Bearish Call?

[Marc]

Hard to convince my wife that it is "safe" to be investing for retirement when she sees articles like this:

The Bearish Call to End All Bearish Calls - MoneyBeat - WSJ

I am not familiar with this analyst. I also don't believe there has been enough historical data (even going back to tulip bulbs) to claim a cycle that will foretell a 75% drop in equities. In my belief, fundamentals alone should provide a higher floor.

Please provide good arguments for me to explain away this article or provide me location of the closest prepper supply store.

Marc

 

[jflynn4]

Do a quick google search and you'll see that, back in 2011, he was also predicting a decent start to 2012 but then as much as a 60% drop after that. No idea who he is but it sounds like he's out there somewhere.

There are those who regularly predict the end of the world but, after a few misses, they disappear. Maybe it's time for the press to take that same approach on some of these guys.

 

[Ready]

We know these guys are wrong about as often as they are right. Which means anyone can predict the future of the stock market and have a 50% chance of getting it right.

 

[LOL!]

I'm laughing at why your spouse would even give one iota of respect to such a quack. I'm laughing at why the WSJ would put this out there until I realized that it creates buzz, drives eyeballs to the WSJ, and lets them charge more money for advertising or at least not less.

If the market didn't drop 75% in the recent past in the face of BearStearns, Lehmann, & other disappearances, and then the Fiscal Cliff, Sequestration, Budget Impasses, …, I don't see how anything that we have on the horizon is going to make it drop 75% this year.

But no worries, just wait a week or two and the WSJ will have another article, but this with the title "The Bullish Call to End All Bullish Calls -WSJ".

 

[CaliforniaMan]

Hard to convince my wife that it is "safe" to be investing for retirement when she sees articles like this:

The Bearish Call to End All Bearish Calls - MoneyBeat - WSJ

...
Marc

In my opinion just another guy trying to convince the public he can foresee the future of the market using 'cycles' and 'trend' lines so he can make a buck off of them. We could spend all of our time trying to "provide good arguments ... to explain away" these kinds of articles, but another one comes along ever minute, so what is the point?

Unfortunately no one has ever shown any method to predict future prices using a market's past price history. A good place to start reading about this is "A Random Walk Down Wall Street" by Burton Malkiel.

As for trying to convince her it is safe, I would never even try to go there. Ask me Dec 2014, then I will tell you for certain if it was safe to invest in Jan 2014. Other than that, neither Zimmerman, nor I, nor anyone else knows whether it is safe now.

All we have are guesses about future probabilities from what has happened in the past. That is it.

 

[growing_older]

If you want the coverage, you have to say something more outrageous than the other guys. Too bad being right is such a small part of whether he is successful or not.

 

[MRG]

Since I've been a kid, some bunch of id10ts, have claimed the world was going to end on ......

Since I've been investing, I've heard an equal number of id10ts, saying the same junk about the market.

Really if the author knew it all, why would they w*rk? They would just go short, and hang with the top 1%.

Sad to see marketing pass as advice.
MRG

 

[Alan]

In Romania, the laws for wrong predictions are pretty dire,

Freakonomics » The Folly of Prediction: Full Transcript

So if you are one of my clients, and if I’m a fortune teller, if I fail to predict your future, I pay a quite substantial fine to the state, or if this happens many times, I will even go to jail. The punishment is between six months and three years in jail.

Unfortunately, even in Romania this law only applies to witches, not financial wizards.

 

[REWahoo]

No one is better at making predictions of gloom & doom than Paul B Farrell. I saved a link to his 2011 predictions of the coming apocalypse just for grins...

Our decade from hell will get worse in 2012 - MarketWatch

Love this quote:

Over the past decade we predicted the 2000 crash, the 2008 meltdown, the short-lived 2009 rally.

He made this statement in December of 2011. "Short-lived 2009 rally"? Hello, it's still going five years later.

 

[MooreBonds]

Hard to convince my wife that it is "safe" to be investing for retirement when she sees articles like this:

The Bearish Call to End All Bearish Calls - MoneyBeat - WSJ

I am not familiar with this analyst. I also don't believe there has been enough historical data (even going back to tulip bulbs) to claim a cycle that will foretell a 75% drop in equities. In my belief, fundamentals alone should provide a higher floor.

Please provide good arguments for me to explain away this article or provide me location of the closest prepper supply store.

Marc

Your wife didn't read far enough into the article:

What will it take to prove Mr. Zimmerman wrong? He said a “decisive monthly close above 17150.25″ for the Dow in 2014, and above 1924 for the S&P 500 and 4537 for the Nasdaq, would be needed to derail the bearish scenarios.

So he's seeing a 75% drop in equities....unless the markets rise even more, in which case we're somehow safer!?!?!

So let me get this straight - he thinks the market is overvalued, so it's virtually guaranteed to drop 75% - but if the market keeps going up, then it somehow has enough staying power to simply stay at that level for good and never drop 75%??

If the market is overvalued because it's the "bubble to end all bubbles" (as Zimmerman says), then why would the bubble somehow disappear if it goes EVEN HIGHER? Wouldn't that make a bubble on top of a bubble, and set the stage for an even larger 85% drop?

Also, even if equities did drop 75% - that would place earnings at roughly 4 times next year's earnings. Barring a zombie virus changing 1/3 of the population into zombies, I don't see the economy changing substantially enough to impact corporate earnings. And if equities did drop to 4 times earnings, it would be the buying opportunity of truly epic proportions. Does she really think companies would be priced at just 4-5 times earnings, yielding 8%-15%+, with interest rates at these levels, for longer than a blink of the eye?

 

[audreyh1]

It's so easy for an inexperienced investor to get spooked out of the markets.

So many times in the early 90s I got spooked out - or, rather, hesitated to add new money, including a minor scrape with selling at the bottom in 1991 due to the Gulf War. There was always some dire event right around the corner. I still remember all the nervous nellies after the 1994 correction.

This was funny, because during the 80s I ignored the markets completely. I didn't even know 1987 had happened until way later. My 401K additions were steadily invested with me none the wiser other than occasionally pleasantly surprised by a growing portfolio.

Finally, I got wise to the pattern and realized that there would always be someone in the media loudly screaming imminent Armageddon. I also noticed how many times the dire predictions failed to come to pass. The outcome was always not what anybody had predicted.

So by the later 90s I realized that I just needed a simple investing system that didn't rely on market predictions or any attempts at market timing.

People who wait for "the air to clear" usually end up with a much appreciated market once everything seems "safe". And it's when things seem most "safe" that the plunge might be right around the corner. That is the nature of market psychology.

If you are still in accumulation phase, select an AA and keep adding money steadily. Ignore the short term noise.

 

[Ready]

If you are still in accumulation phase, select an AA and keep adding money steadily. Ignore the short term noise.

And if you are no longer in the accumulation phase, then what?

 

[audreyh1]

And if you are no longer in the accumulation phase, then what?

When you retire, select an asset allocation (AA) that lets you sleep at night. Think about long term risks (inflation) as well as short term risks (volatility) when you select this target.

Then rebalance as needed when your portfolio moves away from the target allocation, no more than once a year.

If market volatility really scares you consider having some extra cash in short-term funds to help with expenses for the next year or two.

Then ignore the financial media and let your AA rebalancing take care of itself.

 

[zedd]

When you retire, select an asset allocation (AA) that lets you sleep at night. Think about long term risks (inflation) as well as short term risks (volatility) when you select this target.

Then rebalance as needed when your portfolio moves away from the target allocation, no more than once a year.

If market volatility really scares you consider having some extra cash in short-term funds to help with expenses for the next year or two.

Then ignore the financial media and let your AA rebalancing take care of itself.

On a similiar note, would recommend Bill Bernsteins "Deep Risk". Many of the same suggestions Audrey raises

 

[Ready]

When you retire, select an asset allocation (AA) that lets you sleep at night. Think about long term risks (inflation) as well as short term risks (volatility) when you select this target.

Then rebalance as needed when your portfolio moves away from the target allocation, no more than once a year.

If market volatility really scares you consider having some extra cash in short-term funds to help with expenses for the next year or two.

Then ignore the financial media and let your AA rebalancing take care of itself.

Well, I've done all those things. Ignoring the financial media can be quite challenging, especially now that I have all this free time in semi-retirement. And I don't sleep all that well at night, but I don't think it's related to market worries. I'm told it's just part of getting older.

 

[target2019]

Hard to convince my wife that it is "safe" to be investing for retirement when she sees articles like this:

The Bearish Call to End All Bearish Calls - MoneyBeat - WSJ

I am not familiar with this analyst. I also don't believe there has been enough historical data (even going back to tulip bulbs) to claim a cycle that will foretell a 75% drop in equities. In my belief, fundamentals alone should provide a higher floor.

Please provide good arguments for me to explain away this article or provide me location of the closest prepper supply store.

I see this as a technical analysis wherein the analyst draws a clear picture of his interpretation of what the indicators predict. There will be another peak soon, and the indicator line shows a very low bottom to come. If the market breaks through the upper resistance line, then the upper line pattern is broken, and there is large step up.

In this analysis, he is covered either way. I guess that is the inside joke, of sorts.

 

[seraphim]

Think of the buying opportunity a 75% drop would provide! Lol

Just for fun, on the Morningstar site, Christine Benz asked readers to 'predict' the market in 2014. We got results from -18 to +26, I think. Crystal balls must be malfunctioning...

 

[Fermion]

We are planning to ER in 2015 but I would jump for joy for a 75% drop in 2014 as we have not burned any bridges at work. I would hunker down and continue our job for a few more years, apply for a new mortgage on our paid off house and go margin on SPY and BRK-A for about $1,000,000. On the v-shaped recovery I would have a few extra million in the bank!

 

[haha]

We are planning to ER in 2015 but I would jump for joy for a 75% drop in 2014 as we have not burned any bridges at work. I would hunker down and continue our job for a few more years, apply for a new mortgage on our paid off house and go margin on SPY and BRK-A for about $1,000,000. On the v-shaped recovery I would have a few extra million in the bank!

With your joy jumping you would be one popular mofo on this board.

Ha

 

[clifp]

It's so easy for an inexperienced investor to get spooked out of the markets.

So many times in the early 90s I got spooked out - or, rather, hesitated to add new money, including a minor scrape with selling at the bottom in 1991 due to the Gulf War. There was always some dire event right around the corner. I still remember all the nervous nellies after the 1994 correction.

This was funny, because during the 80s I ignored the markets completely. I didn't even know 1987 had happened until way later. My 401K additions were steadily invested with me none the wiser other than occasionally pleasantly surprised by a growing portfolio.

Finally, I got wise to the pattern and realized that there would always be someone in the media loudly screaming imminent Armageddon. I also noticed how many times the dire predictions failed to come to pass. The outcome was always not what anybody had predicted.

So by the later 90s I realized that I just needed a simple investing system that didn't rely on market predictions or any attempts at market timing.

People who wait for "the air to clear" usually end up with a much appreciated market once everything seems "safe". And it's when things seem most "safe" that the plunge might be right around the corner. That is the nature of market psychology.

If you are still in accumulation phase, select an AA and keep adding money steadily. Ignore the short term noise.

One of the smartest things I did was starting listening to Warren Buffett even before I owned the stock. In 1987 after the Oct crash, Buffett told people they should buy stocks.

In the summer 1999, he told people that we are in bubble and this will not end well.

In Oct 2008, he published an OP Ed in the NY Times telling folks to buy stocks.

During the 25 years he has said many things, but on the direction of the market he tends to be pretty cautious making predictions.

Now one of these days on the major market moves Warren maybe wrong but honestly I think he'll be dead first.

There are other folks who I pay attention, including several board members, but as general rule, if the person making the prediction ain't well on his way to become billionaire, I don't put much stock in their forcasts.

 

[HFWR]

Total bull****, but if this guy is "very" short the market, I'd at least believe he has the courage of his convictions...

 

[Fermion]

Total bull****, but if this guy is "very" short the market, I'd at least believe he has the courage of his convictions...

Of course it is bull****. The guy could buy Jan 2015 SPY $140 puts for only $2.35 each. When it falls 75% to $46 those puts would be worth $94 each.

That is a gain of almost 4000%

He could invest $50,000 and make $2,000,000 and never have to write another fake, crappy, bull**** article again in his life. We could tell him how to arrange the $2,000,000 to ER if he becomes a forum member.

 

[haha]

Of course it is bull****. The guy could buy Jan 2015 SPY $140 puts for only $2.35 each. When it falls 75% to $46 those puts would be worth $94 each.

That is a gain of almost 4000%

He could invest $50,000 and make $2,000,000 and never have to write another fake, crappy, bull**** article again in his life. We could tell him how to arrange the $2,000,000 to ER if he becomes a forum member.

Do you know that he did not do this? I just looked at the open interests in various long duration put contracts, and there is plenty open interest in various strikes to accommodate him.

Also, if I were young guy, I'd like to have that $2mm that you mention, but I also think that I would not want to trade a well paid, easy job where all I had to do was go beyond my certain knowledge from time to time. We do it all day every day here, for no pay at all.

Ha

 

[karluk]

Mr. Zimmerman has been dispensing worthless advice for years now. Without even looking hard I found his prediction from December, 2011, in which he fearlessly predicted that the S&P 500 would fall to 579.57 by the end of 2012. The five signficant figures in his target number are a nice touch - he can't even get the direction of the market right, but that doesn't prevent him from predicting the closing price a year in advance to the nearest 1/100 of a point.

His quoted remarks are quite amusing in retrospect for how thoroughly clueless he was in reading the economic tea leaves.

I also see that both the recent article and the one from 2011 were written by Tomi Kilgore of the WSJ. I don't want to question Kilgore's journalistic integrity, but quite frankly this strikes me as at best lazy and at worst totally cynical. Kilgore seems to have made Mr. Zimmerman his official spokesman from the bearish camp and knows that whenever he needs a sensational headline, Mr. Zimmerman will be there to provide it - no disclaimers required, even though Kilgore knows that Zimmerman has been spectacularly wrong in the past.

He expects 2012′s price action will mirror what the S&P 500 did from its Oct 2007 peak until it bottomed in March 2009.

“The technical patterns suggest that 2012 will be a terrible year for holding stocks. Even if by some miracle the euro zone hangs together, it is already falling into a deep and enduring recession,” says Zimmerman. “We expect this recession will drag down both the USA and China.”

S&P 500 Falling Below 600? This Will Even Make The Bears Shudder - MarketBeat - WSJ