The Mess That Greenspan Made - Part 6

The Diverging U.S. Stock Market

This CNN/Money story about how a peak in the number of new highs for individual stocks (as shown below) consistently spells trouble for broad equity market indexes almost a year later is probably of little concern to those who bid share prices higher in recent days as all major U.S. stock indexes turned in big gains this week after last week’s tumble.

Ned Davis Research looked at 15 stock market highs since 1962 and says the peak in new highs for individual stocks precedes the peak in the overall markets by 9 to 11 months.

If that holds true this time around, we’re about done with the bull run.

We’re 11 months past the May 2013 peak of new highs in individual stocks.

I recall reading about this in the wake of the early-2000s internet stock crash where some investors were able to avoid the carnage by taking note of this development before share prices reversed course.

They say what’s different this time is that stock market leaders are the first to fall (e.g., tech and biotech shares in recent weeks), however, this may well be another case where we’re in such uncharted territory (i.e., due to the mis-pricing of assets after unprecedented central bank intervention) that historical comparisons are all but meaningless.

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Good Friday Morning Links

MUST READS
If Russia invades Ukraine, this is how it will happen – Vox
Ukraine Talks End With Accord on De-Escalate Conflict – Bloomberg
Jerry Brown’s Next Budget-Saving Step for California – Reuters
The reverse world of retirement investing – USA Today
Are We Headed for a Credit Market Crash? – House of Debt
Morgan Stanley, Goldman Adjust to New Banking Climate – NY Times
Whither The Bottom 90 Percent, Thomas Piketty? – Forbes
Crackdown on Flash Trading Gathers Momentum – Fiscal Times
Wealth’ Effect Without Wealth – Alhambra Partners
Yuan Depreciation Is Deeper Than You Think – WSJ
The Divergent trend: Bad for stocks – CNN/Money
The Case Against Stocks – Barron’s

To find out what Tim thinks of today’s news, subscribe to Iacono Research

MARKETS/INVESTING
Traders frustrated by false breakouts – MarketWatch
Hedge funds get clobbered by fall in tech stocks – CNBC
Week Ahead: Spring fever brings hope for U.S. earnings – Reuters
Fed’s Low-Rate Pledge Keeps Wind At Stock Market’s Back – Short Takes
IPO market is casualty of stock market pullback – USA Today
If The Smart Money Is Selling, Who’s Buying? – Zero Hedge
Treasuries Fall as Ukraine Talks End in Accord – Bloomberg
Gold flat below $1,300/oz, heading for weekly fall – Reuters
Several Factors Suggest A Big Move Is Coming For Gold – IRD
U.S., Chinese Economic Data Hold Keys For Gold Next Week – Kitco
Geneva Talks Pressure Gold – Trader Dan

ECONOMY/WORLD/HOUSING/BANKING
(Mis)leading Indicators – Foreign Affairs
Has US household deleveraging ended? – voxeu
Got a minute? 3 little words that kill productivity – Fortune
QE has boosted UK growth by 3pc, says Martin Weale – Telegraph
Sina Weibo shares jump 19% in US debut – Channel News Asia
China March New Home Price Increases Ease on Tighter Credit – Bloomberg
Will the Housing Market Stay in the Tank? A Look at Homebuilders – The Street
Mortgage Reform Is Worth the Small Extra Cost to Borrowers – NY Times
Thoughts On US Inflation in Light of Yellen’s Comments – XE
Big banks lend to corporations over consumers – Fortune
What Janet Yellen Didn’t Say: The B-Word – New Yorker

 

Skip to about about the 40 second mark of the CNBC video below to hear Peter Boockvar, Chief Market Analyst for the Lindsey Group, talking about nascent signs of higher inflation in the latest U.S. economic data (that might, someday, be noticed by somebody) following years of central bank money printing (a.k.a. “QE Fluff”).

About half-way through, Boockvar talks about how inflation can increase rapidly and of the Federal Reserve’s multi-year forecast for very tame consumer prices.

One of the consequences of a more open Fed is that they publish a huge number of economic forecasts, inflation being one of them. It will surely be fun to recall this period in 2014 if, sometime in the years ahead, sharply higher inflation rates finally arrive.

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Tyler Cowen of Marginal Revolution notoriety points readers to two CBC News stories about the listing of the cheapest house for sale in the Vancouver market at just under $600,000 and its subsequent sale just two weeks later at almost $50,000 more than the sellers asked.

From the latter, we learn the following:

Vancouver’s cheapest listed single family home attracted large numbers to open houses, with two written offers pushing the final purchase price seven per cent over asking.

The house was the cheapest listing in Vancouver last week.

The price of the 100-year-old, 1,951-square-foot, three-bedroom, detached house at 2622 Clark Dr. was set low initially due to its smaller size and half lot site.

“It’s very rare, and that’s why all the excitement,” said RE/MAX realtor Mary Cleaver.

“I believe this house was, potentially, saved because it is on a different kind of lot, one that isn’t necessarily appealing to builders. So this has been a lovely family home for 100 years and, if well taken care of, could house a family 100 years from today,” she said.

Looking at the house and that lot, the excitement really is perfectly understandable.

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