The Binary Circumstance

Atheists are starting an advertising campaign on buses in London to complete with pro-religion messages.

The British Humanist Association will be administering all donations to the campaign, and Professor Richard Dawkins, bestselling author of The God Delusion, has generously agreed to match all contributions up to a maximum of £5,500, giving us a total of £11,000 if we raise the full amount. This will be enough to fund two sets of atheist adverts on 30 London buses for four weeks.

From Metafilter.

In spite of today’s huge stock market rally, there are many, including myself, who think we have probably not hit bottom. CNBC has a useful article on how to identify capitulation. I’d suggest reading the entire article and also looking at the graph which identifies the stages.

The activity in the Dow Jones Industrial Average and other global markets shows an acceleration of downwards momentum. The massive increase in volume has not yet developed and this suggests the market bottom is not yet established. There is a high probability that markets will see a selling climax in the next 3 to 5 days.

But here is the important difference. The recovery rally after climax selling is temporary. It is part of a longer-term consolidation pattern that may last months, or even a year, and make more new lows before a new sustainable uptrend can develop. The potential shape of the recovery is shown in the chart. The bull market rebound rally follows a temporary selloff. A bear market rebound rally follows climax selling. It is a relief really, but it is not part of a sustainable trend change.

After a bear market, volumes remain low. When you lose trillions of dollars it takes a long time for spare change to start rattling around the economy again. Spare change drives the bull market because money is available for speculation.

Today the House approved the massive $700 billion bailout (I’m sure that’s just the beginning) that was approved by the Senate a couple of days ago.

The stock market as measured by the DJIA had been up over 300 points in anticipation of the positive vote in the House. But it dropped 470 points off it’s high for the day to close down 157 points for the day, and down over 800 points for the week.

In addition, the credit markets remained frozen after the bailout was approved.

My own personal view is that the market is trying to form a bottom and it would do that without the bailout. (See some of the evidence here.) The pressure to get the bailout passed was more about getting the taxpayers to pick up the bill for the bad decisions of banks. It would be much harder to sell that politically if the markets had already started to recover on their own.

Today’s purchase of Wachovia Bank by Well’s Fargo without any help from the government, along with Warren Buffet’s multi-billion dollar investments in Goldman Sachs and GE show that big investors are finding great long-term value in the stock market at these levels.

Continued efforts by the government to artificially prop up markets with bailouts and restrictions on short sales will only further erode confidence I believe. Artificially propping up housing prices didn’t work in recent years did it? That’s what got us into this mess. But at along as the public views government intervention in the markets are their salvation, we’ll get more of the same. I fear this could drag on for a long time.

Markets, in order to function properly must be free and honest. The government has a nasty habit frustrating those ideals making it impossible to know what the true value of anything is.