Was the top in? Or it's topless?

[Cobra]

Well, too bad, the overwhelmingly bearish poll results last week turned out to be deadly wrong. Now let's see how many of us had given up the hope in calling a top.

[taggard]

cobra

re your spx trend line--as you drew roughly in the last years action--but extending back to 2007 and lining up tops works about the same. that gives it a bit more validity. at least first hit.

as usual if they give a choice blowing though it (false breakout) would be ideal. somebody just noted DeMark calling for a top (20-30 points higher on es on tuesday which would be pre aapl earnings and the last day of the fed who are unlikely to take action--so taking a few bux off the table in there not absurd) that should roughly fit that idea. using my stuff we could get maxed out on 10 ad of nyse or nymo if we had a solid monday and decent tuesday. so does first hit fail in this area someplace? seems not unreasonable to hit the daily 20 ema and after that we see. have a good weekend--thanks for the effort.

[Cobra]

cobra

re your spx trend line--as you drew roughly in the last years action--but extending back to 2007 and lining up tops works about the same. that gives it a bit more validity. at least first hit.

as usual if they give a choice blowing though it (false breakout) would be ideal. somebody just noted DeMark calling for a top (20-30 points higher on es on tuesday which would be pre aapl earnings and the last day of the fed who are unlikely to take action--so taking a few bux off the table in there not absurd) that should roughly fit that idea. using my stuff we could get maxed out on 10 ad of nyse or nymo if we had a solid monday and decent tuesday. so does first hit fail in this area someplace? seems not unreasonable to hit the daily 20 ema and after that we see. have a good weekend--thanks for the effort.

Thanks, here's the updated chart.

[Claire]

ST top is near, but not the IT top

[FinancePhD]

Morgan Stanley's Mike Wilson

Insanity

Wasn’t it just a year ago that we had the exact same set-up? Growth was slowing, Greece was close to default and there was unrest in Middle East. I guess one could argue China is no longer tightening policy and Europe is closer to the end of their crisis. On the other hand, earnings growth in the US is now decelerating and likely to get worse over the next several quarters. Furthermore, the political environment in the US has rarely been more charged and bipartisan than it is today. The S&P500 is trading almost exactly where it was at this time last year, but with a lower multiple. This is the direct result of higher earnings in 2011 than 2010 but with the prospect of lower growth going forward. This makes sense to me. Most investors I speak with concur with the view that growth is likely to be below trend for the next several years thanks to deleveraging and a more stringent regulatory environment. However, there is quite a bit of excitement over the probability of QE3 being implemented at some point during 2Q. Exhibit 5 shows just how excited stock investors seem to be getting over this prospect, especially in relation to their fixed income peers. But, this is almost always the case when animal spirits get going. The last time I pointed out such a divergence (October of last year), the SPX had a swift 10% correction over the proceeding 3 weeks. I have no idea whether we are likely to get such a correctly immediately, but I sure can’t rule it out and I am pretty confident you won’t be able to get out of the way unscathed. Just another reason for why I want to be paired off right now.

I’d like to end this week’s note with a quote from Albert Einstein who said “Insanity is doing the same thing over and over again expecting a different outcome.” I feel like this is exactly where we are today with respect to the policy choices being made all over the world. Do we really think the result of QE3 is going to be any different than QE2? Or that the second European LTRO is going to end up resolving Europe’s solvency problems simply because the Fed is now supporting a larger effort via its open swaps line? Didn’t we learn anything from the Japanese experience of the past 20 years! I might be more on board with the program if I thought we were making real progress on the things that matter for sustainable organic growth. Unfortunately, I just don’t see it. While I am watching many things to determine if the facts are actually changing, there is one metric in particular that has to turn for me to get more constructive fundamentally. I am talking about personal income growth excluding government transfers. Until this shows some signs of life, I will remain highly skeptical that additional policy stimulus will end differently than what we have recently experienced. Exhibit 6 tells the sad story of our current plight and how this current rally will likely end. Until then, I will look forward to my next lunch with Adam Parker.

[FinancePhD]

I recently read a paper about long term stock return predictability and demographic structure.

Basically it predict a bear market before 2014 for the stalling structure of US population, because:

1. More and more baby boomers are going to retire and withdraw money from their 401K.
2. Less and less young get hired and earn a decent pay. This will let them under-invested on all kinds of assets.

The author claim a super high predicting power for such model in the long run, especially during the years when 401K came into effectiveness.

[taggard]

I recently read a paper about long term stock return predictability and demographic structure.

Basically it predict a bear market before 2014 for the stalling structure of US population, because:

1. More and more baby boomers are going to retire and withdraw money from their 401K.
2. Less and less young get hired and earn a decent pay. This will let them under-invested on all kinds of assets.

The author claim a super high predicting power for such model in the long run, especially during the years when 401K came into effectiveness.

i like your transfer payments chart. The whole reason for the next move down (i mo) is that "something has to change" and we need that crisis to create the change.

the idea of "organic growth" implies a whole lot of things such as improving education (for starters lowering the price not raising it during the exact period we need to stress it). Also a serious longer term (like darpa but more broad based) r and d funding (ideally close to doubling existing funding) would be nice. but what both of these ideas have in common is longer term planning.

that is what is missing in this country. along with ideology over science or rational thought.

something is going to come along and shift this stuff to some extent (likely not enough for my taste). i tend to think you will get the bear from this and not the demographic stuff although that too is likely to play a part. the fed/treasury could easily print say 3-6 trillion and offset the pull outs from a 10-20 trillion dollar market. but as an at the margin thing--it makes sense to me.

the problem in the end is not really financial in nature--it's about people in this country and what they think believe and feel. we are now a somewhat mature country and we are showing the same stupid thinking that often happens at this age thought history. So i think in the end it's a mistake to blame an entity or a group of entities such as wall street and Washington. the problem is at a cellular level (each person) and what is needed is some sort of shift in thinking.

it's almost gotta happen--because history shows it generally happening. also the rate of change is so fast now that no matter how stupid something is--it dies off (ideas and beliefs evolve the same way bacteria do). what would be nice is if people stopped fighting both this coming shift--and esp each other and tried to welcome or act to further the change that will likely happen as yet another crunch comes.

there are so many directions this crunch can come from i am reluctant to try to project the direction--but timing wise it seems very likely before 2015 assuming debt grows and "the economy" grinds. the good news about people in this country not understanding the longer term thinking is that they will crack sooner--the bad news is we even have to go through this at all.

but that is why they make puts.

[EFA]

I recently read a paper about long term stock return predictability and demographic structure.

Basically it predict a bear market before 2014 for the stalling structure of US population, because:

1. More and more baby boomers are going to retire and withdraw money from their 401K.
2. Less and less young get hired and earn a decent pay. This will let them under-invested on all kinds of assets.

The author claim a super high predicting power for such model in the long run, especially during the years when 401K came into effectiveness.

Thank you guys for your very interesting and enlightening posts, please keep on posting these kind of news/opinions, you are definitely a big help to the rest of us!


i like your transfer payments chart. The whole reason for the next move down (i mo) is that "something has to change" and we need that crisis to create the change.

the idea of "organic growth" implies a whole lot of things such as improving education (for starters lowering the price not raising it during the exact period we need to stress it). Also a serious longer term (like darpa but more broad based) r and d funding (ideally close to doubling existing funding) would be nice. but what both of these ideas have in common is longer term planning.

that is what is missing in this country. along with ideology over science or rational thought.

something is going to come along and shift this stuff to some extent (likely not enough for my taste). i tend to think you will get the bear from this and not the demographic stuff although that too is likely to play a part. the fed/treasury could easily print say 3-6 trillion and offset the pull outs from a 10-20 trillion dollar market. but as an at the margin thing--it makes sense to me.

the problem in the end is not really financial in nature--it's about people in this country and what they think believe and feel. we are now a somewhat mature country and we are showing the same stupid thinking that often happens at this age thought history. So i think in the end it's a mistake to blame an entity or a group of entities such as wall street and Washington. the problem is at a cellular level (each person) and what is needed is some sort of shift in thinking.

it's almost gotta happen--because history shows it generally happening. also the rate of change is so fast now that no matter how stupid something is--it dies off (ideas and beliefs evolve the same way bacteria do). what would be nice is if people stopped fighting both this coming shift--and esp each other and tried to welcome or act to further the change that will likely happen as yet another crunch comes.

there are so many directions this crunch can come from i am reluctant to try to project the direction--but timing wise it seems very likely before 2015 assuming debt grows and "the economy" grinds. the good news about people in this country not understanding the longer term thinking is that they will crack sooner--the bad news is we even have to go through this at all.

but that is why they make puts.