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No BS

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No, as memorable as 2008 was, don’t remember it as a so-called “BS event.” Unless you recognize the only smidgen of validity in BS thinking to be in the admission of ignorance, and count yourself among the fools.

And 2009? We still haven’t touched the bottom yet. We’ve been bouncing around in this current range only because we got here too fast, so are waiting for gravity to catch up with where we dug ourselves down to, then will sink further. Yes, we’ve now discounted that Bush recession into the market, perhaps even as deep and as long as the top edges of what we have yet to see. So yes, stock prices are cheap, even taking into account all the companies that won’t survive 2009. But as Borders is finding out, it doesn’t matter how far down you discount your product if you don’t have customers walking through the door.

And pension plans still won’t be lining up to buy stocks, even at these cheap prices. I know, demand for equities also comes from 401(k) plans and mutual funds and hedge funds and all; in fact, the market’s dysfunctional tantrum this past autumn can largely be blamed on those other potential buyers finally getting with the program. But with the collapse of what had been a decades-long reliable source of buying in the form of defined benefit pension plan cash, the market will continue to bump around in the dark lost, with no major buyer stepping up to lead us out of the dark.

So we won’t break out back to a five-digit Dow anytime soon. Rather, before spring break, we’ll be making stocks even cheaper by testing those November 2008 lows, and still no major buyer will come forward, not just yet. By Labor Day perhaps, the largest wave of pension fund selling will have subsided (although smaller pension funds will still be catching up with delayed me-too sales); and even without a reversal that would switch over to major pension fund buying programs, the mere decrease in selling pressure should whiplash through the markets enough to stir others back over to the buying side. Depending on how bad things have been through the first half of this year.

So we ourselves might return to the market by mid- to late summer. But not yet: we’re not yet in “Buy Soon” mode. For now, it doesn’t matter how cheap the market has priced itself when there aren’t yet any major buyers willing to commit.

bumper sticker [www.internetbumperstickers.com] - calls & puts

Written by macheide

7 January 2009 at 5:17 pm

Posted in calls & puts

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