Spot the Bear. Weekly chart analysis of S&P500
- Thread starter romik
- Start date
This guy says the bull market isnt over!!! hmmmm
Wonder what its going to take to convince people that there is such thing as bear markets and that bull markets don't last forever....im going to laugh my a$$ off when this market is down 30-40% and all those who said the bull market wasn't done were proven very wrong...
Leon Cooperman: Why this bull market isn't over
Tom DiChristopher
37 Mins Ago
Hedge fund founder Leon Cooperman said Tuesday he's been a buyer throughout the recent selloff, and he sees stock markets heading higher.
"Even though I think the market is in a zone of fair valuation, I think the market is not in a position in my opinion to go down a lot, and I think that the path is still upward," the Omega Advisors chairman and CEO said on CNBC's "Squawk Box."
His No. 1 reason for being optimistic: This would be the first bull market in history to end without one Federal Reserve interest rate tightening.
There have been eight interest rate cycles since the mid-1950s, and the market went up for 30 months on average after each rate hike, he said. In addition, the market was up 9½ percent one year after liftoff on average across those eight cycles.
Read MoreConversations for the next 20 years
The Fed has held its benchmark federal funds rate near zero since December 2008, but could raise it for the first time in more than nine years when the Federal Open Market Committee meets Sept. 16-17.
Cooperman said he believes the economy is strong enough to absorb higher interest rates.
"I think the Fed's been somewhat irresponsible," he said, citing strong automobile sales and continuing employment growth. "There's no basis for zero rates."
Cooperman's second reason to be optimistic is his belief that bear markets don't "materialize out of immaculate conception," but because investors anticipate the onset of recession.
He noted that at a recent gathering convened by Blackstone Advisory Partners' Byron Wien, not one of 21 distinguished guests saw a recession coming.
Thirdly, Cooperman said stocks still represent the best option among financial assets.
"Common stocks are in line with their historical norms, not overpriced, and you can find so many attractively priced stocks," he said. "I think stocks are still the most attractive house in the financial asset neighborhood."
Read MoreCramer Remix: Be on guard against this
To be sure, stocks are not cheap, he said, "I think the market's priced to give you a return in line with the growth in earnings. If earnings don't grow, the market's not going up."
The period of annual 20-percent-plus S&P 500 gains is over, he said, but with the index currently trading at a multiple of 15 to 16, it could get back to 2,100 next year.
Recent extreme market volatility is due to complex, automated quantitative and risk parity trading, Cooperman said.
"I think the machines seem to be taking over, which I have a very negative view of," he said, adding, "It's scaring the public, and if the public gets scared, they leave the market. It's going to raise the cost of capital to business."
Cooperman said about 75 percent of daily trading today has nothing to do with fundamental investing, but is instead tied to high-frequency trading and "slicing and dicing of ETFs and things like that."
"In the world I grew up in, and the world Warren Buffett grew up in, when something went down you wanted to own more, and in the world that we're in now, it goes up you want to own more and it goes down you want to own less, and that's just counter-intuitive. It lacks common sense," he said.
Omega Advisors has $9 billion in assets under management. The firm has generated compound annual returns of 14 percent, net of fees since 1991, a source told CNBC.
The firm's equity-focused investment funds are down 6 to 11 percent this year following a 9 to 11 percent drop in August amid a broader stock market selloff, according to a letter to investors cited by the Financial Times.
Read More'Risk parity' shares blame for market ructions, says Omega
In the letter, Cooperman blamed systemic and technical investors who use esoteric trading strategies for exacerbating the selloff. Fundamental factors like weakness in China and interest rate uncertainty cannot entirely explain the decline, he said.
Wonder what its going to take to convince people that there is such thing as bear markets and that bull markets don't last forever....im going to laugh my a$$ off when this market is down 30-40% and all those who said the bull market wasn't done were proven very wrong...
Leon Cooperman: Why this bull market isn't over
Tom DiChristopher
37 Mins Ago
Hedge fund founder Leon Cooperman said Tuesday he's been a buyer throughout the recent selloff, and he sees stock markets heading higher.
"Even though I think the market is in a zone of fair valuation, I think the market is not in a position in my opinion to go down a lot, and I think that the path is still upward," the Omega Advisors chairman and CEO said on CNBC's "Squawk Box."
His No. 1 reason for being optimistic: This would be the first bull market in history to end without one Federal Reserve interest rate tightening.
There have been eight interest rate cycles since the mid-1950s, and the market went up for 30 months on average after each rate hike, he said. In addition, the market was up 9½ percent one year after liftoff on average across those eight cycles.
Read MoreConversations for the next 20 years
The Fed has held its benchmark federal funds rate near zero since December 2008, but could raise it for the first time in more than nine years when the Federal Open Market Committee meets Sept. 16-17.
Cooperman said he believes the economy is strong enough to absorb higher interest rates.
"I think the Fed's been somewhat irresponsible," he said, citing strong automobile sales and continuing employment growth. "There's no basis for zero rates."
Cooperman's second reason to be optimistic is his belief that bear markets don't "materialize out of immaculate conception," but because investors anticipate the onset of recession.
He noted that at a recent gathering convened by Blackstone Advisory Partners' Byron Wien, not one of 21 distinguished guests saw a recession coming.
Thirdly, Cooperman said stocks still represent the best option among financial assets.
"Common stocks are in line with their historical norms, not overpriced, and you can find so many attractively priced stocks," he said. "I think stocks are still the most attractive house in the financial asset neighborhood."
Read MoreCramer Remix: Be on guard against this
To be sure, stocks are not cheap, he said, "I think the market's priced to give you a return in line with the growth in earnings. If earnings don't grow, the market's not going up."
The period of annual 20-percent-plus S&P 500 gains is over, he said, but with the index currently trading at a multiple of 15 to 16, it could get back to 2,100 next year.
Recent extreme market volatility is due to complex, automated quantitative and risk parity trading, Cooperman said.
"I think the machines seem to be taking over, which I have a very negative view of," he said, adding, "It's scaring the public, and if the public gets scared, they leave the market. It's going to raise the cost of capital to business."
Cooperman said about 75 percent of daily trading today has nothing to do with fundamental investing, but is instead tied to high-frequency trading and "slicing and dicing of ETFs and things like that."
"In the world I grew up in, and the world Warren Buffett grew up in, when something went down you wanted to own more, and in the world that we're in now, it goes up you want to own more and it goes down you want to own less, and that's just counter-intuitive. It lacks common sense," he said.
Omega Advisors has $9 billion in assets under management. The firm has generated compound annual returns of 14 percent, net of fees since 1991, a source told CNBC.
The firm's equity-focused investment funds are down 6 to 11 percent this year following a 9 to 11 percent drop in August amid a broader stock market selloff, according to a letter to investors cited by the Financial Times.
Read More'Risk parity' shares blame for market ructions, says Omega
In the letter, Cooperman blamed systemic and technical investors who use esoteric trading strategies for exacerbating the selloff. Fundamental factors like weakness in China and interest rate uncertainty cannot entirely explain the decline, he said.
VERY VERY INTERESTING!
That Was Not a Crash - John Hussman
By GuruFocus.com19 hours ago
Following the market decline of recent weeks, the most reliable valuation measures we identify now project average annual nominal returns for the S&P 500 of about 0.5% in the next 10 years. On a broad range of historically reliable valuation measures (see Ockham's Razor and the Market Cycle) the May peak in the S&P 500 reached valuations averaging about 114% above run-of-the-mill historical norms - more than double the valuation levels that have historically been associated with the 10% average expected market returns that investors have enjoyed over the long-term. At present, those measures have retreated to about 92% above historical norms.
Keep in mind that low interest rates don't raise the estimated 10-year expected return on stocks from the current 0.5% level. Low interest rates only make the low expected return on stocks somewhat more "acceptable" because the alternatives are similarly dismal. The Federal Reserve's policies of zero interest rates and quantitative easing have done nothing but to encourage yield-seeking speculation, bringing valuations to extreme levels, and leaving prospective future investment returns equally depressed.
Those who assert that high equity valuations are "justified" by low interest rates are actually (and probably unknowingly) saying that 0.5% expected returns on equities over the coming decade are a-okay with them. But it's critically important to understand that while low interest may help to explain why current market valuations have been driven to obscene levels, low rates do notchange the relationship - the correspondence - between elevated valuation levels and dismal subsequent long-term market returns.
The chart below shows the relationship between the most reliable valuation measure we identify (MarketCap/GVA) versus actual subsequent S&P 500 total returns over the following decade. The current level of valuations is associated with a likely range of 10-year returns between about -3% and +4%, with an average expectation of 0.5% annually.
View gallery
.
The following chart shows the same data from a time-series perspective. Try the identical analysis with other popular valuation indicators and you'll see why we rely on MarketCap/GVA and similar variants such as price/revenue, market cap/GDP and our margin-adjusted version of the Shiller P/E. We see all kinds of valuation metrics trotted out by analysts as if they're meaningful. It's only when investors examine the historical data (or live through the consequences of failing to do so) that they realize how little relationship many popular valuation metrics have with actual subsequent market returns. For our part, we insist on evidence. It makes us much less fun to hang around with at parties if the conversation turns toward the markets.
View gallery
.
Market conditions will change. Look at every market cycle in history, and you'll see that prospective market returns have always approached 9-10% or more in every market cycle - even when interest rates were similar to current levels (prior to the mid-1960's). The best opportunity to boost investment exposure is at points in the market cycle where a material retreat in valuations is joined by broad improvement in market internals.
That was not a crash
The market decline of recent weeks was not a crash. It was merely an air-pocket. It was probably just a start. Such air pockets are typical when overvalued, overbought, overbullish conditions are joined by deterioration in market internals, as we've observed in recent months. They are the downside of the "unpleasant skew" that typically results from that combination - a series of small but persistent marginal new highs, followed by an abrupt vertical decline that erases weeks or months of gains within a handful of sessions (see Air Pockets, Free-Falls, and Crashes).
Actual market crashes involve a much larger and concerted shift toward investor risk-aversion, which doesn't really happen right off of a market peak. Historically, market crashes don't even start until the market has first retreated by 10-14%, and then recovers about half of that loss, offering investors hope that things have stabilized (look for example at the 1929 and 1987 instances). The extensive vertical losses that characterize a crash follow only afterthe market breaks that apparent "support," leading to a relentless free-fall that inflicts several times the loss that we've seen in recent weeks.
Continue reading: http://www.hussmanfunds.com/wmc/wmc150907.htm
That Was Not a Crash - John Hussman
By GuruFocus.com19 hours ago
Following the market decline of recent weeks, the most reliable valuation measures we identify now project average annual nominal returns for the S&P 500 of about 0.5% in the next 10 years. On a broad range of historically reliable valuation measures (see Ockham's Razor and the Market Cycle) the May peak in the S&P 500 reached valuations averaging about 114% above run-of-the-mill historical norms - more than double the valuation levels that have historically been associated with the 10% average expected market returns that investors have enjoyed over the long-term. At present, those measures have retreated to about 92% above historical norms.
Keep in mind that low interest rates don't raise the estimated 10-year expected return on stocks from the current 0.5% level. Low interest rates only make the low expected return on stocks somewhat more "acceptable" because the alternatives are similarly dismal. The Federal Reserve's policies of zero interest rates and quantitative easing have done nothing but to encourage yield-seeking speculation, bringing valuations to extreme levels, and leaving prospective future investment returns equally depressed.
Those who assert that high equity valuations are "justified" by low interest rates are actually (and probably unknowingly) saying that 0.5% expected returns on equities over the coming decade are a-okay with them. But it's critically important to understand that while low interest may help to explain why current market valuations have been driven to obscene levels, low rates do notchange the relationship - the correspondence - between elevated valuation levels and dismal subsequent long-term market returns.
The chart below shows the relationship between the most reliable valuation measure we identify (MarketCap/GVA) versus actual subsequent S&P 500 total returns over the following decade. The current level of valuations is associated with a likely range of 10-year returns between about -3% and +4%, with an average expectation of 0.5% annually.
View gallery
.
The following chart shows the same data from a time-series perspective. Try the identical analysis with other popular valuation indicators and you'll see why we rely on MarketCap/GVA and similar variants such as price/revenue, market cap/GDP and our margin-adjusted version of the Shiller P/E. We see all kinds of valuation metrics trotted out by analysts as if they're meaningful. It's only when investors examine the historical data (or live through the consequences of failing to do so) that they realize how little relationship many popular valuation metrics have with actual subsequent market returns. For our part, we insist on evidence. It makes us much less fun to hang around with at parties if the conversation turns toward the markets.
View gallery
.
Market conditions will change. Look at every market cycle in history, and you'll see that prospective market returns have always approached 9-10% or more in every market cycle - even when interest rates were similar to current levels (prior to the mid-1960's). The best opportunity to boost investment exposure is at points in the market cycle where a material retreat in valuations is joined by broad improvement in market internals.
That was not a crash
The market decline of recent weeks was not a crash. It was merely an air-pocket. It was probably just a start. Such air pockets are typical when overvalued, overbought, overbullish conditions are joined by deterioration in market internals, as we've observed in recent months. They are the downside of the "unpleasant skew" that typically results from that combination - a series of small but persistent marginal new highs, followed by an abrupt vertical decline that erases weeks or months of gains within a handful of sessions (see Air Pockets, Free-Falls, and Crashes).
Actual market crashes involve a much larger and concerted shift toward investor risk-aversion, which doesn't really happen right off of a market peak. Historically, market crashes don't even start until the market has first retreated by 10-14%, and then recovers about half of that loss, offering investors hope that things have stabilized (look for example at the 1929 and 1987 instances). The extensive vertical losses that characterize a crash follow only afterthe market breaks that apparent "support," leading to a relentless free-fall that inflicts several times the loss that we've seen in recent weeks.
Continue reading: http://www.hussmanfunds.com/wmc/wmc150907.htm
