Replies to post #3163 on General Stock Ideas

[bigworld]

MF4: The first wave of a protracted bear market is often the strongest wave. My key to watch is the VIX. It has spiked to > 24 but I don't think the drop has ended. In April 2010 we saw the VIX spike over 40, so that is will be my cover signal. As the VIX approaches 40 I'll start covering my shorts. I still think we have 100 more S&P points to drop and at least another 1000 on the DOW. We might temporarily rally peridoically but the 'risk on' trade appears at this point to be breaking down, not just our markets but accross the full spectrum of risk assets. Major trendline support has been breached in almost all risk assets, from emerging markets to commodity intensive countries like Brazil to China and South Korea and now our own markets. This is and will be worldwide phenomenon. Japan was just the trigger. If the earthquake and tsunami had not happened it would eventually have been something else. The world is grotesquely overleveraged. That has to be worked off one way or another. Bond holder haircuts, defaults, bankruptcies, bank failures, governmental bankruptcies, large public sector layoffs, etc. Or Bernanke can continue printing money and risk hyperinflation and a failed Dollar which would destroy our standard of living in one fell swoop. Pick your poison. But we are most assuredly transitioning from a bull market to a bear market. One constant among all secular (generational) bear markets throughout market history has been that the ultimate nadir does not occur until the Dividend yield on large caps stock indices approaches or exceeds 6%. Recently the dividend yield on the S&P 500 was under 2%, so we have a long way to go. We'd need to be at @ 450 on the S&P to have a dividend yield of 6%. That is still our ultimate destination, but the market will gyrate up and down in order to confuse and paralyze investors. Buying the dips has been so successful that it has become pervasive, and prospects for QEIII and QEIV and QEV will keep many investors complacent in anticipation of a Fed fueled rally to new highs. But macro conditions are too far gone for the ultimate end to be anything but a develeveraging, deflationary bear market slow motion crash.