Did The Stock Market Bottom Last Week? You Can’t Be Serious

Toward the end of last week, when the S&P jumped 58 points (3%) for the week, 46 on Friday alone.  The negative interest rate announcement by the Bank of Japan triggered the move on Friday.  Earlier in the week the bottom-callers in oil were on their megaphone proclaiming a new bull market in oil, which got the stock market permabull drones all giddy.  The trading action last week was entirely characteristic of a typical bear market short-squeeze rally fueled by momentum-chasing hedge funds and daytraders who had piled into the short side of the market as they chased momentum lower.

Typically these bear market counter-trend rallies are short-lived and are followed by sell-offs to new bear market lows.

I was quite dismayed by all of the stock market bottom-callers who jumped out of hiding to announce that the stock market “water” was warm and that it’s safe to jump in.  Several of these mentally challenged mutual fund manager drones were on bubblevision Friday. These guys are either complete morons or ethically challenged.  If it’s the latter case, then they are breaching their fiduciary duty by encouraging the public to put more money in their funds.

An article in the Wall Street Journal featured a money manager who tried to make the case that the bottom is in.  Again, I hope that view comes from stupidity rather salesmanship.   And some guy named Rob Arnott who supposedly manages a zillion dollars was featured on a well-known podcast website encouraging listeners to put money in emerging markets. May as well take lighter fluid and a match to your money.  At least that would be worth the heat you create from the fire.

It simply blows my mind that, after 6+ year bull market in stocks that was entirely a product of money printing by Central Banks globally, a supposedly well-educated market “professional” can announce that the market has bottomed after a paltry 10% decline. The directional movement of the stock market is now solely derived from the actions and words coming from Central Banks.  The valuation levels in the stock market have never been more dislocated from underlying fundamentals than the present era and thus conveniently ignored.

But we can’t even begin to discuss a bottom until the entire investment universe is focused on real fundamentals.  This guy Rob Arnott tried to make the case that the emerging markets represent “deep” value.  That must be some kind of joke.  Many of the emerging market countries are the verge of financial, economic and political collapse.  If you put your money in Mr. Arnott’s fund you may never see it again.  But just like every other big money manager, he’s motivated by selfish interests.  If he were to preach the truth, his investor base would disappear and along with it the $10’s of millions in fees he’s making off of it.

I have a couple of friends who manage individual accounts. They both called me on Friday with the same story of taking multiple calls from clients asking  if the sell-off was over and if it was time to move more money into stocks.  That’s one of the surest signs that the move last week was nothing more than a bear market counter-trend rally.

Bear markets are designed by the laws of nature to inflict damage on as many people as possible.   Weeks like last week are designed to keep the middle class invested in stocks while the market goes lower.  The truth is that the entire global financial/economic system is collapsing.  The stock market and credit market action in January was nothing more than tremors ahead of a massive “earthquake” that will inflict unimaginable financial damage.

It’s part of the human condition to believe that really bad things can’t happen.  This is a big part of the reason it takes a long time for a bear market in stocks to unfold.  That plus blinding greed.  But the unfortunate truth is that more than likely the stock market in general will have to drop at least 50-70% before we can credibly discuss whether or not a bottom will occur.  I say 50-70% because most people would not believe me if I were to disclose where I really think the stock market is headed before this over.

12 thoughts on “Did The Stock Market Bottom Last Week? You Can’t Be Serious

  1. “I say 50-70% because most people would not believe me if I were to disclose where I really think the stock market is headed before this over.”

    Bingo. Thank you for that. Just like Bill Bonner’s article on Zerohedge discussing the nonsense of investing in the stock market for the long haul. (http://www.zerohedge.com/news/2016-01-31/forget-about-stocks-long-run)

    He failed to mention the underlying loss of purchasing power of the $ during the long haul. Factor that in and you are still upside-down over 100 years.

  2. The problem is for the most part clients do not want to be told bad news. We grew up where when the market was high and economy slowing, you got “defensive” meaning you bought stocks which did not go down too much. Thats still too true.

    Financial advisors who hold mutual funds for clients are buy and hold forever. Its too hard to sell mutual funds and when they do they lose their revenue stream. So its buy and hold forever. Diversify to some EM. But not PM.

    Schwab actually is now promoting PM in its robo portfolios, and ran a piece that portfolios do better, long term, when holding pm. Of course, since 2000 gold is still up 5 times while market up 35% or so.

    And market smells overvalued while pm undervalued.

  3. The stock market should have actually gone up in January. I know that my 401K contribution and a lot of others were deposited in January.

    1. Ooohh…. please! That is perfect proof how stupid the money “managers” (and I use that term loosely) are with… your money. These idiots are throwing your money into a deep hole that will swallow it up forever, and you will be destitute in your old age if you are counting on these pirates to be good stewards of your money. Do not Buy the Dip, as these money “managers” suggest…. Sell the Rally. The author of this article says a 50% to 70% crash. I say 70% to 90%. Can you really afford to put your future in the hands of someone who derives their (lavish) living from people who are too lazy to educate themselves as to what is really happening?

  4. Went to a Elliott Wave seminar this past weekend and no there
    was nothing for sale. It was hosted by my tax attorney who brought
    in the guest speaker. The bottom line is, look for the stock market
    to bounce up until the May-June time frame. Then look out below,
    we are talking 1100-900 on the S&P. As for gold it should rebound
    back up to the 1700-1800 area late in 2016. Gold will then pull back
    to 1450-1550 area before resuming it’s uptrend into late 2017-2018.
    Target could be 2000-2200. Of course the caveat in all this is a world
    war which could change everything for everybody. Please don’t
    shoot the messenger just sharing what was shown to me.

    1. Forget China, the U.S. stock market is going to get crushed from the fundamental problems in the U.S. I love the way
      everyone focuses on China. This just in: U.S. Treasury debt is now over $19 trillion. Oops

      1. Ooohh…. please! That is perfect proof how stupid the money “managers” (and I use that term loosely) are with… your money. These idiots are throwing your money into a deep hole that will swallow it up forever, and you will be destitute in your old age if you are counting on these pirates to be good stewards of your money. Do not Buy the Dip, as these money “managers” suggest…. Sell the Rally. The author of this article says a 50% to 70% crash. I say 70% to 90%. Can you really afford to put your future in the hands of someone who derives their (lavish) living from people who are too lazy to educate themselves as to what is really happening?

  5. I am always amazed with the quality and simplicity of the articles from IRD. It would seem that it is always better to pay for good and truthful advice than to receive it for free from someone who derives their income from selling you something on commission. And that’s all you can expect from the Wall Street whores, whose fiduciary duty to their clients is always in conflict with their wallet, and we all know how that mental battle will end. It reminds me of the book “Fleecing The Lamb”, which is a story of how the Vancouver Stock Exchange (VSE) got the illustrious handle “the scam capital of the world”, owing to the millions of dollars stolen from people who put their trust in these nice men and women in thousand dollar suits who had a FIDUCIARY DUTY to act in their clients’ best interests. One particular segment caught my attention. Note: It is not verbatim but the concept is the same. One of the bad actors of the time was being interviewed about how it is possible for the stock of a new company with no capital, no product, no income, and no prospect of ever becoming a going concern, and managed by shady characters later discovered to have managed other VSE companies that failed and lost millions of dollars of peoples’ life savings, could go from an IPO price of $1 a share all the way up to $25 a share and become completely worthless, all in the same year. “Fren”, he says. “It doesn’t matter what the company has or how much it sells or how much money it makes (or doesn’t). After all of our shills bid up the price, it’s time for the dog and pony show, and all that matters is that once the stock doubles, we can let the little old ladies in and we can get all our money out and a nice profit, to boot. Then we can tube it and let the little old ladies fend for themselves.” Fortunately, the British Columbia Securities Commission showed some fortitude and cleaned it up, and some of the crooks went to jail, and by the looks of things, the rest went to New York. Now the Canadian capital markets are mostly run through the TSX. But the story is the same. Ask your broker to explain “Fiduciary Duty” to you. If he/she cannot, or starts to squirm, get the hell out of there and take all your money with you. Great article as usual.

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