Sunday, January 10, 2010

Market Update 02.10

Another week of gains for major market averages to start the year. Volatility is low. Fear is non-existent. An array of 12 analysts polled by Bloomberg all expect gains for stocks in 2010. The most "bearish" of all these analysts expect gains of 10% on the year. Have these people learned nothing of the perils groupthink and recency bias can bring?

I can only equate today's long grind higher - behind the veil of steadily weakening fundamentals and unacknowledged credit market deterioration - as analogous to that of what we experienced toward the end of the bull market in '07. See the charts below for a visual on that analogy.

First, here is today's market.

Next, here is the '06-'07 advance. Following this grind, while very few even conceived of anything other than perpetually higher prices, a few subprime mortgage lenders "all of a sudden" went bankrupt. Following a fairly substantial two day shock, the markets continued higher. But they were never the same.

Just a short blurb today. I'll have something more cohesive later this week.

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1 comment:

mike.montchalin said...

And of course all of your readers should know by now that under these perpetually higher prices was subprimes "all of a sudden" defaulting.

And now, will it be Commercial Real Estate or Sovereign debt? Or both?

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