By Charles Biderman
In this weekend's TrimTabs Weekly Liquidity Review, which is our $10,000 per year primary institutional research product, we turned 100% bearish from 50% bearish. In addition, Biderman’s Market Picks, our weekly video market letter, which can be purchased on our blog for $10 each or $260 a year, also turned more bearish.
While I know have many reasons to be bearish on stocks, there is only one good reason to be bullish. The only bullish hope is that the Bernanke Put again will save the stock market.
However, if and when the Fed eases again, I do not think the Bernanke Put this time will do more than pop stocks maybe as much as 10%. Then I think stocks will go lower, lots lower, probably dropping about 20% from the April high before we find out what type of year-end fiscal cliff we face.
For the record, TrimTabs Weekly Liquidity Review model portfolio is up 5% since April 1, while the S&P 500 was down about 4% through the end of trading Monday. The Weekly Liquidity Review model portfolio is a single directional bet on where stocks prices are headed. Currently that model portfolio is 100% short the S&P 500. The Biderman Market Picks model portfolio is up over 1% since the first issue at the end of May, while the S&P 500 is down about 1% over the same time frame. The BMP model portfolio is roughly 34% short and 18% long equities, 23% long gold and 25% long inflation-protected securities.
The key reasons we are more bearish start with the fact that there is almost nothing the Fed can do to boost the economy. Creditworthy borrowers can already borrow at almost nothing, and dropping short rates to zero would bankrupt the entire money market world, creating untold havoc - much worse then the two commodity trading house frauds.
Equally as important to the bearish call is that growth in the US economy has slowed to just about zero. Wages and salaries are barely growing year over year, and what’s worse, the modest growth rate has been slowing each of the past two months. To remind you all, we estimate wages and salaries based upon real time income and employments taxes withheld from all employees with a W2. Jobs are barely growing. Our TrimTabs Online Job Posting Index is growing at its slowest rate since February 2010, and the year over year growth in new unemployment claims is at its highest since April.
Then there is Europe and slowing global economies. China is in recession, and remember, low tides uncover all the hidden garbage created by booms. I predict we will start to see major Chinese financial frauds being uncovered by this year's end.
Finally, supply and demand of stock and money is also now bearish. The Biderman Market Theory says all there is in the stock market are shares of stock; money flows in and out of the checking accounts of institutions. What we are now seeing is more corporate selling, then buying. Also our Demand Index based upon 21 investor activity variables plunged to a six month low last week and is down 36% from the early April, which coincided with this years stock market peak.
My bearish scenario does not include any unexpectedly fast European implosion or the like, which, if it happens, could accelerate the downside move and speed.