14 replies to this topic

[ogm]

Put me in a bearish camp here. This rally is severely mispricing the market. I don't know how long it will last, but as others have pointed out the economy has just lost a major stimulus in the form of the payroll tax hikes. and I don't think this fact has been priced in yet. It is estimated that this alone will reduce GDP growth by close to 1%. Nevermind the other tax hikes and possible cuts in spending that will be addressed in 2 month. Corporate earnings growth will be weak and stock prices are already high. I don't see this rally as sustainable by any means. Timing of course is an open question, but I think you'll see the internals start eroding shortly as euphoria wears off and reality starts setting in.

Edited by ogm, 07 January 2013 - 06:11 AM.

[IYB]

I don't know how long it will last, but as others have pointed out the economy has just lost a major stimulus in the form of the payroll tax hikes. and I don't think this fact has been priced in yet. It is estimated that this alone will reduce GDP growth by close to 1%. Nevermind the other tax hikes and possible cuts in spending that will be addressed in 2 month.

Thanks for comments ogm. I've noticed that you've made the above statement about the -1 to 1.5% hit to GDP a number of times. Can you cite your source? Originally, my sources had estimated that if we went over the F cliff in toto with ALL the hikes and all the sequesters, that THIS would cost GDP about 1%. If that were the case, the the payroll tax by itself should be just a very small fraction of 1%.

Of course, as you know, it's the market internals that I care about anyway- not economics..... but I'm just curious where you get that estimate?? Many thanks and continued great trading. You've been hitting it out of the park week after week and I appreciate your posts -- a lot. Regards, D

[ogm]

I don't know how long it will last, but as others have pointed out the economy has just lost a major stimulus in the form of the payroll tax hikes. and I don't think this fact has been priced in yet. It is estimated that this alone will reduce GDP growth by close to 1%. Nevermind the other tax hikes and possible cuts in spending that will be addressed in 2 month.

Thanks for comments ogm. I've noticed that you've made the above statement about the -1 to 1.5% hit to GDP a number of times. Can you cite your source? Originally, my sources had estimated that if we went over the F cliff in toto with ALL the hikes and all the sequesters, that THIS would cost GDP about 1%. If that were the case, the the payroll tax by itself should be just a very small fraction of 1%.

Of course, as you know, it's the market internals that I care about anyway- not economics..... but I'm just curious where you get that estimate?? Many thanks and continued great trading. You've been hitting it out of the park week after week and I appreciate your posts -- a lot. Regards, D

I've seen and heard multiple sources estimating anywhere from 0.5% to 1% for payroll tax hike.
The fact is that it was one of the most effective stimuluses for the middle class consumers over the past 4 years. And now its gone.

This is just one of the evaluations of the Fiscal Cliff "deal" that came up on the search.
http://www.huffingto..._n_2396189.html

One of the biggest immediate hits to the economy is the expiration of the payroll tax cut, which for some reason nobody was interested in extending for another year. That alone could trim 0.5 percent from GDP, according to Pantheon Macroeconomic Advisors chief economist Ian Shepherdson -- and that doesn't include any "multiplier" effects from weaker consumer spending. Goldman Sachs economist Jan Hatzius sees the payroll-tax cut shaving 0.6 percent from GDP.

The fiscal cliff deal delays or prevents some of the worst consequences of the cliff from taking place, but not all of them. The hit to growth will be something on the order of 1.3 to 1.75 percent, according to a handful of early estimates. That's meaningful for an economy widely expected to muddle along at 2.3 percent gross domestic product growth next year, according to the latest survey of economists by the Wall Street Journal.

Edited by ogm, 07 January 2013 - 10:14 AM.

[IYB]

I don't know how long it will last, but as others have pointed out the economy has just lost a major stimulus in the form of the payroll tax hikes. and I don't think this fact has been priced in yet. It is estimated that this alone will reduce GDP growth by close to 1%. Nevermind the other tax hikes and possible cuts in spending that will be addressed in 2 month.

Thanks for comments ogm. I've noticed that you've made the above statement about the -1 to 1.5% hit to GDP a number of times. Can you cite your source? Originally, my sources had estimated that if we went over the F cliff in toto with ALL the hikes and all the sequesters, that THIS would cost GDP about 1%. If that were the case, the the payroll tax by itself should be just a very small fraction of 1%.

Of course, as you know, it's the market internals that I care about anyway- not economics..... but I'm just curious where you get that estimate?? Many thanks and continued great trading. You've been hitting it out of the park week after week and I appreciate your posts -- a lot. Regards, D

I've seen and heard multiple sources estimating anywhere from 0.5% to 1% for payroll tax hike.
The fact is that it was one of the most effective stimuluses for the middle class consumers over the past 4 years. And now its gone.

This is just one of the evaluations of the Fiscal Cliff "deal" that came up on the search.
http://www.huffingto..._n_2396189.html

One of the biggest immediate hits to the economy is the expiration of the payroll tax cut, which for some reason nobody was interested in extending for another year. That alone could trim 0.5 percent from GDP, according to Pantheon Macroeconomic Advisors chief economist Ian Shepherdson -- and that doesn't include any "multiplier" effects from weaker consumer spending. Goldman Sachs economist Jan Hatzius sees the payroll-tax cut shaving 0.6 percent from GDP.

The fiscal cliff deal delays or prevents some of the worst consequences of the cliff from taking place, but not all of them. The hit to growth will be something on the order of 1.3 to 1.75 percent, according to a handful of early estimates. That's meaningful for an economy widely expected to muddle along at 2.3 percent gross domestic product growth next year, according to the latest survey of economists by the Wall Street Journal.

Thanks ogm. Yep I see where you get those numbers, and your points are very well taken. Just very glad I don't have to try to figure that stuff out. Even though I have degree in Economics, after 40 years of this stuff I still find developing and following models for stock market timing FAR easier and more effective (for me) than trying to estimate economic outcomes....and then decide from that how markets are likely to react.

If you are right about a cyclical top in here - then that will show up soon enough in trend tracking (momentum) models....and I will join you in saying "bring it on!". But it just isn't there in the long term momentum at this point for whatever reason, hidden or otherwise.

This will be definitely be an interesting year for all of us.... Regards, D

[diogenes227]

Enjoyed this thread. Yes, imagine there's no top yet. It's easy if you try.

I getting an awful lot of stocks that are breaking to new highs, consolidating and following through with the NYSI upturns to move higher. That is not bearish activity.

Good luck and good trading.

And check out the breakout in this little stock today:

http://stockcharts.c...01-01&en=(today)&i=p26189888958&a=286423755&r=1357591520971.png