InvestWithAlex.com 

Subscribe Today
My Account

Posts

Posted on

The S&P Would Have To Drop 80% To…..

Daily Chart June 1 InvestWithAlex

6/1/2015 – A positive day with the Dow Jones up 29 points (+0.16%) and the Nasdaq up 13 points (+0.25%).

The S&P would have to drop 80% to recreate an environment when interest rates were this low last time.

Most bulls (most investors today) will argue that today’s high valuations are very well justified. Due to low interest rates. In fact, because interest rates are so close to zero, most stocks deserve infinite valuations. This premise is also know as, “this time is different”.

This chart brings that assumption into question.

shiller pe with rates investwithalex

Simply put, just because interest rates are low, doesn’t mean P/E multiple cannot go down. For instance, in 1941 interest rates were at around 2% (exactly where they are today) while the P/E ratio rested at 8.

If such an environment was to repeat itself today, the S&P would have to take a 66% haircut.

But wait, it gets even worse. In 1941 we were at the bottom of that particular economic cycle. The earnings have already contracted and stocks were selling at a massive discount. In fact, they were about to stage a 5 year WW2 rally.

Today, the situation is reversed. Earnings expansion is at its peak (thanks to the FED and their little QE liquidity party) and the P/E ratio has only been higher on two other occasions (1929 and 2000). In other words, for the S&P to reach 1941 levels it would have to fall 80%.

Let me put it this way.  Anyone who believes that this stock market rally will continue hasn’t studied history nor appropriate market valuation metrics. Plus and just FYI, “this time is different” is a terrible investment strategy.

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 1st, 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 S&P Would Have To Drop 80% To…..Google

Posted on

Scary Amount Of Margin Debt Points To A Violent Market Correction

Margin Debt Investwithalex

A massive and rather rapid stock market decline is coming later 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. 

The chart above is scary for two reasons. First, the amount of margin debt out there is truly staggering.  It is 33% higher than it was at 2000 tech bubble top and 25% higher than it was at 2007 mortgage finance bubble top.

And we are expected to believe we are not in a bubble and the stock market is climbing the wall of worry?  Yeah….right.

Second, while the margin debt is surging higher off of its 2014 lows, the stock market hasn’t gone anywhere over the same period of time. That should be a massive red flag to anyone who is paying attention. That means the market is stalling despite this surge in margin debt, corporate buybacks, capital inflows, M&A and overall bullish confidence. Not a good sign.

z33

Scary Amount Of Margin Debt Points To A Violent Market Correction Google

Posted on

What You Ought To Know About Grexit -Guest Post

grexit investwithalex

When the next great financial crisis strikes, millions will be blindsided by what is coming and will be shocked in to “New Great  Depression of The 21 th Century”.  But that doesn’t have to happen to you.  It is empowering to know what is coming and to understand why it is coming.  It is empowering to get prepared in advance for turbulent times.  It is empowering to have a plan for the years ahead and we will prepare you in advance.

When we take away the Fuzz Math that the Federal Government uses, The Real GDP for the 1st Quarter of 2015 was -2.00%.

Greece will have a series of massive debt payments come due this week and we know that Greece cannot afford to make these payments. But contrary to many opinions, Greece cannot and will not be thrown out of the Euro-zone. There will be no “Grexit,” unless Greece chooses to leave.

According to Article 50 of the Treaty of Lisbon, which governs the EU, no member can be thrown out of the Euro-zone. There is only one way to exit via this treaty, and that is by the choice of each country only. Withdrawal from the European Union is a right of European Union (EU) member states under Treaty on European Union (Article 50), which states, “Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.”

Greece can choose to leave the EU whenever she wants, but Greece cannot be forced to leave against her will. The same is true with Germany. Thus, it is more likely that Germany would leave the Euro Union before Greece, since essentially, Germany – more than anyone else – is on the hook for Greece’s debt. Furthermore, many people in Germany (and France and Netherlands) share opinions similar when it comes to distrust for the power of central banks, financial institutions, and multinational corporations. One wonders how long they (especially Germany) will stay in the Euro Union if other entities expect them to keep picking up the debts of their fiscally (and perhaps morally) challenged siblings.

Therefore, it is likely that this can will be kicked down the road once again by the members of the Eur ozone. In fact, it is possible that this drama will continue for many year to come   In other words, something will be worked out shortly that no one is really happy with, and leads the matter a little closer to an ultimately sour ending.

This global financial drama is also part of the “incubation” effect of as part of the 2008-2015  There would be a much larger financial crisis. Decisions were made that seemed to resolve that crisis, but in reality, probably only delayed it. The world is not in less debt due to the decisions of central bankers during that 7-year period. To the contrary, the nations of the world are in more debt and require a rise in inflation to help bring them out of this crisis. But, will they be able to tame the forces of inflation once they really get underway? We will know shortly, within the next 1-5 years

Thus, we may see many unenforceable threats being made, but all Greece needs to do is… nothing, which of course, angers others who are owed by Greece.

Post By: Mark Ackerman: A Financial Engineer,Brilliant Wharton Graduate Using Elliot Wave Principle Fractals and Fibbs as well as Quant Models for analysis of different 18 Asset Classes, 35 years of trading experience.Click Here To Learn More

Z30

What You Ought To Know About Grexit -Guest Post  Google

Posted on

COT Reports & Weekly Market Calendar – May 30th, 2015

COT Reports: If you are not familiar, the Commitments of Traders (COT) reports provide a breakdown of each Tuesday’s open interest for markets in which 20 or more traders hold positions. In other words, it gives us a preview of what commercial interests are buying or selling. As the theory goes, we want to be on the same side of the trade as the big guys.

While not a good timing tool, currencies, commodities and the stock market (to a lesser extent) tend to move in the direction of the bets made by the commercial players. Not always, but often enough.

Latest data, as of May 26th, 2015

Currencies: 

  • USD:  5K Long Vs. 72K Short – Significant short interest remains.
  • Canadian Dollar: 38K Long Vs. 56K Short – Neutral -No change from last week.
  • British Pound: 76K Long Vs. 41K Short – Commercials decreased their long position – more neutral now.
  • Japanese Yen: 111K Long Vs. 13K Short – Big increase in net long exposure.
  • Euro: 143K Long Vs. 22K Short – Significant long position.
  • Australian Dollar: 97K Long Vs. 32K Short- Significant long position.

Conclusion: Based on the information above, commercial interests expect the US Dollar to decline while British Pound, Euro, Yen and Australian Dollar rally. 

Markets/Commodities/Volatility: 

  • E-Mini S&P 500: 200K Long Vs. 597K Short – Slight decrease in short interest. However, a heavy short position remains.
  • VIX: 111K Long Vs. 15K Short – Heavy long position suggests market turbulence ahead.
  • Gold: 60K Long Vs. 102K Short – Slight decrease in short interest. More neutral now.

Conclusion: Based on the information above, commercial interests expect the stock market to decline as volatility surges higher.

Next Week’s Market Calendar: 

  • June 1 – ISM Manufacturing PMI

z33

COT Reports & Weekly Market Calendar – May 23rd, 2015Google

Posted on

The FED Juiced 2009-2015 Stock Market Rally By 50%

Daily Chart May 29th InvestWithAlex

5/29/2015 – A down day with the Dow Jones down 115 points (-0.64%) and the Nasdaq down 28 points (-0.55%). 

A massive and rather rapid stock market decline is coming later 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 few interesting things to discuss before the weekend hits

The United States warned on Friday of a possible accident for the world economy if Greece and its creditors miss their June deadlines to avert a debt default.

That’s an interesting twist. There is no question that Greece will default, one way or another. Well, unless someone is stupid enough to offer them another line of credit and Greek politicians are stupid enough to make IMF/ECB payments with that money.

Yet, that is not my primary concern as I always read between the lines.  Are the US Officials (fed, treasury, etc…) staring to positions themselves for an eventual market tantrum later on this year? Most likely in conjunction with interest rate increases. Are they planning to blame Greece for their shortcomings and failures (today’s bubble, QE, speculation, zero interest rates)?

We shall see, but that does sounds awfully suspicious to me.

A fascinating look at what has transpired over the last 6 years and how much the FED juiced the stock market.

It took the Fed 95 years to build up a balance sheet of $1 trillion and only six years to go from there to the present level. The Federal Reserve was providing this stimulus to improve the growth of the economy, but it is my view that three quarters of the money injected into the system through the purchase of bonds went into financial assets pushing stock prices up and keeping yields low. If I am right, the Fed contributed almost $3 trillion (some may have gone into bonds) to the $13 trillion rise in the stock market appreciation from the 2009 low to the current level, earnings increases explained $9 trillion (1.5 x $6 trillion) and other factors accounted for $1 trillion. You could argue that the monetary stimulus financed the multiple expansion in this cycle.

I would have to agree with Mr. Wein, but with one slight adjustment. He did not account for how much impact the velocity of capital had on today’s valuations. Here is what I mean. This $3 Trillion then created a self perpetuating loop in terms of earnings, stock buybacks, speculation, etc….

While impossible to calculate, I would say that the real number is closer to $6 Trillion. In other words, the FED has artificially added  $6 Trillion to today’s stock market. A number that will have to vanish. And sooner rather than later.

That would put S&P’s fair value at about 1,400. Meaning, it would have to decline 30-40% from today’s levels. Hmm, that sounds about right to me.

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. May 29th, 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 FED Juiced 2009-2015 Stock Market Rally By 50% Google

Posted on

Why Most Bulls Are Delusional

bull-vs-bear1

Just because they like to stick their heads in the sand and pretend that we are in a newly formed secular bull market, doesn’t make it so. Let’s take a closer look.

Expert: Stocks are underowned-here’s why. Buy the dips, markets likely going higher.   

First, buying the dip only works until it doesn’t. The next dip can very easily transition into a 20-30% decline. Or have we forgotten that since the FED’s liquidity party started?

“When you look at fund flows over the last couple of years in ETF mutual funds, two-thirds have gone into fixed income; only one-third has gone into stocks. I think valuations suggest the market is fully priced, but not overly expensive, looking broadly.”

I have already shown here at least a half a dozen times that valuations are in a bubble. With the stock market being more expensive in only two other instances. Right before the 1929 crash and 2000 tech bubble (due to lack of tech earnings at that time).

She is not concerned about a Fed interest rate hike since “we have a ton liquidity out there,” and she thinks the stock market is poised to keep going higher for at least another year. A rate hike has already been priced in,” she said. “The short-term impact on the equity market is basically nothing. It’s insignificant. I think that’s what the Fed wants. They want to telegraph this. Rates go up, and nobody cares.”

A ton of liquidity? Try telling that to a real money manager who is trying to liquidate his 1-2% stake in any given stock today. This is sheer nonsense. Already priced in…..nobody cares….there will be no impact!!! Alright, based on what? If anything, the only thing that is priced in at this time is how much money the bulls will lose.

I will tell you one thing. If these people are on the other side of the trade, it will be as easy as taking candy from a two year old. And I mean no disrespect to the latter.

z32

Why Most Bulls Are Delusional Google

Posted on

Sussan: This Listing Is Special John

Hey, remember this commercial from 2006. That was about the time when I scratched my head and said to myself “There is no freaking way this housing and mortgage finance bubble can go on for much longer”. Boy, was I wrong. It went on for another 2 years before blowing sky high in a matter of weeks.

Why am I bringing this up? Well, it appears that Sussan is back. In a different form, but she is definitely back. Not buying a home could cost you $65,000 a year

Penalties for not buying today? Not buying a home will cost you self respect, dignity, the American dream ? Wow, take it easy there Realtor propaganda machine. Even Kremlin would be proud of such a spin.

Despite this rubbish, the hard cold reality remains. Housing prices are bouncing for the exact same reason the stock market is where it is today. Zero interest rates, QE, the FED and speculation. Once this nonsense works itself out, housing prices will collapse in a 3rd leg down decline. In other words, buying a house today is equivalent to buying a house in 2005-2006. Take that Sussan.

Z30

Sussan: This Listing Is Special John Google

Posted on

Janet Yellen’s Dirty Little Secret

Daily Chart May 28th InvestWithAlex

5/28/2015 – A down day with the Dow Jones down 37 points (-0.20%) and the Nasdaq down 10 points (-0.17%) 

John Hussman had quite a few things to say about today’s market environment. Nothing that you haven’t read here before, but it is important to compare notes.

“The Fed has now created the third financial bubble in 15 years,” he writes in his latest market commentary. “Focusing on two variables — inflation and unemployment — the Fed has missed the most important consideration: the risk to financial stability.”

That’s what happened in last decade’s housing bubble, and “this mistake will ultimately end just as tragically” both for the economy and financial markets, Hussman states.

He is absolutely right. I wrote about the same thing in Peak BubbleS??? And it cannot possibly end in any other fashion.

As for stocks, “our concerns remain extremely high due to the combination of obscene valuations and unfavorable market internals,” he explains. “While we continue to monitor the evidence for any shift, it’s important not to assume that Fed easing (or a delay of Fed rate hikes) would necessarily provoke a favorable shift in market internals, or would necessarily produce a shift back to risk-seeking.”

Don’t count on a delay in Fed rate hikes boosting stocks, Hussman says. “Examine the worst market collapses in history, and you’ll often find the Federal Reserve easing the whole time,” he writes. “Don’t fight the Fed, indeed.”

Bingo. On two fronts. I can attest that I cannot find a single undervalued company in today’s market. Not to speculate in, but an undervalued company that I would feel comfortable holding over a long period of time. Everything has been driven to exuberant valuation levels. Second, the FED might be powerless to stop the next decline. No matter what they promise or how many more QEs they bring to the table. Once perception changes, the market will overshoot to the downside. As it always does.

(***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. May 28th, 2015  InvestWithAlex.com

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

Janet Yellen’s Dirty Little Secret Google