Sunday, April 22, 2012


Generational LOWS in interest rates. Historical support for the markets and intervention by the FED and world Central banks. Government policies all geared for growth and support of economy including unprecedented 99 weeks of unemployment benefits and other government transfer payments. Some say housing is the most affordable in decades and stocks off great values.

Banks paying near nothing for deposits and Money Market funds, and a 10 year that can't stay above 2% yield, that we could hardily argue doesn't come close to even keeping up with inflation. But then how can a sub 2% yield for 10 years give any competition to stocks that have more than doubled off the lows of 2009?

Can I offer an argument where the focus is on RETURN OF PRINCIPAL, not RETURN ON PRINCIPAL?

Most only see the day to day price of the popular indexes, and maybe follow the VIX for indication if fear is kicking up. But it is important to look underneath the general information to see how the market as a whole is performing from a historical basis.

Here we see a different picture, one of fewer and fewer stocks participating in the march to new rally highs. We have gone from under 10% stocks which were 20% off their own highs when the market made new rally highs in April of 2010, to about 1 in 3 stocks at the recent April 2012 rally highs were already declining at least 20% or more.

IMHO the current BULL MKT is in the last, final stages, and the rallies are bringing less and less stocks with it , to the final high. AT the final high, if we haven't already seen it, a large % of stocks will already have fallen from their own highs by 20% and more.

More active management is suggested to peel off your under performers and maybe begin to build up a nice cash position, only holding your strongest, best performing stocks......if you feel it important to stay invested.

IMHO, most are positioned to try and eek out the remaining leg of the bull and will not see the top coming, will not get out, and will most likely suffer horrendous losses on paper again.

This game is not made for the majority to do well, we all can't win, for every winner a loser is needed. Most of the winners reside on Wall Street, not on Main Street. Now is NOT the time to remain complacent, to ride it out, to ignore the danger signs of an approaching top.

There is a limit to what influence the FED can have, as more and more drastic intervention and propping will bring fewer and fewer real world results. If this intervention and targeting of asset prices was the game all along, good chance the BEAR will awaken and bring values down to earth reflecting the real world economy, that never was given a chance to heal and purge the excesses of the prior period, only sweep them under the rug and BAIL OUT the players responsible for the crisis.

To this day, not ONE PERSON has been brought to justice for the financial crimes/crisis of the century.



Anonymous said...

Bernie Madoff?

Marc R said...

That was a PONZI scheme, goes on all the time. I'm talking about general misdeads of the subprime scum