“At least one notable investor thinks we may be in bubble trouble again.
Sam Zell on Thursday at the SALT hedge fund conference in Las Vegas said stocks are due for a fall. The legendary real estate investor thinks the market is out of touch with what is really going on in the economy…"Right now you are buying at an all-time high," says Zell. "And there are times when stocks hit a high, and then go higher, but that's when you have a good economy." Story at…
http://finance.fortune.cnn.com/2013/05/10/sam-zell-says-sell/?iid=HP_LN
FACTSET EARNINGS (excerpts from Factset Earnings Insight,
Friday, 10 Apr 2013)
“With about 90% of the companies in the S&P 500
reporting actual results, the number of companies reporting earnings above
estimates is in-line with the recent average, while the percentage of companies
reporting revenues above estimates is below the recent average……In aggregate, companies are reporting earnings that are 4.9% above expectations. Over the last four quarters on average, actual earnings have surpassed estimates by 4.1%...
…The blended revenue growth rate for Q1 2013 is -0.2%, down from an estimate of 0.4% at the end of the quarter (March 31). However, only two of the ten sectors are reporting a decline in revenues: Energy and Materials.” Excerpts from FACTSET at…
http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_5.10.13
HUSSMAN ON THE ECONOMY
“Regional purchasing managers surveys and Federal Reserve
surveys have turned uniformly lower in recent reports. Importantly, while non-farm
payroll growth was surprisingly robust in April, the gain belied a significant
decline in the average hourly workweek. It is the combination of workers and
hours worked that determines production and income. If labor hours were held
constant, total non-farm payrolls would have declined between 550,000 and
623,000 jobs in April (depending on whether one uses non-farm payrolls x
average weekly hours or instead uses the index of aggregate weekly hours). The
U.S. may or may not avoid recession, but there is no evidence of a material or
durable acceleration in economic growth here.”
- John Hussman, PhD, Weekly Market Commentary for May 13, 2013 from
Hussman Funds at…http://www.hussmanfunds.com/
The Shiller P/E is based on the current price divided by
inflation-adjusted, 10-year average earnings.
(See my blog “Stock Market Advice
From Darth Vader” at http://navigatethestockmarket.blogspot.com/2012/04/stock-market-advice-from-darth-vader.html
for a detailed discussion of the Shiller P/E.) Here’s the current info:
SHILLER P/E (CAPE OR PE10) AT EXTREME HIGHS (John Hussman,
PhD)
“…the Shiller P/E reached 24 last week (S&P 500
divided by the 10-year average of inflation-adjusted earnings). Secular bear
market lows have typically taken the Shiller P/E below 8 before durable secular
bull market advances have taken hold…Though the discipline to “sit by quietly
while the mob has its day” can be nearly excruciating in the excitement of
late-stage bull markets, as the market registers multi-year highs amid rich
valuations and heavily optimistic sentiment, it’s worth remembering that the
2000-2002 bear market wiped out the entire total return of the S&P 500 in
excess of Treasury bills all the way back to May 1996…Moderate losses are
frustrating, but deep, major losses from rich valuations are the ones that
matter, because it is difficult to recover from them in a durable way. The
recent advance is a gift in that regard. Consider that carefully now, not
later.” - John Hussman, PhD, Weekly Market Commentary for May 13, 2013 from
Hussman Funds at…http://www.hussmanfunds.com/
Yes, it has been hard to sit on the sidelines for the
past month. My consolation is: some have
been on the sidelines since last year!
MARKET RECAP
Monday, the S&P 500 was virtually unchanged at 1,634 (rounded).
VIX fell 0.3% to 12.55. Monday, the S&P 500 was virtually unchanged at 1,634 (rounded).
The Morgan Stanley Cyclical index fell 0.7%
while the S&P 500 was unchanged Monday.
The cyclical stocks will be an important item to watch since they tend
to be recession sensitive. If this
downward trend continues it will show investor concerns over the economy.
Market internals seem neutral at this point
without giving clues on market direction.
NTSM
Monday, the overall NTSM analysis was again HOLD at the close.
MY INVESTED POSITION
I remain about 20% invested in stocks as of 5 March (S&P 500
-1540). My reasoning may be found at…(although
that probably looks pretty lame by now.)http://navigatethestockmarket.blogspot.com/2013/03/why-i-got-mostly-out-of-stock-market.html
The NTSM system sold at 1575 on 16 April. (This is just another reminder that I should follow the NTSM analysis and not act emotionally – I am under-performing my own system by about 2%!)
I have no problems leaving 20% or 30% invested. If the market is cut in half (worst case) I’d
only lose 10%-15% of my investments. It
also hedges the bet if I am wrong since I will have some invested if the market
goes up. No system is perfect.
