BosyBillups Wrote: ------------------------------------------------------- > To be honest, it’s not really impressive, your > call now. > > It would have been impressive last October, > however. This board was screaming buy and go long > on everything when the Dow hit 14,000. But when > the market is down 30% or so, and to claim it will > go lower… all I have to do is laugh. But if it > makes you feel smart, then go for it. Please use search function.
Please provide links
Wait, I JUST IMPRESSED MYSELF. Yea, I rock: Check this out: http://www.analystforum.com/phorums/read.php?1,608805,608862#msg-608862 Posted by: BosyBillups (IP Logged) [hide posts from this user] Date: September 12, 2007 05:01AM I think that PE is in a bubble, and it’s a bubble showing signs of deflating. Private Equity will still be big, and relevant, but if the credit bubble starts to deflate, PE could slumber a bit. That’s speculation, and don’t rely on that for picking a job, but tuck it in the back of your mind when setting long term goals. — This was one month before the highs were reached in October. – http://www.analystforum.com/phorums/read.php?1,620239,620240#msg-620240 Re: 2-yr Treasury down 40 bps in a week Posted by: BosyBillups (IP Logged) [hide posts from this user] Date: October 19, 2007 05:29PM Word is that the big banks bailing out the SIV’s are not bailing out the real low quality ones, just the top of the trouble, so it won’t have that big of an impact, if any. To me, it’s a creative way to help their numbers during what will be a hard period for the financials. Bernanke is now saying housing will drag the economy? now? A little late. Anyway, the Fed can’t stop a recession either, so… – Nice recession call, no? Now admittedly, PE didn’t just slumber, it crashed. And I did not forecast how fast the unwind would happen… don’t think anyone could. But still, these calls were made before the highs. Does it make me super smart and a genius? Nope! Sorry. “The markets can stay illogical far longer than you or I can stay solvent.”
Ok, let me first make the point that I have been looking for any positive catalyst for the stock market to rebound, and I cannot find 1. So the idea of having a “hunch” that the market will go up is absurd. The only marginal silver lining was the fact that in the few days following the passing of the TARP, front end swap spreads tightened. However, with the exception of the 10bp tightening in the front end of the swap spread curve following the coordinated rate cut this morning, spreads were generally wider on the day in the 2yr and in bucket. On top of that, the IG11 remained wider than its post-rate cut level of 163 for the entire day. In this market, credit should not underperform equities. For one thing, this is a credit problem, and the notion of deleveraging and capital infusion (dilution of equity capital) will certainly help credit much more than equities. So I cannot wrap my head around the fact that people out there are calling bottoms in the equity market when the credit market remains under EXTREME pressure. Once you see the pressure eleviate on the front end of the swap spread curves, that is when you should be getting more constuctive on spreads. For all these aforementioned reasons, we got short equities around 2:45. It turned out well, and we did not cover. Again, in case you missed my point, this is a credit issue. Without pressure taken off of the credit markets, any equity rally will not be sustained. Would be happy to hear any feedback on this, because honestly, I watched every credit indicator today sell-off while equities rallied. It made zero sense. Net net, I would take the opposite side of your “hunch” unhedged anyday in these markets.
I agree with you, mib. But what do you say to someone who says the stock market is not looking at today, but 6-9 months down the road. It has discounted all the troubles of today, and hence, the massive sell-off. The credit markets should be much more calm by then, and yes we might be deep in a recession, but with all the liquidity flushing around the system, it will find a home by then. Yes, this is qualitative, but right now the contrarian play is to bullish, not bearish. Is there not any merit in this?
If u are thinking about putting money to work now for a 6-9 month gain, I would say absolutely keep your money out of the market. At least you can get some decent (fed backed) commercial paper interest, given that libor is so distorted in the front end. If your time horizon is much more long-term than 6-9 months, why throw money in now while the credit markets are still under pressure. Wait til those front end spreads start pulling back to a substantially tighter level. So what if you miss a little bit of the upside. Did I mention that spreads in the credit market are at levels not touched since the Great Depression. Kind of hard to justify that the near term future will have a serious rebound in equity values. Especially when you consider that instruments higher up in the capital structure are under grave pressure. I hope this addresses your point that the idea of discounting what the future may hold is a bit of a “hunch”-like theory.
I was taking the side that what is priced into the market right now is all those things you have outlined, including the pain and decreased earnings for the next 6-9 months. But that the market will start to look beyond these major problems, and start to look for a recovery, in housing (at least a bottoming), and liquidity coming back to the market from all angles of the globe. Just to let you know, I’m playing a little devils advocate here. What I think is not priced in yet, or has not even started, is the CDS dilemma. This could be a catastrophe. But I’m trying to think of a theme for a recovery, and suprisingly, equity markets have gone up during major recessionary periods, namely because it is looking at the recovery and has baked in the recession.
Ok, so if the CDS dilemma is lagging the equity markets then we have come to a point under which something that represents something senior in the capital structure to equity instruments is not fully priced in. I am assuming that the CDS dilemma is that there will be more counterparty defaults, which will in turn, cause more senior unsecured obligations. To give a little 101 on capital structure, these are senior to your equity claim. And if you are referring to a MTM dilemma in CDS, this will also be senior to your equity claim (thinking AIG here), because a new bank line to support the additional collateral will likely be on a senior secured basis. Spreads are a pure function of credit risk, and thus, when you are senior to equity and still remain at depressed levels, how can you justify any equity rally here. I would also remind you that this is a leverage centered recession. Thus, if we need to delever, it will come in the form of equity capital. This will further dilute you as an equity holder. I really do not know how you can just assume that this is priced in, given that we do not necessarily know how much earings erosion deleveraging will create. This is purely a credit and capital structure issue, and unfortunately, those claims senior to you as an equity holder are still under pressure. Without the ability to generate liquidity under those senior claims, you can kiss your equity goodnight.
Sold. Now, time to man up. How low can we go. No pressure, no careers riding on this. But if I am understanding your position, you are forecasting a 5,000 dow, 400 S&P (which by the way, is a prediction made by some very smart people in the HF space). But I want to hear from you - can you make a reasonable estimation based on all your analysis above. Provide a tangible number, and I will provide mine right here. We have the gremlin’s number above. My prediction: Dow - touches 10,000 by November 25th, 2008. Then retreats below 8,000 in early 09. — rationale: the bounce comes from Fed + treasury egregious meddling in the credit markets to unfreeze. They prevail short term. More mortgage bailouts. Oversold markets. Bottom fishers coming in. We get a bounce up to the end of the year. Then the erosion continues. Corporate defaults mount, and so to CDS credit events. The consumer is given up on as they have no capital to spend. Don’t forget the muni defaults, too. And after deflation, comes hyper-inflation –
For me it is really a day by day type of excersize. I personally believe that the correct way to look at the SPX is on a multiple of future earnings base. If anything is going to drive stocks higher it is going to be multiples and not forward earnings. That said, we are probably at historical trough multiples. But with dilution coming into play, I am going to say that we can bottom at 20% below current multiples, so make that a bottom of around 700 with the possibility of muddling around for awhile before going higher. I am not optimistic about year end, but again, my view could change on a dime if i see front end swaps moving significantly tighter.
Fair enough. I can respect that. I think a S&P of 700 would = a Dow of 6000. The smartest investors don’t make predictions of future price, because it can change due to many unforeseen events. I will join that camp. But near term, I just have trouble seeing the markets not bouncing at least 10% or so from around here. If it doesn’t, we are in grave, grave, once in a generation, moving from fear about makets to fear about society, trouble. Just IMHO.
I am with you. It very well could jump 10%. That said, I will not put a penny to the long side until I see the credit market fundamentally improve. This has yet to happen. I am more than willing to sacrifice 10% of upside in order to be much more comfortable with equity valuations.
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i like the story here. this thread is a great read too lol
It’s true, the global situation is very bad, in just about every way. And really, there is no solution other than the eventual mega crash. It just needs a push, some trigger event, and it all comes crashing down.
Personally I don’t do “predications” though, I have no way of modeling 400-500 specifically, or of modeling timing. I just keep shorting any highs so I have my shit in place, global stocks higher right now, very unlikely.
is your crystal ball broken?
lol at cfa_gremlin… SO confident and SO wrong… wish he was here to reflect on this.
Oh crap, is this another one of those posts from 8 years ago?? Dammit I always fall for that.
CFA_Gremlin should repost same prediction here in 2016.
haha got ya! i was looking into CINF and this was the only thread i found about it
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