Tuesday, 27 January 2009

Commentary: Your source for news, commentary, and stock info

When will we get to the end?: I think we are 1/3 of the way to the end of the bear market. I am nowhere near as sanguine about the prospects for a recovery in the stock market and the economy anytime soon. You should read the book, Anatomy of the Bear: Lessons from Wall Street's Four Great Bottoms by Russell Napier, if you want to know how to spot major bottoms in the stock market. None of them (including the bear market we are in) are the same, but they all have similar characteristics, and some things are absolutely necessary before you see a turn around in the stock market or the economy. 1) Automobiles sales; At major bottoms, you have the pent-up demand for vehicles explode and auto sales start to rise. We are definitely, years away from that. 2) Vegas and Macau pick up; Gambling joints start to see increased volume. People begin to spend money and casinos are one of the first businesses to enjoy that. Definitely not there either. 3) Commodity prices begin to bottom (and typically, they bottom before the contraction ends); Oil and natural gas are still plummeting, although not as much lately. Also, I think they made a new world record. They went from raging bull market to growling bear market in the fastest time ever. 4) Price stability; Definitely don't have any of that; House prices: Down, Stocks: Down; Currencies: Down (except for the dollar); That's called deflation (more precisely, credit contraction). 5) Companies start hiring; This comes a little later after the stock market bottoms, but typically companies start to reopen closed factories and hire new workers. Not there again either. Companies are still laying off workers, and that should continue until the end of the year.

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