1 / 18

Crash or Bear Market? Aug 8, 2007

Crash or Bear Market? Aug 8, 2007. By Daryl Montgomery. The Bull Market Has Been Gored. Liquidity makes markets move up and the liquidity (private equity, stock buy backs, real estate loans) has dried up. Non-US Government Interest rates are skyrocketing (spread is widening).

colin-gates
Download Presentation

Crash or Bear Market? Aug 8, 2007

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Crash or Bear Market?Aug 8, 2007 By Daryl Montgomery

  2. The Bull Market Has Been Gored • Liquidity makes markets move up and the liquidity (private equity, stock buy backs, real estate loans) has dried up. • Non-US Government Interest rates are skyrocketing (spread is widening). • If there is insufficient liquidity, even good earnings will not make the market move up (the market discounts future earnings anyway) • The Federal Reserve bailing out the Credit Markets will seriously damage the Dollar. • Volatility is out of control. Short-covering rallies are the source of future upside.

  3. Recap from July Meeting • This bubble like all others will deflate.It is likely to cause a spike in Interest rates, which in turn will make the Stock Market Decline (Bear Stearns). • Sub-Prime and other iffy mortgages have been monetized and sold as multi-part bonds (RMBS). Barron’s estimates that $1 Trillion of this paper exists, most held by major financial institutions and a 7% default rate could wipe out its value. • Two million sub-prime mortgages will have theirinterest rates reset in the next several months. • Mortgage defaults are increasing rapidly even though the economy is in good shape.

  4. What is Taking Place • A number of mortgage companies have failed so far, first in Dec 2006, AHM and LUM being the latest. More will follow. • BSC has had 2 Hedge Funds Fail, 3rd in Trouble. Failure/Take Over of a Broker-Dealer possible. • Independent Hedge Funds have Failed, many more will follow. • Rumors of impending Bankruptcy for BZH. One or more Homebuilders likely to Fail. • Trouble in Australia and France. More Contagion Internationally will occur. • Market for Sub-Prime and Alt-A Debt has disappeared. It will not return. Jumbo Rates Rise.

  5. American Home MortgageOne Year Daily

  6. LUMINENT – 3 Months Daily

  7. Bear Stearns – 5 Year Weekly

  8. CISCO – 10 Year Weekly

  9. Beazer Homes – 5 Day/5 Minute

  10. Home Builders – 3 Year Weekly

  11. US Dollar – 10 Years Monthly

  12. Crash vs. Bear Market • Crash is basically a VERY short Bear Market. • A Crash takes place in Days (>5% drop in a Day, or waterfall decline), while Bear Markets can last a Year or more. • The ‘Bubble’ Sectors of the market suffer the mostdamage in both (now Finance and Real Estate). • New Leadership arises from the ashes. (likely to be Technology). • Biggest Danger: Buying Too Late in Crash, Buying Too Early in a Bear Market.

  13. Crash Specifics • Panic reigns, Everything is Sold. Extreme Negative Breadth, Huge Volume. There appearsto be No Bottom. • In a Major Crash, you will have no access to your Broker, Charts, or even reliable Quotes. • Market Bottoms and Recovers Quickly. • To Buy at the Bottom, need to Guess where it will be and enter orders the day before the Crash. Use Charts to Determine Buy Points. • Best Buys: High Beta Stocks with (actual) Good Fundamentals, Less than $10. This time Tech.

  14. Bear Market Specifics • Usually take a year or more to Finish. • At least Two (powerful) Counter Rallies • Only Bottom when everyone turns Negative on the Market. NO ONE recommends you buy stocks at the Bottom. • There can be crashes at Beginning or End. • Must Wait and Wait and Wait to Buy.

  15. DJIA – One Year Daily

  16. SP 500 – One Year Daily

  17. NASDAQ – One Year Daily

  18. Russell 2000 – One Year Daily

More Related