Thursday, October 30, 2008

The Common Mistake

When US markets hit new lows few days back everyone was bearish from regular analysts on CNBC to bloggers who post about markets and trends. But, there was a class of these species which thought its "the" bottom, while some thought its "a" bottom. I was in the last category and thought this should be "a" bottom for few sessions, then it will resume the downtrend and the last support is at 2002 lows.

My friend Moyo posted his views on his blog which I found quite a bit interesting. He says the markets have tested bottom and are poised for a rally, also, he says thursday (today) the data on GDP will clear things about wheather US is in recession or not. My first reaction was WHAT????? but instead of repying to that post I thought to post my detailed views here.

If one thinks the lows have been tested and a time for "sustainable" rally is here, then better go to some remote island and relax for few months. If its a vertical up move after such a big sell off, then certainly it is a bear market rally which will fizzle out sooner than later and chances of new lows are more than ever before. To all my readers: there is no BOTTOM for now. For traders, there is definitely a trading opprotunity, but for investors, its nowhere close to bottom.

As far as GDP is concerned, you should keep in mind that GDP of US of A is based on NOT the factory output BUT the consumption by people, which is illusiory by definition. How can Gross Domestic PRODUCT be higher by people buying things they don't need with the money they don't have !!! But, the fact is, people live in illusions and wouldn't listen to me and so they would believe their GDP is growing with increasing spending with borrowed money !!! All this is magic of Fiat Money combined with fat Fate.

Moyo says " Thursday is expected to be another interesting trading day, with the release of the third quarter GDP, this will help clear the air as to whether the US is in a recession or not". How come? US is definitely in recession. Why do you need more data to counter the FACT?

Anyway, what I say was not popular and I do not expect it in near future either. But, the facts can not be changed by data.

God bless America...
God bless humans...

4 comments:

  1. take a look at this post I referred to http://futurescafe.com/blog/2008/10/markets-due-for-a-major-rally/

    also I said "this will be a rally that will be sustainable in the short while", because markets are indeed due for a short term bear market rally!

    I'm hoping for the best in the economy, but I don't want to be a doomsayer either, so I try to keep my post as optimistic as possible.

    The government has been telling us all along that the US was not in a recession even when the whole world knew it, it was more sarcasm than anything else to say third quarter GDP report would "help clear things up", because then I wonder what they would say

    You sound as upset as I was when I read that the last year's inflation in the US was put at 4%....since then, i just decided to go with the flow and smile :-)

    ReplyDelete
  2. Yes, dear friend, smile works :-)

    But the essence of my post is - these are rather extraordinary times; some say its the "FIRST WORLD DEPRESSION" and I agree with them.

    The fact is all this data is of no use as long as there is no fundamental shift in policies AND we must understand that even a "correction" in policies can not avoid the gloom. In fact, if world govts are serious in correcting the root cause, still we need to suffer first and then only can the effects be realized. Its like what Volcker did in 80s, raising interest rates to historical highs. That did have deteriorating effect for some time untill ALL THE EXCESSES were over.

    Your posts are always great and visit your blog regularly to read your views...

    ReplyDelete
  3. The concept of a recession I find utterly fascinating. In the UK a recession is classed as three straight quarters on the down-turn. Not sure if this is true for other countries.

    However, recession in my eyes simply means that the fat cats, bank execs, hedge fund managers have had their fill of gluttony with the markets.

    The markets then collapse due to the masses of money they have stashed away and fluttered away.

    And who is left to pick up the pieces - Joe Public.

    I find it criminal the way the whole finance system works. The rich certainly do get richer. Now while the sso called global credit crunch kicks in, I can only wonder where these bank fat cats are right now - St Lucia, Bermuda perhaps, living it up on their yachts.

    Why should the public have to pay for other peoples/institutions mistakes. Surely if I lose money on a bad investment, then I can't expect to go to the government and ask for my money back.

    Or can I!...

    Pathetic, I really do despair at the system as a whole.

    Regards
    SolReka

    ReplyDelete
  4. Yes solreka, pathetic is right word. The system is made by the riches with the riches(with their connivance) for the riches...

    ReplyDelete

If you have arrived here from a search result, please click here to see main page where you will find the latest post