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Bearish Article - Sprott

9607 Views 27 Replies 13 Participants Last post by  rayray
Check out this article by Eric Sprott regarding his bearish stance on the future of the equity markets. I found it very informative.

Thoughts and opinions?
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I don't like it when these guys compare the S&P of 1929 to todays market. The market has a mind of its own (meaning the factors influencing the market are not identical), and the two really can't be compared.

Having said that, I do necessarily agree with Obama in that the 'fire is out'.

Alot of the companies putting out decent Q2 results, are doing so on the backs of all of the payroll that they shed.

The unemployed are also consumers, and the unemployed don't exactly go on buying frenzies. So I am curious to see the Q3 numbers, when they come out.

Also, Canada seems to be the only place in the world that hasn't realized that housing is overpriced. Perhaps the lowest mortgage rates in several generations will do that.

I am doubtful that the markets will go up another 30% in another 3 months, and wouldn't be surprised if they were to fall another 30%.

At best we may have a few years of spinning tires to get some traction. Which really wouldn't be that bad.

But then again, I am just a lowly rookie...and this is just my humble opinion at this time.
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It's not hard to beat earnings estimates when the bar is set so low.

The market didn't have a mind of its own in 1929?? Obviously things change, but the basics stay the same. Forget that and you'll stay a rookie. ;)
"The analogy I use sometimes is, we had this beautiful house. And there was a fire. We came in and we had to hose it down. The fire is now out, but what we've discovered is, we need some new tuckpointing, the roof's leaking, the boiler's out, oh, and by the way, we're way behind on our mortgage," Obama said.

So, what was the fire or what caused the fire? And what did they do to put it out? Opinions?

I bet the president claimed "the fire is out" in the first bear market rally of the great depression. ;)
The fire that got put out was the irrational fear that everything was going to zero except US t-bills. That may be an exaggeration, but that's what many saw last Fall. Since then, the interbank lending markets have returned to something resembling normal. Just this past week, CIT was on the brink of bankruptcy, yet it hardly caused a ripple in the market. That is a sign of relative normalcy. Almost no one thinks there is going to be a mass contagion of bank failures anymore. This is the fire that was put out. Some commentators are saying that the credit crunch is still in full swing. While certainly credit conditions are tighter now than they were in January of 2007, this would be expected given the business cycle. When do we say that it is over? When we are back at the height of the boom? The fact is that credit is available, even to many junk borrowers in the current market.

As for earnings, mogul777 is right that the bar is set really low. Also, it should be noted that many financial firms have written off a significant portion of the value of those mortgage backed securities. I wasn't surprised to hear that Goldman reported bumper profits in the second quarter. Almost half of their competition has been laid low. I can't speak for Morgan Stanley though.

And as for all this pessimistic talk, we have already pierced the illusion that the sky is falling. Now we are just in a plain old (terrible) recession. Just remember that all recessions end eventually. If you are a medium to long-term investor, you shouldn't worry too much.
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CIT was saved by it's own bondholders as they would stand to lose $$$$ if they filed for bankruptcy due to CIT being a recipient of TARP funds last year. If they let CIT fail, many Americans will be affected greatly so I didn't see it happening.

There are multiple banks failing every week in the US, just not big enough to be on your radar. Maybe no more big banks will fail. But a headline from a couple of days ago read "Morgan Stanley sets aside 72% of revenue to pay bonuses". Like the old saying goes... a stupid robber robs a bank, a smart robber becomes a banker.

I think we've yet to see the end of the effects of financial weapons of mass destruction such as OTC derivatives.
Sprott Canadian Equity Fund

Well I am one of the poor Schlobs that invested in Sprott Canadian Equity before the UNFORESEEN Crash. It is still down over 40% from the time I got in.

I have since been watching my other funds climb back to even, or above, or just slightly below on the sentiments of people trading in the market.

I will not claim to have the experience, know how, or reputation of Mr. Sprott, and I certainly second guess myself, when I think there are some pretty fantastic buying opportunities, or when I think that the 25-35% increases in several funds YTD is a good thing. Dare I say I feel, negative sentiment sent the markets down. How much does a Telco suffer in the past year. New business will likely suffer, the mainstay likely not, and yet their stock plummeted with everything else, I say sentiment.

Any Way I still hold this Bear's Canadian equit 1/3 of the remaining 40% haircut balance, the rest I moved into his Energy and Precious Metals funds, where he is not hiding.

Now the other thing I wonder about is if the Crash somehow effected Mr. Sprott's foresight for the better. If so we should invest in cash, maybe bullion like him, and hide till everything is better. If not well my results certainly speak for themselves.

Is it the same skill that tells you what to buy, as the one that tells you not to buy?

I know I lost money!!!! Same with everyone else! Some are making some back!!! GO Sentiment!!!!
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Compelling article, but that's the intent. I would like to see how previous, shorter recessions/downturns compare on a graph to the current situation; would it also track the same path, but show that the recent upturn did not return to a downward trend?

I get the feeling that the author has as much knowledge and foresight about what will happen as any of us. Some of us will be right, some not. I wish I knew who will be "most right"!!

All that I take from the article is that you should be cautious. Nothing new, in any market. Also, if he's right, he's announce it with a megaphone, if not, he won't mention it again. Sound familiar? Just like most of em!

I'll be keeping with my dividend-paying stocks and ride out any storm. I have 20 years to retirement, and I can wait.


If we represent several thousand investors and we short the market with their money, then spread fear far and wide as loudly as we can, announce predictions of depression, continued recession overinflated market values, no signs of improvement... If we get enough people "feelin' it"; we make money, and look brilliant.
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