'Suckers rally' to fade

[Kubes.SG]

My sentiments exactly.   This also applies to the idiotic run up in sales of crappy little mass-market private property.  Oh the humanity !

'Suckers rally' to fade
      
HONG KONG - WELL-KNOWN economist Nouriel Roubini, one of the few experts to foresee the current global crisis, said on Tuesday a 'suckers rally' in stock markets would fade as the US economy continues to wither and the financial system suffers unexpected shocks.

Mr Roubini, a professor at New York University's business school and former adviser at the US Treasury Department, also said he expected China's economy to grow up to 5.5 per cent this year, missing the government's 8 per cent target.

Hopes the world economy will stage a faster recovery this year have fueled a six-week rise in global markets, with major benchmarks on Wall Street and in Asia up more than 20 per cent over just six weeks. But Prof Roubini was doubtful and predicted markets would test the lows seen in March.

'For people who say there are green shoots, I see only yellow weeds frankly,' he said at a conference in Hong Kong. 'It's not a true recovery. It's just a bear-market rally, it's a suckers rally.'

That's because the US economy will still be contracting toward the end of the year and won't grow again until 2010, he said. Unemployment will hit 11 per cent next year and corporate earnings will come in worse-than-expected, he predicted.

Troubles in the financial sector, meanwhile, are far from over and will be worse than many expect. The results of the government's 'stress tests' will show even the biggest 19 American banks don't have enough capital to cope with the huge losses they'll inevitably suffer on souring loans.

'The losses are much more than people are predicting and (the banks) have not reserved enough,' Prof Roubini said. 'It looks ugly for every one of those 19 banks, let alone the smaller ones,' he added. 'So it's going to be ugly for the financial system.'

In Asia, many investors are betting China's growth will help pull other markets from their slump. Prof Roubini said a tentative recovery in China's economy would be hard to maintain long-term because it was largely the result of government measures rather than a fundamental shift in domestic spending habits.

'They can buy some growth in the first half of the year ... it's not sustainable growth,' he said.

Prof Roubini was participating in an investor conference panel along with Kirby Daley, a senior strategist at Newedge Group brokerage in Hong Kong. -- AP

[Cut & Paste]

 NEW YORK - WALL Street snapped back on Tuesday from bruising losses a day earlier as comments by US Treasury Secretary Timothy Geithner eased market fears about the health of the banking system.

The Dow rose 124.57 points (1.59 per cent) to 7,966.30 at the closing bell as the market shook off a weak start.

The tech-heavy Nasdaq rallied 35.64 points (2.22 per cent) to 1,643.85 while the broad-market Standard & Poor's 500 index advanced 17.29 points (2.08 per cent) to a preliminary close at 849.68.

The action came a day after a plunge of more than four per cent in the broad S&P index in a market gripped by fear about the outlook for the economy and earnings.

The market opened lower but swung higher 'after Mr Geithner said that the 'vast majority' of the nation's banks have more capital than needed,' said Al Goldman at Wachovia Securities.

The S&P bank index rallied some 10 per cent in late trade, recouping a large chunk of Monday's losses.

JPMorgan Chase rose 9.6 per cent, Citigroup jumped 10.2 per cent, while Goldman Sachs rose 4.7 per cent.

Morgan Stanley added 4.8 per cent ahead of its quarterly results on Wednesday. -- AP, AFP

[Still a Suckers' Rally]

The market is just speculating, choosing to listen only to what sounds like good news and finding an excuse to rally. But the professionals know that the rally cannot be sustained because the banks are still technically insolvent without the govt backstopping losses. Even Goldman Sachs cannot survive without the near zero interest FDIC backed govt loans (which they have taken some $30bn so far). Note that Goldman Sachs is merely offering to return the $10bn TARP it took (so that it could pay out the $5bn bonuses that it has provisioned for), but will not give up the privilege of borrowing more zero interest FDIC backed loans (and of course, they will not return the $13bn that it took via AIG's bailout). That's because $10bn is a small finite sum with lots of strings attached, but the FDIC backed loans is technically, limitless and can be quietly borrowed to paper over its losses. Does this sound like a highly profitable bank? It is a zombie to all intents and purposes because it cannot survive without more capital infusion by the govt. All the banks would probably be reporting losses by the next quarter...it's almost a given. So on the whole, it is still a suckers' rally because it is not underpinned by sound fundamentals. Btw, no one has really come up with a good reason why banks should rally back to their old valuations, while they are sitting on their illiquid toxic waste (which probably would be removed only through fraud and gaming PPIP and sticking the bill on taxpayers). The banks should have been allowed to fail...that's what capitalism is about. If the banks want to operate free of govt intervention, it should not expect to be bailed out through govt intervention. Since one of the arguments of loosening regulations that it is not possible for banks to become 'too big to fail' due to inherent checks and balances in the free market, then the argument that banks that are 'too big to fail' is utter rubbish because there cannot be any bank that could possibly be 'too big to fail' in a free market....according to the ideology of free markets. This whole thing unfurling in front of us is a circus and pure hypocrisy.

[great post]

PP this is gold well done

[boo hoo]

3 stages of a bear market rally:

Stage 1 - market reacts positively to any news including bad news because it has been beaten up so badly.

Stage 2: many proclaim that its a bear rally and that it has no legs (where we are now).

Stage 3: "All clear! Better buy now else we will miss the boat".

[Vulcanl]

Reply #2 refers to the US equities market and I agree with all of its contents.  We need to get used to the fact that EM Asian equities performance has decoupled from the USA:

Month   MSCI EM Asia   S&P 500   
Sep-08   301.32      1,166.36   
Oct-08   228.54   -24.2%   968.75   -16.9%
Nov-08   212.15   -7.2%   896.24   -7.5%
Dec-08   235.84   11.2%   903.25   0.8%
Jan-09   220.36   -6.6%   825.88   -8.6%
Feb-09   206.01   -6.5%   735.09   -11.0%
Mar-09   238.65   15.8%   797.87   8.5%

2009 YTD to Q1   1.2%      -11.7%   

Sep 08 to Q3 09   -20.8%      -31.6%   

Source: Bloomberg

As the facts above indisputably show, EM Asian equities have alreaady recovered better than US equities.  As a matter of fact they are actually up for the year.  This is no sucker's rally in Asia.  We have seen a solid 6 months worth of outperformance relative to US equities.

[boo hoo]

Actually your table just shows that the two are pretty well correlated. Outperformance is not decoupling - decoupling is when Asia can still grow strongly while the rest of world is mired in trouble.

For you, you are clearly in the 3rd stage of the bear rally heeehee

[Vulcanl]

"...decoupling is when Asia can still grow strongly while the rest of world is mired in trouble..."

This is precisely what equities markets are expecting: Asia will start to grow again by Q3 of this year. 

Investors like me who purchased Asian equities earlier this year have been rewarded thus far. 

At this stage I do not need to repeat myself - the facts speak for themselves.  You may interpret the data any way you please but it does not change the reality.

[boo hoo]

And investors who got out of equities in 1Q2008 are even better off ahhaahaa! Like me!

[total muppet]

Reply #2 refers to the US equities market and I agree with all of its contents.  We need to get used to the fact that EM Asian equities performance has decoupled from the USA:

Month   MSCI EM Asia   S&P 500   
Sep-08   301.32      1,166.36   
Oct-08   228.54   -24.2%   968.75   -16.9%
Nov-08   212.15   -7.2%   896.24   -7.5%
Dec-08   235.84   11.2%   903.25   0.8%
Jan-09   220.36   -6.6%   825.88   -8.6%
Feb-09   206.01   -6.5%   735.09   -11.0%
Mar-09   238.65   15.8%   797.87   8.5%

2009 YTD to Q1   1.2%      -11.7%   

Sep 08 to Q3 09   -20.8%      -31.6%   

Source: Bloomberg

As the facts above indisputably show, EM Asian equities have alreaady recovered better than US equities.  As a matter of fact they are actually up for the year.  This is no sucker's rally in Asia.  We have seen a solid 6 months worth of outperformance relative to US equities.

You really are hilarious.

Correlation between those percentages is 96.8%.

Even an idiot like you who doesn't understand correlation that can't claim it isn't high.

So much for decoupling.  Performance (short term) - yes, decoupling - you just totally shot yourself in the foot.

[Vulcanl]

You don't want to talk about clear facts that the layman can understand, so of course you resort to technobabble about correlation. 

Look at the data - it is staring you in the face!  returns and PERFORMANCE are what matter to the average investor, not correlation.

You need to be more humble.  My detractors are being proven wrong.  I was and am right about decoupling.  It is happening as we speak.

I WAS willing to let this go and felt I had said enough about the topic.  Geniuses like you might convince me to make my point in a stronger fashion.

[Beavis]

Vulcan's conclusions are "facts", ours merely "interpretations". 

Mr Market has been foaming-at-the-mouth crazy lately, as if a couple of months of outperformance prove anything.  There are all kinds of reasons for why markets may move that have nothing to do with fundamentals.  At this moment the markets are little more than a giant gambling arena for momentum-chasers.  And no, I'm not sore, I'm up almost 50% since early March, but let's call it what it is.  As for the Chinese recovery, they're basically back to being a command economy, let's see where that leads.  Way too early to crow over that.  For all we know, those loans that banks have been forced to make are just being added to fuel the stock market. 

[boo hoo]

Sure, dismiss everything you don't understand or doesn't suit your thinking as technobauble.

Correlation is simple - if A goes and and B goes up, or if A goes down and B goes down they are correlated (coupled). If they don't move up and down together then they are not correlated.

Also, making money on some S-chips doesn't prove you right about decoupling (you are really fond of proclaiming that you are right, aren't you?).

[total muppet]

You don't want to talk about clear facts that the layman can understand, so of course you resort to technobabble about correlation. 

Look at the data - it is staring you in the face!  returns and PERFORMANCE are what matter to the average investor, not correlation.

You need to be more humble.  My detractors are being proven wrong.  I was and am right about decoupling.  It is happening as we speak.

I WAS willing to let this go and felt I had said enough about the topic.  Geniuses like you might convince me to make my point in a stronger fashion.

Just because you don't understand doesn't make it technobabble.  Merely means you are too thick to use the excel "CORREL" function or dropped out of school early.

It has out performed over 6 months, whooppee.  Do you know what beta is by the way?  As another poster pointed out, decoupling is about correlation not performance.  I could give a specific example but it would confuse you too much.

You haven't been proved right about anything.  You claimed you were then had your thread locked on the basis someone somewhere agreed with you stopping anyone debating it.  China is trying to boost domestic consumption, doesn't mean it will work (read Kubes post - an eminent economist who thinks you are dead wrong).

Let me give you a clue, you will be proven right IF and WHEN they succeed, not when they claim they will TRY to.

I would let it go if I were you, every time you try and say anything you put your foot in it.

[Vulcanl]

Comedians...I am laughing at you.  This not 'a few months' we are talking about...it goes all the way back to 1998.  Go see the 'decoupling' thread that I decided to lock.  It's all there, explained to you in clear terms anyone can understand.

You can try and hide behind overly complex explanations to suit your biased opinions.  The bottom line is there, plain as day.

And don't worry, I am still here to point out FACTS.