Saturday, September 16, 2006


[9/15/96] (Mauldin writes] The market, my various mentors have all told me, is designed to cause the most pain to the largest number of people. And while I am not in pain, the recent move up in the various market indices is certainly not in keeping with my thoughts that the economy is going to slow down and thus should exert downward pressure on the equity markets. Has the world transitioned to a kinder, gentler Mr. Market?

... this statistic from Paul Robinson: What happens when you have 3-plus years without a 10% correction in either the S&P 500 or DJIA? On March 15th, 2006 the market sustained 3 full years without a substantial sell-off from a 6-month high. This long a bull run has occurred only 3 other times in the past 100-plus years of market history and led to an average decline of 18.5% between the 3 occurrences.

In summary, I think it is too early to throw in my bearish towel. A slowdown means that earnings are not going to grow as fast as currently projected. That means some disappointments may (will?) be coming our way in the next few quarters.

Disappointments are the stuff that makes for bear markets.

[7/27/06, via investwise] Dr. Marc Faber says "Most asset markets including stocks and commodities are extremely overbought, and there is far too much speculation in all investment markets. Therefore, severe downside volatility, also in precious metals, should not be surprising in the period directly ahead.

... we can say that, yes, the Dow has been in a bull market since October 2002 in dollar terms, but it has been in a bear market in gold terms. This is an important point to understand. In case we should experience continuous monetary inflation, which could lift, over time, all asset prices such as stocks, real estate, and commodities, some asset classes will increase more in value than others."

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[6/15/06] There are market bears--and then there's Barry Ritholtz. Some might call him one of the grizzliest forecasters on the Street. Although the Dow Jones Industrial Average came close to its all-time high of 11,722.98 earlier this year, Ritholtz expects the Dow to finish the year at 6,800. He's also forecasting that the Standard & Poor's 500 Index and Nasdaq will lose more than 25%.

[via investwise]

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But even Ritholtz may not be as bearish as Doug Casey who believes that another depression is practically inevitable. On the bright side, he hasn't totally given up hope. "Perhaps friendly aliens will land on the roof of the White House and present the government with a magic technology that can undo all the damage it's done."

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