Sunday, March 24, 2013

Risky Assets Are Already In A Bubble

"If market forces were allowed to prevail and the government permitted the economy to deleverage, earnings of U.S. corporations would be in a depression. And the price to earnings ratio would reveal that stock prices are already in a bubble. A bubble that is only becoming more dangerous with each day of the Fed's money printing."

5 years of intervention and historical stimulus and manipulation. The Federal Rserve is in uncharted territory and admits it is making it up as they go along. So, a room full of men can make decisions effecting the whole country, the entire world population?
                            And there are NO checks and balances for this room full of men?

This room full of men, known as the Federal Reserve, can set interest rate policy and they serve no man, no country, no President, answer to no one?

If printng of $3 TRILLION and flushing it into risky assets has helped corporate profits, stabilized housing, improved home prices, improved Consumer sentiment, then what will happen when this can no longer be done? If this is not a grass roots movement, if the economy and markets cannot stand on their own 2 feet, what will happen when these policies are reversed?

At the moment, there is little in competition with rising asset prices, as the SAVER has been rubber hosed. A $MILLION in a savings of MM account will net you about $100 !!! A $100 return on your $1 MILLION????

I keep hearing radio ads for seminars which will teach you how to ???? FLIP HOUSES!! WTF???
25% of homes bought are from "investors", not new home owners, this is a huge %. 0% rates,
3% mortgages come with a price...CHEAP MONEY COMES WITH A PRICE. That price is the deleveraging processs was not allowed to take place and the HEALING needed to reset economy has not taken place, what we have instead in the steady IV DRIP from the FED RESERVE.....and other CB'S.

If you think we are at beginning of some new great movement, a new great bull market and SOUND economic expansion, then fear not. If however, you question the current environment, understand how we got here and realize it is NOT ORGANIC, then while you are eating your Organic baby spinach salad, and roasted veggie pizza on a gluten free crust with tofu cheese.....think carefully what you are doing and consider other outcomes are possible in the future other than the rosy scenario.


Thursday, March 21, 2013


This was generated on March 6th, and by itself is not proof of a top. What this does show is the EXTREME ALL IN SENTIMENT being generated as we are making new highs in the market.

While other data suggests a strong market internal, IMHO it would be prudent to be cautious going forward with new allocations until some froth is removed. Current advance I think is around 4 months old. Would it be the "pause that refreshes"? Could be, many obviously think so.

Wrap your head around this thought. Those who prefer safety for safety sake or because of their age, in retirement, cannot or do not want to take on risk.....these have been FORCED into risky assets, stocks, because of continued FEDERAL RESERVE POLICY.

The idea is to create a wealth effect loop, where rising stock prices beget home purchases, beget rising home values, beget consumer confidence, beget job creation, which in turns feeds the loop and back again. PROBLEM SOLVED!

Balance sheet of FED has grown from $800 B to near $4 T in last 5 years....they make this up as they go along, they have NO exit plan.

The companies in the SPX will see there first qtr of falling ro flat profits since this Bull began I believe. FDX warned and missed their profit target. We will keep close eye on the Transports going forward.

Then there is this, unsettling to say the least.


Wednesday, March 20, 2013


"The Fed's reticence to divulge their plan for exiting has some of its own members on edge, as a messy exit could throttle a market rally, the ups and downs of which have been closely tied to the asset purchase cycle."


Copper prices have been falling since 2011, bears watching.


Sunday, March 17, 2013


"There’s no historical precedent for such massive and protracted deficits in a country’s external account. There is no precedent for such a consumption and services-dominated economic structure. And there’s no precedent for anything remotely comparable to the current fiscal and monetary policy regime.
Decades of unfettered global finance have, not unpredictably, fostered progressive financial and economic fragilities. These policy-induced deficiencies have incited increasingly desperate policy measures - and attendant market exuberance. Indeed, it’s all evolved into one epic experiment in unanchored international finance, unchecked speculation and financial leveraging, new paradigm economic structures, ballooning global imbalances and ever expanding monetary inflation. So I especially appreciate Mr. Volcker’s pertinent insights. And to see Greenspan on CNBC touting an equities valuation model and market undervaluation – well, it was just more of the ridiculous."

When considering your options and investing strategy, you must consider your goals and time frame.
If you are young, especially if you have established retirement account that is tax deferred, you can keep a LONG TERM perspective and stay IN the market come hell or high water.

Do you find this surprising coming from me?
Don't, I also have funds in a 401K invested in some 15 products across broad spectrum of investments. The MAIN issue I would ever have is if you atrying to get a LUMP SUM in at any given juncture, easing it in would be better call, IMHO.

Are you buying near THE TOP? If long term, meaning 10 PLUS years or more, who cares? The avg, and even above avg person will not cannot try to TIME enterring and exiting. What WILL happen is these decisions will be dominated by EMOTION. You will gamble near the top because of GREED, you will exit near the bottom because of FEAR....this is what drive market behaviour and the extremes of each.

If you looked at what your portfolio could be today over the last 15 years.....using HINDSIGHT, you would have ignored the last 2 BEAR MARKETS......hung tough and continued to avg into the market.

Problem is, we are emotional creatures, so if you want to be a LONG TERM investor and reap those benefits, then you are best not to ponder daily what your account is worth....ON PAPER.

My own personal mistakes were not that I couldn't identify a BEAR MKT, which I have now twice in 13 years, it was in trying to pick THE BOTTOM. Getting out near 14,000 DOW.....8,000 Dow wasn't a sale? Of course it plunged below 7,000 briefly, but my point was....I had saved my ass from a 6,000 point decline...WHEN was I going to reap the rewards of lower prices?

The answer to that was I had NOT YET mastered my own emotions. I did not believe my own charts which told me a bottom was at hand. I did not trust that THE BOTTOM would hold on a test....or the rising tide was real or sustainable!

I have answered this period before in my blog, tried to be as honest as I can, openly sharing what I'm thinking, my own experiences in an attempt to help others.

I argue from both a fundamental and technical viewpoint. I'm not saying I will leave  even my own 401K in under any circumstances, no I will probably go to the sidelines hen I think it appropriate.
But should stock prices go on sale again, and I AM on the sidelines in plenty of time with CASH ON HAND IN WHICH I CAN BUY THE BARGAINS (because what good are bargains if you have NO CASH?)  (I am on sidelines in another account) I WILL be prepared to put money to work at or below certain market price thresholds, NOT because I KNOW the bottom is near. I will buy because I know prices have gotten severe haircut, are on sale, and my chances of making money are very good even in the intermediate term.

Timing with LUMP SUMS is important, if you have shorter horizon, buying in 2007 meant you waited until this year to recoup, but you did. Getting scared out in 2009 would have been a horrible decision.

The GREAT BULL MARKET OF THE 80'S and 90'S began with historic highs in interest rates, then during that entire period, falling interest rates. We had an INDUSTRIAL, MANUFACTURING and TECHNOLOGY LED expansion....real jobs, real FED meddling....of course then came GREENSPAN.....we exploded.....but there was a price to pay.

Then came Bernanke, now even more historic FED bubble, two, 3? each bubble bursts and causes financial and market havoc.

Are we on the cusp of another GREAT BULL MKT, or is what we are witnessing just a figment of the FED's intrusive meddling and manipulation and targeting of financial assets?

What then should we expect to happen when that game ends or fails?    

To be continued......


Saturday, March 09, 2013


Triple top and that converges with top in Broadening bearish megaphone I have posted....and all AFTER a possible bottom in yields?

ALL this after some major inflows to stock funds, and the euphoria of 4 straight record highs? Can't say a high degree of bearishness anymore....that's been SWIPED from their faces.

My previous post, where I posit no way we will top here, is and I still feel possibly we are set for a balst off blow off top, where MORE divergences are in place at the NEW highs.....or one DOWN move before last up cycle.

How euphoric can one really be, when unemployment rate drops because of gross number of newly dropped out of work force?

GDP could surprise to upside....companies will be hard pressed to keep a good rate of earnings momentum, IMHO

So maybe, we are at tactical, and technical crossroads?


Friday, March 08, 2013


Unemployment Rate Falls To 7.7% As Labor Participation Rate Falls To 63.5%–Lowest in Three Decades296,000 of Discouraged Americans Leave Labor Force In February


Fundamentally I have tons of issues, but IMHO we will soon if not now enter the final explosive phase of this bull market.

0% on savings, no other alternatives, what is being presented as positive economic and job data, 4 straight days of new all tme highs....fence sitters won't be able to hold off much will be everyone in the pool soon.....could be 6 months, a year or longer.....til we get there...then.....burst.

In the data today , just so you know, LESS people in the workforce, participation fell, so maybe 230K found jobs...a bunch more left and gave up.

Just my 2 cents....more later


Wednesday, March 06, 2013


60 minutes piece, in a word, SHOCKING




"The Fed is printing a lot of money. They are forcing people into markets. You shouldn't be buying securities because you're forced to buy them by zero rates. you should buy them because you think they're great value. They're great value only relative to zero interest rates. they're not great value on an absolute basis."

Think about it, 5 years of HISTORIC rally from abyss, 5 years of historic FED printing.


Tuesday, March 05, 2013



I take no pleasure on being pessimistic on the underpinnigns of the whole house of cards, but I am happy to see those who STUCK IT OUT have regained ALL that had been lost in the near depression of 2009, pretty amazing.

Chances are you don't make that kind of BOTTOM without lots of the little guys jumping out and who knows if they ever came back, though they tend to come back near the highs.

As stocks have closed at (let me say again) NEW ALL TIME HIGHS , here are 2 stats you might find perlexing

2007  27 M on food stamps
2013  47 M on food stamps

2007 7.5 M unemployed
2013  12.5 M unemployed

And I cannot find anyone other than robert prechter (bearish longer than me! haaa) that doesn't think stocks are at EARLY stages of a GREAT BULL MARKET!!!

To those who never waver, or worry, or avg in month after month....none of any of this will really matter, the wild swings and bull and bear tops and bottoms always occur from extremes in emotion greed and fear and back again.

These can be short term or cyclical (3-5 years) or secular (15-20 years like move from 1974-2000)

The bigger question is, are we in a LONG TERM BULL or are we still stuck (or have we ever been in) a Secular Bear market? Though it may sound crazy, that is possible.

The economy has plenty of slack, so I can see the room for optimism it can get better.
They say 2.5-3% growth is all we need to create more jobs, profits will rise, so might stocks.

Below I'm going to show you the mother of all SECULAR BULL MARKETS....10 year treasuries....price is up, yields is down, since before 1980.

AM I the ONLY one that think the direction of stocks over this same time frame and again today has also been UP and now at new highs.

ALL BULL MKTS END....30 PLUS years of FALLING YIELDS....bears watching

Friday, March 01, 2013



Here's the reality

Think again of where interest rates are right took rates at 3% to accomplish what you see in the chart above. Median home prices in 2005 were $231,000, they HAVE recovered to $173,000. SO MOST if not ALL the homeowners since 2005 are STILL under water.

With all this talk about a housing recovery, it is logical to consider many of these people who want to get away from the housing boat anchor will LIST THEIR HOME, when MORE supply comes onto market than demand, what happens to price?

AT least 50% of homes sold are still foreclosed homes.....we have a LONG WAY to go.

In the meantime, we have inflationary pressures, we have a FED who started just 5 years ago with $800B and now has around $3 TRILLION in holdings....almost none of it is LIQUID. DO the math