Editor’s Note: In this series of articles, we include important or interesting videoclips with our comments. This
is an article that expresses our personal opinions about comments made
on Television and in Print. It is NOT intended to provide any investment
advice of any type whatsoever. No one should base any investing
decisions or conclusions based on anything written in or inferred from
this article. Investing is a serious matter and all investment decisions
should only be taken after a detailed discussion with your investment
advisor and should be subject to your objectives, suitability
requirements and risk tolerances.
1. The U.S. Economy
All eyes were on the Non-Farm Payroll report on Friday morning. The headline numbers were strong and the Household survey was even stronger. But the real story of this report was told by TLT, the long duration Treasury ETF, which closed up on the day. The obvious negative was the tiny rise in hourly wages suggesting continuing pressure on incomes of American families. That’s not encouraging for consumer spending. Further, as Nouriel Roubini tweeted mid-morning on Friday:
- Labor market improving but demand data are softer – real consumption, capex spending. construction spending, trade balance, govt spending
Later in the afternoon, he told CNBC’s Maria Bartiromo (see clip 2 below):
- all components of aggregate demand are slowing down….US data starting to look more mixed.
The last phrase seems disturbing. Because, it suggests that the trajectory of improvement in US data is turning lower. That is the sentiment of Morgan Stanley’s Adam Parker, who told CNBC, “our U.S. Q1-GDP is tracking at 1.0%“. And 1% is David Rosenberg’s estimate for Q1 GDP, as he told BTV on February 24. Goldman Sachs is not as bearish but they took down their Q1 forecast from 1.9% to 1.8% on Friday morning.
But what about the improving tone in the labor market? We hope he is wrong but we can’t help recalling what ECRI’s Lakshman Achuthan said to CNBC’s Becky Quick two weeks ago on February 24 (see clip 1 of our February 20 – February 24, 2012 Videoclips article):
- jobs are basically a bit of a lagging indicator. They follow, they do not lead consumer spending growth….and I’d say in the next few months I would expect them to start to flag because they follow, they lag at turning points where consumer spending growth has been going and we know that’s clearly been going down and if you delve into that, look at personal disposable income, you look at personal disposable income that has been negative now growth for five months. You’ve never had that, not even close.
But, the Weekly Leading Index of Mr. Achuthan’s firm rose to its highest level since mid-August in the week ending March 2, 2012.
In contrast, there were no ifs or buts in the comments by Goldman’s Jim O’Neill who told CNBC that a 3rd straight month of strong payroll data will be “a huge event for U.S. and global markets” because it will show the U.S. economic recovery is real.
2. Greece & Europe
Forget about a strong U.S. payroll number being a “huge event” for markets. Even the largest debt restructuring in history proved to be a pretty minor event for the markets on Friday afternoon. The new Greek Sovereign Debt promptly began trading between 17-21 cents on the dollar in the when-issued market. But that is not a major issue either. Because that is par for the course in debt restructurings, as Hans Humes of Greylock Capital told Bloomberg TV on Friday afternoon.
The real question, is what next? This simply postpones the inevitable as Nouriel Roubini, Rebecca Patterson of JPMorgan, Sean Egan of Egan-Jones and Mohamed El-Erian said on Friday:
- Patterson – … my investment bank colleagues think in eight years we’ll be closer to 180% debt-to-GDP…I think the risk around Greece is they’ll need more restructuring and more aid possibly as early as this year.
- Roubini (see clip1 below) – … the
country is still insolvent even after the PSI, the debt-gdp ratio in
the best scenario will be 120% ten years from now, 160% in the worst
scenario, Greece is likely
to restructure again, eventually Greece will be the first country to
exit the Eurozone, not this year but may be later next year
- Egan – I think it’s negative growth. In the case of Greece it’s down 7.5%. That was the official figure. You can rest assured the real decline was closer to 10%. It’s going to be difficult for them to raise capital in the open markets. So they’re on life support from the ECB.
- El-Erian (see clip 4 below) – In
Greece, what we’ve done is, we’ve reduced the debt stock somewhat, but
even at 120% of GDP, by 2020, if everything goes well, which is a big
assumption, that’s still too high. That is why the market immediately
price in a second PSI, or a second debt reduction operation, down the
road….We haven’t fundamentally solve the problem of too little growth and too much debt.
Yields on Portuguese debt rose on Friday. So is Portugal next, CNBC’s Melissa Lee asked Sean Egan of Egan-Jones. His answer:
- yes. however, it’s going to take a little bit of time. the LTRO have provided a fair amount of liquidity in the market. in fact, in excess of a trillion euros. That’ll cover a lot. in fact, as close to the GDP of France in one swoop. we think the next stop will be Portugal and after that Spain.
3. The New De-Coupling Debate
Remember late 2007 – early 2008 when the talk on FinTV was about decoupling. At that time, FinTv rolled out “experts” who told to not worry about global growth because Emerging Markets were decoupled from USA. We know how that turned out.
This week, China shocked investors by lowering their forecast of growth to 7.5%. This time, we heard from “experts” who told us to not worry because the US recovery was decoupled from China and other foreign economies. Jim Cramer was particularly explicit. In his Mad Money segment on Monday titled How Important is China?, he said:
- …if China catches a cold, copper gets some real headache for the moment,…, but the United States, the largest economy in the world, is going from bad to good. And that’s just as important, if not more important, than China going from good to not as good.
This is the same Jim Cramer who has argued that the US recovery is not that important because a huge amount of S&P earnings come from China and so, as long as Chinese growth is strong, the U.S. Stock Market is in good shape.
A different view was expressed by Ken Rogoff on Friday (see clip 1 below):
- …People are saying we’re depending on the United States for growth. No, that’s because we take China as a given. I think that if the China story somehow were derailed for a while, that would be, you know, about the worst realistic thing we can imagine happening.
Add to this the forecast by Nouriel Roubini of a slowdown in qtr-over-qtr Chinese growth to below 6% for Q1 2012 (see clip 2 below). And China is not the only slower growth story.
This week, the Reserve Bank of India surprised the markets with an abrupt 75 bps cut in the Cash Reserve Ratio to ease a liquidity squeeze that threatens to deepen an economic slowdown. The RBI did not even wait until next Thursday’s review meeting. That to us demonstrates the extent of the slowdown that we witnessed in early January in Mumbai.
This Friday, Singapore Airlines (SIA) asked pilots to volunteer for unpaid leave for up to two years to help the airline cope with the slowdown. The pilots can join SIA’s rivals during their leave, a measure that shows the desperation of SIA. A couple of weeks ago, SIA cut freighter capacity by 20% because of slumping demand and higher fuel prices. SIA is the second largest carrier by market value and one of the two best airlines in the world.
This week, McDonalds stunned investors with its Asian and European sales. Asian growth used to be the growth story for the Happy Meals company and 40% of profits come from Europe. This was a stock that could do no wrong. Earlier this week, Merck lowered its first quarter guidance by 3-5 cents.
With due respect to Jim Cramer, we think the new decoupling story will play out just as the previous decoupling story did. As David Rosenberg warned on February 24, we should not confuse lag with decoupling. By the way, “Rosie” predicts a very severe recession in Europe.
4. The U.S. Stock Market
On Tuesday, the stock market suffered its first triple digit down day of 2012. It was a 90% down day and the VIX spiked 15% to close above 20. The Oscillator showed a deeply oversold condition. So the bounce back on Wednesday was not a surprise. By Friday, this sharp decline was a distant memory. S&P, Nasdaq and Russell 2000 closed for the week. The Russell 2000 which had threatened to break its 200-day moving average rallied about 1.8% on the week.
Jordan Kotick of Barclays repeated his call for a choppy, flat market for some time. The “market is giving a big sign that it’s getting a little bit exhausted“, he told CNBC’s Maria Bartiromo. Abigail Doolittle of PeakTheories saw a rising wedge pattern in the S&P on Tuesday after the big 90% down day. She repeated her view of a rounding top in Russell 2000.
Lawrence McMillan of Option Strategist said, “… The upside is probably still the path of least resistance“. In his work, “breadth indicators are now back on buy signals” but “Equity-only put-call ratios turned negative this week and remain in sell signals“. The S&P once again established 1340 as support, he states.
What happens next week? Ben Bernanke will probably decide.
5. Middle East
It appears that the minority Alawite regime of Bashar Assad is winning the civil war in Syria. This was conceded even by CNN’s Anderson Cooper who has led the US media protests against the brutal suppression of Sunni rebels in Syria. In this conflict, Shia Iran has been Syria’s primary backer and the Sunni Arab League, led by Saudi Arabia, has been the prime backer of the Syrian rebels.
Another sign that Iran is winning the proxy war in Syria is the sudden escalation in Bahrain, a neighbor and a very close ally of Saudi Arabia. The Shiite majority of Bahrain’s population is ruled by a small Sunni majority led by a Sunni royal family modeled after the Saudi royal family. The protests first erupted a year ago during the height of the Arab spring (see our article Bahrain – Start of the Real Battle in the Middle East? dated February 19, 2011).
The New York Times reported a “Huge Rally” by ” tens of thousands of anti-government protestors” in Bahrain on Friday, March 9. The NYT further reported:
- The march stretched for miles. Some opposition leaders estimated the crowd at nearly 100,000, which would make it one of the largest protest gatherings since the street rallies erupted in February 2011…”Down, down Hamad,” protesters chanted in a reference to Bahrain’s King Hamad bin Isa Al Khalifa.
If this were not enough, about 2,000 Iraqi Shiites called for Bahrain’s king to be banned from the Arab League summit set for the Iraqi capital later this month. After all, Syria has been suspended from the the Arab league for its crackdown on Sunni protestors.
Now that the Shiite Syria-Iran side feel confident about the Shia vs. Sunni civil war in Syria, they have fired a shot in what they hope will be a sustained Shia-Sunni conflict inside tiny Bahrain, a very close ally of Saudi Arabia. And Bahrain has oil, is situated close to Saudi Oilfields.
We are seeing the Middle East being divided between Shiite camp of Iran-Iraq-Syria and the Sunni camp of Saudi Arabia-Bahrain-the Sunni Arab League.
6. Shia-Sunni Civil War & Israel’s potential attack on Iran
The above is relatively straightforward. So now we veer off the straight and narrow to ask whether this Friday’s sudden protest in Bahrain has another meaning.
Remember Bahrain is home to the U.S. Fifth Fleet that protects the Persian Gulf. Could the Obama Administration stay silent if the minority Sunni regime in Bahrain begins crushing the Shiite majority to protect its rule? Yet, could the Obama Administration afford to speak or act against the Sunni regime that hosts the US Navy and that is so close to the Saudi royal family?
What if the Shia minority in Saudi Arabia rises against the Sunni Saudi royals and demands autonomy? The Saudis will crush it by using any means necessary. But if Bahrain and Saudi Arabia are racked by Shiite protests, then can the Obama Administration afford to allow Israel to attack Iran?
Iran has no credible means of protecting itself against an Israeli air attack. Its only defense is to threaten the world with intolerable consequences of such attack. What consequences or ploys have they threatened already?
- Their first ploy was to threaten to close the Straits of Hormuz. The US has promised to make sure that won’t happen.
- Was their second ploy to game a threat to Saudi oilfields as we wondered last week? In our opinion, that catastrophic threat can be mitigated by a counter-threat to destroy Qom, the religious headquarters and residence of Iran’s Shia theocrats (incidentally, President-elect Reagan reportedly threatened privately to do precisely that after his election and before his inauguration. That, knowledgeable conspiracy theorists say, is why the Iranians released all American hostages the night before his inauguration).
Are we seeing the third ploy now? The possibility of a Shia-Sunni civil war inside Bahrain and the oil-rich provinces of Saudi Arabia may be Iran’s best option. America is not Syria. It cannot crush civil revolts brutally. Nor can it stand by and watch its allies do so. So America’s military might will be helpless in the face of such human revolt. So will Iran try hard to foment a revolt in Bahrain and then in Saudi Arabia? Will such a revolt persuade America to restrain Israel?
We have no idea about the scenarios being discussed in Washington DC, Tehran or Tel Aviv. May be, this is all fanciful. But, we cannot help feeling that the world is slowly crawling towards a conflict that no one seems to want but one that no knows how to prevent.
We can only try to buy insurance. And the best insurance seems to be a bar bell of Call Options on Oil-Oil Stocks and 30-Year US Treasuries.
- Kenneth Rogoff on CNBC Squawk Box on Friday, March 9
- Nouriel Roubini on CNBC Closing Bell on Friday, March 9
- Mohammad El-Erian on BTV In The Loop on Friday, March 9
- Robert Shiller on CNBC Street Signs on Wednesday, March 7
- Robert Prechter on FBN on March 1
1. Worst Realistic Thing We Can Imagine Happening – Kenneth Rogoff on CNBC Squawk Box (02:26 minute clip) – Friday, March 9
Ken Rogoff of Reinhart & Rogoff fame and a Harvard professor was a guest host on CNBC Squawk Box on Friday. We focus on his comments on China and the impact of a China slowdown on US. Though expressed in a soft, mellow tone, it is a sharp warning for those who believe in a triumphant US recovery despite and almost in your face China slowdown. This out-of-consensus position merits the pole position of the week, in our humble opinion.
- Kernen (CNBC) – while you are here, I want to ask you quickly about China. I don’t know whether I would call you an outlier on that, but you’re just not willing to buy in to good times forever there,
- Rogoff – it’s ridiculous, of course, as the economy normalizes, it’s going to have business cycles like everybody else, and there’s this mantra out there that says, oh, you know, things slow down, they got a lot of money, they’ll just do a big fiscal package, and, you know, every fast-growing, emerging market, developing economy had speed bumps and investments more 50% of GDP, how long can that last? and exports have got to slow down. they have to make adjustments. they can’t keep doing what they’re doing. it’s very hard to call the timing, but, yeah, i think they’ll have normal recessions, not necessarily technical recessions, not when you are growing at 10%, 3% is a recession.
- Kernen – but are expectations at this point is that consensus that they never slow, even if it was just a slight slowing that would be a big surprise?
- Rogoff – I think it is consensus. I mean, when I go out and give talks around the world and even mention that China just might have a bad year once in a while, people go crazy, you know, and I worked at the world bank on the china, you know, department and you don’t know anything. and Britain grew forever and the u.s. grew forever, which they didn’t. we had recessions and business cycles so —
- Kernen – and that could eventually involve printing some money or turning up the printing presses in China. That something will go wrong, that they’ll spend money and print money themselves, no?
- Rogoff – yeah, I don’t know. They did invent the printing press and had the first hyperinflation 1,000 years ago but I think that was something else.
- Kernen – Yeah. so, that’s not likely to happen. but will that cause you to change your viewpoint for the rest of the world?
- Rogoff – If they had a recession or — yeah. I mean, that would be disaster. People are saying we’re depending on the United States for growth. No, that’s because we take China as a given. I think that if the China story somehow were derailed for a while, that would be, you know, about the worst realistic thing we can imagine happening.
This is the second week in a row that Joe Kernen treated his guest host with respect and focused on the topic at hand. We like it but don’t get it. Is it just respect for Harvard professors or is he changing as the 6-handle in age draws near?
2. All components of aggregate demand slowing down – Nouriel Roubini with CNBC’s Maria Bartiromo (07:02 minute clip) – Friday, March 9
This is a must watch clip but with a glass of your favorite elixir. Mr. Roubini speaks very fast and CNBC has not provided an automatic transcript. So we will do our best to include the important excerpts:
- Bartiromo – You say that we are reaching a tipping point in what you call an anemic and sub-par economic recovery. …What do you mean by that?
- Roubini – ….the Euro zone periphery is in a recession, the austerity and credit crunch is getting worse…the euro is not weakening …there are political shocks coming from France, Greece elections, Ireland referendum, Oil prices are high and rising….gasoline prices are approaching $4 a gallon which is hurting consumers….
- Roubini – …and the US data are starting to look more mixed.. the labor market is improving but the indicators for aggregate demand are weakening –
- real consumption growth has been flat for 3 months ,
- capex spending fell in January after expiration of the tax breaks
- construction activity is down,
- home prices are still down,
- our net exports are worsening..-
- Roubini (contd.) – you know all the components of aggregate demand, including the government sector, are slowing down, so I still see a very anemic recovery
- Bartiromo – what about Greece?
- Roubini – ….
- 20,000 people homeless in the streets of Greece, riots in the streets,
- unemployment rate is 22% rising, almost 50% among the young,
- the recession is becoming a depression, contraction is becoming worse and you know,
- the country is still insolvent even after the PSI, the debt-gdp ratio in the best scenario will be 120% ten years from now, 160% in the worst scenario,
- likely to restructure again, eventually Greece will be the first country to exit the Eurozone, not this year but may be later next year
- Bartiromo – You have been talking of a China hard landing. What do you expect in 2012?
- Roubini – our estimate is, in Q1 2012, the qtr-over-qtr growth in China will be less than 6% – between 5-6%.. But year-over-year growth will be closer to 7.5%. Because:
- export growth is slowing down sharply,
- residential investment is starting to fall, commercial investment is starting to fall,
- a lot of infrastructure spending is now put on hold because the provincial governments don’t have the land revenue sales that allowed them to do the infrastructure projects.
- So growth in China is slowing down. Now they are gonna react by monetary easing, by fiscal easing so they will get close to 7.5-8%
- they are pushing the problem to the future, they have to move away from net exports, fixed investments of 50-% of GDP towards less savings and more consumption.
- But as fixed investments are gonna fall, the risk is consumption does not grow and the risk is eventually hard landing by next year or the following year becomes a rising probability…
- Bartiromo – How are you investing in all of this?
- Roubini – Our Asset Allocation Model suggested going overweight in equities in January – now we are neutral – there has been such a rally that at this point with the slowdown in economy, valuation being high, neutral or market-weight is probably the right thing to do for the time being.
3. Growth rate just under 2% for US – Mohamed El-Erian with BTV’s Betty Liu & Shiela Dharmarajan (06:30 minute clip) – Friday, March 9
The excellent summary below is courtesy of Bloomberg PR.
On today’s jobs report:
“It’s good number – not just the headline but also the revisions. Also, the fact that the participation rate is going up and some of the structural elements are improving…Overall, a good report. Having said that, it’s just indicative of the healing process. We are not yet at escape velocity. We’re not yet in a place where the labor market and consumers can push this economy forward.”
On reaching the escape velocity point:
“I wish we were, Betty, but I don’t think so. In Europe, we haven’t really solved anything. Greece still has too much debt. Nothing has been done to improve the growth rate of European economies. So, in European, all we’ve done is push back the problem as little but we haven’t solved it.”
“We have the geopolitical headwinds out there and then when we look at our own economy, we haven’t done enough on the structural side and we now have the prospects that the fiscal side is going to be contractionary. Unfortunately, the best we can do right now is just muddle along. We’re not yet at escape velocity.”
On the jobs being added to the payroll being so low pay:
“First, hourly earnings were 0.1. We need to see hourly earnings increasing a lot more. That speaks to what you just said, which is we’re creating only low-pay jobs. Yes, oil is a headwind. We must not forget that it’s a significant part of consumption. Unfortunately, we’re going to be at high oil prices because of all of the geopolitical concerns.”
“That’s why it goes back to, when you look at different components of demand, it’s difficult to identify the one that will cause this breakout. It’s not going to be the rest of the world. They’re slowing. It’s not going to be the government. It’s not going to be the consumer. Could it be business? Yes. But business has to have better assurances that demand will ultimately go up, otherwise they do not invest.”
On whether stocks will rally even if the economy is “muddling through”:
“Correct. We’re looking at a growth rate just under 2% for the U.S. Within that, you will see a lot of differentiation. The key issues for PIMCO as an equity managers and others is to be able to choose the different sectors and companies. What are you looking for? You’re looking for strong balance sheet. You’re looking for an ability to put money back to the shareholder. You’re looking for exposure to high growth. There are companies out there and our analysts and portfolio managers work very hard to identify them. Yes, you’re going to get some companies doing really well and differentiation is going to be key.”
On whether we’ve averted a disaster in Europe:
“Not yet. In Greece, what we’ve done is, we’ve reduced the debt stock somewhat, but even at 120% of GDP, by 2020, if everything goes well, which is a big assumption, that’s still too high. That is why the market immediately price in a second PSI, or a second debt reduction operation, down the road.”
“We haven’t solved Greece, yet. Greece will come back. We have Portugal, which has sovereign concerns. We’ve made progress and particularly, we have made progress for the LTRO. We haven’t fundamentally solve the problem of too little growth and too much debt.”
On the difference between Greece, Portugal and Italy and Spain:
“We exited Portugal a long time ago, two plus years ago. We’ve been watching, and the reason why we exited Portugal and the reason why we exited Greece a long time ago is because we are worried about the sovereignty issues. We’re not involved in Portugal or Greece. We’re watching it and we still think both of them have not been solved. Spain and Italy are fundamentally different. They don’t have the sovereignty issues that Greece and Portugal have, and they also have an ability to turn the corner and they have much more support from the European community I would draw a line between Greece and Portugal and Italy and Spain.”
On the stock market rally:
- “I think we’ve benefited enormously in the markets from liquidity. Not just the ECB and the Fed, but the Swiss National Bank, the Bank of Japan, India, Brazi
l, everybody is easing monetary policy. We’ve had a rush of liquidity come in and that has helped the markets. Plus, we’ve had one-off factors. Do not forget the fall in the U.S. savings rate that has helped us. So, this rally is warranted. It is warranted by these temporary factors, but we now need to hand off to more permanent factors.”
4. Housing Bottom-This is It & Could Languish for 20 Years – Robert Shiller on CNBC Street Signs (04:48 minute clip) – Wednesday, March 7
Brian Sullivan, the CNBC anchor and @Sully to his tweeterverse, pointed out in his introduction that home prices have been falling for four months in a row and are down basically every year since 2006. He quoted Professor Shiller’s view that house prices are all about momentum – they go in directions, one direction, for years and that direction has been down.
- Sully – How much more trend on the down side do you see in terms of years?
- Shiller – well, it’s really hard to tell, because we’re just coming out of the biggest housing bubble in history. So we’re kind of in uncharted territory. It could turn around, you know. It’s been going a long time. We’re seeing some good news now. Starts, Permits, Confidence, the NAHB housing index is strikingly up, though it’s still low, but it’s up. So it could turn around. I just don’t see any scientific way to be assured what it’s going to do. It could keep going down.
- Sully – This is your thing, Robert. If you don’t know where housing prices are going to go, how could anybody else have any hope of forecasting it correctly. Where is the end game here, Robert? What needs to happen? Does it have to do with Fannie Mae or Freddie Mac, or foreclosures? What needs to happen to turn things around?
- Shiller – well, in terms of housing, we might be at the end game. Home prices are back to a normal level. They could just stay here, and that would be all right. Housing is very affordable. interest rates are down, prices are down to kind of a normal level. They haven’t overshot normal. So maybe in terms of housing, this is it, this is it. And maybe nothing exciting will happen. Maybe they’ll drift a little down.
- Sully – I‘m smelling a little optimism from Robert Shiller on housing. Did you just say this may be the bottom?
- Shiller – It might be, yeah. because I’m particularly interested in leading indicators, like permits. or the NAHB traffic index which asks builders to assess the traffic of prospective home buyers. And that’s up a lot. These things can turn quickly and sharply. It’s too soon to tell and confidence is everything.
- Sully – You’ve studied that with equity prices, right? Things are better. People feel better, the economy is better. If, – when housing turns, how quickly can it turn?
- Shiller – well, see, it depends on whether real animal spirits come back. It could languish for 20 years. It could just stay where it is. Maybe it’s coming back, but I don’t see any clear signs of that. There’s no reason why we have to have another boom soon. We might. But there’s no reason and we’ve been kind of shocked. We went through a depression scare. So it could be 20 years before we have another boom.
CNBC trumpeted the Housing has bottomed call of Professor Shiller all week. But not even once did they add his caveat that housing could languish at this bottom like level for a awhile, even for another 20 years.
It is a great idea to buy a house you love to live in. But it might not be a great investment, not even a good investment for a long time as Professor Shiller said on Friday, December 23, 2011. We encourage readers to read those comments of Prof. Shiller (see clip 3 of our December 19 – December 23, 2011 Videoclips article).
5. Markets Headed Below 2009 Levels? – Robert Prechter with FBN’s Neil Cavuto (06:37 minute clip) – Thursday, March 1
March 9, 2012, this Friday, was the 3-year anniversary of this current bull run. So we thought it would be ironically appropriate to feature recent comments of the uber-bear Robert Prechter this week even though the interview took place the week before.
The thesis of Mr. Prechter remains what he articulated on December 14, 2011 (see clip 2 of our article Videoclips of December 12 – December 16, 2011) – that there is simply too much debt in the world, that it would lead to deflation and out of that will arise a great buying opportunity, that until then you should take refuge in US Dollar Cash.
Mr. Prechter admits:
- “I have thought that too early in every single one of the overvaluations; so I don’t know I am the right guy this time”.
Then he proceeds:
- “But I will tell you, most of the t
ops have had such extreme sentiment figures that we can’t believe our eyes. This one has also extreme sentiment figures but this time the momentum figures are far worse. We have a contraction in the A-D ratio on a 10-day basis all the way back to the first week of January, we have got volume which is not only been light for the entire past 3 years but declining and that is including the first 2 months of this year, it continues to decline. You have got those two and then…even the Dow theory is beginning to flash a warning signal,..”.
At this time, Neil Cavuto asked ” What would be a more realistic level on the Dow if you don’t mind?” Prechter answered:
- “Well, I think the market is peaking out in a cycle, this is the 3rd one. Its got all the same symptoms as the last two except the underlying fundamentals are weaker and the underlying technicals are weaker. So I think the market could easily in the next 4 years easily take out the 2009 lows and probably go a lot lower than that.”
So there. A completely inappropriate anti-celebration of the 3-year anniversary of the current bull market!
Send your feedback to [email protected] or @MacroViewpoints on Twitter