Four Bears

It's been awhile since I posted charts from dshort.com.  Here is the Four Bad Bears graph:

And here is the Mega Bear Quartet (mentioned near the bottom of the linked entry; apparently not inflation-adjusted):

And here is the Real Mega Bears (an inflation-adjusted overlay of three secular bear markets):

Naked short selling

While driving around today running errands, I heard an interview with the author of an article in Rolling Stone about naked short selling and the market collapse of last year. Much of it was over my head, but the interviewer kept making the comment that descriptions of short selling, naked short selling, etc. that were very easy to follow and understand were in this article. So when I got home, I read it. For those of you who are all into the Fed and the market (i.e. Stephanie), this is a must read.

All I can say is...UNBELIEVABLE.

Status check on bailouts

I haven't checked these numbers, but according to Tim Fernholz at Tapped today, here's the current tally on bank bailout money:

Even the limited transparency has allowed federal regulators to examine the weird compensation practices at the banks, creating a prototype for real financial regulation. And for all the talk of taxpayer money and expense, we may end up being surprised by how relatively cheap the bailouts ultimately are -- keep in mind, for all the talk of spending, the Obama administration's policies will still result in a lower deficit than if Bush administration policies had been kept in place, that banks are paying back their loans, plus interest, and that ultimately the cost of the bailouts will be much lower than its sticker price, especially if management of the program continues to improve under congressional and public pressure for higher returns. Of the $1.1 trillion in bailout money being tracked by ProPublica, only $583 billion has been committed, even less has been spent, and $77 billion has been returned.

That picture will only continue to improve as banks continue to pay the loans back. I don't know whether the bailouts were a good idea, but it's useful to keep the actual dollar amounts in mind when considering the topic.

CRA: not guilty

I'm not trolling any right wing blogs these days (now that Hot Air crashes my browser), so I don't know if they're still pushing the story that the Community Reinvestment Act is to blame for our recent economic collapse. Let's hope not, since that idea has been debunked, most recently by Ellen Seidman at The American Prospect.

Based on the Canner and Bhutta study, former Federal Reserve Governor Randall Kroszner concluded, "we believe that the available evidence runs counter to the contention that the CRA contributed in any substantive way to the current mortgage crisis." In reaching this conclusion, Kroszner and the Federal Reserve Board joined other bank regulators in affirming that CRA did not cause the mortgage-market meltdown. Federal Deposit Insurance Corporation Chair Sheila Bair has stated, "I want to give you my verdict on CRA: Not guilty." Comptroller of the Currency John Dugan agrees: "CRA is not the culprit behind the sub-prime mortgage lending abuses, or the broader credit quality issues in the marketplace. Indeed, the lenders most prominently associated with sub-prime mortgage lending abuses and high rates of foreclosure are lenders not subject to CRA." All of these regulators were appointed by President George W. Bush.

Bear: Was it over several months ago?

From dshort.com:

Bear: Age 20 months

From dshort.com, as of the end of trading June 12:

Bear? Age 19.2 months

From dshort.com as of the end of the day on Friday, May 15:

Bear: Age 18.7 months

From dshort.com as of the end of the day Friday, May 1:

Is the stock market cheap?

In response to Anonymous' question earlier about whether it's time to get back in, dshort.com notes that "every time the P/E10 has fallen from the first to the fourth quintile, it has ultimately declined to the fith quintile and bottomed in single digits." If that pattern holds true this time, we're still on the way down.

Bear: age 18.5 months

From dshort.com as of the end of the day Friday, April 24:

Bear: Age 18 months

I have completely forgotten to publish dshort's bear graphs for weeks. Here's where we're at as of yesterday:

Bear: age 17.1 months

From dshort.com, Four Bad Bears:



And the Bear Bottoming Process:

Bear: age 16.9 months

From dshort.com:

Bear: age 16.7 months

From dshort.com:

Bear markets and dshort.com

Dshort.com has generated a couple of interesting graphs regarding bear markets. This one shows market decline (as a percent from the peak it has just passed) over the course of months:

A second is this one:
This one plots market movement since the 1950s. Click on the blue bands (labeled with year ranges) to see detailed info about each bear market. (The good news here, though not really news, is that the performance of the market over time follows an exponential regression line.)

The site doesn't try to predict what's next for our markets, but it certainly provides some perspective.

[Update: Here is a better post on dshort.com explaining the second graph.]