MARKET COMMENTARY:
(NO mention of ENE and should not be read by lovers of
"analysts")
Idiots on Wall Street Crawling Out of the Woodwork Once Again
Stocks bit it again last week as all the major indexes skidded to new multi-month lows. The S&P 500 lost more than 20 points after having posted a new 9-month low, the Dow shed almost 29 points and the Nasdaq composite slipped nearly 31 points. Gold and the dollar both continued to slip back a bit.
It was many moons ago that The Sovereign Strategist wrote that it’s exceptionally unlikely that the stock market could launch an extended rally or new bull market without the confidence of knowing what’s hanging around the late-September low. And now it looks like the market is about to find out. Both the S&P 500 and the Nasdaq are within easy striking distance of those lows and a test is pretty much inevitable.
Why are we likely to see more lows? Because we’re in a bear market, that’s why. And contrary to what you may have heard on CNBC, in bear markets, stocks FALL.
But apparently that’s news to famed technical analyst Ralph Acampora of Prudential. You may remember good old Ralph. In the heady days of the Big Bull, he fed naive investors with liberal helpings of bullish prognostications. Good old Ralph recently told the National Post that a new bull market dawned in January of 2001.
Funny, that. On the first day of trade in 2001 the S&P 500 closed at about 1348. Last Friday it closed at around 1007. Interesting bull market, isn’t it? Down more than 25% in a year and a half. But then Ralph, like so many of the mainstream analyst ilk, isn’t in the business of providing intelligent nor accurate forecasts. His business is saying whatever needs to be said to generate commissions and underwriting business for his employers. How else can you explain a "forecast" that has no basis in logic, intelligence or reality?
To his credit, Ralph did mention that he "wouldn’t totally disagree" with the idea that gold might be in a multi-year uptrend. I guess his employers loosened his gold-plated muzzle for a moment and allowed him not to "totally disagree" with the exceedingly obvious, even though it spells bad news for the Wall Street establishment. When gold is going up, the rest of the market generally isn’t.
I shouldn’t be so hard on Ralph. Ralph knows it’s a bear market. But his boss won’t let him say so. Bad for business, you know. And the chairman needs a new leather sofa in his office.
But silly season didn’t close up shop at Prudential’s doorstep. Apparently much of the Wall Street establishment is beginning to acknowledge that perhaps investors won’t get rich being long stocks this year, albeit in their own absurd manner, totally lacking in any semblance of reality or integrity. (REMEMBER: this business isn’t about providing you, the investor, with an intelligent forecast, but only telling you whatever it takes to get you to buy their latest offering of worthless stock.) Salomon Smith Barney, cut its S&P 500 target to a range of 1,200 to 1,250 from 1,300 to 1,350.
Here we are in the midst of the most vicious market in decades and the folks at SSB expect the market to climb more than 21% in the next 6 months. That’s 42% annualized, by the way. Funny isn’t it? Ralph’s bull market in which stocks fall 25%, and Salomon’s crazy bear market in which stocks climb 21%. War is peace, black is white, bears are bulls and bulls are bears, all pigs are created equal but some are more equal than others and George Orwell is rolling in his grave.
Remember perennial bull and one trick bullish pony Abby Joseph Cohen? No, she hasn’t yet been put out to pasture. She’s still collecting seven digits each year to fleece whatever portion of the public is still stupid enough to listen to her inane prattle. According to her latest, "fair value" for the S&P 500 is 1300. A mere 29% from last Friday’s close.
Newsflash for you Abby: "fair value" is where the market is right now. That’s the only thing you’re going to get for it. I don’t care what the market is "worth". As of last Friday, the only thing anyone is paying for it is 1007. If 1300 is "fair value" how about if I sell you a couple baskets of S&Ps at 1200? What a bargain...
Are you amazed yet? Throughout this multi-year BEAR MARKET, Wall Street has been spoon-feeding us forecast after forecast for HIGHER prices. Every year the stock market is supposed to close HIGHER and yet even a brain dead idiot can look at a simple S&P 500 chart and understand that the trend is down and has been so for years.
WHAT ARE THESE PEOPLE GETTING PAID FOR?
If any doctor had the track record of the major Wall Street firms, the Abby Jo Cohen’s, Henry Blodget’s and Ralph Acampora’s of the world, they’d either be bankrupted by malpractice suits or be tossed in jail for murder. But these Wall Street buffoons keep pulling in MILLIONS of dollars every year for being DEAD WRONG, OVER AND OVER AND OVER AGAIN.
Yes I’m on a particularly vicious rant tonight, but it’s not merely for sport. The point is to demonstrate just how far we really are from the end of this bear market. We’re not even close. Wall Street is still spinning bullish yarn after bullish yarn. Every idiot analyst, fund manager and his grandmother is still expecting stocks to move higher. Where’s the capitulation? Where is the extreme negative sentiment that characterizes major market bottoms?
About 6 or 8 or 10 months ago I forecast that the market would likely see a major downside surprise this year. In fact, I submitted that forecast to a major advisory service who asked me for my opinion. Of course it never got printed. Not bullish enough. And now, even though the stock market tanked over the past two weeks, I’m more convinced than ever that the "downside surprise" is more likely than ever.
It’s a funny thing about markets, and a subtle point that almost no one understands: higher prices beget higher prices and lower prices beget lower prices. The illusion is that in a bear market, the more the market falls, the closer you get to the lows. But the fact of the matter is that the farther the market falls, the more disappointed and scared people get. And MORE selling is generated. Selling that would never have happened had the market not fallen that low. Lower prices beget MORE selling in the same way that new highs in a bull market draw in more buyers, even though the market is already vastly overpriced. It’s the new highs that literally create new buyers and new lows that create new sellers!
The idiots on Wall Street will sit in their leather chairs, paid for by dollars fleeced from YOU with their bogus "buy" recommendations, and tell you that all this selling is bringing us closer to the bottom, generating great bargains. Bull! Lower prices are crawling under the skin of the remaining bullish hold-outs and will eventually cause them to bail on their positions and cause an even sharper sell-off. WHEN THE MARKET FALLS FAR ENOUGH, IT WILL CAUSE STILL MORE PEOPLE TO SELL IN PANIC. Lower prices will beget lower prices.
The market is NO bargain. It is overpriced. It is a bear market. Anyone who tells you otherwise is either lying, losing money, or both. Why listen to a liar or a loser?
Oh we’ll see some nice rallies in there. In fact, judging by last Friday’s close, we’ll probably see a healthy one in coming weeks. It may even start this Monday. And here’s my forecast, should that occur: the idiots on Wall Street, the fund managers who couldn’t beat the S&P 500 if their lives depended on it, (and get paid to underperform, year after year) will start prattling off to Reuter’s and CNBC that "the market tested the low and is now moving higher. We saw capitulation and now the stock market will catch up with the improving economy."
And they will be wrong. As they always are and as they always have been, And they will still collect seven digit salaries for being dead wrong because they work in one of the only two businesses where you can be dead wrong day after day and still get paid, as long as you dress well: Wall Street and TV weather forecasting.
At least TV weather forecasters have some credibility to go with their nice suits. And a much better track record...
Mark M. Rostenko
editor@sovereignstrategist.com |
