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Mark's Market Blog

10-13-08: Bear Market Rally

By Mark Lawrence

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Well, today I made back 60% of my losses from the last two weeks. I'm currently making money on Apple and Google, and I'm behind a bit on SPY and a lot behind on GM. The miracle of cost-averaging.

This "indian summer" is just as difficult for me to understand as last week's panic. The G7 economists released a statement. I've read their statement, and as I read it it doesn't promise anything, it boils down to "we care, we care, we care." I suppose maybe Europe is going to guarantee all bank deposits and all interbank loans. Anyway, I don't see it as but an excuse to have a market turnaround. A month ago GM was worth $6B. Friday it was worth $3B. Today it's worth $3.7B. In a couple weeks I expect it will be worth like $5B. What's changed?

Speaking of GM, there's a lot of talk about how GM might merge with Chrysler. Well, maybe - Jeep is a good brand, and it would be nice to put a different grill and hood on a GMC pickup and sell it as a Dodge Ram, I suppose. The combined companies could perhaps save $5B a year in production costs, and perhaps another $3B a year in development and marketing, and it would make GM the clear #1 again. It would also cost probably $15B to combine the two, and take 2-4 years. No one has $15B laying around right now, so I don't see this happening. The truth is GM could realize about 60% the benefit by just waiting 6-10 months for Chrysler to go bankrupt and buy the Jeep brand at the last minute for $50M or something.

I expect this market will be up a bunch tomorrow, and a bit more on wednesday; then we'll have more normal fluxuations and what seems to be a bullish market for a bit. I expect that we'll go up to about a DOW of maybe 11,500 to 12,000. That will likely take a few weeks. Then we'll drift down slowly for a few weeks, then another spike down just like last week. I expect to sell everything I own in 2-4 weeks at a profit, then sit in cash for 3-6 weeks, then buy it all back for about 50% off. Anyway, to my eyes, history is clear on this point: bear markets don't have one big down spike, they have two to four. We've seen one.

This market has shown great panic over bank illiquidity, but it has not really discounted the coming recession, nor some of the garbage being floated around by politicians, like they're going to re-capitalize the banks by buying bank stock private issues. That's what we all really need, for the government to own controlling interests in the banks. Isn't there a word for that? I forget, facebookism? Oh yah, fascism. On our side of the pond, anyway. In France it's called "the third way," or socialism for short.

When the going gets weird, the weird turn pro - Hunter Thompson.

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