Inside The Stock Market ...trends, cross-currents, and outlook

In mid May, 4% of assets were shifted from U.S. stocks to Emerging Market holdings, buying a package of individual Asian stocks. This same package is being used to boost exposure to 70% in early June.

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One might have expected gold and gold stocks to stumble as investors abandoned their defensive postures. However, spot gold and gold stocks (on a relative basis) are threatening to break out to new highs.

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After an uneventful start in 2009, deal flow for equity financings has jumped to life in recent weeks.

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Starting to see some modest inflow into U.S. focus equity mutual funds, which is a stock market positive.

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Despite the recent rally, the best two month move since 1933, investors migrating back to bearish camp. This is the best defined “wall of worry” we have seen in over a decade, and one that will provide more fuel for what we believe is a cyclical bull market.

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So, over the long run, stocks are supposed to provide better returns than bonds as compensation for taking greater risk. Well the last 20, 30, and 40 year periods show that bond and stock returns have been at the smallest performance spreads ever. In some cases, bonds actually produced better returns. It’s pretty depressing huh?

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A look at the perils with Chinese A Shares. Concern has been raised about China A Shares because they are seeing significant increases in their share float, due to government releasing restricted shares to the public.

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Looking for reasons to own more stocks? Doug Ramsey has a whole bunch of them.

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We’ve been receiving a lot of client questions on normalizing earnings. We take a look at a “Bottom Up” approach and give a simplistic description of our approach.

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Dividends have been garnering a lot of attention of late. We provide a list of S&P 500 constituent dividend changes and examine the implications of dividend cuts from an historical perspective.

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Have analysts blown through reality and swung too far, paving the road for upside surprises?

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If the November lows in the Homebuilders holds, based on the leading relationship between stocks and starts, an upturn in housing starts (not the broader economy) should be imminent.

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The “Fail-Safe” mechanism was removed in mid-March, after market action moved above the re-entry point.

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The “Fail-Safe” was triggered by the poor market action at the end of February, and we are moving towards a 50% net equity exposure. Caution seems prudent despite the Major Trend Index remaining in positive territory.

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The Morgan Stanley Cyclical Index: a group we didn’t recognize as a bubble two years ago (and we suspect we’re not the only ones), but one that meets the minimum requirement for “membership” by declining at least 70% from its high.

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Extrapolate the current state of affairs into the future at your own risk - “normalcy” is bound to return at some point.

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Identifying and comparing important characteristics of the broad sectors of the S&P 500.

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Fed policy in the current crisis has been far more aggressive than at a comparable point in either the Great Depression or in Japan’s “Lost Decade.”

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A brief description of the differences among these Chinese market segments and comparisons of major funds offering exposure to the Chinese stock market. 

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Last month, using Ben Graham's model, we found the U.S. market to be undervalued for the first time in about 50 years. Unfortunately, the values have become even more compelling over  the past five weeks.

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