Birchtree's Account Talk

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Re: Birchtree's account talk

Steve,

Last October - November the market experienced a capitulation and an unprecedented irrational panic event that was triggered primarily by 10,000 hedge funds leaving the market in mass hysteria. These fools are now on the sidelines sitting on $10 trillion that is earning no income. There is more liquidity building up in money market funds, and even more in refinancing of mortgages that is available to invest. The last leg of this bear was an undercut low when the retail investor was selling and on the run. History tells us that we will experience an equal and opposite reaction to the up side - and there will only be intermittent corrections to slow the parabolic move down. I've seen it happen before and very few believe it when it's happening. Eventually all lily padders will be encouraged to get fully long again. Frankly there is very little over head supply to provide resistance. Don't forget that the worst months of a bear market precedes the best months of a bull market. I'm long and staying that way.
 
Re: Birchtree's account talk

I unfortunately did not make my $100K this week - failed again with only making $91K. Here is what happened to me: According to Societe Generale strategist James Montier, the better route for success for an investor is to buy shares when stocks are in the bottom quartile of historic valuation. I did this back in Oct. - Nov. to the tune of $772K. More often than not, such a move will result in more losses initially - losses that can last from six months to nine months as equities finish the process of bottoming out. After absorbing more pain, however, buying at those levels will prove prescient - after about a year. In the meantime, investors are likely to see more pain. If that has to be then it has to be - but I believe we rockjet up strongly from here for the next eleven trading days at least. My dilemma now is that I have another 10 dividends due for reinvestment on Monday - I'd prefer to see a little easing back some but of course I have no comtrol over what the market will do. Late 2002 and early 2003 was absolutely a classic bottoming period and today's SPX action mirrors these bottoming patterns of behavior very well. If Bernanke says anything positive on 60 minutes expect a blast off come Monday.
 
Re: Birchtree's account talk

Steve,

Try and think a little longer term. Here is an example of what I mean. The recession began in December 2007. The number of employed nonfarm workers fell 651,000 in February. That followed declines of 655,000 in January and 681,000 in December. Do you see the bottoms above bottoms patern of higher lows. The pace of job losses may be stabilizing - this means getting less bad. The labor market has historically been a lagging indicator of activity, which means that even if the economy were to recover soon, the jobless level is likely to climb for many more months. Some taklking media heads were thinking that the final figure for for February could rival the 602,000 jobs lost in December 1974 which was close to the bottom of that recession. But the overall labor market is about 75% larger today, so the job cuts now represent a smaller share of the work force. In November I thought the mother of all buying opportunities had arrived - and I might still be correct. I regard myself as an average investor and inorder for someone to play my game you must be able to suffer through further mark to market losses and ignore short run volatility in the stock market. You must have money to invest so that you can purchase assets the suddenly risk averse are trying to unload. And that is exactly what I did and Caymanbrac 12 has been doing something similar. The main damage that investors can do to their financial security at this point would come from selling into steep but impermanent declines. Maybe I'll make my first ever $100K week next week. Snort.
 
Re: Birchtree's account talk

"With the likely duration of the current rally expected to last for about 8 weeks and extending for about 25%, the SPX may reach 840-850 level as the next target for possible re-emergence of selling into end of June. Technically, 850 coincides with the 100-day moving average, which has not been broken since June 2008."

http://safehaven.com/article-12817.htm
 
Re: Birchtree's account talk

Birch --

Though I don't follow all of the stuff you are referring to, I follow enough to understand that you are seeing signs that, to you, suggest we are ready to exit this bear market and begin a new bull. Fine -- that's fair enough, and of course I can't say you are wrong (though I believe that you are). But 1700 SPX?

Steve
 
Re: Birchtree's account talk

Greg --

Thanks for that info. That in many ways makes sense, to me, FWIW. I guessed at 550 SPX as "the bottom" several weeks ago, which happens to be very close to a level this article mentioned, for whatever that is worth. A rally of 47% by end of year seems pretty aggressive to me, but at least I could buy into that if we did hit 560-ish SPX (This would mean SPX finishing the year at about 825 -- much more believable than 1700, to me! :)).

Steve
 
Re: Birchtree's account talk

Greg said:
Morgan Stanley Says S&P 500 to Drop 25%, Cuts Outlook
Bloomberg - ‎Mar 13, 2009‎
Click to expand...

To be fair, this article also states:


Wall Street equity strategists lost credibility last year when none predicted a down year and the average forecast was for a gain of 11 percent, according to data compiled by Bloomberg. The stock index plunged 38 percent, the steepest decline since the Great Depression.
Click to expand...

Keep in mind what Bullitt said about those professional analyst estimates.

Bottom line- it's anyone's guess what move Mr. Market will take next. My advice is this- always keep an "IFT" primed and ready to fire off.

As for myself, I have to wait until 31 Mar.:rolleyes:
 
Re: Birchtree's account talk

The Dow closed last Friday at 7223.98 - the final bear market low on Octobedr 9th, 2002 closed at 7286. If we can get above that level tomorrow perhaps that will ignite the bulls into buying.

A few recent comments from Alan Greenspan: "There are at least two broad and competing explanations of the origins of this crisis. The first is that the "easy money" policies of the Federal Reserve produced the U.S. housing bubble that is at the core of today's financial mess.

The second, and far more credible, explanation agrees that it was indeed lower interest rates that spawned the speculative euphoria. However, the interest rate that mattered was not the federal-funds rate, but the rate on long-term fixed-rate mortgages. Between 2002 and 2005, home mortgage rates led U.S. home price change by 11 months. This correlation between home prices and mortgage rates was highly significant, and a far better indicator of rising home prices than the fed-funds rate." I think the same will apply again this time around - only this time only the qualified will buy homes and the at risk population that Obama does not save will go back to public housing until they progress enough to be more responsible and can afford better accommodations.
 
Re: Birchtree's account talk

Birchtree said:
The Dow closed last Friday at 7223.98 - the final bear market low on Octobedr 9th, 2002 closed at 7286. If we can get above that level tomorrow perhaps that will ignite the bulls into buying.
Click to expand...

Currently the Dow futures is at 7,138.
 
Re: Birchtree's account talk

It's always good to have a first hour on the opening to be down - get the sellers out of the way.
 
Re: Birchtree's account talk

Maybe the "at risk population" can afford one now?

Don't get me wrong...I agree with your earlier post.
 
Re: Birchtree's account talk

The M&A activity is heating up in the drug and health care sectors. That's a classic sign of a bottom. In June 1933, long before all the banks had failed or unemployment had peaked, the S&P rallied 105% in 6 months. Similarly, in 1974 it rallied 148% in 5 months. If I were a bear and short I'd be worried.
 
Re: Birchtree's account talk

Birchtree said:
The M&A activity is heating up in the drug and health care sectors. That's a classic sign of a bottom. In June 1933, long before all the banks had failed or unemployment had peaked, the S&P rallied 105% in 6 months. Similarly, in 1974 it rallied 148% in 5 months. If I were a bear and short I'd be worried.
Click to expand...
I hope it happens again Birch, then we can get our DOUGH back and some more, that would be nice.:rolleyes: That is if I ever get back in?:laugh:
 
Re: Birchtree's account talk

Birch:

You said:

In June 1933, long before all the banks had failed or unemployment had peaked, the S&P rallied 105% in 6 months. Similarly, in 1974 it rallied 148% in 5 months.
Click to expand...

This sounded like absolute BS to me -- the S&P took, if I'm not mistaken, 23 years after the Great Depression bottom to reach its pre-crash highs, so I couldn't imagine that it could have rallied 105% in 6 months. But, I wanted to check to make sure, before I questioned you on this.

Well, I couldn't find the data back to 1933. But, I did find it for 1974. So, I checked on your "1974 148%" claim.

Here are the facts:

On Oct. 3, 1974, the S&P reached its low -- 62.28. From there, it began a rally. It reached 75.21 Nov. 7, 1974 -- about a 20% gain. It then fell through the end of '74 and started another rally into '75. On March 14, 1975, just over 5 months from the bottom (presumably the time you are referring to), the market reached a short-term peak of 84.76 -- a 36% gain from the bottom.

After a short dip, the market rose some more, reaching a peak of 95.61 on July 15, 1975 -- just over 53% above the absolute bottom from Oct. 3, '74, 9 months earlier. This was the highest close of 1975.

A 148% gain from the Oct. 3 bottom of 62.28 would be 154.43. That level was not reached until April 11, 1983 -- when we closed at 155.14. That is 8 1/2 years after Oct. 3, 1974.

Steve
 
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Re: Birchtree's account talk

steveg said:
Greg --

Thanks for that info. That in many ways makes sense, to me, FWIW. I guessed at 550 SPX as "the bottom" several weeks ago, which happens to be very close to a level this article mentioned, for whatever that is worth. A rally of 47% by end of year seems pretty aggressive to me, but at least I could buy into that if we did hit 560-ish SPX (This would mean SPX finishing the year at about 825 -- much more believable than 1700, to me! :)).

Steve
Click to expand...

Noting Tom's commentary showing S&P at 450+/- at P/E of 15, Matt's multiyear S&P chart shows possible 444 as a neckline, Oscar shows a continuing down channel, and other bearish/negative information, do you still see 550 as the bottom? If the expectation is now 440, it makes sense for remaining invested to make the G move because the "rocket" won't make it up before one has a chance to join in.

Just trying to keep Birchtree's thread balanced between glass-half-full-even-after-drying and MOT. :laugh:
 
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