Ms. Park was a guest on This week in money on Saturday. You can listen to the audio clip here, Danielle’s segment starts at 17:15 (after Garth Turner).
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Bear market slowly picking up believers
I have done 9 media interviews in the past 5 days alone, so I know that the bear market is finally starting to grab the angst of the populace. The advising community is still wildly oblivious it seems, with lots of happy talk about “don’t panic, don’t sell, sit tight…this is a buying opportunity.” Same old useless bunk. Here is the question for you: if your advisor never told you to sell and raise cash at any point in the last year or so, how the bleep bleep are you supposed to be snapping up buying opportunities?
My thought is that there may be quite a bit further to go here before the buying opps get really valuable. And it could take a few more weeks or months before that happens, with lots of noisy up and down days in between. We likely have a good deal more disappointment to get priced into asset values here. The number one job of capital today is to get through this bear market liquid, safe and with as few losses (even some gains) as possible. Then it will get really exciting for those who are prepared.
Monthly charts are best for cutting out short-term noise, and this one of the XIU (investable version of the TSX 60) paints a good picture of where we have been, where we are now, and where we may bottom in the weeks ahead. Each time the price has breached the orange circles below (as it has done year to date again) the Canadian stock market (and major global markets) have retraced 50% from their peak to re-test long-term secular support. That would be about 25% further down from today’s levels. Stay awake and stay tuned.
Source: Market Technician, Cory Venable. VPIC
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Bond yields fathom fresh lows
In the last recession, bonds yields bottomed in December 2008 when the 10 year treasury yield bounced at 2.074. Global stock markets bottomed 3 months later in March 2009. This morning the 10 year treasury yield took out that previous cycle low breaking to a new record below 2% (red line below). Last summer the chart shows that stocks (S&P 500 in blue) defied the gravity of falling bond yields for a few months from April to October as stocks popped on misplaced hopes for an economic boast from the Fed’s QE2. The world now understands that these hopes were misplaced.
The renewed support for bonds over the past 8 months aligns with our belief that we are likely already in or entering the next global recession. It also suggests that the next low for stocks is probably not yet in but may present in the next 3-6 months for those who are ready.
