MARKET
The S&P 500 was DOWN 1.1%
Monday to 1338. VIX rose 10% to 21.87. The S&P 500 is currently 5% above its
200-day moving average.
FROM HUSSMAN FUNDS:
“...the joint
deterioration in the growth of real personal income, real personal consumption,
real final sales, and employment, coupled with our inference of leading
economic pressures from "unobserved components" methods, creates not
only the concern but the expectation that the U.S. economy is entering a
recession - not a quarter or two from today, but most likely at present.”
“Indeed, Europe already
appears to be in a broadening recession, which the U.K. has now joined, and the
confluence of economic weakness and already strained government debt conditions
in Europe is likely to produce disruptive outcomes in the coming
quarters...(During these) conditions that match the worst 2% of our return/risk
estimates...the market has lost an average of 20-25% just in the following
6-month period.” – John Hussman, PhD, Weekly Market Commentary. See the complete weekly commentary at:
FROM THE ECONOMIC CYCLE
RESEARCH INSTITUTE (ECRI):
“For the past three
months, year-over-year real personal income growth has stayed lower than it was
at the start of each of the last ten recessions.”
BLOOMBERG
Lakshman Achuthan, the
Director of the ECRI, predicted recession soon.
He said that in the last 6-recessions, the recession, has not been
recognized until about 6-months later.
“We’re cycling down and about ready to go negative.” Watch the Bloomberg
video interview at:
WALL STREET JOURNAL
Over the weekend the Wall
Street Journal (WSJ) reported the following, in several different articles:
(1) “China’s economy slowed sharply in April – from
industrial output to bank lending to foreign trade...Growth in industrial
output fell 9.3% in April, the lowest level since May 2009.” (i.e., the last
global crisis)
(2) “India’s industrial output unexpectedly slumped in
March...to its weakest since the 2008 global crisis.”
(3) “Spain’s failure to deal with the weakness in its
banking system has become a threat to global financial stability.”
(4) “Falling (Treasury) yield underscores rising anxiety
over the global economic outlook...”
Considering inflation, treasury yields are now priced to produce a loss.
(5) If Japan fails to double its sales tax (as the current
Japanese administration has proposed) “...the failure...would possibly throw
Japan into the kind of fiscal crisis now engulfing Europe.”
Japan is borrowing a huge
amount compared to its spending. Their
deficit spending and low interest rates (at the suggestion of U.S. Keynesian
economists) haven’t helped them get out of an economic malaise that has lasted
20+ years.
The only good news I could
find in the WSJ was, “The European Union said that while risks remain, it sees
initial signs of an economic recovery in Europe next year.” Reality or wishful
thinking? I don’t know. Europe is already in recession by most
measures.
This looks like a
conflagration of issues that may send the S&P 500 into a tailspin down; but
in reality, many of these issues have already been recognized as risks by the
Smart Money. The question is, as always,
when will “the market” decide that the risks outweigh the rewards?
In 2008, it was easy to
call the major top. The S&P 500 hits
its prior high – failed to go higher – and banks were failing. Will the above issues kill the market? I don’t know; my crystal ball is on the
fritz. They do remind us; there are extreme
risks present now and it would be wise to adopt a conservative approach to investing.
NTSM
The NTSM analysis remained
to SELL Monday.
MY INVESTED POSITION
I reduced my stock holdings to 30% in the long-term portfolio on
the SELL signal on 9 May 2012. (See the page “How to Use the NTSM System” – the
link is on the right side of this page).
With 30% remaining in
stocks, I will make some money if the sell signal is wrong. Conversely, even if
the market loses half its value, I would only be down 15% of the portfolio.
