Tuesday, June 29, 2010


Just a note as I'm still trying to get back in the swing of things after returning from Florida.

Just as we saw in October of 2008 we are seeing a move in Treasuries that is abnormal.  Buyers of Treasuries in size are typically NOT Mom and Pop (although I bet we have more Moms and Pops in there than 1 year ago).  Just as we saw in 2008, bad things happen when lots of people are willing to put their money away for 30 years and receive 3.94% or sock it away in the 10 year for 2.95%.  Although when put in contrast to the money market rates or savings rates they get in their checking account it's great right?

This move in treasury rates is not good and I will be watching the bond market for additional signals that confirm this breakout.  This is not a moment to be a hero and take on a bunch of extra risk.  In fact, if we do get some sort of stock market rally, it must be used as a opportunity to unload some long positions.



Well, Goatmug survived a well needed adventure to Disney World with the family.  As he battled with crowds and the Florida heat he was able to coax his kids to ride Space Mountain twice, Splash Mountain twice, Big Thunder River once, and Expedition Everest at Animal Kingdom 3 times.  Clearly the Goatmug family is comprised of roller coaster junkies.  The break from staring at charts all day allowed me to refresh and get a renewed picture of where we are and where we are going.  I don't have much time to write right now, so I'll leave you a taste of two pictures that probably say as much about what I think will happen as writing my normal long winded rant.

Where do I think we are going in the next 6 to 8 months?

Goatmug, that is a lovely picture of poor saps descending into terror, but is there something that you can produce that will help give us a tangible outlook for where the markets could go?

Well of course.  I pulled S&P 500 Data from Robert Schiller's website which I frequently use to look at P/E ratios.  http://www.irrationalexuberance.com/  I created a graph and added a note of how deep I believe this move could be.  The combination of economic headwinds, political leadership (lack of it), and the risk of a national debt default give me more confidence to show this picture.


Well As usual my blogger editor did strange things to my chart and deleted the embedded comments.  Note that we had the peak of 1929 and then the fateful crash.  We recovered from the lows driving up around 25% or so into April of 1930.  The market dropped almost without pausing through June of 1932.  During that period almost 84% of market valuation was destroyed.

I had an emailer send me data on the ERCI Leading Indicators information showing that growth is declining.  I could only respond by saying, YES, that is what we have been commenting for several months.  Today's Consumer Confidence numbers are only parroting that information.  Consumers know that things are bad and jobs are not coming on line.  This double dip I've been speaking about is about slowing growth, poor income levels, rising debt levels, rising defaults (consumer and commercial), and a lack of real job prospects (not government fake jobs!).  Oh yes, and a cliff dive on the housing recovery.  Sales, prices, are going to go down while more foreclosures are going up.  This is no mix for a recovery.

The only thing I can say is be looking for more STIMULUS!

More to come soon, buckle up.  I'm still sticking to my 950 on the S&P 500 projection here, but may need to build a fundamental and technical case for year end at 825 or so.    I also have a 1/2 year review on my Annual Projections.  My results are mixed so far, but some of the projections were so dour that I'd happily report if I was wrong.

It's good to be back.