Well the rally in stocks seems to continue unabated defying all sorts of things and spreading good cheer throughout the land. Around Christmas I said that I expected a big rally to come (because that is how it usually works) but this has exceeded what I had in mind both in magnitude and duration.
In just over five months the S&P 500 is up 51% and while may people think it can go higher Michael Kahn mentioned yesterday that the bear market down trend line doesn't come into play until SPX 1100. When the market was at its lows I commented that it is not as bad as it seems. Up here I would say things are not as good as they seem. It doesn't take much to think the crowd may not have it exactly right or that the people who completely missed the crisis before won't correctly declare it over now.
For a little historical perspective that I concede may not be apples to apples, from the March 2003 low of 800 the SPX was at 980 five months later which is a 22.5% gain on its way to a 38% gain from that low to the end of the year before flattening out. We are now up 51% in five months.
There was a low in October 2002 of 798. It went up to 938 by Thanksgiving only to go back down again by March. The fall 2002 rally was 17.5% in two and a half months before turning back down. We are now up 51% in five months.
The rally off of the 1998 double bottom took the SPX up 32% in three months before going sideways for a while. We are now up 51% in five months. The Asian contagion of 1997 barely shows up on the chart. The rally that ignited after the start of the first Iraq war took the market up 18% in a month before going sideways for a while. We are now up 51% in five months.
Of course the current rally has been impressive for its duration and magnitude but it has exceeded reasonably visibility in terms of where revenue is headed, the reality of the jobs situation (unemployment went down due to workforce contraction), the real state of the consumer, the real health of the banks, the reality of the real estate market, the sheer massiveness of the budget and ensuing deficit and more. None of this precludes the market from going higher but the declining volume tells us there is some air under there and I for one am glad to have some cash built up in case these things turn out to matter.
As a follow up to yesterday's post about Canadian investment trusts I stumbled across the Liquor Stores Income Trust LIQ-UN in Canada and LQSIF on the pinksheets. It owns over 200 liquor stores in Canada, a bunch in Alaska and just bought several Liquor Barn stores in Kentucky. I did not look under the hood but like many of the trusts it got pasted in the bear market, has come back some but has held the dividend steady. If you're thinking that liquor store traffic would hold up during a big economic contraction (I would think so) then the decline, more than 50%, might surprise you. If I have time I'll try to learn a little more.
Liquor stores! Wow.
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19 comments:
RR: I was already feeling a bit of vertigo, but your numbers give me pause. Don't get me wrong, it was nice to open my wife's 401k and finally see it making upward progress (getting me somewhat off the hook for some stupid moves last year)...but the wall of worry is seeming awfully steep.
Wanted to give you a data point with regard to the Canadian liquor stores: We're from Phoenix, but happen to be living in Fredericton, New Brunswick, for the year. The liquor taxes here are absolutely outrageous--a bottle of wine that would be $4 in the States is about $12 here, "cheap" beer is $25+ a case, and a liter of decent rum is $35. It certainly has cut down on our consumption, regardless of outside economic realities.
That said, if LIQ's business plan includes acquiring more stores (and arguably more room for profitability) in the States, they might be onto something.
Thanks for always bringing new ideas and an interesting perspective to the table!
Rally??? or Bull market?
Just because the market is up 51% does not stop it from going up another 51%.
Of course it does not mean it will either. But constantly repeating 51% is not particularly predictive.
Well I can only surmise that we won't get a pullback unless I declare my intentions. So I formally announce that:
1) we are going straight up to new highs.
2) Pullback and backing/filling are a thing of the past. This time it really is different.
3) I am going 100% long 3x ETFs.
4) No bonds or any form of diversification for my portfolio! Equities and commodities only baby!
There, that should result in a correction within, or quite likely - under, 24 hrs.
Blueman
Roger, I'm curious: What's the difference (if any) between investing in the pink sheet and via the Toronto exchange?
Roger,
I am in your camp. My system gave me a number - 1166. It just showes how oversold we were in march. For me, Roger, It has been a great learning period. I started investing in early 2007 and in Oct.2007 was so scared that I froze. In dec.2008 started investing again and froze in jan.2009 to pick up in march - Thanks to you and your blog. Now Roger, the system that I have developed gives me 1166. And planning for the worst. But If I see a good deal I jump in. In liquor a grat company is Campari - Grat Managment. I have been looking to get in but have not liked the numbers. I like to pick it up for less.
Best,
Jeff From Milan, Italy
C'mon, Roger, you need a pep talk.
We're up so much because we were down so much. The first battle, systemic risk, has been met and we're back to pre-Lehman levels. The next battle, the economy, is now turning in the market's favor. Look at Germany, France, and our own Fed's pronouncements.
Don't be afraid of big round numbers. Interest rates are accomodative, the yield curve is normalized, and demand for stocks is healthy (above the 200 dma.) Cash pays you nothing.
Go look in the mirror and repeat this--I'm good enough, I'm smart enough, and doggone it, people like me. There now, don't you feel better :)
Roger,
You are looking at it wrong. Stop looking at how high we ar off the bottom.
Wouldn't a 1/3 to 2/3 retracement be normal? If government stimulus is over 1 trillion possibly 2 trillion or more depending on what the fed is not disclosing would you expect the high end or the low end for the retracement?
You are showing your bearish bias instead of increasing your allocations and selling your sds as we move higher above the 200 dma (which has turned up)
Go ahead and continue to explain why the market is wrong and you are right, fight the trend, and lots of luck succeeding because you are going to need it.
Sorry if this is rude but I honestly think you need to get a more neutral as opposed to bearish attitude. The market will do what it does not what we think it should do.
The irony of pairing a post about fear of flying with a liquor store trust is delicious!
high booze tax? gotta pay for the healthcareXD
in most brokerage accounts there is no diff that i know of between buying direct in Canada vs the pinks.
I believe most firms require the pink sheet route. i know there a couple of firms that let you go direct.
6:26, not trying to be real predictive so much as point out that just as things were not as bad as they seemed before i doubt they are as good as they seem now and that a decline would not be a shock and i hope that our clients realize this.
7:14 I can't refute your comment, I can only say that the way I am coming at it is to temper enthusiasm in case there is a big decline. I am very close to the market YTD cash and now tiny SDS notwithstanding. I went down MUCH less, went up much less and close to even which is what I spelled out ahead of time if this was the scenario that played out.
8:26, never thought about that--good stuff. maybe there is a legalized marijuana trust we can buy.
Clive Wachtel is running a series of articles on SeekingAlpha, which may also be found on http://highdividendstocksguide.blogspot.com/
If you are interested, this is well worth checking out.
And there is the Canadian Edge newsletter ($99/quarter), which fully concentrates on these trusts, which I can also recommend.
Doesn't seem to do much good explaining that going down a little during a crash means you don't need to stress out going up ...or worry about what label to hang on the current trend if it comes to that (shrug).
Overall trend's up on weak sponsorship, government supported earnings and speculation. Big financial outfits are clearly feeling better given all the goodies and slack they've received but the regional and smaller financials are pretty much in the same place the rest of the country is: Nervous, depressed, angry or some combination thereof.
Those of us who added more long exposure this Spring based on fundamental values (while maintaining hedges) aren't fretting too much; mildly bemused by the moderate opportunity cost of remaining strategically defensive during a big rally (sure had bigger legs than I figured) but strategic accounts are in positive territory (above their last peak) so it is what it is and we are where we are; obeying the first rule of investing and avoiding "down a lot" does extract its moiety from time to time.
On the tactical front, my real estate short is still working (up by 12% as of an hour ago) and it looks like yesterdays pop couldn't muster a repeat today but if it does I may have to cover with a small profit until next time: The sector was strenuously overbought and commercial RE fundamentals are under water with 100's of regional banks entangled but there appears to be one devil of a lot of money that wants to believe otherwise. Can't fight liquidity when swing trading so I'll read the chicken entrails and decide at end of trading today (if it's a young chicken I might slap the carcass on the grill afterward though).
Hi ROger/readers: Wondering if anyone would care to share their thoughts on the strategist in Barrons who said he buys when the index is greater than 5% above the 200 day MA and sells when it is greater than 5% below it. Am wondering if this reduces whipsaws. Thanks..
Nails
http://tinyurl.com/bsbcz
onefer u roger...thanks
Roger,
after taking today's numbers some key indicators are breaking down. We are in a retracement, perhaps to make a final push to 1166. However I have sold another italian stock. Granitifriandre(grf.mi). So I am converting some gains that I stored into stocks into cash. This has been a bull since march. The suprise will be in 2010 when everyone will be looking for a recovery and we will have what you where looking for a down push to either a new low or touch the march bottem. It would be funny if the yamada turns bullish at 1166 before we begin a new bear(hope final). That would be hillarious. Mike C. will start become a believer not to believe any"PRO" - I am just joking Mike C.
Do not take it sirous. Hope you are doing well Mike.
Best,
Jeff from Milan,Italy
Roger,
Any thoughts on nuclear energy as a "theme"? I recently read that China is expected to add 100 new nuclear plants in the next 10 years.
it seems pretty clear that nuclear will be part of the solution over the next decade. I do not know the best way in. if memory serves the two ETFs have a lot of uranium miners and japanese industrial companies (plant builders).
In 2006 and early 2007 you could not justify the price of the S&P or other indicies on fundamentals but Roger and I were bullish. The prices were based on liquidity from the fed.
Today the price on the S&P can not be justified on the S&P and Roger has become bearish, but the fed liquidity makes me bullish.
IMO this defines the rally vs. bull market debate or as RW has decided we no longer need to give it names - which is a cop out IMO which is typical when you are in very confusing times and we are in very confusing times so I probably should not be so difficult - but tell me when it is easy?
I think you need to be bullish when prices are low and/or there is a lot of liquidity from the fed (don't fight the fed)
There is a lot of liquidity from the fed and this bull market will continue (with some scary pull backs that we have not yet experienced)
You're turning Euro-pean
I think you're turning European
I really think so
*Di di, dum dar do doo*
Welcome to the club. It's better than many, like capitalism is bad but not as bad as the alternatives.
Without a manufacturing advantage, what else are you gonna do?
Despite his taunting tone, anon 5:09 raises an interesting question. What is our role in the world going to be without a manufacturing advantage? I suspect think tanks inside the beltway spend lots of time pondering stuff like that. Aside from geopolitical implications, it raises some interesting long term investing questions.
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