The Bad News

Greg writes:

Don’t you think people are too optimistic for a year-end rally to make it actually happen? You know what they say: when everybody’s in agreement, everybody’s wrong.

I’m not sure what optimism Greg’s referring to in his note. I find an abundance of negativity around me.

John McClure at ProfitScore just emailed me this:

The reason that recessions are so devastating is that few see them coming. We are still in a pre-election year which has historically been the best time to be in the market and, for this reason, many have remained steadfastly bullish. But this factor would be more than offset by the bursting of one or more of the bubbles that exist today so that when it comes, it will cause assets to get rapidly re-priced. Based on the data we are now seeing, if this time has not come, it looks like it’s just around the corner.

With all the talk of recession, it’s sometimes hard to remember that we’re not in one, nor are incoming data showing one on the way. The latest was well presented yesterday morning by Dick Green at

New claims for unemployment for the week ended November 10 rose to 339,000 from 319,000 the week before but remain at levels well below recessionary trends.

The NY Empire State index of manufacturing conditions for November was stronger than expected at 27.4, but down a bit from 28.8 in October. This is just a regional survey but is seen as an early read on November conditions. It is good news.

Then, there’s Enzio von Pfeil who wrote on Monday:

We have just now asked the Bank to sell all individual stock positions, the view being that this is the beginning of the end. That is because markets not only swing from buy to sell, but they also start discounting news. So, as we put forth recently, we thought that that by selling in mid-December we would beat the rush to the door. Today, we have fast-forwarded this and sold out completely. . . . We have taken the sales proceeds and will be going into a “short” ETF on the S&P.;

Regular readers will recall Mr. Von Pfeil from my disagreement with him about October. He went on “red alert” for October, saying that many of the market’s crashes have happened in that month. I said that you should not fear. Indeed, the S&P; 500 gained 1.4% in October while the Nasdaq gained 5.8%.

Other dire forecasts include Outstanding Investments editor Byron King calling for $150 oil by December, Bank of England Governor Mervyn King saying that stocks are headed for a severe fall, and the estimable Economist writing that “the United States may well be heading for recession” and expounding:

Dearer oil is set to squeeze households further (this week’s drop in crude prices notwithstanding). Consumer confidence has already fallen sharply. It cannot be long before consumer spending stumbles, which in turn would hurt companies’ profits and investment. The weak dollar will boost exports, but at only 12% of GDP, exports are too small to make up for a weakening of consumer spending, which accounts for 70%.

I’d say there’s plenty of negativity to go around, and that the minority viewpoint would be one looking for higher share prices, not lower.

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