Monthly Market Analytics & Technical Analysis

JUNE 2014 Edition

JUNE DATA FILE

MATA- JUNE 2014

6/14/2014

1 JUNE 2014 Edition

Copyright 2014 Gordon T. Long All Rights Reserved

Restricted & Confidential

general@GordonTLong.com

Monthly Market Analytics & Technical Analysis

JUNE 2014
HIGHLIGHTS - WHAT YOU NEED TO KNOW ................................................................................................................................... 8
SUMMARY ANALYSIS ...............................................................................................................................................................................................8
Valuation Summary ........................................................................................................................................................................................... 15
Era of Delusional Distortions & the Super Cycle Pivot b .................................................................................................................................... 18
Defining Chart #1 - "Delusional Distortion" Expectations & the Log-Periodic Cycle ......................................................................................... 20
Defining Chart #2 - Finding the Longer Term Super Cycle Pivot b ................................................................................................................ 21
Defining Chart #3 - The Big M and Super Cycle b ....................................................................................................................................... 23
Defining Chart #4 Intermediate Term Topping Process ................................................................................................................................. 24

OUR APPROACH - MACRO ANALYTICS ...................................................................................................................................... 26

.............................................................................................................................................................................................. 28
JUNE 2014: Global Macro Drivers ........................................................................................................................................................................... 29
DRIVER: Real Wealth, Commodities & Dr Cooper ........................................................................................................................................... 32
DRIVER: Carry Trade & the : Cross ............................................................................................................................................................ 41
DRIVER: Currency & Forex Markets ................................................................................................................................................................. 51
DRIVER: Yield, Spread & Credit ....................................................................................................................................................................... 55
DRIVER: Global Equities ................................................................................................................................................................................... 56
RESEARCH WE FOLLOWED ........................................................................................................................................................................... 56
CHARTS OF NOTE ........................................................................................................................................................................................... 58
DRIVER$ - Treasury Shorting versus S&P 500 ............................................................................................................................................ 58
DRIVER$ - The Central Banks Desperate Stage is Still Ahead! ................................................................................................................ 58
DRIVER$ - Carry Trade Reacting to Accelerating JGB Selling .................................................................................................................... 59
DRIVER$ - USDJPY Taking Aim at 200 DMA and Below ............................................................................................................................. 59
DRIVER$ - US$ Basing View At Risk .......................................................................................................................................................... 60
DRIVER$ - US Treasury 10 Year Yield Breaking Down ............................................................................................................................... 61
DRIVER$ - S&P 500 Rate of Change Tracks Fed Total Asset ROC ............................................................................................................ 62
DRIVER $ - Its about Flows and the Rate of Change of Flows .................................................................................................................... 62
DRIVER$ - A +22.0% average price performance in the 12 months prior to Fed tightening cycles ............................................................ 63
RESEARCH OF NOTE ...................................................................................................................................................................................... 64
DRIVER$ - Two Most Powerful Forces Pushing the Stock Market Higher ................................................................................................... 64
DRIVER$ - 10Y UST and USDJPY Weakness ............................................................................................................................................. 67
DRIVER$ - Underlying Driver$ is Shifting Sentiment .................................................................................................................................... 71
DRIVER$ - A Treasury Supply Squeeze or Something More Sinister? ........................................................................................................ 74
DRIVER$ - BoAML Now Supports Our Long View that US Treasury Yields are Headed Lower ................................................................. 80
DRIVER$ - The Carry Trade Driver$ ............................................................................................................................................................. 82
RESEARCH OF NOTE ...................................................................................................................................................................................... 85
SENTIMENT - Fear & Greed Index ............................................................................................................................................................... 85
RISK: Risk-On versus Risk-Off ................................................................................................................................................................................ 87
CHARTS OF NOTE ........................................................................................................................................................................................... 88
CHARTS Two-month decline in NYSE margin debt is steepest since 2011.............................................................................................. 88
CHARTS Markets Exposed to a Macro Shock / Surprise .......................................................................................................................... 89
CHARTS Correlation of S&P 500 versus Smart Money Flows .................................................................................................................. 90
CHARTS Breadth Shows Some Markets Already in Bear Market ............................................................................................................. 90
CHARTS Smart Money Flows .................................................................................................................................................................... 91
CHARTS Russell 2000 versus Russell 1000.............................................................................................................................................. 91
CHARTS NYSE Margin Debt at All Time High in February........................................................................................................................ 92
CHARTS Risk Being Withdrawn from Markets........................................................................................................................................... 93
CHARTS Old Adage: Rarely a Sell-off Without the Banks Leading the Move Lower............................................................................... 94
CHARTS Hedge Funds Levered to the Hilt on: AMZN, GILD, DISH, PCLN, YHOO and FB .................................................................... 95
CHARTS Poor Historic Comparisons ......................................................................................................................................................... 96
CHARTS US Macro the Lowest in 19 Months ............................................................................................................................................ 97
CHARTS Russell 2000 200 Week MA Distortion ....................................................................................................................................... 97
CHARTS 1929 Crash, Nikkei 1989 Crash .................................................................................................................................................. 98
CHARTS - The Mutual Fund Decoder ........................................................................................................................................................... 98
CHARTS - Maximum Drawdown by Year Since 1960 .................................................................................................................................. 99
CHARTS - Swap Spreads Widening & Often Accompany S&P 500 Declines............................................................................................ 100
CHARTS - Skew Index ................................................................................................................................................................................ 101
CHARTS - VIX ............................................................................................................................................................................................. 102
RESEARCH OF NOTE .................................................................................................................................................................................... 103
RISK - Markets Have Left the "Complacency" Phase, Have Entered Full Blown "Mania" ......................................................................... 103
RISK - Smart Money Correlation ................................................................................................................................................................. 104
RISK - Smart Money Correlation II ........................................................................................................................................................... 105
RISK - Excessive Risk from all Historic Measures ...................................................................................................................................... 107
RISK - Precious Metals Will Point the Way ................................................................................................................................................. 108
RISK - The Last Two Times This Happened, the Stock Market Crashed ................................................................................................... 110

JUNE 2014 Edition

Copyright 2014 Gordon T. Long All Rights Reserved

Restricted & Confidential

general@GordonTLong.com

RISK - Hedge Funds Most Short Into Latest All Time High Ramp since September ................................................................................. 113
RISK - Felix Zulauf: Expect 20% Correction This Year ............................................................................................................................... 116
RISK - Markets Are Riskier Than At Any Time Since The Depths Of The 2008/9 Crisis ........................................................................... 117
RISK - Small Business Optimism Disconnected from Markets ................................................................................................................... 121
TECHNO-FUNDAMENTALS ................................................................................................................................................................................. 123
RESEARCH WE FOLLOWED ......................................................................................................................................................................... 123
CHARTS OF NOTE ......................................................................................................................................................................................... 126
CHARTS Post Financial Crisis Investor Sentiment shows pattern nearing completion .......................................................................... 126
CHARTS Shorts Throwing in the Towel ................................................................................................................................................... 127
CHARTS Weakening Breadth Sending a Warning .................................................................................................................................. 127
CHARTS Nasdaq Leading the Way Towards June Market "Death Cross" .............................................................................................. 128
CHARTS Global Equities Reach All Time Market Cap High of $62.4T ................................................................................................... 131
CHARTS Cluster Zone of Trend Support & Prior Resistance .................................................................................................................. 132
CHARTS Russell 200 DMA Support Test ................................................................................................................................................ 133
CHARTS Symmetry in the DOW Transportation Average ....................................................................................................................... 134
CHARTS Bank Index Sending A Message ............................................................................................................................................... 135
CHARTS Fed Balance Sheet Versus QE Actions .................................................................................................................................... 136
CHARTS Pattern Shift in High Beta Risk Distortion............................................................................................................................ 137
CHARTS Russell 2000 versus Leuthhold Small Cap Universe Medium P/E on 5-Yr Normalized EPS .................................................. 138
CHARTS 2002 2007 Reflation Pattern Comparison ........................................................................................................................... 139
CHARTS 1929 Crash and Nikkei 1989 Collapse Comparison ................................................................................................................. 139
CHARTS Shanghai Composite Trend ...................................................................................................................................................... 140
CHARTS Mid-Term Election Year Pattern ............................................................................................................................................... 141
CHARTS - GLOBAL EQUITES versus GDP Expectations ......................................................................................................................... 142
CHARTS - The NYSE / PPI ......................................................................................................................................................................... 143
CHARTS - Bear Market Began with the End of the Tech Bubble ............................................................................................................... 143
CHARTS - Unusual US Macro Decay Pattern ............................................................................................................................................. 144
CHARTS - Steadily Falling CNBC Viewership ............................................................................................................................................ 145
RESEARCH OF NOTE .................................................................................................................................................................................... 146
PATTERNS - The Carnage beneath the Bullish Stampede ........................................................................................................................ 146
PATTERNS - Economic Cycles ................................................................................................................................................................... 149
PATTERNS - Be Patient: Wait for the Death Crosses! ............................................................................................................................. 153
PATTERNS - M Tops ................................................................................................................................................................................ 159
PATTERNS - Soross Reflexivity Suggests another Crash Is Inevitable .................................................................................................... 165
PATTERNS - Early Credit Crack Warning Signals in the SWAPS Market ................................................................................................. 167
PATTERNS - Mid Term Election Year Pattern ............................................................................................................................................ 170
PATTERNS - Sornette's Log-Periodic Model Prediction ............................................................................................................................. 172
PATTERNS - The Stock Market Is Not the Economy Anywhere In the World............................................................................................ 174

OUTLOOK - ANALYTICAL ANALYSIS .......................................................................................................................................... 175

STUDY: MARKET INTERNALS REQUIRE URGENT MEDICAL Rx .................................................................................................................... 175
RESEARCH OF NOTE .................................................................................................................................................................................... 178
INTERNALS Breadth is Warning .............................................................................................................................................................. 178
STUDY: WHO IS BUYING? ... And maybe more importantly - WHY? ................................................................................................................. 180
CHARTS OF NOTE ......................................................................................................................................................................................... 190
CHARTS Institutions Selling ..................................................................................................................................................................... 190
CHARTS Corporate Buy-Back Growth ..................................................................................................................................................... 191
CHARTS Rate of Corporate Buy-Back Growth ........................................................................................................................................ 191
CHARTS How Executive Incentives Can Destroy a Nation ..................................................................................................................... 191
RESEARCH OF NOTE .................................................................................................................................................................................... 193
SELLING - Virtually Everyone "Sold In May" ............................................................................................................................................... 193
BUYBACKS - 1H 2014 Has the Potential to be the greatest annual buyback tally in market history. ........................................................ 197
DIVIDENDS - Continuing Shift from Capex to Dividends ............................................................................................................................ 200
BUYBACKS - Going nowhere if it wasnt For BUYBACKS from Cheap Debt ............................................................................................. 205
BUYBACKS - Buyback Achievers Index at 2007 Top ................................................................................................................................. 208
STUDY: TOPS ARE A PROCESS.. and the Rewards Go Only To Those with Patience ................................................................................... 209
STUDY: A SUMMER SHOCK? .............................................................................................................................................................................. 215
STUDY: AN ORCHESTRATED BOND ROTATION Setting up for a UST Supply Shortage............................................................................. 219
SETTING UP A SUPPLY SHORTAGE ........................................................................................................................................................... 219
SHRINKING THE SUPPLY ............................................................................................................................................................................. 219
NEVER FORGET: QE IS ABOUT FUNDING GOVERNMENT DEBT ........................................................................................................... 221
CREATING DEMAND THROUGH FEAR! ...................................................................................................................................................... 221
FINANCIAL REPRESSION ............................................................................................................................................................................. 222
STUDY: GOLD ....................................................................................................................................................................................................... 224
RESEARCH WE FOLLOWED ......................................................................................................................................................................... 224
CHARTS OF NOTE ......................................................................................................................................................................................... 226
CHARTS Gold May Soon Start Rising While Equities Fall....................................................................................................................... 226
CHARTS - Chinas Exploding Rise in Gold Consumption ........................................................................................................................... 227
RESEARCH OF NOTE .................................................................................................................................................................................... 228
GOLD A Death Cross is haunting gold ................................................................................................................................................... 228
GOLD Golds Real Value is Now > $10,000/Oz According to SocGen.................................................................................................... 230
GOLD Our Trigger$ Gold Analysis 03-19-14 ........................................................................................................................................ 232
GOLD Our Trigger$ Gold Analysis ........................................................................................................................................................... 233
GOLD - China Buys, Produces Record Amounts of Gold ........................................................................................................................... 239

JUNE 2014 Edition

Copyright 2014 Gordon T. Long All Rights Reserved

Restricted & Confidential

general@GordonTLong.com

GOLD - Going to China ................................................................................................................................................................................ 241

GOLD - Below Cash Cost, Approaches Marginal Production Costs ........................................................................................................... 241
GOLD - Bottom Still Likely Not In - A Little More in Price and Time ........................................................................................................... 243
GOLD - Level Of Currency Debasement ..................................................................................................................................................... 244
GOLD - Winners in Q3 ................................................................................................................................................................................. 248
STRATEGIC MACRO INVESTMENT INSIGHTS Q2 2014 RETAIL CRE (RETAIL COMMERCIAL REAL ESTATE) .................................. 249
RESEARCH WE FOLLOWED ......................................................................................................................................................................... 250
CHARTS & TABLES OF NOTE ....................................................................................................................................................................... 251
RESEARCH OF NOTE .................................................................................................................................................................................... 253
STRATEGIC MACRO INVESTMENT INSIGHTS - Q1 2014 - UKRAINE CONFLICT & ENERGY ...................................................................... 254
CHARTS & TABLES OF NOTE ....................................................................................................................................................................... 256
UKRAINE NATO Encroachment ............................................................................................................................................................... 256
UKRAINE Russias Current Account Problem.......................................................................................................................................... 257
UKRAINE Russias Oil Export Destinations ............................................................................................................................................. 257
UKRAINE Russian Natural Gas and Oil Production ................................................................................................................................. 258
UKRAINE Bank Exposure to Russian Debt .............................................................................................................................................. 258
UKRAINE European Bank Exposure to Ukraine ...................................................................................................................................... 259
UKRAINE Rising CDs Spreads Make Russian Investments More Expensive......................................................................................... 259
UKRAINE Global MARKETS Are Pricing in Russian and Chinese Hard Landing ................................................................................... 260
UKRAINE Food Import Costs A Real Problem ......................................................................................................................................... 261
UKRAINE Wheat & Corn Supplier ............................................................................................................................................................ 261
RESEARCH OF NOTE .................................................................................................................................................................................... 262

SHORT TERM TECHNICAL ANALYSIS ..................................................................................................................................... 263

SUPPORT & RESISTANCE .................................................................................................................................................................................. 263
Gann Analysis .................................................................................................................................................................................................. 263
Boundary Conditions ....................................................................................................................................................................................... 264
Channels & Regressions ................................................................................................................................................................................. 266
Fibonacci - Controlling Time Extensions ......................................................................................................................................................... 267
Elliott Wave ...................................................................................................................................................................................................... 269
Bottom Line Big Picture ................................................................................................................................................................................... 273
SENTIMENT - Consumer, Investor & Trader ........................................................................................................................................................ 274
Consumer Confidence - Conference Board .................................................................................................................................................... 274
Consumer Sentiment - Michigan ..................................................................................................................................................................... 278
Consumer Comfort .......................................................................................................................................................................................... 279
Investors Intelligence ....................................................................................................................................................................................... 280
American Association of Independent Investors ............................................................................................................................................. 280
National Association of Active Investment Managers (NAAIM) ...................................................................................................................... 281
Small Business Optimism ................................................................................................................................................................................ 282
Percentage Stocks above 50 & 200 DMA ....................................................................................................................................................... 283
Margin Levels ................................................................................................................................................................................................... 284
Mutual Fund Cash Levels v S&P 500 .............................................................................................................................................................. 288
OSCILLATORS & BREADTH: Indicators of Importance ...................................................................................................................................... 291
NYSE Overbought / Oversold .......................................................................................................................................................................... 291
OEX Open Interest (Puts/Calls) ....................................................................................................................................................................... 292
TRIN ................................................................................................................................................................................................................. 293
McClellan Oscillator ......................................................................................................................................................................................... 294
CHARTS OF NOTE ............................................................................................................................................................................................... 295
CHARTS Smart Money Flows .................................................................................................................................................................. 295
CHARTS Fed Assets versus Bullish Sentiment ....................................................................................................................................... 295
CHARTS Macro Support Has Technically Broken Down ......................................................................................................................... 296
CHARTS US Surprise Index Setting Up for Downturn ............................................................................................................................. 296
CHARTS The Public No Longer Trusts the Market Feel it is Manipulated and Ineffectively Regulated ........................................... 297
RESEARCH OF NOTE .......................................................................................................................................................................................... 298
SENTIMENT: US Households To Withdraw $430 Billion From Stocks In 2014 ............................................................................................. 298
SENTIMENT: Elliott Wave's View from the Top .............................................................................................................................................. 301

INTERMEDIATE TERM RISK ANALYSIS ................................................................................................................................. 305

RESEARCH WE FOLLOWED ............................................................................................................................................................................... 305
AGGREGATED GLOBAL FINANCIAL RISK INDEX ............................................................................................................................................. 308
BANKING RISK - LIBOR-OIS SPREAD (Updated) ........................................................................................................................................ 309
BANKING RISK - TED SPREAD (Updated).................................................................................................................................................... 309
CREDIT RISK - GLOBAL CREDIT DEFAULT SWAPS (Updated) ................................................................................................................ 310
CREDIT RISK - EU CREDIT DEFAULT SWAPS (Updated) .......................................................................................................................... 310
CONSUMER RISK - HOUSING - RATE OF CHANGE (Updated) ................................................................................................................. 311
ECONOMIC RISK - ECRI LEADING INDEX (Updated) ................................................................................................................................. 313
INFLATION RISK - MONEY SUPPLY GROWTH - M3 (Updated) .................................................................................................................. 314
INFLATION RISK - MONEY VELOCITY (Updated) ........................................................................................................................................ 314
MONETARY RISK - BANK LIABILITIES (Updated) ........................................................................................................................................ 315
COST OF MONEY RISK - INTEREST RATES (Updated) ............................................................................................................................ 315
AGGREGATED RISK LEVEL ................................................................................................................................................................................ 317
RESEARCH OF NOTE .......................................................................................................................................................................................... 318
RISK: CS Warns Volume & DeMark Raise "Topping Threat" In Stocks ......................................................................................................... 318

JUNE 2014 Edition

Copyright 2014 Gordon T. Long All Rights Reserved

Restricted & Confidential

general@GordonTLong.com

RISK: No One Will Ring the Bell at the Top .................................................................................................................................................... 322
Cassandra's - New Additions to the List ................................................................................................................................................................ 329
CASSANDRA: Comstock Funds Weighs In ................................................................................................................................................. 330
CASSANDRA: Michael Lombardi Weighs In ................................................................................................................................................... 332
CASSANDRA: Ron Paul Portfolio, 'Craziest' we've ever seen? ..................................................................................................................... 334
CASSANDRA: John Mauldin Goes Negative................................................................................................................................................ 335
CASSANDRA: Hayman Capital Dramatically Reduces Risk...................................................................................................................... 343
CASSANDRA: Byron Wien Warns "Oblivious Markets" Of 20% Correction ................................................................................................... 344
CASSANDRA: Harry Dent Warns Stocks to Sink More than 60% by End of 2014 ........................................................................................ 344
CASSANDRA: Stanley Druckenmiller: "When You Get This Kind Of Rigging, It Will End Badly".................................................................. 345
CASSANDRA: Mohamed El-Erian: "Prices Are Artificially High - Its Time to Take Profits" .......................................................................... 346
CASSANDRA: Felix Zulauf: World Headed Toward 1987 Style Market Collapse .......................................................................................... 347
CASSANDRA: Doug Kass: 'I'm Getting The Summer Of 1987 Feeling' In The Market Right Now ............................................................... 347
SECTOR: CANARIES ............................................................................................................................................................................................ 349
Q1 CANARIES ................................................................................................................................................................................................. 349
The Stock Market Bubble is getting ready to burst ...................................................................................................................................... 349

LONGER TERM - FUNDAMENTAL ANALYSIS .............................................................................................................................. 351

HIGHLIGHTS ......................................................................................................................................................................................................... 351
VALUATION SUMMARY ................................................................................................................................................................................. 351
VALUATION: Alternative Methodologies ............................................................................................................................................................... 354
FOUR SET CONSOLIDATED MARKET VALUATION INDICATORS ............................................................................................................ 354
Crestmont from the Arithmetic ..................................................................................................................................................................... 358
Cyclical PE 10 Ratio..................................................................................................................................................................................... 360
Q Ratio ......................................................................................................................................................................................................... 365
S&P Composite Regression-to-the-Trend ................................................................................................................................................... 371
REFERENCE METHODOLOGIES ANALYSIS ............................................................................................................................................... 373
Market Cap to GDP: The Buffett Valuation Indicator ................................................................................................................................... 373
Valuation Based Equity Market Forecasts December 2013 Update ........................................................................................................ 375
VALUATION: Situational Assessment ................................................................................................................................................................... 384
Q1 VALUATIONS ............................................................................................................................................................................................ 384
RESEARCH WE FOLLOWED ..................................................................................................................................................................... 384
CHARTS OF NOTE ..................................................................................................................................................................................... 385
CHARTS Forward 12 Month EPS vs Price: 10-Year ............................................................................................................................ 385
CHARTS Forward 12 Month EPS vs Price: 10-Year ............................................................................................................................ 386
RESEARCH OF NOTE ................................................................................................................................................................................ 386
Q1 VALUATIONS - Markets in a "Topping Process" ............................................................................................................................... 386
PE CONTRACTION - Situational Assessment ...................................................................................................................................................... 389
We Have Been Warning, Now Here it is ......................................................................................................................................................... 389
PE Ratio: Rising PE Multiples, Not Better Earnings, Are What's Driving The Stock Market .......................................................................... 393
PE Ratio: Expansion, Then Contraction .......................................................................................................................................................... 394
PE Ratio: Multiples Grow at Fastest Pace Since Dot-Com Bubble ................................................................................................................ 395
PE Ratio: CAPE currently stands at 23.6, higher than 90% of comparable readings since the 1870s. ................................................ 397
PE Ratio: PE's In Perspective ....................................................................................................................................................................... 399
PE Ratio: The Four Regimes of Equity Valuation ........................................................................................................................................... 400
PE Ratio: Since 2010, valuations have moved with Non-Investment grade (B) yields .................................................................................. 403
PE Ratio: PE's Are At Historically Elevated Levels ................................................................................................................................... 406
PE Ratio: Signs of Peek PE ............................................................................................................................................................................ 407
PE Ratio: The Four Regimes of Equity Valuation ........................................................................................................................................... 408
PE Ratio: Since 2010, valuations have moved with Non-Investment grade (B) yields .................................................................................. 411
PE Ratio: Have Significant More Room To Compress .................................................................................................................................... 413
PE Ratio: Over Next Year Trailing PE to be Below Generational Norm. .................................................................................................. 415
MARGIN COMPRESSION - Situational Assessment ............................................................................................................................................ 418
Compression: Cost Push now Creating Margin Compression! ....................................................................................................................... 418
Margin Compression versus PE Compression ............................................................................................................................................ 419
S&P 500 PE Ratios ...................................................................................................................................................................................... 421
Big companies' P-E's shrivel to single digits ................................................................................................................................................ 421
Compression: Corporate Earnings - Signals of Margin Compression ........................................................................................................ 422
Margin Compression ...................................................................................................................................................................................... 424
Compression: Expect Further PE Compression: Margin Squeeze ................................................................................................................ 427
Compression: Shifting Secular Sands - Emerging Impediments to Global Earnings Growth Rates .............................................................. 429
Compression: Corporate Margins - 2013 Margin Expectations Not Credible ............................................................................................. 430
Compression: Profits Have Stalled. Has the Market? ..................................................................................................................................... 431
MARGIN & CREDIT ............................................................................................................................................................................................... 433
MARGIN DEBT - Rolling Over & Suggesting a Significant Correction Ahead ........................................................................................ 433
ROTATION-CREDIT CONTRACTION II ............................................................................................................................................................... 437
Credit Contraction - Bank Reserves A Ticking Bomb, But Who Will Be Caught in the Blast?................................................................. 437
Credit Contraction - Traders Reacting to the 1994 Pattern ......................................................................................................................... 440
Credit Contraction - Global Growth Clearly Slowing and near Contraction Without BRICS..................................................................... 442
Credit Contraction - Fundamentals Emerging as ERP is Changing ........................................................................................................... 443
Credit Contraction - Falling Real Disposable Income means Falling Consumption ................................................................................ 446
Credit Contraction - A Credit Squeeze Leads to a Deflationary Leg Down .............................................................................................. 449
Credit Contraction - Stunning Withdrawals from Emerging Markets ......................................................................................................... 450

JUNE 2014 Edition

Copyright 2014 Gordon T. Long All Rights Reserved

Restricted & Confidential

general@GordonTLong.com

Credit Contraction - Private Equity are Major Sellers of All Assets ............................................................................................................. 453
Credit Contraction - Asset Trends versus Bubbles ..................................................................................................................................... 455
EQUITY RISK PREMIUM ...................................................................................................................................................................................... 457
Equity Risk Premium: Yields Improved, Especially Against Stock Yields ................................................................................................ 457
Equity Risk Premium: The Incentive for the Anticipated "Great Rotation" ...................................................................................................... 458
BUYBACKS ............................................................................................................................................................................................................ 461
Buybacks: Going nowhere if it wasnt For BUYBACKS from Cheap Debt ...................................................................................................... 461
Buybacks: Buyback Achievers Index at 2007 Top .......................................................................................................................................... 463
INSUFFICENT WEALTH CREATION MEANS SHRINKING EQUITY GROWTH ................................................................................................ 464
Wealth - Debt Saturation Means there is Simply Insufficient Wealth Creation within Developed Nations ..................................................... 464
Wealth - The "TAPER" Scare before the 'OPMF' Storm ............................................................................................................................ 470
Wealth - Cash Flow and CAPEX ................................................................................................................................................................... 474
Wealth - Removing the Manipulation to See Real Enterprise Value Metrics ........................................................................................... 475
EARNINGS - Situational Assessment ................................................................................................................................................................... 478
Q1 EARNINGS Being Brought Down Dramatically ...................................................................................................................................... 478
RESEARCH WE FOLLOWED ..................................................................................................................................................................... 478
CHARTS OF NOTE ..................................................................................................................................................................................... 479
CHARTS Q1 Earnings Pre-Announcements ......................................................................................................................................... 479
CHARTS Q1 Earnings Taken Down Dramatically ................................................................................................................................. 479
CHARTS Q1 Earnings Already Taken Down By 5% since January ...................................................................................................... 480
CHARTS Positive & Negative Q1 Pre-Announcements ....................................................................................................................... 480
CHARTS Q1 Revenue Slippage in Last 60 Days ................................................................................................................................. 481
CHARTS Earnings Slippage in the last 60 Days Consumer Discretionary Plummeting! .................................................................. 481
RESEARCH OF NOTE ................................................................................................................................................................................ 482
Consumer Discretionary Sector Has Plunging Cuts to Earnings Estimates ........................................................................................... 482

TARGETS ................................................................................................................................................................................ 484

CONCLUSIONS....................................................................................................................................................................... 485
I- DEFINING CHARTS ........................................................................................................................................................................................... 485
Defining Chart #2 - Finding the Longer Term Super Cycle Pivot b .............................................................................................................. 485
Defining Chart #3 - The Big M and Super Cycle b ..................................................................................................................................... 487
Defining Chart #4 Intermediate Term Topping Process ............................................................................................................................... 488
II- TARGETS .......................................................................................................................................................................................................... 490
III - MONTHLY RISK & PATTERNS ...................................................................................................................................................................... 491
RISK ................................................................................................................................................................................................................. 491
CHARTS Markets Exposed to a Macro Shock / Surprise ........................................................................................................................ 491
PATTERNS ...................................................................................................................................................................................................... 493
IV STUDIES ........................................................................................................................................................................................................ 494
STUDIES Market Internals Need Urgent Medical Rx................................................................................................................................... 495
STUDIES Who Is Buying? ............................................................................................................................................................................ 496
STUDIES A Summer Shock? ....................................................................................................................................................................... 497
STUDIES Tops Are A Process! .................................................................................................................................................................... 498
STRATEGIC MACRO INVESTMENT INSIGHTS Q2 2014 RETAIL CRE (RETAIL COMMERCIAL REAL ESTATE) ............................ 499
STRATEGIC MACRO INVESTMENT INSIGHTS - Q1 2014 - UKRAINE CONFLICT & ENERGY ............................................................... 501
V - TRIGGER$ ZONES .......................................................................................................................................................................................... 504
VI - DRIVER$ & BIA$ ............................................................................................................................................................................................. 505
VII- QUARTERLY KEY METRICS & ASSESSMENT UPDATE ......................................................................................................................... 506
A - LONG TERM: Fundamentals ..................................................................................................................................................................... 506
FUNDAMENTALS ........................................................................................................................................................................................ 507
B - INTERMEDIATE TERM: Risk .................................................................................................................................................................... 508
CANARIES-RISK ......................................................................................................................................................................................... 508
C - SHORT TERM: Sentiment ......................................................................................................................................................................... 510
VIII- GORD'S VIEWS & OPINIONS ....................................................................................................................................................................... 513
SENTIMENT & CONFIDENCE - NERVOUSNESS ........................................................................................................................................ 513
EARNINGS ...................................................................................................................................................................................................... 515
MARKET AT HISTORIC HIGHS ..................................................................................................................................................................... 517
The Intrinsic Enterprise Value ...................................................................................................................................................................... 522
Stock Valuations are based on a Discounted Free Cash flow. EBITDA is Cash flow. ............................................................................... 523
How Long Will Labor Tolerate this or Survive on Shrinking Disposable Income? ...................................................................................... 524
Have a Look at the Market Deflated by QE ................................................................................................................................................. 524

JUNE 2014 Edition

Copyright 2014 Gordon T. Long All Rights Reserved

Restricted & Confidential

general@GordonTLong.com