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EmailSunday, July 26, 2009
Executive Summary
- Data is either good, murky, or unreliable. The good data says we are not yet at the bottom.
- Stock trading volumes are way, way down.
- High frequency trading (HFT) harmfully obscures true market activity.
- S&P 500 earnings indicate that stocks are still expensive.
- The recent stock market advance is lacking a solid fundamental story to base itself on, it is running on hopes and fumes.
On a recent leg of a flight heading between Denver and Detroit, a kindly, middle-aged woman took the seat next to me and made small talk. As she hailed from Detroit, I had all sorts of questions for her. Did she know anybody who is out of work? How did the city 'feel' these days? What had she noticed lately?
When she inquired as to my interest and I told her a little bit about my work, she asked for my prognosis. I said, "Not good, not yet; the base data is very weak." She immediately replied, "But the stock market has been going up. How do you explain that?"
She said this as if she had just played an undetected trump card; as though I was missing out some incredible secret. Given the power of the stock market to communicate to the masses (as exemplified by this exchange on the plane), and given how easily large, self-interested parties are able to manipulate and influence people, I consider the stock market to be among the least reliable of indicators.
So, understanding that all bull markets climb a wall of worry and that I could well be wrong, here are my three main reasons for discounting the messages implied by the recently rising stock market:
Your faithful information scout,
Chris Martenson
Copyright 2009, Chris Martenson. All rights reserved.
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Comments
Hello Chris:
Super read, thank you!
I'm actually short the Dow and the dollar and a few hotels and some commercail real estate. I used puts, so for me it is like betting on a horse. I think once the CRE tanks and the Alt-A's and Option Arms roll to shore we are going to have a 5-7 trillion dollar mess...
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Chris,
Below is a re-post of what I recently discovered regarding the murkiness of continuing claims. The good news is the data becomes much less murky when we simply add three numbers together.
The Bottom line: Continuing Claims only includes claims under Regular State programs (approx...
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Hi Chris,
Just a quick comment about the data buckets; I listened to an interview with with Mark Faber the other day, and he mentioned that looking at the ratio of the number of food stamp recipients to the number in the eligible adult population yielded a number around 17%...
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Unemployment claims are a mess. I found a few sites that track total U3 and U6ers by numbers, I believe the latest I saw was 27 million. I know in 2006 or 2007 there were 150 million workers. Personally I like the numbers as opposed to BLS statistics...
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Yes, SUPER READ! I will use the buckets in more areas of my life than just info coming out of Wall Street and DC!
Thanks!
Jeff
Great report; just when I was almost second guessing myself for sitting out this rally this gives me the info to continue trusting myself. So what is driving the stock market up despite the reasons the rally is false? Real fundamentals are bad as CM noted...
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Man, Chris, you continue to amaze me with the depth of your analysis.
The number one reason why the stock market is false is because the 'money maker banks' are authorized to create and invest money on stocks that do not exsist. This creates a system where manipulation is as easy as a key stroke on a computer.
Chris,
If you want more information about that message me...
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Chris...
You've answered the questions I had regarding earnings expectations. Your explanations indicate I was adequately correct in my personal...primitive ongoing analysis in my e-mail comments to you. I plan to watch closely how this evolves the next several months...
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Nichoman wrote:
I do find interesting that we share the same timing (Sept/Oct) for a further market downturn as I've stated in an earlier thread.
Nichoman
It seems all great downturns occur in Sep or Oct. Is there a fundamental reason for that? It seems counterintuitive as that's when businesses are gearing up for new product introductions and the big shopping season is coming (at least historically)...
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