11/4/2015 – A negative day with the Dow Jones down 49 points (-0.27%) and the Nasdaq down 3 points (-0.05%)
At least according to the Wall Street.
Data be damned, Wall Street says all is well
Let’s see if we can unearth some gems from this masterpiece.
Wall Street strategists who normally live and breathe data are now pushing a curious new narrative: Don’t believe the data.
Alright, who should I believe then…… Janet Yellen…..Bank of Japan….Santa Claus? This is just another way of saying “This time is different”. But wait, it gets better……
More specifically, it’s become routine practice lately to disparage economic numbers as being not representative of underlying strength that the headlines just don’t seem to verify. Essentially, this means an economy that continues to grow without wage and price pressures, allowing easy monetary policy to continue but not doing much for a sustainable growth pattern. In Hartnett’s words, expressed in a note to clients, deflationary expansion entails a “slow, jerky transition to higher growth/higher rates, led by the U.S., (and a) China soft landing.”
Fair enough, but there is another way to look at the subject matter. For one, there is no reason to believe that growth will all of a sudden accelerate. Simply put, zero interest rates and QE took forward demand and spent it in between 2010-2014. That is the reasons you see CAPEX dead in the water.
There is overcapacity in pretty much every industry, margins are being compressed and businesses see no need to invest. That is one of the reasons they are buying their own stocks at crazy valuation levels instead of investing that money into plant, research, equipment, etc… I just don’t see where this growth will come from. Particularly, with massive debt levels overhanging over the entire system.
Companies, meanwhile, seem more devoted to boosting short-term share prices than committing to long-term investments. Since 2010, corporate America has spent $296,000 on stock buybacks per each job it has created, according to a BofAML analysis.
There is part of your answer. The stock market is as expensive as it is due to corporate buybacks. It doesn’t take a genius to borrow at zero interest rates and then use that money to drive equity prices higher. And while that often leads to short-term gains, long-term pain is just a few steps behind. That has always been the case.
“Although we may have another quarter of inventory-related adjustments, the underlying growth fundamentals remain intact,” he said. “This is just one more worrying headline that, when you dig into it, is reasonable and nothing to worry about. Remain calm and carry on.”
In other words, keep buying stocks. The stock market is going much higher. Perhaps.
But, if he is not worried, this should do the trick. The stock market is in a massive valuation bubble. As is evident from Shillers Adjusted P/E ratio – 3rd highest level in history. The velocity of zero interest rates and QE, even if the rates go negative, is slowing down substantially. The FED cannot or will not raise rates in any meaningful way. We are still in a secular bear market that will only terminate in 2017. All bear markets end with a 2-3 year severe beatings.
That is to say, there are quite a few things to worry about if you ask 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. Noveber 4th, 2015 InvestWithAlex.com
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