LONDON (MarketWatch) — The chief of the International Monetary
Fund, Frenchwoman, Christine Lagard, “…warned
on Monday that the global economy could slide into a “1930s moment” unless
Europe deals with its debt crisis and other economic powerhouses such as the
U.S. and China fulfill their responsibilities.…Lagarde urged the euro zone to…adopt
some form of fiscal risk-sharing, such as the creation of euro-area bonds or a
debt redemption fund. “Political agreement on a joint bond to underpin risk
sharing would help convince markets of the future viability of European
economic and monetary union.”
<My comment: So far, that doesn’t seem likely since it is
really aimed at Germany (the strong) paying to prop up other Eurozone
“partners” (the weak).>
In her speech, the IMF head said that in the US, “The key policy
priorities must be to relieve the burden of household debt and to deal
decisively with the issue of public debt.” Full story at...
While
things seem to be getting slowly worse in Europe, the US seems better off,
given that earnings have been OK so far and the market has been on a tear
upward.
Even John Hussman noted that “Leading
economic evidence continues to teeter at levels that have always and only been
breached in recessions, but the sharp deterioration we initially observed late
last year has been followed by modest stabilization - though still near the
area that has historically marked the entry to economic contraction….The interpretation
best supported by the data is that recession risk remains very high based on
the leading evidence and the typical outcomes that have resulted, but that the
rate of deterioration has eased significantly, and it is simply unclear whether
this is a temporary pause or a reversal.”
– Weekly Market Comment, John Hussman, PhD, at... http://www.hussmanfunds.com/weeklyMarketComment.html
That’s positively bullish when compared to
past posts, but in fairness, I am a huge fan of Dr. Hussman because of his
analytic approach and we must continue to be vigilant regarding US recession.
As
I’ve noted before, cyclical stocks should underperform if a recession is
coming. When I look at the spread between the S&P 500 and the Morgan
Stanley Cyclical Index (^CYC), I note that the ^CYC has been out-performing the
S&P 500 since the 1099 October low and that out-performance has accelerated
since December. Right now, the market is
betting that we won’t have a recession in the US and that is the only opinion
that counts when it comes to investing.
Today
the NTSM remained HOLD, and that was again caused by market action that has
been straight up this month.
I
bought back into the stock market at S&P 500, 1155 on 7 Oct after the 6 Oct
NTSM buy signal. I remain 100% long in
the long term portfolio (100% stocks in the 401k.). (See the page “How to Use
the NTSM System” – the link is on the right side of this page).
I
am 90% long in the trading portfolio.
Just
a reminder: 100% invested in stocks is way too much for most rational
folks. Don’t do it unless you have a
high tolerance for risk.
