CI Outlook - Archives

July 2012

Pessimism is the majority view on both Main Street and Wall Street.  On Main Street the latest monthly survey of consumer confidence darkened.  It showed the number of respondents expecting lower stock prices jumping over 10%, from 32% to 42%.  This is very unusual and has happened only 7 times since 1987.  On Wall Street analysts have been lowering market and earnings expectations for 10 straight weeks.  This is another very remarkable occurrence.  Importantly, this sudden spike in negativity is coming right before second quarter earnings announcements begin.  We think the combination of negativity along with the uncertainty over earnings news explains the subdued price action over the last three months.  A period in which markets declined sharply before rebounding strongly in the last week of June.

Those declines were not limited to equities but also extended to most commodities.  For instance oil fell from $105 in May to $77 in June before snapping back $10 last week to $87.  And natural gas was even more dramatic falling from about $3 to $1.50 before bouncing back to almost $3.  We believe these levels of volatility are becoming a self perpetuating source of investor anxiety and are a major contributor to the feeling of gloom and potentially a malaise that could overcome investment markets.  That malaise may be starting.   Volume has contracted to 50% of normal, investors continue to dump stock mutual funds and major news announcements no longer move the markets.  Amazingly this is potentially good news!

We know that statement makes it sound like we have lost our sanity.  But long experience has taught us the validity of an old adage.  “Bear markets die with a whimper not a bang.”  We are fast approaching that time when “nobody” (read very few people) will care what the markets are doing.  Everybody who wants to sell their stocks will have done so.  Money will be invested in anything but stocks and daily volume will be very low.  At that point investors will have reached maximum disgust with stocks.  They will not believe in the possibility of ever again making money in stocks.  That is the low point and we may be approaching it faster than anyone realizes.

Not only is volume is drying up but major news announcements no longer drive correspondingly large moves in the market. For example recent big interest rate cuts in Europe were greeted with a yawn, and the Libor scandal hardly caused a ripple.  For the last few years earnings news has driven the markets.  The upcoming second quarter earnings announcements are scheduled to start July 9th with Alcoa.  Those earnings announcements may be the markets litmus test.  Most may be lower than hoped for and many companies economic outlook for the future will be negative.  If that news combined with worries about world economic growth does not meaningfully depress prices then we may be hearing “the whimper”.  Even so it will take time to build investment confidence.  For now uncertainty about this year’s Presidential election, the fate of the healthcare bill and lack of budget action by congress should continue to depress confidence.  Without confidence the markets may continue to trade up and down without direction.  But, having heard the whimper we can start to believe that the worst of the bear markets damage is behind us.

In that case we will continue to pursue the course of action laid out last month.  We will continue to concentrate on income producing investments with occasional momentum type trades as they become available.  We would hope to become more aggressive in our investment thinking once the market begins to trend higher.  And we hope that would be as early as this fall.


July 2014
JUNE 2014
May 2014
April 2014
March 2014
Feburary 2014
January 2014
December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013
May 2013
aPRIL 2013
March 2013
February 2013
January 2013
October 2012
September 2012
August 2012
July 2012
June 2012
May 2012
April 2012
March 2012
February 2012
January 2012
December 2011
November 2011
October 2011
September 2011
August 2011
July 2011
June 2011
May 2011
April 2011
March 2011
February 2011
January 2011
December 2010
November 2010
October 2010
September 2010
August 2010
July 2010
June 2010
May 2010
April 2010
March 2010
February 2010
January 2010
December 2009
November 2009
October 2009
September 2009
August 2009
July 2009
June 2009
May 2009
April 2009
March 2009
February 2009
January 2009
December 2008
November 2008
October 2008
September 2008
August 2008
July 2008
June 2008
May 2008
April 2008
March 2008
February 2008
Yead End 2007
December 2007
November 2007
Third Quarter 2007
September 2007
Second Quarter 2007
June 2007
May 2007
First Quarter 2007
March 2007
February 2007
Year End 2006
December 2006
November 2006
Third Quarter 2006
September 2006
Second Quarter 2006
First Quarter 2006
Fourth Quarter 2005
Third Quarter 2005
Second Quarter 2005
First Quarter 2005
Newsletter Year End 2004
Client Newsletter 2nd Quarter 2004
First Quarter 2004
Newsletter - Year End 2003
It Ain't Over 'Till It's Over
Newsletter - 2nd Quarter 2003
Newsletter - 1st Quarter 2003
Newsletter - Year End 2002
Newsletter - 3rd Quarter 2002
Newsletter - 2nd Quarter 2002
Newsletter - 1st Quarter 2002
Newsletter - 4th Quarter 2001
Newsletter - 3rd Quarter 2001
Newsletter - 2nd Quarter 2001
Newsletter - 1st Quarter 2001
Newsletter - Year End 2000
Newsletter - 3rd Quarter 2000
Newsletter - 2nd Quarter 2000
Newsletter - 1st Quarter 2000