tag:blogger.com,1999:blog-816559531110064247.post5217732899591759388..comments2024-03-08T01:03:44.522-08:00Comments on Humble Student of the Markets: Does the market bottom in 1Q/2Q 2009?Cam Hui, CFAhttp://www.blogger.com/profile/09672203690656029787noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-816559531110064247.post-7867023937017847892008-11-02T09:00:00.000-08:002008-11-02T09:00:00.000-08:00Hi... stumbled here somehow and from a quick look,...Hi... stumbled here somehow and from a quick look, I appreciate your perspective.<BR/><BR/>I'm more likely to think that the relief rally will end in 1Q/2Q 2009. Of course, developments between now and then will influence things. And the "bottom-fisher's paradise" of the last few weeks indicates that there were some prices that won't be available again soon. I'm seeing heavy rotation into dividend stocks. All of a sudden Pfizer is more attractive than JNJ... watch how those two fare on the next down day. I suspect the selling pressure is off, and rotation will dominate the next few months, likely with an upward bias. Retracement, consolidation call it what you want.<BR/><BR/>But the market headwinds longer term remain in place. Housing remains overpriced relative to income, and income is static at best. A generation that was pouring money into 401K's during times of low unemployment is now approaching retirement. True we've pumped up the M1 money supply, but the deflation we're experiencing is velocity deflation... and there's really no lower bound on how low velocity can go, and there no proven policy remedies for it. Eventually, increased M1 will matter, but when?<BR/><BR/>I'm wondering if we don't end up in a scenario whereby the broad economy fares about as well as it did in the 1970's, but the equity markets get wiped out like in the 1930's.Bob Khttps://www.blogger.com/profile/16483715846140238501noreply@blogger.comtag:blogger.com,1999:blog-816559531110064247.post-6260200109968441772008-10-31T18:40:00.000-07:002008-10-31T18:40:00.000-07:00Henry,Those are all very good thoughts and insight...Henry,<BR/><BR/>Those are all very good thoughts and insights. Email me with your contact details and we can talk - I am in the Vancouver area as well. I would be interested in how you reached the same conclusion.<BR/><BR/>CamCam Hui, CFAhttps://www.blogger.com/profile/09672203690656029787noreply@blogger.comtag:blogger.com,1999:blog-816559531110064247.post-60313831351479287532008-10-31T06:53:00.000-07:002008-10-31T06:53:00.000-07:00Hello Cam,Henry from Vancouver here. I used comple...Hello Cam,<BR/><BR/>Henry from Vancouver here. I used completely different methods and came to the same conclusions as you. I think you are onto something. Quick question before I go into my methodology. If small caps initially underperform, would you be buying phoenix stocks AFTER S&P 500 bottoms? Here are my 3 cents.<BR/><BR/>First, the global yield spread (10-year minus 3-month rates), not just the US yield spread, must first bottom and turn up substantially. Markets have historically bottomed 1 year and 3 months after the global yield spread bottoms, making this an excellent leading indicator. The global yield spread bottomed around November 2007, which implies a potential stock market bottom in the first half of 2009. Second, the Market Vane sentiment survey needs to reach extreme pessimistic levels. The current reading is quite pessimistic, but would require another round of sell-off to push it to an extreme level. Third, market liquidity, as measured by various corporate bond spreads, must narrow meaningfully. Past data shows that stock markets never perform well when liquidity is declining on a year over year basis. Your thoughts?Henry Beehttps://www.blogger.com/profile/12176365362835822750noreply@blogger.com