Monday, September 15, 2008

Who Is Buying?

We all know that in the stock, bond, and commodities markets there is always a buyer for every seller. On a day like today, a day with bad news everywhere I look,  I like to spend my spare time wondering about who would have the courage to buy stocks in these circumstances.

The way I see it, the averages are down about 25% from their October highs and the news has been uniformly bad for nine months now. Yet, compared with their January lows, both the Dow and the S&P are only down about 5% despite this nine month torrent of bad news.

I think people who buy in these circumstances are not likely to be shaken out of their positions if the averages drop from here. They are probably investors with very long time horizons and with confidence in the ability of the U.S. economy to recover quickly from the current credit crisis.  Buyers like these strengthen the condition of the market and set the stage for a big run up in prices once the bad news has been digested. 

For this reason I am confident that the market is very close to its ultimate low and that the next big move from current levels will be upward. 

17 comments:

Anonymous said...

The market might not have moved much since January, but financial dip buyers have lost their shirts and are probably looking for an exit more than a long-term hold.

Anonymous said...

who would have the courage to buy stocks in these circumstances?

probably investors with very long time horizons and with confidence in the ability of the U.S. economy to recover quickly from the current credit crisis.

=================

well hopefully they didn't buy Lehman last week. It was on most analyst conviction buy list last week.

Anonymous said...

This crisis is not unexpected, we have known about this crisis for awhile now. I did some buying today and yes for a long-term hold (it was not a financial that I bought). The chickens have come home to roost and its name was GREED. It just needs time to unwind.

Anonymous said...

Well lets hope that they hold their position for more than 90 minutes.

Anonymous said...

I would also say that the reason the market hasnt fallen much since Jan is that the Fed has spent billions of usd and evert strategy available trying to prop the market up.

Anonymous said...

I think another 100 S&P pts will do it. Maybe we see a pop to 1235-1240 first. But 1090-1100 is my # before any sustainable up move.

Jim in Iowa

Tom said...

Well, I started some long positions at the close today. Will we go to 1175 as Carl predicts? Perhaps, but my positions are in stocks that have held up well and a few spec stocks as well. We shall see.

Tom K.

Anonymous said...

You are focusing to much on sentiment which is normally very important.

Currently the BIG issue is solvency and this could take a while to work out. The government bailed out bear sterns, fannie and freddie. The government does not have the money to keep this up which is why they let Lehman go under and the real declines will start soon now that the government has stopped under writing the financials.

Anonymous said...

I wish Edwardo write something bearish .. he is so great contrarian indicator .. bears plese write here how wrong Carl is ... Carl you really know nothing about this market :) LOL

tommymoose said...

Both technically and fundamentally this market looks very close to a bottom. 1165-1175 SPX is my zone.... very strong.

pursuitist said...

Carl,

Why is someone who has just exposed himself to be a cagey (if unproven) daytrader now singing the praises of the investors who are buying now with their "long time horizons." Sorros said in the spring that after 60 years of credit expansion it's not unreasonable to expect as much as ten years of credit contracttion. Are you, fellow speculative trader to Soros, arguing that his pessimistic longterm view is a less profitable base from which to launch shorttem attacks on the market?

Compare your records.

If making money, long or short, long term or short term, is the goal, a bullish bias and a flag waving opinion of the resilience of US markets--is a professional liability.

Again check the record--recorded here.

Mike said...

maybe a few more magazine covers should do it.. lol

Anonymous said...

Well said pursuitist.
I came to the website for long term views but now find 30 minute ones (which maybe useful to some people but were not what I was seeking).
Apart from the spx, other views appear cursory at best. How can you say usd jpy will be heading back to 112 when it has been steadily falling and is trading below 105 ? (on the back of a massive unwinding of jpy crosses which was one of the easier trends of the year to spot)
Lots and lots of people suggested that your spx view that we were heading to 1500 was wrong . I thiml we have been proved right and the man who said you were an idiot (whilst rude), thought you had no idea of what was happening.

Anonymous said...

I'll tell you who is buying. The same people who believed Bernanke when he said the subprime mortgages were contained. And these people are buying stocks with other people's money, not their own. Its a lot easier to push the buy button when your own dollars are not on the line.

Anonymous said...

Isn't it funny when short term traders, finding themselves on the wrong side of a 500 point decline, suddenly become long term investors.

Anonymous said...

That is tru Carl. I like your blog and I miss your longer terem analysis like Doomed house etc. Can you make some doomed house analysis? Also other Lindsay stuff

Thanks.

Anonymous said...

At times like these with this much volatility, short-term trading is about the only way to make money. This has been a traders market for some time. Nothing wrong with what Carl is doing or is trying to do. I believe we are very near atleast an intermediate-term bottom. A number a people have been looking for the 1175 or so on the S&P for sometime and we should see that today.