Friday, November 7, 2008

Weekend Weimer and Beagle

It has been one hell of a week. So it's time to take a break and do anything except think about the market. In that vein, here are some pictures of the kids. I'll be back on Monday

Sarge on top of a big pile of laundry



Kate backseat driving



Scoobey inspecting her kingdom

The Detroit Death March Continues

From Reuters:

Ford Motor Co posted a deeper-than-expected $2.98 billion quarterly operating loss on Friday and told investors it would take aggressive actions to further cut costs as it faces a severe slump in demand.

Weak demand for autos is being felt around the world, driving down shares of No. 1 automaker Toyota Motor Corp after it slashed its profit forecast for the year.

Ford warned investors it is burning through cash quickly and sources said Chrysler LLC is doing the same, as they struggled to survive the deepening global financial crisis.


Here's what the car companies are thinking. Survive until they are retooled, the recession is over and they have cars the public actually wants to buy. That means they have to hunker down, conserve cash and pray like hell they can survive. The problem is they are burning cash.

Ford Motor Co., with U.S. sales shredded by the worst financial crisis since the Great Depression, posted a third-quarter operating loss of $2.98 billion and said it used up $7.7 billion in cash.

The per-share operating loss of $1.31 was wider than the 93-cent average of 10 analyst estimates compiled by Bloomberg. Ford said it would trim more salaried jobs by January, deepen its fourth-quarter production cuts and shrink capital spending by as much as 17 percent.

Revenue plunged 22 percent to $32.1 billion, forcing Ford to triple its consumption of cash compared with the second quarter. Cash, cash equivalents and marketable securities for Ford's automotive business plummeted 29 percent to $18.9 billion on Sept. 30, the Dearborn, Michigan-based company said today.

``Cash burn is the No. 1 issue,'' Rebecca Lindland, an IHS Global Insight Inc. analyst, said in a Bloomberg Television interview. ``We associate cash burn with General Motors. It has not always been a problem with Ford. That is potentially a new problem.''


Ford is facing one hell of an uphill battle. First, we're clearly in a recession. Secondly, consumers' purchases of durable goods plunged 3.1% last month. Credit is tightening. And it doesn't look like we're going to get out of this situation anytime soon.

Employment Down 240,000

From the BLS:

Nonfarm payroll employment fell by 240,000 in October, and the unemployment rate rose from 6.1 to 6.5 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. October's drop in payroll employment followed declines of 127,000 in August and 284,000 in September, as revised. Employment has fallen by 1.2 million in the first 10 months of 2008; over half of the decrease has occurred in the past 3 months. In October, job losses continued in manufacturing, construction, and several service-providing industries. Health care and mining continued to add jobs.


Let's look at this in a bit more detail.

-- The unemployment rate increased by .4%. That's a huge increase

-- The economy has lost 1.2 million jobs in the last 10 months. The best reading of job growth for the latest expansion is 7,177,000 total jobs. That means that in the last 10 months we've lost 17% of the total number of jobs we've created during this expansion.

-- Job losses are accelerating: over half of the jobs lost in the last 10 months have occurred in the last 3 months.

There is nothing good in this report.

Forex Friday



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Notice the following on the weekly dollar chart:

-- Prices formed a double bottom in 2008 with the first bottom occurring at the end of the 1Q and the second bottom occurring at the end of the 2Q/beginning of 3Q.

-- Prices have increased 22% since early July

-- Prices are currently at levels not seen since 2006

-- Prices are above all the SMAs

-- All the SMAs are moving higher

-- The shorter SMAs are above the longer SMAs

-- The market is technically overbought right now



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Notice the following on the daily chart:

-- Prices have clearly been in an uptrend since the beginning of July

-- Prices have continually moved through upside resistance

-- Prices have used the 10, 20 and 50 day SMA as technical suppot

-- All the SMAs are moving higher

-- The shorter SMAs are above the longer SMAs

-- Prices are forming a consolidating triangle around the 10 day SMA

-- The market is technically overbought right now

Bottom line: both of these charts together imply we'll see a consolidation after a strong multi-month rally.

Thursday, November 6, 2008

Today's Markets

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The triangle consolidation that occurred in October looked like a bottoming pattern. However, today's action leads to an alternate conclusion about where the market is going. The main issue with this chart now is prices moved through the 10 and 20 day SMA on high volume today. Also note the chart has printed two long candles in a row indicating strong movement.

The downward move in prices means the shorter SMAs will be moving lower as well. In addition, the 10 day SMA might not cross over the 20 day SMA.

Bottom line: this is still a bearish chart and the idea we would be rallying off of the triangle consolidation pattern is in jeopardy.

Retail Sales Disappoint

From the WSJ:

U.S. retailers largely reported October sales declines in a month that saw consumer confidence plunge amid the nation's financial crisis and spreading layoffs.

The sector's weak performance was no surprise, but nonetheless sets the scene for what is looms as a dismal holiday-shopping season.

Numerous retailers reported sharp declines, led by teen retailer Abercrombie & Fitch Co., which saw a 20% drop in sales at stores open at least a year. Upscale retailers like Abercrombie have been feeling the pain more than lower-end stores, which are showing the best overall strength.


From Bloomberg:

October same-store sales fell 0.9 percent, the first drop in seven months, and 4.2 percent excluding Wal-Mart, the International Council of Shopping Centers said. Excluding the effect of the shifting Easter holiday, it's the first decline since at least 2000, Retail Metrics said.

Many retailers anticipated the economic downturn and have done a ``very good job'' of reducing the amount of merchandise on shelves, even as sales decline, Perkins said. Cost-cutting and lower inventory helped retailers including Gap maintain their profit forecasts today.


None of this should be surprising. Over the last few year consumers have seen real estate prices drop. Then over the last 3-4 months they have seen their other source of wealth -- stocks -- plummet as well. Combine that with a deteriorating job picture and you have record low consumer confidence which leads to a consumer led recession.

Below are charts from Prophet.net of various retail sectors. Note that most are trading at or near multi-year lows. Clicking on all the pictures will give you a larger image.









Federal Debt Could Constrain Obama's Plans

From the WSJ:

The Treasury Department laid out near-term borrowing plans Wednesday, saying it expects to tap financial markets for $550 billion in the final three months of 2008 and another $368 billion in the first three months of next year by issuing Treasury securities with a wide range of maturities.

Economists project that total government borrowing could pass $1.5 trillion in the fiscal year, which ends next September, pushing up the government's total debt burden by more than 25% in one year.

.....

The sharp rise poses a potential dilemma for Mr. Obama's ambitious agenda. Few economists believe the Treasury will be constrained in the next year in its ability to manage its rising borrowing needs or in advancing another fiscal stimulus program. But in the long run, rising government debt could make it harder for Mr. Obama to pursue new spending and tax-cut programs aggressively.

"I don't think that anything on the stimulus end will be constrained by these deficits," said David Greenlaw, a Morgan Stanley economist. "But if you're talking about health-care reform and some of these longer-term programs, there is some constraint there."


Let's get some political baggage out of the way before we go forward.

I've been complaining about the deficit for the last 4 years. And I will continue to complain about the deficit for one primary reason: as a country we have to make choices. Some things are more important than others. Those things we find important we should spend more money on.

Over the last 8 years we have not made any choices. Instead we have funded, well, everything that has come down the pike. In addition, we cut taxes, further exacerbating the problem of deficit financing. As a result, we have issued mammoth amounts of public and intra-government debt. Here's a reading of the last 8 years from the Bureau of Public Debt:

09/30/2008 $10,024,724,896,912.49
09/30/2007 $9,007,653,372,262.48
09/30/2006 $8,506,973,899,215.23
09/30/2005 $7,932,709,661,723.50
09/30/2004 $7,379,052,696,330.32
09/30/2003 $6,783,231,062,743.62
09/30/2002 $6,228,235,965,597.16
09/30/2001 $5,807,463,412,200.06
09/30/2000 $5,674,178,209,886.86

The current total is $10,566,146,196,490.58

From a debt as a percent of GDP perspective we have increase from 57% in 2001 to 73% at current levels. Now -- it's entirely possible for the US to issue more debt. I would become extremely concerned at the 85% and higher level. That means we have some way to go. But there are other problems involved with that development.

1.) Interest rates. Here is a chart of the 10 year CMT's interest rate for the last nearly 40 years.



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Clearly rates have been heading lower. Will the issuance of all this debt finally break this cycle? Will the US finally start having to pay for a higher rate of interest to attract purchasers?

2.) The dollar. While the dollar has enjoyed a rally recently more debt could kill that pretty quickly.



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While a drop in the dollar would be great for exports it would also be stoking commodity based inflation because most of the world's commodities are priced in --- dollars.

In other words -- there are a lot of policy angles we need to consider going forward.

Thursday Oil Market Round-Up



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Notice the following on the weekly chart:

-- Prices have dropped nearly 60% since the market top near $1450/bbl. In addition, this drop occurred over a four month period. That's not an orderly drop; that's a collapse in prices.

-- Prices have moved through several technically important support levels before settling at their current price

-- The 10 week SMA has moved through the 50 week SMA

-- The 20 week SMA is about to move through the 50 week SMA

-- Prices are below all the SMAs

-- All the SMAs are moving lower

-- The market is technically oversold right now

Bottom line: this is a bearish chart. However, I would expect a bear market rally fairly soon based on the massive sell-off in the last three months and the technically oversold reading on the MACD



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Notice the following on the daily chart:

-- All the SMAs are moving lower

-- The shorter SMAs are below the longer SMAs

-- Prices have been dropping for four months

-- Prices used the 20 day SMA as upside technical resistance

-- The market is technically oversold right now

Bottom line: this is a bearish chart, but it appears the market may be heading for a bear market rally. The market has consolidated over the last week or so, the MACD has bottomed and is rising and the RSI has already started to move higher. In addition, the weekly chart is also in a good position to make a bear market rally.

Wednesday, November 5, 2008

Today's Markets

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Big sell-off today, but consider the bigger picture.

-- Prices have broken out of the triangle consolidation pattern established in October

-- Prices are still above the 10 and 20 day SMA (meaning the 10 and 20 day SMA are providing technical support for a possible sell-off).

-- The 10 day SMA is about to cross above the 20 day SMA

-- The 20 day SMA is neutral

BUT

-- The 50 and 200 day SMA are both heading lower

-- The shorter SMAs are below the longer SMAs

Bottom line: this chart is sending mixed signals. The short-term trend is bullish but the long term trend is still bearish.

So -- What Are People Buying These Days?

Last Friday the BEA released the personal income and expenditure report. I wanted to dig a bit deeper into the data to see what it says.

First, here is a graph of total personal consumption expenditures:



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Note that this statistic has been neutral for the June - August period and it ticked down in the August to September period. In other words, the slowdown started about 4 months ago when people started to spend a bit less on things.

The report breaks expenditures down into durables goods expenditures, non-durable goods expenditures and service expenditures.



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Service expenditures continue to tick up.



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Non-durable goods rose until July but have retreated for the last two months. Remember -- these are goods that will last less than three years.



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Durables goods numbers have been decimated over the last 7 months. Let's also assume that durable goods purchases are a proxy for consumer confidence. Durable goods last more than three years. Therefore, there is a higher probability a consumer will purchase these goods on credit. With credit and the job market contracting there is little reason for consumers to get into a long-term financing arrangement right now.

In other words, consumers aren't that confident right now.

A Closer Look At the Last 4 Quarters of GDP Growth



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The BEA breaks down GDP data into four subsets. Here is the list with the percentage each contributes to GDP growth:

1.) Personal consumption expenditures,
2.) Domestic investment,
3.) Exports/imports, and
4.) Government spending.

The last four quarters have not been good for the US. The annualized growth rate starting in the 4Q 2007 was: -.2, .9, 2.8 and -.3. The second quarter number was the result of a statistical fluke not real growth. Let's see what the chart says about this growth.

1.) Gross private domestic investment has consistently lowered GDP growth. This is largely the result of residential investment which has been a negative contributor since the first quarter of 2006. However, also note that non-residential investment in equipment and software has subtracted from growth for the last three quarters thanks to drops in industrial and transportation equipment. In other words, we're seeing a slowdown in some business investment as well.

2.) Personal consumption expenditures took a huge nosedive last quarter. This jibes with the record low consumer confidence number we're seeing along with the poor showing on the jobs front. Considering this sector is responsible for 70% of GDP growth a continued weak showing would seriously hurt growth.

3.) Government spending was very important last quarter. But notice that this was the highest contribution for the last four quarters. In other words, don't expect this trend to continue.

Now, let's ask a very important question: what are the possibilities that any of these categories will increase next quarter?

Consumer confidence is low, the job market is terrible and two main sources of personal wealth (stocks and real estate) are all dropping in price. Combine all of these factors and you get more low readings for PCEs/

The economy is slowing down domestically and internationally. That does not bode well for either domestic business investment or exports.

That leaves government spending to prop up the economy.

Wednesday Commodities Round-Up

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Notice the following on the weekly chart:

-- Prices clearly broke through the uptrend started in mid-2007

-- Prices are below all the SMAs

-- The 10 and 20 week SMAs have moved through the 50 week SMA

-- All the SMAs are moving lower

-- The shorter SMAs are now below the longer SMAs

-- Prices moved through support established in early 2007

-- Technically the market is oversold at this level.

Bottom line: this is a bearish chart.

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Notice the following on the daily chart:

-- Prices have been dropping for three months

-- All the SMAs are moving lower

-- The shorter SMAS are below the longer SMAs

BUT

-- The market is technically oversold right now and

-- Prices have moved through the 10 day SMA and are meeting resistance at the 20 day SMA

In other words, this could be a reversal point. However we would need to see a convincing move beyond the 20 day SMA to say for sure.

Tuesday, November 4, 2008

Today's Markets

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The post break-out rally from the consolidation pattern continues. In addition, note the following:

-- Prices are above the 10 and 20 day SMA

-- The 10 day SMA is moving higher

-- The 20 day SMA is now neutral

BUT

The longer term SMAs are moving lower

-- The 50 and 200 day SMA are moving lower

-- The shorter SMAs are below the longer SMAs

Bottom line: it's a mixed signal market right now.

How Long Will the Recession Last?

My own view is the recession started in the first quarter of this year. While the economy was growing at a .9% annual clip at that time, there were a ton of other problems. Employment started to fall and unemployment was rising. Housing had been a mess for some time. The credit markets had been in turmoil for at least 6 months. Assuming this assessment of when the recession started to be the question now becomes how long will the recession last? If commodities are any indication we have a long road to hoe:

A record plunge in commodities may signal the U.S. is headed for the longest recession since 1981, just after Ronald Reagan became president and the economy began a 16-month slump.

Industrial raw materials measured by the Journal of Commerce fell at an annual rate of as much as 56 percent last week, the most since 1949 and worse than the declines before every recession since then. Crude oil, copper and wheat tumbled more than 50 percent from records this year as the U.S. economy declined in the third quarter by the most since 2001.

``The industrial sector, which was helping to keep the recession relatively mild, has completely given way and now we need to be prepared for a much more severe recession,'' said Lakshman Achuthan, managing director at the Economic Cycle Research Institute in New York, which compiles the Journal of Commerce data. ``It's at least going to look something like what we saw in the early 1980s, but it could be worse.''


Some of the relevant charts show big drops in key commodity areas:

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The CRB index is now at or near its lowest level in three years. All the SMAs are moving lower, the 10 and 20 week SMAs have moved through the 50 week SMA and prices are below all the SMAs. Bottom line: this is a bearish chart.

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Industrial metals are also at or near their lowest level in over three years. Also note this area of the commodities markets was in a trading range for the better part of two years. Now it is out of that range. Also note prices are below all the SMAs, the shorter SMAs are below the longer SMAs and all the SMAs are headed lower. Bottom line: this is a bearish chart.

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Energy prices are also dropping. Also note that prices are below all the SMAs, the 20 week SMA is about to move through the 50 week SMA and all the SMAs are moving lower. Bottom line: this is a bearish chart.

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Agricultural prices formed a double top in 2008 with the first top occurring near the end of the first quarter and the second top occurring near the end of the second quarter. Since then prices have fallen through all the SMAs, the 10 and 20 week SMAs have crossed below the 50 week SMA and all the SMAs are now moving lower. Bottom line: this is a bearish chart.

In other words, all of these charts indicate there is a tremendous amount of demand destruction -- demand simply going away. The latest readings from the manufacturing sector confirm this view:

The nation's manufacturers continued to cut back production sharply in October for the second straight month, the Institute for Supply Management reported Monday. The ISM index fell to 38.9% in October from 43.5% in September. This is the lowest level since September 1982. The size of the decline was unexpected.


On the good side, this will eventually ease inflationary pressures, thereby making the recent interest rate cuts less problematic in the long run.

Additionally, I would like to point out the possible problem of speculation and its effect on these markets. While I originally felt the run up in commodity prices was mostly the result of supply and demand, I think speculation played a part. However, I have no idea what degree of the price increase was caused by speculation. However, the more speculation was the cause of the multi-year rally, the less the drop in price will lead to a prediction for a longer recession. So keep that in mind with these charts as well.

The Detroit Death March Continues

From the WSJ:

"In my 27 years, I have never seen a month like this," said GM sales chief Mark LaNeve. "It was like somebody turned off the lights in the month of October."

.....

October's declines were led by GM, where sales fell 45% to 166,744 vehicles. The company was hurt when its financing arm, GMAC LLC, began offering loans only to customers with top credit scores. In many areas of the country, only a third or so of all customers would qualify for loans, Mr. DiGiovanni said.

.....

Ford reported its sales fell 30% to 132,248 cars and light trucks, Toyota Motor Corp.'s fell 23% to 152,101 and Honda Motor Co.'s dropped 28% to 85,864. For Toyota, fleet sales comprise less than 10% of total sales.


Let's loan these guys some money -- they seem really credit worthy, don't they?

The central issue with the car companies is their size and impact. Ford and GM combined employ about 500,000 people according to Yahoo Finance. While these figures don't break that number into foreign and domestic numbers I think a majority are US based. And those jobs have impacts on many other industries. Assume at minimum that 1 auto job directly impacts the employment of at least one other person. For example, an auto employee also shops for clothes at local malls etc.... In other words, we're looking at minimum at 1 million people directly impacted by the auto industry. That's the main reason people are scrambling to do something about this mess.

James Hamilton at Econbrowser made the following observation about car sales:

Lost income from motor vehicles and parts subtracted 64 basis points from the 2008:Q2 GDP growth rate (quoted at an annual rate), and took another 80 basis points away from quarter 3 (see BEA Table 1.5.2). Today's numbers suggest that the fourth quarter is going to be significantly worse than that.


But there is also the issue of horrible leadership. Toyota invested a lot of time and money in the Prius. It's a well-made car with that gets fabulous gas mileage. And it's now sold over 1 million cars indicating there is a clear demand. The US industry in contrast has relied on large autos/trucks which are well made but which are not well-positioned for an expensive oil environment. And despite oil's recent drop, we are in the age of peak oil where gas mileage will become a driving factor in car purchases. Bottom line, the US car company's management has closed their eyes to the underlying fundamentals of the car market for some time. Neither company has been profitable for fiscal year 2006 or 2007. And for that they should be punished, not rewarded.



Finally, take a look at their stock charts. These charts say "headed for bankruptcy."

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Treasury Tuesdays

First, please vote today.

Secondly, let's look at the Treasury market. I use the IEF -- the ETF that represents the 7-10 year of the curve -- as a proxy for the market.

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In last week's installment, I noted that I think the market is going to either move sideways or lower. As this yearly chart shows, the market has likely made a double top with the first top occurring in mid-March and the second occurring in mid-September. Remember the yield and price are inversely related. Therefore there is a naturally occurring floor for Treasury prices. Because of inflation adjustments I just don't think we'll see the Treasury market rally higher than the 92 area on this chart that we've seen twice this year.

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On the daily chart, the main issue is the bunched-up nature of the SMAs. I use the SMAs as trends; when they are this bunched up it tells me there is a great deal of confusion about where traders want to take the market. Note the following:

-- Prices have been gyrating around the 200 day SMA since mid-September. Before that he had a clear rally as indicated by the then existing relationship between the SMAs.

-- The SMAs are all within a point of each other

-- The 50 and 200 day SMAs (the longer averages) are moving sideways.

Monday, November 3, 2008

Today's Markets

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On the daily chart, note the followingl

BULLISH:

-- Prices are above the 10 and 20 day SMA

-- The 10 day SMA is moving wideways

BEARISH:

-- The 20 and 50 day SMA (longer-term averages) are moving lower

-- The shorter SMAs are below the longer SMAs

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However, I do want to point out there are three possible technical support levels for prices right now -- the 10 and 20 day SMA along with the upper level of the consolidating triangle. In addition, note that prices have clearly broken out of the triangle consolidation pattern.

Bottom line: this is a mixed market -- it's looking for a reason to move convincingly in one direction or the other.

Nothing Good in Today's Economic Reports

From Bloomberg:

The Institute for Supply Management's factory index fell to 38.9 from 43.5 in September; 50 is the dividing line between expansion and contraction. The Commerce Department said separately that construction spending fell for the eighth time in 10 months in September.

Today's report may add to pressure for further interest-rate cuts and an additional federal package of tax and spending measures. The figures also showed the weakest level for U.S. export orders in the two decades the ISM has kept the data, a sign of slowdowns in Europe and Asia.


Let's break this down sentence by sentence.

Manufacturing in the U.S. contracted in October at the fastest pace in 26 years as it got tougher to obtain credit and faltering economies abroad eroded prospects for American exports.

It's been a quarter of a century since we've seen a manufacturing number this bad. We have to go back to 1982 -- one of the worst recessions of the last 50 years -- to see a number this bad. When numbers show up in bad recessions you know you've got problems. Here's chart that shows today's number in perspective:



Today's report may add to pressure for further interest-rate cuts and an additional federal package of tax and spending measures.

Interest rates are at 1% -- which means we're essentially at 0% after adjusting for inflation. We don't need to lower rates any more; they're about as low as we can go. However, I do agree we need fresh spending measures for the economy.

The figures also showed the weakest level for U.S. export orders in the two decades the ISM has kept the data, a sign of slowdowns in Europe and Asia.

Exports have been one of the only bright spots in the economy over the last year or so. In the last GDP report, exports and government spending basically kept the economy afloat:



What happens if we take exports out of that equation?

Bottom line: today's news stinks.

Are we Fairly Valued or Cheap?

From this week's Barron's:

In a recent research note, you wrote: "I remain bullish and wrong." Is that still your sentiment?

Yes, it is. I was just looking at an interview I did with Barron's in December 1980, and I was called a super bull. And then we got prematurely bearish in 1998, and people started calling me a perma-bear. Right now, though, I am not a super bull, but I am a very convinced and optimistic bull.

What underscores your case?

Certainly, the intrinsic value of stocks. In terms of our valuation model, it's the most positive we have seen since 1984. We look at 28 different factors, including price-to-earnings and price-to-sales, and they are quite decidedly positive. Because we look at normalized earnings, we smooth them out over a business cycle. We have always done it that way, and we are at about 12 times earnings now.

Is that on forward earnings?

No. What we do is we take the last 4½ years of historical earnings, and then we project forward only six months. Then we divide the whole thing by 20, or the number of quarters. We have found over the years that it is almost imperative that you do that -- that is, smoothing out the business cycle to get the underlying level of earnings.

How does that 12 times P/E ratio compare to other periods?


Looking back 55 years, we are in the 15th percentile, well into the bottom quartile, and this is where markets very often have bottomed out. So on a valuation basis, this is a really cheap market. At these levels, we are really down in bull-market territory. From here, on a one-year basis -- and this goes back to 1926 -- the market has been up about 18%, on average, in the next year.


The interview is with 71 year old Steve Leuthold who has been in the investing business for over 5 decades. In other words, he's seen a thing or two. Like most serious investors/traders he has developed his own indicators so it's hard to compare his results with standard publicly available tools. However, it's important to note he sees the market as pretty inexpensive right now and that's with a system that employs 28 different factors.

While I don't use a model that proprietary the market's recent heavy sell-off has got me thinking this is a time to buy as well.

Continuing:

Does this particular downturn remind you of any other economic slumps in particular?

This recession is probably similar to the one that occurred around 1981. The average recession since World War II has been about 11 months. The longest was 16 months, and we've had two of those. And I think this one is going to last at least 16 months and probably longer than that, maybe 20 months.

This recession started in the fourth quarter of last year, so you are looking at a recession through the fourth quarter of 2009. But you have got to remember that the stock market is a lead economic indicator, and historically it has turned up about 60% of the way through a recession. Applying that timetable suggests that this market should be bottoming sometime this month, and that is very, very possible.


This is really interesting. I think the recession started in the first quarter of this year. Regardless of when we date it, the main thing I am interested in is 1.) how long it will last, and 2.) when to start adding stocks in relation to that prediction. I also think it will be a long recession. More importantly I think that once the recession is over there is still a decent possibility (at least 50%) that we will experience slow growth (1%-2%) for at least a year if not longer.

All that being said, his observations that stocks start rallying before the end of the recession is important. It indicates you can miss some of the the boat by waiting too long.

Market Mondays

Let's start the week with a look at the markets.

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Let's begin with a long view. I always consider these to be "you are here" perspectives. Note that from 2003 - 2007 the market rallied from a low of roughly 80 to a high of roughly 155. The market has since lost 38% of its value and is currently trading at 96.83.

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On the yearly chart note the following:

-- A large amount of the damage was done very quickly. Once the market moved through 120 it dropped to 85 withing a few months.

-- Prices are 23.75% below the 200 day SMA

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On the one month chart notice the following:

-- Prices are above the 10 and 20 day SMA

-- The 20 and 50 day SMA (the longer SMAs) are moving lower

-- The 10 day SMA is neutral and has been for about a week

-- The shorter SMAs are still below the longer SMAs

-- Prices have broken out of a triangle consolidation pattern

Bottom line: there are some promising developments here. First, prices are above some of the SMAs. Secondly the shorter SMA is now neutral. Third, prices formed a triangle consolidation pattern and then broke out. However, note the longer term indicators -- especially the 20 and 50 day SMA and their orientation to each other -- are still bearish.