Analysts who Forecast the Stock Market Crash of 2008
Stock-Markets / Financial Crash Oct 13, 2008 - 11:22 AM GMTBy: Nadeem_Walayat
We have just lived through one of the greatest stock market crashes in history, on par and in many cases exceeding October 1987. As I have iterated several times that the stock market crash would comprise of many crashette's rather than a single one day crash of the 1987 variety as 'most' of the worlds governments following 1987 have implemented circuit breakers and plunge protection teams in place so as to prevent a one day crash, and have thus stepped in during market freefall's to engineer a bounce, this has happened many times over the last 3 weeks. Still falls of as much as 10% in a single day's closing basis are still pretty significant crashette's!
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This article looks back to analysis specifically published during August 2008, to determine which of the analysts at the Market Oracle correctly concluded that a stock market meltdown was imminent.
Yes, the stocks bear market began about 10 months earlier.
Yes stocks had already declined significantly from their all time highs.
Yes there were signs of the economy going into recession.
Yes housing markets were still plunging.
Yes the credit crisis was still going from bad to worse.
Yes the governments were set to pump in ever more liquidity.
Yes further bank bailouts were expected after the Bear Stearns bust.
Yes as there are perma bulls there are perma bears....
..... But specifically analysts who during the month of August 2008 wrote unequivocally that was understandable to ANY READER, that implied an imminent severe downtrend or even crash in the immediate future. The analysis had to have been clear enough to arrive at the said conclusion, i.e. doublespeak is ignored where the analyst may state several outcomes of what could happen within the same article
Therefore only articles have been selected that were clear in their message and conclusions that leaves the general readership with the understanding that the article is strongly implying the likelihood of an imminent severe downtrend.
August proved to be an ideal month for this exercise as stocks rose during the month in a counter-trend rally, which meant that whilst many analysts recognised that the market was in a counter-trend rally within a bear market, however only a few managed to take the leap to suggest that severe and imminent stock prices falls were on the horizon, both as per the articles written message and the charts presented.
Therefore the following analysts arrived at significant and highly relevant conclusions that deserve special attention.
Friday, August 01, 2008 - Making sense of the Stocks Bear Market- Round Table By: William_R_Thomson
This is the worst financial crisis since the 1930s and equity prices have more room to fall.
All told, the total losses could run into trillions of dollars.
High inflation is likely to persist, at least for some months.
Investors can seek refuge in precious metals and selected emerging markets.
Saturday, August 02, 2008 - New Investment Era, Contracting Earnings and PE Reversion Below the Mean - John_Mauldin
This is from Vitaliy Katsenelson's book: If you take 10-year trailing P/Es – you average them together so you don't have the effect of just one year – you find that valuations go from high to low from where bull markets start, in what he calls a range-bound market or what I would call a secular bear.
They go from high valuations to low valuations and back. Around 2000 we were at 48. It's down to 30 today on those long, ten-year runs, and it always corrects below the mean. Valuations are mean-reverting machines.
If you just look at one year, you get the same effect. You have a P/E average of 15 – remember they're projecting 28. You don't have a projection of 28 in a recession and not have the stock market feel that.
Saturday, August 02, 2008 - Worthless AAA CDO's Hit National Bank of Australia, 90% Debt Writedowns - Mike_Whitney
Tuesday's "sucker rally" in the stock market was just the convulsive writhing of a dying bull. It won't last. Once the bad news sinks in; investors will pull up stakes, equities will fall, and banks will crumble. The big-hand just inched a little closer to midnight.
Tuesday, August 05, 2008 - Stock Market Mega-Trends August 2008 - Hans_Wagner
Given this perspective, it is important to have your portfolio positioned for a bear market. I expect the market to rebound from this support level. However, any move up will only last a few weeks before turning back down. Any rebounds are good places to add more down side protection by using short Exchange Traded Funds (ETF), put options or covered calls. Of course, you can also sell long positions that can be bought back after they have fallen further.
08 Aug 2008 - Using Macroeconomics to Obtain Long-term Market Forecasts - Mike Stathis
Even if the current rally continues, that does not mean we won't retest recent lows before making it all the way up. In contrast, if over the next few weeks, the market drops below recent lows, it could signal some really big problems since there is very little support until the 10,100 range. As the next chart shows, a breakdown below 10,000 would be catastrophic, as there is very little support down to the 8300 range. The good news is that the 10,600-10,800 support level is fairly strong and the 8300 level is stronger.
Wednesday, August 13, 2008 - Stocks New Bull Market or Bear Market Rally? - John_Browne
So beware the current rally in the dollar and U.S. stocks. The fundamentals remain miserable, and stock performance will ultimately reflect this reality.
Wednesday, August 20, 2008 - Economic Critical Juncture Towards a Generational Depression - Eric_Chevrette
One more time, we have to reassess the LONG time EW scheme in USA in order to view the currently IMMINENT market developments under the proper perspective at worldwide level. No one needs to repeat that the current global crisis is a bank and credit driven one where the US housing bubble has been the appointed match to ignite the fire. But no one should either keep a blind eye on how DEEP the current credit crisis REALLY IS : as you can see with charts #1 to 5 , it is a crisis of GENERATIONAL size and depth where the peak in October 2007 is the door to that generational crisis. With the BKX index (US banking sector) reaching below 50 in July 2008, we have all EW evidence ( chart #1 ) that the rise from 2003 to 2007 was the final “wave 5” of a FULL cycle of “banking expansion” which did start in USA in 1984 and peak 23 years later in 2007.
Friday, August 22, 2008 - SPX Stocks Bear Market Technicals - Zeal_LLC
In addition, the VXO is now very low, equivalent to late-October levels, which shows little prevailing fear. Despite all the bearish technicals, the great majority of traders still aren't even close to taking this bear seriously! Not only has Wall Street misled them, but this bear is exceedingly crafty in not letting fear get out of hand. The fact that fear remains scarce and the mid-July fear levels at the latest SPX bounce were far too low to end this downleg strongly suggests that more selling is yet to come.
And this selling will drive new lower lows in the SPX, probably in the next couple months. Eventually general stocks will fall far enough to spark enough fear to generate a selling climax of sufficient intensity to end this downleg, but probably not this bear. Cyclical bears tend to run for a couple years or so before giving up their ghosts. We are just one year into our current one.
Saturday, August 23, 2008 - Imminent Bank Failures- Credit Crisis Worst is Yet to Come - Anthony_Cherniawski
The Dow and S&P 500 rose on Thursday as surging oil prices drove up energy shares, though fresh fears of more credit losses on Wall Street kept gains modest and pushed the Nasdaq into negative territory.
At Thursday's close, the S&P 500 Index was only 6% above the July low. This failure to thrive in the markets means that the lows will be tested again very soon. This is one rally to sell into, rather than hope for a miracle.
Aug 29, 2008 - Stock Market Rally Does Not Change Fundamentals - Chris_Ciovacco
While Thursday's gains in stocks appear to be impressive, they do little in terms of making an impact on longer-term trends. We do not need any complicated technical indicators to discern the long-term trends on the following charts. Thursday's rally in stocks cannot even be seen on the six-year chart of the S&P 500 Index below.
Saturday, August 30, 2008 - The Greatest Government Bailout of All Time - Martin Weiss
If you have other assets at risk — stocks, real estate or business properties — hedge against possibly devastating losses ahead with instruments like inverse ETFs or put options. Better yet, if you've cleaned out all of your vulnerable assets, consider using those same instruments to turn this dramatic situation into an equally dramatic profit opportunity.
Sunday, August 31, 2008 - Stock Market Dead Cat Bounce —What to do... - Martin Weiss
Don't let last weeks rally in the Dow fool you. There are two crucial reasons why I'm convinced it was nothing more than a dead-cat bounce: Nevertheless, the Pollyannas of Wall Street — the same analysts who used to swear on a stack of Bibles that the mortgage mess would be "small" and "limited to sub-prime" — are out in force again, trying to lure you back into some of the most vulnerable stocks in the world today.
Mark my words: This credit crisis cannot end ... the bloodletting in bank stocks cannot subside ... the damage being inflicted on companies that need credit to survive cannot be healed ... and the carnage in the economy cannot be reversed ...
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By Nadeem Walayat
http://www.marketoracle.co.uk
Copyright © 2005-08 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.
Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 150 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.
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