They Never Learn
I read Bill Fleckensteins Contrarian Chronicles, they say he's a perma bear, I think he's a realist....the following is a gem from one of his columns.
Over the past couple of weeks, this market has reminded me of a few earlier markets. There seems to be an eerie lack of upticks, while the downward pressure is relentless, though not yet serious enough to be visible to the masses. . . . I'm not predicting a crash, but such an event seems overdue, and there are a few subtle hints showing up.We have not had a real crash since 1987.
The “old” versions of a crash used to take eight to 12 weeks, with losses in the major averages running from 25% to 40% over that time frame. . . . However, in addition to the 25% to 40%, multiweek “crashes,” there are numerous examples of 15% to 20% drops throughout market history. . . .
All crash patterns contained a common thread: Day after day, week after week, the market just “leaked,” while those waiting for that elusive uptick sat there growing more fearful each day and losing their patience. Then, “things” would begin to accelerate a bit as sellers started to step up and cancel limit offerings, in favor of market orders. . . .
Virtually all the so-called “professional” money managers running OPM lack any real historical perspective regarding the nature of crashes. Their education/experience has been gained in a bubble environment of endless optimism. They simply have no idea of what real fear looks like or how it manifests itself in the general market. Furthermore, they lack any sense of values, having abandoned rational thought processes in favor of momentum styles, whereby chasing motion pays the bills.
However, “momentum” thinking produces positive results only in a bull market. When the beast turns south, there is no value anchor to stabilize the price structure, so the decline rapidly becomes mentally open-ended, reinforcing the sense of panic. So far, all these ingredients have not manifested themselves in a post-bubble decline.
Optimism has remained high, “players” keep coming back to the ”stuff” that worked during the bubble -- chasing tech, Internet junk, anything designed for speed. This is a classic sign that no one ever learned anything from the 2000-2002 decline.
They still ”believe” the ”long-term-will-bail-you-out” nonsense. Before the broken bubble bottoms, we will likely see multiple crash events of 15%, 20%, 25% or more, all entirely within normal, historical expectations.
Full Text at: Contrarian Chronicles - Bill Fleckenstein
http://moneycentral.msn.com/content/P90635.asp
Over the past couple of weeks, this market has reminded me of a few earlier markets. There seems to be an eerie lack of upticks, while the downward pressure is relentless, though not yet serious enough to be visible to the masses. . . . I'm not predicting a crash, but such an event seems overdue, and there are a few subtle hints showing up.We have not had a real crash since 1987.
The “old” versions of a crash used to take eight to 12 weeks, with losses in the major averages running from 25% to 40% over that time frame. . . . However, in addition to the 25% to 40%, multiweek “crashes,” there are numerous examples of 15% to 20% drops throughout market history. . . .
All crash patterns contained a common thread: Day after day, week after week, the market just “leaked,” while those waiting for that elusive uptick sat there growing more fearful each day and losing their patience. Then, “things” would begin to accelerate a bit as sellers started to step up and cancel limit offerings, in favor of market orders. . . .
Virtually all the so-called “professional” money managers running OPM lack any real historical perspective regarding the nature of crashes. Their education/experience has been gained in a bubble environment of endless optimism. They simply have no idea of what real fear looks like or how it manifests itself in the general market. Furthermore, they lack any sense of values, having abandoned rational thought processes in favor of momentum styles, whereby chasing motion pays the bills.
However, “momentum” thinking produces positive results only in a bull market. When the beast turns south, there is no value anchor to stabilize the price structure, so the decline rapidly becomes mentally open-ended, reinforcing the sense of panic. So far, all these ingredients have not manifested themselves in a post-bubble decline.
Optimism has remained high, “players” keep coming back to the ”stuff” that worked during the bubble -- chasing tech, Internet junk, anything designed for speed. This is a classic sign that no one ever learned anything from the 2000-2002 decline.
They still ”believe” the ”long-term-will-bail-you-out” nonsense. Before the broken bubble bottoms, we will likely see multiple crash events of 15%, 20%, 25% or more, all entirely within normal, historical expectations.
Full Text at: Contrarian Chronicles - Bill Fleckenstein
http://moneycentral.msn.com/content/P90635.asp
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