Earlier this month I shared that cash levels/negative net worth in brokerage accounts were nearing the lowest levels in history. (see post here) The last three times levels were this low the market fell in price.
My mentor Sir John Templeton said the four most dangerous words in investing are…”It’s different this time!”
The chart below reflects something “IS DIFFERENT THIS TIME!”
CLICK ON CHART TO ENLARGE
The inset in the above chart reflects that Negative Net worth and margin debt are reaching levels not seen many times in history. The last couple of times this combo took place the stock market retreated a little bit in 2000 and 2008.
Is anything different this time around? One thing that is different this time around is…if take two extreme emotional market price points, (1987 high and the 2002 lows) and draw a support/resistance line into the future, it happens to come into play where the S&P 500 is RIGHT NOW!
Is the “Averaged PE ratio” any different this time?
CLICK ON CHART TO ENLARGE
The above chart from Doug Short/Bruce Carman looks at that averaged PE ratio since 1877. As you can see, if this was the only tool you could use… does the market look like a screaming bargain right now?
Some things aren’t much different now than at the 2000 and 2008 peaks, when you look at cash levels in brokerage accounts, margin debt and averaged PE ratios! The one thing that is different this time.…a resistance line that started at the 1987 highs and the 2002 lows is now coming into play, 11 years later.
Will the results be any different this time? Do we “have to go down there? If two other things fall into place, I am going to do something different, something I haven’t done in 30 years.
If you would like to see how I am going to play this situation, send an email to [email protected] and in the subject box enter “game plan” or click on the box below and I will send a complimentary game plan on this set up.
Belsha…your a stud!
High yield funds are still doing ok. I am on guard for a divergence from SPY, so far not.
Chris
Thanks, Chris, I still don’t need glasses at age 46 !
I wondered if you could give an update on the high-yield and junk bond complex: while TLT was rising together with SP500, JNK and HYG have topped in january it seems, and creating a negative divergence with stocks now. JNK, especially, seems to be stuck on support under falling resistance…. anyway this situation could be called alarming already ?
Belsha…Again, Grrreat eyes. What eye Dr do you go to? 😉
Hi Chris, did you see the breakout on the TLT (20 year US Treasury Bonds) today? Falling trend line since november was gapped, and this with SP500 near all-time highs.
I hope your hedging with a large %, I have been short and now even more 100% short. I just don’t believe any of the numbers anymore from the gov’t and can see with my own eye’s, this is going to end very badly. I know POMO is there, but POMO doesn’t know the rest of the world is rolling over.