Stock Market Concern/Question

[slimjim935]

I read an interesting post today on another forum and just want to see how the primers view this.


Somewhat long but its a decent read the guy made some decent points to back up his statements....

however personally I believe no one knows what the market will do so.. cant take a post by a random financial overseer to serious


He wrote this today about the stock market and the up and coming next few months...

-The stock market rally is fake as hell and completely manipulated. Basically a "pump & dump" in the making.
-We are currently in the final stage of the fake rally
-Banks are currently selling their shares to people like your parents who put $ into IRA's and mutual funds (aka the "bag holders")
-After the banks sell out, they will make money by letting the market fall and rebuying their shares at lower prices.
-You/your parents will get SCREWED unless you sell before its too late
-GTFO OF STOCKS/MUTUAL FUNDS WITHIN 30 DAYS


Details:
As a future finance professional (getting my MS in Finance currently), I feel an obligation to tell as many people what is happening and what WILL happen in the financial markets over the next 6 months. You dont have to take my advice, but at least read this and form your own opinion. Most people not educated about the stock market and financial markets just read about stuff in the newspaper and take it at face value, because they know nothing else. I'm sure many other finance professionals on this board will agree with me on this. Please enlighten yourself a bit by reading my post.

Right now the stock market has rallied nearly 50% from its lows, and everywhere you go you hear about the coming economic recovery. Banks are reporting positive earnings, Ben Bernanke and Tim Geitner are saying they see "signs of a recovery", and CNBC is announcing the recession is now over. THIS IS BS!!!!

If you dont know by now, the stock market is like a casino, except your odds of winning are even worse unless you know how the house plays. The house in this case is Goldman Sachs, JP Morgan, and the other large financial institutions. The only way they make money from their trading operations is if someone is losing money, namely YOU the average investor with an IRA in some mutual funds and random blue chip stocks.

Right now, everyone in the media is saying BUY STOCKS WHILE THEY'RE CHEAP! Are they cheap? HELL NO! They have no real earnings! The government has worked closely with Goldman Sachs and JP Morgan to engineer a stock market rally (with government news releases, media hype, and automated programs that make stock prices rise artificially) to lure in small investors, like you and your parents, with promises of great stock gains in a recovery.

The fact of the matter is that if you or your parents have ANY stocks, mutual funds, or bonds in an IRA or personal portfolio DO YOURSELF A FAVOR AND SELL. The safest place to be right now is on the sidelines.

Goldman, JP Morgan and the rest of the banks make money by causing the most pain for the most people (because they are the ones taking the opposite side of the trade when they sell you a stock). Right now, I'm seeing the last stage of market manipulation that is intended to hurt those speculating the market will go down (namely forcing short buy-backs, and making people take losses on stocks). When the people who buy back stocks they have sold short (to make money when stocks fall), the banks take the other side of the trade and SELL their shares to those who need to buy back. After banks have sold all of their holdings off and are no longer at risk, they will inflict the most pain to the most people (ie people buying stocks in hopes of a recovery) and the market will fall as hard as it did in Sept/Oct of 2008. Even if you look at the risk/reward, the S&P 500 is currently at 935ish and the highest it could go to in the best scenario over the next couple years is 1100 (+17%) and the lowest it could reasonably go to is 400 (-43%). Your risk/reward is essentially 2.5/1 (risk 2.5 dollars to get 1 dollar return), which a HORRIBLE r/r in the financial world. You should NOT own stocks at this point until their valuations come way way down.



Any thoughts?



Like I said, just a post from another forum - nothing from me here ... just wanted to see if anyone DOES agree with this and thinks anyone in the market should be on the "Sidelines" right now

 

[tosugrad]

Id say he is about a year too late in his advice.

 

[steveny]

Id say he is about a year too late in his advice.

LOL.

I dodn't know but I got this feeling the market is going a lot lower soon. Ihave been doing a few trades a week and have made a bit of money but for the most part I am sitting on the sidelines.

 

[Ski_Banker]

That guy should quickly consider switching careers.

 

[Ski_Banker]

To the OP, there are plenty of legit reasons to be "on the sidelines" but none of them relate to what that clown wrote. I personally think that the market will be much lower in 1-3 years, but not in the short term because things are stabilizing. Most investors think only in terms of business cycles, meaning that as long as the economy is slowly improving, they'll be buyers. They won't change their view, and start to sell aggressively (bringing back to or below the old low), until:

- The recovery reverses (economic data starts to turn more negative)
- The recovery stalls (and, eventually, they'll get fed up with waiting)
- Major, new/unexpected/remote bad events occur with economic consequences (Iran, Russia, systemic bank failure, etc)
- The unintended consequences of gov'ts less-than-capitalist-friendly policies start to appear in economic data

"Valuation" has surprisingly little to do with the market these days, because future earnings for even the most stable businesses is anyone's guess. What will the economy look like in 2-5 years? Are we really at/past "the worst" of the business cycle? How will corporate tax policy change? What will happen to the U.S. dollar/inflation/LT interest rates? What if consumers don't return to spending 99% of their (lower) income, but instead have been shocked into actually saving? What new industry regulation is on the horizon? What happens when 5 million people run out of unemployment benefits starting next year? If unemployment benefits are extended (most likely), how will the extension discourage welfare abuse (even traditionally hardworking people will become lazy when the social stigma of being unemployed is gone...safety in numbers. Same behaviour affects bankruptcy and home foreclosure activity) How will the federal gov't handle the state/local budget crisis? How will every other gov't around the world address these same problems? The "protectionism" ball is already rolling (GM), but how far will it go? In light of this, how will supply chains evolve and at what cost (bringing outsourced activity back to the U.S. will lower profits, but may be worth it if risk is reduced)?

My point is, those are all LT macroeconomic questions that most people will ignore when analyzing an individual stock. They'll just assume "In a year or two, we'll be back to something close to normal levels of growth/profitability" and will continue buying until they realize that they are wrong.

 

[Ryanmcd2]

I got my brother long @ 7700 and added more each time it dropped so far he is doing well. What no one seems to understand is the FED is behind this and when they are printing money and putting it into the flow you cant really fade it. Not sure how much you guys remeber the days when the dow was +400 and it just went up all day very consistant and no huge moves, that was a fed day lol.

Going forward we may have $ issues but right now when the printing press is hot I would not fade it, also how many brokers have a clue of what they are doing and if they did why do they work for a firm if they can trade? It's like having a fat personal trainer, or a broke financial advisor.

 

[sahtt]

That guy is an idiot. If the stock market goes down, it's going to be the same reason it's gone down every other time it's gone down. The earnings and or the price to earnings ratios are going to contract. So far firms have beaten expectations recently overall. Unfortunately, it's an extremely complicated process to decipher what is "real" and what is shorter term.

Like a couple other people here, I start trading the stock market before it even "opens" and am often still trading 2 hours after it "closes". Every large order or size that has enough force to push a large cap around I know about. Attempting to manipulate the stock market is probably one of the costliest endeavors one could possibly undertake. The only noteably strange activity is that since the bottom was put in, extremely large bids (100,000+ share bids that constantly refresh) come into the market regularly about 10 minutes before the close in most of the major banks. Always JPM, usually WFC, sometimes 6+ of them. Traders caught on and started expecting this so the buyers come in later and later, sometimes only 30 seconds before the closing bell. Anyone who says they've figured out when the market is going to crash or rebound is an idiot.

Not to mention VERY few "retail" investors have put more money in since the collapse. Most have removed money from it. Mutual fund managers etc. are the vast majority of "investors" in the past 12 months.

 

[jond]

I'm still on the sidelines.
It seems to me that since our government has stepped in with 0% loans to banks, and the willingness to borrow infinite money, and other countries actually wanting our TBills, that maybe the risk is gone. At least for now.

On the other hand, the ARM loans that are just now starting to reset COULD cause just as much of a mess as the sub-primes did. I read one blog that said they're less of an issue, but I don't know for sure.

Can anyone here explain why this graph isn't a deal killer?

 

[sahtt]

I'm still on the sidelines.
It seems to me that since our government has stepped in with 0% loans to banks, and the willingness to borrow infinite money, and other countries actually wanting our TBills, that maybe the risk is gone. At least for now.

One kicker is the ARM loans that are set to reset in the next few months for around 24 months. They COULD cause just as much of a mess as the sub-primes did. I read one blog that said they're less of an issue, but I don't know for sure.

Can anyone here explain why this graph isn't a deal killer?

Because the rules of the game are ever changing. With free loans and loan modifications, no amount of housing data is clear anymore.

 

[jond]

Because the rules of the game are ever changing. With free loans and loan modifications, no amount of housing data is clear anymore.

I agree with you there. But IF that chart is true, then the current rally is a result in that slump that you can see in late 2008. And what's ahead is more 2007 type economics. More of banks running out of money, more TARPs, etc.

And regardless of what modifications they make, if someone is 20% underwater on an ARM, the bank isn't going to allow them to refinance it are they?

 

[sahtt]

I agree with you there. But IF that chart is true, then the current rally is a result in that slump that you can see in late 2008. And what's ahead is more 2007 type economics. More of banks running out of money, more TARPs, etc.

And regardless of what modifications they make, if someone is 20% underwater on an ARM, the bank isn't going to allow them to refinance it are they?

Based on the false premise the banks are in charge they wouldn't. Compared to events that have already unfolded, I wouldn't be surprised if tax money etc. was used to fill the difference.

 

[jond]

Based on the false premise the banks are in charge they wouldn't. Compared to events that have already unfolded, I wouldn't be surprised if tax money etc. was used to fill the difference.

I know that has been discussed in congress(taking money from the responsible and giving it to the risk takers to forgive their mortgages in part).
I imagine if it happens on a large scale that the masses will start burning down neighborhoods in protest and things will go way beyond bad.

Things have to stay SOMEWHAT fair, or I think there will be violence.

But I understand with, and agree with your key point, which I think is, 'the second round of home forclosures might not be a big deal because our government has already demonstrated they're willing to do ANYTHING shortterm to fix the problem, regardless of long term consquences'.
I appologize if that's not your main point.

 

[tosugrad]

I guess I have a real hard time feeling sorry for the vast majority of people in foreclosure. What is it, 1 in 10 now? I bought way less house than I could "afford" and even with a 10-15% decline I owe less than half of its value.

People that used their houses as income streams to buy country club memberships and Range Rovers get what they deserve.

Unfortunately they will be able to refi with Uncle Sams help or just walk away.

They made out by taking extra risk.

 

[SilverStone05]

In addition, that clown has no idea how a market maker or a specialist makes money. Buying and selling their own inventory is just a part of it.

Lastly, you don't have to be the Government or Goldman to to move a stock in the direction you want. You just need a low latency trading platform, a level ii screen and an iron will.