The problem for the stock market is that the 13-year journey of underperforming T-bills – with wicked collapses and break-even recoveries – is most probably not over. Stocks remain overvalued on the basis of the probable long-term stream of cash flows they will deliver to investors, though the extent of this overvaluation is obscured by unusually high (but reliably mean-reverting) profit margins, which make current and forward P/E ratios seem pleasantly digestible.
There are two ways to think about this. One is to think of these rich valuations and low prospective returns as a durable feature of the market environment. That’s basically the vision that PIMCO’s Bill Gross recently suggested, noting that we have entered a period of “negative real interest rates and narrow credit and equity risk premiums; a state of financial repression as it has come to be known, that promises to be with us for years to come.” His take is well worth the read. That said, an alternate possibility is that we will see a more rapid adjustment as investors lose the apathetic overconfidence that they can ignore the risks of a global economic downturn, massive and recurrent sovereign debt crises, and an implosion of the European banking system. In that event, we are likely to observe a significant increase in risk premiums toward more historically normal levels, but followed by a more gradual recovery in risk assets than the one that followed the 2008-2009 crisis.
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The Greatest Equity Collapse Of The Last Millennium *The Historically Saturated Asset Money Debt System *The Crash Devaluation Fractal Sequence of A Historically Saturated Asset Money Debt System * A 15 February 2012 6/14-15/12/9 day :: x/2.5x/2x/1.5x trading day pattern similar to the saturation curve incorporating the 6 May 2010 flash crash * The Wilshire and CAC comparative 27 June 2011 x/2.5x/2.5x final reflexic series with base days of 31 and 32 days (x) respectively *The 2009 24/60/48/35 of 39 week Lammert x/2.5x/2x/1.5-1.6x sequence *Synchronized terminal portions of composite equity second fractals with bases of 70 years, 9 years, and 38-39 days starting respectively in 1789, 1982 , and 4 October 2011. * A final Wilshire 25 November 2011 decay y/2-2.5y/2-2.5y sequence of 17/40/17 of 39-43 days with the final 39-43 day composed of a 6/14-15/12/9-10 day sequence * For the week of 12-16 March 2011 composite world equity and CRB valuations 2-3 days down then 2-3 days up …. * Saturation Macroeconomics: The (system’s asset valuation nodal low determined and) Patterned Science of the debt-money-asset system The world is at its global debt-money-asset system’s politically have and have-not polarized maximum saturation limit. Too much bad global debt that cannot be repaid. Too great a supply of houses and vehicles for those who earn wages Too great of equity, commodity and real estate asset valuation whose valuation foundation ….. is in a significant part premised on debt as an interchangeable money equivalent asset Too great of have and have-not dysequilibrium and polarity to produce the moment’s need of an instantaneous World Keynesian Marshall plan. When the bad debt disappears in mass, a nonlinear reassessment of all assets’ valuations will transpire. The nonlinearity will be breathtakingly historical. For the week of 12-16 March 2012: long positions on Monday and Tuesday and perhaps Wednesday and thereafter short positions on Thursday and Friday will be shaken out the market this week prior to a historical nonlinear devaluation occurring on Monday or Tuesday on 19 or 20 March 2012. The Wilshire’s (and its progenitors)1789 70/154year :: x/2-2.5x terminal second fractal area contains an interpolated 1982 9/23 year :: x/2-2.5x terminal second fractal area which contains the following interpolated 2009 operative Lammert fractal series: 24/60/48/35 of 39 weeks : x/2.5x/2x/1.6x … The 60 week second fractal which is composed of a 9/23/18/14-15 :: x/2.5x/2x/1.6x and it is the 60 week time length that sets the ideal durations for the first, third and fourth fractals :: 24/2.5x/48/36-39 weeks. Equities have been bestowed rules and conditions by generation after generation bankers and their spawned trading houses and their politicians – that make equities the favored advantaged royalty of the debt money asset system and place money in the kill zone for the trading housing who skim and siphon from the rule facilitated speculation. Savers and pensioners have been crucified over the last three years with low interest returns on their savings. Keyesnian governmental spending was necessary to prevent the debt asset money system from imploding and interest rates of the global hegemony currency were driven down via QE programs. While there was no net new consumer demand for companies to produce more assets and new jobs in this saturated asset-debt-money system, year to year employment at least stabilized. This QE necessary action maximumly rewarded those who needed help the least, the rich and the equity holder tax advantaged dividend spared speculators. As long as the current rules exist, equities will have maximum Lammert reflexic x/2.5/x2.5x growth patterns prior to synchronized second fractal collapse. The next similar system second fractal nonlinear event may not occur for another 500 years What is the final day or two of maximum equity growth contained in the US equity 1789 x/2-2.5x first and second fractals series, the terminal interpolated second fractal area of the 1982 x/2-2.5x series , and the interpolated 2009 x/2.5x/2x/1.5-1.6x fractal sequences? By comparing the fractal anatomy of the Wilshire and French CAC, the final daily x/2.5x/2.5x sequences are respectively reflexive fractals of 31/77/72 of 77 days (Wilshire)and 32/79/75 of 79-80 days(CAC). This daily sequence starts on 27 June 2011. The Wilshire second 77 day fractal is the terminal 2nd and 3rd fractals in a series in the decay form of a y/2-2.5y/2-2.5y :: 17/40/38 days with day 17 ending on 9 August 2011. The Wilshire’s third 77 day fractal of the 27 June 2011 x/2.5x/2.5x series is composed a 17/40/17 of 22-23 day x/2-2.5x/1x+ peak fractal series with the 2 May 2011 14500 Wilshire peak valuation at risk. The French CAC’s 32/79/79-80 ::x/2.5x/2.5x day second fractal is composed of two conjoined and partially interpolated decay fractals y/2-2.5y/2.5y with a 3 day intiating fractal. The series are (3) 7/17/17 days with an 8 day base in the final 17 day third fractal with a second decay fractal of 8/21/19 days. The CAC’s reflexic 32/79/79-80 day maximal growth fractal’s third 79-80 day fractal is composed of a 17/43/17 of 22 to 23 days series ::x/2.5x/1x+ series. The 17 day third fractal of the Wilshire’s/CAC’s 17/40-43/17 day series is composed of a 6/12 day x/2x first and second fractal series. A terminal 2x-2.5x 12-15 day nonlinear drop is expected over the next three trading days 12,13, and 14 March 2011. Thereafter there will be a sharp rise for two days taking the reflexic respective Wilshire-CAC fractal series to their x/2.5x/2.5x maximum limits of 31-32/77-79/77-80 days. The low for the Wilshire will come in a 15 February 2012 deteriorating Lammert growth pattern of 6/14/12/9 days and an interpolated Leap year day 29 February 2012 y/2.5y/2.5y decay fractal of 5/13/13 days. Halting of trading is expected during this time period. 6.5 trading hours which usually constitutes one trading may be extended over several trading days. The 6 May 2010 flash crash occurred on the 7th day of the third fractal of a similar 6/15/12/9 day :: x/2.5/2x/1.5x decaying Lammert growth and decay fractal series. The historical US crash is anticipated on Friday 16 March to Tuesday 20 March 2012 which is day 3-5 of the third fractal of a 6/14-15/12/9 day decaying 3 phase phase growth and one phase decay fractal sequence and which is day 8-10 of the 13 day second fractal of a 29 February 2012 5/13/13 day y/2.5y/2.5y decay series. Mar 11 10:00 AM | Report Abuse| Link | 1 Comment
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And not buying pressure! We think the market is due for a significant correction (actually, whatever we think is besides the point — the market is toppy here objectively) and that the market will correct in short order. That said, anything can and will happen in life and in investing — just as in a poker game, when you have the nut straight on the flop you still lose about 35% of the time… Investing is a lot like poker — the odds are about 60% that we see a 5% or higher correction here because of technical and fundamental factors, but there is always that 40% of the time where the market participants throw out all of the rational data mining and simply buy buy buy…
Career risk brought the market higher last fall, but career risk could cause the market to fall this spring (just as it did last spring). As someone who always is net long the stock market in some way or another, I have to deal with it just like everyone else, but for the truly liquid, there is likely a sure fire way to make some quick money right now (and I mean 5% in a month type of money) which would be to sell bear call spreads on the QQQ or pick out a basket of overpriced securities and buy puts or put spreads on them.
One thing is certain in my view, the market doesn’t have a ton of upside left in the near term. The Greek Debt situation, the political sham going on in the U.S., the Iran ordeal which is surreal in its own right, and the lingering end of the world Myan Calendar black swan type of stuff always exists just beyond the pale of the CNBC pumptards.