Replies to post #14527 on Value Microcaps Free-For-All

[ari5000]

market action:


I see a lot of predictions about rallies and so forth but the bank problems sound mostly like what happened in Japan when they bid real estate to astronomical prices and then people used real estate to secure loans.

I don't see how the junk 'clears' when the Fed won't allow failure. Japan did the same thing. The market is going to be somewhat predictable based on the Fed's actions -- it will likely create sharp rallies whenever people perceive the problem is fixed (currently by using taxpayer money) and outlawing shorts on banks, longs on oil futures.

These fixes won't eliminate the real problem. It certainly won't free up the credit markets. Mortgage rates, for example, are moving higher than when I bought a house over 8 years ago and climbing. Housing inventory continues to pile up. So eventually, reality will sag on the markets once again.

It's funny now because I'd say the only industry with the brightest outlook and possibility to generate strong profits for at least 10-20 years with little pullback is energy -- and now people can't get rid of oil and oil service stocks fast enough!

I was watching NE selloff over a buck after posting 30% growth and a 9 cent beat and comparing that to Wachovia rising 25% after losing 8 trillion dollars. This kind of backwards logic can't last too long. It now looks like NE has recovered most of that drop but still...

I think there's a tendency for most people to WANT to believe in a rally rather than accept there may be 5 more years of no gains (assuming buy and hold).

So far this year -- we've seen ever major drop turn into a rally by FED INTERVENTION. Three times already. The market was almost off a cliff under 11,000 when finally the Fed moved. Now it'd be one thing to stop the bleeding -- but they always seem to set off a rally as well.

Just how high can the market go if it can't stop dropping without intervention? All we're really doing is bouncing and making new lows.

Next leg down there won't be many shorts to break the fall of the financials. Should be interesting.