Posted by
john on Friday, November 21, 2008 12:51:37 AM
Louise Yamada, renowned technical analyst and winner of multiple Institutional Investor awards, appeared on CNBC this afternoon. She put up a chart of the S&P 500 from 1980 to present. Friends, this was the most frightening chart or graph I think I've ever seen. We've broken support on the right side of a massive double top, on the way down to the long, long-term trend line. Can you say Dow 6000?
This reminded me of something I've thought of quite a bit recently. In 1996, I heard a presentation by one Alan Shaw, since retired, who at the time was Chief Technical Analyst at one of the big counting houses. He put a chart of the Nikkei over a chart of the S&P, and it was chilling. It was the same chart, only we were 12 or so years behind. He then launched into a discussion of demographics, specifically noting that our demo trends trailed Japan's by, oh, about 12 years or so. He concluded this segment of his talk by saying: "Hey, I don't have a crystal ball. I don't claim to have all the answers. But we've got to ask ourselves some questions here, don't we?"
Are we looking at a multi-year walk in the wilderness similar to what Japan has endured? Is there any way we could avoid it? I hate to be a broken record, but the one thing we can't do is repeat the mistakes of the past, and throw good money after bad. If we've got to reflate massively and then take our chances, that's fine, but there are right ways to do that, and there are wrong ways. Pandering to a decrepit labor union and its ossified political machinery does not exactly inspire.