Sometimes people fool themselves...

[jtuck004]

It was written in a post at Naked Capitalism here...

Albert Edwards: Market Still Deluding Itself That It Can Escape The Inevitable Denouement
...
To repurpose an old saw about pessimists, bears are bulls who have all the facts.
...
The current situation reminds me of mid 2007. Investors then were content to stick their heads into very deep sand and ignore the fact that The Great Unwind had clearly begun. But in August and September 2007, even though the wheels were clearly falling off the global economy, the S&P still managed to rally 15%! The recent reaction to data suggests the market is in a similar deluded state of mind. Yet again, equity investors refuse to accept they are now locked in a Vulcan death grip and are about to fall unconscious.

The notion that the equity market predicts anything has always struck me as ludicrous.
...

Maybe he has a point? 30 million of our neighbors unemployed or underemployed, lackluster prospects going forward, at least 10 million more homes underwater or subject to foreclosure. And the major indexes have been rising...


From Reminiscenses of a Stock Operator, advertised as the "the thinly disguised biography of Jesse Livermore"

Of course the same things happen in all speculative markets. The message of the tape is the same. That will be perfectly plain to anyone who will take the trouble to think. He will find if he asks himself questions and considers conditions, that the answers will supply themselves directly. But people never take the trouble to ask questions, leave alone seeking answers. The average American is from Missouri everywhere and at all times except when he goes to the brokers' offices and looks at the tape, whether it is stocks or commodities. The one game of all games that really requires study before making a play is the one he goes into without his usual highly intelligent preliminary and precautionary doubts.

Always liked that quote. Everyone is from the "Show Me" state, until they walk into their broker's office. I think I see that in politics as well...

[Skittles]

1. there sure of a lot of fooled DUers

INDEED

[dmallind]

2. Funny - how do my predictions play out against doomers like Kunstler's for example

He's predicted 4000 DJIA for the last three years straight and doubtless will again (this dead cat is quite a helium filled beast ain't it?).

Yet in Novemebr 2009, almost a year ago, with the Dow at 10225 my post on DU, open for all to see who want to check was, paraphrased "the Dow is about where it should be right now - I see nothing likelier than variation around this in the range of a thousand or so and slow overall steady upward momentum".

I was laughed at for being hopelessly optimistic. Something tells me I still will be, even though shown 100% correct. And Kunstler will still be called an ignored but accurate Cassandra crying in the wilderness for how many more years he is wrong before shame finally catches up.

[jtuck004]

3. Very good. What's your prediction for next year at this time? n/t

[dmallind]

4. Will you put up yours and see who's closest?

Or do you defer to any famous doomer who has made projections to act as proxy for you?

FWIW I'll gladly go first. One caveat - the chances are I will not be alive to either feed you crow or eat yours, but that said let posterity see.

Nobody of course can accurately predict such things with consistently reliable results. I am a layman dilettante so me less than many. However I am neither insanely optimistic nor insanely doom-laden, and lack the incentive to cause controversy or generate ad revenue or readers, so I think I have an advantage over some with far more notoriety on both sides.

So that said I suspect what we'll see is a later year drop down into the 9000s followed by another upswing a bit steeper than this last one overall ending up with a slightly improved but nott extraordinary bullish 11750 by this time next year.

I doubt you'll be willing to put up comepting predictions even against someone who will likely never see them comethrough, but I guarantee you without a shadow of a doubt I'll be closer than the wackjobs on DU and off who prattle about vermin stew and barter systems a la Mad Max movies...

[jtuck004]

5. Funny. No, I can speak for myself.

I think they make some good points. There is little in the fundamentals out there, including the loss of 54K more jobs last month that bodes well for the future. There have been some attempts at stimulating the economy, though I think insufficient and misdirected, so a portion of what we are seeing is something that cannot possibly be sustained. Maybe that's generating what I think is a false sense that things are improving. Don't know, but it appears they have been seeing it since the time of Livermore.

I wasn't doubting the veracity of your claim, or trying to challenge. I just asked since you held out your prediction, curious based on your past success what you thought of the future. Though I am not in the crystal-ball-gazing-business like some people seem to be, sure, I'l throw out 6500 on the DJIA. And with a money-back guarantee!!

And that's assuming that we don't just blow up or fold, (it is a little tenuous). In that case I am pulling out my recipes for vermin stew...


Hope you are here next year. Hell, I hope we are all here next year. Either way, throwing your prediction in your face isn't my way.

I wish you well.

[dmallind]

6. So if my math is OK that makes 9125 the cut off

On Sept 14 2011. My reason for being more optimistic than that is that theer is plenty of cash out there and plenty of signs that businesses are willing to spend it when they foresee a likelihood of demand. We have China becoming more middle class by the day (and China imports billions from us already. We make the big ticket items that build their widgets and their widget factories). We have plenty of other LCC targets to replace them, and job losses are slowing and in fact reversing (the 54K was ALL those census jobs that doomers said weren't real anyway - private sector added jobs. You can't call the 54k loss real and an omen for the future if you didn't call the 200K jump in May or June - I forget which - real and an omen for the future).

Obviously you are willing to look into the crystal ball because you confidently predicted that investors were being fooled, obviously predicting a major fall. It's possible I suppose, but only if some other externality comes across. My failsafe is the long term bond and T bill markets. If the masters of the universe who control everything know this is just a house of cards they need to milk short term before it sinks like a rock, why are 10 and 20yr notes so low and yet bought up easily by investors both in and outside the US?

It's about 50/50 if I'm around in a year. A bit less actually, but we'll see.

[jtuck004]

7. I hope we move in the direction you are suggesting...

I agree there is cash, but there is so much debt in mortgages, on top of consumers, on top of the nation, as well as trillions, perhaps, hidden behind the opaque curtains of the Fed and off the books in the largest banks. I think that is going to squash any growth.

China is only about 30% consumer driven, from what I have read, and they are investing billions into polysilicone, alternative energy, sustainable technologies and others. When they don't have the expertise, they get it. And while we sell them billions, they still sell us more than we sell them, so much so they reportedly have $2 trillion in reserve. I recently met a guy at a picnic who is a contract engineer there after many years of work here. Said virtually everything has been shut down here, what we have is a token as far as silicone, (electronic circuits), and China is making a big push to be the leader in alternative engergy. They are adding 1500 cars a day to their roads. That's a lot of consumer pressure. Here, on the other hand, we have weak retail sales and increasing inventories. I don't see near enough demand.

You are correct about the jobs, but we have 30 million plus unemployed and underemployed, numbers that seem likely to increase over the next 12 months or so. Most things I read say we need approximately 125,000 net new private sector jobs each month to simply soak up the new entries into the job market, so to re-employ the others we need more. Let's just say we want to re-employ 20 million. We would need 167,000 new jobs each month, on top of the 125 for "new" folks. That's 292K per month, starting now, every month, for the next 10 years, would get us close to 6-7% unemployment, I think. And the current unemployment funds run out again in November for a million-ish people, as I recall. Christmas may not be the happy time people are used to, if they rely on material goods.

Here's the job creation, from the BLS web site, for several decades:

"Monthly Growth in Total Nonfarm Employment, Seasonally Adjusted: 1980-2008
Average Per Month Thousands.


Year
----
1980 22
1981 -4
1982 -177
1983 288
1984 323 <---
1985 208
1986 158
1987 263
1988 270
1989 162
1990 26
1991 -71
1992 96
1993 233
1994 321 <--
1995 179
1996 233
1997 280
1998 250
1999 264
2000 163
2001 -147
2002 -45
2003 7
2004 173
2005 211
2006 175
2007 91
2008 -256
2009 -373

So since 1980 we have only had two years that we had sufficient job growth per month to accomplish this. I think the actions the current administration has taken are like setting a glass of spilled milk upright, after most of the milk has run out. They stopped the flow, but but they aren't refilling it.

That doesn't make me hopeful. (On the other hand, look at how good job creation was under Clinton - with tax increases! <LOL>). So it is possible.

You have a very good point about the bonds, but I think people are too concerned to go much of anyplace else. The bonds aren't paying much interest, but it is (probalby ) slightly better than inflation for a change, and banks are buying them for the little bit of interest they get, because their only other alternative is to make loans <gasp> to people, and they are really risk averse right now.

I posted the articles 'cause I thought it was interesting that a great stock trader from 1905 seemed to have a similar outlook to a person a hundred years later about the same stock market. I don't know that we are being fooled, but it does seem like a lot of people are hoping for a more optomistic outcome out of what looks to me like a wreck waiting to happen. That's not bad, but if action is needed but not taken because of a too optomistic outlook, conditions could get worse. And there are too many people hurting now.

Yea, I did dust off the crystal ball out of respect for your answer ;) But mostly I do this because I want to see the PTB spend some serious money to re-educate people for a modern world, rebuild our sagging manufacturing sector for the 21st century, and get people to work at jobs which will stimulate demand and give their minds something to work with.

Barring that, I just want to keep up on what's happening, so I can keep my dogs safe.

I can't know what you are going through, (you can mail me privately if you wish, of course) but I sure do hope you make it. I think most of us like having smart people to talk to, whether they agree or not, and we need all those we can get. I do know I will hope for the better 50% outcome for you, and with any luck maybe you will wind up in that select group whose odds are way better!

Thank you again.