6 More Reasons to Short the Market

A year ago on January 30, 2008, I declared "Victory for Bears." I said:

What have looked like "panics" in February [2007], August [2007], and last week have been prices beginning to approach reasonable levels only to have bull market conditioning cause people to buy the dips.

That was right. Now we are in a bear market rally that has caused amnesia and so people have forgotten that the economy is terminal.

California:
If they're sensible, over the next few weeks legislators will find enough flexibility to finish their work on a solution the state desperately needs. Otherwise, state Controller John Chiang said that he will have to start paying California's bills with IOUs in February.

Arizona:
November sales tax collections were down (13.3)% compared to November 2007.
November individual income tax collections were down (14.8)% compared to November 2007.
The job market in Arizona continues to weaken... a decline of (3.1)%, the largest year-over-year reduction of the Arizona work force since July 1975.

No Capitulation Yet:
The same Wall Street strategists who told investors to buy stocks in the worst year since 1937 are even more bullish than a year ago, predicting the Standard & Poor’s 500 Index will rise 17 percent.

rich writes:
I don't think that a year from now anyone will be saying that: 1) the recession is over; or 2) the U.S. led the way out. The U.S. economy just keeps digging itself deeper into a hole. All the stupidity and false optimism is a leading indicator of nightmares.

O'bama proclaims:
America's economy as "very sick" and has said that the situation was worsening.

Politicians are paid liars, and the president does not say the economy is very sick unless it is actually swirling the drain.

The current projections are for $42.26 for 2009. That makes the forward P/E 22. That doesn't look like value at all, when the historical average is closer to 15.

I own Maguire (MPG) puts:
There is no relief in sight for Orange County, where subprime lenders and title companies once dominated the market but are now shedding space because their business has dried up, and big banks are now shrinking because of a wave of mergers. The vacancy rate has soared from 7 percent at the end of 2006 to 18 percent.

Comments

[Steve in Gr...:]

I generally agree with this note, but would put a slightly different interpretation on Obama's proclamation of economic doom. Obama is not forecasting an extended recession, he is promising one. His policy of expanding governmental power is certain to extend the downturn, just as FDR's did in the 30s.

Jan 06 09:13 AM

[investor88:]

I was getting plenty of bullish signals [golden cross all over 20d/50d moving average, rising advance/decline ratio, dividend yield on stocks exceed 10 yr Treasury first time in 51 years, stock market discount worst and looks forward to better times, big and brainy money managers proclaiming bull etc].

Now this article which says beware! for 6 good reasons. We have to tip toe forward and be flexible, the all clear is not here yet.

Jan 06 09:32 AM

[Roger Knights:]

Maybe the market will mostly go sideways for a couple of months. (If so, stockholders would benefit by selling out-of-the-money puts and calls.)

It's funny that so few 'sidewinder" predictions are made.

Jan 06 11:53 AM

[PROXIMO:]

Obama obviously has a vested interest in saying whatever he can to lower economic expectations prior to his taking office.

Jan 06 02:01 PM

[prudentinve...:]

Optimism is great, but not at the expense of realism.

Jan 06 09:13 PM

[billp37:]

Supporting data for "the economy is terminal."

"Unemployment Claims Overwhelm N.Y., N.C.

Manufacturing.Net - January 06, 2009

ALBANY, New York (AP) -- A rush of unemployment claims has crashed computer systems in New York and North Carolina states, overwhelmed by jobless people trying to file ahead of this week's deadline.

New York State labor department officials say the problem started Monday and caused the phone banks at the state's toll-free claims center to shut down, followed by the online filing system.

Leo Rosales, an agency spokesman, says as many as 10,000 people per hour were trying to log into the system. ..."

www.manufacturing.net/...

Jan 07 09:55 AM