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| | How Low Can It Go?
Fear & Capitulation Stage of Bear Market
10/09/08 11:30 AM
We believe that the market has further to go on the downside. The stock market would have to meet a few more requirements for us to at least move to a neutral stance before we hopefully can turn bullish.
The first requirement is for a "wash-out" event of public capitulation precipitated by major redemptions of equity mutual funds and massive selling of equities by the public, hedge funds, and the institutions that are forced to liquidate due to public redemptions.
The second requirement would be for stocks to trade down to the levels that we would consider attractive values. We have been updating the "Limbo, Limbo, How Low Can it Go?" article on the right side of our home page every few months, and it has recently been updated. Ever since we authored "Limbo, Limbo" in early 2000 the stock market has never reached levels that we would consider attractive. The article shows five different metrics to measure the valuation of the stock market-Price to Dividends, Price to Sales, Price to Cash Flow, Price to Book Value, and Price to Earnings.
The third requirement for us to get more positive is for Housing Prices to decline to more normal levels of under 3 times median family income after rising to over 5 times median income in 2006. This would require home prices that have already declined by 20% to decline by another 20%. The deleveraging of the record debt will accompany the housing price decline. We will only deal with the capitulation in this comment, but you should visit "Limbo, Limbo" to see how overvalued the market is except for the price to book metric.
The last stage of panic selling is in the process of meeting our goal, but has not yet reached the level of massive capitulation that would be needed to counter the outrageous speculation that took place in the late 1990s and from 2003 to 2006 in both equities and home prices. The equity mutual fund redemptions in 2002 did not come close to the liquidation we expected after the financial mania of the late 1990s and the latest redemptions in 2007 and 2008 have so far not reached the levels we would expect in order to be classified as enough capitulation to end the final stage of the bear market.
One of the best ways to measure the last stage of the bear market is to monitor the public's participation in the equity market through the net purchases and sales of equity mutual funds.[More]
| We Hope to Be Wrong
10/02/08 5:30 PM
As many of our long-term readers know, we have been very negative on the stock market and economy ever since we first started writing these comments at the beginning of 2000. We have tried to explain the way we see the financial environment even if we were hoping to be wrong the whole time.[More]
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You Are Not Missing A Thing
10/02/08
Gentlemen,
You are not missing a thing. I am a reader of the column for quite some time. What would be of value to point out is the insurance industry is going to a slow train wreck similar to the banks high speed crash. While being better risk managers and better capitalized, the life and annuity companies are big buyers of corp debt.[More]
| From Costa Rica
Your Article Headwinds vs. Tailwinds
9/16/08
I just found this e-mail that was sent in May. A lot has manifested itself since. The economic catastrophe has become visible.
5/17/08 As usual this is a well-written, balanced article with much information.[More]
| Good Column
9/08/08
Charlie good column. Trailing twelve months $52 is the lowest since the end of 2003, so to get to the same PE as then the S&P has to drop 200 points to 1030.. I have been looking at the S&P as a 30 now 32 month head and shoulder.1560-1230=330..subtract that from 1230 and you get 900. Sept 01 bottom 950 is the only hard bottom from current 1230 to the 2002-2003 lows..[More]
| Correct Predictions
8/15/08
I read, with great admiration, your reports on the future downtrends of the
market. They were backed-up with strong facts and arguments and a consistent
track record of correct predictions. That being said, I was curious to see
what you would then be suggesting one should do with their money if they had
100k to invest, for example. Stay in cash? Or are there some sectors worth
investing in? Thank you.
| You Guys Saved Me A Ton Of Money
7/29/08
Hello,
The dow transports have been steadily moving upward while the dow has been
going down. Do you feel this could possibly cause the bear to be less
severe. To my understanding, a megabear usually coincides with both indexes
going down. ps.[More]
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| Last Major Comstock Report | FEET DON'T FAIL ME NOW
Dated, but not out of date
12/10/99
The list of negative factors impacting the stock market has now become so numerous that it is highly likely that a severe bear market has already started
Comstock Funds - Contrarian Charlie Minter Bear Market Bearish
Introduction
The list of negative factors affecting the stock market has now become so numerous that it is highly likely that a severe bear market has already started. We begin with the fact that, as measured by earnings and dividends, this is by far the most overvalued market of the past century.[More]
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