« The Gordon Brown Indicator Flashes Buy Signal (for Gold) | Home | Speaking of Gold… »
Generational Bottom?
Doug Kass was on Kudlow and again mentioned a generational bottom. He seemed to be neutral if not subdued about the next five years essentially subscribing to John Mauldin’s “muddle through theory.” If that is the case then there can be no generational bottom. In my recent podcast, I talked about the two components to bear markets and corrections- time and price.
The bottom in terms of price can occur well ahead of the bottom in terms of time. The Great Depression bear bottomed in terms of price in 1932, though the market didn’t begin a new bull until 1942. The price bottom during the 1966-1982 bear occurred in 1974 but the next bull market didn’t begin until 1982. You get the point. The bear market doesn’t end until the next bull begins. If a market is in a trading range, it is still in a bear market. 1942 and 1982 were generational bottoms- not 1932 and 1974.
Could the S&P mark at 666 be the “price” bottom? Very likely not. Major bottoms occur when the market trades at eight times earnings. S&P earnings in 2009 are going to be closer to $40 than $50, which means the market would need to go below 400. Perhaps David Tice’s call of 320, is derived from $40 in EPS with a PE of eight? In any event, expect the recent bottom to be retested, though probably not until 2010. And if you are calling for a generational bottom, then you should be expecting a bull market to begin immediately thereafter.
Kass, as well as Peter Schiff on Kudlow part 1
Kass, as well as Peter Schiff on Kudlow part 2
Where is the Dollar heading? Part 1 Click Here
Comments are closed.