Misery Economic Theater 2011

[garo]

Bob,
Your guess is as good as mine but I will note that Barry Ritholtz of the Big Picture blog fame - someone who I have been reading for three years now and respect immensely - went long last week. His reasons are threefold: seasonality http://www.ritholtz.com/blog/2011/10...nal-investors/ , his proprietary quantitative indicators and an oversold bounce/Europe getting a bit closer to a solution. To this I would add renewed chatter from Fed honchos about QE i.e. debasing the dollar.

But this is a Bear Market rally and could fail anywhere from 1275 to 1360. A marginal new high like in 2007 should not be ruled out.

[R.D. Silverman]

Originally Posted by R.D. Silverman

Yep.

So what has caused the recent climb in equity markets???

Something is causing the upswing and I don't understand it, especially
in light of the following:

http://finance.yahoo.com/news/US-rat...13190.html?x=0

http://finance.yahoo.com/blogs/daily...181308391.html

The U.S. economy is still is deep trouble, Greece is about to default,
foreclosures are still "though the roof", Goldman-Sachs just announced a
quarterly loss for only the second time, and Congress is getting ready
to play another of its "debt reduction" deadlock games in November,
yields on bonds in Europe have risen dramatically (accompanied by the
proce drop, of course!) etc. etc. Yet U.S. equities are rising steadily.
It makes no sense.

[R.D. Silverman]

Originally Posted by R.D. Silverman

Something is causing the upswing and I don't understand it, especially
in light of the following:

http://finance.yahoo.com/news/US-rat...13190.html?x=0

http://finance.yahoo.com/blogs/daily...181308391.html

The U.S. economy is still is deep trouble, Greece is about to default,
foreclosures are still "though the roof", Goldman-Sachs just announced a
quarterly loss for only the second time, and Congress is getting ready
to play another of its "debt reduction" deadlock games in November,
yields on bonds in Europe have risen dramatically (accompanied by the
proce drop, of course!) etc. etc. Yet U.S. equities are rising steadily.
It makes no sense.

And check out the following list. This is what OWS is complaining about.

http://247wallst.com/2011/10/20/amer...overpaid-ceos/

[garo]

Repeat after me:

There is no correlation between the stock market and the economy over periods less than a quarter or two.

[R.D. Silverman]

Originally Posted by garo

Repeat after me:

There is no correlation between the stock market and the economy over periods less than a quarter or two.

Of course there is. The market has a psychological knee-jerk reaction
to every hiccup and sound-bite.

[Spherical Cow]

Originally Posted by garo

Bob,
Your guess is as good as mine but I will note that Barry Ritholtz of the Big Picture blog fame - someone who I have been reading for three years now and respect immensely - went long last week. His reasons are threefold: seasonality http://www.ritholtz.com/blog/2011/10...nal-investors/ , his proprietary quantitative indicators and an oversold bounce/Europe getting a bit closer to a solution. To this I would add renewed chatter from Fed honchos about QE i.e. debasing the dollar.

But this is a Bear Market rally and could fail anywhere from 1275 to 1360. A marginal new high like in 2007 should not be ruled out.

The article and chart you refer to is fascinating, with a huge, lopsided difference in investing during one 6-month period of each year versus the "opposing" six months. I may not be understanding it correctly, but since both sets of investments show an increase over the time period in question, doesn't that mean that simply leaving the money invested continuously would have produced an even larger profit, rather than investing on Nov. 1, pulling it back out on April 30, then re-investing on Nov. 1 over and over again? Even if it does, this much of a seasonality to the S&P500 is still fascinatingly large.

Norm

[firejuggler]

Invested money offer taxes reductions?
Money earned (by investissement) before 31 december is counted for the *current* year and after that for the next?
*please don't quote me, i'm no expert in this field, but if they do, there is a reason, either to get more money or to pay less taxes*

[R.D. Silverman]

Originally Posted by Spherical Cow

The article and chart you refer to is fascinating, with a huge, lopsided difference in investing during one 6-month period of each year versus the "opposing" six months. I may not be understanding it correctly, but since both sets of investments show an increase over the time period in question, doesn't that mean that simply leaving the money invested continuously would have produced an even larger profit, rather than investing on Nov. 1, pulling it back out on April 30, then re-investing on Nov. 1 over and over again? Even if it does, this much of a seasonality to the S&P500 is still fascinatingly large.

Norm

I am still going to wait to see what Congress does in Nov. vis-a-vis
deficits before diving back in.

[Christenson]

Originally Posted by R.D. Silverman

I am still going to wait to see what Congress does in Nov. vis-a-vis
deficits before diving back in.

I'm betting (again, a certain bridge built by the master himself, John Roebling) they'll do nothing except produce fireworks. Things are going to get worse before they get better.

[R.D. Silverman]

Originally Posted by Christenson

I'm betting (again, a certain bridge built by the master himself, John Roebling) they'll do nothing except produce fireworks. Things are going to get worse before they get better.

Yep. But I expect the fireworks will have a negative influence on the
markets.

[garo]

Originally Posted by Spherical Cow

The article and chart you refer to is fascinating, with a huge, lopsided difference in investing during one 6-month period of each year versus the "opposing" six months. I may not be understanding it correctly, but since both sets of investments show an increase over the time period in question, doesn't that mean that simply leaving the money invested continuously would have produced an even larger profit, rather than investing on Nov. 1, pulling it back out on April 30, then re-investing on Nov. 1 over and over again? Even if it does, this much of a seasonality to the S&P500 is still fascinatingly large.

Norm

You are correct. And it also does not take into account cap gains taxes and transaction charges you would have had to pay by going in and out the market twice a year. But look at the chart closely and you see that most of the returns for the "low" season came during the long 1982-2000 bull. And being out of the market in those six months would have resulted in a much less volatile portfolio and been good for peace of mind.