Saturday, May 31, 2008

Shiller about Shiller

Interesting interview with Robert Shiller about the U.S. economy and the Great Depression.

The S&P/ Case Shiller Home Price Index
As discussed in the interview, a major fall the last months and there are no direct signs of a turning yet.

Friday, May 30, 2008

After sunshine comes rain

After the last weeks sunshine over stocks known as a bear market rally, it seems like it has come to an end. According to Morgan Stanley we are in for some rain, but not as much as in March. What we have seen since the bottom in late January is the so called "Fase 1" in the stock business cycle. We have seen the usual bear market rally driven by interest rate reductions. People tend to forget all the larger problems around them and focus on the interest rate which now is probable the have hit its lowest point for a while. This will result in the next fase, which is the fase when people realise that the economy isn't as healthy as they though. Of course it is different from decline to decline, but this time it is the earnings that are the interesting part. The market is focusing on the oil price at this very moment, but as soon as Q2 sets in, I am certain that the eye will concentrate more on the falling earnings than the northgoing oil.

Thursday, May 29, 2008

Major Bear Market

A picture says more than a thousand words, and this picture indicates that we are in for a long bear market. The average longterm bear markets has lasted for approximately 18,5 years, but since Dow Jones has new All time heights since the 2000 hysteria, the massive bear market might just have started with the credit crunch. For Sweden's OMXS30 thou, the index has not reached its 2000 ATH and with inflation at its highest level on several years which is probable to continue northwards for many years according to the author of "Hot Commodities", Jim Rogers, it's not looking so pleasant. High inflation has a statistic negative correlation to most indicies. If the picture provides a general vision of the future, we might see new heights in 10 years from now, in 2018...

New blog, new thinking

The blog has been down for a while due to lack of interest, but it is obviously up again. I've been doing some research and come up with the conclusion that since the U.S. downturn is mainly consumer-driven and the CCI has shown it's lowest point in several years the GDP development will not be, as FED has stated, a V-formed graph. Earlier big consumer-driven problems in different economies has been followed up by a U-, W- and sometimes L-formed GDP advance. This means that the period of business decline will be longer than the general public has expected and therefore so will the stockmarket.

Generally in this bear market, I advice people not to buy stocks in any industry based on a quote of Jesse Livermore; "I never hesitate to tell a man that I am bullish or bearish. But I do not tell people to buy or sell any particular stock. In a bear market all stocks go down and in a bull market they go up." Still, there are exceptions. There are always winners, even in bear markets and this time raw materials are the keyword. This afternoon important oil statistics will be revealed and will effect the oilprice in the shortterm, but in the longterm, the price can only go one way as seen over the last year. North is the way and the rest of the commodity sector will follow it.