Thursday Outlook: Commodities, Emerging Markets

<< Return to page 1 - Heading for Further Declines?

If you have a chance during your busy day to watch C-SPAN or listen to the radio, you can see just what passes for intelligence from our elected officials. It should take a lot more than seniority, like an intimate knowledge of the subject, to be on any committee. But, with some rare exceptions, we don’t have representatives with the proper set of skills. It should become obvious, but then, we keep re-electing them. Then we get what we deserve.

People are definitely pissed-off at our financial situation. They’re looking to Washington to solve their problems. They may be expecting too much beyond posturing and an aura of change.

One thing many have been expecting occurred today. The US is being lectured by China about how to run its financial affairs from this article in Bloomberg. Yu Yongding states: “China should seek guarantees that our holding of US government debt won’t be eroded by reckless policies.” Perhaps this is just payback for Geithner’s lecturing them about the artificial level of their currency.

The rebound today wasn’t very dynamic and there’s not much else on the agenda before a long weekend that can lift prices in my opinion. The world is much interconnected despite what some may have you believe but it would appear the US is heading for a long-term decline.

Let’s see how things play out.

Disclaimer: Among other issues the ETF Digest maintains positions in: QQQQ, IEF, TLT, FXE, GLD, DGP, GDX, XLE, EWY, EWZ, IFN and FXI.

Comments

[Moon Kil Woong:]

Long term the market looks bad, but I don't think today is due to release anything that will shock the system below normal trading ranges. Public sentiment against banks and executives aren't really what affects stock prices. If it did, then the market would be trading down another 50% or more because sentiment is at the bottom of the barrel.

Feb 12 04:47 AM

[Dr. O:]

I appreciate it when someone more fully articulates what I was thinking or feeling when I myself am having trouble finding the words. I published a much shorter article today on SA with identical sentiments and conclusions. I did have a nifty pic from the last Depression and asserted that we are in a Depression that will worsen based on irrational Government.

Feb 12 06:57 AM

[Seeking Advice:]

Always appreciate the charts and the accompanying analysis. This is typically among the most informative articles on SA or any web site and I always look forward to reading it. Though I've come to see that we have different political perspectives, the analysis is very rational and reasoned - a nice change from some writers.

I can't help thinking also that this situation will get worse than most are expecting and that the economy and the markets stay down for longer than most seem to expect as well. I think we're just too deep in it and that no matter who is in the White House, there are too many "pressure groups" with clout to allow uninhibited construction of a plan that would allow an "optimal" course of action. Regardless, I'm not sure there's a way to prevent the longer term economic malaise (e.g. lower consumer spending going forward), maybe just the speed and slope of the completion of this period and the speed and slope of the eventual recovery - whatever that will look like.

Feb 12 08:49 AM

[Michael Shu...:]

You can draw all the charts you want -- markets regress to the mean, over time, based on fundamentals. Always. S+P earnings this year will be between $35-$50, the high end of the range and giving the current market a multiple of 16 plus. Multiples in non growth markets are closer to ten, in steep recessions below that number. Just do your third grade math -- and forget the noise about the S+P dividend yield being above T Bill yield as a mitigating factor. These dividends are coming down and the real comparison is corporate yields -- and the dividend yield right now is less than half the yield of corporate bonds.

Feb 12 08:51 AM

[deflation r...:]

Let's all hold hands and short treasuries.

Feb 12 09:01 AM

[Jake Berzon:]

I like your quick charts with ranges indicated. However, to be usefull they need to be adjusted for distributions. Some of the ETFs you have charts for and especially IFN made very significant payouts. Without such correction, the information you are presenting may be misleading.

Feb 12 09:02 AM

[Conan the B...:]

Thanks for the IYT, I was expecting the DJTA to drop to 2500. IYT gives me a comparison.

Keep Charting. An unemotional view is always welcome.

Feb 12 10:54 AM

[Winston Smi...:]

Hey Dave, Great as usual. Question: We have recently seen one of the most manipulated markets ever beginning back last fall. We saw the SEC step in and change the rules for shorts. What will keep them from going further if things deteriorate? When this market drops below the November lows, do we see more government interaction? Specifically, do you foresee the government coming in and effectively outlawing any or all of the inverse ETFs? Could the shorts be wiped out overnight?

Feb 12 11:44 AM

[David Fry:]

Winston, the only thing that will stop them is an army.

Feb 12 11:55 AM

[User 306214:]

FYI Jake,

Generally prices on charts like those from StockCharts are already adjusted for any dividends. So Dave's charts aren't misleading at all.

Feb 12 02:55 PM

[cashflowtrader:]

Right on! Hunker down b/c this one bad tsunami. If our growth prospects suck, baby boomers exiting market, we may be looking at 1970's crappy PE multiples for the next several years.


On Feb 12 08:51 AM MICHAEL SHULMAN wrote:

> You can draw all the charts you want -- markets regress to the mean,
> over time, based on fundamentals. Always. S+P earnings this year
> will be between $35-$50, the high end of the range and giving the
> current market a multiple of 16 plus. Multiples in non growth markets
> are closer to ten, in steep recessions below that number. Just do
> your third grade math -- and forget the noise about the S+P dividend
> yield being above T Bill yield as a mitigating factor. These dividends
> are coming down and the real comparison is corporate yields -- and
> the dividend yield right now is less than half the yield of corporate
> bonds.

Feb 19 10:07 AM