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It’s Hard To Be A Bear When Everyone Is Bullish. Part 9

bear market thinking investwithalex

Explanation: Being a bear while everyone else is bullish is one of the most challenging propositions in investing. For instance, ‘Short selling is an incredibly lonely proposition,’ billionaire hedge fund manager Bill Ackman says.  Yet, it can pay off big time if you get your TIMING right. However, since most people, even professional investors are terrified of shorting, I will introduce a quick series about short selling, proper risk management when short selling and the best way to maximize returns. This was to be a part of my never finished book (no time to finish it)…….

Part 8

For the purposes of this book, we can apply the following tools or shortcuts.

Know What Time Frames You Are Working With and/or Trading:

If you are day trader, chances are, you are trading based on weekly, daily, hourly and minute charts. If you are more interested in catching larger moves, as I am, it is highly probable that you are trading based on both the long-term and short-term charts. Whatever your situation might be, the first step is to define, without a shadow of a doubt, what it is that you are trading.

In other words, if you are day trading based on your daily charts, stick to that.  If you are trading based on weekly or monthly moves, continue on with that approach. Do not move between various time frames until and unless the move is permanent.  Why? It is highly probable that constant shifting between different time frames will lead to multiple errors and substantial losses.

Identify The Cyclical Composition Within Your Time Frame:

Attempt to identify exactly where you are in the above mentioned cycle. Bottom, bull, top or bear. Typically, the longer the time frame you are working with the easier it is to identify exactly what part of the cycle is working in the market at the time. If you are working with short term cycles, simply understand that multiple short-term cycles will complete themselves within the confines of longer cycles. For example, one long-term completed cycle on the Dow would be a bull/bear market of 2002-2009. Yet, it was within the confines is this larger cycle that multiple short-term bull/bear moves developed at the same time. In fact, a day trader might see as many as 4-5 small daily cycles develop on a daily chart.

Identify Where In The Cycle You Are (bull or bear).       

Based on the time frames you working with, determine exactly where in the cycle you are. For instance, if you are working with weekly and monthly charts, identify if the weekly/monthly cycle is in a bull or bear market and/or distributing/consolidating.

Apply Other Time Frames For Confirmation:

Consider other time frames before deciding where in the cycle you are.  For instance, if you are trading based on daily charts it would be helpful to consider what weekly and monthly charts are indicating. While the market might be in a 5 day bull run or a bounce, weekly and monthly charts might suggest you are in the midst of a bear market.

Doing all of the above should give a you fairly good indication of where in the cycle you are coming in. Allowing you to take an appropriate trading position in the process.

For example, today’s (September 16th, 2014) market environment presents us with a perfect analysis opportunity for the Dow Jones.  Here is a sample analysis to show you how to determine exactly where in the cycle we are and what positions or entry points are optimal.

To be continued……

z33

It’s Hard To Be A Bear When Everyone Is Bullish. Part 9 Google

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Just How Much Student Debt Is Out There

student debt

The amount of student debt out there is truly staggering. Another problem is…..it is going parabolic. Up about $300 Billion in a little over a year. I guess the only positive out of all of this is that Wall Street is not yet creating CDOs out of student debt and then selling it to Greece.  Although, some people already use student loans as their home equity ATM’s.

Here are some things I wrote about the subject matter before. They are just as relevant today……

Obama’s New Student Debt Law Perpetuates The State Of Welfare
Why You Should Default On Your Student Debt….Today!!!
Private Debt Crisis. Roadmap To Next Economic Collapse?
America’s Experiment In Debt Slavery Continues Unabated
Warning: Student Loans Replace Home Equity ATM’s

How any of this ends well is beyond me.

Z30

Just How Much Student Debt Is Out There Google

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Fed’s Achilles Heel & Margin Debt Monstrosity

Daily Chart Uly 14 InvestWithAlex

7/14/2015 – A positive day with the Dow Jones up 72 points (+0.42%) and the Nasdaq up 33 points (0.66%). 

The stock market continues to perform as per our forecast to subscribers. A massive and rather rapid stock market decline is coming later on this year. And while we won’t have a crash, considering the amount of margin debt out there, quite a few people will get wiped out. If you would like to find out exactly when this move will develop, to the day, please Click Here. 

As of today, the FED is facing the following set up.

  • Massive stock market, bond market and other asset bubbles.
  • Slowing economy and collapsing macro data. We are a stone throws away from an “official” recession. I can argue we are already in one.
  • Zero interest rates and limited options to stimulate the economy further.

As a result, the FED has only two options.

  1. Raise interest rates NOW in order to reload their recession fighting toolkit before the next recession hits. Again, we are nearly there.
  2. Cancel rate hikes and eventually introduce QE4 to further “stimulate” the economy. Also known as, maintaining financial market stability. This scenario includes postponing interest rate hikes until we are in a recession.

You don’t have to be a genius to figure out which scenario the stock market is betting on. And while it would be prudent for the FED to reload now, in reality, no one really knows what they will do. I don’t think they know. 

At the same time, it is a no win situation for the FED. There is no guarantee that the stock market won’t crater even if the FED introduces another round of QE while cancelling interest rate hikes. And I am not the only person who thinks that way.

While most are focused on the risks around a withdrawal of liquidity, we believe the biggest hit to confidence could be the opposite: if another round of US QE is necessary to prop up the economy. While the market could have a knee-jerk rally on an indication of forthcoming stimulus, we think this would likely be short-lived and could end in the red. QE fatigue is already evident: each subsequent round of QE has seen diminishing risk rallies.

Bingo. That’s how complex today’s macro economic setup is. We are at the end of this massive credit expansion cycle and there is nothing that can save this market now. Not even another round of QE. Well, unless the FED goes into a full monetization drive. But that’s entirely another matter.

Now, to margin debt. A few weeks ago I displayed this chart of skyrocketing margin debt and why it is yet another bearish indicator. That is to say, most investors are extremely bullish at the precise moment when they shouldn’t be.

Margin Debt Investwithalex

Not everyone agrees with my assessment above. Traders are borrowing tons of money to bet on stocks … and it’s just not a big deal

“Margin debt does not, by any statistical measure, lead equity prices. They are, essentially by definition, coincident. As stock prices move higher, outstanding margin debt does as well. If and when stock prices move lower, margin debt will follow.”

While I would have to agree with the statement above, they are looking at the wrong metric. It’s not the fact that margin debt moves in tandem with the stock market, it is the fact this metric is now 33% higher than at 2000 and 2007 tops. All while the stock market hasn’t gone anywhere over the last 12 months (NYSE). In other words, the market is storing a tremendous amount of fuel for a correction. And given how much margin debt is out there, any such correction can very quickly turn into a violent sell-off.

Further, I would have to agree with the following sentiment. The stock market is becoming a ‘lose-lose’ situation

Investors are in the grip of “Stockholm syndrome” because there is a trust that central bankers don’t want to hurt markets, which more or less forces investors to maintain a “risk-on” positioning, buying things like stocks and lower-rated bonds.

I couldn’t agree more. I continue to maintain that this is the worst trade out there today. The problem is, everyone is in it. By the time most investors realize the FED is not in control and cannot backstop the market, it will be too late. At least 50% of the down move will be over by that point. Oh well….

This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2015-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years.  If you would be interested in learning when the bear market of 2015-2017 will start (to the day) and its internal composition, please CLICK HERE.

(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. July 14th, 2015  InvestWithAlex.com

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!

Fed’s Achilles Heel & Margin Debt Monstrosity Google

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Am I Wrong About This Market Being Overvalued?

PE Ratio

I have displayed the chart above on quite a few occasions before. It is an easy way to illustrate just how overvalued we are today. Consider this. The chart above suggests that the stock market has been more expensive on only two other occasions. Right before the 1929 crash and in 2000. We are now above 2007 overvaluation bubble levels.

Further, the S&P would have to fall over 50% from today’s levels just to revert back to its mean. And we are not even talking about overshooting to the downside.

With that in mind, this articles brings today’s “Overvaluation Premise” into question.

Are Grantham And Hussman Correct About S&P 500 Valuations?

To save you time, the author uses accounting tricks and today’s environment to bring up Shiller’s P/E ratio mean from 16.6 to today’s 27. Justifying today’s valuation levels in the process.

That is to say, the author uses “This Time Is Different” premise to make his argument.

Is it? 

It never is. Listen, you can argue all of sort of things through the use of mathematics and statistics. For instance, you can even argue that most of the stocks today deserve infinite valuations because interest rates are at zero.

Plus, I can’t tell you how many times I have heard the same argument and its application to the housing and stock valuations right before the 2007 top. At the end of the day, you have to decide who is right here. This time is different or over 200 years of financial data. I will leave that decision up to you.

Z31

Am I Wrong About This Market Being Overvalued?   Google

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Did Blackstone Just Ring The Bell At The Real Estate Bounce Top?

credit_bubble_machine

I think so. I have asked this question over a year ago….What Happens When Blackstone Starts Dumping Real Estate At Market?

It appears we are about to find out as Blackstone is starting to liquidate their Real Estate portfolio. Blackstone Selling 1,300 Atlanta Houses in Strategy Shift

“It’s that stage in our lives where we’re now in a position of looking at dispositions as an active part of portfolio balance,” Bartling said in an interview. “You should expect us to sell 5 percent of our portfolio every year.”

Is Blackstone beginning to see the same thing that I have predicted here over 2 years ago? Particularly, the fact that this real estate bubble 2.0 (dead cat bounce) is coming to a conclusion?

I believe so. Blackstone went from acquiring properties like crazy between 2010-2013, to cutting their acquisitions last year by 70-90% to now selling large chunks of their portfolio. I don’t think they would be doing that in a red hot market that offers value. I think its safe to say that the bounce is over and that the real estate market is rolling over into a 3rd leg down. I believe Blackstone is beginning to realize that as well.

What happens next?

Easy. The real estate market might hover here for some time. Not too long thought. As soon as a bear market hits and the US falls back into a severe recession, you will see housing going down once again. Once investors realize where we are in the real estate cyclical composition (dead cat bounce and not expansion) you will see the likes of Blackstone and foreign investors trying to get rid of their properties at a much faster pace. With investors heading for the doors, mass volume of real estate should hit the market. Collapsing existing values just as fast, if not faster, than their initial ascend between 2010-2014.

Good luck selling your 48,000 rental properties Blackstone. 

Z30

Did Blackstone Just Ring The Bell At The Real Estate Bounce Top?  Google

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The Stupidest Economic Analysis Yet

Daily Chart Uly 13 InvestWithAlex

7/13/2015 – Another up day with the Dow Jones up 217 points (+1.22%) and the Nasdaq up 74 points (+1.48%)

Alright, since Greece has been sacrificed for the benefit of the EU, at least for the time being, can we now concentrate on something that really matters. For instance, Q-2 earnings. And while the mainstream financial media is cheering our return to break even point for the year, here is the stupidest reason yet as to why the US Economy/markets will outperform.

So, let me get this straight. The fact that we are in a massive overvaluation bubble, by almost any measure, is irrelevant. The fact that corporate buybacks and QE velocity is collapsing,  doesn’t really matter. The fact that government officials throughout the world are doing extreme things in order to prop up their respective financial markets, is immaterial.

It is the American worker and their “know-how or resilience” that will save us all and propel our financial markets higher.  Crazy!!! That is to say, it might be time to reconsider your relationship with LPL Financial (if you have one). On the flip side….

I don’t know, it is playing out pretty well over the last few days. The primary question is, is this just a bounce or is the market getting ready for another leg higher.

Longer-term, the article is right on the money. “Buying the dip” hasn’t really paid off in over a year now. Unless you are buying right at the bottom and selling right at the top. Plus, we haven’t had a proper bottom since about October of 2014.

Why?

I continue to maintain my view that the stock market is compressing and/or accumulating energy. Once this energy is released we should see very fast moving markets. Something we haven’t seen in quite a few months. In other words, at some point in the future “buy the dip” mentality might backfire big time. I also believe this time is fast approaching.

This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2015-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years.  If you would be interested in learning when the bear market of 2015-2017 will start (to the day) and its internal composition, please CLICK HERE.

(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. July 13th, 2015  InvestWithAlex.com

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!

The Stupidest Economic Analysis Yet  Google

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It’s A Cold Day In Hell……

angry larry summers

….when I have to agree with Larry Summers, but he is right on the money here. China playing dangerous stock market game: Summers

Comparing the Greece debt drama and the recent meltdown in the Chinese stock market, the situation in China represents a “greater source of financial risk to the world.

I thought the strategy of manipulating the market upwards that the Chinese were pursuing was quite a dangerous one…….

The problem is, everyone is playing the same game. The EU with their debt problem and Greece and the FED with the US stock market/economy. Although, in more subtle way when compared with the Chinese.

Understand something very important. At this juncture it is a confidence game. As soon as investors lose confidence in either the Chinese government or the FED or the EU clowns, it will all come crashing down. And fast. The only question is…..WHEN? Click Here to find that out.

z32

It’s A Cold Day In Hell…… Google