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Bear Hate Mail, Low Interest Rates & Infinite Valuations

Daily Chart June 10 InvestWithAlex

6/10/2015 – A positive day with the Dow Jones up 234 points (1.32%) and the Nasdaq up 63 points (1.25%) 

This is anecdotal at best, but I do find the following fascinating. Over the last few days I have noticed a significant increase in “bear hate e-mails”. They typically contain one or more profanities, tell me how wrong I am and then proceed to challenge my sanity or intelligence.

As accurate as their point of view might be, here is what I find interesting. A miserly 600 point drop on the Dow is bringing out the bulls in droves. This is important and here is why. A lot of people are on margin and super bullish. Yet, they are nervous and not convinced in this market. Imagine what happens when a sell-off turns into a typical 10-20% correction. Do I smell a panic?

Now, Jeffrey Gundlach brings up an excellent point.  Borrow Infinite Amount At Negative Interest Rates

In theory, you can borrow massive amounts of money today and then use that leverage to juice up your returns. While nice in theory, it much more difficult to implement. Here is why…..

What are you going to invest in?

  • The US Equity Markets? With the S&P Shiller P/E ratio being at the 3rd highest level in history (right behind 1929 and 2000 tops), any 10-20% decline can very quickly wipe you out.
  • The Bond Market? At 0-2% interest rates? No, thank you. Even in arbitrage, with hedges and foreign exchange risks, it is a no win situation.
  • Business Capacity? Interest rates have been low enough and for long enough for most businesses to increase their capacity to the max. That is the primary reason as to why we didn’t see an expansion in capital investment this business cycle.
  • China’s bubble stock market? Yeah, good luck with that.

Just thinking out loud here. Even if I am able to borrow a Billion dollars today, I wouldn’t know what to do with it. Even if I take a massive short position at an opportune time, that carries a significant risk when borrowed money is involved.

In other words, we are at the end of this business cycle of capital expansion. There is nothing to invest in, even with FREE capital.  Sure, you can speculate with above mentioned capital, but that is a totally different conversation. There is no scenario where this ends 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. June 10th, 2015  InvestWithAlex.com

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

Bear Hate Mail, Low Interest Rates & Infinite Valuations  Google

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Why You Should Never Disclose Your Trading Position

Apple InvestWithAlex

I always pay attention when somebody, big or small, begin to run around yapping about their stock position. But not in a positive way. I am always interested if there is an opportunity to take the other side of the trade.

Let me give you an example. A few months ago some guy was running around in various public forums and screaming at the top of his longs that Netflix (NFLX) was going to collapse based on his fundamental research. Not only that, he was so confident that he wasn’t shying away from disclosing his massive Put Option position. As accurate as his fundamental analysis might have been, Netflix did the exact opposite, staging a massive rally. Gaps included. I can only imagine that the person in question was whipped out in a matter of minutes.

Here we go again,  The last time Apple did this, it rallied 55%

Sure, the chart above can be interpreted as “base building” before the next push higher, it can also be interpreted as “distribution”. It is anything but strong. And just because that’s the way it worked out last time, doesn’t mean it will play in the same fashion again. Plus, there is this, Alert: Smart Money Is Trying To Distribute Apple (AAPL) To Fools

In the final analysis, don’t ever disclose your trading position. It rarely pays off.

z32

Why You Should Never Disclose Your Trading Position Google

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What Does Today’s Trading Range Mean?

trading range investwithalex

NYSE Chart investwithalex

The stock market can either move in time, price or both. As is evident from the charts above, the overall stock market (NYSE) hasn’t gone anywhere over last 11 months. Compressing even more since the beginning of the year. S&P 500 at Smallest Price Range in 20 Years

What does that mean?

Standard technical analysis would suggest that we are either going through a period of distribution or consolidation. They would be right right, but there is much more to it.

Think about it in the following fashion. The stock market is accumulating energy for a big move ahead. If we are to employ physics, it is identical to winding up a spring. Once released, a large amount of energy is let out at once. The exact same thing will happen in the stock market.

Once the timing is right, a tremendous amount of volatility and volume will come back. And since most investors will be fast asleep, due to today’s tight trading range, most will be caught unprepared. If you would like to find out exactly when that date is, in terms of completion of this tight trading rage, please Click Here.

Z31

What Does Today’s Trading Range Mean? Google

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What Does The Stock Market Care About?

Daily Chart June 9 InvestWithAlex

6/9/2015 – A slightly negative day with the Dow Jones down 4 points (-0.02%) and the Nasdaq down 8 points (-0.15%) 

So, is there anything to worry about when it comes to the stock market?

Not according to the bulls. For instance….

Possible Q2 earnings recession nothing to lose sleep over

“When we see the price of oil this quarter, or last quarter which will affect this quarter’s earnings, it has gone up,” Drogen added. “And so we’re looking for better numbers than the Street is this quarter again and we don’t think there’s going to be an earnings recession. Currently, the magnitude of potential earnings growth is around negative 1% for this quarter, but there are still a few weeks left for the numbers shift as more data comes in.

Well, call me stupid, but I wouldn’t worry about earnings falling into a slightly negative territory if the S&P’s P/E ratio was, well, let’s say at around 5-10. However, I would have nightmares if Shiller P/E ratio was sitting at the 3rd highest reading in history (as it does today) and we had negative earnings growth.

What else the bulls don’t care about? 

  • Upcoming interest rate hikes – who cares, it’s already priced it.
  • The US Economy rolling over into a recession – doesn’t matter.
  • Velocity of capital is slowing – this metric is for losers.
  • 11 Months of Distribution/Consolidation on NYSE – It’s 100% consolidation for sure.
  • This 6 year bull cycle is pushing its limits – another 10 years to go. We are in a brand new secular bull market baby, +20% annual gains are a sure thing.
  • Dow Transports are not confirming – confirming what….who cares.
  • Multiple divergences on primary indices – the Fed will not let this market fall.
  • Margin debt setting extreme record highs – well, duh, it’s a sure one way bet.
  • Etc….

That’s quite a bit of “blissful ignorance” if you ask me. If history is any guide, this never ends 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. June 9th, 2015  InvestWithAlex.com

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

What Does The Stock Market Care About? Google

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Should The Rich Be Allowed To Live Up To 200 Years Or More?

playing-god-investwithalex

Most Americans can agree at least on one thing. Our entire healthcare system is beyond repair. Not in terms of quality and associated technologies, which are by far the best in the world, but due to a sheer wastage/cost of our insurance based system.

And with new technologies and drugs coming onto the market at increasingly unbelievable prices, costs only the rich will be able to afford, an important question arises. Should the rich be allowed to live longer, perhaps twice as long as the rest of the populace?

There is no question that our lifespans have increased dramatically, as a whole, over the last 200 or so years. Yet, should the ruling class have the ability to live 200-500 years while the rest die? I don’t have the answer to that, but it is definitely something worth thinking about.

z33

Should The Rich Be Able To Live Up To 200 Years Or More? Google

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Will There Be A Blow Off Top?

bull vs bear

Despite the fact the overall stock market hasn’t gone anywhere in 11 months, the overall bullish sentiment remains near historic highs. If anything, most bulls agree on one thing. Even though the stock market is on a expensive side, we won’t have a top until some sort of a “euphoric blow off top” is set. And since we are not there yet, not by a long shot, there is nothing to worry about.

Case and point….

“At the market peak in 2000, 66% of individual investors were bullish. Likewise, at the peak in 2007, 55% were bullish. Today, just 25% of individual investors are bullish stocks. Until investors become significantly less nervous about the future for stocks, the longer-term bull market likely remains intact.“

First, I am not sure what planet she is getting that 25% number from. You just have to look at the margin debt, P/E ratios and VIX/VXX to realize the statement above is complete nonsense. I have written about it before Ameritrade CEO Confirms A Bull Trap

In terms of anticipated “blow off top”. I wish investing was this easy. Yet, a simple truth applies. When everyone expects and banks on a certain development, particularly in the stock market, it rarely comes to fruition.

Z31

Will There Be A Blow Off Top? Google

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Why Today’s Real P/E Ratio Is 5-10 Points Higher

Daily Chart June 8 InvestWithAlex

6/8/2015- Another down day with the Dow Jones down 83 points (-0.47%) and the Nasdaq down 47 points (-0.92%) 

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. 

A number of quite important opinions about today’s stock market. Let’s take a look.

As the stock market climbs ever higher, professional investors are warning that companies are presenting misleading versions of their results that ignore a wide variety of normal costs of running a business to make it seem like they’re doing better than they really are.

We have talked about this before. BlackRock: Most Of Corporate Earnings Growth (If Any) Is Accounting Driven

I have said it before and I will say it again. Today’s distortions are so great that the FED’s Ponzi Finance makes Bernie Madoff look like a boy scout. But its more than that. Everyone is playing the same accounting game. Whether it is through low interest rates, share buybacks or outright accounting gimmicks.

While impossible to calculate, I would say that a more normalized environment would add 5 to 10 points to today’s P/E ratios. Turning an already expensive market into “are you freaking kidding me overpriced accident” waiting to happen.

Never before has a rally in the U.S. stock market gone on this long without a Federal Reserve interest-rate increase. Expecting valuations to keep rising once one comes is asking too much, if history is any guide.

As I have suggested earlier today, the FED finds itself in an impossible situation. It is stuck in the corner. With all of the misallocations over the last 15-20 years about to come crashing down on them. They best they can hope for at this stage is debt monetization and run away inflation. But with bond prices possibly collapsing, they might not even have that option.

Interesting times ahead, that’s for sure.

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. June 4th, 2015  InvestWithAlex.com

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

Why Today’s Real P/E Ratio Is 5-10 Points Higher Google

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A Nightmare On FED Street

10 Year Note InvestWithAlex

Imagine the following scenario for a second. The US Economy rolls over into a severe recession over the next 6-12 months and the FED attempts to stimulate again. Since interest rates are already at zero, the only other tool they have is QE 4…5…etc… Yet, despite all of their “easing efforts” the bond market stages a massive rally in yields.

Checkmate and game over to the FED and every other central banker around the world…..impossible?

If you have been around financial markets long enough, you very well know that nothing is impossible. As of today, the market is most certainly set up for the scenario above. Given unprecedented volatility, lack of liquidity, potential technical breakout (chart above) and bubbles, the scenario above can develop rather quickly. And I am not the only one who thinks that way.

Finally, should the scenario above fire off, given today’s general overvaluation and bubble stock levels, the stock market can be in for quite a shock. Just something to think about.

z32

A Nightmare On FED Street Google