DrStool Posted January 25, 2003 Report Posted January 25, 2003 Only The Beginning 1/24/03 The handwriting is on the wall, and it is written in crimson. The forces that have been set in motion have built up over 20 years of speculation, culminating in an explosion of free money and credit creation, and the accompanying moral hazard. Until now, there has been no penalty for wanton high risk credit creation. The addiction to cheap and easy money, with no penalty for the endless creation of ever more risky credits, has caused a growing chain reaction explosion of bad debt. The GSE's, enabled by the Fed, have expanded money supply at an exponential rate, while the generation of real profits and real investment lagged farther and farther behind, finally going in reverse. The piper must be paid. As always, Doc also chronicles the cycles in the usual intraday, short term, and intermediate outlook and tells us where this shipwreck is heading, with hot pictures of naked stock charts, Uncle Buck and the Golden Stool. Now there's a real bull market.? If you're not a stoolie already, become one Now! And don't forget to join Doc during the market day in Stooltrading Beta as he plots the market's twists and turns for you, in advance yet!
DrStool Posted January 25, 2003 Author Report Posted January 25, 2003 One of the things Doc has been pounding in your Anals, is that one of the legs of the three legged capitalstool, the cash postion of the institutional nutcases, is busted. (The other two legs are furriners and the Feed. They're busted too.) Doc has been saying it for weeks. He based his conclusion on a combinaton of earlier reports of low institutional cash levels, the maniacal bullishness among portfolio sphincters appearing on Crapvision and being quoted in the financial infomercial media, along with the market's behavior in early January. It was clear to Doc that if cash levels were low in the fall, then given the wildly bullish pronouncements the idiot poodits were making, they had to have gotten even more fully invested of late. Now comes the proof. This from the venerable Alan Abelson in this weak end's Barrooms. ...from Merrill Lynch's latest soundings of sentiment among mutual fund managers. According to David Bowers, the firm's chief investment strategist (but a sensible chap nonetheless), in December more fund managers thought equities were undervalued, and even more undervalued than they did in November. At the same time, he observes, the amount of cash said managers had on hand continued to dwindle, to 4.2% on average, last month, from 4.4% in November and 4.6% in October. David reports that excluding hedge funds, "institutional and retail fund managers' cash levels are the lowest we have ever recorded."
Drano Posted January 25, 2003 Report Posted January 25, 2003 "According to David Bowers, the firm's chief investment strategist (but a sensible chap nonetheless)" Alan Abelson I love it. And people wonder why Abelson is under attack by Barrons' editors?
fxfox Posted January 25, 2003 Report Posted January 25, 2003 Oh my god, now i really start thinking about Armageddon maybe we will get an event which everyone ruled out, even we bears: A CRASH! i think it is more and more likely that there will be the day when the fed says: "damn it, this makes no sense anymore, let the stocks die!" also in mid feb there opens the time window of japanese repatriation, no one knows how much they will repatriate, but why should they repatriate less then last year for example? It is more likely they will repatriate more. There will be no capital flowsd fiorm europe, only repatriation AND even the americanos themselves will transfer dollar to switzerland and so on. This all can turn into a real nightmare very soon.
Guest Posted January 25, 2003 Report Posted January 25, 2003 Doc, You speak of low cash levels in mutual funds, is this because the fund managers are having to commit more of their cash reserves to game more stocks in an attempt to offset the already committed money locked into losing positions, therefor causing their cash reserve percentage to decline? That is, the mutual funds are losing more money with their existing positions than can be offset from the combination of (probably declining) cash inflows from 401k plans, and/or from the winners in their portfolios that traditionally helped build up the cash reserves? The result being the fund managers are committing even more of their limited cash reserves to buy stocks, etc., in a desperate attempt to bolster their funds. It would appear that the mutual funds are approaching the point where they may be forced to SELL some existing positions just to generate the cash (to replace the declining cash reserves) and to give them some flexibility, otherwise they may lock up (so to speak) from lack of liquidity. Is this somewhat accurate or am I all wet on this?
Guest Posted January 25, 2003 Report Posted January 25, 2003 It would appear that the mutual funds are approaching the point where they may be forced to SELL some existing positions just to generate the cash (to replace the declining cash reserves) and to give them some flexibility, otherwise they may lock up (so to speak) from lack of liquidity. Is this somewhat accurate or am I all wet on this? I could be wrong, but the "rational" selling of stocks by mutual funds back in Oct. '87 play a large part in that hiccup. I am of the opinion that these fund companies do not want a repeat performance, which is why they are willing to take more risks and hold losing stocks in the process. I wonder what they really talk about at those mutual fund companies' powwows.
Hypertiger Posted January 25, 2003 Report Posted January 25, 2003 Most likely they have already sold off alot and embezzled most of it and just make the numbers up and run the whole thing on fools money and credit. but It can't last forever... it will collapse very soon.
The End Posted January 26, 2003 Report Posted January 26, 2003 Two points concerning this thread. grot, In 87', I was on wall street then, Instead of selling stocks, MF's borrowed money to pay the redeeming clients. Why did they do that? Becuase they thought it was a short term event. They were correct. This time, will they do the same? This will not be a short term event, IMHO. In regard to the low cash levels. I think it mainly has to do with the managed funds trying to keep up with, the still very popular index funds. They cannot compete with high levels of cash. IMHO, that will be their undoing. One more thought. Did my fellow stoolies know that there are more people invested in stocks today than at the peak? That is the scariest thought of every scary thought i have seen. No fear for the future. The MF industry should be blamed for this but, also everyone who believed the bullshit.
Pretzel Logic Posted January 26, 2003 Report Posted January 26, 2003 Oh my god, now i really start thinking about Armageddon maybe we will get an event which everyone ruled out, even we bears: A CRASH! i think it is more and more likely that there will be the day when the fed says: "damn it, this makes no sense anymore, let the stocks die!" also in mid feb there opens the time window of japanese repatriation, no one knows how much they will repatriate, but why should they repatriate less then last year for example? It is more likely they will repatriate more. There will be no capital flowsd fiorm europe, only repatriation AND even the americanos themselves will transfer dollar to switzerland and so on. This all can turn into a real nightmare very soon. I'm in the crash camp somewhat. If it was ever gonna happen, it seems like now would be the time. In no particular order: 1. You've got geopolitical instability -- "event risk" is high 2. Many cycles are heading down with force in unison, including cycles longer than the 10-13 week 3. Counts seem to line up for a 3rd wave in Elliot (or a C wave, same thing) 4. Lotsa TA indicators (i.e.- MACD) have been "coiling" for months, indicating vast potential energy building, and have now broken to the downside. Large price triangle also broken to the downside (as well as large H&S topping pattern) 5. Dollar's dropping like a rock, foreign investors are pulling out in droves 6. Ma and Pa investor are at the end of their collective rope, and I think they're itchin' to pull the sell trigger like at no other time in this bear 7. Mutual fund cash at record lows (as just posted) 8. Consumer debt levels at record highs, savings at record lows 9. P/E values are still astronomically high If ever the time was ripe for a crash, this is it, imo.
Yoshaviah Posted January 26, 2003 Report Posted January 26, 2003 All well and good. Right on Doc. But, da boyz can still pull a few bucks from the bond market to ease it down or maybe give it one last jam. They can also pick up a few bucks from shorting the furrin markets. Have you noticed that they seem to be going down a bit faster than US markets? They will have to get interest rates higher with the dollar falling and gold rising. Why not blow out the bond market? Why not? Put a couple more legs on that STOOL at least for the short term.
Drano Posted January 26, 2003 Report Posted January 26, 2003 End, remember there are lies, damn lies, and statistics.... I wouldn't jump to any conclusions about there being more people who own stocks than at the peak of the mania, IF indeed that is true. Some of those people are like a friend of mine, who after years of working as an independent contractor, is now a full-time employee. This is someone who always plopped any leftover cash into a bank account. Now, there is one more person with a 401K which is invested in....you got it, the mutual fund the employer signed up with. Every year there are more people coming into the work force -- I bet some of those new "stock owners" are young people who are getting their first job with benefits suck as 401Ks, or who have IRAs and are doing what Ma and Pa and their co-workers tell them to do -- put it in some mutual fund for the long haul. Most people do not have the time or the financial knowledge to do their own investing. This is a pretty elite bunch here at Capitalstool. Most people spend most of their time on their jobs, family, and lives, and do not have the time, skills, and sometimes the intelligence to be able to research investments like the people here do. I firmly believe that intelligence is for the most part inherited. Let's have a little compassion for the average person who has already lost a lot of the comfortable retirement they thought they had earned, and who is victimized by the mainstream media which convinces them to just leave their money where it is for the recovery. I feel nauseated when I think of what's happening to most people's savings and retirement funds -- and G-d help us all if the dire scenarios many of us are posting about actually happen. This is not going to be a pleasant life for anyone if the disaster scenarios prove to be correct.
The End Posted January 26, 2003 Report Posted January 26, 2003 I would like to say that i am amazed by the intelligence of this board. I am in the game, those of you who know me, know what i mean. The average person in the game, has no clue as to what is going on. I am in the 20% (pat on back) who do. The average investor also has no clue as to what is happening and why but, they rely on the 80% of borkers who also don't know. Here at the stool, we got something completely different. 80% DO know what is going on. I understand that this a bear site but, on all other bear sites i have seen, the contributors can't really justify their bearish intent. Here the typed word of most stoolies should be seen by all and i am PROUD to be apart of it.
The End Posted January 26, 2003 Report Posted January 26, 2003 Drano, It's true. And you are absolutley in lock step with me, or i , you, when we think about our future. I sure hope something can be done. If Prechter is right then the best answer is to buy a gun and pray you don't have to use it.
Guest Posted January 26, 2003 Report Posted January 26, 2003 Two points concerning this thread. grot, In 87', I was on wall street then, Instead of selling stocks, MF's borrowed money to pay the redeeming clients. Why did they do that? Becuase they thought it was a short term event. They were correct. This time, will they do the same? This will not be a short term event, IMHO. In regard to the low cash levels. I think it mainly has to do with the managed funds trying to keep up with, the still very popular index funds. They cannot compete with high levels of cash. IMHO, that will be their undoing. One more thought. Did my fellow stoolies know that there are more people invested in stocks today than at the peak? That is the scariest thought of every scary thought i have seen. No fear for the future. The MF industry should be blamed for this but, also everyone who believed the bullshit. One more thing to add to TE's excellent post, the market peaked in August of 1987, only three months before the "Crash of '87" (which turned out to be really a correction or one day gap fill). This market's peak was almost three years ago! Not even comparable. I don't even see it all that comparable to the subsequent drops in the 1930's after the 1929 "crash." There are right now, I believe, 7 or 8,000 stock funds. I'm almost temped to start a Stoolie "dead pool" on how many and what will be left at the time this bear does finally end.
seamus Posted January 26, 2003 Report Posted January 26, 2003 Continuing on with the talking with others/those not of a sound financial background - I have been trying to advise family members for years about how to invest (not all is bad), and more so recently have been advocating selling their stock mutual funds. It seems recently I get the push off because these people have become droned by the media and I am cast as a negative person. Believe me, no one wants to be considered the wacko of the family, but I just cannot standy by and let what I consider to be robbery occur to my family and friends. Nothing is worst than postulating your position among confidantes, then hearing over your shoulder that you are a nutjob. And by disclosure, I possess an MBA, hold the CFA charter and have managed $b in fixed income funds both here and internationally (Like that makes a difference )
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