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Still Not Yet Turning Up

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For several months now, business media has been flooded with prognosticators whose main argument for calling a market bottom and advising equity purchase amounts to little beyond the simplistic observation that a bull market has generally preceded emergence of the economy from a recession. Blindly, “If you wait until the recession is over, it’s too late to buy stocks at their cheapest, so buy now.”

Without showing the slightest inclination to understand why a bull market precedes emergence from a recession. That whereas the economy is like watching the bow of a huge vessel, the market watches the props and tiller, which set the direction long before the boat actually reflects a change.

So yes, the market quite likely will behave as it usually has, and move up before we’re out of this mess. But don’t expect it to do so when we’re still laying off over 25k more employees day after day after day, when we’re still cutting back on new equipment expenditures, when we’re closing down businesses left and right. Level out, and maybe the market won’t even wait for reversal of those trends before it moves back up. But as long as those indicators continue to plummet, don’t look for the market to find any steam to lift it out of the valley.

Besides, I still don’t see any major buying power standing ready to do anything more than a day or two of ass-covering. Until pension plans and other major institutions return to regular buying day after day after day regardless of market direction, there is nothing out there to support a bull market. They still don’t get it: much of that supposed “cash on the sidelines” is money that has left the market permanently, no looking back, no return.

So yes, we’re still 0% invested in equities, and still looking for lower markets as we move through the winter. I have distant hopes of maybe edging a toe back into stocks perhaps as early as the last month or two of this year, but I don’t think I’d be missing much of any bull market if we just hold our powder until 2010.

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Written by macheide

4 February 2009 at 5:59 pm

Posted in calls & puts

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