Bear Market

Dollar downmove still seems corrective in nature.  Fed hike in September still seems most likely scenario.  Taalk of US recession is over the top when unemployment, broadly measured is falling and weekly initial jobless claims are at new cyclical lows.  

The current consternation among global equity markets is centered around the recent considerable rise in bond yields globally. Historical precedents, or the lessons they contain, which bear some resemblance to present market conditions suggest the recent spike in bond yields would appear to have historical evidence to back up those who harbor concerns about its potential negative impact on stocks – a negative impact that may be of a long-term nature.

PetroChina just surpassed Exxon Mobil to become the largest energy company in the world, on a market cap basis. Now the question becomes: can PetroChina retain its status as the world’s largest energy company?

Marc Faber Contrarian Bet Against Market Consensus - US Treasuries

Special thanks to Dr. Marc Faber for giving us permission to publish excerpts from his May Gloom Boom & Doom Report.

There is grave danger in the lack of momentum, as momentum serves as an indirect proxy for belief and rationalizations. Once they fade away it is harder to deny reality any longer. At the very least, top or not, it seems as if investors all across the financial landscape are themselves are losing faith not just in monetary policy and the economy but maybe even the idea that this was anything more than yet another bear market rally. Even Janet Yellen might think so; after all the “dollar” beat her to it.

"The transition from investment to consumption in the Chinese economy, together with a shift towards cleaner energy sources, has caused a sharp deceleration in dry bulk trade. After expanding at an average annual rate of 7% over the period 2005-14, seaborne demand in iron ore, thermal and metallurgical coal is set to increase by only 2% in 2015 to 2.5 billion tonnes as these trends persist," Goldman says, before warning that freight rates aren't likely to recover until at least 2020.

Having painted themselves into an impossible corner of junk Keynesian economics, they are now clueless about how to get out. So its time to recognize that there has been a monetary regime change. The Fed might well have been your friend since March 2009 or even for the last several decades. But stranded on the zero bound and smothered by a $22 trillion collective balance sheet, the central banks of the world are now fast becoming your fiend.

"What investors need to know today is that they are currently priced just as high as they were back then! The problem is they once again want their cake and to eat it, too. Despite paying an extremely high price for stocks today they also expect a high rate of return. A few recent polls show investors expecting to get 10% per year from their equity investments right now. Some are even expecting to generate twice that much and there’s just no chance it’s going to happen."

"It seems logical to assume that absent a major international economic accident, the current Fed is bound and determined to continue stimulating asset prices until we once again have a fully-fledged bubble," GMO's Jeremy Grantham says, reiterating his stance that S&P 2250 marks the point where investors should start to get worried.

As Bloomberg summarizes the various opinions suggested by Wall Street analysts, the rout in German debt and other European sovereign bonds was caused by market-technical factors such as investor positioning and supply glut rather than shift in views on economic outlook, analysts say, with profit-taking on successful QE trades, thin market liquidity and position-squaring before month-end are cited among main bearish catalysts.

Over the past couple of years, there has been a growing chorus of individuals claiming that the financial markets have finally shaken the shackles of the secular bear market that began at the turn of the century. Bank of America is the latest to jump onto the "new secular bull market" bandwagon; but what they miss is that secular bull markets are not born of price, but rather of a set of fundamental metrics that foster sustained economic growth over long periods of time.

The economic data has continued to disappoint on virtually all fronts, earnings are weak and markets are grossly extended. Yet, investors are more bullish than ever...

GE stock is down almost 13% over the last 7 years, and this is with record shares being taken off the market.  However, Jeff Immelt thinks he has a solution for this problem after 15 years at the helm of GE. 

The US dollar has been even stronger than this bull thought let alone the perma-bears.  Here's why,