Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stocks Bear Market Rally, Examining the Facts

Stock-Markets / Stocks Bear Market Jul 11, 2009 - 12:43 PM GMT

By: Sy_Harding

Stock-Markets

Best Financial Markets Analysis ArticleIn the section of his annual letter to his stock-holders explaining why their stock plunged 32% last year, Warren Buffett said, “I did some dumb things in 2008. . . . . sucking my thumb when new facts came in that should have caused me to re-examine my thinking and promptly take action.”
Buffett doesn’t often get caught up in the problems that foil ordinary investors.


What is known in studies of human psychology as the ‘status quo bias’ is sometimes one of those problems. We humans dislike change, especially dislike having our minds changed, and usually wage an internal fight against it. When new facts are revealed that challenge our existing convictions the natural response is to reject the information as probably untrue, to accept only information that supports our current view - as in the age-old joke, “Don’t bother me with facts, my mind is made up.”

The facts certainly seem to be challenging the recent prevailing wisdom that the economy is already bottoming and will be recovering in the second half of the year. But prevailing wisdom is only slowly responding to those changing facts.

Friday a week ago the Labor Department reported 457,000 more jobs were lost in June, considerably higher than the 350,000 forecast, and a considerably faster pace of losses than May’s 322,000 jobs lost. Wall Street analysts were shocked, but only for a few hours, before responding with opinions that the report actually indicated we are near a bottom for job losses.

When June retail sales were reported on Thursday this week, and the additional declines in same-store sales were substantial, indicating that consumers are still cutting back, Wall Street spokesmen gulped and paused for only a few minutes before telling us that June sales aren’t important anyway, that what will count will be back-to-school sales in a couple of months, and they will be encouraging. The stock market actually closed up some on Thursday.

On Friday this week the University of Michigan released its Consumer Confidence Index, and it fell from 70.8 in June to 64.6 this month, another indication that the retrenching of consumers will not be even ending anytime soon, let alone reversing. Investors and traders didn’t seem to be unduly concerned, even though the hope for a quick economic recovery is based on consumer spending coming to the rescue. The stock market closed mixed, the blue chips down fractionally, and the speculative issues of the Nasdaq up fractionally for the day.

Yet some of those who led the cheerleading a few months ago that resulted in the bullish expectations that the recession is already ending are allowing the latest facts to cause them to re-examine their previous thinking.

Warren Buffett is probably one of the most prominent, all over the tube lately with remarks like “the economy is falling off a cliff”. “the economy will be in shambles this year and probably well beyond.”

The President, Treasury Secretary, and Fed Chairman are all toning down their previous optimistic remarks, which had also helped move prevailing wisdom past justified relief that the economy will not plunge into the next Great Depression, all the way to the opposite extreme of believing that the Great Recession is already ending.

Yet, while the market has been slowly drifting lower over the last few weeks, it seems very reluctant to allow facts to change its mind and factor out of stock prices its conviction that good times are only a couple of quarters away.

In February I said the prevailing wisdom had become far too pessimistic, and in the process had driven the market down to the most extreme oversold condition we had ever seen. I predicted one of the biggest bear market rallies ever would begin from those conditions and moved my subscribers from 70% cash to 70% invested within one day of the March low.

However, I also predicted it would still only be a bear market rally; that the market would return to the downside during the summer months, and that the easiest way to make profits would again be from downside positioning.

While I will be willing to re-examine my thinking if the facts or conditions change, I have certainly seen nothing in the latest economic reports to disabuse me of that expectation. I don’t expect the next buying opportunity to arrive until the September/November time-frame. By then - and it is only three or four months from now - perhaps the market will be able to look six to nine months out and legitimately see the economy actually bottomed and recovering next summer.

Sy Harding publishes the financial website www.StreetSmartReport.com and a free daily market blog at www.SyHardingblog.com.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in