“The danger of mispricing risk is that there is no way out without investors taking losses. And the longer the process continues, the bigger those losses could be. That's why the Fed should start tapering this summer before financial market distortions become even more damaging.” - Martin Feldstein, President emeritus, National Bureau of Economic Research, July 1, 2013
“… I don't expect this cycle to be completed with a 20%
loss, or a 25% loss, but instead a loss in the 40-55% range…A 40% market loss
is the central expectation.
Even run-of-the-mill bear markets average a loss of about 32%, while
run-of-the-mill cyclical bear
markets in a secular bear
context average a loss closer to 38%...”
“…we have one of the most overvalued, overbought,
overbullish equity markets in history, but one where investors are under the
illusion that stocks are appropriately priced, because they are being sold a
valuation benchmark (forward operating earnings) that reflects profit margins
70% above historical norms – a direct result of unsustainably large deficits in
combined government and household savings.”
– John Hussman, PhD, Hussman Weekly Commentary for 29
July 2013. Read the commentary and
analysis at Hussman Funds at… http://www.hussmanfunds.com/
Of course John Hussman has been warning of this potential
for more than a year. Now he is being joined by the “Elliott Wavers” who are
calling for a top as soon as August. I
can’t say too much because the NTSM system has been negative on the markets
since March, and the market is up almost about 7% since then.
80% OF ADULTS: NEAR POVERTY; RELY ON WELFARE; OR UNEMPLOYED
(ZeroHedge)
“Despite consumer confidence at a six-year high,
the latest AP survey of the real America shows
a stunning four out
of five U.S. adults struggle with joblessness, are near poverty, or rely on
welfare for at least parts of their lives amid signs of
deteriorating economic security and an elusive American dream. Hardship is
particularly on the rise among whites…” Story at http://www.zerohedge.com/news/2013-07-28/80-us-adults-are-near-poverty-rely-welfare-or-are-unemployed
I know ZeroHedge tends to report the negative news, but
the above is a stunning statistic reported by the AP. This story was also prominent on the MSN Home
Page Monday in the AM, but MSN misquoted the statistics in its headline
(claiming 80% of the population was on welfare) and I couldn’t find the article
anywhere on MSN Monday afternoon.
QUESTION: If US income nationwide has fallen 5% in the
last 5-years and the rest of the world is in trouble too, how can the economy avoid
recession? The short answer is…only if a
lot of people get hired. See below
chart:
Tuesday, the S&P 500 was up 1pt to 1686 (rounded).
VIX was unchanged at 13.59.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks
advancing on the NYSE bumped up to 51%.
Usually a value below 50% signals additional trouble for the markets.
There were 114-new-highs today (Monday) an
improvement over the previous day, but 6-days ago there were over
300-new-highs. Market internals are
still trending down so internals suggests further down for the S&P 500.
NTSM
Tuesday, the overall NTSM analysis was HOLD
at the close.
SENTIMENT – NOW VERY NEGATIVE
Sentiment was 70%-bulls at the close Monday
and the 5-dMA of percent-bulls was 66% at Monday’s close (based on
Guggenheim/Rydex funds I track). Both of
those numbers are extremely bullish and that is a negative for the market. The topping process continues!
MY INVESTED POSITION
I remain about 20% invested in stocks as of 5 March (S&P 500
-1540). 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.
