Fundamentally Where are we at?

[buns]

Over the past week or so, I've been trying to grapple exactly where things are at in the market place, and the likely direction over the next 3, 6, 12, 24months in world equities..

We have now seen most of the reporting season, and by all means it's been a hugely positive one. With the majority of companies beating earnings forecasts, and strengthen balance sheets.

Then the economic data coming from around the world also getting stronger (facts provided from fisher).

- US: manufacturing sector has expanded for 13 consecutive months, there has been a robust rebound in agricultural exports, consumer confidence and house prices edged up, and consumer spending rose at the fastest pace for four months.
- Europe: economic confidence is the highest in two years, as unemployment concerns have eased and economic activity appears to be holding up in spite of spending cuts in countries like Greece and Spain.
- China: Manufacturing grew at a faster pace than expected, confirming that China’s economic growth
is stabilizing.
- India: The economy expanded at the fastest pace in two and a half years and South Korean
manufacturers’ confidence rebounded in August.
- Australia: The Australian economy grew at its fastest pace in three years during the last quarter, exports increased 5.6%, household spending increased, and rising commodity
prices

Now you may be thinking about some of the macro data - Rising unemployment and GDP not rising to forecast. Being a bottom up investor, i.e. value the company by his operations and $$, I largely ignore these trends, and don't quite understand them as they do not colarate to what is happening across all the facts listed above, all I can think of is a lag effect between the two..

Anyhow, Being a relatively new investor (2-3 years of it), I'm throwing it out there to those long timers who have seen these market swings before. I've never been through a recession before, but I can't help my self in thinking we must be on the other side of this right? Things are on the way up, the rate this happens I'm unsure of, but the actual data/facts can't be ignored.

It seems to me market sentiment is the one lagging behind these facts, people have been burned, and burned hard and are really jumping on the bad news, these macro trends. But ignoring what’s actually happening. These companies are doing well, and seem poised to continue. Remember it's the companies we are investing in here.

The market rose about 70% post the 2008 hit,I missed out on to much of that last time.This time I want a big piece of that, so am pondering when it’s time to get back to 100% (or whatever your personal limit is) invested in securities.

Thoughts welcome

Note – please leave technical analysis out of this, and any stock picking for the turn, these threads are out there. My argument is based purely on the fundamental facts arising in our economy and how I think they look positive.

[winner69]

Market Still Deluding Itself That It Can Escape The Inevitable Dénouement


The current situation reminds me of mid 2007. Investors then were content to stick their heads into very deep sand and ignore the fact that The Great Unwind had clearly begun. But in August and September 2007, even though the wheels were clearly falling off the global economy, the S&P still managed to rally 15%! The recent reaction to data suggests the market is in a similar deluded state of mind. Yet again, equity investors refuse to accept they are now locked in a Vulcan death grip and are about to fall unconscious.

..... and the rest here

http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2010/09/13/market-still-deluding-itself-that-it-can-escape-the-inevitable-d-233-nouement.aspx

[winner69]

But then

Bullish Buffett rules out US double-dip

by Daniel Grote on Sep 14, 2010 at 08:09


Warren Buffett has ruled out a double-dip recession in the US and said he is a 'huge bull' on the US.

'I am a huge bull on this county,' he told the Montana Economic Development Summit, according to Bloomberg. 'We will not have a double-dip recession at all. I see our businesses coming back almost across the board.'

Buffett (pictured) said that he had seen sentiment 'turn sour' in recent months, but that he didn't see that reflected in his businesses.

'I don;t see that in our businesses,' he said. 'I see we're employing more people than a month ago, two months ago.'

Buffett added that banks were ready to boost lending. 'It's night and day from a year, year and a half ago,' he said.


http://www.citywire.co.uk/global/bullish-buffett-rules-out-us-double-dip/a430574?re=11027&ea=131945

[buns]

Hmm interesting, as I stated in my first post I expect this expectation gap to be created by some sort of macro or monetary cycle lag with corporate earnings and similar data.

However, I don't understand his swing theorys. The article states macro signs were well out there before 08, with the impact in corporate earnings coming through that year. However they swung up in 09, then again stronger this year in 10 and across those two years the macro signals have only got worse. I suppose what you/this guy is saying is, these earnings have no grounding, are not driven by anything and are un sustainable? And these bad Macro effects we are seeing now will flow through in the coming years (double dip)?

Not sure what to read into this..

[buns]

But then



Ha come on mate, don't just go around slapping the first article you find in here. I'm after some peoples thoughts having been through these in the past, how to filter out the non sense in the media, what trends/$$ count, and general feeling going forward..

[Hoop]

S&P500 valued fundamentally at 1440 ..

that doesn't mean a thing because Mr market dictates....

Its all to do with group behaviour... attitude and perception (which can be measured by the changing values of the PE Ratio. The PE Ratio is the key primary driver of the share market)....Share Markets do not correlate with the overall state of the economy but inflation and to a lesser extent interest rates do correlate. The news about a sudden change in the economy affects the Share market only for a brief moment in time and is soon forgotten and replaced by another worry in times of an under valued market or exuberance and "all times are great" feeling when the market is over valued.

Fundamentally... gold is worth more than water......

[kiora]

At the moment the markets seems to me like it was in 1989 ,post 1987.That was a great time to buy as well.Vix is up at the moment but in my opinion this is being driven by the big merchant banks .They love volitility because that way they make big profits.The last 6 months have been great buying opportunities on pullbacks in share prices.BUT keeping an eye on copper commodity prices.Thats my 2 cents worth

[winner69]

Ha come on mate, don't just go around slapping the first article you find in here. I'm after some peoples thoughts having been through these in the past, how to filter out the non sense in the media, what trends/$$ count, and general feeling going forward..

come on mate .... the first article seemed to make you think about it more .... and then I posted something that said Buffett thinks it is all a load of the proberbial and that the US will boom ahead

As Hoop says its all about investor behaviour .... over time rhere is little short term correlation between economic growth and the market anyway ... it all depends on how much punters are prepared for a $ of earnings

My view ... and I have been through all this in the past ..... as stated numerous times .... we are in a secular bear market which wont end until PE ratios (on real earnings) fall to about 8 .... which means the markets will probably be at about the same level as they are now in 2014 .... but in the meantime there will be big swings up and big swings down ..... and many individual stocks will do well while many will be badlt with some disappering altogether

Buns ... I get the impression you have already made your mind up which way the market should be heading .... so why confuse yourself .... thats investor behaviour for you

[kiora]

A bad news bull.This is where I sit at the moment
http://finance.yahoo.com/news/For-Bad-News-Bulls-Adversity-nytimes-3535916757.html?x=0&sec=topStories&pos=7&asset=&ccode=

[shasta]

Over the past week or so, I've been trying to grapple exactly where things are at in the market place, and the likely direction over the next 3, 6, 12, 24months in world equities..

We have now seen most of the reporting season, and by all means it's been a hugely positive one. With the majority of companies beating earnings forecasts, and strengthen balance sheets.

Then the economic data coming from around the world also getting stronger (facts provided from fisher).

- US: manufacturing sector has expanded for 13 consecutive months, there has been a robust rebound in agricultural exports, consumer confidence and house prices edged up, and consumer spending rose at the fastest pace for four months.
- Europe: economic confidence is the highest in two years, as unemployment concerns have eased and economic activity appears to be holding up in spite of spending cuts in countries like Greece and Spain.
- China: Manufacturing grew at a faster pace than expected, confirming that China’s economic growth
is stabilizing.
- India: The economy expanded at the fastest pace in two and a half years and South Korean
manufacturers’ confidence rebounded in August.
- Australia: The Australian economy grew at its fastest pace in three years during the last quarter, exports increased 5.6%, household spending increased, and rising commodity
prices

Now you may be thinking about some of the macro data - Rising unemployment and GDP not rising to forecast. Being a bottom up investor, i.e. value the company by his operations and $$, I largely ignore these trends, and don't quite understand them as they do not colarate to what is happening across all the facts listed above, all I can think of is a lag effect between the two..

Anyhow, Being a relatively new investor (2-3 years of it), I'm throwing it out there to those long timers who have seen these market swings before. I've never been through a recession before, but I can't help my self in thinking we must be on the other side of this right? Things are on the way up, the rate this happens I'm unsure of, but the actual data/facts can't be ignored.

It seems to me market sentiment is the one lagging behind these facts, people have been burned, and burned hard and are really jumping on the bad news, these macro trends. But ignoring what’s actually happening. These companies are doing well, and seem poised to continue. Remember it's the companies we are investing in here.

The market rose about 70% post the 2008 hit,I missed out on to much of that last time.This time I want a big piece of that, so am pondering when it’s time to get back to 100% (or whatever your personal limit is) invested in securities.

Thoughts welcome

Note – please leave technical analysis out of this, and any stock picking for the turn, these threads are out there. My argument is based purely on the fundamental facts arising in our economy and how I think they look positive.

As you pointed out the last reporting season showed things are turning around slowly & on the improve.

We know in NZ inflation will rise (the increase in GST guarantees it, as does the ridiculous ETS) & with low interest rates we are at the start of the next economic cycle of the share market, when interest in stocks rise & money moves into the market.

Most companies have raised capital to reduce debt & strengthen there balance sheets, & will be looking for opportunities for growth, so from early next year i expect to see a rise in M&A, but in specific sectors to start off with. the agriculture sector has already started

With the property sector still rather flat & interest rates/term deposits still near there lows, the share market is looking more appealing.

[h2so4]

If the opposite were true and the economy was booming you probably wouldn't be considering economic data as an answer to the question, even though this would be a time to be even more cautious. But now because we are bombarded with a seemingly over supply of data it affects our decision making. I don't think we should be looking for a green light from economic data, I think you should grab opportunities as they come, even if that opportunity comes at a bad time in the economic cycle.