Smart money heads for the exits

For those of you who thought that the recent stock market rally was anything more than a counter-trend rally, this should be disturbing.

(Bloomberg) -- Executives at U.S. companies are taking advantage of the biggest stock-market rally in 71 years to sell their shares at the fastest pace since credit markets started to seize up two years ago.
...
“They’re looking to take some money off the table because they think the rally will come to an end,” said Ben Silverman, the Seattle-based research director at InsiderScore. “It’s the most bearish we’ve seen insiders, on a whole, in two years.”

The last time there were more U.S. corporations with executives reducing their holdings than adding to them was during the week ended June 19, 2007, the data show. The next month, two Bear Stearns Cos. hedge funds filed for bankruptcy protection as securities linked to subprime mortgages fell apart, helping trigger almost $1.5 trillion in losses and writedowns at the world’s biggest financial companies and the 57 percent drop in the S&P 500 from Oct. 9, 2007, to March 9, 2009.

Insider selling during the height of the dotcom bubble in the first quarter of 2000 climbed to a record $41.7 billion on a net basis, according to data compiled by Bethesda, Maryland- based Washington Service. The sales coincided with the end of the S&P 500’s bull market and preceded a 2 1/2 year slump that erased half the value of U.S. equities.

So much for "Green Shoots".

Looking at the charts today, I noticed that the SPX broke through both its 200DMA and 50DMA. If it closes below 880 this week then all the indicators turn negative and the rally will officially be over.

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global growth

First time I call NC make a mistake but contrary to their statement some of this information came out the 11th (this is true), the World Bank today issued a horrific report, which I went through and pulled out a few stats and 1 questionable on in the Instapopulist.

There seems to be almost a war going on right now between the "green shoots" analysts and others who are "brown weeds".

My conclusion is actually that we've hit a bottom, but we're just gonna stay there.

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We are talking a much lower living standard.

We, consumers, drive the economy. If we continue to de-leverage we will not see any real growth (greater than 2%) for a very long time. It is a good thing that we rebuild our balance sheets but it will be painful. Prof. Edmund Phelps thinks it will take at least 15 years to rebuild wealth.

“The only way we’re going to get a healthy, full recovery is over a long period of time, involving households rebuilding their balance sheets and companies in trouble rebalancing their balance sheets,” Phelps said in an interview today with Bloomberg Television. “There’s no silver bullet that’s going to get us into good shape quickly.”

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what is so sad

this simply does not have to be, not at all.

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Brown weeds

There seems to be almost a war going on right now between the "green shoots" analysts and others who are "brown weeds".

Count me among the Brown Weeds, but don't mistake me for being a perma-bear. For instance, I went very long in equities in March. I knew the rally would have legs and I rode it to a handsome profit.

As of the beginning of June I went into cash and I'm going to stay there for a while. The equity rally is over. The Green Shoots are going to turn brown this summer.

Consider these my predictions for September:
1) The SPX drops back to around 800
2) The USD posts a bear-market rally to at least 84
3) The TNX drops to around 31
4) Unemployment goes over 10%
5) A currency crisis somewhere in Europe
6) Even the people on DKos will acknowledge that the stimulus isn't working

Call me out on it in 2+ months if I'm wrong.

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I suspect that it doesn't appear that stimulus is working

because the initial aspects, short-term, of the stimulus focused on tax cuts. The bulk of the true stimulus won't be felt until 2010. Those tax cuts could be going to savings instead of consumption.

But, and Robert made this point earlier, what impact is the states fiscal problems having on the effectiveness of the stimulus. States are cutting spending and raising taxes.

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I'll take the opposite side of that bet

At least as to number 6.

I can see an S&P 500 correction, easily. No problem there.

Agree re USD rally (I'm taking the opposite side of Bill Gross's public remarks).

If there is a stock market correction, bond yields will go down as a "flight to safety"

Unemployment will be 10%+ by July.

European currency crisis -- no idea.

Finally, I'll side with the Conference Board, the Fed's leading index, Paul Krugman, and ECRI specifically as follows:

The Economic Cycle Research Institute, a New York-based independent forecasting group, ... has forecast that the U.S. recession will end sometime during this summer, as its yearly economic growth reading ... spiked to an 85-week high of minus 0.6 percent from the prior week's revised rate of minus 3.5 percent.

It was ECRI's highest yearly growth reading since the week ended October 26, 2007, when it stood at minus 0.6 percent.

"With WLI growth rocketing up almost 30 percentage points in six months, it's virtually pounding the table about the recession ending this summer," said Lakshman Achuthan, managing director at ECRI.

The ECRI's data covers 100 years, and it has already published that the sole time this index failed to accurately forecast GDP growth was 1931, and unlike now, in 1931 its "long leading index" forecast a further downturn.

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It's possible I overreached

at least on #6.
If Republicans can still believe that Bush was a good president, then people on DKos can still believe that the stimulus worked.
At the same time I noticed this today.

But the share of Americans who believe that his $787 billion economic stimulus package will restore the economy has slipped to 52 percent from 59 percent two month ago.

#5 might also be a reach, simply because it is hard to time those things. I'm positive it will happen, but I shouldn't be so certain of when it will happen.

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unemployment

From reading middle's analysis, we already have unemployment > 10% in 13 states and this is from May.

Then, the charts do not show a leveling, the slope looks like a bottle rocket.

There was a stat showing people exhausting their benefits (rolling off) without a job somewhere but I cannot find it now...

i.e. it doesn't look like a 10% national peak in July is going to be the max. and by most estimates, unemployment is exceeding what is projected...

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Found it

There was a stat showing people exhausting their benefits (rolling off) without a job somewhere but I cannot find it now...

I linked to it here.

I never said that we would top out at 10% unemployment. Only that we would hit that level by September.
Where it tops out depends on if there is a 2nd economic shock in this Depression. If we avoid the 2nd shock then we should top out somewhere between 10.5% and 12%.
But if there is a 2nd shock then the sky is the limit.

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thanks, the "top out" @ 10% unemployment

I don't think either you or NDD has concluded a top out @ 10%. If I recall correctly this is the main stream economists estimates, which so far have been blasted as pathetically incorrect.

A history lesson on unemployment begats unemployment begats depression with stats, histograms would be a hot post I think.

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I'm a near permabear

To the point that if I do get my hours cut back, I'll be going to my local neighborhood association meeting and promoting replacing landscaping with edibles.

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Maximum jobs, not maximum profits.

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Maximum jobs, not maximum profits.

I should point out

But, and Robert made this point earlier, what impact is the states fiscal problems having on the effectiveness of the stimulus. States are cutting spending and raising taxes.

This is what happened during the GD too. State and local government was forced to cut way back on spending and employment, and was only partially offset by the increase in federal spending.

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