Excellent Insights on Current Stock Market

[mshan]

"First of all, as we enter the holiday season, you normally tend to see volumes dry up. And volumes throughout the fall actually have been quite low. When you have low volume trade, the price tends to move higher. It's just a dynamic of having, there are more natural buyers of equities than there are sellers. The second piece is, you know, there's a single trade out there right now and it is the short U.S. dollar trade. If that continues to play itself out here and we continue to see weakness in the U.S. dollar, you will see higher equity prices. Then finally, most of this talk about money on the side lines, we think is really a little bit of fabrication. Most of the institutional money managers that we know and talk to are fully invested and the last leg of somebody coming into this market is going to be the retail investor, of which we would caution them at these levels, equities are quite pricey."

"Remember that there's two kinds of inflation. One is M3 or monetary types of inflation and that is being anticipated by the market and that's reflected in things like upticks in TIPs, prices and in the price of gold. The other is more consumer related or demand related inflation and that's more reflected in the CPI number and that would be a positive certainly in the Fed's play book to allow them to take their foot off the gas pedal a little bit and begin to think about what their exit strategy is going to be in terms of cleaning up the massive amounts of liquidity that we've seen enter into the market over the last 18 months."

http://www.pbs.org/nbr/site/onair/transcripts/lincoln_ellis_of_the_lind_group_091117/

 

[DuffmanOhYeah]

"The second piece is, you know, there's a single trade out there right now and it is the short U.S. dollar trade."

I used to work as an analyst at a hedge fund, and still keep in touch with other analysts/managers I got to know working there. This is the one point everyone agrees on.

 

[mshan]

Any insights on what rough percentage of hedge fund managers or mutual fund managers / money managers are still underperforming broad market indexes?

I remember reading that alot of hedge funds had good years and closed their books already (end of October?) (recent downdraft may have been people locking in profits for the year?), and now mutual fund managers are buying aggressively to beat their indexes by end of year (?)

Any truth to that?

 

[Acanthus]

"The second piece is, you know, there's a single trade out there right now and it is the short U.S. dollar trade."

I used to work as an analyst at a hedge fund, and still keep in touch with other analysts/managers I got to know working there. This is the one point everyone agrees on.

The problem is that the fed can pull money out of the market just as effectively as it places money in.

Bernake and Geithner both plan on doing this when the economy is well on its way back to growth.

Over the long term I would say that it isn't a good idea...

 

[bamacre]

The problem is that the fed can pull money out of the market just as effectively as it places money in.

Well if that isn't unintended irony, I don't know what is.

Bernake and Geithner both plan on doing this when the economy is well on its way back to growth.

What happens when inflation kicks in and the economy hasn't?

The other problem is knowing exactly when to press that button. Obviously, Greenspan didn't.

 

[Acanthus]

Well if that isn't unintended irony, I don't know what is.



What happens when inflation kicks in and the economy hasn't?

The other problem is knowing exactly when to press that button. Obviously, Greenspan didn't.

I don't think they will repeat greenspans folly... Deflation is still a threat right now, which is why I believe the fed isn't afraid of the record-low rates.

I would imagine that jobs will begin to return in 2Q 2010. It will probably be safe to hike rates then.

 

[bamacre]

I don't think they will repeat greenspans folly... Deflation is still a threat right now, which is why I believe the fed isn't afraid of the record-low rates.

I would imagine that jobs will begin to return in 2Q 2010. It will probably be safe to hike rates then.

There lies the main problem. As Greenspan says in the link in my sig, "it is not possible to manage something you cannot define."

 

[Acanthus]

There lies the main problem. As Greenspan says in the link in my sig, "it is not possible to manage something you cannot define."

I agree, they need a way to define appropriate ranges for interest rates based on economic indicators.

Right now it is arbitrarily decided by the fed with some guidelines.