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Message: IS THE BEAR MARKET of 2014 About to Begin?
Is the Bear Market of 2014 About to Begin? 5 Signs That Say Yes
By Dave Skarica Jan 27, 2014 3:18 pm
For one thing, this bull market is getting old.
2. Money printing can stabilize things short term, but leads to disaster longer term. It's like a drug or alcohol addiction: You feel good after you take your shot, but at some point you crash. People think that the market has stabilized and good times are here again; however, the inevitable hangover is going to be much worse than it would have been without money printing.
3. Sentiment. Indicators of sentiment, such as Investors Intelligence (a poll of investment writers), the Rydex Ratio (what investors are doing with their money), and NYSE Margin Debt (which has hit 2000 and 2007 levels) have reached levels that they normally see at major bull market tops, not just before corrections in the market.
4. Valuation. If you look at the CAPE (Shiller’s 10-year average P/E ratio), the P/E smoothed out over 10 years on the S&P 500 (INDEXSP:.INX) is now about 25, or the highest it has been since the 2000 bubble in stocks. This is a long-term indicator. However, at the very least it tells us that market returns in the next three to five years will be minimal at best.
5. Bubble symptoms in technology. Stocks like Yelp (NYSE:YELP), Facebook (NASDAQ:FB), and Twitter (NYSE:TWTR) all traded at 15 times revenues, or higher, at their peaks. In addition, even more established names such as Netflix (NASDAQ:NFLX), LinkedIn (NYSE:LNKD), and Amazon (NASDAQ:AMZN) trade at well over 100 times earnings. This is reminiscent of the 2000 tech bubble.
While there are problems in numerous emerging markets (Turkey, Thailand, and Argentina) which often prop up during bear markets (especially when there has been easy money propping these markets high), the fact remains that we now have too many dislocations in too many sectors, and stocks are too expensive. #pagination-container {display:none;};
Read more: http://www.minyanville.com/business-news/markets/articles/Is-the-Bear-Market-of-2014/1/27/2014/id/53511#ixzz2rl5sI7Ag
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