Wall Street Says It's Different This Time

May 16 2014, 4:02pm CDT | by

It’s a good thing it’s different this time! We know it is because Wall Street says so.

The high-valuation levels indicated by the Shiller CAPE 10 Price/Earnings Ratio mean nothing this time, because things are different than when that indicator’s similar readings in previous periods were accompanied by market tops.

The age of this bull market also means nothing because it’s different this time, since we have the Greenspan/Bernanke/Yellen Put in place, That promise is that the Fed is neither ahead of nor behind the curve, as it was so often in the past. This time the Fed is on top of what is going on, and knows what it must do to prevent economic slowdowns or market corrections from worsening into recessions and bear markets.

It sure worked in the summer slowdowns in 1998, 2011, and 2012. Well okay, not so much in the summer of 2010 when the S&P 500 plunged 19%. And not so much in preventing the 2000-2002 and 2007-2009 meltdowns. But 2010, 2008? That’s ancient history.

We also know the stock market cannot be timed. We know that also because Wall Street says so. We know that it cannot even warn when risk is high with enough accuracy to require cutting back exposure. Just buy any time and all the time, and let time take care of it.

Therefore, we need not be concerned about those high valuation levels, nor that we are in the second year of the Four-Year Presidential Cycle, and since 1934 the average decline in the 2nd year was 21%.

How about that silly stuff about Sell in May and Go Away outperforming the market over the long-term? It supposedly does so by avoiding the large losses often associated with the summer months? You only have to look back and see it didn’t work last year, or in 2012. It hasn’t worked since 2011. Besides, don’t look back. Look at what’s going on now. The Dow and S&P 500 just made new record highs a few days ago.

They pulled back some over the last few days, but not even enough to retest the potential support at their 50-day moving averages.

Sure, the Nasdaq and Russell 2000 are already in correction territory (down 10%)? So what? That’s meaningless, just a reflection of how speculative stocks got ahead of themselves and needed to cool off a bit before getting back in harness to the upside.

Corporate insiders are selling at a near record pace? Corporations themselves are dumping IPO’s on the market, selling stock to enthusiastic investors at a frenzied pace? So-called ‘smart money’ big-names are issuing warnings of a serious correction, even a bear market?

Okay, so they were right with their selling and warnings in 1999, and in 2006 when the housing bubble was building, and in 2007. And investors who didn’t pay attention to the warnings were smashed down when those bubbles burst. And the wealth inequality between the top 5% and the rest of the country kept getting worse.

Well listen to this. Corporate insiders were selling heavily last spring, and those top 5% ‘smart money’ guys, hedge funds and the like, warned early last year that a big correction was coming last summer. And it didn’t.

So why be concerned. Wall Street says it’s different this time, and the stock market can’t be timed anyway.

Okay, I get all that. See and hear it every day.

So I must be a dinosaur in my thinking that conditions at previous tops, valuation levels, warnings from ‘smart money’, seasonality, etc., going back at least 100 years, have always had relevance when similar conditions appeared in later periods. Not with enough accuracy to provide buy or sell signals, but certainly with enough to warn of unusual risk.

And they are doing so now.

My advice is that investors pay attention./>/>

Sy is president of StreetSmartReport.com and editor of the free market blog Street Smart Post. Follow him on twitter @streetsmartpost. He was the Timer Digest #1 Gold Timer for 2012 (Gold Timer of the Year), as well as the #2 Long-Term Stock Market Timer.

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

High powered MRI scans identify language centres in brain
Vienna, Oct 29 (IANS) A study from the Medical University of Vienna found how 7-Tesla ultra high-field magnetic resonance imaging (MRI) could be used to clearly show the brain areas responsible for speech processing and production.
 
 
Binge drinking hampers memory in long run
Washington, Oct 29 (IANS) High doses of alcohol during adolescence may continue to affect the brain even after drinking stops, leading to structural changes in the brain and memory deficits, says a significant study.
 
 
EU: inspiring innovation through 3D-printed robot
Brussels, Oct 29 (IANS) The European Union (EU) said that it has a 3D-printed robot ready to be introduced in schools to cultivate the creativity of students studying mechanics, computer sciences, electronics and 3D printing.
 
 
NASA cargo spacecraft explodes minutes after launch
Washington, Oct 29 (IANS) In a shocking incident, an unmanned commercial rocket carrying crucial scientific cargo for the International Space Station (ISS) exploded moments after lift-off Tuesday evening.
 
 
 

Latest from the Network

Chloe Grace Moretz: I'm a geek
Chloe Grace Moretz is a ''geek'' when she's at home. The 17-year-old actress - who can be seen playing a prostitute alongside Denzel Washington in new action thriller film 'The Equalizer' - insists she lives a pretty...
Read more on Celebrity Balla
 
High powered MRI scans identify language centres in brain
Vienna, Oct 29 (IANS) A study from the Medical University of Vienna found how 7-Tesla ultra high-field magnetic resonance imaging (MRI) could be used to clearly show the brain areas responsible for speech processing...
Read more on Business Balla
 
Timothy Spall sees 'certain parallels' with William Turner
Timothy Spall sees ''certain parallels'' between himself and William Turner. Spall, 57, plays the influential painter in his new film 'Mr. Turner', for which he won the Best Actor award at the Cannes Film Festival, and...
Read more on Movie Balla
 
Trinidad cricket board condemns Windies players pull out
Port-of-Spain, Oct 29 (IANS/CMC) The Trinidad and Tobago Cricket Board (TTCB) has condemned the recent decision by the West Indies cricketers to abort their tour of India. The condemnation came in the form of a motion...
Read more on Sport Balla
 
Binge drinking hampers memory in long run
Washington, Oct 29 (IANS) High doses of alcohol during adolescence may continue to affect the brain even after drinking stops, leading to structural changes in the brain and memory deficits, says a significant study....
Read more on Celebrity Balla
 
EU: inspiring innovation through 3D-printed robot
Brussels, Oct 29 (IANS) The European Union (EU) said that it has a 3D-printed robot ready to be introduced in schools to cultivate the creativity of students studying mechanics, computer sciences, electronics and 3D...
Read more on Politics Balla
 
'Confident West Indies will appear in 2015 World Cup'
Sydney, Oct 29 (IANS/CMC) John Harden, 2015 Cricket World Cup chief executive, has said he is confident that the former champions West Indies will appear at next year's event in Australia and New Zealand. Harden...
Read more on Sport Balla
 
NASA cargo spacecraft explodes minutes after launch
Washington, Oct 29 (IANS) In a shocking incident, an unmanned commercial rocket carrying crucial scientific cargo for the International Space Station (ISS) exploded moments after lift-off Tuesday evening. Orbital...
Read more on Politics Balla
 
Sleep disturbances linked to higher Alzheimer's risk in men
London, Oct 29 (IANS) Elderly men with self-reported sleep disturbances run a higher risk of developing Alzheimer's disease than men without self-reported sleep disturbances, says a study. "We demonstrate that men...
Read more on Business Balla
 
Champ Bailey Retires From the NFL
Former Denver Broncos cornerback Champ Bailey retired from the NFL on Oct. 28.Bailey ends his career as one of the top shutdown cornerbacks in league history, per Ben Swanson of the Broncos' official website:"Longtime...
Read more on Sport Balla