On the Dow falling to 6,000, Charles Biderman's recent Video

Market crashing on 10/9/2008, features bailout squad
Remember in 2010 when Robert Prechter called for the Dow to hit 1,000 in the next 5-6 years? Or in 2010-2011 when Charles Nenner called for the Dow to hit 5,000 in the next few years? Well, there are still bears out there. Charles Biderman, founder of TrimTabs Investment Research, a firm that specializes in market liquidity flows, told his viewers on 3/13 that he sees the Dow falling to 6,000 when the Fed stops propping up the market with liquidity (or when "the Fed fix stops working"). And it's not just about the Fed, Biderman thinks the cyclically adjusted price/earnings ratio, or Shiller P/E, should be lower to reflect lower income growth and historical comparables. Another interesting thing he said was income growth and P/E expansion, since 1904, have been led by technological breakthroughs in communications, which he says is currently lacking. I somewhat agree. When will we see household holographic communications take off, or household humanoid Watson-bots? Or a crazy energy breakthrough that hits the masses? That should do it. I embedded Biderman's Youtube video below (originally saw it on Zero Hedge - hat tip). If you can't watch the video, you can read the transcript at TrimTab's blog at the link below.

Biderman’s Daily Edge 3/13/2012: Stocks Could Drop More Than 50% When Fed Fix Ends (TrimTab blog post with video):

"Historically stock prices sold at a 10 PE when income growth was 3% or less and with the Dow at 13,000 the PE is 23 today using Robert Shillers 10 year earnings PE.

Historically there have been three major bull markets since 1900 each lasting 24 to 25 years. During each bull run income growth averaged over 5% after inflation; and as a result of that rapid income growth the price to earnings ratio, or PE, grew rapidly.

On the other hand, during the 1930’s bear market and from 1967 to 1982 when stocks did nothing, income growth averaged 3% net of inflation or less. During those low growth times, the PE dropped to 10 or less."

Now, here's what Robert Prechter and Charles Nenner said during interviews in 2010 and 2011. These are obviously hardcore deflationary views, so we'll see if Bernanke can keep asset prices up, or stable, when the economy enters a new recession, and a cyclical bear market in equities starts to price it in (within a structural bear still?). The wild cards will probably be the sovereign debt crisis(es) and oil, if tensions escalate in the Middle East or liquidity floods into oil as a result of monetary policy, and puts a huge tax on the economy (liquidity chased oil in 2008 even during a recession and bear market). Any other scenarios you can tink of?

In the meantime, it appears that Treasury bonds are selling off (yields rising), the market is still trending higher, and gold is taking a hit. That's why I chart out correlations and trends to see what the market is thinking in the near-term relative to news.

NYT about Robert Prechter - July 20, 2010:

"For a rough parallel, he said, go all the way back to England and the collapse of the South Sea Bubble in 1720, a crash that deterred people “from buying stocks for 100 years,” he said. This time, he said, “If I’m right, it will be such a shock that people will be telling their grandkids many years from now, ‘Don’t touch stocks.’ ”

The Dow, which now stands at 9,686.48, is likely to fall well below 1,000 over perhaps five or six years as a grand market cycle comes to an end, he said. That unraveling, combined with a depression and deflation, will make anyone holding cash “extremely grateful for their prudence.”

Charles Nenner interviewed by DailyCrux - July 26, 2011 (via CharlesNenner.com):

"We are looking for a turn down in the major indices. We initially thought last summer's decline was the start of this turn. But when the short-term cycles turned up last fall, we received a buy signal and went long stocks again in September.

We now see weakness into the second half of the year, followed by a rally before year end. We are looking for a much bigger decline over the next 24- to 30-month period in the major indices. Our cycles show a major downturn going out about 2.5 years. The low we calculate is 5,000 on the Dow Jones Industrial Average... indeed a significant low. This move to 5,000 will be interrupted by small bull and bear markets... But the trend is clearly down."

This is also interesting, to me at least. Nenner mentioned in the medias previously (videos 12) that the sunspot cycle will have a negative effect on geopolitical conflicts and the market. That's why I've been watching the sunspot cycle at NASA ever since. Look how the sunspot prediction for March crashed! Looks to me like a monthly 13 DeMark signal on the sun.

Sunspot Cycle Capitulation March 2012
Source: http://solarscience.msfc.nasa.gov/predict.shtml

*The image at the very top is a snapshot of a watch list I found when the Dow was at 8,579 on 10/9/2008. Low how GLD was the only one trading up. The Dow bottomed at 6,469.95 in March 2009.

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