Forget The Dips, Sell The Rips – David Stockman’s Contra Corner 08-24-15

Salient to Investors:

David Stockman writes:

  • The S&P 500 has sliced through both the 50-day and 200-day moving averages. 2130 on the S&P 500 will prove to be a generational high.  CAT, China, European luxury brands, the NASDAQ Biotech Index are shorts.
  • Expect the Fed to announce they are well short of the their magic 2% on the PCE deflator and so defer a September rate increase: not because there is too little inflation but because it is scared about the stock market fall. This will catalyze a frenzy of dip buying, claims the market has bounced off support is ready to resume the bull market. Do not buy the dip.
  • In the past 15 years CPI has risen by 2.5% annually if you include housing and rent inflation. The Fed hurts savers and retirees in order to keep Wall Street gamblers in free carry trade money, hoping to generate economic growth by giving the 1%  wealth effect windfalls.
  • The Wilshire 5000 has gained more than $15 trillion of market cap during the last 6 years, while the total value of all corporate equity in the US economy has risen by more than $20 trillion – substantially passing the two earlier stock market bubbles – despite having virtually nothing to do with the long-term trends in the US economy, weak at best.
  • Zero interest rates can do nothing about global deflation caused by massive malinvestment generated by years of zero interest rates and central bank financial repression. The central banks have created a monumental falsification of prices in virtually every asset class, while divorcing the financial market from the real economy.
  • The post-2009 recovery is the final and radical expansion of the growth and capital spending bubble underway around the world since the early 1990s. Since 2013, the massive capital spending bubble driven by central bank policy has begun to roll-over. The cliff-diving phase of commodity and industrial prices and profit margins has only just begun, and worldwide capital spending will be plunging sharply for years to come. Chinese and Korean shipyards will soon be bankrupt, Australia and Brazil are heading for depression.

Read the full article at http://davidstockmanscontracorner.com/forget-the-dips-sell-the-rips/?utm_source=wysija&utm_medium=email&utm_campaign=Mailing+List+AM+Tuesday

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Fidelity’s Rossi Buying Stocks as Hedge Funds Get Caught – Bloomberg 10-16-14

Salient to Investors:

Dominic Rossi at Fidelity Worldwide Investment said:

  • He is looking to buy markets at these levels, particularly US stocks, amid a sell-off exaggerated and exacerbated by poor positioning from hedge funds.
  • Long-only investors had largely maintained their asset allocations, but there has been a massive contraction of hedge fund investments in assets tied to growth.
  • When hedge-funds gets caught, they sell first and ask questions later.
  • Low valuations will lure investors back into the market and end the current spiral downward.
  • US stocks will lead the rebound – to a new high in 2015 – led by a rally in tech, biotech and media companies.
  • Fidelity Worldwide is overweight in US equities and very underweight in emerging markets.

Read the full article at http://www.bloomberg.com/news/2014-10-16/fidelity-s-rossi-buying-stocks-as-hedge-funds-get-caught.html

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Biotech, Internet Stocks Fall as Fed Cites High Valuation – Bloomberg 07-15-2014

Salient to Investors:

  • Paul Zemsky at Voya Investment Mgmt sees a new era of macro policy where the Fed uses new tools to prevent bubbles and raises concerns when markets are away from fundamentals.
  • Alan Gayle at RidgeWorth Investments said the Fed recognizes it needs to broaden its scope of factors affecting financial health and stability.
  • The S&P Smallcap 600 Index is at 26 times earnings, the Nasdaq Biotech Index is at over 500 times earnings, versus the S&P 500 at 18 times.

Read the full article at http://www.bloomberg.com/news/2014-07-15/biotech-falls-with-internet-stocks-as-fed-cites-stretched-values.html

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