- 968
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- Feb 28, 2008
After the Fed cut target benchmark rates to 0-0.25% (1. quantitative easing ftl smh, and 2. what the hell is this target "zone"?) on Tuesday, themarket staged a powerful rally, sending indices and leading stocks above their all-important 50 day moving average levels. Three days later, we have reversedall of those gains, and things are looking bearish as ever. The market is in a rising wedge pattern, common in powerful bear markets, and I expect a break downcoming very soon. Next week is shortened due to Christmas and the week after that is the last trading week of the calendar year so I expect a small bounce toend the year, but the beginning of January will be met with big selling, in my opinion.
Commercial real estate is the next shoe to drop. The global credit crisis's effects are just now starting to trickle into normal American's spendinghabits, as their wealth has been drastically diminished with falling housing prices, mutual funds, pension funds, and widespread layoffs. Consumer spending isgoing to get hit hard starting in 2009, kicking off after bad Christmas season numbers are reported and stores start going out of business. Retailers leavingmalls and other commercial real estate developments further decrease the lease prices real estate investment trusts (REITs) and mall operators generate incomefrom. This is going to send commercial real estate collateralized debt obligations spiraling down, just as they did for residential real estate in 2007-2008,leaving companies like Simon Property Group (SPG), Vornado Realty Trust (VNO),and Public Storage (PSA) absolutely toast.
Insurers are another sector to watch for in 2009. They are another batch of financial companies very adversely affected by widespread insolvency ratios. Thesecompanies are going to lose a lot more money as credit tightens further and they suffer more write-downs and losses, as their huge exposure to synthetic CDOstopples their revenues. Also, as unemployment starts rising (first cost-cutting measure of a business is labor capital), fewer Americans will drive to work,and automobile use will decline significantly. This will drastically decrease demand for auto insurance, further hurting insurers. Prudential (PRU), Hartsford Insurance Group (HIG), Allstate (ALL), and Metlife (MET) are among the best names to watch for big downside incoming months, and these might be names that will be requiring TARP bailouts in the future.
Here's my take on the market in the forseeable future: we rally/bounce/consolidate through the end of December and starting in early January, we startselling off strongly. I expect the indices to sell off at least to their late November lows, most likely breaking them. The rising wedge pattern the market isforming is very bearish and when we undercut the lower trendline, we should sell off hard. Bernie Madoff news shold add fuel to the fire, as people will wantto liquidate their own hedge funds, and other institutional funds will get redemption orders. We may bottom out around March, possibly sparking a strongcountertrend bear market bounce/rally, as we will be coming off of two strong selloffs. Look for oil's bottom to come in the next few months, as well, atleast an intermediate term bottom. In June, I called for July 4 to be the top of oil around $150 and for oil to sell off from there to a bottm around $50. Wellit is already below $40, so a bottom may be approaching, but there is no reason to buy quite yet.
Here is a chart of the S&P 500 with my rising wedge drawn in. A strong breach of the support trendline should usher in a fresh selloff.
Click here for my stockblog, which I will regularly update.
Click here for an article I wrote on the economiccrisis, published on financial website SeekingAlpha.
I made big money off of the recent market crash, making over $400k in September and October with huge put positions in indices, techs, commodities, andfinancials. I see another big decline coming soon, not as drastic as the Sept-Oct selloff but still significant. Liquidate your mutual fund, pension fund, andIRA holdings, pay the fees and taxes, it's worth it. The Dow isn't bottoming for good until 4000. The entire 1990s and 2000s were fueled by artificialwealth allowed by artificially free credit. America financed overconsumption through debt and now we will be purged of this artificial wealth. Get out of yourfunds and liquidate into cash and gold.
Commercial real estate is the next shoe to drop. The global credit crisis's effects are just now starting to trickle into normal American's spendinghabits, as their wealth has been drastically diminished with falling housing prices, mutual funds, pension funds, and widespread layoffs. Consumer spending isgoing to get hit hard starting in 2009, kicking off after bad Christmas season numbers are reported and stores start going out of business. Retailers leavingmalls and other commercial real estate developments further decrease the lease prices real estate investment trusts (REITs) and mall operators generate incomefrom. This is going to send commercial real estate collateralized debt obligations spiraling down, just as they did for residential real estate in 2007-2008,leaving companies like Simon Property Group (SPG), Vornado Realty Trust (VNO),and Public Storage (PSA) absolutely toast.
Insurers are another sector to watch for in 2009. They are another batch of financial companies very adversely affected by widespread insolvency ratios. Thesecompanies are going to lose a lot more money as credit tightens further and they suffer more write-downs and losses, as their huge exposure to synthetic CDOstopples their revenues. Also, as unemployment starts rising (first cost-cutting measure of a business is labor capital), fewer Americans will drive to work,and automobile use will decline significantly. This will drastically decrease demand for auto insurance, further hurting insurers. Prudential (PRU), Hartsford Insurance Group (HIG), Allstate (ALL), and Metlife (MET) are among the best names to watch for big downside incoming months, and these might be names that will be requiring TARP bailouts in the future.
Here's my take on the market in the forseeable future: we rally/bounce/consolidate through the end of December and starting in early January, we startselling off strongly. I expect the indices to sell off at least to their late November lows, most likely breaking them. The rising wedge pattern the market isforming is very bearish and when we undercut the lower trendline, we should sell off hard. Bernie Madoff news shold add fuel to the fire, as people will wantto liquidate their own hedge funds, and other institutional funds will get redemption orders. We may bottom out around March, possibly sparking a strongcountertrend bear market bounce/rally, as we will be coming off of two strong selloffs. Look for oil's bottom to come in the next few months, as well, atleast an intermediate term bottom. In June, I called for July 4 to be the top of oil around $150 and for oil to sell off from there to a bottm around $50. Wellit is already below $40, so a bottom may be approaching, but there is no reason to buy quite yet.
Here is a chart of the S&P 500 with my rising wedge drawn in. A strong breach of the support trendline should usher in a fresh selloff.
Click here for my stockblog, which I will regularly update.
Click here for an article I wrote on the economiccrisis, published on financial website SeekingAlpha.
I made big money off of the recent market crash, making over $400k in September and October with huge put positions in indices, techs, commodities, andfinancials. I see another big decline coming soon, not as drastic as the Sept-Oct selloff but still significant. Liquidate your mutual fund, pension fund, andIRA holdings, pay the fees and taxes, it's worth it. The Dow isn't bottoming for good until 4000. The entire 1990s and 2000s were fueled by artificialwealth allowed by artificially free credit. America financed overconsumption through debt and now we will be purged of this artificial wealth. Get out of yourfunds and liquidate into cash and gold.
