Japan Plunges Into Deep Recession (Financial Sense)
“Japan’s economy shrank an annualized 3.5 per cent between July and September, the steepest decline since the earthquake-hit first quarter of 2011, as exporters suffered big falls in shipments to key markets such as China and Europe…Japan has extremely serious issues already, it's just that the market is ignoring them for now. If interest rates rise by a mere 2% or so, interest on the national debt will consume 100% of Japanese tax revenue. Global imbalances are mounting. I suspect within the next couple of years (if not 2013) Japan will resort to the printing press to finance interest on its national debt and the Japanese central bank will start a major currency war with all its trading partners to force down the value of the yen.”
Full story at…
http://www.financialsense.com/contributors/michael-shedlock/japan-plunges-into-deep-recession-gdp
…and Europe too…
RETURN OF EUROPE RECESSION IS BAD NEWS FOR U.S. (CBS)
(MoneyWatch) 15 Nov 2012“The eurozone's return to recession is particularly bad news because it is now hitting once strong economies like Germany. This means the recession will last longer and have a bigger impact on U.S. consumers and companies. .. The relatively small size of the overall contraction doesn't show the full scope of the problem facing Europe. Some nations -- notably France and Germany -- even saw their gross domestic product expand. Howard Archer at IHS Global is one of many analysts who do not expect these expansions to continue.
‘Latest data and survey evidence remain
generally weak, and the odds currently strongly favor the eurozone suffering
further GDP contraction in the fourth quarter of 2012,’” Full story at…
http://www.cbsnews.com/8301-505123_162-57550532/return-of-europe-recession-is-bad-news-for-u.s/
MARKET
RECAP
Thursday the S&P 500 was
down 0.16% to 1353 (rounded). VIX rose 0.4%
to 17.99.
NTSM
The
NTSM analysis remained SELL Thursday.
VIX is now confirming the
downturn and recession worries won’t help.
I still think it is
unlikely that the US will be able to avoid recession, but the timing could be
out into the future so there’s no reason to panic. Still, the news that many of our trading
partners are falling into recession is disconcerting.
Breadth was poor today
with about twice as many stocks declining as advancing, but the S&P 500 was
only down 2-points. It would seem that
there are investors buying the S&P 500 in a flight-to-safety. Unfortunately, buying the S&P 500 now
seems to be a bad move because the large multi-national stocks in the S&P
500 can’t do well if the world is in recession.
Just look at McDonalds. MCD is
down 11% in the last month.
MY INVESTED POSITION
Based on the SELL signal,
7 November 2012, I moved out of the stock market at 1377 on the S&P
500. Because of the extreme negativity I
have noted from Hussman and others, I am currently invested in a range of near
15% invested in stocks. I also took
short positions on the morning of the 8th that make me currently net
short the S&P 500. (I am using Guggenheim
(formerly RYDEX) funds and 2x Short ETF, SDS.
Those are dangerously volatile so I don’t recommend them unless you have
a BIG tolerance for risk. Also, if they
are held too long they may not perform well.
REPEATING STRATEGY
As
I have noted before, others may choose to keep more invested in stocks without
too much damage to their portfolio if the invested % is low. For example, if one were to keep 30% invested
in stocks and the market crashed by 50%, the loss to the portfolio would only
be 15%. If that is your plan, keep the
low-beta stocks (those with lower P/E ratios) such as utilities, consumer
staples, or value oriented mutual funds.
Sell technology. Keeping 30% invested
in stocks is actually a pretty good strategy since it hedges the bet if the market continues up after a sell signal.
To
be clear I am not predicting a crash; but there seems to be a lot of risk now.
