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Why To Fred Hickey These Are The "Last Gasps Of A Dying Bull Market (And Economy)"
Once upon a time, the "Tech Strategist" Fred Hickey used to be part of Barron's Roundtable. Alas, the famed newsletter writer, who accurately predicted the bursting of the 2000 and 2007 bubbles, was deemed too bearish and was cut from the magazine whose hyperbolic covers have long been used as contrarian inflection point signal by the markets.
How bearish? As the following excerpt from his latest excellent monthly newsletter titled "Last Gasps of a Dying Bull Market (and economy)" reveals, the answer is "about as bearish as Hickey has ever been."
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Last Gasps of a Dying Bull Market (and economy)
Deteriorating market breadth and herding into an ever-narrower number of stocks is classic market top behavior. Currently, there are many other warning signs that are also being ignored. The merger mania (prior tops occurred in 2000 and 2007), the stock buyback frenzy (after the record amount of buybacks in 2007 buybacks were less than one-sixth of that level at the bottom in 2009), the year-over-year declines in corporate sales (-4% in Q3 and down every quarter this year) and falling earnings for the entire S&P 500 index, the plunges this year in the high-yield (junk bond) and leveraged loan markets, the topping and rolling over (the unwind) of the massive (record) level of stock margin debt... and I could go on.
It was very lonely as a bear at the tops in 2000 and 2007. I was just a teenager in 1972 so I was not an active investor, but just a few days prior to the early 1973 January top, Barron 's featured a story titled: "Not a Bear Among Them." By "them" Barron 's meant institutional investors. I do vividly remember my Dad listening to the stock market wrap-ups on the kitchen radio nearly every night in 1973-74. It seemed to me back then that the stock market only went in one direction — and that was DOWN.
The global economy is in disarray. It's the legacy of the central planners at the central banks. China's economy has been rapidly slowing despite all sorts of attempts by the government to prop it up (including extreme actions to hold up stocks). China's economic slowdown has cratered commodity prices to multi-year lows and helped drive oil down to around $40 a barrel.
All the "commodity country" economies (and others) that relied on exports to China are suffering. Brazil is now in a deep recession. Last month Taiwan officially entered recession driven by double-digit declines (for five consecutive months) in exports. Also last month Japan officially reentered recession. Canada and South Korea's governments recently cut forecasts for economic growth. Despite the lift from an extremely weak euro, Germany's Federal Statistical Office reported last month that the economy slowed in Q3 due to weak exports and slack corporate investment. The German slowdown led a slide in the overall eurozone economy in Q3 per data from the European Union's statistics agency. The recent immigration and terrorist problems make matters worse. Tourism will suffer. ECB President Mario Draghi is expected to react later this week by providing even more QE (money printing) and driving interest rates to even deeper negative levels (unprecedented).
Here in the U.S., the economy appears relatively healthier only because the rest of the world is so awful. That has driven the U.S. dollar skyward (DXY index over 100), hurting tourism and multinational companies exporting goods and services overseas. Last month the U.S. Agriculture Department forecast that U.S. farm incomes will plummet 38% this year to $56 billion - the lowest level since 2002. Yesterday's ISM (Institute for Supply Management) manufacturing index for November fell into contraction territory at 48.6, the lowest reading since the 2009 recession. Economists expected a reading over 50. Industrial production fell in October from September. It was the ninth month-to-month drop in the ten months of the year.
Ports around the country have been reporting declining exports and imports all year. Last month the nation's busiest port (Los Angeles) reported that loaded exports were down 15% for the year and empty container volumes in October were up 13% year-over-year. Empty containers are shipped overseas to be sent back to the U.S. filled with goods. The Cass Freight Index (primarily measures truck and rail shipments) dropped 5% in October from September and 5% year-over-year. Last month trade researcher Zepol Corp. reported that for the first time in at least a decade, imports in both September and October (the peak shipping season) at each of the three busiest U.S. seaports fell. They didn't just fall. They dropped by more than 10% between August and October. The three ports handle over 50% of the goods entering the U.S. by sea.
With freight shipments slowing, carriers are cutting way back on capacity additions. According to the Railway Supply Institute, North American railcar orders plunged 83% year-over-year in the third quarter, the biggest drop in at least 27 years. ACT Research reported last month that trucking companies ordered 44% fewer large trucks year-over-year in October. The causes of this are falling industrial production and lower consumer demand, which has led to an unwanted buildup in inventories. American Trucking Association (ATA) chief economist Bob Costello recently said (in an ATA statement): "I remain concerned about the high level of inventories throughout the supply chain." The gap between wholesale inventories and wholesale sales (as reported by the U.S. Census Bureau) is greater than what was seen prior to the 2009 recession.
Despite plunging gasoline prices (below $2 a gallon in some places), sales reports from most of the major U.S. retailers have been soft for several months. The latest round of reports released last month continued the trend. Target, Macy's. Dick's Sporting Goods, Best Buy, Nordstrom, Kohl's, Tiffany (in other word, the gamut) and many more reported disappointing sales results. A Nordstrom exec on the conference call: "All we can tell you is, in our business, we saw a slowdown. And it was across the board." Wal-Mart's existing store sales grew 1.5% in its latest quarter, but profits fell 11% due to higher costs. Macy's and Kohl's spoke of excess merchandise inventories at the end of their quarters that needed to be cleared. Dick's inventories jumped 13.1% from a year earlier while sales grew just 7.6% in the quarter.
Last week the Wall Street Journal wrote a story titled: "Retailers Ring Alarm Bells for the Holiday Season." Two weeks earlier the Journal's story was: "Retailers' Full Shelves May Force Holiday Discounts." Yesterday, the Atlanta Fed reported that its GDPNow model is forecasting just 1.4% seasonally adjusted annual GDP growth in Q4, down from the prior 1.8% forecast. Part of the reason for the Q4 slowdown is the anticipated hit to growth coming from the necessary inventory reductions.
There are pockets of strength in the economy, namely auto sales and housing. However, auto sales appear to be peaking out at just above the 18 million annual unit mark (extremely easy credit can only take the industry so far). In general, the majority of U.S. consumers are being squeezed by a combination of higher expenses and stagnant (or lower) real incomes. Due to rapidly rising rents (renters are paying the highest percentage of their income on rent ever per Zillow), high levels of consumer debt (record auto and student loans outstanding), and for many (including my family), sharply higher (record) healthcare costs (see chart below sourced from Meridian Macro Research); it doesn't matter if there are lots of low-paying healthcare and service industry (hamburger flipping) jobs available. The U.S. consumer is under siege.
The Final Straw?
When the Fed was printing money (quantitative easing) in 2008-2014, the Fed itself described QE as the equivalent of monetary easing. Therefore, stopping quantitative easing (more than $1 trillion annually at its peak) as the Fed did late last year is tightening even though Wall Streeters are loath to admit it. As the result of this tightening, we've watched the broad stock markets slowly break down all year and the economy steadily weaken.
The Fed should have raised rates from the emergency zero-bound level long ago. However, since the economy never reached "escape velocity" as the Fed expected (all of the Fed's forecasts have been wrong), they never got up the gumption to pull the trigger, despite leading people on that they were about to do it - over and over again. In 2015 there's one last Fed meeting (December 15-16) remaining and next year there will be a presidential election, so in order to save face, it appears the Fed will try to pull off one tiny, quarter point rate hike and talk as dovishly as possible in order to minimize the damage. But remember, this is tightening on top of the prior tightening in an aging, though wretched, seven-year "recovery," that's worsening by the day.
Moreover, as noted earlier, the stock market is giving every indication that it's about to collapse. Looks like bad timing to me. The Wall Street Journal's Jon Hilsenrath issued the following warning two months ago: "In the seven years since the world's central banks responded to the financial crisis by slashing interest rates, more than a dozen banks in the advanced world have tried to raise them again. All have been force to retreat." Assuming they can pull it off, the Fed will rescind this hike too — but not before there's a lot of damage to the stock market.
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Ummm...so, from 2000 to 2015, "consumer" health care spending has increased 3.2%?
The Fed is a bunch of fucktards. Completely insane, with no regards to consequences.
Fred Hickey, even back in his Barron's commentary days, always liked gold.
Hickey is not a dumbass.
EDIT:
And I liked his comments re healthcare costs up so much (bad, duh), and port traffic down (a good indicator along with the Baltic Dry Index).
They cow-tow to the whims of thier corporate masters, the banks.
You tow cows ? After they are udderless in the water.
Kow-tow.
...most of those increases during the Bush years....with the Obama years seeing and end to ramping?....how can this be?
With "Socialized Medicine", it's "free", but the Government sometimes makes you wait weeks/months for specialized, sometimes life saving, care!
With "Capitalist Medicine", you pay through the nose till it breaks you, and you get an instant denial of coverage if your specialized or life saving care is going to cost too much.
...and people wonder why the shift to Socialism is gainging steam...people are not running TO Socialism...they are running AWAY from Capitalism that is bankrupting them...the system is CRUSHING THEM and they'll empower anyone not offering more of the same...Sorry Hillary, and JEB BBUSH...not gonna fly this time...
Well O.K. as long as you use your own definitions, your argument works. I'll try that on my next spelling test.
1. Health spending is relatively flat under Obama while it ramped under Bush; see the chart.
2. Socialism provides "free" access to poor care, INSANELY expensive Capitalism denies expensive care.
What's there to argue about?
Somehow I bet this excludes insurance premiums.
Somehow I (HOPE) this excludes insurance premiums; otherwise, someone's been a lying to me...
Still waiting for those MILLIONS of newly insured to SWAMP the hospitals causing weeks, even months, of delay to receive care...yep, total BULLSHIT, SCARE MONGERING, LIES!...from your "dear leaders"...
Check this legitimate ways to mak? money from home, working on your own time and being your own boss... Join the many successful people who have already used the system. Only reliable internet connection needed, no prior experience neccessary, that's why where are here. Start here... www.wallstreet34.com
Hedonicly adjusted because your Omamacare is such a good product
"Ummm...so, from 2000 to 2015, "consumer" health care spending has increased 3.2%?"
Well considering government is the largest employer their increase has been about 1% the rest of the serf taxes were increased to fill the gap the other thing is the word "spending", the free shitters don't spend on health care so there is that.
We'll be okay as long as debt increases faster than GDP.
QE commeth 2016 . Rejoice the slavery
Ànd so how long can the flywheel keep spinning with so much drag on it?
Until the pins holding it together POP - then it is going to be interesting.
Does this mean Austin homeprices will collapse and property taxes double?
Nice rant writer, but you forgot, this economy died in 1913-14, all else is bullshit. Progressivism is the desease. There is only one cure left.
Bullshit UNIX, you think "Progressivism" is what is killing us?
The banking system is "Progressivism"?
The health insurance system is "Progressivism"?
The hospital system is "Progressivism"?
The Pharma system is "Progressivism"?
The Military Industrial system is "Progressivism"?
The PUSH is TOWARDS "Progressivism"; meaning we are MOVING AWAY from SOMETHING ELSE that is CRUSHING US...CRONY, CORPORATE, CAPITALISM!...that is what is failing/dying here!
Call it what it is,,,Fascism. And no, it isn't dying. It is becoming hybridized.
Yep, that is what I am calling it, truth hurts or something? You can also call it Fascism...same thing.
What 20th century are you looking at? You can argue the Fed was no help, but the resource extraction was very cheap.
Eh? what are you blathering about? The Fed is ILLEGAL...get that thru your skull. I sure don't know what you are looking at, you evidently have a lot of homework to do progressive.
question: how many sovereign funds have, apple, google, facebook, amazon, and microsoft in their portfolio and at what allocation percentage?
2X Question Bonus:: how many central banks have bought and held[?] these 'Five Amigos'???
Well, if they are buying the S&P500 by valuation, those five would be half of their holdings.
For sure, ALL, will be allowed to go deeper in debt for xmas!
but, you'll be sweating bullets, all of 2016!...prices ain't going down!
go buy a car...they say, gas is cheap
Incredibly great article; the best on the subject, and amazing how long the central bankers have been able to fuel the stock market north, the single most important reason they do not want to be audited. I cannot wait until Janet reverses her position and shorts the phonebook, or just allows the Fed's position to implode. Ugly days ahead.
Oh, and did you catch Janet live this past week, saying that the lower employment participation was acceptable because employment was no longer needed with the aging population. I saw her choke on her words. Dispicable.
"saying that the lower employment participation was acceptable because employment was no longer needed"
Maybe next time Mrs Debtfire will keel over next she pauses while speaking at the podium. Like a dead stuffed bird
"employment was no longer needed with the aging population"
That's exactly correct...BUT...INCOME is still needed and .25% CD's ain't providing it...and everyone that's willing to go all in, is already in the Stock Market...Welfare (SS/Medicare) provides a big chunk of income for the geezers...exactly why EVERY politician swears thier political lives upon NO SS/Medicare cuts.
Everything is distorted and inflated beyond reason and Janet's playing with pins in a room full of swollen balloons.
"QE commeth 2016"
For sure. The Fed deems the stock indexes as a barometer of the economy.
They'll be doing a Draghi, "Whatever it takes" position.
For years, Martin Armstrong has been calling for a stock bull market in the face of a collapsing economy. The reason has to do with American dollar denominated stocks being the last safe refuge for institutional investors. He also predicts further declines in precious metals. A reversal of both is still in the more distant future. Stay tuned.
Martin Armstrong, whether he winds up being right or wrong, is always worth reading.
His blog, typically he puts up one or two new pieces daily:
http://www.armstrongeconomics.com/armstrong_economics_blog
so SQQQ, SH and Sdow? Got it
Just think, once the DOW drops over TEN THOUSAND POINTS, ZeroHedge can say "I told you so".
The de Rothschild Bank, and the FED, plus all the Synagogue of Satan Jews, don't want to admit that they have lost control. Frankly, everyone would be much better off if de Rothschild Bank simply relinquished all of the physical gold bullion in their vaults into my hands before this bitch has puppies and they all find themselves completely in the dark, and left out in the cold.
Note to de Rothschild Bank:
Resistance is futile.
Fred Hickey is absolutely right and this is also exactly my observation http://forum.prisonplanet.com/index.php?topic=100571.msg1580310#msg1580310
Do you remember Eduardo Saverin?
Evan Benzon May 15, 2:55 PM said:
@Luke:You assume he has Billions.
The guy has never had a job in his life.
He has never been an employee.
He didn't start the company with his own money.
Is the company registration with city hall even in his name ???
You ever watch "Survivor ? " with Jeff Probst.
Ol' Mark Zuckerberg is the greatest of them all.
On Day 1 he created an alliance with Eduardo Saverin and Dustin Maskovitz.
On Day 2 when things looked bleak - he enlisted the services of The Winkelvoss Twins and solidified on of the most powerful alliances in the game.
On Day 10 he made a secret side alliance with Sean Parker who already had an alliance with Peter Thiel and the entire Silicon Valley and together they blindsided Eduardo Saverin and The Winkelvoss Twins.
On Day 20 after winning reward - Sean Parker was caught eating an extra cup of rice.
And he was voted off unanimously by his tribe.
On Day 25 Sheryl Sandberg realized she was on the hot seat and the next to be voted out. So she made a plea to the one person who could turn the vote and keep her in the game. She gave Mark Zuckerberg her hidden Immunity Idol in exchange for a spot in his alliance.
Sheryl Sandberg standing in waist deep water with her arms folded.
" I survived another Triable Council, maybe if I show them I work hard around camp they will keep me around ."
Mark Zuckerberg sitting half behind a Tree and some long grass holding the hidden immunity idol:
" I'm running the show , I'm the most powerful player in the game "
Peter Thiel walking on the beach with a big stick.
" I know eventually I'm going to have to make a big move and change the game "
9 are left. 1 million dollars is on the line.
Tune in next week for a special 2 hour edition.
The Social Network - Favorite Scene
Between ZH and the MSM its the same difference of perception as between Captain Ahab and Moby Dick, in the upcoming battle/
Here is how Janet Yellen perceives the country's future : WE ARE READY FOR BLAST OFF. CLEAR THE RUNWAY !
http://uk.businessinsider.com/monday-scouting-report-dec-7-2015-2015-12
The bottom line is that Federal Reserve System, owned by the Criminal Banking Class, and Federal government policies have been destroying United States industrial capacity and jobs to enrich a very, very small group of obscenely rich oligarchs and crony capitalist corporate executives. The political parasites in both political parties implement these de-industrializing, America-destroying policies for a pittance in bribes. That's why the Federal Reserve System should be abolished. The American People on Main Street should not be sacrificed by the Federal Reserve System to further enrich Wall Street.
Qualitative Easing is just a fancy name for printing money, that is counterfeiting OUR nation's currency, funding Federal government deficit spending and enriching Wall Street at the expense of Main Street America. The political parasite class knows for a fact that is exactly what is happening, but their silence is insured by the bribes they receive from Wall Street.
Barron's is a mouthpiece for the Staus Quo and their crimes against humanity. Everyone who works for them is complicit in this raping of America. Each and every one is on the guillotine list...