The whole world of fundamental and technical analysis seems to be in a state of chronic confusion – confounded by this seemingly trendless stock market….[Usually] the stock market possesses the ability to forecast coming events but the periodic spates of Fed stimulation have thrown some sand into the stock market’s delicate machine….Thus, we see the stock market ‘up on Fed-created stilts’ and at the same time we see depressing economic news in the newspaper headlines. Meanwhile, Treasury yields are sitting on near-record lows. We’re seeing a strange paradox here.
So says Richard Russell in paraphrased comments from his recent interview with Eric King of King World News brought to you by Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!) and www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds). This paragraph must be included in any article re-posting to avoid copyright infringement.
In further edited comments (the entire interview can be read here) Russell goes on to say, in part:
The Wilshire 5000, which includes almost all stocks traded on the NASDAQ, the Amex and the NYSE, is now below the 2011 peak reached in May, 2011 – caught in a standstill between two opposing forces:
- The positive force is the hope of additional Fed stimulative action.
- The negative force is the primary trend of deflation and over-production.
It is my opinion, however, that deflationary and deleveraging forces are still in command, and all the Fed’s manipulations are, and will, fail to turn the bear market into a new bull market.
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Editor’s Note: The above may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
The US Federal Reserve, which has been the life-support for the U.S. economy (for better or for worse), is finally discovering that its policies and theories don’t actually apply [in] the real world….This means that the primary prop underneath the U.S. stock market and financial system (namely Fed intervention) is slowly being removed. What follows will not be pretty and smart investors should be taking steps now to prepare in advance. Words: 350
The deficits aren’t going to stop anytime soon. The debt mountain will keep growing…Obviously, the debt can’t keep growing faster than the economy forever, but the people in charge do seem determined to find out just how far they can push things….The only way for the politicians to buy time will be through price inflation, to reduce the real burden of the debt, and whether they admit it or not, inflation is what they will be praying for….[and] the Federal Reserve will hear their prayer. When will the economy reach the wall toward which it is headed? Not soon, I believe, but in the meantime there will be plenty of excitement. [Let me explain what I expect to unfold.] Words: 1833
James Turk believes hyperinflation is ahead. Bob Prechter believes massive deflation is coming. An interesting discussion between the two takes place in this audio. Ultimately, both lead to Depression. Only the route taken differs, but that is important.
A look at the status of the economy, and in particular money supply, shows that deflation is starting to show up. Below are 7 charts that support that view. Words: 370
You don’t need [actual] deflation—a reduction in the outstanding supply of money—to have markets react to a decrease in the rate of money supply growth…, anticipate the eventual deflation [and begin to price it into the market. Remember 2008?] Oil prices fell from $147 in July of 2008 to $33 per barrel by early 2009. The S&P 500 went into free-fall starting in September of 2008 and bottomed out in March of 2009—falling almost 50% in six months. This is what has already happened to the gold mining sector but, remember, central banks may be on a counterfeiting holiday right now but they have a history of taking very short vacations.
Global investors are now being violently whipsawed by the decisions of central banks, as they switch between inflationary and deflationary policies. The choice governments now face is to allow a deflationary depression to finally purge the worldwide economy of its imbalances, or try to levitate real estate, equity and bond prices by printing massive quantities of their currencies.
There is an all out assault on the part of global central banks to destroy their currencies in an effort to allow their respective governments to continue the practice of running humongous deficits. In fact, the developed world’s central bankers are faced with the choice of either massively monetizing Sovereign debt or to sit back and watch a deflationary depression crush global growth. Since they have so blatantly chosen to ignite inflation, it would be wise to own the correct hedges against your burning paper currencies.
We are continuing to see ongoing pessimism among individual investors about the short-term direction of stock prices [but if you are a contrarian you should bet on a continued rise in stocks despite the continued sense of unease. Let’s take a look at a few charts that tell the story.] Words: 510
Looking at the charts we…[see] a very strong double-top formation – very similar to what we saw back in 1980….[which suggests] that we are headed all the way back down again, possibly even to the lows that we saw in 2011….This is likely to weigh on equities. Words: 291
Goldman Sachs reports their Global Economic Indicators (GLI) show the world has re-entered a contraction and…is predicting a market crash worse than that of the early 90′s recession and one slightly less than the sell-off at the turn of the millennium. [Below are graphs to support their contentions.] Words: 250
The latest research note from CITI’s Richard Schellbach includes the firm’s “Multi-asset Investment Clock” which tells us we are now at 8 o’clock. What does that mean? Take a look.
As investors become more and more worried about the world economy…it makes sense to us to look into stocks that held up best in periods of market decline. Managing risk is as important as reaching for return. One aspect of managing for risk is the past behavior of particular stocks in negative market periods. Toward that end, we identified four key, recent down periods for the S&P 500, and identified those liquid stocks that were in the top quartile for price return in each of those four periods, and did at least as well as the S&P 500 index in the 2008 crash period. [Take a look!] Words: 620
Marc Faber has stated in an interview* on Bloomberg Television that “I think the market will have difficulties to move up strongly unless we have a massive QE3 (something Faber thinks would “definitely occur” if the S&P 500 dropped another 100 to 150 points. If it bounces back to 1,400, he said, the Fed will probably wait to see how the economy develops)….. If the market makes a new high, it will be with very few stocks pushing up and the majority of stocks having already rolled over….If it moves and makes a high above 1,422, the second half of the year could witness a crash, like in 1987.” Words: 708
Investors are being told that the worsening sovereign debt crisis in Europe will leave the U.S. economy unscathed….[because,] since we don’t make many things to export to Europe, our GDP won’t suffer a significant decline at all…. What [has been] conveniently overlooked, [however’] is the fact that 40% of S&P 500 earnings are derived from foreign economies and the seventeen countries that make up the Eurozone have collapsed into recession. [Let me explain what effect that will have on the performance of the S&P 500 this summer.] Words: 325
At the end of November 2011 the U.S. behavioral indicator for the U.S. stock market, based on insights on investor psychology, touched the crisis threshold for the fifth time (1971,1979, 1986, 2006) since 1970. If the current case follows the four prior cases, we expect a similar positive return from November 2011 to the end of October 2012 as in the four prior periods followed by a decline somewhere between 15% and 30%. [Let me explain.] Words: 317
The Q Ratio is a popular method of estimating the fair value of the stock market developed by Nobel Laureate James Tobin. My latest estimates [suggest] that the broad stock market is about 33% above its arithmetic mean and 42% above its geometric mean……Periods of over- and under-valuation can last for many years at a time, however, so the Q Ratio is not a useful indicator for short-term investment timelines [and, as such,] is more appropriate for formulating expectations for long-term market performance. [Let me review the Q ratio with you, along with several graphs, so you can clearly understand what the Q ratio is, how it works and what it is currently conveying.] Words: 800