Isn't Anyone Bearish Anymore?
Yeah - whadda ya think Toddo ???
Yesterday, the seemingly omnipresent Kevin Depew addressed the question: Isn't anyone bearish anymore ???
Well, it's NOT that we are bearish so much as we are fearful that this market simply cannot continue to stroll thru the macro-mine-field, skipping merrily along as if there was nary a single imbalance in the world without stepping on, and detonating one, if not several, of the macro-land-mines that have been buried in the eco-landscape since Nixon abandoned the gold standard.
In fact, while every body is of the belief that PAPER WEALTH IS STILL REFLATING, the longer-term SECULAR evidence suggests otherwise.
As defined in the chart on display below, plotting the 5-Year Rate-of-Change on a mega-macro-monthly basis, dating back to 1905 ... we could easily say that US paper equity wealth has been FLAT, ever since DEFLATING in the post-Y2K period. Basis the perspective below, the current malaise looks more like the 1968-1982 period, when deficits were exploding, the gold standard was abandoned, energy prices soared, and real income imploded.
Relative to the CRB Index, US equity market wealth has been DISINFLATING since 2002, and, is doing so currently at the most rapid pace to date, as STUFF outperforms PAPER in a way not seen since the 70's and early 80's.
INDEED gold really IS appreciating against ALL paper 'currencies', including, and now especially against, the US equity market's 'scrip'. Evidence the chart below, revealing that the pace of DEFLATION in the US Dow Industrials, relative to Gold, over the last five years, is as DEEP as it has been since the early eighties.
Thus, with US paper equity wealth reflation already under attack from rising energy inflation and monetary debasement withdrawal, NOW the Fed proposes to inflict intensified monetary pain, as per the accelerating rise in interest rates, which has finally sparked a retrenchment in credit creation.
Relative to interest rates, paper equity wealth disinflation has just begun.
Petrified NOT, the Dow Industrials remain buoyant but we believe increasingly at RISK, both fundamentally from a macro-secular perspective, and, as noted in the next sequence of long-term charts, technically too.
This IS scary when we note that the secular landscape is littered with macro-land-mines of NUYMEROUS 'detonation-types' ... fundamental, technical, and psychological. Observe the weekly chart below, revealing a head-and-shoulders topping pattern in the DJIA, along with severely diminished momentum, and a downside threat to the long-term moving average.
On a shortened-time frame we add our Volatility overlay, and a MAJOR macro-secular imbalance appears, as volatility lines up in a way to suggest a sharp, violent, breakdown.
A move below 10,012 would suggest that the technical land-mine has been detonated.
Similarly, we note the potential for a Dow Theory confirmation, should the Dow Transports violate the 3550 level, which would complete a downside break of both the 200-day moving average and the 18-month uptrend line. Such a move in concert with an upside surge in the Volatility measures would, again, suggest a sharp, violent, move to the downside was unfolding.
And finally, in our constant search for clues to confirm, or refute, our main theories and themes we will be closely monitoring the PAPER real-estate sector, as best represented in the chart below by the NYSE traded Real Estate Income Fund, or RIT, which is threatening to break down technically.
We will monitor the paper realty scene with an eye on the chart on display below, plotting the ratio spread between the upside leading Dow Jones Real Estate Fund iShare, or IYR relative to the RIT.
The steep realty uptrend since the end of 2002 has been BROKEN and shows signs of having ALREADY REVERSED.
It is within that context, as per our last comment, that we close today's Money Monitor missive, as Frankenstein, to tell you that a MAJOR home-builder, Centex, has announced a price discount of (-) 5%, in selected new developments around various parts of the country, in an effort to move an UNSOLD SUPPLY of new homes. (See Friday's copy of Weldon's Money Monitor for a full-scaled dissemination of the most recent housing related macro-eco-data).
From corporate America, to global trade, to CB reserves, to money supply and credit creation, to religious fanaticism and even to Mother Nature herself the ever wider and intensified tug-of-war represented by our spectrum-stretch theme, and the continued escalation in volatility, seems as omnipresent as Kevin Depew within everything EXCEPT the global capital markets
So it's NOT that we are bearish, and, we are certainly NOT bullish, rather we sit quietly, ready to POUNCE, when we begin to hear the detonations begin.
Hey, I predict that someday, probably sooner rather than later, but someday we will see Boo, looking sharp, wearing a SUIT, all spoofed out and proud and Hoofy, depressed and downtrodden, concave-chested, in his pajamas.
Whadda ya think Toddo ???
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter