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What is motivating all the prophets of doom out there

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Not applicable
This happens everytime we make higher highs, the doomsdayers come out in force and issue all their warnings. Well I don't see a single s***** of evidence that we are moving for a downturn. Virtually every single market is showing the age old tried and tested Dow Theory of higher highs and higher lows. The only potential exception is the Hang Seng, which is now sitting on a triple bottom with a decending triangle. But how much influence does the Hang Seng have on the global economy?
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22 REPLIES 22
Not applicable
OK, I will leave it to forumite imagination to guess what word got deleted by the overzealous net nanny!
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Rovert
Super Contributor
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divz
Super Contributor
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Galuc
Super Contributor
I am not sure what the word or the mood is but the last 5 days have made me liquidate a couple of my positions, some which have turned positive, but I have an uneasy feeling in my gut. According to Simon being liquid is still a position, so I am a fence sitter at the mo.
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saash
Super Contributor
There's not enough fundamental backing to motivate the rallys. The reversals have just a bit too much gusto in them. People are looking for any reason to sell off a bit.
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Not applicable
you see, this is my point, no index has pulled back by more than 1%, I meand the JSE has pulled back 400pts in a day, but no more. That is hardly any kind of wild swing?
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Wizard
Super Contributor
Yes "sk" ..who invented the words corrections and recessions...silly people..just put your money in the market and become the next Warren Buffett!!
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richardw
Super Contributor
U.S. "insiders" (directors) are still selling 24 times more than they're buying. So the people who know the stock market (traders, investment banks) are making money, but the people who know their companies better than most, aren't. That (strongly) hints that the fundamentals aren't there, in my opinion.

Our own market has been a lot more reasonable. There are still good deals every so often although the index is pretty high. We're off the recent peaks by a lot in many stocks.
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SimonPB
Valued Contributor
directors are always net sellers as they get paid in stock .. an in many cases they have been waiting to sell as they didn't want to sell at depressed prices ..
more importantly is what causes bubbles ?? simple lots of cash - which is exactly what we have right now .. this rally will only be under threat when rates start to rise ..
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richardw
Super Contributor
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KVW
Super Contributor
Whats the general feel on rates? Still going to come down, stay steady for how long or go up after first signs of a actual recovery?????????? Me, I think stable until about Oct. after that we are going to see that every second metting will see an increase. How can you graph Banks vs Rate Changes?
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richardw
Super Contributor
Sure, that's the problem with options - free money and less skin in the game. But if those guys thought their companies were undervalued in any way, they'd wait until they thought it was maxed out. Yes, some might need money now, but the sheer magnitude of the difference seems alarming.

Anyway, it's not a sign of impending doom any more than it was 6 months ago. The market is driven by the government support and will go on until it stops, or something more important happens.
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kwagga
Super Contributor
Nothing wrong with a bit of caution right now. We need to get through the US earnings season without any nasty surprises. Some US banks reporting back in the next few days, and from the look of it, it won't be that rosy. The DOW has also seen resistence at the 10720 level, so expext a bit of volatility. I'm mostly in cash, just waiting for some opportunities to come along like the MVL deal.
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SimonPB
Valued Contributor
see if you can find some historic data on director sales/purchases .. I have seen research that largely suggests it is meaningless in predicting anything, beyond better quality holidays and red wine for directors ..
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SimonPB
Valued Contributor
depends which US banks, Citi, GS etc. are set to make almost record profits from last year ..
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kwagga
Super Contributor
high expectations for banks - maybe too high......
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topgun
Super Contributor
You are way too bullish...there is a better than 50% chance that domestic rates will drop another 50bps. NO increases this year. Check credit extension, durable sales figures etc. The strong R/$ exchange rate is impeding recovery on the current account of the BOP and the fiscal position is worsening by the day which will constrain future govt. GDFI. Difficult position.
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Werner_1
Super Contributor
Yes, i agree, Citi made a loss for Q4 to the value of $7.6bn (better than 1 year ago though), JPMC made $3.3bn profit, lets see what the others had, when JPMC reported on friday, the market dropped, some say the market was upset about no increase in dividends which is stupid because they should listen to the CEO and CFO, there was no reason to expect an increase so early. I think the investors expecting too much and also not listening properly, which makes volatility.
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richardw
Super Contributor
I'm not sure I'd take a long-term average to mean anything about the current situation, specifically because most markets are a lot calmer than what we've had lately. To find an analogue in my mind, we'd have to say "what usually happens after 9 months of sustained insider selling when the market had gone up 60%, after a crash"

Having said that, here's a paper from 2007, which still doesn't really give us much for the current situation:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=970987

"We decompose realized market returns into expected return, unexpected cash flow news and unexpected discount rate news to test the relation between aggregate market returns and aggregate insider trading. Our motivation is to distinguish whether the observed relation between market returns and insider trading is due to contrarian strategy or managerial timing. We find that (1) the predictive ability of aggregate insider trading is much stronger than what was reported in earlier studies (2) aggregate insider trading is strongly related to unexpected cash-flow news and (3) market expectations do not cause insider trading, contrary to what others have documented. These results strongly suggest that the predictive ability of aggregate insider trading is because of managerial timing rather than contrarian strategy. These results hold even after we control for information uncertainty by using firm size as proxies. "

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