I have seen this a few times in the last 2 days, my comments are inserted in [CAPS]
Is a Crash Coming? Ten Reasons to Be Cautious • By BRETT ARENDS
Could Wall Street be about to crash again? [YEP]
This week's bone-rattlers may be making you wonder.
I don't make predictions. That's a sucker's game. [I GENERALLY AGREE, EXCEPT WHEN IT'S THINGS LIKE GRAVITY WILL CONTINUE TO WORK AND AS OUR FRIEND "OUCH!" HAS WRITTEN FOREVER, THE LAW OF SUPPLY AND DEMAND CONTINUING TO WORK - THANKS AGAIN KIRK] And I'm certainly not doing so now.
But way too many people are way too complacent this summer. Here are 10 reasons to watch out.
1. The market is already expensive. Stocks are about 20 times cyclically-adjusted earnings, according to data compiled by Yale University economics professor Robert Shiller. That's well above average, which, historically, has been about 16. This ratio has been a powerful predictor of long-term returns. Valuation is by far the most important issue for investors. If you're getting paid well to take risks, they may make sense. But what if you're not? [EARNINGS HAVE BEEN HELD ARTIFICIALLY HIGH AND AS THEY DROP THIS 20X WILL LOOK EVEN WORSE]
2. The Fed is getting nervous. This week it warned that the economy had weakened, and it unveiled its latest weapon in the war against deflation: using the proceeds from the sale of mortgages to buy Treasury bonds. That should drive down long-term interest rates. Great news for mortgage borrowers. But hardly something one wants to hear when the Dow Jones Industrial Average is already north of 10000.
3. Too many people are too bullish. Active money managers are expecting the market to go higher, according to the latest survey by the National Association of Active Investment Managers. So are financial advisers, reports the weekly survey by Investors Intelligence. And that's reason to be cautious. The time to buy is when everyone else is gloomy. The reverse may also be true. [MONEY MANAGERS AND FINANCIAL PLANNERS ARE BULLISH BECAUSE THEY MAKE MONEY SPEWING NONSENSE, JUST LIKE NAR AND ALL THEIR DROID REALTORS TELLING EVERYONE WE'VE HIT A BOTTOM IN THE HOUSING MARKET - WHAT A BUNCH OF SHI$%^!]
4. Deflation is already here. Consumer prices have fallen for three months in a row. And, most ominously, it's affecting wages too. The Bureau of Labor Statistics reports that, last quarter, workers earned 0.7% less in real terms per hour than they did a year ago. No wonder the Fed is worried. In deflation, wages, company revenues, and the value of your home and your investments may shrink in dollar terms. But your debts stay the same size. That makes deflation a vicious trap, especially if people owe way too much money. [THINK JAPAN NO APPROACHING 2 LOST DECADES AND REALIZE THAT IF WE CAN GET AWAY WITH JUST THAT WE WILL BE VERY FORTUNATE!]
5. People still owe way too much money. Households, corporations, states, local governments and, of course, Uncle Sam. It's the debt, stupid. According to the Federal Reserve, total U.S. debt—even excluding the financial sector—is basically twice what it was 10 years ago: $35 trillion compared to $18 trillion. Households have barely made a dent in their debt burden; it's fallen a mere 3% from last year's all-time peak, leaving it twice the level of a decade ago. [HELL A DECADE AGO WE HAD FAR TOO MUCH DEBT AND WE KNEW, AND DISCUSSED THAT IT WAS UNSUSTAINABLE!!!]
6. The jobs picture is much worse than they're telling you. Forget the "official" unemployment rate of 9.5%. Alternative measures? Try this: Just 61% of the adult population, age 20 or over, has any kind of job right now. That's the lowest since the early 1980s—when many women stayed at home through choice, driving the numbers down. Among men today, it's 66.9%. Back in the '50s, incidentally, that figure was around 85%, though allowances should be made for the higher number of elderly people alive today. And many of those still working right now can only find part-time work, so just 59% of men age 20 or over currently have a full-time job. This is bullish? [LESS THAN 3 OUT OF 5 US MEN OVER 20 YEARS OF AGE HAVE A FULL TIME JOB? YEP THINGS ARE JUST FINE OUT THERE, THAT NUMBER RIVALS THE 30'S]
7. Housing remains a disaster. Foreclosures rose again last month. Banks took over another 93,000 homes in July, says foreclosure specialist RealtyTrac. That's a rise of 9% from June and just shy of May's record. We're heading for 1 million foreclosures this year, RealtyTrac says. And naturally the ripple effects hurt all those homeowners not in foreclosure, by driving down prices. See deflation (No. 4) above. [ I WON'T TOUCH THIS ONE OTHER THAN TO SAY IF YOU AREN'T FOLLOWING WHAT KIRK NACE HAS BEEN SHARING FOREVER YOU WILL EVENTUALLY KICK YOURSELF, HIS PROJECTIONS, WHILE SOMETIMES A BIT TO CAUTIOUS, HAVE BEEN DEAD ON. HE IS NOW SAYING WE ARE 5+ YEARS AND AT LEAST 25% PRICE WISE FROM A BOTTOM. IF I KNOW HIM, AND I DO, I WOULD BET THAT WE ARE AT LEAST 7 YEARS AND 35+% FROM A BOTTOM, NOT BECAUSE I KNOW MORE BUT BECAUSE I KNOW HE TENDS TO BE TOO CONSERVATIVE IN HIS ANALYSIS.]
8. Labor Day is approaching. Ouch. It always seems to be in September-October when the wheels come off Wall Street. Think 2008. Think 1987. Think 1929. Statistically, there actually is a "September effect." The market, on average, has done worse in that month than any other. No one really knows why. Some have even blamed the psychological effect of shortening days. But it becomes self-reinforcing: People fear it, so they sell. [LOOKS LIKE WE MAY HAVE STARTED A BIT EARLY THIS YEAR . . . GOTTA LOVE SDS/SRS/SPXU THANKS KIRK!]
9. We're looking at gridlock in Washington. Election season has already begun. And the Democrats are expected to lose seats in both houses in November. (Betting at InTrade, a bookmaker in Dublin, Ireland, gives the GOP a 62% chance of taking control of the House.) As our political dialogue seems to have collapsed beyond all possible hope of repair, let's not hope for any "bipartisan" agreements on anything of substance. Do you think this is a good thing? As Davis Rosenberg at investment firm Gluskin Sheff pointed out this week, gridlock is only a good thing for investors "when nothing needs fixing." Today, he notes, we need strong leadership. Not gonna happen. [DON'T GET ME STARTED - REVOLOUTION/RIOTS/REBUILDING WITH A CLEAN SLATE IS THE MOST REASONABLE OPTION, PERIOD]
10. All sorts of other indicators are flashing amber. The Institute for Supply Management's manufacturing index, while still positive, weakened again in July. So did ISM's new-orders indicator. The trade deficit has widened, and second-quarter GDP growth was much lower than first thought. ECRI's Weekly Leading Index has been flashing warning lights for weeks (though the most recent signals have looked somewhat better). Europe's industrial production in June turned out considerably worse than expected. Even China's steamroller economy is slowing down. Tech bellwether Cisco Systems has signaled caution ahead. Individually, each of these might mean little. Collectively, they make me wonder. In this environment, I might be happy to buy shares if they were cheap. But not so much if they're expensive. See No. 1 above. [BUCKLE UP, IF YOU AREN'T HELPING PEOPLE WHO ARE HURTING YOU ARE MISSING THE CHANCE OF A LIFETIME.]
