Thread: Market Talk / May 7 - 13

Some market watchers I listen to mention there will be a correction sometime soon ... but are no more specific than that. Really, if the Fed does not tack another 0.25% in June the market is bound to react positively.
Makes it tricky trying to time any short term correction ... could happen in September!

http://www.comstockfunds.com/index.c...tartrow/14.htm

End of Fed Tightening Cycle Not Bullish

The current conventional wisdom that the end of Fed tightening is immediately bullish for stocks is simply not supported by history. In looking at the last rate hike in all 16 instances going back to 1920, we found that the Dow Jones Industrial Average declined by an average of 19.1% from the date of the last rise in rates to the eventual market bottom. In fact the Dow dropped by at least 10% in 12 of the 16 instances and by more than 20% half of the time. In only four cases did the Dow actually rise after little or no decline, and one of these times was in early 1995. That is why Wall Street likes to bring up that one case while ignoring the bulk of the evidence.



In looking at the way events have typically unfolded in previous cycles, it makes a lot of sense that stocks fall significantly following the last Fed rate hike. The Fed’s usual objective in raising rates is to prevent or stop inflation in a mature economic expansion, and it generally stops when the policy shows signs of working. However, since changes in monetary policy work with lengthy and uncertain lead times, the last few rate hikes are still kicking in for some time after the policy changes direction. Therefore it is usually after the last rate hike that the economy slows significantly and earnings fall out of bed. Since this generally happens following a period of overvaluation and optimistic sentiment, disappointed investors then leave the market in droves as they focus on the highly negative fundamental news despite the change in Fed policy.



Given both the past odds and the current condition of the economy and stock market, we think it likely that stocks will decline significantly either before or after the final Fed rate hike. Stocks are overvalued, and the rally since October has largely discounted the event in advance. The slowdown in housing will impact consumers’ ability to extract cash from their home values at a time when household debt is at record levels, wage and salary gains are anemic and savings rates are negative. In addition none of this analysis allows for the possibility that the economy remains strong or that rising energy prices threaten to spread. In that case the final rate hike would be even further down the road. All in all we think the widespread belief that the end of rates hikes will spark the market is based on a misreading of the evidence, particularly in view of current market and economic conditions.

It's all to bearish for me - I don't believe a word of it. We are looking at a break up through the ascending wedge pattern on the SPX and then 1400 will fall next. Maybe we get a correction and maybe we don't - certainly at some point - but from much higher levels. At anyrate, I'll be there to take the consequences.

News for the Birch Camp
http://www.montereyherald.com/mld/cc...rsonal_finance
Even as the market moves higher, there is a decided lack of enthusiasm among investors for U.S. stocks. So far this year, investors have plowed $68 billion into mutual funds that invest in Europe, Asia and emerging markets. This compares with only $24 billion invested in U.S. funds, according to Trim Tabs Investment Research, which tracks fund flows

The major stock indexes now stand at their highest levels in more than five years.

The Dow had a fine week last week -- gaining more than 300 points -- and is up almost 6 percent year-to-date. If it can muster a gain of just 3 percent, it will top its all-time high of 11,722 hit in January 2000.

Not sure how or if this will impact our investments but here he goes again.
http://english.aljazeera.net/NR/exer...DC97293384.htm
Hugo Chavez, who made the announcement during his weekly television and radio programme on Sunday, said the measure would create $1 billion in new revenue.

He said details of the new tax would be revealed in coming days.

"We are going to create a new oil tax, called the tax on extraction," Chavez said. "The companies that are pumping oil in Venezuela are making a lot of money."

Originally Posted by JOVARN

News for the Birch Camp
http://www.montereyherald.com/mld/cc...rsonal_finance
Even as the market moves higher, there is a decided lack of enthusiasm among investors for U.S. stocks. So far this year, investors have plowed $68 billion into mutual funds that invest in Europe, Asia and emerging markets. This compares with only $24 billion invested in U.S. funds, according to Trim Tabs Investment Research, which tracks fund flows

And the "insiders" are bailing like their shares are on fire.

Originally Posted by JOVARN

News for the Birch Camp
http://www.montereyherald.com/mld/cc...rsonal_finance
Even as the market moves higher, there is a decided lack of enthusiasm among investors for U.S. stocks. So far this year, investors have plowed $68 billion into mutual funds that invest in Europe, Asia and emerging markets. This compares with only $24 billion invested in U.S. funds, according to Trim Tabs Investment Research, which tracks fund flows

The major stock indexes now stand at their highest levels in more than five years.

The Dow had a fine week last week -- gaining more than 300 points -- and is up almost 6 percent year-to-date. If it can muster a gain of just 3 percent, it will top its all-time high of 11,722 hit in January 2000.

Seems like a bit of an immigration issue... colored green $$. Wonder if our administration will build a TSP wall; like a 14-day trade lag or something?

Then I would sell ALL of my US stocks.

Spartan,

For simple dialogue, no arguement.....

Do we want In G-d we trust or another A Bright Shining Lie?

Except for a small position in FLVCX (2.74%), I am 97% in international stocks. Buffett has said it several times. He expects that our currency will continue to devaluate over the next several "years". That devaluation makes it very hard to make real money in the main US markets.

Looking overseas this morning- once again the dollar is down against both the Yen and the Euro.

Nikkea is up 0.8%, while the FTSE is down slightly.

Overall, good tidings again for the "I" fund today.

I'm ready to pull some off the table from "I", but not until the wind comes out of the sails. It's still moving upward and onward today for the "I" fund.