Is there anybody else out there that would like to add a little economic or stock market commentary here? Please feel free to add some of your observations.
I just think if this economy keeps going the way it is we are in big trouble. The price of oil with its never ending climb is just starting to choke this country. Since the economic damage is only just beginning we could be in for some very big changes in the near term. The auto makers are coming out with their latest results today and it is not pretty. Ford has seen a 33% decrease in its f 150 sales. That is bad news however I dont think it is near as bad as it is going to get. I know that everybody in this country that is and has to drive trucks can very easily forgo buying a new truck in the future. It is so easy to keep a older vehicle running I do believe truck sales in the future will get much worse.
That is just one small example. Now that all types of transportation in this country is so much more expensive the whole dynamic of the economic landscaping will change. This country is so dependent on cheap oil, now that it is not cheap, the changes will slow this economy considerably.
This is not any type of recommendation however I do believe the medium to long term investors are going to see some damage to their personal accounts. This stock market could very well go down a long way from here. Just look at GM. My data goes back to 1984 and it is less than half of what it was then. Didnt there use to be a saying in America? As GM goes so goes the country.
Thanks for Listening
Rick Haines
Hello Richard,
Congrats on you systems continuing to prove themselves and the recent "staunch" outperformance versus the market.
All I can say (since most of what I look at is contained in my daily posts) is that the Nasdaq is just now very close to the 2265 late-March, mid-April low.
Falling below this would be considered a bearish technical sign.
Regards,
Gilbert
[LINKSYSTEM_30873120]
I can’t argue against much of what you say. I have several things on my radar across different timescales.
Longer term (and I’m talking multi-year) I expect the market to be significantly lower, not only will the current problems take much longer to unwind than people imagine but I also have one eye on the demographic arguments that will see the largest percentage of the population enter retirement; the baby-boomers born after WW2 that fuelled the optimism and creative drive of the 60’s as young adults and later powered the longest bull market in history as their earning power hit it’s peak will all in the next 10 years be retiring. Most market observers have known nothing but net inflows into the stockmarket but once the source of that money is gone and they become net sellers slowly drawing down their hard earned savings I believe the market will be in for the most prolonged downturn in history. It’s even possible we are witnessing the first steps of that process now as if things worsen as you suggest people will start to protect their pensions. If you had saved all your life and were just a year or two from retirement when the market started to look vulnerable what would you do?
Shorter/Medium term I am more optimistic. On a seasonal and cyclical basis election years have an amazing record of finishing strongly as candidates make negative issues at the forefront of their campaigns earlier in the year (which the media in turn exacerbates) and the slow low volume declines of the summer give way to a 4th quarter rally and new found optimism. In this regard I wouldn’t be surprised to see the market bottom in the next month and rally for the rest of the year. Additionally I live in Charlotte, NC so I get to hear a fair amount of local coverage of banking issues with BofA and Wachovia headquartered here and the contrarian in me knows that banks are without doubt the single worst predictors of financial markets and economies, so when I see them laying off thousands of employees I can’t help thinking we are closer to the bottom than the top as if their record is anything to go by they ALWAYS do two things; They react to a situation too late, and then they always overreact. So if history repeats they will be hiring people back again in 6-12mos probably at the next intermediate peak before the downturn resumes in earnest. Morale at Wachovia is absolutely dire at the moment and the market has priced in the very worst possible outcome so when they announce their results in a few weeks I can see 3 scenarios:-
if it’s better than expected the stock goes up,
if it’s in line it’s a huge relief so the stock goes up,
if it’s worse than expected it’s almost guaranteed to get bought out by someone so the stock goes up.
What is happening with high gas prices is perhaps the best thing possible at this time. First the high prices will save us from going to the gas stations only to find they have no gas for us to fill our tanks with, but most importantly the high gas prices will force many people to think differently or in many cases to think period. When we are forced to think for survival, we can move mountains and everything will change for the better. There will be struggles ahead and the economy might suffer for a while, but as soon as the societal correction takes place there will be unimagined prosperity. We are at the beginning of a major collective shift of consciousness, and what we need the most is change, the bigger the better. Fasten your seatbelts.
Jon a buddy of mine went to some big shot speach at the money show in Las Vegas several weeks ago. According to the speaker there are several banks that are insolvent at this time. Wachovia is the worst looking one. I wouldn’t be suprised to see it go the way of Bear Stearns.
I think the quote "The market can be irrational more than you can be solvent" is pertinent
Although worrying about different industries like banks, atuomotive, exports, manufacturing, whatever might be interesting, I rarely find that the average investor, trader or even industry guru makes trading gains from it.
The market is the closest thing to all-knowing and all-seeing. In the past, the worst of times were the best buying opportunities. So it could be argued this is a great time to buy auto, airline, bank or other stocks. But it could also be the wrong time.
We only know, that the current price is a good indicator of value. It is not reasonable to say a market sector must continue upp or down. The market believes that now is correct, and it will adjust if future information becomes known. So the idea of "trade what you see" is usually correct.
Experts seem to believe people do the opposite of buy low sell hi. They in reality buy at tops and sell at lows.
Oil up is a net increase to S&P earnings. While it does “slow down” an economy, I think gas was at about $0.20 around the fifties. Then a dollar in the 80’s and 90’s. I would fully expect this to increase with inflation. Fed has its hands tied. Can’t raise rates, or the economy will slow down, and it can’t keep them the same or oil goes up. Lose, lose situation for them.
Exports will start to increase over the next several years as we stay near the dollar lows. ISM shows growth as was predicted near the beginning of his year to be above 50. The second half will be better.
Do you really think you made an economic observation, Gilbert?
Richard:
"Is there anybody else out there that would like to add a little economic or stock market commentary here?"
Gilbert:
"All I can say (since most of what I look at is contained in my daily posts) is that the Nasdaq is just now very close to the 2265 late-March, mid-April low.
Falling below this would be considered a bearish technical sign."
[LINKSYSTEM_31190907]
Beau:
"Do you really think you made an economic observation, Gilbert?"
Ross:
"He deletes my posts."
I like this argument and I very much hope you’re right. As much as I suggested there is a bubble in crude I’m not about to argue with the price action and step in front of the freight train but I have never understood the logic of the peak oil crowd. Throughout history when faced with such situations the human race adapts and changes it’s behaviour because circumstances force it to, alternative fuels or methods of transport will be developed providing no end of logistical solutions. We won’t simply blindly use up every last drop and suddenly be stranded with no alternatives once there’s nothing left. We are living in a time of great technological advances in communication and infrastructure where with a little further innovation and effort the vast majority of jobs could be done from home. Take it to it’s logical extreme, when we are down to the last ever barrel of oil in the world what do they think it will be selling for, $1 million?? If there’s nothing beyond it and alternatives have been developed the reality is it will be worth nothing because by the time we get there no-one will need it. As you said the tipping point will be when that change in behaviour begins and I believe it will coincide with oil prices having a long long downward trajectory to navigate.
what are you smoking?
Spsrt from baby boomers retiring, another long-term concern is globalization. With globalization comes equalization, particularl standar of living (S.O.L.). Now this doesn’t necessarily mean that emerging countries will see their S.O.L. rise to ours, but our S.O.L. will be lowered as well. The falling U.S. dollar is one part of this.
My “bet” is that the stock market woes will continue through the summer and fall. The market will rise dramatically (optimistically) as Bush’s term comes to an end. But, reality will strike early in the new year as the markets realize that the new leader will require tough action to get us out of this economic mess. Expect 80’s style interest rates as part of the solution.
Steve
I personally think while unfortunate as it is for those employed by those firms, that the auto makers are now sowing what they reap. Especially when it comes to GM. Back in the 90’s they had an electric car. A marvelous supreme car that had zero emissions. They, along with big oil, and the political powers of the day, ran the program into the ground destroying the car and as far as I know all the engineer plans that went along with it. GM had Toyota beat by 3-5+ or more years, but they decided along with the powers to be to continue to sell us larger than life gas guzzling supremo vehicles (the hummer!)
Toyota made a compromise early on which satisfied big oil via the “hybrid” concept, not an “all electric” which seemed to satisfy all major players - including big oil.
Go rent the movie, “who killed the electric car”… for a real eye opener.
We didn’t have to be in the situation we are in now. GM, FORD and others didn’t have to be in the shape they are in today, if they had made better choices years ago when they had the technology and the chance to do something about it before the continued crises with oil that we currently see happening.
Plus we were sold a bag of goods with ethenol and other “discussions” for alternative fuels that have all been just that, discussions, debates, if not a waste of time producing little if any results. Yes, let’s make fuel out of the same material that we need for our own food consumption (corn) to drive up the consumer prices of that product - that’s an idea that will work well for the consumer - not.
Anyway, what we need is leadership. Political leaders that will get out of the way and let innovation prevail. What we need is companies that will lead through innovation by listening to the consumer and doing the right thing when given the opportunity.
These concepts are hard if not impossible to put in place unfortunately.
I once read that democracy as a system of government is always doomed to fail, because the people always vote to pay themselves too much, ultimately bankrupting the nation.
Aspire Trader is absolutely right, I think this applies quite aptly to the US automakers. Gasoline is cheaper in the US than europe or japan, because the American people have voted for lower gasoline taxes - or rather, they’ve made it clear that they just wouldn’t stand for such taxes. The result? Predictably, the US automakers are adept at huge testosterone gas-guzzling monsters, whilst the europeans and japanese have finessed the art of the efficient and compact. Entire American cities are built entirely around the idea of the automobile, and implicitly, the idea of cheap oil.
The peak oil argument is all well and good (in fact, maybe it is peaking now), and as the previous poster said (Richard, Jon, sorry I forget who), it will ultimately sort itself out. Oil will price itself out of many uses, and alternatives will be found, and new sources will come on stream. We will survive.
The problem is, this is all going to take a long, long time. At the moment, we have no choice but oil.
