Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Wall Street Says It’s Different This Time

Stock-Markets / Stock Markets 2014 May 16, 2014 - 11:04 PM GMT

By: Sy_Harding

Stock-Markets

It’s a good thing it’s different this time! We know it is because Wall Street says so.

The high-valuation levels indicated by the Shiller CAPE 10 Price/Earnings Ratio mean nothing this time, because things are different than when that indicator’s similar readings in previous periods were accompanied by market tops.


The age of this bull market also means nothing because it’s different this time, since we have the Greenspan/Bernanke/Yellen Put in place, That promise is that the Fed is neither ahead of nor behind the curve, as it was so often in the past. This time the Fed is on top of what is going on, and knows what it must do to prevent economic slowdowns or market corrections from worsening into recessions and bear markets.

It sure worked in the summer slowdowns in 1998, 2011, and 2012. Well okay, not so much in the summer of 2010 when the S&P 500 plunged 19%. And not so much in preventing the 2000-2002 and 2007-2009 meltdowns. But 2010, 2008? That’s ancient history.

We also know the stock market cannot be timed. We know that also because Wall Street says so. We know that it cannot even warn when risk is high with enough accuracy to require cutting back exposure. Just buy any time and all the time, and let time take care of it.

Therefore, we need not be concerned about those high valuation levels, nor that we are in the second year of the Four-Year Presidential Cycle, and since 1934 the average decline in the 2nd year was 21%.

How about that silly stuff about Sell in May and Go Away outperforming the market over the long-term? It supposedly does so by avoiding the large losses often associated with the summer months? You only have to look back and see it didn’t work last year, or in 2012. It hasn’t worked since 2011. Besides, don’t look back. Look at what’s going on now. The Dow and S&P 500 just made new record highs a few days ago.

They pulled back some over the last few days, but not even enough to retest the potential support at their 50-day moving averages.

Sure, the Nasdaq and Russell 2000 are already in correction territory (down 10%)? So what? That’s meaningless, just a reflection of how speculative stocks got ahead of themselves and needed to cool off a bit before getting back in harness to the upside.

Corporate insiders are selling at a near record pace? Corporations themselves are dumping IPO’s on the market, selling stock to enthusiastic investors at a frenzied pace? So-called ‘smart money’ big-names are issuing warnings of a serious correction, even a bear market?

Okay, so they were right with their selling and warnings in 1999, and in 2006 when the housing bubble was building, and in 2007. And investors who didn’t pay attention to the warnings were smashed down when those bubbles burst. And the wealth inequality between the top 5% and the rest of the country kept getting worse.

Well listen to this. Corporate insiders were selling heavily last spring, and those top 5% ‘smart money’ guys, hedge funds and the like, warned early last year that a big correction was coming last summer. And it didn’t.

So why be concerned. Wall Street says it’s different this time, and the stock market can’t be timed anyway.

Okay, I get all that. See and hear it every day.

So I must be a dinosaur in my thinking that conditions at previous tops, valuation levels, warnings from ‘smart money’, seasonality, etc., going back at least 100 years, have always had relevance when similar conditions appeared in later periods. Not with enough accuracy to provide buy or sell signals, but certainly with enough to warn of unusual risk.

And they are doing so now.

My advice is that investors pay attention.

Sy Harding is president of Asset Management Research Corp., and editor of the free market blog Street Smart Post.

© 2014 Copyright Sy Harding- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Sy Harding Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in