans and debt. I don't think Australia has anything to do with US house market. I do like the global commodities boom thats going on. In Australia, Russia, Brazil (a big one), and China! RTP, DSX, EXM, RIO, MTL; commodities may be the next market bubble, which is always something to keep in mind.

quote:

Originally posted by Capitalizt I have been a bear for a few years now but even these prices are tempting me. Markets always forecast 6-9 months ahead, and I can't help but think it has already priced in a recession and we are now near the bottom. Most stocks have been killed and it seems there is crazy value out there right now. The p/e, dividend yield, etc for stocks looks very good but everybody is throwing their hands up and selling. There are no bulls to be found. This makes the contrarian in me scream "buy buy buy!" but I'm too chickensh!t to pull the trigger.. been getting all the silver I can afford on Ebay though woo!

I'm waiting until 4th quarter earnings reports come out. Then I'll decide what to buy.

quote:

Originally posted by Capitalizt I have been a bear for a few years now but even these prices are tempting me. Markets always forecast 6-9 months ahead, and I can't help but think it has already priced in a recession and we are now near the bottom. Most stocks have been killed and it seems there is crazy value out there right now. The p/e, dividend yield, etc for stocks looks very good but everybody is throwing their hands up and selling. There are no bulls to be found. This makes the contrarian in me scream "buy buy buy!" but I'm too chickensh!t to pull the trigger.. been getting all the silver I can afford on Ebay though woo!

Sorry, but imo you are optimistic like hell. I've been bear for quite some time now as well but the contrarian school of thought isn't how long you're bear, it's how long everyone ELSE has been bear, and that hasn't been very long at all. And given how long the markets have been irrationally bullish for quite some time, you can bet that everyone's been optimistically pricing shit incorrectly for quite some time. I think there's a much larger correction ahead. Subprime writeoffs total up to what ... $80-100 billion so far? The total exposure is around $360 billion. Then take into account the explosion of credit default swaps recently. Everyone has been getting into the business of selling protection and have been making a ton of money because corporate bond defualt rates have been at historic lows. Guess what's going to happen if default rates approach historic averages? For christ's sake Ambac just got downgraded ... People on CNBC are still saying that the conditions are great for buying and now is the time to do it ... fuck that, when EVERYONE on tv is saying not to buy is when to buy.

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Retro ...

quote:

Originally posted by occrider Sorry, but imo you are optimistic like hell. I've been bear for quite some time now as well but the contrarian school of thought isn't how long you're bear, it's how long everyone ELSE has been bear, and that hasn't been very long at all. And given how long the markets have been irrationally bullish for quite some time, you can bet that everyone's been optimistically pricing shit incorrectly for quite some time. I think there's a much larger correction ahead. Subprime writeoffs total up to what ... $80-100 billion so far? The total exposure is around $360 billion. Then take into account the explosion of credit default swaps recently. Everyone has been getting into the business of selling protection and have been making a ton of money because corporate bond defualt rates have been at historic lows. Guess what's going to happen if default rates approach historic averages? For christ's sake Ambac just got downgraded ... People on CNBC are still saying that the conditions are great for buying and now is the time to do it ... fuck that, when EVERYONE on tv is saying not to buy is when to buy.

Agreed. As Ned Davis says, it's good to be a contrarian when crowd sentiment is at extremes. Consensus is finally starting to embrace recession as more than just a "scenario." The morons on CNBC (have you seriously ever watched that buffoon Dennis Kneale?) rarely, if ever, get it. Bear markets are brutal. The time to buy the market will be once people finally acknowledge we're in a recession. At that time the crowd will hopefully finally capitulate and panic-sell and then you can pick up some great bargains.

On a side note to Krypton--I sure as hell hope your magical algorithm isn't telling you to step in and buy the likes of MBI, RDN, ABK etc. I've decided to try shorting a couple of select reinsurers at this point--I hope I'm right. They might have to actually pay real claims if this situation keeps getting worse (which it likely will considering we're only in about the 5th inning of subprime resets). In any event, I might get a good move from weak sentiment alone. Check out PRE--it looks like it might just we rolling over. Either I'm wrong or I'm timely. We'll see!

quote:

Originally posted by Shakka On a side note to Krypton--I sure as hell hope your magical algorithm isn't telling you to step in and buy the likes of MBI, RDN, ABK etc. I've decided to try shorting a couple of select reinsurers at this point--I hope I'm right. They might have to actually pay real claims if this situation keeps getting worse (which it likely will considering we're only in about the 5th inning of subprime resets). In any event, I might get a good move from weak sentiment alone. Check out PRE--it looks like it might just we rolling over. Either I'm wrong or I'm timely. We'll see!

Lets see what the intrinsic strength financial model says...

====================================================
MBI

INTRINSIC STRENGTH VALUE = 4.78
FS = 70
Gamma = 35
Yield Price Ratio = 67.05
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RDN

INTRINSIC STRENGTH VALUE = .28
FS = 41
Gamma = 12.30
Yield Price Ratio = 1.84
====================================================
ABK

INTRINSIC STRENGTH VALUE = 5.02
FS = 65
Gamma = 48.75
Yield Price Ratio = 46.92
====================================================

At this time, I would not consider any of these companies a buy. But I have to state this one fact. All of them are DOLLAR STORE CHEAP! Now, which one is the best, and worst? Two companies, MBI, and ABK have a good chance of recovering after the threat of credit defaults subsides. The emphasis is AFTER. Don't buy them now. When to buy (if you are going to)? Buy when MBI or ABK return to profitability which means wait until their quarterly earnings reports shows a profit once again.

Out of these 3, which one would I buy? That would be MBI. I would pull the trigger after they report a profit on their earnings report.

Which one would I shun? That would RDN. STAY AWAY from RDN!! This one is toxic with losses.

In my personal investments, I wouldn't touch any 3 of these. I'm just explaining what one should do if they made the decision to buy from these 3 stocks based on the data of these 3 companies. What stocks do I buy personally? I buy stocks that are at least INTRINSICALLY VALUED higher than 10 or 15. My highest one is EGY at IS value 17.87. That's from a small list of 20 stocks though. For me to get a comprehensive full list of about 100 stocks with intrinsic values, I'm waiting until the mid-February when I can get 4th quarter 2007 data.

Last edited by Krypton on Jan-19-2008 at 20:28

Crap, I might have to dump everything tomorrow if this spills into the US:

The return of Black Monday:

http://www.thisislondon.co.uk/news/...ares/article.do