Market resembles recession

and by "market resembles recession" i meant "market resembles depression"

the charts look fugly!

Market did a great job predicting the housing bubble and the Tech Bubble. I don't see much value in looking at stock prices as any kind of indicator. Bond spreads and currencies, and commodities are far better and those are not perfect.

Stock Market is nothing more than the sum total of a bunch of momentum and high frequency traders, so if these two long term investor classes have something to say, why would any intelligent person listen? Unless you mean to say , less people are playing in the Casino these days.

http://www.ritholtz.com/blog/2010/07/tbp-deja-vu-all-over-again-post/

Some more charts. ISM relationship to employment is also bearish. Implies that the growth in employment, as much as there is, has already been achieved.

I would have to agree second half and more importantly 2011 could be ugly. We have the hit to the economy from Obama's moratorium on drilling, the stimulus hangover(housing, cash for clunkers and other credits), the expiration of Bush' tax cuts which is really an increase in 2011 ,effects of Obama health bill and the end of the inventory adjustments.

Ever notice how taxes are levied in order to augment a budget shortfall and never passed with a "sunset provision" meanwhile every tax break inherently has one?

Scary times are ahead. Maybe I'll move back in with mom...

http://www.usatoday.com/money/industries/telecom/2006-05-25-phone-tax_x.htm

A pesky, century-old tax on your phone bill is finally being put to rest.

The Treasury Department said Thursday that it will no longer collect a 3% federal excise tax on long-distance calls and would refund about $15 billion to taxpayers.

The tax was imposed in 1898 to help pay for the Spanish-American War. It was designed as a tax on wealthy Americans, back when phone service was considered a luxury.

"It's not often you get to kill a tax, particularly one that goes back so far in history," Treasury Secretary John Snow said.

But if they had a sunset on augmented taxes how could they decide for you how to spend the money?

As to things that will be with us forever, my favorite is still the war-time emergency rent stabilization laws. (People forget that it was because we finally had GROWTH then and rents were rising after being depressed in the '30's. Seems there is a correllation between employment and rents. Who knew?)

My personal favorite: legislation that fails to benchmark economic metrics (income levels, etc.) Sure it's great to be able to offer advantages to low income households but doesn't the definition of a low income household vary through time and space? Much like accountancy, we build a world which is just flawed enough to ensure that we'll have work to do in the future...

90---Riversider, the truth is by the time the long distance excise taxed was eliminated in 2006 the number of traditional long distance "toll calls" had already declined substantially. Even phone traffic that isn't on cell or VOIP connections is overwhelmingly on a flat rate billing plan. So this tax elimination was a very hollow victory, kind of like eliminating a tax on carriage horses.

I�m no stock market expert but i�m a firm believer that whatever goes up to much too quickly is due to a severe correction. It was true with the dot com era, true with the housing bubble and shall be true with the stock market in the next few month. Don�t tell me that the dow going from 6500 to 11000 in 1 year without any solid fundamental is something to be considered normal...

Don�t tell me that the dow going from 6500 to 11000 in 1 year without any solid fundamental is something to be considered normal...

...
It is not normal, nor atypical of the stock markets clairvoyance....

Here is a story that makes N. Roubini look like the original optimist. A guy with a track record calling for a very, very dismal market. But the interesting thing is that at the end of the column is another story about the screw up at AXA that hasn't been explained, just the top guys quitting. AXA holds a formidable amount of annuities for investors and baby boomers. If they withdraw all that money from the market due to the "cover up", the prophesy of the first article make be fulfilled sooner than even the author would suppose.

http://www.nytimes.com/2010/07/04/your-money/04stra.html?emc=eta1

Yeah, it's hard to know what to do. Being all cash for over a decade is not necessarily the wise thing to do either (wait, I've already been in cash for the better part of a decade).

The thing we have to remember about making moves in today's market is the difference in velocity. We've Monday morning quarterbacked the Great Depression to death and thought we'd learned something from it. With the amount of AI trading that goes on today, we might not even have time to recognize and react to a cataclysm.

Right now the banks are not lending due to regulatory pressure to maintain capital ratios. The Fed routinely see-saws between jawboning the banks toward loose lending and high capital ratios. At some point the pressure will change from high reserves and move to loose lending and when they do all those zeros that have been added to banks balance sheets will circulate and cause a great deal of inflation. I would position a portfolio to be ready for higher rates with the understanding that it is not possible to predict the exact timing. With a ten year yielding less than 3% and the thirty year yielding less than 4% seeking the safe haven of risk free bonds, just winds up being a purchase of return free risk. Stocks will not deliver the returns in this environment either. The financials have make believe balance sheets and rising taxes will not be great for corporate profits.