Bear market–phase 2

by Bull Bear Times on June 7, 2010

in Stock Market,U.S. Economy

In 2008, the U.S. faced a significant credit crisis and was saved only by the Federal Reserve Board pouring in trillions of dollars.  Now, the second phase of the credit crisis has begun.  Greece was the starting point to be followed by Central Europe, Eastern Europe and other countries.  Contagion is spreading and will eventually be global.  There is no bailout possible for all this debt.  The Central European banks face a major risk.

What do I see for 2011-2012?

  1. New stock market lows – below 6600 on the Dow Jones in this second phase of the global bear market. Bear markets will continue for the next several years. Sell all rallies.
  2. Global deflation will grow and be especially harmful to commodities, real estate,      and other tangible assets.
  3. A double dip recession worldwide is very likely because the U.S. money supply is declining at a very dangerous rate.  Central banks have put in an estimated 3 trillion dollars for support, but losses are estimated at 25 trillion dollars.
  4. Credit will continue to drop as there is no trust between borrowers and lenders and between banks. De-leveraging will stay as the focal point along with risk aversion.
  5. More Government intervention, additional new programs, and higher taxes will slow economic growth. Unemployment may reach 20%.
  6. Globally, world economies will slow as monetary contraction in Asia (China and India) and fiscal contraction in Europe continues.
  7. The U.S. dollar will stay king for a while as the Euro heads for 90 cents.

Critical Time in Stock Market and Economy

by Bull Bear Times on May 17, 2010

in Stock Market,U.S. Economy

Economies extend excess credit until a bubble occurs. The results: excess leverage and after an extended period of time, de-leveraging and credit contraction start. This is where we are today.

Now, after a large down move in 2007-2008 in stocks and the economy, we had a very sharp counter trend bounce that is ending. The next phase down is just starting and should be much longer in duration and more severe in price.

The global stock markets have major risk as we enter the second half of 2010 through 2012.

1. Where stocks bottomed in March 2009, now in March-April 2010, you see the opposite–the mirror image.

2. Three things caused the 2009 rebound: a) the government stimulus, b) a weak U.S. dollar, and c) massive cost cutting. All of these have ended.

3. Government intervention into all areas of our economy will continue to restrict economic growth.

4. The U.S. dollar will continue higher most of this year and cause negative effects for most commodities.

5. Risk aversion by investors will result in a move to cash and cash equivalents.

6. Government debt defaults–as in the Greece default–will be a greater problem than the sub prime problem of 2007 and 2008.

7. Watch the Dow Jones– a close under 9800 will be a major warning.

8. Deflation risk is very high as credit availability is limited and higher taxes return.

9. Emerging markets have extreme risk. The Chinese economy is likely to contract under current government restrictions.

Bull market top forming

January 26, 2010

The January 11th Dow Jones top at 10,723 looks completed. Expect the Dow Jones to fall below 10,000 over the next several weeks. Then, expect another move up into March/April to complete the bull market top. Commodities, oil, and gold should fall with the stock market over the second half of 2010. The U.S. dollar [...]

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Major stock market top approaching

January 3, 2010

Markets begin 2010 very overbought (meaning stocks have risen too steeply and too fast). Bullish sentiment indicators are at extremes (meaning people are very bullish–even more than in October 2007 when the Dow was at 14,000, an all-time high). Look for short-term weakness and a major top over the next 60-90 days. Sell rallies. A Dow Jones [...]

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What is the Volatility Index?

December 28, 2009

If you’re looking for a simple explanation of the VIX indicator–let me see if this helps. First, the VIX is actually called the Volatility Index and more formally–the Chicago Board Options Exchange (CBOE) Volatility Index. This is a forward-looking index that shows the market’s expectation of 30-day volatility. Because it’s a widely used measure of [...]

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Economic recovery should slow in 2010

November 29, 2009

An imminent debt default in Dubai looks unlikely at this time. Expect stock and commodity market rallies to continue through end of year. Use all rallies to sell into–liquidate securities and commodities as markets rally. Signs of deflation–where prices go down rather than up– should be much more prevalent in 2010. Commercial real estate refinancing [...]

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The U.S. Dollar–a long-term depreciating asset

November 11, 2009

The U.S. dollar continues to be the key to most investment markets. A weak dollar policy by the U.S. government (where the value of the dollar goes down) accomplishes the following: It makes our real estate and stocks cheaper for foreign investors. It makes our goods cheaper for export. It helps our large multi-national companies [...]

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Stock market top

November 1, 2009

The stock market rally that started in March appears to have ended October 21–with approximately a 50% return. Coincidentally, the same return was seen in the rally (from November 1929 to April 1930) after the October 1929 stock market crash. So despite much better third quarter earnings than expected and a much stronger third quarter [...]

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Intermediate sell signal

October 30, 2009

Read our November 1st (Sunday evening) post for an update on the intermediate sell signal we received this past week.

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Unemployment not an easy fix

October 20, 2009

Key findings from “The Anguish of Unemployment”–a report conducted by the John J. Heldrich Center for Workforce Development at Rutgers, The State University of New Jersey–reveals the economic and personal costs of prolonged joblessness. This national survey conducted among 1,200 Americans nationwide who have been unemployed and looking for a job in the past 12 months, [...]

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