Wednesday, December 30, 2015

Why Are You Buying Stocks?

No, I'm not against the stock market, however the way to win is to buy low and sell high. This is my point of reference. The market is now priced high and to believe that new highs are on the horizon is ignoring danger signs between you and that far off distant level. At present, the percentages point down or to the correction ledger. Let me address my view on that this week and next week, I will post my much anticipated outlook: Forecast 2016.
Bull Market
We all realize that stocks have been in bull mode for seven years. The S & P 500 rose over 200% from March 2009 to December 2014. This year the market is flat!
It is not only flat but belies the truth of its value. The market corrected 10% in August, rebounded and now ranges between low and high resistance. The P/E ratio is over 21. Historically, it is moves between 12 and 15. Today's market is 35% to 40% over-priced by P/E ratios. Now, consider this aspect, earnings.
was up less than 2% in 2014 and yet, stock prices rose double digits. This year, earnings were down and prices are still rising. Wall Street expect earnings to fall another 4.5% in the fourth quarter. Bottom line: earnings are lower, but the price that you pay is higher. This is a serious red flag.
is skewed to favor certain companies which give a false reading on the market and economy. Five tech stocks are holding the market up (Amazon, Google, Netflix, Facebook and Microsoft)the rest of the market is down 5% and oil is down over 50%. By the way, AMZN has a P/E of 963. Suckers, beware!
The shills will keep pushing the market. Just like all the Fed knows is to print money, the shills keep barking to "buy the dips." My response to that is this, ever fall in a sand hole? No matter how hard you shovel on one side, the other side keeps refilling the hole. This dear reader, leaves you one question. No, not what is in your wallet, but what new product or innovation will cause a rally in our economy and stock market? blank____? Silence is the answer.
At this time the cycle of life and business cycle will be more influential than rate hikes, driverless cars, etc. The market is past its due date while prices are still getting higher. Take out your money and watch, wait and listen. Better days and opportunities will come, but not in the near-term.