“Many advanced economies are likely to require financial repression, outright debt restructuring, higher inflation and a variety of capital controls, a new research paper commissioned by the International Monetary Fund (IMF) has warned. The magnitude of today's debt in Western economies will mean fiscal austerity will not be sufficient, Harvard economists Carmen Reinhart and Kenneth Rogoff said in the report, as policymakers continue to underestimate the depth and duration of the downturn. "It is clear that governments should be careful in their assumption that growth alone will be able to end the crisis. Instead, today's advanced country governments may have to look increasingly to the approaches that have long been associated with emerging markets, and that advanced countries themselves once practiced not so long ago," they said. Delving into the realms of history, they detail the widespread default by both advanced and emerging European nations on World War I debts to the United States during the 1930s. The research suggests that "collective amnesia" of this history has led to current policies that in some cases risk exacerbating the final costs of deleveraging…
…Central government gross debt-to-GDP (gross domestic product) ratios this year are expected to be 95.3 percent for the euro area and 109.2 percent for the U.S., according to the IMF's projections last April.” Full story at…
http://www.cnbc.com/id/101307602
This sort of report may get the gold bugs going. Gold has lost about 25% of its value during
2013 and qualifies as a legitimate bear market.
Gold made new lows recently, versus the prior low 6-months ago, on lower
volume. That’s a reasonable technical bottom
call, but many are calling for gold to go lower in 2014. Gold was around 40 in 2005; now it’s close to
120. GLD (gold ETF) was up 1% today.
PROFIT MARGINS
Corporate earnings improved by 5.4% in 2013 while revenues increased
only 1.4%. As Art Cashin, UBS and CNBC
contributor, reminded us today, “Margins revert to the mean” and margins are
high. Corporate earnings can only
improve if revenues improve. Revenues will
have to improve in 2014 or expect trouble.
MARKET REPORT
Friday, the S&P 500 was unchanged at 1831 (rounded). VIX declined about 3% to 13.76.
The 10-year Treasury Note closed at 3% yield. Rates at 3%
or above are considered by some traders to be “trouble-for-stocks”.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of stocks advancing was 57% at
the close Friday. (A number above 50%
for the 10-day average is generally good news for the market.) New-highs outpaced new-lows Friday, leaving
the spread (new-hi minus new-low) at +73 (it was +53 Thursday). The 10-day moving average of change in the
spread was minus 3. In other words, over the last 10-days, on average, the
spread has decreased by 3 each day. Market
internals remained neutral on the market.
The up-volume has been trending down and today the new-high, new-low
drifted negative. 
Market Internals are a decent trend-following analysis of
current market action, but in 2013, if I had been buying the positive ratings
and selling negative ratings I would have under-performed a buy-and-hold
strategy.
NTSM
The S&P 500 was 10.1% above the 200-dMA at the close
Tuesday and a value of 10% has led to small pullbacks in 2013 (and corrections
in 2011 and 2012). That stat was 8.9%
above the 200-dMA Friday. I said
yesterday that the S&P 500 is only 2% above the 50-dMA so it looks like any
pullback would be small. Actually the
opposite outcome is more likely. If the
markets pullback, they will be quick to break the 50-dMA and that may cause a
little more worry among traders.
I expect the markets to pullback in the first quarter of
2014, but it remains to be seen whether it will be another small buy-the-dip
event or something more.
My New Year’s resolution was to stop trying to predict
short term moves in the markets…Gone already!
The most recent BUY signal for the NTSM system was 25
October. The “5-10-20 Timer” switched to
BUY from HOLD on 18 December.
MY INVESTED POSITION
I am about 30% invested in stocks as of 20 December
(S&P 500-1540) because I upped my stock holdings by 10% on the 20th
of December. Unless I get a SELL signal
in the NTSM system, I will continue to income-average (a little each month)
into the stocks to get my %-invested up to around 50% (max for me now) unless
there is a correction that would allow me to move in sooner and at a higher
percentage.
(A good rule of thumb for percent invested is to subtract
your age from 100 and put that amount into the stock market. Generally a minimum of 50%-50% stocks and
other investment is a reasonable value for the over 50-crowd; that’s my
group. With bond yields rising keep to
the short end of bonds, i.e., less than 10-year maturity or mutual funds that
focus on the short end.)
