The global economy has been showing a bit of resilience as of late, with the manufacturing index recovering back towards 50.2 in December from 49.6 in November. Stabilisation is seen in US and China at present, while Eurozone and Japan continue to deteriorate. However, the question is weather or not the 2011/12 economic soft patch is a bottom from which another expansion period will re-start?
Chart 1: Recovery in global manufacturing, but for how long?
Chart 1: Recovery in global manufacturing, but for how long?
Source: markit / JP Morgan
Personally, I highly doubt it. When I watch Bloomberg or CNBC, I get the impression from various analysts, strategists and traders that this is a great time to buy into investment cycle. In my view, many market participants fail in understanding how to read the business cycles, as they are usually focused on short term trading and news headlines.
Chart 2: Global investors view the economy in a late cycle with 12% seeing a recession
Chart 2: Global investors view the economy in a late cycle with 12% seeing a recession
Source: BofA Merrill Lynch
My personal view is that the current business expansion, as well as the investment cycle (bull market), both started in March 2009. As we approach the four year anniversary in March 2013, the bull market will be in very late stages of the investment cycle.
Chart 3: The four year old bull market has returned 120% from its lows
Source: Barchart
With the return of over 120% from its March 2009 lows, this has been one of the strongest rallies in the stock market post World War II era. Other higher beta indices have enjoyed similar or even more of a speculator runs. Consider that the German DAX is up 111%, Singapore's STI is up 113%, Mexican Bolsa is up 160%, Nasdaq 100 is up 168%, US Industrial sector is up 174%, US Discretionary sector is up 216%, Philippines Composite is up 236%, Thailand's SETI is up almost 260% and so on.
Investors seem to be in disagreement on weather or not the S&P 500 September high at 1474 is a top, but in my opinion this is irrelevant. The point is that the majority of the gains in the current bull market are most likely realised, especially in the earlier parts of the expansion from early '09 to early '11. Technically, we are approaching an enormous resistance area between 1450 to 1550.
Chart 4: Bull market leaders like Apple have most likely topped out
Source: Stock Charts
Furthermore, it seems more and more likely that bull market leaders and investor darlings like Apple have now topped out. Apple has managed to gift investors an impressive gain of 8 times return since the March 09 lows and even more impressively, a return of 110 times since the March 2003 low. If the top is now in place for this speculative stock, it could most likely mark the beginning of the end when it comes to the business cycle.
Chart 5: Risk taking appetite and greed have prevailed since August 2012
Source: SentimenTrader
I understand that majority of the investors do not agree with my views. After all, they point to the recent price action of several percentage points and automatically make conclusions based on emotions. In markets, success is usually achieved when one is almost alone against majority. The chart above shows that majority of investors have been consistently hungry towards risk as they chase equities and other risk assets since August 2012. However, overwhelming bullishness held by the herd is not reflected in the gains. Consider that over five months, since risk appetite indicator became extreme, S&P 500 has managed to gain only 4.5% at best.
Chart 6: After four years of rapid expanding, corporate profits could disappoint in 2013
Source: SentimenTrader
I am also of the opinion that this overly bullish condition will not last forever, especially as margin squeeze and earnings disappointments could sneak up on investors, as they deteriorate in coming quarters.
Chart 7: Corporate insiders are currently extremely negative on the US stock market
Source: Technical Take
In summary, I do not see equities as an attractive long term investment right now. If you have been following the blog for awhile, you should also know that I have sold short some US equity sectors, between late July and early September, with a view of lower prices into 2013/14 period. While majority of these positions have not performed at present, as the bull market continues its topping process, I hold a very high conviction that in due time the financial markets are headed for another crisis, equities in the US are heading towards another cyclical bear market and the economy is headed towards another recession.
*Note - Over the coming days, I will cover currencies, commodities, precious metals and bonds.
What I Am Watching
As usual, a great issue of your blog. This may be old news to you, but to other readers who may be long the market, watch out:
ReplyDeletehttp://www.theaustralian.com.au/business/economics/services-sector-contraction-adds-to-case-for-rate-cut-aig/story-e6frg926-1226547530619
I perfectly agree with your view of a late stage bull market. But keep in mind that this late stage is where market usually become emotional as well as irrational.
ReplyDeleteThat means that we could see a buying climax where optimism take control and therefore see a last, very strong rally to new highs. It can be very costly to be short on such occasions, just ask Julian Robertson, Tiger hedge fund manager ;)
I think this phase is just starting now due to the last global liquidity injection, and my guess is that it should last up until April of this year. If it happens,this last blow will be an awesome selling opportunity.
Memento mori: "the market can stay irrational longer than you can stay solvent". Nevertheless, I wish you all the best in 2013.
ReplyDeletePAT
Tiho my two questions for you are
ReplyDelete1a. What about timing - this can drag on for 6 more months or year.
1b. Patience - where do you find the patience for this trade? I've been short since end of November and I'm going insane here and no fun to be around. How do you keep your spirits high?
1c. Conviction - I'm freaked out that Russel and some European indexes are breaking out to all time high.
2. Central bank liquidity - do you think it is wise for us to bet against the Fed
I think every bear is freaking out at the moment macrot.
DeleteIt seems so obvious now - of course they were going to do a deal and making money on the markets was easy money.
I don't believe the above for a minute. They could just as easily not come to a deal and the markets might be down 1,000 points as of this weekend.
What I do not see happening now is the markets losing anywhere near a 1,000 points going forward. Each time there is a crisis that is about to bring the markets down... they pump up the markets... and then in any subsequent panic any dips do not take us back to the last level.
It would take a Lehman to take the markets down over a 1,000 points now IMPO - and that will not be allowed to happen IMPO.
I would love to see it though - only a few months ago we talking about maybe seeing 9,000 on the DOW, then it might have dropped to 10,000 and then we were all hoping for it to drop to 11,000. We will be lucky to see 12,500 again in 2012.
Hi tiho, hope you are right with your comments.
ReplyDeleteJust 1 question. Where do you get chart 7 from ? And which line is insider buying and insider selling.
Congrats for your blog !
Tiho:
ReplyDeletePretty high volume on Wed celebration of the fiscal cliff being solved in the US. Perhaps most of the blow off for the bulls and squeezing out the shorts?
I doubt that. PEs on the DOW are only at 12.5 which is about long term average. This bull has been climbing a wall of worry since 09 I think only now the dumb money is getting ready to enter, there's a whole lot of cash sitting in bonds ready to light a fire under equities, this thing could easily bull for another 2 years. Being short now is not a good idea but hey that's just my opinion and those are like ar*sewholes - everyones got one ;-)
DeleteAnyway good luck to all
JG
Mugiwara - I understand all of the points you have made. I do not know what the correct answer is, weather or not equities will or won't rally until April or weather or not we are not in the last blow off phase. I believe the market has managed to gain a lot from the October 2011 lows, when the S&P 500 traded at 1070. And I also believe that just about no one believes the market could top soon.
ReplyDeletemacrot - to answer your questions, there is just about every reason to be long equities. On the other hand there isn't a lot of reasons to be short equities. Just about everyone who comments here states that this thing could go on for "6 more months" as you yourself stated. Personally, with no one believing we are topping right here, I rather be on the other side.
John Q - chart 7 is from technical take blog. I highly recommend reading it.
JG - PE is an awful measure of valuation unless you actually use the CAPE10. Even then it is difficult to gauge proper valuation due to the government CPI numbers, which have been changed many times and have been distorted. During the bottom of the last secular bear market, PEs traded in single digits for a good part of late 1970s and early 1980s. During secular bear markets PE ratios contract and the trend lasts at least until we get to single digits.
Furthermore, you are using a PE based on inflation record high earnings after a 4 year expansion. If earnings were to disappoint in the coming year or two, as I believe they will, then I highly doubt stocks are cheap today. You should value the stock market at the beginning of the expansion cycle and not near the end as earnings sit at record highs. Consider that even a 13 PE on S&P 500 at $85 per share of earnings would get you a price of 1,100. Consensus believes earnings will be at $100 or higher, but I think we could fall towards mid $80's if and when a recession starts. And if you apply a single digit P/E ratio, things could get even worse.
Hmm it appears like your blog ate my first
ReplyDeletecomment (it was extremely long) so I guess I'll just sum it up what I wrote and say, I'm thoroughly enjoying your blog.
I as well am an aspiring blog blogger but I'm still new to the whole thing. Do you have any helpful hints for beginner blog writers? I'd really appreciate it.
my site: www.ropewalkmethodistchurch.co.uk
Tiho,
ReplyDeleteEven using Shillers PE10 we are still well below the 2007 levels and much lower than 2000. The PE is just one indicator for why I believe this bull may easily continue for the next year or 2, the focus on the PE in your response ignores the other points.
The fact is that:
Interest rates are low and will continue that way through to 2015
The Fed is currently injecting over 80B a month
BOJ is now proactively debasing setting the stage for the re emergence of the Yen carry trade
The ECB is printing
Record cash in bonds indicates that dumb money has yet to participate
Over the whole 4 years this bull has climbed a huge wall of worry and continues to do so i.e. the consensus has been against it, I think every month for the last 4 years people have been calling for a recession. Now I believe the mindset is starting to change.
The US economy is improving and the housing market is now in recovery
In my opinion to be short the market in the face of many of the above facts is a pot shot, even if you are not bullish it is best to step aside and sit in cash rather than trying to call tops which is what you are doing when you go short.
One last thing I will say is Tiho beware Cognitive dissonance, it can kill your account…
JG
Comparing the current Shiller PE with the peaks of two egregious bubbles is quite brazen,isn't it?Expecting equities to be perennially overvalued at nose-bleeding levels doesn't sound like a prudent investing strategy.I suggest you peruse HussmanFunds' research on the topic.
DeleteMoney printing is a negative,not a positive factor:it undermines the real economy,thus setting the stage for glorious disappointments when reality finally sets in(think 2000 and 2007).
The BoJ isn't debasing(at least not at a rate comparable to those of the ECB and FED):traders just think it is and have accumulated massive short yen positions.This will end in tears,as it always infallibly does.
I have yet to see all this negative consenus/wall of worry you mention:the vast majority of pundits and analysts claim that the secular bear market bottomed in 2009 and that housing bottomed as well.
The US economy is not improving:GDP growth is a phony measure and a lagging one to boot(it measures flow and not stock,it doesn't tell us anything about the quality of such growth,it includes government spending which always harms the economy),many leading indicators are deteriorating and flirting with contraction territory.Moreover Japan and Europe are both in recession already.
Finally,"cash on the sidelines"(or parked in bonds for that matter)is the last refuge of bulls and has been proven to be a specious argument.
One last thing I will say is JG beware of confirmation bias and phony economic theories based on the false assumption that government intervention/spending and money/credit creation actually contribute to economic prosperity rather than impeding it,they can kill your account as well,and in a much more spectacular fashion...
Brazen is printing 80billion a month, thats the kind of behavior that leads to egregious bubbles so in answer to your question. No.
DeleteI did not argue money printing as a positive factor, I never said it improves the real economy. money printing is what it is and WILL cause asset price inflation i.e. stock bubbles.
Considering Hussmans Fund performnce I would not use his preachings as a guide, hes a perma bear and hes performance and writings reflect this.
I disagree with your comment regarding the BOJ debasement and the assumptions you make regarding short covering.
If your are telling me the last 4 years havent been a wall of worry for the markets then lets just agree to disagree on this point.
I have no need to beaware confirmation bias the reason is because I have a nuetral market stance i.e. Im only lighly long and certainly not short so which ever way the market goes is fine by me.
Can I ask are you short? perhaps you need to assess biases...
JG
Although I do agree with your assertion that money printing creates bubbles, it is by no means a given that said bubbles have to happen in equities and that they have to reach the same magnitude of the preceding ones.Case in point:CAPE 10 peaked in 2000 and in 2007 the stock market peaked at decidedly lower CAPE 10 values, notwithstanding egregious money/credit creation in the meantime.I expect the current cyclical bull market to peak before the 2007 or let alone the 2000 CAPE 10 levels are reached.This happens for a precise reason: money printing depletes the so-called "pool of real funding"(i.e. saved consumption that constitutes capital that can be used to fund investment),by encouraging malinvestments(i.e. investments that falsely appear profitable because of the distortions created by money/credit).Thus it follows that at each successive stage of this pernicious inflationary policy there is more money but less capital available(and all investments have to be ultimately funded with actual capital)and the little that remains is wasted even more recklessly because of the false signals that money printing gives to economic actors.A point is reached where all this malinvestments are revealed to be unsustainable(i.e. it becomes apparent that they lack the capital needed to fund them)and as such have to be liquidated.All this complex discourse to say what can be stated in these simple terms:if money printing does not help the economy,but damages it,how is it supposed to indefinitely lift stock prices if the underlying economy in which companies operate is getting weaker and weaker as more money is introduced in the system?It doesn't: all it can do is to delay the inevitable and make it worse to boot.Each successive dose of money has less and less effect on stock prices and does more and more damage to the economy.The end result isn't going to be pretty and I think it's going to come sooner rather than later,for a variety of reasons,not least the fact that we already have a stock bubble,even if not big enough for your liking,in the face of a deteriorating economy(and even if the economy wasn't deteriorating,we'll still have to witness some impressive growth to sustain current valuations):this to me smells more like 2000 or 2007,not like 2009 or 2003 or even 2005.
DeleteYour argument against Hussman is a specious one:I am not following his "preachings",nor is his own performance proof that his historical analysis of bear markets and stock valuation levels is flawed.I consider it sound and fact-based.How he or I decide to employ it in our own investing is a different matter.
Re the BoJ:glad that you disagree,because you disagree with factual data,as for example TMS growth rate and BoJ balance sheet size as calculated by Michael Pollaro.
Regarding shorts:maybe this time massive one-sided positioning,extremely lopsided sentiment and media hype are indeed going to mark an important turning point,in the same way that the race is not always to the swift...but that is the way to bet.
The wall of worry existed in 2009 and in 2010.In 2011 there was generally complacency,briefly spooked by the late summer decline,and in 2012 there has been nothing but complacency.
I am not short,but I am carefully watching for an entry point as I think we are presented with an excellent risk/reward proposition.I too have a neutral stance,accompanied by a proper understanding of sound economic theory.
I think your discourse on the economic fundamentals of money printing and malinvestments has taken us off course some what. Nobody is disputing this so I'm unsure why you felt the need to lecture on it.
DeleteGetting back to the core of the discussion, you are confident that with your proper understanding of sound economic theory you will be able to pick the top of this bull cycle. That's great, I myself have not such confidence despite my sound understanding of economics.
One think you should understand that is that market fundamentals and timing are to wholly seperate things, just ask Mr Hussman ;-)
JG
Ok.
Delete@Rothbardian, @JG
Deletegreat discussion. Personally, I'm sadly short, and that remains me how easy is to repeat the same investment faults again, and again. I read once from Gartman "Thinks fundamentally, act technically", and probably is the best way to do. Waiting the technical signals that confirms our analysis, if that signal does not come simply our analysis is wrong.
Anyway, this market looks really bullish from a technical side.
Best. Santiago
Thank you Santiago.Of course technicals and sentiment play important roles,as do money management and proper position sizing.Gartman however rarely follows his own advice I think.I do not see very bullish technicals to be honest,I actually see overbought conditions accompanied by quite ominous divergences and recent VIX behavior that has not at all been consistent with what was seen at prior major bottoms,making the November bottom and the recent retest of the 200 day SMA on the S&P500 look temporary rather than long-term in nature.However,everybody has to make up their own mind with their own research and study(as well as usually painful yet much useful experience)!All the best to you as well!
DeleteTiho I've just started reviewing Poly's precious metals service after looking through Gary's work. Someone else mentioned on here that Poly was much better at timing the market but I don't find Poly's work to be that great. What is interesting in his past reports that he has been bearish and trying to call a top in equities and made calls that gold will "rocket" since May. Both of these major calls have been dead wrong for over 9 months now. In fact, the market has gone more against him then for him. This is the problem with cycles I think - they don't consider what smart money is doing and what is happening in the real economy. I for the life of me don't understand why anyone thinks gold will rally or equities will fall at some magical turning point.
ReplyDeleteAlso I find unlike Gary, Poly tends to flip flops from being bullish dollar to bullish gold from week to week but he keeps getting fooled like everyone trying to short term time the market. Gary's strategy seems to be more logical in minimizing trading fees and buy and hold whereas Poly appears to be much more active but neither can claim to do much better then the market. That is my take.
Commit,
DeleteWe all under and over perform the market in any given time period. It's the long run that counts. But I wont apologize for closing a trade that has not developed well or moved to my stop point. Avoiding a $9 trading fee is the least of my concerns when I'm avoiding a 20% market draw-down.
I move from bullish to bearish over given time-frames, these reflect the flow of Cycles. Members understand that such positions must be taken in context of time, this is very important.
Santiago, I'm sorry to hear that. Shorting is always a difficult endevour as picking the 'top' is always difficult and when you have governments manipulating the markets as today it becomes near impossible. Even when you pick the top its not a straight forward trade.
ReplyDeleteHope it all works out for you.
JG
Tiho,
ReplyDeleteGood article again but re the chart you posted about the economic cycle by degrees which puts us late in the 4 year cycle.
Does it seem like we have had a peak in the economic cycle (not stocks) to you? Or are we are nearer 270 then the 90 it shows?
For example they say US housing is recovering now... if we were near the end of the cycle wouldn't that have happened ages ago? Has the money printing made the cycle last longer this time? The GDP figures for the West haven't signalled an economic boom have they?
So this time, the first year of the economic cycle has lasted 3 years?
Some great comments here over the last couple of days. I've really enjoyed reading all of them.
ReplyDeleteAnonymous January 5 @ 8:56 PM - First of all, apologies for the blog filtering through your comment. I am not sure why that is. Regarding blogging, I write this blog without any major experience of my own. I treat it as a traders diary where I write my own thoughts and actions within the market environment. I wish I could help you properly, but the best advice I can give you is to be yourself and write your own thoughts / opinions / actions on the market. If you offer interesting thoughts and ideas, maybe people will like it. Thats about it.
JG - thank you for your advice. I have had many of similar thought patterns run through my own head, well before I engaged into shorting the stock market. Having said that all, each one of us holds a view on the market and I personally hope I know what I am doing so that when end of 2013 and into 2014 rolls around, I can see my investments perform well. Weather I am right or wrong, my own observations on the stock market in the US are as follows:
- Regarding cash in bonds, I have explained many times that the majority of inflows have gone into Corporate, Junk and GEM bonds. Not Treasuries. That is not to say that I favour Treasuries as an investment, but the point I am trying to make is that almost all the money has flown into these riskier bonds that have a very close correlation to the business cycle and equity prices. So essentially the cash that went into bonds is a bet on a stock market, just in another shape and form. The bond inflow story is constantly misrepresented by the media and majority of investors have not done their research in this matter.
- I do not believe money printing can push assets up forever. It works for awhile, but it is also a myth that it will work all the time. If that was true, since 1913 when the Fed came into control, we wouldn't have seen a bear market... ever! All they had to do is keep debasing the currency and stocks would never decline... apparently. That is the theory so many bulls keep quoting. Where were these bulls during March 09 lows? The truth is majority were all bears as they feared the end of the world, when S&P 500 broke support at 750 and went lower. I didn't hear the herd talk about central bank intervention back than, and the S&P 500 was moving towards 670. It is funny how you hear these bullish stories when S&P 500 is at 1460 four years later, with a gain of 120% plus and leading stocks like Apple losing momentum and topping. Personally, I think majority of the gains in this bull market occurred at the beginning as we rallied very powerfully from March '09 to Feb '11.
- Bulls keep quoting that the last phase of the bull market is usually a blow off top and we could move much higher in coming quarters before the final top occurs. This could be true without a doubt and it should be on a radar of any trader who is willing to engage into short selling activity. Having said that, I believe that this phase already occurred. We've had a stelar year last year and many stocks in many sectors entered a parabolic phase. From December 2011 to March 2012 gains were huge, especially in stocks like Apple. That was followed by a second swing to higher highs into September 2012. Many of those leaders who went parabolic seem to be breaking down now. These include Yum Brands, McDonalds, Apple, IBM, Starbucks, Intel, Coca Cola, Nike, Microsoft and so on and so on.
commlt - I cannot comment too much on what other investors use in terms of tools, timing, fundamentals, strategies etc etc. After all, it is there own capital and they are free to do whatever they like. I can tell you what I think and what I do:
ReplyDelete- I have no interest or confidence in using any of these cycle or wave tools, be it stuff from Elliot Wave or timing cycles. For me, the only cycle I would use it the Kondratiev Cycle which last between 30 to 60 years. Furthermore, I try to grasp comprehend the business and investment cycle which last about 6 years or so on average. I try to keep things simple. Currently, I am long commodities like Silver and Agriculture because I believe in a secular bull market progressing higher (much much higher until it turns into a bubble like Nasdaq between 1996-2000). I am also short stocks because I believe in a secular bear market progressing sideways (from 1966 to 1982 and the current one from 2000 until sometime mid decade). Furthermore, I believe we are at the end of the business expansion / investment cycle and we are marking an important top around these levels.
- Recessions come about every 5 years since the beginning of modern US economic history (mid 1800s). Last recession started in late 2007 so if we add 5 years, the next recession could occur very soon into 2013 or 2014 or 2015. And the fundamentals are lining up for it as debt problems and credit bubbles are evident everywhere from Europe to China to the US and Japan. It is only a matter of time and there isn't too many things that could surprise investors on the upside because earnings are at record highs, profit margins are at record highs and stock prices have enjoyed the best bull market rally since World War II. With everything at record highs, we could have plenty of negative surprises, but I hardly doubt things could get "better".
Anonymous January 6 @ 7:24 AM - yes I understand you question. It is difficult for me to give you "facts" you are after, because when we all judge market prices for any asset, or the economy itself, we are just giving opinions. Only time and price proves us right or wrong. But since I write my own opinions on this blog, I would like to highlight that it is a very small remote possibility that we are at the begging of an early expansion or 270 degrees. In my opinion that occurred in June 2009 as US came out of the recession. What followed was an early cycle slowdown (May 2010 flash crash) and mid cycle slowdown (August 2011 correction), but now we are at the end of the cycle. We are close to a recession. By the way, listening to CNBC and Bloomberg which keep stating that housing is just bottoming out and that US economy is about to enter a new dawn of prosperity is total non sense from my perspective. Maybe housing is bottoming, but it won't be booming.
Tiho,
ReplyDeleteTo be honest I'm suprised by your response, for me most of the points you raised are weak, let me explain why I believe this to be the case:
Corporate Bonds: Yes most of the bond cash went into corporates chasing the higher yield but to say these will remain proxy for the stock is at best naïve. The influx into corporates over the last 18 months has driven yields to record lows thus increasing the risk to investors. Do you really believe the herd are going to continue grazing on detiroriating low single digit yields when the shares themself have just returned 15%?
Money Printing: I also do not believe that printing money can inflate asset prices forever, infact each round of QE has had a depreciating effect in terms of reflation HOWEVER knowing when the reflation effect will end is the cookie in the jar. RE your point about the printing argument being over done by the bulls, you forget that QE deployment has been staggered throughout the 4 years with the last one coming only late last year so for me your argument rings hollow. Fact is the smart money has been heavily invested in this bull, you believe it is topping, I'm saying I don't know and that it could easily go for another 1, 2 even 3 years.
Blow-off Top: You believe that the blow off top has already occurred based on the sole metric that a few mega cap stocks have had their parabolic run, do you realise that:
- The NYSE advance/decline has climbed to a new high
- The 52 week highs on the NYSE are greater than 52 week lows
- That the Dow Jones US financial index has climbed to a multi year high
All of the above are very bullish developments.
JG
Hi JG,
DeleteI disagree with everything you have stated on bonds, QE and blow off top - but I won't get into the debate back and forth about what I think vs what you think and so on. And yes I do a lot of data collecting and reading, so I am aware of the points you have stated. None of those are overly bullish factors for me in the long term looking out into late 2013 and 2014. Nevertheless, your view is your own and it is heard and respected.
That is called the "market", where you have buyers and sellers. By the looks of things, you have already made your mind on the market direction with or without my "weak" points so you are obviously a buyer. With a 1, or 2 or 3 years still lot go... you better hurry up and buy stocks before train leaves the stop. I want to wish you good luck with your investments in 2013.
Hi JG, please check all the printing that has been made by the BOJ over the years and contrast it with the Nikkei. Money printing does not necessary make the stocks go up, they have been going up because they had to go up while commercials were distributing all their assets. In my humble opinion the strong hands have been distributing all the paper they could and still are. There are many charts where you can see that smart money (commercials) is being bearish at the moment (way much more than in 2011) and the dumb money is also being very bullish (same level than in 2011). The spread between smart and dumb money might not be as big as it was in 2007 but it is deffinetely quite big. Personally i would not dare to expect another bubble maniac like 2000 or 2007 since this is the third time in such a short time i think most of the paper should have been distributed already, therefore the bear market shouldnt take long. However the funny thing is that almost all banks are expecting 2 digit returns for the stock market this years. How comes that they are oppening more short posittions while they tell the herd that this year is comming a 2 digit return? There is something that doesnt match here (again, i think they are distributing all they can).
ReplyDeleteI have another idea why i wouldnt be long in equities and thats the political differences between UK and USA VS Europe (Germany). There are many countries in europe that will have elections this year (among them Germany) and i think there will be an attempt to change the leaders. The best way to do it is through fear. Therefore i would expect some kind of negative surprise that sends shockwaves through the rest of the world and most definitely through the markets. It could be anything, a recession that is worse than expected, Greece, Spain, something hidden in the banks balance sheet, etc.
Tiho: One old technician used to say of retests of market tops was similar to a drowning man trying to return to the surface, each attempt would show less strength than the previous attempt as the drowning man's strength was sapped. Are we there yet (again)? This time? Everything is clear with the benefit of hindsight..................
ReplyDeleteI love that chart on corporate profits. Close to 1.8 trillion dollars. Checked the latest Monthly Treasury statement:
ReplyDeleteIndividual Americans are expected to turn over to the government close to 1.3 trillion dollars in fiscal year 2013. Corporations 294 billion.
We know who runs this country.
http://www.fms.treas.gov/mts/index.html
I am convinced that their are going to do a Bernanke Buzz Lightyear and print to infinity and beyond. There is no chance of IRs rising for years IMPO so any cash anyone holds will just be inflated away.
ReplyDeleteI've waited for a few years now for another major crisis but, each and every time one looks like cropping up, they just print each more.
So what is it to be - stocks, gold, silver, houses?
I remember looking at the DOW at 11,000 and thinking that it could not go any higher on such poor global economic fundamentals - it is now nearly 13,500. It could be 14,000 in a few weeks. Heck, even 15,000 in 2013.
Yes, it could crash as well but, boy, what would it need to crash these markets now - something MASSIVELY bad happening. I can't even imagine what that might be.
They will find a way to stop the bond market collapsing so I doubt it will be that - anyhow, all that money will then try to get into shares won't it?
Very nice debating from both sides I would say. And also a very nice blog! Keep up the good work to the owner of the blog and to all of you who comment.
ReplyDeleteTiho,
ReplyDeleteAnonymous January 6 @ 7:24 AM again. Re your "Maybe housing is bottoming, but it won't be booming."
There are various reports that imply it is booming in places.
##
Home-bidding wars have erupted in Washington D.C., a reminder of the days of the real estate frenzy.
While much of the nation is still struggling to emerge from a historic housing-market meltdown, the District is reliving its boom days. High rents, low interest rates, low inventory, and a flood of new residents in their 20s and 30s are making parts of the city feel like it’s 2005 again.
Washington Post, Dec. 20
The article mentions a run-down home within walking distance of Union Station. The list price was $337,000 --but 168 bids later it sold for $760,951.
Prospective home buyers have bid up other Washington D.C. homes; a resurgence of the old real estate mania is also evident in Seattle, Boston and Palo Alto, Calif.
http://www.elliottwave.com/freeupdates/archives/2012/12/21/Real-Estate-Mania-Makes-a-Comeback.aspx
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Plus the new Basel rules have been put back and now allow mortgages as a liquid asset! It seems what caused the financial crash has been erased from some minds.
http://www.bbc.co.uk/news/business-20928354
Forex Kong has suggested that further weeaking of the Yen will throw a real wrench into the Fed's plans to tank the dollar.
ReplyDeleteHe also goes on to say that getting long USD/JPY could be one of the best trade ideas of 2013.
http://www.forexkong.com
Thats a buy signal if ever I've heard one
DeleteWell Forex Kong is a very smart man... or maybe he is a monkey, since he is a Kong!
DeleteMonkey see monkey do,as his name obviously implies.He'll be in great company:legions of aunts Minnie and cousins John have long joined the party."He also goes on to say that getting long USD/JPY could be one of the best trade ideas of 2013.":if I were going to make a list of all the bloggers/analysts/traders/pundits/aunts Minnie and cousins John who said it,I would end up with a telephone book.Hardly a case of "you heard it here first"!Luckily,this blog's headline should remember people what the smart thing to do is.
DeleteYour blog impresses us. So We bookmarked your site a couple of days ago.
ReplyDeleteShorting the stocks is a job reserved for top professionals. Not for those who think that this is a top. 'Stock prices are never too high to buy'-j. evermore. Anyway good luck shorts, preserve your capital at all costs, accepting a loss is important part of the game.
ReplyDeleteOne of the unreasonable longs