It is clear why the bears would be furious with the FED. As was covered on this blog earlier….Bulls Predict New All Time Highs. Will The Market Deliver? and Central Bank Mafia Goes All In…Stocks Rally…A Little
But, why in the world should bulls be upset?
Allow me to explain. First, today’s perceived bullish backdrop is a mirage. Must I remind you that the NYSE (largest index by capitalization) is still down 10% from two years ago. Second, how do you expect to make money when Shiller’s Adjusted S&P P/E ratio is at 26. The third highest level in history, behind 1929 and 2000 tops. All while GAAP earnings are down 18% from a year ago and with no hope for recovery.
Most importantly, the bulls must realize the following. No one makes money with the backdrop above. Under the best of circumstances investors should be able to maintain their capital base, but they will not increase it. Over 200 years of market data says so.
Investors tend to make money when the market has collapsed and stocks are liquidated. And if you have enough conviction to buy at those inflection points, as I did in March of 2009, you will make a fortune. With quite a few stocks zooming up at 5-10X or more to the market.
Very few stocks (if any) will do that in today’s market environment. As a result, you should be furious. And while most bulls don’t realize this yet, the FED has taken away their ability to generate any sort of a return.
Now that I have that out of my system, consider the following…..
- One of the best signals in the stock market is saying it may be time to sell
- The Coming Default Wave Is Shaping Up to Be Among Most Painful
- The divergence that’s worrying the stock market’s bulls
- ALBERT EDWARDS: A ‘tidal wave’ is coming that will throw the US into recession
- Nomura’s Bob “The Bear” Janjuah: “The Question Is What Would Be Necessary For The Fed To Do QE Or NIRP”
I am also even more convinced now that we are about 10 months through a multi-year bear market that likely won’t bottom until late 2017 or early 2018. This will be a stair-step decline with all the strength to the downside punctuated by occasional (very) violent bear market counter-trend rallies driven by short covering, hope and residual (albeit rapidly decaying) belief in policymakers.
I still feel confident that we will see 1500s on the cash S&P500 index in late Q2 or Q3, and some of the things I look at suggest a final bear market bottom for the cash S&P500 index around the same levels as the 2011 lows of sub-1100. However, this is a longer-term idea that will be subject to refinement. The focus must be on the next few days, weeks and months.
I couldn’t have said it better myself. But hey, who am I to tell you not to go long here!!!
