October 29, 2013

Sell Stocks, market top for the year

It remains my view that stocks have topped for the year and that stocks should now be sold.


Two other asset classes soared -- namely gold (up $35 an ounce) and bonds (the ProShares UltraShort 20+ Year Treasury (TBT) dropped by $2 a share as the 10-year yield fell by 5 basis points, to 2.62%) -- signaling slowing economic growth and the prospects for a weakening in corporate sales/profits.

Meanwhile the U.S. dollar is taking its worse licking in a month and is moving back toward the February 2013 lows.

Below are some of the reasons behind my negative market outlook.

Market participants might have been somewhat naive in yesterday's celebration, as it is clear that last night's agreement again failed to incorporate any tax or entitlement reform as part of the package to a debt-ceiling extension and a clean continuing resolution. More importantly, it is not likely that the extra time bought will be used productively to achieve a grand bargain in 2014. With our snollygoster government officials simply kicking the can down the road and failing to address our growing debt problem, a normalization in interest rates coupled with U.S. demographics (the aging of our population will lift entitlement spending dramatically) will likely bring the problem back into investors' focus sooner than later.

Indeed, it is unlikely that there will ever be a grand bargain with the animosity between the two parties. More political partisanship lies ahead - indeed, the schism between the Republicans and Democrats will likely deepen as we move ever closer to the important elections in November 2014, especially with the House of Representatives up for grabs.

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