The five root causes of a BEAR MARKET are caged for now!

robo

Well-known member
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For investors looking out6 monthsor more,things look good.

1. Tight money -------OK

2. Rasing Rates-------OK

3. High Inflation-------OK

4.Rapid growth-------OK

5. Overvaluation-------OK



The "five root causes of a bear market" provide no basis for concern. The economy remains on a moderate growth pace, monetary policy remains accommodative, valuation is reasonable, and core inflation is within the stated federal Reserve guidelines of acceptability.

I'm sure we are going to have lots of pullbacks.... but it's the final score that counts.
 
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Robo,

I must say I agree with your assessment of the future. There will be no inverted yield curve - the Fed has paused already - just not saying anything. I believe the market in its' prescient wisdom will begin to discount the rosy future and provide some formidable fireworks to the up side. Once it starts there may be very few roll backs for people to get aboard - international money may play a larger roll this time around - looking for opportunity. The Chinese are hurting the Euro zone economies and they don't quite know how to handle the competition from trade. Regards,

Dennis
 
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Yield curve is all ready inverting.

Overnight 3%

6 Month 2.98.

Spread between overnight and 10 year is .97%

100% of the time inverted yield curve has led to recession.

:D
 
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DMA,

You are correct about the possibility of a recession - if the yield curve inverts. But we are a long way from that point yet. I don't think AG has any plans to ruin his legacy by instigating a recession - if anything he may become concerned about the possibility of inflation going to zero - rather like the Bank of Japan. The Fed has done their job and now should rest and admire their work. The M2 supply has been trending down since they began raising rates and is about ready to go negative.

I don't mind seeing folks trapped in the shelter of the G fund, but I certainly would not like to see them trapped in their homes. That is the risk of the current real estate market - you can get in, but may not be able to get out - the liquidity may dry up if AG is persistant. I don't think he wants to hurt the country or the econnomy.

Now I know that Yogi and Smokey have different ideas - but they can run - they just can't hide. OK?
 
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Birchtree wrote:
The Chinese are hurting the Euro zone economies and they don't quite know how to handle the competition from trade. Regards,

Dennis
Keep in mind that as our dollar gains strength, so too does the Yuan.
 
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Birchtree wrote
The Fed has done their job and now should rest and admire their work. The M2 supply has been trending down since they began raising rates and is about ready to go negative.

Real year-over-year growth of M-2 is (0.8%), versus 0.8%lastmonth.

M-2May 2005 May 2004 Y-O-Y Changes Real Y-O-Y Changes

6,460.1 6,289.8 +2.7% - 0.8%

Data in Billions


Real changes adjusted for the consumer price index increase of 3.5% for the 12-month period through April 30, 2005.

The Masestro will not let us down........................
 
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Birchtree wrote:
You are correct about the possibility of a recession - if the yield curve inverts. But we are a long way from that point yet. I don't think AG has any plans to ruin his legacy by instigating a recession - if anything he may become concerned about the possibility of inflation going to zero - rather like the Bank of Japan. The Fed has done their job and now should rest and admire their work. The M2 supply has been trending down since they began raising rates and is about ready to go negative.
Birch,

I agree with you in part. Remember in Feb when Greenspan was worried about the condundrum? It is worse now.

What is going to happen next week with the 5 and 10 year auction the yield will spike on the 10 year and stocks will fall.

G fund is best right now as a wait and see vehicle.

We may have a bounce on Monday and Tuesday due to light economic news. I amnot sure about the trade balance report. But the five year auction is at 2pm.

This is a good week to be in the shelter. Will get .01 on Monday and wait and see.

I believe they are going to extend Greenspan until private accounts are established.

We just have to be patient and keep communicating.

Good day. DMA
 
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robo wrote:
Birchtree wrote
The Fed has done their job and now should rest and admire their work. The M2 supply has been trending down since they began raising rates and is about ready to go negative.

Real year-over-year growth of M-2 is (0.8%), versus 0.8%lastmonth.

M-2May 2005 May 2004 Y-O-Y Changes Real Y-O-Y Changes

6,460.1 6,289.8 +2.7% - 0.8%

Data in Billions


Real changes adjusted for the consumer price index increase of 3.5% for the 12-month period through April 30, 2005.

The Masestro will not let us down........................


Keep in mind everyone is purchasing U.S. treasuries further pushing the yield down.

Who wants to own Euro bunds right now?

Japan 10 year bond is 1.21%

You get to go after the yield for retirement accounts.

DMA
 
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DMA,

I can see clearly now, the rain has gone. Honestly, the problem is that we are most likely heading for a yield shortage - where no one can make money in the fixed account markets. The only casino in town open for a better return will be the stock market - where dividends will be increasing - and capital gains will be available.

I remember in the early 80s when you could have bought a 30 year Treasury bond for $50 with a yield of 15%. That 15% was good for a life time - the long bond went to 105 or there abouts. Inflation was at 13% - and no one thought it would ever change. Enter Paul Volker to ruin your business and put you into serious chapter 11

Greenspan does not want to hurt you, especially if you own a mortgage with a variable rate financing that comes due in spring 2006. 60% of the mortgage money lent in the last 2 years has been variable rates. A house like the shelter does not produce income unless you are a landlord. Your costs only increase as the taxes go up. Smart money will use any built up equity with a variable interest rate that also happens to be tax deuctible, to take out an equity loan to buy income producing stocks. This is not speculation - only good money management. Interest rates have paused- let them eat the 3.98% bond all the way down to 3.5%.
 
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I cannot fathom why anyone would cling to one piece of data (a yield curve) and use that and that alone to determine whether or not we are heading into recession.

:%
 
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Mike because 100% of the time of yield curve inversion we have had a recession.

Remember the birth/death rate for the job created 207K with a job report of 78K that means a next lose of 132K.

You will not hear that on CNBS.

Hedious accounting that has started since 2000 is covering up a lot of the rotten core of this economy.

:D
 
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And you post all that with absolutely no proof whatsoever... :shock:

You're simplifying things a bit too much with the yield curve always being associated with a recession. In the past, there has been NO yield curve inversion with interest rates this low. Tight money supplies contribute to recessions by choking off the ability of individuals / companies to borrow money / invest it / start up businesses.

Our lending rates right now are so low, they're practically giving money away for mortgages (30 year rate is still well below 6%). :shock:

As for a recession, we're nowhere near it yet. We still have GDP growth in excess of 3% annualized (which is okay historically), and jobs are still being added (though in fits and starts). The unemployment rate (with the caveat of lower labor force participation) is sitting at 5.1%.

For the record, in the short term, I am very defensive investment-wise, since I expect this slowing to persist awhile and wreak havoc with the markets. However, longer term, I don't see ample evidence of a big enough slide taking place to dump us into a recession. GDP has to drop quite a bit to bring us into that territory.
 
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No indicators of recession?

Have you looked at any of the economic data over the past three months?

No proof!!!! Recent samples:

The Philadelphia Federal Reserve's manufacturing index, which tracks the Mid-Atlantic region, fell ominously in May, down to 7.3 from 25.3 in April.


The Empire State index continued to plunge for a second month, well below expectations at -11.11 in May vs. 2.03 in April and 20.18 in March.


The Chicago purchasers' index dropped like a rock in May, in line with declines in other regional business surveys.


The Institute For Supply Management's non-manufacturing business activity index fell sharply in May, the latest in a domino series of declines in business surveys.

What do you thinkthe aboveequaltes too?

No proof?It is screaming at you.
 
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DMA,

Glad to be reunited with those statistics - they are all very note worthy. The person who is paying the most attention is Greenspan. You forgot the LEI being down for the last 11 months consectutively. These statistics all point to the Fed having done an admirable job of keeping things in line with their last 8 rate increases. They are aware that they have over shot their targets in the past - and I think will not repeat the same folly this time.

Merrill thinks they go to 3.5% before year end - actually next two meetings- and then begin to drop them again in the spring just before variable rate adjustment time. I say why bother - leave them where they are and watch and wait. If this happens, a strong bull market up leg will already be in place - discounting mechanism. I appreciate your concern that the bulls will get burned in a bear trap - but it's only money. Risk provides reward - and I want to be dearly rewarded.

Now please be careful while sitting in the shelter - don't play with fire - you may catch your fuzzy coat igniting. Think about the safety of the pilgrims hiding with you.
 
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DMA, you are talking about sectors and not the whole economy.

Recession = two consecutive quarters of no growth / negative growth. We are nowhere near that. The first quarter's GDP grew over 3%. Anemic as the last payroll report was, it was still a net gain in jobs - which is something that has happened every single month for nearly the past two years.

I don't know what you believe a recession is, but 5.1% unemployment, net gains in jobs, and GDP gains over 3% do NOT constitute a recession, regardless of year or president.

By no means am I saying we are in great shape right now. However, to say we are in a recession or are very close to one is flat out wrong.
 
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I bought one of those bonds around 1988. I paid $150 per thousand for a T-bill maturing in 2010. I still own it. It now represents 65% of my IRA, a figure that climbs every year as stocks have been unable to keep pace lately.

I also owned a Fannie May bond paying about the same, but the govt bought it back from mearound 1992 when interest rates went down. This is the manner in which the Clinton adminstration reduced the size of the deficit so dramatically, and returned the budget to the green.

Mike, I agree -- two consecutive quarters of negative growth define a recession. Our sustained (roughly) 3% growth is far from that. Three percent over time is a pretty big number. They would say that 4% is too high, too great a danger of inflation.

Dave
 
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Once again: hedious accounting.

Job numbers: changed in November 2000 that people not getting unemployment benefits were not counted towards the job report, i.e. your six weeks or 10 weeks or whatever: you are dropped from being counted. 5.1% unemployment rate is a understated joke.

March 2004: Birth/death module for job numbers.

Last job report (May): 207K jobs were magically created. Not real jobs. Numbers. Job "growth" was 78K. That means the real REAL REAL number was negative 132,000 job growth. What do you think the market would of done if thereal job number was put out on the news? (132K).

Apr job report the gain buster 274K job report - 257K were pulled from the birth/death model air - real gain 17K. People that enter the job force each month? 157K that means 140K people entering the job force were SOL. This economy is not growing jobs just statical errors.

Hedious account sooner or later will catch up. When it does it is bad news. Like I say the rotten core will show. It allows does when you sugar coat something. The rain will come and wash it away.

:D
 
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Mike and Robo,

Snort, snort, and snort some more. Why is DMA playing Tom Dooley out here hanging all by himself - where is his TA support group? This Bear must feel like General Custer - totally surrounded by stomping bulls. Well he did say come get some. He's a fighter though - I certainly admire the courage and fortitude - only wish there was a way for him to make some money. Oh, that's right there is a penny on the way, correct?

The recent GDP number was revised to 3.5% and the household jobs number was 376K, these jobs include self-employed folks as well as small business owners. Even the current GDP exceeds levels from the past - but still "Goldilocks" and has the potential to be prolonged several years. Oil I understand has taken a full 1% off the top as an economic tax on the consumer. I believe eventually oil will break back to more moderate levels - perhaps 35-45 dollar per barrel.

Tekno gave me a web sight that has left me dizzy - but helped me maintain my bullish stance for the future.
 
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Household number is phone survey of 5000 people by the same people that put the job numbers out.

I would not put much credibility into it. Since these are the same people that created the birth/death model.

You can lead a horse to water.................

I only am telling you the facts.

If you think about it if you use the real numbers not the make believe numbers how is the economy doing?

With the inflation numbers: Use rental index (not the cost of home ownership - changed May 2002). Do not count food or energy. Hey none of us own a home, buy gas or buy groceries. Inflation is none existence. Prices are exactly the same as two years ago if you believe their stastically data. And oil over 30 a barrel is temporary 29 months later. :shock::shock:

Fed rate is at emergency rates -how is the economy doing?

When houses can not longer be used as ATMs -how will the economy do?

When credit cards minimum payments changeJuly 1 from 2% to 6%how will retail sales do? Which is 70% of the economy - shopping - great economy based on shopping and not manufactoring where you produce something REAL.

:DGDP number. Do not even get me started. 27% of our exports are cars. Have you taken a look at GM and Ford lately? Japan starting July 1 will have open trade with Mexico where 12% of GM cars are sold too (which is countedtowards our exports even thou they are made there).

If this economy was a horse - I would shoot it.
 
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