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Friday, 4 September 2009

A Dozen Reasons To Be Bearish Now

Courtesy of http://www.conradalvinlim.com/

Okay, here we go …

1. Commercial property defaults were up by 200% in June this year from the entire year’s end of 2008. With half a year left to go, any recovery will lag behind this indicator when defaults slow to an end to indicate a bottom in the economy.

2. Unemployment still continues to rise in spite of better-than-feared numbers month-on-month. A 9% unemployed population that continues to rise is not a market or economic bottom.

3. Housing defaults are still on the up and up. Projected home numbers such as pending home sales, building permits and construction spending is not an indication of rising home ownership. If anything, home ownership is dipping and the loss of homes to foreclosures and defaults is still on the rise.

4. Rising bank failures indicate an economy that is far from recovering. Only when bank failures slow down to a stop can we consider a bottom with a hope to recovery.

5. Better-than-expected earnings on downwardly revised estimates is not a reason to be bullish. Let’s see the majority of companies beat estimates regularly on higher guidance that isn’t revised down by the next earnings. Same goes for revenues.

6. Institutional participation now is all talk and no action. The big money continues to be sidelined or tied up in safe havens and flights to quality. How about more participation in the blue chips and a move away from the safe stuff - not happening, especially in the last 6 months - which prompts the question; “What’s pushing the rally?” Let’s have more participating volumes over the broader market instead of the speculative 4 (FRE, FNM, AIG and C) dominating 25% of the activity.

7. Oil continue to hold their highs and even break new highs. Leadership in the market by oil has often been seen as a sign of growing inflationary fears. The divergence between oil prices against natural gas’ 7.5 year low is not encouraging especially when you consider that NG is supposed to provide for 25% of America’s energy needs. Low energy consumption = low production = lower manufacturing = lower exports = lower GDP.

8. Gold is obviously the safe haven of choice after breaking new highs in recent weeks. If there is a recovery in progress as the analysts and economists are crowing about, the public doesn’t seem to agree by their participation in the precious metal. Analysts and economists don’t move markets and economies … the public does. Or maybe someone forgot to remind these legends in their own minds.

9. Interest rates are still down. With the 10yr Yield at an average of 3.5%, why does the Fed keep its Fed Fund Rate at 0.25% and instead persist to buy the 10yr in a fruitless effort to keep the TNX down? As long as Fed Fund Rates stay down, the dollar will stay down. Hmmm … deja-vu Japan and its “Lost Years”?

10. Next year is Obama’s second year in office as President. The second year of any president’s term is the most bearish of the four years.

11. Years ending with the number “0″ have the dubious honor of bearing the most bearish years since 1900.

12, Volumes continue to dip even as the market continues to rise. Market corrections have better volumes than bullish session.

Of course, there are lots more other reasons - more bearish reasons than bullish reasons like the market being at a high is not a reason to be bullish and next month is October, etc - but these are the dozen that concern me most … something to think about through the weekend.

What’s your take?

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