Friday, May 10, 2013

Enjoy your dinner, but don’t get too late



The feel good factor in global equity markets is going strong since past few months. India has also joined the party in past few weeks. Obviously no one would like to see a party pooper at this point in time. Nonetheless, there are some and investors would ignore them only at their risk.

The perennial party pooper Nouriel Roubini said on Tuesday that Stocks aren't in bubble territory as yet, but a "huge rally in risk assets" over the next two years puts markets in danger of a big crash.

But more notable is Michael Snyder of The Economic Collapse Blog, who is flashing the following dozen warning signals:

1.       The price of copper has traditionally been one of the very best indicators of the future performance of the U.S. economy. It is down nearly 20 percent so far this year.

2.       Home renovation spending has fallen back to depressingly-low 2010 levels.

3.       U.S. retail spending is repeating a pattern that we have not seen since the last recession.

4.       Manufacturing activity all over the country is showing signs of slowing down. In fact, Chicago PMI has dipped below 50 (indicating contraction) for the first time since the last recession.

5.       In April, consumer confidence unexpectedly fell to a nine-month low.

6.       NYSE margin debt peaked right before the recession that began in 2002, it peaked right before the financial crisis of 2008, and it is peaking again.

7.       The S&P 500 usually mirrors the performance of Chinese stocks very closely. That is why it is so alarming that Chinese stocks peaked months ago. Will the S&P 500 soon follow?

8.       The economic data coming out of the Chinese economy lately has been mostly terrible.

9.       Things just continue to get even worse over in Europe. Unemployment in both Greece and Spain is now about 27 percent, and the unemployment rate in the eurozone as a whole has just set a brand new all-time record high.

10.   Crude inventories have soared to a record high as demand for energy continues to decline. As I have written about previously, this is a clear sign that economic activity is slowing down.

11.   Casino spending is usually a strong indicator of the overall health of the U.S. economy.  That is why it is so noteworthy that casino spending is now back to levels that we have not seen since the last recession.

12.   The impact of the sequester cuts is starting to kick in. According to the Congressional Budget Office, the sequester cuts will cost the U.S. economy about 750,000 jobs this year.

In our view, investors may enjoy their dinner, listen to party poopers and decide when to return home. Make sure it’s not too late.

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