Daily State Of The Markets: Wake Up And Smell The Breakout [View article]
Mr Stuber: The S&P is fast approaching your upper end target of 1600. You may want to consider upgrading that number before the crash starts that you have been predicting since last fall. I am thinking maybe 1800 or 1900 (just a suggestion)
Daily State Of The Markets: Wake Up And Smell The Breakout [View article]
It's interesting how few commentators there are when an author presents a bullish article in contrast to the articles a bearish author, who will get countless supportive comments and praise for their supposed insight despite the fact that they have been dead wrong since 2009.
It's equally perverse that the bears who endlessly call for a crash are the same ones that go on to write successful books when it finally happens. There is a lesson here but I can't quite figure it out.
Why GDP Growth Should Only Really Matter To Economists [View article]
It is not GDP that the market cares about, it's earnings and today's lean and mean global corporations have been making piles of money even during periods of low and even negative GDP.
The correlation between GDP and the markets has always been erratic. On the other hand, the correlation between earnings and the S&P is quite consistent when adjusted for a lead time of 3 to 6 months for the market vs earnings
Investors seek capital gains and worry about earnings. Retiring Baby Boomers were the investors of the nineties but today seek yield and worry about dividend income. The bonds are getting a little shaky looking so guess who's driving the market up with their headlong plunge into dividend paying defensive stocks.
The TINA-Effect: Why The Dow Jones Keeps On Climbing [View article]
Very good article. This is one of the very few authors who understands why the dividend paying stocks have been driving up the markets. The Boomers are being herded out of bonds and into equities and they want safety and yield. Forget the risky and low paying commodity and tech sectors. Gold stocks and gold itself pay practically nothing so what's left? Utilities, financials ( fading due to trust issues), consumer goods and services, and let's not forget health care because if there is one thing the Boomers know first hand: Getting old sucks and the health care sectors absolutely must be big winners for the next 30 years. (Note to self; get into funeral services 30 years from now, no wait, tell my children to do that with their inheritance)
Would A War With North Korea Be Bad For Stocks? [View article]
If North Korea were to use nukes, the Americans would be more than willing to bomb them into the stone age, maybe with a few nukes of their own. The war would be over in a matter of hours or a few days, at the most, with minimal disruption to the markets. Of course, if China were to be offended by the fact that North Korea was being flattened, things could get a little dicey.
Even The Bulls Are Becoming Wary: Can We Trust The Market Any Longer? [View article]
Mr Stuber: This is, by far, the best article you have written. You did an excellent job explaining the M2 velocity issue and it's relationship to inflation. There are far to many authors (who should know better) who insist on spreading the false premise that the FED's "money printing" absolutely must result in a falling dollar, sky rocketing precious metal price and rampant inflation. That may happen someday, but only if the M2 velocity reverses it's downward trend and moves up sharply. The Fed isn't as stupid as some want to believe and they will remove excess reserves as quickly as they dare to. The markets will not be enthusiastic if too much play money is removed too quickly.
You call on the dollar was spot on, congratulations. My proprietary momentum indicators say that the dollar rally has got strong legs. I would not dare short the US dollar.
I also agree that bonds are going higher. It would not be surprising if they were to challenge the highs. I would not short them at this point but definitely down the road when the rally weakens.
The only area that we disagree on is the state of the stock market. In my opinion, not enough retail investors have been sucked in to allow for adequate distribution. The volumes are simply to low for that to occur. The market is all about psychology and the public must be made to believe that all is well and under control. A market crash, at this point, would be counter productive in achieving that goal.
Right now, the smart money is driving up the market, patiently waiting for the pension funds and retail investors to dive in with both feet. There will be a corrections, followed by dramatic recoveries that will be accompanied by good economic news. It is those kinds of moves that get the dumb money excited, not wanting to miss out any longer .
Yes, Mr. Stuber, a crash is coming, but only after the dumb money has blown their cash reserves in a market that they will be convinced cannot go down, at least not before they get out with their imagined profits. Are we there yet? In my opinion, not even close.
During the past two days, GDX, GDXJ and GLDX all exhibited unusually high volumes. Today, April 4, GDX bottomed at $33.71 and then reversed to close up 96 cents at 35.22. It is noteworthy that gold was down slightly on the day. I am not a gold bull but that but that, my friends, looks like bottoming action that should produce some upward movement in the miners. We shall see.
Daily State Of The Markets: Bull Markets Don't Stop On A Dime, Unless ... [View article]
There has been a notable lack of bearish articles here on SA in the past week and the several of the perma-bears have gone quiet. That is not a good sign for the bulls.
The Federal Reserve Continues To Misinterpret The Economy: Part III [View article]
The U.S manufacturing base has been decimated by outsourcing of jobs. The world's champion of capitalism has been a victim of it's success. Ironic huh? What jobs can't easily be exported, such as those in the service industry, have become a backbone of an economy where too many unskilled workers are trying to survive on near starvation wages that are coupled with food stamps.
One bright spot for employment is the U.S. dominance in the manufacture of goods that are meant to kill people. The manufacture of bombs, guns, bullets, tanks, missiles, planes, etc, provide plenty of good paying jobs. The U.S share of world armament sales is somewhere in the neighborhood of 30% of the world's total! Didn't Eisenhower warn us that something like this situation was going to happen? Didn't Eisenhower warn that something like this was going to happen?
It is somewhat disconcerting that wars can do wonders for America's unemployment rate and it's economy.
ilanfl: You are right. My example was mathematically incorrect. That's what happens when one is trying to think when the brain wants to go to sleep at 3 am. If input costs were 50 and prices were 100 and both were increased by 5%, the nominal increase in profit increase by 5%. It should be noted that the profit margin does not increase. In both cases, the margin would remain at 50%.
The real problem is that as inflation increases, consumer resistance sets, largely due to the fact that wages are no longer keeping pace with inflation(unless you are a CEO). The phenomena of diminishing returns puts business in a squeeze and they either have to become more efficient or profits suffer.
There have been studies done that show the effect inflation has on stocks and one researcher summarized it by with a rule : " Charles R. Nelson, an economics professor at University of Washington, has studied the impact of price inflation, as measured by the consumer price index. He's formulated the following trading rule: “When CPI inflation is on the rise, stay out of stocks; when CPI inflation is on the decline, buy stocks.” (http://bit.ly/Xmb8ca) There have been other studies that indicate that stocks do best in low inflation environments and suffer as the inflation increases. If anyone wishes to spend the time to investigate the inflation/stock price correlation, just use that wonderful search engine, Google.
I stand by my point which was that trying to arrive at an adjusted S&P number with cumulative inflation factor, produces nothing of relevance. To do so one would have to make the assumption that stock prices and inflation exhibit a linear correlation and it just isn't so.
Up 10%, Are Stocks Now Too Dangerous To Hold? [View article]
Very well reasoned article. It is true that the leadership of this market is odd in that the best performing are sectors are those of the defensive stocks, which normally are not market leaders during periods of economic expansion and in fact are more representative of the final stage of a bear market.
However, there may be other factors in play that are messing up the normal rotation of sectors of a market cycle.
It is very probable that investors who have been fleeing the bond market are of the conservative type (baby boomers). They are seeking to invest for income (dividends) in sectors that are perceived as being safe sectors(defensive). The more risky sectors, like materials, have been left out of the party. It doesn't matter that there is little growth in the economy. They need yield and treasuries are not looking so hot anymore.
The Baby Boomers have been well noted for their ability to distort markets as they rush like a giant tidal wave from one area of investment to another. I don't think we have seen the last of what that massive herd is capable of in terms of market distortions. The phenomena could carry on much longer than what anyone is expecting. Just look what the Boomers did to the markets in the eighties and nineties.
The Boomers, whether as retail investors handling their own retirement fund or as being represented by the giant pension funds, represent a majority group of the public and ultimately, will be left "holding the bag" when the market rolls over from exhaustion and slides into the next bear market. Unlike some, I don't see that happening anytime soon.
A rising market on low volume is indicative of the smart money treading water, gradually sucking the wary Boomers back into the market. In my opinion, a scarey crash is not in the cards, at least not until the Boomers have fully committed to the markets.
Daily State Of The Markets: Wake Up And Smell The Breakout [View article]
Daily State Of The Markets: Wake Up And Smell The Breakout [View article]
It's equally perverse that the bears who endlessly call for a crash are the same ones that go on to write successful books when it finally happens. There is a lesson here but I can't quite figure it out.
Why GDP Growth Should Only Really Matter To Economists [View article]
The correlation between GDP and the markets has always been erratic. On the other hand, the correlation between earnings and the S&P is quite consistent when adjusted for a lead time of 3 to 6 months for the market vs earnings
April Longings [View article]
The TINA-Effect: Why The Dow Jones Keeps On Climbing [View article]
Would A War With North Korea Be Bad For Stocks? [View article]
Even The Bulls Are Becoming Wary: Can We Trust The Market Any Longer? [View article]
You call on the dollar was spot on, congratulations. My proprietary momentum indicators say that the dollar rally has got strong legs. I would not dare short the US dollar.
I also agree that bonds are going higher. It would not be surprising if they were to challenge the highs. I would not short them at this point but definitely down the road when the rally weakens.
The only area that we disagree on is the state of the stock market. In my opinion, not enough retail investors have been sucked in to allow for adequate distribution. The volumes are simply to low for that to occur. The market is all about psychology and the public must be made to believe that all is well and under control. A market crash, at this point, would be counter productive in achieving that goal.
Right now, the smart money is driving up the market, patiently waiting for the pension funds and retail investors to dive in with both feet. There will be a corrections, followed by dramatic recoveries that will be accompanied by good economic news. It is those kinds of moves that get the dumb money excited, not wanting to miss out any longer .
Yes, Mr. Stuber, a crash is coming, but only after the dumb money has blown their cash reserves in a market that they will be convinced cannot go down, at least not before they get out with their imagined profits. Are we there yet? In my opinion, not even close.
2 Words: Shorting Gold [View article]
I honestly don't know what it is going to do in the next year.
The Glitter Is Wearing Off [View article]
2 Words: Shorting Gold [View article]
Gold is going down.
Daily State Of The Markets: Bull Markets Don't Stop On A Dime, Unless ... [View article]
The Federal Reserve Continues To Misinterpret The Economy: Part III [View article]
One bright spot for employment is the U.S. dominance in the manufacture of goods that are meant to kill people. The manufacture of bombs, guns, bullets, tanks, missiles, planes, etc, provide plenty of good paying jobs. The U.S share of world armament sales is somewhere in the neighborhood of 30% of the world's total! Didn't Eisenhower warn us that something like this situation was going to happen? Didn't Eisenhower warn that something like this was going to happen?
It is somewhat disconcerting that wars can do wonders for America's unemployment rate and it's economy.
The 'Real' S&P 500 Index High [View article]
The real problem is that as inflation increases, consumer resistance sets, largely due to the fact that wages are no longer keeping pace with inflation(unless you are a CEO). The phenomena of diminishing returns puts business in a squeeze and they either have to become more efficient or profits suffer.
The 'Real' S&P 500 Index High [View article]
There have been other studies that indicate that stocks do best in low inflation environments and suffer as the inflation increases. If anyone wishes to spend the time to investigate the inflation/stock price correlation, just use that wonderful search engine, Google.
I stand by my point which was that trying to arrive at an adjusted S&P number with cumulative inflation factor, produces nothing of relevance. To do so one would have to make the assumption that stock prices and inflation exhibit a linear correlation and it just isn't so.
Up 10%, Are Stocks Now Too Dangerous To Hold? [View article]
However, there may be other factors in play that are messing up the normal rotation of sectors of a market cycle.
It is very probable that investors who have been fleeing the bond market are of the conservative type (baby boomers). They are seeking to invest for income (dividends) in sectors that are perceived as being safe sectors(defensive). The more risky sectors, like materials, have been left out of the party. It doesn't matter that there is little growth in the economy. They need yield and treasuries are not looking so hot anymore.
The Baby Boomers have been well noted for their ability to distort markets as they rush like a giant tidal wave from one area of investment to another. I don't think we have seen the last of what that massive herd is capable of in terms of market distortions. The phenomena could carry on much longer than what anyone is expecting. Just look what the Boomers did to the markets in the eighties and nineties.
The Boomers, whether as retail investors handling their own retirement fund or as being represented by the giant pension funds, represent a majority group of the public and ultimately, will be left "holding the bag" when the market rolls over from exhaustion and slides into the next bear market. Unlike some, I don't see that happening anytime soon.
A rising market on low volume is indicative of the smart money treading water, gradually sucking the wary Boomers back into the market. In my opinion, a scarey crash is not in the cards, at least not until the Boomers have fully committed to the markets.