QUOTE OF THE WEEK
“Our truest life is when we are in dreams awake.” – Henry David Thoreau
TECH CORNER
50% or so rally off the bottom. Don’t be fooled by this rally. The data is still negative.
We are now into the third leg of a bear market where corporate earnings start to go negative. So far, 284 companies of the S&P 500 have reported and the average of those companies is down -1.61%. The companies that have reported for the Nasdaq are down an average of -7.46%. When The markets were up for the month of April. This is not unusual during a bear market where we can have a earnings go down, stock prices follow.
Due to the data showing increased slowing of the economy we anticipate earnings will be down substantially more when the second quarter is reported. This should be the last leg down for the stock markets unless something out of the ordinary happens.
Speaking of something bad potentially happening, the Treasury came out with their updated time frame on the Debt Ceiling. Due to tax revenues not being as great as in prior years, the date when the U.S. can no longer meet its obligations has been moved up to June 1st.
Another issue that few people are looking at is the shrinking of the money supply. Last year the money went negative for the first time in over 60 years. This is portending something big for the stock market and that is not good. The four previous instances of money supply contraction has led to three depressions including the Great Depression and one panic.
It is always hard to predict the future, but there is an increased likelihood that a U.S. recession is taking shape in the not too distant future.
Sources: Hedgeye, MSNBC, Barron’s
