Macro Market Overview Bull Vs. Bears

Stocks just seem expensive with the DOW at 5 month highs.   Sell in May and walk away is really going to be a reminder in May given the last two years.  Consider how the April market has been horizontal just like in the past two years.   


The Bears Team:

1. Middle East and OIL:
1. Limited War with Iran over Sanctions
1. We sanctioned Japan before the Japanese attacked Pearl Harbor so we should not be surprised if another war in on the horizon with Iran
2. Israel is waiting for the opportunity to scuttle Iran Nukes.
3. United States still assumes role as world policeman.    After Arab Spring there is probably more government risk in Iran to remain at peace.  
2. Oil is on the high end of the $80 -$100 dollar range.   
3. Middle East - Arab Spring is settling in.    Syria is the last festering overthrow to move forward.   
1. Iran and Arab Peninsula have still been untouched - Jordan, Bahrain, Iran.....
4. Israel and Iran are unusually quite.   When will hatreds in the Middle East ignite again.
2. De-leveraging 
1. EU Issues:
1. Hungary on the verge of bail out.
2. Greece out of the EU?    Issue seems eminent!  Will EU and IMF kick the can down the street again or kick Greece out of the EU and devalue ate the Drachma.
3. IRELAND!   GREECE!   What about Portugal, Spain, and Italy?   What about a recurrance of Greece unresolved issues?
4. European pop-up issues from the banking, lending, or housing issues from the little or big PIIGS.    Moody's or S&P downgrades possible.
5. Future Headlines? - "EU Division Eminent On Spain (or Italy) Moody's Bond Rating Downgrade!"
6. Earnings are starting to slow. 
7. EU continues to just spend its way out of Banking issues.   The shell game will have to get resolved soon.   Every 3 month we start with problems in Greece then Italy then Portugal then Ireland and finally Spain. 
8. Leveraged buybacks of bonds which are internally purchased are just kicking the can down the road. 
2. US State Bankrupsies: 
1. CALIFORNIA STATE DECLARES BANKRUPSY!    just kidding!  But someone is going to post something like this and the market will react.   California, New Jersey, Ohio and populous "Blue" states still are running unsustainable deficits.   There is a lot of downside to a credit downgrade of a state and a lot of potential what next questions.     What will be the market ripples on a large state downgrade?
3. China Real Estate Bubble starting to top.    Will this migrate to banks anytime soon.
1. Communists are managing this pretty well, but how long can you hide these issues.
3. QEII ended - Now what?
1. Operation Twist will likely end in July.
4. Emerging Market Interest Rates are Up but in a flattening or downward trajectory
5. Where are the Rogue States:
1. North Korea is always good for a pop downward:How much BS can South Korea tolerate from North Korea.   North Korea massing special ops troops on the border.    Will posturing ever be misinterpreted into WAR? 
2. Iran - Israel strikes eminent?
3. Venezuela
4. Russia
6. Currency Wars to deflate currencies - GOLD
1. .   How will China, Brazil, and Japan continue to lower the Dollar?
2. How will the US continue to lower its currency in the face of downward competition on developed currencies.
7. Companies are running out of ways to cut costs.   Given they are not growing what will propel valuations higher. 
8. Market Volatility From Past Bubbles..   Investors Still Remember the Painful Days of 2001 and 2008.    1998 LTCM 1991 Commercial Banking Crisis and 1987 Crash is probably old by now: 
1. remain skittish about past Dot Bomb and Financial Busts.   Major downturns have not had enough time to be solidly in the past.   Market memory is still very negative so greed is not likely to take hold for quite a while. 
9. Market has had a run since the March 2009 lows.
1.  There is a long way down especially in peoples minds.
2. Since October 2011 we are up huge.   
3. A downturn is expected.
10. US political risk should be getting larger as we move into 2nd half of 2012.
11. Recession in Europe is starting to take hold without EU Stimuli.

The Bull Team:

1. Money flows are back to stocks as the bond market looks like it will be dying for years to come.    Lower rates are not very feasible at these historically low rates.
2. US Stocks are having some momentum and money around the world is moving into US Equities.   
3. EU keeps handling the situation even if at the last minute - Anxiety over a year can not remain heightened.
4. US budget is B.S. kibuki theater is long over.  
5. Where else you going to put your money:
1. Bond - Ya Right!   Just because yield keep dropping does not mean they will.   Besides how low can they go.
2. Real Estate - Starting to level off, but neither liquid or an appreciating asset.
3. Gold - Maybe as that new currency has the least amount of hair.   Levels do seem speculatively high at the current time.
6. Unemployment is near 8.2% for first time in years and there continues to be increase employment numbers repeatedly.    Numbers are still rising at a slow rate. 
7. Economic Activity is starting to happen but at like 2-3% increased level expectations now from 1% 6 months ago.
8. Bernanke has great wisdom about depressions and has a calming effect on the market.
1. rates low for an extended time period is predictable and great for business makers.
9. Political Democrat vs. Republican - gridlock means no new regulations or business environment changes.
1. Government gridlock is likely to limit spending programs?    We will see.  
10. Earnings are likely to push further higher on continued cutting and trimming of budget.  
11. Corporate Earnings still good in the US. 
12. WIKILEAKS seems to be quite and soon to be erased by legal means of the EU and US.

Waiting for Uncommon Value or Mid May To Start the Buying

The charts and probably the Hedge Funds will likely be on the same page?   

If Last Year is a Model This Downturn is a Buying Opportunity

Having said that I am still in waiting model.    Last year also had a big drop in May after earnings season was finishing.    The market seems likewise high currently and especially after last quarter.   What to do...

Sell in May and Walk Away Time Approaching Again?

The headlines are starting to spook the market.    I think this year will be a lot better than the May Cycle of 2010 and 2011.     For more reading see. below  like.

http://www.marketwatch.com/story/where-to-go-if-you-sell-in-may-and-go-away-2012-04-05?siteid=YAHOOB