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A macro headwind for the market - the Citigroup Economic Surprise Index turns negative for the...

A macro headwind for the market - the Citigroup Economic Surprise Index turns negative for the first time since late April. It was a pretty good time to lighten up then, as were the last few times this indicator turned from green to red.
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Comments (3)
  • TheeSeer
    , contributor
    Comments (305) | Send Message
     
    Market is at a top within 50 points 1550 is the absolute top before shallow pullback. Money printing by Central Banks around the world will keep the market from tanking severely.
    23 Jan 2013, 10:20 AM Reply Like
  • Zenith Strategies
    , contributor
    Comments (609) | Send Message
     
    Money printing does have diminishing returns on equities especially if p/e ratios contract due to inflation.
    23 Jan 2013, 11:44 AM Reply Like
  • Neil_Anderson
    , contributor
    Comments (2248) | Send Message
     
    If the market reaches a high enough point where too many people start fearing that the market will crash, too many people will stop buying and try to sell. The printing of money (with which the Fed buys TreasuryBonds from Banks, and the Banks buy TreasuryBonds from the USTreasury) will not stop a severe market crash. Investors will flock to safe investments, like TreasuryBonds, and once again we will see the interest rates drop below zero. Perhaps well below zero.

     

    The printing of money to buy Bonds obviously drives interest rates down, and thereby encourages investors to inflate the stock market.

     

    Presumably, however, at some point rational investors will judge the stock market to be too high, and Bond yields to be too low, and sit on the sidelines. One by one, they take a seat. And cash piles up in safe securities or under mattresses.

     

    Corporate America has been sitting on a record amount of cash for several years. Are they going to pay it out as dividends, or make acquisitions? What are they waiting for?

     

    At some point, the printing better stop or the ballon will burst. Of course, the market might double before that happens.
    24 Jan 2013, 06:12 PM Reply Like
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