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Warning: The Biggest Market Story No One Is Talking About

 

 

10 year November

Everyone is running their mouth. Bernanke is talking about indefinite QE, Yellen is saying that she will accommodate the markets any way that she can and Larry Summers is talking about 0% interest rates to avoid economic depression. All of that is garbage. 

The only thing that truly matter is the 10-Year Note chart above. As you can see the chart is extremely bullish. I have said numerous times here, it is fatal to believe that the FED’s can control interest rates. They can influence them over the short term, but interest rates will behave as they should over the long run. The chart above clearly indicates that interest rates have reversed their course and are climbing up. Given massive amount of leverage  and speculation in the system, even a misery 0.5% increase from this point on will have huge negative consequences. Should interest rates zoom up within a short period of time (which they might) there will be hell to pay.

This is the most important trend to watch going forward. So far the trend is incredibly bullish (for interest rates). This plays very well into my forecast of the bear market starting in 2014. This confirms it. 

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Carl Icahn Agrees, Every True Bear Will Get A Lamborghini

bear in lamborghiniI remember 2006 very well. I was going around telling people the following,  “Listen guys, this is unsustainable, this market is in a crazy bubble driven primarily by mortgage finance and it will blow up soon”.   Most didn’t care and those who did called me “Boy who cried wolf”.

Fair enough. I decided to take matters into my own hands by shorting subprime mortgage lenders and multiple other real estate related companies that I believed are nothing more than a pile of stinky (but worthless) mortgage paper. Yet, the companies kept going up throughout 2006 and early 2007. Not only going up, they kept surging up like they were the best investments in the world. This was before my timing work and I was feeling miserable. My research was 100% accurate, yet the market was going the other way.  When these stocks did finally collapse in the summer of 2008, they have collapsed within weeks. With one stock price going from as high as $87 to as low as ZERO (filed for bankruptcy) in 11 trading days. I was vindicated, but it didn’t matter.

What’s the point of this story?

Even though I am currently a huge bear based on fundamental, macro and timing analysis, I do not currently hold a short position.  Quite the opposite. I am long the market, but solely based on my timing work.  My mathematical work clearly illustrates that a severe (3 year) bear market is starting in 2014 to complete in 2017. Before that happens, I feel the pain the bears are going through. Of course, they are right but they are suffering through the most difficult stage of all…. market blow off top.  This is the time where there are almost no bears left. Most of them have been killed.  Case and point.

S&P 500 Will Be at 2,000 Sooner Than You Think article that not only makes fun of the bears, but claims that everyone is bearish and that’s why S&P will hit 2000 soon. Well, maybe everyone is bearish if you can find any bears left. I don’t know of any. Even permabears have turned bullish.  

 

Perhaps he is talking about Carl Icahn who has turned bearish CARL ICAHN: The Stock Market Could See A ‘Big Drop’ And I’m ‘Very Cautious’

To moral of the story is this. With the market surging ever higher, this is the most difficult time to be a bear.  Every bear looks like a complete idiot and loser. Yet, as the saying goes, it is always darkest before the dawn.  True bears who maintain their position at this time will soon be greatly rewarded.  So much so that every true bear will be able to afford a Lamborghini.   

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Stock Market Update, November 15th, 2013

daily chart Nov 15, 2013

 

Summary: Continue to maintain a LONG/HOLD position. 

Once again, no change since the last market update to alter my opinion. The market continues to push through it’s daily highs as it marches forward.  My previous updates remain right on the money. Please click on the links below to see them. 

November 8th Report.

November 1st Report.

With that said, I would like to point out two things that you must keep in mind.

1.  As of right now, everyone is asleep at the wheel.  Meaning the market is continuing its slow ascend and the volatility is not there.  Everyone expects this to continue indefinitely.

2.  Bullish sentiment is close to record highs. I don’t see any bears. None at all. Even the people who used to be bearish have turned bullish. Bottom line, everyone expects the bull to continue.

When you combine both factors together, you end up in a dangerous situation. Kind of like speeding while driving drunk. In more simple terms, the market is perfectly setup for a volatile down move here. As we continue to hold our long position we wait for the reversal and the confirmation that the bear market into the 2016-2017 bottom has started. 

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Stock Market Update, November 15th, 2013

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Stock Market Update, November 8, 2013

daily chart Nov 8, 2013

Summary: Continue to maintain a LONG/HOLD position

Not much has changed since the last market update to alter my opinion. The market continue to push through its daily highs as it marches forward.

While everything I have mentioned before is still in play (Please Click Here To View Previous Market Update), …..here is the difference. 

Since early September of this year I have maintained that the market is topping and will resume its bear market shortly. As of now there is categorically no adjustment to that view.  Yet, I have also mentioned that there were two possible time frames for the bear to begin. September -November of 2013 or March of 2014.  I have argued that if we are too see the bear market now (from September of 2013 top) the market must start its down move in October or early November of this year.  As of now, that window has basically closed.

That leads me to believe that March of 2014 will be the final top (even if its lower than where we are today) before a prolonged BEAR MARKET into the 2016-17 bottom.  My timing work doesn’t show any serious turning points between now and the end of the year.  That means the market is unlikely to experience severe volatility between now and December 31st.  The next inflection point I see is January 1st, 2014. I will discuss that later.

As such, I recommend holding a LONG position until the market tells us otherwise. 

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Are You A Genius -Or- A Delusional Fool? Find Out Here

Yahoo Finance Writes: 3 Reasons to Re-Think Bailing On Stocks at All-Time Highs: Belski

denial - investwithalex

Uncharted territory is always scary. Whether you’re trekking the nether reaches of the Amazon jungle, or simply trying to time the top of a stock market that is trading at levels never seen before, it’s nerve wracking to be someplace you’ve never been before.

1) Quality, Transparency, Consistency

Belski says he follows the investment axiom of “buying scarcity and selling capacity,” and right now, he thinks the U.S. alone offers what investors want most. In particular, while jokes that Europe may have great coffee, he argues that the structural reforms of the past ten to twelve years have left American companies in a unique – and investable – position of strength. “That’s the U.S.” he says.

2) Way More Bull Market Ahead of Us

“Fundamentally the U.S. is in very sound position, and we think it will continue to lead for the next three to five years,” he says. Broadly speaking, he thinks a lot of new investors fail to appreciate what a bull market really is, reiterating his belief that we are “in the midst of an 18 to 20 year equity bull market cycle.”

3) The Coming CAPEX Cycle

Belski says people not only forget that the U.S. is still the world’s largest economy, and as a result, “is poised to continue to take business away from Europe and the emerging markets as manufacturing capacity comes back here.”

Read The Full Article Here

No offence, but I think even bulls are starting to run out of legitimate reasons of why the market should continue going up. While it could be viewed as a good thing, reasoning presented here clearly shows how delusional most investors are.  Let’s just take a quick look at 3 reasons above.

1. Quality, Transparency, Consistency?  Is this guy being serious. What about looking at the fundamentals and investing in undervalued companies that make sense. Do you buy a $500 pair of jeans that was made in the USA or do you just buy an identical pair of jeans for $50.  His analogy makes no sense. Well, that is unless you like losing money.

2. Way More Bull Market Ahead Of Us? As I have mentioned here before, what bull market? If they are talking about the bull market from 2009 bottom they are talking about a bear market rally. The market has topped in 2000 and has barely moved since.  While the Dow and the S&P are up a little bit, NASDAQ is still down. One should understand where  they are in the economic cycle before saying that the bull market has already started. If you haven’t figured it out yet, we are still in the bear market that will only end in 2017. Read my timing work to find out why.

3.  The coming CAPEX cycle? What CAPEX cycle? He might as well have said that the US Economy will prosper because aliens will land soon and make the USA their home base. Bringing new technologies and prosperity for all along with them. I am sick of this crap. What kind of stupidity is this. What about the fact that the US Economy and its Financial Markets being artificially maintained by huge credit infusions and the largest credit bubble in the history of mankind. What about massive speculation in all asset classes and overwhelmingly bullish stance. No, I guess those things do not matter.

Anyway, if you believe in this nonsense your money and you shall soon be separated. I guarantee you that. 

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The Secret Behind Macroeconomics & Value Investing

The Secret Behind Macroeconomics and Value Investing

 macroeconomics investwithalex

By now we have looked at value investing and what it is, how to determine the intrinsic value of any stock, what the margin of safety is and how to apply it properly, what types of stocks to look for and what to avoid.  Still, there is one more thing to consider. Macroeconomics.

I am a firm believer that as an investor one should understand Macroeconomic factors prior to making any sort of an investment.  While not an important part of an equation for short term traders, it is an incredibly important factor for most value investors who’s investment time frame is oftentimes counted in years. A miscalculation on macroeconomic front could have severe consequences on your overall investment. Let me give you an example.

For simplicity sake and without going into too many details, let’s assume that you have looked into buying a home building stock in early 2007. After doing a lot of research and valuation work you cannot believe your eyes. For some reason the stock is selling at 60% discount to its Intrinsic Value and the growth rate remains over 20% on all fronts.  Everyone is excited about the real estate market and your work shows that this stock should at least double over the next 12 months.  Based on your work you are 100% confident that this particular stock is a Rocket Ship. You can’t believe how lucky you are as you begin drool just thinking about how much money you are going to make.   

Yet, you have just missed an incredibly important point that only macroeconomic analysis can provide.  You have missed the fact that the overall US Economy and the Real Estate/Financial industry in particular are in a giant bubble that is about to blow up.  You have missed the point that when that bubble does blow up it will take the entire economy and the real estate/financial sector in particular down with it. Big time. Further, when that happens your significantly undervalued home builder stock price is likely to collapse even more because it is directly tied up into that sector. 

That is exactly what happened. Even though home building stocks were already down significantly at the start of 2007 (indicating substantial value), they proceeded to decline even further (50-80% further) when the credit bubble of 2007-2009 finally blew up.

Point being, looking at the company or the sector alone, is not good enough. You must have an overview of the overall economic environment  in order to avoid situations as described above.   A value investor with a clear macroeconomic point of view would have never even looked at home builders in 2007. Well, maybe from the SHORT side, but that’s about it. Bottom line is, any good investor worth his salt should always be aware of where we are in the economic cycle. That is where macroeconomic analysis comes in.

Do not despair.  You do not need a fancy degree from a business school to understand macroeconomics. It is probably best that you don’t have one. That way you have an open mind to see how easy and straight forward this analysis can be.

First, you must understand something very important. Do not pay any attention to the financial media (or media in general) and/or professors of economics and/or the economists themselves.  All of that data and all of their fancy economic models are nothing more than garbage. If their models worked, these people would be on Wall Street making millions of dollars instead of playing with their numbers and/or teaching others.

Let’s make it as simple as possible when it comes to economists with their own interest on the line.  Simply ignore ALL of them.  Don’t give them even a split second of your attention. 

To be continued…..

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Stock Market Update, November 1st, 2013

daily chart Nov 1, 2013

Summary: Continue to maintain a LONG/HOLD position

Not much has changed since our last weekly update. Even though the DOW set a new high by a few points, it doesn’t really matter. In fact, I will leave my last weeks update mostly intact while adding a few little things here.

1. Trippe tops spread out over weeks or months are notoriously dangerous. That is exactly where we are. They typically indicate the end of a move and beginning of a counter move (or bear market in our case). Unless the market breaks to the upside here, this might be the end. 

2. My mathematical work is showing that this energy level is tapped out. The market has no room nor energy to go higher here. That is why we are seeing the triple top. 

3. The market left a huge gap around 14,800, it must go back there before any sustained rally can take place. 

LAST WEEKS MARKET SUMMARY: Still Valid 

This is where the picture gets a little bit fuzzy.  According to my mathematical work there is no doubt that we are at the inflection point with two possible outcomes.

  1. September 2013 top was indeed the top and the bear market down leg will resume shortly.
  2. The final top (a little bit higher or lower than September 2013 top) will be set in March of 2014. Thereafter the market will roll over and begin its bear phase.

As I have mentioned many times before, my mathematical work is clearly showing that the bull is ending and the 2-3 year Bear market is just beginning.  I would call the exact date, but there is just too much interference right now.  Unless a severe down leg starts over the next 2 weeks, we will have to wait until March of 2014 for the Bear to start. Until that happens a lot of ups and downs without so much as going anywhere.  The rest of my analysis remains the same.

Over the next few weeks we will find out if the if the bear market has already started or will start in March of 2014. Should the market break below 14,600 over the next two weeks, the probability is high that we have already started the bear market leg into the final 2016 bottom.  The market is certainly going back into the 14,800 as it left a huge gap there, but a firm break below 14,600 will give us a confirmation that the bear is back.

At the same time we cannot yet ignore the technical picture with the market being near an all time high. As such, I continue to advise you to maintain a LONG/HOLD position while waiting for the confirmation that the bear market has indeed started.  

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Stock Market Update, October 25th, 2013

daily chart Oct 25, 2013

Summary: Continue to maintain a LONG/HOLD position

In the last couple of updates I have mentioned that the market will bounce to the 15,300-15,500 on the DOW in order to close all the gaps and to satisfy all of my requirements. Well, we are here, what’s next?

This is where the picture gets a little bit fuzzy.  According to my mathematical work there is no doubt that we are at the inflection point with two possible outcomes.

  1. September 2013 top was indeed the top and the bear market down leg will resume shortly.
  2. The final top (a little bit higher or lower than September 2013 top) will be set in March of 2014. Thereafter the market will roll over and begin its bear phase.

As I have mentioned many times before, my mathematical work is clearly showing that the bull is ending and the 2-3 year Bear market is just beginning.  I would call the exact date, but there is just too much interference right now.  Unless a severe down leg starts over the next 2 weeks, we will have to wait until March of 2014 for the Bear to start. Until that happens a lot of ups and downs without so much as going anywhere.  The rest of my analysis remains the same.

Over the next few weeks we will find out if the if the bear market has already started or will start in March of 2014. Should the market break below 14,600 over the next two weeks, the probability is high that we have already started the bear market leg into the final 2016 bottom.  The market is certainly going back into the 14,800 as it left a huge gap there, but a firm break below 14,600 will give us a confirmation that the bear is back.

At the same time we cannot yet ignore the technical picture with the market being near an all time high. As such, I continue to advise you to maintain a LONG/HOLD position while waiting for the confirmation that the bear market has indeed started.  

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Warning: Another Hedge Fund Manager With A Perfect Track Record Is Predicting A Market Crash

CNBC Writes: Scary! This bearish call points to 40% market drop

 market crash investiwthalex

The stock market is trading at unsustainable levels that could eventually lead to a major sell-off, with a possible 40 percent drop in stock prices, hedge fund executive Mark Spitznagel told CNBC Wednesday.

“The simple answer, the mom and pop answer, I think, is just to step aside,” said Spitznagel, founder of Universa Investments and an associate of “Black Swan” pioneer Nassim Taleb.

Spitznagel, incidentally, has some Street cred when it comes to predicting downturns: He called it in 2000 and 2008 and made one of the biggest profits on Wall Street during the 2008 financial crisis, while many other investors were losing money.

Appearing on “Closing Bell,” Spitznagel suggested the Federal Reserve, which last month reaffirmed its policies on bond purchases and record-low interest rates, is basically propping up stocks and otherwise distorting the market.

“It’s a market that is sort of set up, I think, for a major crash, a major sell-off,” said Spitznagel. “I would argue all the major tops we’ve seen in the market over the last 100 years look very much like it does today.”

“The ultimate causes of crashes is the distorted environment we’re in,” he continued. 

In turn, Spitznagel recommends retail investors step aside and wait for opportunities to come.

Watch The Video Here 

I agree with his analysis 100%. The only thing I would add is my mathematical timing work. There will be a 40% decline but it will happen over the next 2-3 years and not in a crash type of an environment. It will be very similar to the 2000-2003 move.  Further, my work indicates that this decline will really get going after March of 2014.  

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Warning: USD Is About To Kick Ass

CNBC Writes: De-crowning the dollar, and the ‘collapse’ ahead

 3D chrome Dollar symbol

The gradual erosion of the U.S. dollar’s status as the world’s reserve currency has been greatly hastened of late. This is due not only to the perpetual gridlock in D.C., but also our government’s inability to articulate a strategy to deal with the $126 trillion of unfunded liabilities.

Our addictions to debt and cheap money have finally caused our major international creditors to call for an end to dollar hegemony and to push for a “de-Americanized” world.

China, the largest U.S. creditor with $1.28 trillion in Treasury bonds, recently put out a commentary through the state-run Xinhua news agency stating that, “Such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated.”

In addition, Japan (our second largest creditor holding $1.14 trillion of U.S. debt) put out a statement through its Finance Minister last week saying, “The U.S. must avoid a situation where it cannot pay, and its triple-A ranking plunges all of a sudden.”

Read The Rest Of The Article Here

I disrespectfully disagree with CNBC once again (no surprise there) for a couple of reasons.   

1.  As of  right now there is no alternative to the US Dollar to even attempt any kind of a shift. Chinese Yuan is not a freely traded currency yet and if anything it is still decades away from any sort of an attempt. Plus, China is in the midst of its own Economic Bubble that is surely to blow up soon.  Euro? Not a chance. Europe is a basket case and a one common sense politician away from breaking up.  Bottom line is, there is no currency out there to replace the USD. Yes, the US has its a share of problems, but so does everyone else.

2. USD Collapse?  What collapse?  Listen, we have to make a distinction between Credit Outstanding (which is a huge problem in the US) and the Actual Currency Dollars available. The former is a lot less than Credit Outstanding. That means the demand for USD needed to repay these huge balances will go up substantially over the next decade, pushing the dollar ever higher.

That is one of the reasons I am so bullish on the USD.  While it remains everyone’s favorite target, the USD fundamentals and technicals are looking very good. I would anticipate the USD to appreciate substantially over the next few years. 

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