Wednesday, May 28, 2014

Economic Boom & Bust: 98% Risk of Crash This Year

ANALYST: If There Isn’t An Economic Boom, Then There Can’t Be An Economic Bust
From Oppenheimer’s John Stoltzfus (emphasis theirs):
“It is our opinion that the Federal Reserve (as well as the ECB) is less likely to take a misstep in anticipating a change of rates so long as the Fed and the ECB maintain the level of vigilance that they have had in place over the past few years since the Great Crisis… We believe that a slow growth environment coming out of the Great Crisis is best for the economy, the markets, and their respective constituencies. It is our opinion that a modest expansion is preferable to a boom anytime as every boom we can recall in the last three decades has led to a bust of some kind. ‘No boom, no bust!’ is our mantra for now.“
Bank of Japan Seeks to End Stimulus, Currency Market in Disbelief
The bond markets and currency markets are out of sync with equity markets and widely-touted economic projections that things are getting better.
Today the spotlight is on Japan.
Bank of Japan Confident 
Financial Storm Chasing With Blinders On: How The Fed Is Driving The Next Bust
7-Year cycle suggest an important high in 2014?
 
CLICK ON CHART TO ENLARGE
Wall Street: 98% Risk of Crash This Year
Earlier this year, a select group of Wall Street Insiders were surveyed, and the results were ominous. These financial experts and fund managers predicted a 98% chance a stock market crash will happen in the next six months. 
Gary Shilling, one of Wall Street’s top economists, says the S&P Index could drop as low as 800, a 42% decline. 
Jeffrey Gundlach, one of the world’s biggest bond fund managers and CEO of DoubleLine Capital, says the real damage is yet to come and an “ominous third phase” will “far exceed the damage of 2008.”
And Euro Pacific Capital CEO Peter Schiff, author of “The Real Crash: American’s Coming Bankruptcy,” warns, “I am 100% confident the crisis that we’re going to have will be much worse than the one we had in 2008.”
Even billion-dollar investor Warren Buffett is rumored to be preparing for a crash as well. The “Warren Buffett Indicator,” also known as the “Total Market Cap to GDP Ratio,” is breaching sell-alert status and a collapse may happen at any moment. 
Kyle Bass On China’s “Contraction” And “The Fed’s Worst Nightmare”
With the Fed tapering and both China “I don’t think the markets are discounting what’s really happening in China,” and Japan’s currencies likely to weaken, the net impact on the U.S. will be deflationary, Kyle Bass warned in a recent presentation. That trend will be accelerated by the improvement in the balance of trade for the U.S., which had its current account deficit shrink due to increased hydrocarbon production. Bass warns, the crucial moment will come when the U.S. reports a sub-6% unemployment rate, meeting the target it has set for normalizing its monetary policy by ending QE and raising rates. He predicted that will come in July. That will be the Fed’s “worst nightmare,” he said. Raising rates would stifle growth and recreate unemployment problems, which would be disastrous politically, according to Bass.
Warning: The risk is “quite high” in stocks right now
“The risk is quite high over the coming summer months,” Jason Goepfert told me yesterday.
“For investors, I wouldn’t want to make any more additional purchases right now,” he continued. “I would hold back a little bit.”
When Jason talks, I listen…
I rely on Jason – more than anyone else – to help me figure out whether investments are “hated” or not…
Long time readers know that I want to buy “hated” investments. But how do I define hated? What do I look for? And how do I track it?
My go-to source for these answers for years has been Jason Goepfert of SentimenTrader.com.
Jason shared some key insights with me yesterday… and I wanted to pass those along to you today…
Jason tracks investor sentiment. He looks for times when investors are extremely optimistic (so he can sell), or when investors are extremely pessimistic (so he can buy).
Right now, in the U.S. stock market, investor sentiment is becoming overly optimistic. And when you see that, typically the upside potential won’t be good over the next few months. Specifically, Jason has a 1-10 scale of stock market “risk.” And right now, he says the risk level is 7 – “well above average.”
What does that mean? “At a risk level of 7, stocks have returned 1.1% on average over the following three months,” he explained. “For comparison, when the risk level is at 3, stocks have returned 5.4% on average over the following three months.” (That’s based on 10 years of data.)
ECONOMIC DEATH — Retail Apocalypse, Record High Derivative Bubble

BANKRUPTCY CRISIS: More U.S. Cities Set To File




SOURCES
Detroit not alone, expect more bankrupt cities: Experthttp://www.cnbc.com/id/101698390
20 Cities That May Face Bankruptcy After Detroithttp://www.newsmax.com/US/cities-bank…
Economist: The Case-Shiller Home Price Report ‘Makes No Sense’
We just got March S&P Case-Shiller home prices that beat expectations.
The numbers showed home prices were cooling, but they nevertheless reflected increases on month-over-month and year-over-year bases.
However, Ian Shepherdson chief economist at Pantheon Macroeconomics says “this report makes no sense.” This is because “every indicator” of the house market he watches is slowing or falling.
“We don’t know if the March problem is Easter seasonal adjustments or the long-standing issue of fully adjusting for changes in the proportion of foreclosure sales in the sample, but we think the real trend in existing home prices is now flat at best,” Shepherdson writes.
April Durable Goods Bounce On Defense Orders; Machinery Goods Drop Most Since February 2013; CapEx Slides 1.2%
Richard Ravitch: Expect a Tsunami of Municipal Bankruptcies
Richmond & Dallas Fed Miss; Manufacturing Outlook Plunges
“The Market’s Not There” – One World Trade Center Lowers Asking Rents By 10%


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