Market Observations 10/02/06
We keep repeating the same mantras, "this is a redux of the 70's"... and "the more things change, the more they stay the same"...
Does anyone remember?? I do....
1973 & Today: Unwanted oil war, energy price shocks, stagflation, housing bubble, exhuberant equity & commodities valuations, ambitious M&A and LBO activity...
Overall investor complacency, China is our "friend", the Fed is tightening after dropping rates, near term money velocity increases & devaluation, and the durable economic engine - automotive manufacturing - was being emasculated...
Today: The DJIA is flirting with the 01/14/00 all time intra day 11908 & closing high 11722 as beta chasers keep running up stock prices despite warnings on multiple levels, i.e. lowered forward guidance & deteriorating micro & macro economic reports...
The housing engine is cooling, economies are slowing, commodities are falling & the last vestiges of the durable economic engine - automotive manufacturing - are being emasculated.
This market appears to be generating alot of "false" positives, weakness and a longer term downtrend can be seen since Aug 05 in retail RTH & the economic engine - housing HGX.
The old adage, "retail goes first, then transports, then industrials", comes to mind. Look at the DJTA since May 06 to witness this development.
In Jan 1973: In 71 the gold standard was removed, leading to massive dollar printing, increased velocity & devaluation. Nixons 72 breakthrough with China was hailed. The Fed had been lowering rates for 2 years, then started to raise again...
The markets started a painful annihilation that would wipe out 45% of equity valuations in 2 years.
After the late 1973 Aug/Sept "false" rally, in which investors thought they too were in a permanent bull market, the market dropped 20% in one month, one year later it was down 40%.
Granted the micro & macro conditions are "different" today, but the similarities are uncanny, and our last adage comes to mind... "those who ignore history are doomed to repeat it, over and over again."
Does anyone remember?? I do....
1973 & Today: Unwanted oil war, energy price shocks, stagflation, housing bubble, exhuberant equity & commodities valuations, ambitious M&A and LBO activity...
Overall investor complacency, China is our "friend", the Fed is tightening after dropping rates, near term money velocity increases & devaluation, and the durable economic engine - automotive manufacturing - was being emasculated...
Today: The DJIA is flirting with the 01/14/00 all time intra day 11908 & closing high 11722 as beta chasers keep running up stock prices despite warnings on multiple levels, i.e. lowered forward guidance & deteriorating micro & macro economic reports...
The housing engine is cooling, economies are slowing, commodities are falling & the last vestiges of the durable economic engine - automotive manufacturing - are being emasculated.
This market appears to be generating alot of "false" positives, weakness and a longer term downtrend can be seen since Aug 05 in retail RTH & the economic engine - housing HGX.
The old adage, "retail goes first, then transports, then industrials", comes to mind. Look at the DJTA since May 06 to witness this development.
In Jan 1973: In 71 the gold standard was removed, leading to massive dollar printing, increased velocity & devaluation. Nixons 72 breakthrough with China was hailed. The Fed had been lowering rates for 2 years, then started to raise again...
The markets started a painful annihilation that would wipe out 45% of equity valuations in 2 years.
After the late 1973 Aug/Sept "false" rally, in which investors thought they too were in a permanent bull market, the market dropped 20% in one month, one year later it was down 40%.
Granted the micro & macro conditions are "different" today, but the similarities are uncanny, and our last adage comes to mind... "those who ignore history are doomed to repeat it, over and over again."
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