This is the worst market I’ve ever seen. I do not mean today, or the past 2 months. I am talking about the past two years. No other market, in all of my years in Wall Street, have behaved in such an erratic, unpredictable manner. Sure, there are opportunities to buy and sell; but the moves are too violent to go to sleep at night with confidence.
At least back in 2008-2009, it was literally end of days trading. I was accepting of the declines, and shorted it for most of the way down, because it was a fat pitch. This decline is methodical, done one sector at a time, one small cut after the next until the patient bleeds out. Being a student of the market, I know this is typical behavior of a bear market and I shouldn’t make a big deal about it. Stocks go up and then they come down. If you’re able to withstand the barrage, you will most likely come out the other end intact–providing you have the faintest idea how to structure a portfolio.
Over the past month, 587 stocks are down over 20%. Think about that for a moment.
The problem with downward spiraling markets is the debt. Once the stock market is impaired and companies who need cash are unable to price secondaries, bankruptcies happen fast. I suspect we are about to see a lot of tumult in the oil sector soon. But there are others who will be hurt in the process. So many of our lauded tech names are running deficits in a good economy. If this economy is about to turn lower, those clowns will be pounded into dust, their share prices stripped of all value, and their investors tossed off the cliff of Moher–into the rocks for the birds to pick at.
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We need another round of QE!
Instead, we will get a rate hike.
FML
Did you see the Bernanke portion of Sunday Morning this past weekend? Talk about right guy in the right place at the right time.
Here are the tell-tale signs of a bear market.
Failed rallies: The first stage of a bear market includes rallies that cannot hold. The stock market starts to stair-step lower; the exact opposite of a bull market.
Low-volume rallies: When the stock market does rally, trading volume is modest as fewer and fewer investors “buy the dip.”
Downside acceleration: Conversely, trading volume dramatically increases during declines.
Triple-digit drops: Forget about death by a thousand cuts; as the bear market matures, triple-digit Dow Jones drops become common.
Bulls go into hibernation: When the media start to regularly comment about the bear market… it’s too darn late.
Waiting for some data or consumer effects from the current decline. not guaranteed but now more possible
Nobody is going to come out the other end of this intact. This time, the OTC derivatives go up in smoke. The govt can handle one AIG or the occasional LTCM, but hundreds of them? Not a chance.