The S&P 500 is Worth Only 910: Get Out – or Lose Big!
At the beginning of 2011 USA Today reported…[that] Ned Davis Research says the S&P 500 will make a run at the 2007 high of 1,565, hit a “midyear peak” [and] then it will crash as interest rates rise…concluding that “the midyear peak could mark the end of the cyclical bull market that began in March 2009 and the start of a new cyclical bear market.”
So says Paul B. Farrell (www.marketwatch.com) in an article which Lorimer Wilson, editor of www.munKNEE.com (It’s all about Money!), presents below, in part, with a link to the full article should you wish to read it in its entirety. Farrell’s concluding remarks are as follows:
[Editor’s Note: To read Farrell’s excellent article in its entirety please go here]
Warning, even though your brain doesn’t want to hear it, there is a high probability a new cyclical bear market will begin this summer … and overshadow the 2012 elections.
The Journal’s also warning: “Inflation jitters spread through emerging markets, prompting China’s central bank to raise interest rate for the third time in four months amid worries that a drought threatening the country’s wheat crop will put further pressure on global food prices.”
Wake up America: With commodity prices rising rapidly, all the bizarre rationalizations Wall Street uses to keep Bernanke’s interest rates low are rapidly vaporizing. Yes, Ned Davis’ prediction of a bear will soon be a painful reality.
S&P 500 inflated, worth just 910, get out before it tops 1,500[Jeremy] Grantham also sees inflation and rising interest rates killing the lies, popping the bubble and ending the rally: “As a simple rule, the market will tend to rise as long as short rates are kept low. This seems likely to be the case for eight more months and, therefore, we have to be prepared for the market to rise and to have a risky bias.”
With $107 billion at stake [his firm manages that amount] Grantham better be concerned. He predicted the 2008 meltdown, now sees a repeat dead ahead: “Be prepared for a strong market and continued outperformance of everything risky, but be aware that you are living on borrowed time as a bull.”
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Yes, the bubble will pop this year says Grantham: “If the S&P rises to 1,500, it would officially be the latest in the series of true bubbles. All of the famous bubbles broke, but only after short rates had started to rise.”
So keep a close watch on those two tipping points in your planning, interest rates breaking to the upside and the S&P closing near 1,500. When inflation pushes interest rates up they’ll choke off this bull market. If you’re active, better stop chasing higher returns, especially emerging markets.
Bottom line: In what sounds like a direct shot at super-bull Jeremy Siegel, Grantham says that GMO’s research warns that “the market is worth about 910 on the S&P 500, substantially less than current levels” just above 1,300.
Then Grantham throws his fast ball right down the middle: “The speed with which you should pull back from the market as it advances into dangerously overpriced territory this year is more of an art than a science, but by October 1 you should probably be thinking much more conservatively.”
Translation: Get the heck out of Wall Street’s stock market casino soon, maybe as early as July 4th, and definitely get out by Christmas.
- S&P 500 Likely To Top Out at 1400 – 1500 & Then Topple to 400! Here’s Why http://www.munknee.com/2011/02/uncanny-relationship-with-nikkei-1929-crash-suggests-sp-500-about-to-top-out-and-then-tumble/
- Stock Market is Due for a 15-20% Correction – Here’s Why http://www.munknee.com/2011/06/stock-market-is-due-for-a-15-20-correction-heres-why/
- A Violent Correction Is Coming For the S&P 500! Here’s Why http://www.munknee.com/2011/06/a-violent-correction-is-coming-for-the-sp-500-heres-why/
- Why a Major Stock Market Correction is Imminent http://www.munknee.com/2011/05/why-and-how-best-to-play-a-major-stock-market-correction-is-imminent/
- S&P 500 is 45% Overvalued According to Reversion to Mean Analysis! http://www.munknee.com/2011/01/these-2-historical-charts-show-how-high-then-how-low-the-sp-500-might-go/
- How Mean Will the S&P 500’s Future Regression to Trend Be? http://www.munknee.com/2011/01/how-mean-will-the-sp-500s-future-regression-to-trend-be/
- U.S. Debt Default Risk is Up Dramatically YTD http://www.munknee.com/2011/05/sovereign-debt-default-risk-has-risen-dramatically-in-u-s/
- Inflation to Surpass 4% in 1 Year; 6% Within 3 Years – Here’s Why http://www.munknee.com/2011/06/inflation-to-surpass-4-in-1-year-6-within-3-years-heres-why/
- Global Systemic Crisis Coming THIS Summer! http://www.munknee.com/2011/06/global-systemic-crisis-coming-this-summer/