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Sobering Stat: ARMS Index Indicates Market Is at Peak, Not Bottom

The remarks of Cautious Investor below struck me as well reasoned and an insightful commentary about the macro economic condition in the US and how that is and will affect peoples' lives (jobs) and the constraints on spending. By mentioning the significance of underemployment, Cautious Investor widens the base of our malfunctioning economy on a level that will work to the disadvantage of the large majority of investors in equities. Corporations can only cut costs so much, and existing employees' productivity has limits as well. There is no way for any systemic rise in corporate profits given a dwindling consumer demand within the foreseeable next couple of years at least. Indeed, "things, when looking around the corner, appear rather bleak."!
Thank you Cautious Investor for hitting it on the head and writing in such an articulate manner.


On Aug 29 10:23 AM CautiousInvestor wrote:

> A host of the technical indicators I use have been warnings but this
> market is being driven by historically unique forces, including massive
> deficits and proportionate liquidity injections, or is being supported
> my the machinations of the Fed. In either case, what in the past
> have proven to be useful tools are being compromised, if not castrated,
> in the current setting.
>
> The market is clearly overbought and has risen to unsustainable levels.
> It was first better than expected earnings, then it was the growth
> of China, then it was about housing and other reports, then it was
> we sold a few more cars through the clunker program and now we are
> starting to take stock of the basics. They have remained unchanged
> and over the long-run these cannot be abrogated by either liquidity
> or complicity.
>
> Growth in China is in serious jeopardy and central authorities are
> genuinely concerned about creation of excess capacity and speculation
> in commodities, casino's and equities. Recent policy actions, designed
> to mute some of the excesses, has been initiated over concern of
> these excesses and the larger unspoken concern over the financial
> health of the economy. Corporations with deteriorating earnings are
> borrowing more money; under usual conditions they would be denied
> additional credit. In parallel, banks are concealing non-performing
> loans through rolling them over. Some smart people, including Micheal
> Grant, think China is a ticking time bomb.
>
> Meanwhile, stateside, the core problems of underemployment, consumer
> spending and bankiing sector health remain unchanged.
> To an extent consumer spending and underemployment are intertwined;
> but even if consumers, who have jobs, were not frightened by the
> economy and the administration's policies they would still want to
> save and liquidate debt therby containing spending. Prospects for
> the unemployed are miserable and, unfortunately, government and the
> apparatchiks of MSM do nothing to either clarify or correct the resports
> released federal departments and agencies. The bottom line is hiring
> is still trending down amid a growing potential labor force.
>
> If China follows the path of Japan, the model country that could
> do no wrong until 1989, and the US consumer spending continues to
> contract, what will be the catalyst to spur growth and profits? Many
> times people when confronted by such a question will resort to bromides
> that touch upon ingenuity, creativity and innovation but it is easy
> to forget that these essential qualities must be nurtured.
> A solid investment environment depends on a strong and stable currency,
> restrained federal spending, less harmful legislation, dependable
> contract law, limits on taxation and countercyclical capital regulation.
>
>
> In my humble view things, when looking around the corner, appear
> rather bleak.
>
>
>